Alexander Kovalenko is the chief executive of IBMED

In what may sound like a cheap newspaper story, the idea for IBMED was conceived at a party back in 2001 at the summer house (dacha) of Alexander Kovalenko. At that time Mr. Kovalenko's family and friends got together to celebrate a special occasion. During late night discussions, Mr. Kovalenko's sons cited Bill Gates and lamented the lack of suitable business opportunities in Russia at that time. But Kovalenko had a different opinion -- he pointed the young men to the example of Gennady Sukhih, an old friend and member of the Russian Academy of Medical Sciences (RAMN), who was engaged in stem cell research. "Here is a real chance and new opportunity -- stem cells! That will overshadow Bill Gates."

Throughout his life, Alexander Kovalenko proved to be a gifted businessman (if we may apply this label to someone who worked in Soviet state-owned enterprises). Before 2001 Mr. Kovalenko was the Deputy Director of the Chernobyl Nuclear Power Station (after the 1986 disaster), responsible for nuclear security at the site. Mr. Kovalenko's workers built an efficient structure that prevented personnel working near the site from being exposed to excessive radiation. Mr. Kovalenko then tried a new venture with nanotechnology, but the technology proved to be immature. At the time of our story, Kovalenko was a prominent leader of the International Foundation for Assistance to Chernobyl Victims. A number of well-known world leaders have supported the work of the Foundation including former Soviet President Mikhail Gorbachev.

Mr. Kovalenko being interviewed

Since its inception in 2002, IBMED has attracted top Russian medical scientists. Currently IBMED is an international research, development and applied medicine company specializing in the development of stem cell therapy and its applications, principally focused on differentiation of growth factors of stem cells and associated technologies. IBMED presently has a substantial portfolio of medicinal products and patent applications in stem cell fields. These include technologies to produce stem cell products for use in treating a number of diseases. In fact I gave a general outline of company's business in my post of March 1, 2007.

IBMED has a very appealing story to tell about its applied medicines. As to its current patients', Mr. Kovalenko did not elaborate. However he did mention his company's association with Vladimir Bryntsalov, a Moscow pharmaceutical tycoon (you may read more about Mr. Brynstalov's support for stem cell research in this Moscow News article).

What differentiates IBMED from its peers?

(A) Innovative scientific research in stem cell therapy;
(B) A proven track record of sales of IBMED products in Europe;
(C) An efficient and operational scale clinical unit

On the topic of America's role in the global stem cell marketplace, Mr. Kovalenko was blunt:

"The Americans lost a lot of time in their fight with (President) Bush. They lost substantial momentum in scientific stem cell research. I guess a great input is being made by Governor Arnold Schwarzenegger. However, in these research activities it is next to impossible for one country to become a leader. Only international cooperation may bring success."

From a business point of view, IBMED remains a small venture project. But this venture already has some good things in it stock. IBMED has developed about 70 preparations with 15 of these ready for immediate sale (and a few have already been approved for conditional sales in America by the U.S. Food & Drug Administration). You can find a list in English of the products currently available on the company's web-site. Looking to the future, there is a virtually unlimited list of applications for synthetic stem cells, including dietary supplements, cosmetics, sports, veterinary medicine, etc.

Mr. Kovalenko concluded the interview by stating his objective: " I am looking for strategic investor that may help me to set up proper sales mechanism, who would assist IBMED in its medical treatment management, and who would bring high class business expertise." The company is now preparing for an initial public offering and possible private placement. The money is required to straighten out all appropriate legal and intellectual property issues and expand development of its new medicinal products.

Dr. Yuri Bloshansky is the Chief Physician and Director of IBMED

During our visit to IBMED, we also interviewed Yuri Bloshansky, the Chief Physician, and director of the company. In addition to his corporate responsibilities, Dr. Bloshansky is a distinguished professor of medicine. He told us:

"Presently stem cell therapy may be compared with analog/digital communications systems. Current conventional therapy is an obsolete analog system. In a few years it shall be transformed to a new advanced "digital stage". We should not treat a man, rather a cell."

This is a competely different approach to medicine that is now rapidly expanding. Within 4-5 years conventional medicinal products will be replaced with new ones targeted towards groups of stem cells, and these cells will cure a lot of diseases.

