Poalim Capital Markets estimates functional genomics will become the principal growth engine of Israel's biotechnology industry.

Functional genomics process genetic data in an effort to define the role of certain genes for purposes of developing medical treatment drugs and diagnostic products.

According to Micha Selya, biotechnology analyst at Poalim Capital Markets, the field of pharmacogenomics, the pharmaceutical application of functional genomics, can provide breakthrough in the solution of many problems pharmaceutical companies are faced with today.

Considering the average amount of time required for the development of a treatment drug is 14 years, and the average cost of the development is $500 million, pharmaceutical companies are constantly searching for shorter, more efficient development methods.

The key word for functional genomics companies seeking financing over the next few years will be validation, since most pharmaceutical companies focus on technologies and discoveries already validated.

Selya says there are about 20 functional genomics companies operating in Israel at the moment, 14 of which develop new drugs. He believes the field of bio-informatics, which builds systems for analysis of genetically related data, may grow substantially in the next 3 to 5 years.

The necessary components for the development of bio-informatics in Israel are all there, says the analyst, from professional information technology, computer sciences and algorithms personnel to world-renowned medical faculties. He therefore foresees rapid growth for the industry in the next few years.

"Israel has the potential to become world leader in the field of functional genomics in general, and more specifically in the field of bio-informatics. The availability of engineers and programmers ejected by the hi-tech industry offer biotechnology firms the chance to grow and evolve," he believes.

Selya criticizes the companies for not properly marketing themselves to the investors who are lacking scientific expertise, and as a result refrain from investing in this academically complex field.