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Soviets May Trade Technology for Part Ownership of U.S. Biotech Firm

December 10, 1989

SAN FRANCISCO (AP) _ A Soviet research institute would trade technology for an equity stake in a U.S. biotechnology company under a proposed deal that could mark a new form of Soviet-American business relations, participants said.

Under the plan, the Institute of Protein Research outside Moscow will swap protein synthesis technology for a 5 percent to 20 percent ownership stake in Transgene Inc., a Silicon Valley start-up specializing in protein synthesis.

The plan still needs approval by the U.S. and Soviet governments.

The Soviets have developed a new way to create proteins like insulin that cut the development time from weeks to days or even hours.

Kenneth Lee, national director of the biotechnology practice for the accounting firm Ernst & Young, said the deal would be the first of its kind.

″We have found a way to collaborate without any cash,″ he said.

Pietro Vainio, a venture capitalist who helped negotiate for Transgene, said he hoped the deal would ″form one model for how U.S. venture companies can invest in and commercialize promising new technology in the Soviet Union.″

If the deal is approved, Transgene will be allowed to commercialize the technology and sell it to all but Eastern European countries. The technology would be transferred back to the Soviet institute for sale in those countries.

Under the arrangement, the Soviets would get an opportunity to learn first- hand how to bring technology from the research lab into the commercial world.

″It comes in the context of a new Soviet policy to integrate with the world economy, so it could be the beginning of a trend,″ said Paul Surovell, editor of a newsletter that monitors Soviet trade. He noted that American companies already are taking equity in Soviet companies.

The U.S. Commerce Department and the Treasury Department are expected to become involved in the approval process because the joint venture would involve a transfer of technology in both directions.

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