As an example Academician Bloshansky cited IBMED's success in the treatment of cancer patients. While the stem cell injections do not cure cancer, they substantially reduce pain and side effects from chemotherapy. Right now IBMED's stem cell therapies help its patents better withstand such illnesses as multiple sclerosis, autoimmune diseases, Parkinson's disease, pancreatic illnesses, diabetes, and impotence. Just recently IBMED was approached by German doctors to introduce stem cell methodology in the treatment of "beer hepatitis", an ailment that is widespread in Germany.

Academician Bloshansky was very direct about his objective in giving the interview -- "we need money to expand our services, and of course scientific research -- to make people around the world live longer, happier lives." This is a good example of the way Russian scientists seize an opportunity and develop new innovative projects. We hope that within a few years IBMED will make Russia a global leader in developing stem cell therapies.

You can read the original post at Vladimir Kuznetsov's blog, Equity Financing in Russia. The views expressed in this post and on his blog are the personal opinions of Vladimir Kuznetsov, and are reproduced here solely for educational purposes. To read more Russia Blog posts about Russian capital markets, click on the finance section or type www.russiablog.org/finance in your web browser.

You can also read below an updated version of my previous post about IBMED. You can read original post at Equity Financing in Russia. You can also read my previous thoughts on the stem cell therapy industry in Russia here. Based on what I have seen, IBMED is currently the leader in Russia in this innovative sector of biotechnology. - VFK

Part 4 -- Russia Producing a Global Breakthrough in Stem Cell Research

In early March 2007 BusinessWeek published an article ("Biotech IPO's Iffy Prognosis") analyzing the recent IPOs and acquisitions of small biotech companies. Here are the main points:

- The biotech IPO environment has become more cautious, even as the environment for biotech acquisitions has blossomed

- Larger pharmaceutical companies have been more than willing to assume the risk associated with drug development and approval, and view the acquisition of newer biotech companies as an effective way to "outsource" their research while leveraging their experience in bringing new drugs and therapies to the market

- As is typical of biotechs going public, they are usually money-losing companies without a clearly established product

- Biotech IPOs serve as a cash injection for drug development, as opposed to a payday for investors

- Big pharmaceutical companies, flush with cash and needing to fatten their product pipelines, have produced a compelling alternative to the public markets: Recently they've been buying companies for far more than the fledgling outfits could raise by going public

- Big Pharma can pick off smaller companies, denying investors the opportunity to make pure-play investments in some of the best small biotechs

In this post I would like to introduce you to one a small Russia-based biotech company that is very attractive to growth-oriented investors' tastes. This applied medicine company specializes in researching and developing stem cell therapies. For this company, there are two major areas of concentration: scientific research to develop new therapies, and selling stem cell therapy preparations.

Contrary to the notion that all stem cell companies around the world are losing money, this one is actually profitable, and has a proven track record of commercializing its products through international sales in Europe. It is the first company in Russia to receive a license to apply stem cells medical technologies from the Federal Service for the Supervision of Public Health and Social Development.

The company has been active in the stem cell research field since 2002, principally focused on differentiating the growth factors of stem cells and associated technologies. The company presently has a substantial portfolio of medicinal products and patent applications in stem cell fields. These include technologies to produce stem cells products for use in therapeutic treatment of a number of diseases. The proprietary techniques of this company offer a strong prospect of success as now there are no companies either in Russia or in the world that use cell therapy applying synthetic analogues of growth factors and regional cell stems differentiation.

The real attraction for investors here is the fact that the company has already clinically tested its stem cell therapies in Russia. If the general attitude towards stem cell therapies becomes more positive in developed nations, this company would be in a very advantageous position in the market. Here at the FINAM, we have recognized the tremendous investment potential of this biotech company, and are working with its executives on their financing plans.

The company applies special treatment and methods that differentiate it from its international competitors:

• A non-intrusive method of stimulating the patient's own stem cells;
• Directionally controlled clinical results by means of directed differentiation
• Relatively low-cost and safe treatments
• Individualization of treatments based on directed regulation of vital activities
• Examining genetic predispositions of the patient and preventing adverse reactions
• Introduction of flexible pricing that opens the door to treatments for middle class people.

In a short time we all will see an interesting and competitive player in the world stem cell therapy market. If anyone is interested in investments or strategic partnerships in this sector, please feel free to contact me.