The Thinking Behind Domain’s $760M Life Sciences Deal in Russia

Xconomy San Diego — 

The partnership that the life sciences venture firm Domain Associates and the Russian state technology firm Rusnano disclosed yesterday began almost two years ago, at a time when the U.S. financial crisis was especially bleak.

Domain partner Brian Dovey says he initially conceived of the alliance as a way to tap a new and substantial source of capital for the firm’s portfolio of life sciences companies. “In the beginning, that was kind of the driving force,” Dovey told me last night. “But the more I’ve gotten into it, the more I see the opportunities in developing a medical products company in Russia.”

Domain, which maintains offices in San Diego and Princeton, NJ, and Rusnano, a Moscow-based nanotechnology firm owned by the Government of the Russian Federation, agreed to work together to invest as much as $760 million on both sides of the globe. The deal is intended to provide additional capital for Domain-backed startups in the United States, and to jointly establish a drug and medical device manufacturing facility in Russia.

The agreement calls for Rusnano to invest on a 50-50 basis with Domain and its venture partners in roughly 20 U.S. life sciences companies developing a host of new drugs, medical devices, and diagnostic technologies. Most of the investments would provide crucial late-stage funding for companies already in Domain’s portfolio, although Domain would present Rusnano with investment opportunities in a few early stage deals as well. Either way, Rusnano has agreed to match the amount invested by Domain and its VC partners.

Under a separate-but-related agreement, the startups backed by Domain and Rusnano would grant technology licenses to a manufacturing facility the partners plan to jointly establish somewhere in Russia. The Rusnano plant will make and sell “advanced therapeutic products,” focused chiefly on heart disease, cancer, infectious diseases, wound treatment, and eye disease and target markets throughout Russia, the Ukraine, Belarus, and other members of Russia’s Commonwealth of Independent States.

Russia doesn’t currently have much indigenous pharmaceutical capability, and Dovey estimates Russia now imports … Next Page »

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