A Meretzki Bone
A human bone produced by Dr. Shai Meretzki's team. Dr. Shai Meretzki

JERUSALEM -- Doctor Shai Meretzki can regrow bones.

Not that that makes him special; the medical technology to do it has been available for years. But Meretzki can take excess body fat, extract mesenchymal stem cells from it, and grow custom-made bone, outside the patient's body. It even comes complete with the patient's own blood vessels, and once grafted, it will grow the patient's own bone marrow.

That is what’s unique, and it all started when Meretzki was studying biotechnology and chemical engineering at Technion Institute of Technology in Haifa, Israel, about 15 years ago. What if it were possible, he thought, to grow cells in three dimensions rather than the traditional two-dimension method?

“Many people grow cells two-dimensionally in a petri dish, in which you put the cells and they grow across the dish in a mono layer. But in our body, nothing is 2-D. What we’ve found is that the moment you take 2-D cells and grow them in 3-D, they behave completely differently,” the Israeli doctor and scientist said.

Meretzki’s research group was the first in the world to grow cells in a 3-D culture. He went on to found Pluristem Therapeutics (Nasdaq:PSTI), a biotechnology company that develops off-the-shelf cell therapies for a variety of human diseases. That was 11 years ago. It's now a public company worth about $200 million and employing about 150 people in Haifa.

Pluristem takes a small amount of cells from discarded placentas after childbirth and uses them to grow a larger amount specifically for people who suffer from peripheral arterial disease, or problems with blood flow to the legs. The cells are injected into the leg and ultimately promote the growth of new blood vessels.

“After a few days the cells disappear, but you have a bypass of the block of the blood vessels that you have in your leg,” Meretzki said.

Results of the first clinical trial in Israel and Germany are positive: Of 20 patients who would otherwise have required leg amputations, only one lost the limb.

Meretzki’s story is just one among several medical startups in Israel that are increasingly pushing for their share of the global medical-devices market.

There are 656 medical device companies in Israel, according to the Ministry of Industry, Trade and Labor, which commissioned a 2012 study to learn more about the steadily growing industry with support from Global Business Intelligence, IVC, Ernst & Young and Israel’s Central Bureau of Statistics. It found that 35 of those companies are publicly traded and 18 are owned by foreign companies, which shows high international interest in Israel’s medical startup sector.

The global medical devices industry was valued at $322 billion in 2011. Israeli companies represent just a small piece of the pie, with $1.83 billion of revenue in 2011, of which $1.6 billion was from exports. But those figures were up 9 percent from 2010, indicating solid growth, according to Dr. Ora Dar, head of the life sciences sector for Israel’s Economy Ministry.

“The whole life sciences area is growing, and medical devices particularly,” she said.

The United States is where most of the sales of that burgeoning Israeli technology are going, accounting for $586 million in 2011, followed by Europe with $419 million, and China and Japan each with a little more than $100 million.

Those are still small numbers, but Israel is first in the world for number of patents granted per capita and fourth in absolute number of patents in the medical devices field, Dar pointed out. “Also, the industry is quite young, [so] some of this technology has not matured yet, but the number of companies going to [the] research and development [phase] is advancing,” she said.

Still Small

Some of these companies are attracting international investment from industry giants such as Johnson & Johnson (NYSE:JNJ) and Medtronic (NYSE:MDT). Ventor, a maker of aortic valve prostheses, was acquired by Medtronic for $325 million in 2009. Omrix, which develops immunotherapy products, was acquired by Johnson & Johnson for $447 million in 2008. And in April, Prolor Biotech Inc. (NYSEMKT:PBTH), specializing in longer-acting therapeutic proteins, was acquired by Opko Health Inc. (NYSE:OPK) for $480 million.

But things aren’t as rosy for some of the startups that go public, which are struggling to attract attention, according to the Ministry of Industry’s 2012 study. Investment shifted from small, up-and-coming companies to more mature and established outfits, as investors look for quicker returns.

