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Domain Associates latest investment is as much a bet on Russia as it is on the potential of new medicines.

The Princeton-based venture capital firm is teaming up with the Russian government-backed investment group Rusnano in an ambitious deal to bring new medicines and medical devices to Russias emerging healthcare market.

Its very daunting and its very exciting, said Brian Dovey, a partner at Domain. The Russian government is very committed to establishing a regional pharmaceutical industry.

The agreement calls for Rusnano and Domain to co-invest in as many as 20 U.S. life science companies with products in advanced stages of development. The joint investment will provide up to $660 million over a three-year period to the companies all of which will be selected from Domains existing portfolio.

And theres more to the deal a specialty pharmaceutical company will be created in Russia and through a combination of technology transfer agreements and licensing arrangements, the new company will have rights to manufacture and sell products resulting from the joint venture. In that way, Russia will gain a local pharmaceutical company with a variety of products in a few years far quicker than if the business was started from scratch. Forming the new company will be funded with an additional $190 million, according to the agreement.

Domain, which has $2.4 billion of capital under management, is known throughout the country for its investments in the life science industry. Nearly 25 years ago, it provided early financing to Amgen and helped the company grow into a biotech giant. Its portfolio also includes such names as Align Technology, which makes clear braces and Cardiac Science, a defibrillator maker.

The collaboration with Rusnano represents its first venture in Russia.

Its not such an unusual bet though. With the market for initial public offerings withered by the wobbly world economy and many early-stage companies considered too risky, venture capitalists are putting their money on the promise of emerging markets.

In addition to Russia, venture capitalist firms are pouring money into China and India. For Russia, the partnership provides a leveraging of Domains life sciences expertise and for Domain, the partnership is strengthened by Rusnanos knowledge of Russia and neigboring markets in Ukraine, Belarus and Kazakhstan.

Pavel Rodyukov, Rusnanos senior investment manager, said the group will invest in products that are in the later stages of development, enabling them to go to market within about four years. This will be one of the first big players in a regional pharmaceutical industry, Rodyukov said. It is also the countrys first brush with innovation in the pharmaceutical area.

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Princeton venture capital firm and Russians collaborate on life sciences