The BRIC nation with the fewest people is doing its utmost to keep them healthy. A biotech revolution is gathering momentum in Russia, spurred by state investment programmes, a host of cross-border partnerships and a domestic market that international investors find highly attractive.
The government is modernizing a decaying healthcare system by building new hospitals and introducing innovative technologies. It has also taken a series of measures to stimulate private investment in healthcare. Russia’s sovereign investment funds are backing innovative industries and the government is working directly with business leaders to improve the country’s attractiveness as an investment destination. These were among the key themes discussed at the inaugural Open Innovations forum recently in Moscow.
Global Biopharm Leaders Convene in MoscowThe heads of Russian state development agencies met international investors andbusinesspeople at the first annual Open Innovations forum in Moscow (October 2012). Thepanels at the Forum concerned a range of high-tech sectors, with a particular focus onnanotechnology and biopharmaceuticals. Leading international players in the healthcare sectorattended panel discussions on the latest global trends in innovative medicine. Attendeesdiscussed new opportunities in Russia for both R&D and the production and commercialization ofadvanced biopharmaceuticals. The acclaimed life sciences investor G. Steven Burrill, whose firmBurrill & Company established a Moscow office in November, gave a keynote speech at a paneldedicated to venture investments in the pharmaceutical sector. Burrill notes the Russiangovernment’s “significant commitment to invest capital to build an innovation-driven life sciencesindustry and modernize its healthcare system” as a major factor for his expansion there.Executives from companies such as Pfizer, Sanofi Pasteur, Lentigen Co. and others were also inattendance.
Perceptive international investors have sensed the change in the landscape of healthcare andmedicine in Russia. What has changed? When it comes to high-tech, the government is backingits words with billions of dollars in investment. Life sciences and biopharmaceuticals have beencentral to the Russian government’s investment programme. Regulations have been pared downto make it easier for foreign companies with advanced technology to establish laboratories andmanufacturing centres in Russia. The government has extended its full support, often in the formof co-investment, to foreign high-technology companies seeking entry to the rapidly growingRussian market.
The Russian capital Moscow is the educational, economic and political hub of the region. It has ahuge academic and scientific establishment and a highly educated workforce: more than 241,200people are employed in research and development. Although private medicine is growing inMoscow, the government remains the largest consumer of healthcare products and all majordecisions concerning government policy on healthcare are made in the capital. The Moscow CityGovernment has undertaken major projects to transform abandoned and underutilized industrialspace in the city into world-class laboratories and manufacturing centres for nanotechnology,biopharmaceuticals and other advanced applications. The City of Moscow is offering foreigncompanies special customs and tax regimes as well as full connections to infrastructure and fullyequipped spaces in an effort to combat the outdated perceptions and stereotypes.
Skolkovo Focuses Moscow High-Tech CommunityPerhaps the most prominent government effort in the high-tech arena is the creation of a RussianSilicon Valley in the form of the Skolkovo Innovation Centre, a complex of high-technologyclusters where project participants are provided with the assistance necessary for development.More generally, Skolkovo seeks to concentrate international intellectual capital in Russia to createthe conditions conducive to technological breakthroughs. Open Innovations, which was organizedby Skolkovo along with Rusnano and other state-owned companies, can be seen as an effort tocollect some intellectual capital by bringing some of the top figures in the biotechnology fieldtogether to share their expectations on future global trends.
Skolkovo resident companies include OncoMax, a developer of new diagnostic and therapeuticanticancer agents, TheraMAB, which is researching an innovative immunotherapeutic antibodyfor personalized medicine, and Innovative Technologies, a maker of neural prosthetic devices.These are just a few examples of the many Russian innovative ventures that have already takenroot at Skolkovo. Another major investment in intellectual capital was Skolkovo’s partnership withthe Massachusetts Institute of Technology (MIT) to found a university and life sciences incubator.The MIT Skoltech Initiative aims to integrate education and research and establish a culture ofinnovation and entrepreneurship within Skolkovo. Biotechnology will be a central research area ofthe institute, which will help attract and retain world-class talent in Moscow.
Rusnano Brings US Biopharm to RussiaSkolkovo is not the only Russian government-backed vehicle taking the lead in the future of thelife sciences industry. Rusnano, a 5 year old sovereign wealth fund also capitalized at $10 billion,has a mandate to make Russia a leader in nanotechnology. Rusnano has recently been activelydrawing some of the brightest American biopharmaceutical firms to Russia and helped them toestablish R&D centres outside Moscow.
In November, the Russian subsidiary of US drug developer Selecta Biosciences, Inc. becameRusnano’s first foreign portfolio company in the pharmaceutical sector to open a research centrein Russia. Selecta is developing biopharmaceutical products based on the tSVP nanotechnologyplatform, which was invented at MIT and Harvard Medical School. It is currently pursuing a firstin-class vaccine for smoking cessation and relapse prevention. Selecta’s research centre islocated in Khimki, just outside Moscow, at the ChemRar High Tech Center.
