UPDATE 1-Rusnano, US fund to invest $760 mln in pharma venture

Tue Mar 6, 2012 8:33am EST

* Rusnano, Domain to invest up to $760 million

* Investment to go into U.S. drug firms, Russian facility

* To establish manufacturing facility in Russia

* Deal to boost development of pharmaceuticals in Russia

By Megan Davies

MOSCOW March 6 (Reuters) - Russian state technology firm Rusnano is teaming up with a U.S. venture fund to invest around $760 million in a number of U.S. healthcare and pharmaceuticals firms, establish a manufacturing facility in Russia and bring new drugs to the Russian market.

As part of the deal, Rusnano and life sciences technologies investor Domain Associates are planning to each invest $330 million in about 20 US-based healthcare technology companies.

Rusnano, a $10 billion technology fund, and Domain, with 2.4 billion of capital under management, will also fund a pharmaceutical and medical device manufacturing facility in Russia.

"Russia has a commitment from the top down to pharmaceuticals and hi-tech," said Brian Dovey, partner at Domain Associates, adding that he was attracted to Russia because it is one of the fastest-growing pharmaceutical markets in the world.

Rusnano and Domain will target U.S.-based healthcare firms that develop products in areas that could have applications for patients in Russia. They did not disclose a list of target firms.

The new manufacturing facility in Russia will seek exclusive rights to make and market products created by the U.S. portfolio companies in Russia and the former Soviet Union. They are still considering where to site the plant, Domain's Dovey said.

Russian patients will benefit from access to new medicines as a result of the partnership, Domain's Dovey said.

The groups of drugs which will be produced will be mainly in the sphere of oncology, cardiology, wound treatment and ophthalmology, also infectious diseases, said Leonid Melamed, former head of oil-to-telecoms group Sistema and mobile phone firm MTS, who will develop the project.

"The deal will allow access to the most requested drugs from Russian patients, by investing, and getting the ability to get the rights to manufacture, sell and distribute the drugs in Russia and the CIS (a grouping of former Soviet Union states)," Melamed said. "It is based on the requirements of the Russian healthcare system."

The drugs will come from Domain's portfolio and have been patented and are in late trials, Melamed said.

Dovey said that around 80 percent of pharmaceutical products in Russia are currently imported.

"Most countries go from a cycle of importing products, to buying generic products, to creating unique products," he said. This deal leap-frogs that cycle and means Russia goes straight from importing to creating unique products, he said.

MODERNIZATION DRIVE

Rusnano's Chief Executive, Anatoly Chubais, the architect of Russia's post-Soviet privatizations, said in a statement that the partnership would make a "strong contribution toward driving innovation" in the Russian pharmaceutical industry.

"At present Rusnano's portfolio has approximately 20 percent of its holdings in projects in medicine," Chubais said. "We are working hard to spur development of innovative technologies in the Russian medical industry."

Rusnano aims to invest in promising hi-tech companies and help the Russian economy diversify from its energy-heavy base. The state owns 100 percent but aims to sell 10 percent of that.

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