There are enough innovative developments in Russia
The management company Maxwell Asset Management LLC has decided to create a specialized Venture fund for investments in biotech companies. Dmitry Popov, a member of the Board of Directors of Maxwell Asset Management, told RBC Daily correspondent Olga Redichkina about the goals and objectives of the project.
– What prompted you to create a biotech venture fund?
– Firstly, the current macroeconomic situation in Russia and in the world shows that many markets have become so developed that the use of innovations is extremely important to win the competition. Secondly, we felt the interest and support of the state, which proclaimed a course for the innovative development of Russia. Thus, the availability of investment-attractive projects, the growing demand for innovations and state support for the high-tech sector of the economy, in our opinion, create all the prerequisites for the successful development of venture entrepreneurship. The fund being formed will be specialized, its investment focus will be biotechnological and medical innovation projects. For ourselves, we have identified four key markets to which the fund's investment activity will be directed: the biopharmaceutical market, the food market, the agricultural market and industrial biotechnology. All these markets have a large capacity, are growing rapidly and retain a high growth potential in the future. We are also interested in the market of medical and biotechnological equipment, and in the market of R&D services (research and development). We have established good relations with international and Russian research centers and large corporations. Our assets include specialists with many years of experience in project management in the biotechnology industry, systematic experience in setting up research and monitoring results. The biotechnological specialization of the fund's investment interests will contribute to the concentration of all resources (financial, expert, managerial) in one direction in order to use them most effectively, ensure the synergy effect of implemented projects, create a strong and recognizable brand in an innovative environment.
– It is known that only 15% of the Russian pharmaceutical market consists of innovative Russian drugs, the rest are generics. Do you intend to change this ratio?
"Not exactly. In the pharmaceutical market, 13% are Russian–made drugs, but only a few of them are innovative. Of all the medicines sold in Russia, imported and domestic, indeed, only 15% are original, and the rest are generics. Experts believe that the situation will not change in the near future, but they do not take into account that innovative companies actively attracted by venture funds will be able to present a wide range of original drugs. Russian scientists are already ready to offer a sufficient number of innovative developments, which often have no analogues abroad, but they cannot bring them to the pharmacy counter. And it's not their task. The fund being created is ready not only to provide financing, but also to provide innovators with access to all key resources – managerial, legal, informational. On the other hand, major pharmaceutical market players will be able to significantly increase the share of innovative drugs without taking on the risks associated with their development. I think this is how the problem of drug safety in Russia should be solved, when the pharmaceutical industry can and should produce original domestic drugs, and not only deal with the packaging of substances of Indian and Chinese production.
– With pharmaceuticals, in general, it is clear. And what do you intend to do in the food market?
– The food market in Russia has become critically dependent on imported raw materials, which, together with the low efficiency of food production, creates high volatility in the food market, which gives rise to ideas of administrative price regulation, etc. We believe that innovations in the food market aimed at radical intensification of food production, the creation of technologies for deep processing of raw materials, the development of original food ingredients are extremely important for the sustainable growth of the food sector of the economy. It should be understood that the era of "simple things" has ended in the food industry, when commercial success was based on good quality, original packaging and a well-conducted advertising campaign. Now diversity and nuances are important: exotic taste, therapeutic effect, differentiation of the assortment with emphasized "environmental friendliness" and the natural origin of the ingredients. All this requires new technological solutions and biological ingredients.
– And they need raw materials that need to be grown first... The interest in the agricultural sector did not arise, apparently, by chance?
– Yes, biotechnologies are present at all stages of agricultural production, the fashion for aggressive chemicalization is gradually passing, and biological drugs are conquering the market. We intend to invest in new animal feeding technologies, biological plant protection products and growth stimulants, veterinary drugs.
As for the fund's interests in the field of industrial biotechnology, these are investments in projects for the development of biological products for the extraction and transportation of oil and gas, reagents for the pulp and paper industry, for the creation of bioethanol production technology from plant biomass, etc.
– What criteria should the project meet in order for you to be interested in it?
– I will not list all the criteria, I will note the main ones: innovation should provide a decisive competitive advantage in one of the key markets, have a large potential sales market (at least $ 50 million), the internal profitability of the project is at least 45%, the fund should clearly represent the exit strategy of the project, intellectual property should be protected patents, the export potential of the product and, most importantly, the human factor are desirable – the presence of a formed team of specialists with the necessary knowledge and experience to implement the project.
– How much are you willing to invest in one company?
– The initial tranche will not exceed $ 1 million, the maximum amount of investments in one company will not exceed $ 10 million.
– How long is the fund ready to "lead" the company?
– The task of the fund is to ensure maximum return on investment by increasing the value of portfolio companies. To do this, he finances projects, the fund's specialists help develop the concept of product promotion, create a network of distribution partners, provide innovators with knowledge – how to do business, how to interact with contractors, how to scale success when it comes. However, the investment horizon is not infinite, and within five to seven years the fund must exit the invested company, either by selling a share to management or a strategic buyer, or by selling the company's shares as part of a public offering.
– Are there already applications in the fund's portfolio?
– Yes, currently there are 25 of them from ten applicant companies.
– Do you plan to fill the fund on the basis of public-private partnership, or will it be formed only by private investors?
– Maxwell Asset Management is currently taking part in the second competitive selection of a Russian Venture Company (RVC). We fully rely on the professionalism and impartiality of the RVC Board of Directors, whose meeting will be held on May 27 under the chairmanship of the Minister of Economic Development Elvira Nabiullina and at which competitive applications will be considered. If we are among the winners, the volume of the fund formed on the basis of public-private partnership will amount to about 3 billion rubles. Otherwise, we will achieve the stated goals based only on private capital.
Maxwell Asset Management LLC, part of the Maxwell Capital Group financial holding, is one of the leaders of the Russian collective investment market. The company manages 16 mutual funds, 14 of which are open-ended and designed for a wide range of investors. The net asset value of Maxwell open-end mutual funds is more than 3 billion rubles, the number of fund shareholders exceeds 16,000 individuals and legal entities. The company's own and agency network includes more than 200 points of sale in 39 cities throughout Russia. MC "Maxwell Asset Management" – twice winner of the Company of the Year award, three times – "Financial Olympus" and "Financial Elite of Russia".