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Russian start-ups learn their commercialization lessons in US as bilateral business relations weather political crisis

16 May '14
Oleg Kouzbit, Online News Managing Editor

With U.S.-Russia political relations at their lowest ebb in decades American and Russian businesses still keep pushing for sustainable collaboration and an uninterrupted flow of technology around the world. An example to watch closely is the stepped-up region-to-region interaction between biomedical and IT start-ups from the Volga area and the business and academic circles of the State of Maryland. The widening and enhancement of the U.S.-Russia Innovation Corridor, a bilateral initiative aimed at strengthening university-based research and entrepreneurship, made it possible to organize in late April a two-week field trip to the U.S. by the young companies from Russia’s Nizhny Novgorod and Perm which has helped the start-ups fine-tune their U.S. market entry plans and look at their products from a costumer viewpoint, perhaps the most valuable result of the collaboration to date.

Start-ups from the Lobachevsky State University of Nizhny Novgorod (UNN) and Perm National Research Polytechnic University (PNRPU) traveled to the University of Maryland (UMD) on April 21-May 2 as part of the U.S.-Russia Innovation Corridor (USRIC). The early stage companies comprise the second cohort of USRIC participants since UMD and UNN signed a Memorandum of Understanding in April 2013 to deepen ties in the biomedical industry.

The U.S.-Russia Innovation Corridor is now a one-year-old initiative of the Enhancing University Research and Entrepreneurial Capacity (EURECA) program. The University of Maryland (UMD) and the University of Nizhny Novgorod (UNN) are founding partners in EURECA, with cooperation and support from the State of Maryland and the government of the Nizhny Novgorod region.

USRIC advances region-to-region, industry-based partnerships in innovation, commercialization, and entrepreneurship by offering business development services, networking, and assistance for Russian universities and start-ups looking to accelerate on a global level.

This time, six young biomedical and IT companies participating in USRIC brought to the U.S. a number of potentially cutting-edge technologies stemming from years of painstaking research in their respective areas. These included:

In Vitro Biotech Center LLC, a microcloning process for rare orchid tubers for medicinal application;

Crox-NN LLC, an adaptive radiation control module for mammography;

Radio Lab LLC, a software complex to simulate 3G/4G/4G+ wireless communications systems;

Tectum LLC, a new hemostatic agent for use in external hemorrhaging;

OOO FM Diagnostika, a method of monitoring and assessing microvascular tone regulation in small lab animals;

ELT Center, a system to monitor and control electron beam welding.

A key facilitator for the entire program was the University of Maryland’s International Incubator (MI2). Cooperation with MI2 opened doors for the Russian innovators to study IP protection and commercialization opportunities in the U.S. market in depth during special training sessions.

The Nizhny and Perm start-ups discussed the creation of successful technology ventures with the Maryland Technology Enterprise Institute (Mtech), a program that connects Maryland companies with UMD resources.

The Russian innovators also toured BioMaryland, a center that connects life sciences companies and researchers with potential capital sources, partners, and clients.

Learning to fly

Throughout the two-week visit, the U.S.-Russia Innovation Corridor arranged meetings with the primary drivers behind the USRIC program, most notably the U.S.-Russia Foundation (USRF), as well as investors and industry leaders including Johnson & Johnson, BioHealth Innovation, Abbott Laboratories, GE Healthcare, and Medtronic. The delegation toured 1776, Washington’s premier start-up incubator, and discussed entrepreneurship trends in both the U.S. and Russia.

Meetings, talks and extensive networking helped the Russian researchers and entrepreneurs gain priceless knowledge regarding possible do’s and don’ts of entering the highly competitive U.S. market. Some of the start-ups found they were right on target with their overall commercialization strategies and only a slight tweaking was needed; others have now opted for a considerable modification of their prior plans to fit the actual market reality they faced in the States.

For example, Lavr Kryukov, the director of UNN’s In Vitro Biotech Center, told Marchmont News his meetings with potential investors and market players in the U.S. had corroborated the company’s commercialization strategy. According to him, the trip helped In Vitro, which is focused on the medical aspects of orchid microcloning technology, pinpoint relevant overseas stakeholders interested in this kind of approach and explore problems that the market segment currently faces. “It was useful to listen to an outside opinion and have new applications for our technology recommended,” Mr. Kryukov said. Learning the nuances of operating in the U.S. market was also a valuable outcome of the program, he pointed out.

The CROX-NN and Tectum projects found no reason to reshuffle their market entry strategies, either; but better understanding their potential partners and how to interact with them was in itself a result of great importance.

Slight changes have been made nonetheless. According to Alexander Petukhov of CROX-NN, he and his team have come up with the decision to make some corrections in their roadmap for commercialization, including a new approach to inception-phase collaboration with U.S. medical centers in conducting preclinical and clinical trials for their modules for mammography scanners. The trip gave the company a go-ahead in using the equipment of these centers to test-run and tweak the technology—a key positive consequence of the program, Mr. Petukhov emphasized.

Another USRIC participant from Nizhny’s UNN, Tectum developing a next gen hemostatic agent, discovered the urgent necessity to step up technology-related IP protection and patenting processes as a result of the trip. “We quickly realized that negotiating with the majors without ironclad protection would lead to nowhere,” Tectum CEO Mikhail Gorshenin said in an exchange with Marchmont News. It’s premature to talk about a serious change in strategy, he added; but with fresh market data under its belt the start-up is zeroing in on “certain changes anyway” as the project unfolds.

To the two start-ups from Perm’s PNRPU, the USRIC program has also become a market ‘eye opener.’ Dmitry Trushnikov of ELT Center said the trip has caused his company to revise its pre-USRIC estimation of the U.S. market for its system to monitor and control electron beam welding.

Before the trip, manufacturers of electron beam equipment were viewed as the primary partners, and the local market was being assessed based on annual output data. In the U.S., ELT Center found out that in addition to making new machines, the manufacturers actively engage in upgrading existing ones and also offer their customers new technologies on a regular basis, a factor that dramatically augments the potential market and concomitantly increases the cost of patenting.

The FM Diagnostika team has brought from the U.S. a renewed step-by-step strategy which the developers hope will enable a successful U.S. biomed equipment market entry with their Microtest microvascular tone regulation technique for animal tests.

According to Alexander Mayorov, an associate PNRPU professor and one of the Microtest developers, their new course of action now calls for the setup of a U.S.-registered start-up, a move seen as an important fast track in obtaining Food and Drug Administration (FDA) approval, followed by the securing of IP protection and the licensing of their technology.
Oleg Kouzbit, managing editor: “I’m glad you join us here and take The Bridge walk for Marchmont’s weekly review of the Russian regions’ innovative present and future. Stay close and you’ll find out more of how Russia is bridging the existing gap between its researchers and businesses.”
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