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PRIVATE EQUITY

Less risk in Ukraine, say investors

INVESTMENT in research and specialised medical facilities has been experiencing a worldwide boom given its potential in the knowledge-based economy. Investment attracted from pharmaceutical firms has helped Ireland, which was among the poorest members of the European Union, transform itself from a low-wage economy into a modern and fast-developing country.

INVESTMENT in research and specialised medical facilities has been experiencing a worldwide boom given its potential in the knowledge-based economy. Investment attracted from pharmaceutical firms has helped Ireland, which was among the poorest members of the European Union, transform itself from a low-wage economy into a modern and fast-developing country.

Though it boasts one of the fastest growing economies in the EU, Slovakia has yet to follow Ireland's path in terms of attracting investment in research and medical facilities. Slovak private equity firms are instead exploring neighbouring countries for investment opportunities in these fields. Ukraine and the Czech Republic are already on their maps.

Private equity firm Penta has invested in green-field construction of laboratories in Ukraine through a company in its portfolio, Alpha Medical. Arca Capital, along with GEL-MED International, has set up the BIO-SKIN company in the Czech Republic, which is developing a skin shield for medical purposes.

Alpha Medical picked Ukraine as the site for a network of medical laboratories. The laboratories consist of large-capacity centres integrating all fields of laboratory medicine (biochemistry, haematology, immunology, micro-biology, anatomical pathology and genetics), as well as small, low-cost satellite laboratories that collect and prepare biological samples for the large-capacity centres and provide urgent local analysis, Peter Lednický, General Director of Alpha Medical, told The Slovak Spectator.

Over the next year, Alpha Medical plans to construct three large-capacity laboratories in Kharkov, Dnepropetrovsk and Kiev, and about 15 satellite laboratories worth €7 million, Lednický said.
The main investment will be in building the central laboratories and buying technology.

"Our laboratories are specialised high-end medical facilities and their priority is to provide specialised health care in the area of laboratory diagnostics for the general public," Lednický told The Slovak Spectator. "The laboratories might be involved in research but it is not their main focus."

Alpha Medical wants to transfer the Slovak concept of providing health care, with its experience of collecting biological samples from across a wide geographical area, according to Lednický.
Currently, in Ukraine, there are a number of small, low-turnover laboratories which are not interlinked.

"We are certain that the Slovak concept can be successfully applied in Ukraine," said Lednický.
Alpha Medical is cooperating with experts from the Hospital of the Interior Ministry in Kharkov, the British Medical Centre Kiev and the Academy of Medicine in Dnepropetrovsk.

According to Lednický, in the health sector in Ukraine there is much greater support for the creation of specialised medical facilities and fewer political risks than in Slovakia when investing in health care.

As for the conditions for research development in Slovakia, Lednický said any seed or early-stage investment into special biotech companies, which today dominate the field of medical research and development, runs up against the lack of support from the government for private medical entities.
Alpha Medical is also preparing large investments of up to €100 million in the growth and expansion of its laboratory medicine project in Poland, Ukraine, Romania, Bulgaria and Slovakia, Lednický added.

BIO-SKIN, founded in 2007, is a joint investment by the private equity group Arca Capital and GEL-MED International to develop and produce a skin shield for use in dermatology, traumatology, diabetology and plastic surgery. The company also plans to focus on the development of new types of biopolymers.

Arca Capital, which owns a 49-percent share in the company, has invested €1 million in the project.
"Biotechnology is a developing sector and, along with nanotechnology - which is being used to develop new materials - and information technology, it is leading the field in attracting investment from venture capital funds," Petra Kursová, investment manager of Arca Capital, told The Slovak Spectator.

Arca Capital met the representatives of what was then the BIO-SKIN project at the financial forum which the Czech investment agency, CzechInvest, organises each year. Small and medium enterprises have the opportunity to meet at the forum and present their projects to investors.

"One of the projects was the development of new skin shield," said Kursová. "The investment plan was very well-prepared, understandable and immediately attracted the attention of our managers. Its authors had a clear goal, its experiments were published in the professional press and they had already met with success in medical circles."

The new type of biological skin shield being developed is a result of cooperation between the Science Academy of the Czech Republic and GEL-MED International, as well as professionals in the field of dermatology, burns treatment, plastic and reconstructive surgery in Prague, Brno, Ostrava, and Hradec Králové, said Kursová.

According to Kursová, the Czech Republic is becoming an interesting place for investment in research thanks to its universities, which are committed to research and are encouraging their students to take part in research activities.

Many of these schools have established their own "incubators" where students can apply the results of their research, Kursová said. Students can set up their own firms there and get support from the university and the incubator.

"Later, when they reach a certain size and they became self-sufficient, they become independent," she told The Slovak Spectator.

The product being made by BIO-SKIN has received international certification and the company now intends to increase production. If the launch of the product in the local market is successful, the company plans to expand into other EU markets, Japan or the USA, said Kursová.

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