Israeli Life Sciences Investments Plunge 40% in 2025 Amid Geopolitical Headwinds, AI-Driven Drug Development Emerges as Bright Spot
核心洞察
Private investment in Israeli life sciences fell to a five-year low of approximately $1.6 billion in 2025, with the average deal size dropping below $10 million.
Medical device investment declined more than 60%, while biomed remained relatively stable and showed greater resilience to geopolitical shocks.
AI-driven drug development is a growing force, with about 30 Israeli companies operating at the intersection of AI and pharma, supported by roughly 70% receiving Israel Innovation Authority (搜索) backing.
Private investment in Israeli life sciences companies dropped 40% in 2025, falling to its lowest level in five years, according to an annual report published Sunday by the Israel Advanced Technology Industries Association (搜索) (IATI), the Israel Innovation Authority (搜索), and PwC Israel (搜索). The decline follows a year in which the sector had posted a 25% recovery, underscoring the volatility facing one of Israel's key technology sectors amid ongoing geopolitical uncertainty.
Approximately $1.6 billion was invested in Israeli life sciences companies in 2025, with more than 90% of the total coming from private sources. The average deal size continued to shrink, falling below $10 million.
Diverging Fortunes: Biomed Holds Steady While Medical Devices Tumble
The report painted a sharply divided picture across subsectors. Investments in medical devices fell by more than 60%, while the biomed sector remained relatively stable and demonstrated greater resilience to geopolitical shocks. Biomed companies account for roughly 30% of the sector's approximately 1,800 active companies but employ more than half of its 81,000 workers.
"The main message emerging from the report is that the foundations of the industry are strong," said Karin Mayer Rubinstein, CEO and president of IATI, who described the current period as "one of the most complex and challenging periods it has ever known," citing the security situation, geopolitical uncertainty, prolonged military reserve duty, and global competition for capital.
Public Markets and Exports: A Tale of Two Channels
Public-market fundraising weakened dramatically. Israeli life sciences companies raised only about $115 million on U.S. stock exchanges in 2025, a decline of more than 80%. No new life sciences companies held IPOs on the Tel Aviv Stock Exchange, and total fundraising there was negligible. Most public Israeli life sciences companies use U.S. markets as their primary funding source, and approximately 40% of those traded on the Tel Aviv Stock Exchange maintain dual listings on Wall Street.
Exports, however, remained a source of stability. Israeli life sciences companies exported approximately $1.7 billion in pharmaceuticals and $3.3 billion in medical equipment in 2025, figures consistent with 2024 levels and recent years.
AI in Drug Development Gains Traction
The report highlighted artificial intelligence as an increasingly important force in Israeli health-tech. Approximately 30 Israeli companies now operate at the intersection of AI and drug development, with roughly 70% of them supported by the Israel Innovation Authority (搜索). Globally, about 12% of recent pharma-biotech collaborations are AI-driven, with an aggregate deal value of approximately $30 billion.
In 2025, the Israel Innovation Authority (搜索) invested approximately NIS 560 million in health-tech, representing about 29% of its total investments. Its Startup Fund allocated more than 45% of its investments — approximately NIS 250 million — to health-tech. The authority also supported two venture capital funds specializing in life sciences through the Yozma Fund.
Dror Bin, CEO of the Israel Innovation Authority (搜索), emphasized the country's strategic position. "Israel today stands at the forefront of the global medical innovation revolution. The combination of scientific excellence, breakthrough entrepreneurship, a high-quality healthcare system, and advanced capabilities in artificial intelligence creates an exceptional opportunity to develop solutions that will change the way health is diagnosed, treated and managed," Bin said.
In 2026, the authority and the Health Ministry launched a regulatory pilot to evaluate autonomous AI systems in healthcare, signaling a forward-looking regulatory approach to emerging technologies.
M&A Activity Signals Enduring International Interest
Despite the funding headwinds, merger and acquisition activity remained a bright spot. The report noted that 2025 marked the sixth consecutive year in which at least one acquisition of an Israeli life sciences company exceeded $500 million. Omer Gavish, life sciences leader and partner at PwC Israel (搜索), acknowledged the challenging fundraising environment while pointing to sustained international interest.
"We saw a decline to levels we have not experienced in the past five years, and an average deal size that fell to below $10 million. However, this year as well, we saw several merger deals amounting to hundreds of millions of dollars, alongside many transactions at lower amounts, which validate the interest of international companies in the innovation of Israeli companies," Gavish said.
He added that a survey conducted among funds indicated "cautious optimism toward 2026, with expectations of recovery or a return to growth, and together with the maturation of the AI field and investments in national infrastructure, the foundation for continued growth exists."
Geographic Distribution and Workforce Stability
Tel Aviv remained the leading hub for life sciences companies, hosting 310 firms, followed by Rehovot and Ness Ziona with 120, Jerusalem with 112, and Haifa with 83. The number of active companies remained stable, and the beginning of 2026 saw a company formation rate similar to that of the previous two years, suggesting that the entrepreneurial pipeline remains intact despite funding pressures.
Mayer Rubinstein noted that IATI is working with the Finance Ministry, the Israel Tax Authority, the Israel Innovation Authority (搜索), and other government bodies to improve Israel's competitiveness and encourage startups to incorporate and remain in the country. The weakening dollar has compounded challenges for Israeli companies whose revenues are often dollar-denominated while expenses, particularly salaries, are paid in shekels.