Angel Biotechnology Holdings has confirmed a joint venture with Materia Medica Holding (MMH) should be completed before the end of the year.
The deal was first mooted in October last year and involves the joint company operating from a dedicated manufacturing site at Angel's facility in Cramlington, Northumberland.
Russian firm MMH is a long-time customer of Angel's and uses the Scottish firm, which has a site at the Pentlands Science Park near Edinburgh, for biomaterial manufacturing.
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Angel said the transfer of contracts to set up the joint venture will cause it to book a £1.7m exceptional loss in its half-year results to be published next week while a further £350,000 will be written off.
The liability is to be paid through the transfer of fixed assets, licensing support and achievements of the joint venture so the transfer of contracts is likely to end up cash neutral.
Chairman Nicholas Smith said: "The agreement will represent a significant reduction of exposure to risks and a transfer of substantial ongoing fixed costs for Angel."