Selecta clearly has seen Russia’s promise for the biopharmaceutical industry. Its President andCEO, Dr Werner Cautreels, has left Massachusetts to live in Moscow and run the Russiansubsidiary. Dr Cautreels said Selecta RUS LLC will “incorporate the needs of patients inemerging markets into our product profiles.” Russia is clearly not ancillary to Selecta’s plans, butrather a major trajectory for the future growth of the company. Selecta is further supported by afinancial commitment from Rusnano, which co-invested $25 million in Selecta in October.Rusnano committed the same amount to BIND Biosciences, Inc., another US company, in roundsof financing $94.5 million for the two biopharmaceutical developers. BIND and Selecta will usethe funds to create innovative drugs based on nanomedicine platforms from MIT and HarvardMedical School. Both companies established subsidiaries in Russia to access its scientific andclinical expertise and position themselves in the domestic market.
Life Sciences Partnerships with DomainRussia is generating excitement among international investors in life sciences andpharmaceuticals. In December, Rusnano joined Domain Associates, a US venture capital firmwith an exclusive focus on life sciences, to invest $93 million in three advanced pharmaceuticaldevelopers, Marinus Pharmaceuticals, Inc., Lithera, Inc., and Regado Biosciences, Inc. Marinusis developing a drug for the treatment of epilepsy on the basis of a patented form of the advancedmedication ganaxolone. Lithera is the developer of a pharmaceutical to combat thyroid-relatedexophthalmia, a chronic disease that can result in loss of vision and presently can be treated onlythrough surgery. Regado Biosciences is pioneering a new anticoagulant system that willdrastically reduce the time needed to conduct heart surgery, including such procedures ascoronary revascularization and implantation of the aortic valve. These companies — and apipeline of others that are expected to benefit from Rusnano-Domain funding — are awardingintellectual property rights to their technologies in Russia and the CIS to NovaMedica, a newDomain- and Rusnano-backed Russian pharmaceutical company.
Rusnano first entered into an investment partnership with Domain Associates in March 2012.They agreed to jointly invest in emerging life sciences technology companies with the aims offostering the transfer of technology into Russia and establishing manufacturing facilities there.The first beneficiary of the $760 million investment project was CoDa Therapeutics, the developerof Nexagon, a pharmaceutical for the treatment of venous leg ulcers. Rusnano, Domain otherinvestors committed nearly $40 million to CoDa, which will eventually establish productionoperations in Russia.
Brian Dovey, Partner at Domain, said that around 80% of pharmaceutical products in Russia arecurrently imported. "Most countries go from a cycle of importing products, to buying genericproducts, to creating unique products," he said. This deal leapfrogs that cycle and means Russiawill be able to produce its own unique products, he said. Rusnano intends to “spur modernizationof the Russian healthcare market” by providing Russia, along with Eastern European and theCommonwealth of Independent States countries, with next-generation pharmaceuticals, medicaldevices and diagnostic products.
Soviet Auto Plant Transformed into Hi-Tech HubThe former Moskvitch automobile factory in southeastern Moscow is associated with Soviet-eracar that went out of production in the 1990s and most would prefer not to remember. The groundsand buildings are owned by the City of Moscow, which has decided to revitalize the facilities asthe new centre of innovative industry in Russia. The location, renamed Technopolis Moscow, isintended as a business base with optimal institutional, organizational, legal and technologicalconditions. Moscow Mayor Sergei Sobyanin is personally overseeing the development ofTechnopolis Moscow and is striving to make it one of the most attractive locations globally bothfor Russian innovative projects and for international companies engaged in technology transfer.More than 220,000 square metres of industrial space has been fully renovated and modernized.Another 200,000 square metres of industrial, office and retail space will be opened by 2014. TheTechnopolis offers a comprehensive technical infrastructure and a dedicated customs post,eliminating the major bureaucratic headaches faced by foreign industries operating in Russia.Later this year, it plans to introduce special tax privileges for resident companies in target sectors.
Pharma Reconsiders RussiaWith the weak global financial environment leading investors to seek havens from risk, youngercompanies in need of funding are beginning to look outside traditional sources. New players inemerging markets are filling the gap by supporting forward-looking enterprises. Unlike itsemerging market peers, Russia has a long and distinguished tradition of advanced scientificresearch, especially in the theoretical sciences.
Western observers are increasingly recognizing that the Russian government is serious aboutdeveloping its domestic high-technology and science-related industries, both by retainingentrepreneurial and scientific talent in the country and by bringing foreign companies to produceadvanced products and establish research centers in Russia. It has already committed millions ofdollars to biopharmaceutical companies and has billions set aside for further investment.Government institutions have been established to make things easier for foreign technologycompanies. For a riddle, wrapped in a mystery, inside an enigma, that is quite clear.
Source: pharma-mag.com