Dr. Sobhi Basheer is planning a Nasdaq IPO : Israeli Arabs can make more than hummus

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The Enzymotec founder discusses the nutritional supplements company, which is planning a Nasdaq IPO.

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 Dr. Sobhi Basheer

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/ By Gali Weinreb / 

Even in his student days, Dr. Sobhi Basheer had an international orientation. He did his doctorate in Switzerland, and his post doc in Japan. “That was one of my best years, ” he recalls. When he returned to Israel, he set out on a track that led him to become a successful entrepreneur who will shortly see a company he founded listed on Nasdaq.

The distance that Basheer has travelled, achieving extraordinary success with his first company, would be no mean feat for any entrepreneur. It is even less to be taken for granted for someone who comes from Israel’s Arab community, in which there are hardly any entrepreneurs, or appropriate education. Nevertheless, it seems that entrepreneurship suits him. Since leaving Enzymotec Ltd., he has founded another two companies, the newer of which is already at the sales stage.

From Tokyo to Upper Nazareth

After returning from Tokyo, and after failing to find a post in the Technion’s chemistry department, Basheer joined The Galilee Society R&D Center, and developed the knowledge he had acquired in his academic studies in the field of fatty acids (lipids) processing.

It began with olive oil. “We thought that this was a nice material to work with, ethnic and local, ” he recalls. The aim was to produce margarine enriched with a range of healthy substances, but Basheer and his group gradually realized that the real money was in nutritional supplements. Margarine, much as it might be upgraded, is a basic commodity, whereas for nutritional supplements that become popular, people are prepared to pay, sometimes more than for a drug.

Enzymotec was founded in Upper Nazareth, a long way from the Israeli high-tech scene. “It really was a wilderness as far as advanced industry was concerned, ” he says. Only later on, when the company received substantial investment, did it move somewhere a little more central, Migdal Ha’emek.

The company was set up as part of the Naiot Venture Accelerator, which operates out of Yokne’am, and which in those days was controlled by the Ofer Hi-Tech (now XT Investments), a subsidiary of XT Group Ltd. (formerly Ofer Holdings Ltd.) Enzymotec is one of the most successful companies to have come out of the incubator. “We received very good support from Guy Yachin, then CEO of the incubator, who persuaded the Ofer Hi-Tech fund to invest in us even after the incubator period. The person who particularly believed in us was Daniel Plotkin, who was chairman of the incubator. He was someone with a great deal of influence in the industry, and his support helped a lot. This whole field was in its infancy, and you had to believe in it. The Millennium fund also invested in us after a five-minute conversation.”
“Globes”: They did things a little differently in those days.

“Yes, today you run around for years to obtain investment like that, but Zwi Vromen, who was a partner at Millennium Material Technologies Fund, knew that this area was hot, because he came from the chemical industry and knew what was lacking there.
“At the same time as Millennium, Galam Group, which gave us immense support as an industrial company that had dealt in enzymes for many years, also came in.” Over the years, Enzymotec’s management has insisted on regarding the company not as a biotech start up, but as an industrial company, and this apparently is the source of that approach.

“Ariel Katz, who is still CEO, joined as CEO in 2001. He came with very extensive experience in the chemical industry, and also provided what we lacked in product marketing.” Enzymotec’s chairman is XT Investments CEO Yoav Doppelt.
A growing market

“From the company’s very first day, its flagship product has been OPO, a lipid that is an ingredient in infant formula. Only one company in the world knew how to produce it – Unilever – and it had a monopoly until we came along and succeeded in producing it as well, in an enzymatic process, and we started to compete with them, ” Basheer relates.

“The product was developed in collaboration with a Danish-Swedish company, and immediately became sought after and sold in every corner of the world, and it enjoys very high demand to this day. This is a fat exactly as in mother’s milk, different from all the fats found in other animals and plants. This market, which we entered in 2001, is still growing.”

A second product was developed for improving adult memory and attention and concentration in adults and children. “This is a market we entered when it was really just getting started. The substance was manufactured in the past by other companies from cow brains, and after mad cow disease was discovered, they stopped. Today, there are only three companies that produce it.”

Like all of Enzymotec’s products, these two products underwent clinical trials, which the company volunteered to carry out, as there is no obligation to conduct clinical trials on products sold as nutritional supplements. These trials enabled the company to beat competitors when it came to persuading food companies to choose its product as an additive to their foods. It now hopes that the general public will also understand the importance of clinical information for nutritional supplements as well, and will prefer its products.

“Another unique product for which we were the first to conduct quality clinical trials is a blend of sterols, an ingredient that competes with cholesterol for uptake from the digestive system to the blood system, and reduces both the absorption of cholesterol in the bloodstream, and the concentration of triglycerides.” Today, the product is marketed by Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) as a substitute or supplement for statins, cholesterol reducing drugs.

“These three products were developed by 2003, and I believe that they are also the future of the company at least for the next twenty years, ” Basheer says.

Basheer sold his stake in Enzymotec in 2005. Market sources say that he was later angry at XT Investments and other Ezymotec shareholders over the sale, because they acquired his stake cheaply, and concealed the company’s true condition from him. He says that, in retrospect, the claim was incorrect. “Who says that I did not do well? I made a good exit, within a short time. Many entrepreneurs fail to do this.”

After leaving Enzymotec, Basheer served as a consultant for chemical production processes at High Technology Lipids Ltd. (HTL), which develops nutritional products for premature infants, and later co-founded TransBiodiesel Ltd., which uses immobilized enzyme-based biocatalysts to convert lipids for production of first and second generation biodiesel. “Biodiesel reduces pollution, but its production process is still polluting, ” he says. “We’re the only ones who produce biodiesel with a non-polluting process.”

TransBiodiesel was also founded at an incubator, LN Green Technological Incubator, owned by Altshuler Shaham Ltd. and Zeev Bronfeld. B. Gaon Holdings Ltd. (TASE: GAON), Israel-United States Binational Industrial Research and Development Foundation (BIRD-F), and the Massachusetts-Israel Innovation Partnership (MIIP) have invested $2 million in the company.
“We already have sales all over the world, there are small pilots, and even large factories which use our enzymes, ” says Basheer.

Will TransBiodiesel be the next Enzymotec?

“I hope to surpass Enzymotec.”

You are without question one of the most successful Arab-Israeli entrepreneurs. Are you trying to help others?

“I try to help as many Israeli-Arab entrepreneurs as possible, but I do not focus on that. I am not trying to brand myself as an Arab entrepreneur. People don’t invest in technology because the entrepreneur is an Arab, and they don’t avoid investing because the entrepreneur is an Arab. Business is business.”
Do Arab entrepreneurs have a harder time?

“Yes, absolutely. Until now, there has been little awareness among most of the Jewish community about what has emerged from the Arab community; maybe hummus? Maybe broad beans? Many people I meet in Tel Aviv tell me, ‘You’re from Shfaram? It has good hummus’.”

Are you involved in the Shfaram community?

“Not at all. I have almost no connection with the community. 90% of our sales are overseas. We sell to two customers in Israel, one of which is Rafael Advanced Defense Systems Ltd..”

Do they want to use your product in missiles?

“No, of course not! It’s for transportation. The whole world is interested in biodiesel.”

How do you feel that a company you founded will be listed on Nasdaq?

“It feels good. Despite all the problems I had on the way, it was worth it.”
Published by Globes www.globes-online.com

Read More About Enzymotec :

Enzymotec publishes Nasdaq IPO prospectus