Drug producer Cleveland BioLabs and RusNano have agreed to provide funding for Cleveland’s new subsidiary, Panacela Labs, which will develop a portfolio of new pre-clinical drugs.

Russian state-owned corporation RusNano set up to promote nanotechnology projects will invest up to $26mn in the new company in four years, with an initial investment of $9mn upon closing of the agreement. Three subsequent payments are to be made upon achievement of development milestones and attraction of new investment to the project.

Cleveland BioLabs and three other intellectual property owners – Roswell Park Cancer Institute, Cleveland Clinic Foundation, and Children’s Cancer Institute Australia – will transfer intellectual property rights related to a specific portfolio of compounds to Panacela Labs. Cleveland BioLabs will also contribute $3mn as an initial investment.

The transaction is expected to close on or around September 30, 2011. Cleveland BioLabs will have an initial ownership stake of approximately 55% and RusNano, 24%.