That has made life tougher for startups, which make up the bulk of medical device companies in Israel. Some 69 percent of those companies have not yet reached the commercial stage of selling products; they're either in the seed phase (34 percent) or the research and development stage (35 percent). Most Israeli medical device companies (56 percent) employ five people or fewer.

Overall, private investors put $218 million in the Israeli medical devices sector in 2011. The Israeli government added about $40 million of public money to push the sector forward. The following year, government investment grew to $45 million, but according to Dar, the amount may fall in 2013 because of budget cuts.

“But that said, for very good technology we will find the money,” she added.

The medical devices industry in Israel also faces other challenges. Tough competition means there is significant pressure from buyers -- public and private health care providers -- on medical device companies to prove that their products are significantly better than existing ones.

Then there's President Barack Obama’s health care reform, which introduced a 2.3 percent excise tax on the price of certain medical devices sold in the U.S. by the manufacturer, producer or importer of the device. That’s a blow to Israel’s biggest buyer of medical technology.

Also, the global economy hasn’t yet recovered from the 2008 financial downturn, and the shaky European economy has left investors very cautious.

All of this just makes Meretzki’s success more intriguing. He’s bucked the trend to build four medical technology companies, the latest being Bonus BioGroup (TLV:BONS), which aims to be a global leader in the field of tissue engineering and live bone transplant. Bonus BioGroup said it will complete building its clinical facilities in Haifa this month and launch the human stage of its bone engineering research.

Meretzki highlights what is perhaps the greatest strength of Israel’s medical device sector, and Israeli startups overall: radical innovation.

Not content to rest on the laurels of his 3-D cell technology producing the growth of new blood vessels, he has set his sights on 3-D cell technology to grow human tissue.

Making Bones, Lots Of Them

The pre-clinical stage of his research has already proved it's possible to take immature mesenchymal stem cells from a patient’s fat tissue and direct their growth toward bone tissue. Meretzki points out that the research does not use embryonic stem cells, which are more difficult to manipulate and also raise ethical issues.

The bone tissue is then grown in vitro in a bioreactor system that mimics the human body, using a 3-D mold created by using CT scans and X-rays to mirror exactly the patient’s missing bone.

“Within about a month, you can get a live, three-dimensional, active bone,” Meretzki said.

“One of the nice things that we found is that the moment that you put hematopoietic stem cells -- the cells that create the blood and the immune system -- within the bioreactor next to the bone you are creating, very shortly the hematopoietic stem cells enter the live bone,” Meretzki explained.

“They home in on the bone and proliferate in the bone in the bioreactor outside the body, the same way that they would inside our body.”

The technology has the potential to handle a broad range of bone gaps resulting from trauma and bone deficiencies resulting from skeletal diseases. Meretzki’s team has grown soft bone tissue that can be injected to fill bones damaged by infection or disease.

Its unique selling point is that it is autologous bone tissue, grown from the patient’s own cells, meaning that the risk of rejection is minimal and recovery time is decreased. And it's a cheaper and less painful alternative to a bone-harvesting operation. With all these advantages, there’s a big market just waiting for the technology to become usable.

There are 2 million to 2.5 million bone transplants performed worldwide each year, according to Global Pipeline Analysis’ Competitive Landscape and Market Forecast to 2017, published in July 2011. The bone-substitutes global market was estimated at $1.9 billion in 2010 and is expected to reach approximately $3.3 billion by 2017.

To attack that market, once the development phase is complete, Bonus plans to establish manufacturing centers around the world for the production of living human bones for transplant purposes. It anticipates it can sell its products at a price higher than the bone transplant market’s current average.

Meretzki is now working on growing bone tissue with cartilage attached, which would enable joint replacements. The most significant application would be for hip replacements. If Bonus BioGroup succeeds in its research, it anticipates snagging a large share of the joint replacement market, estimated at $28 billion in 2010. It is expected to reach $32.4 billion in 2015, according to a report by U.S.-based market forecaster BCC on orthopedic implants and regenerative products.

All this is, for now, is the stuff of science fiction. But Meretzki is confident that it won’t be long until what was once far-fetched emerges as scientific fact: “I believe it will be only a few years from now.”