ChemDiv chemistry of cures

- What were the reasons behind the relocation to this new facility here in Moscow?

The new Chemical Diversity Research Institute (CDRI) facility in Moscow is very important for our global growth strategy, because it allows us to combine high throughput chemistry and biology technologies (synthesis, purification, analysis, screening) and the expertise we established in our San Diego laboratories with the chemoinformatics platform and cost-efficient broad scale chemistry expertise and capabilities of our Moscow laboratories - the best part of our Russian and Ukrainian research infrastructure.

Upgrading the current dispersed structure of our Moscow branch laboratories to a centralized research organization unifies planning, design, production, library and reagent storage, formatting and logistics operations. The Moscow bioscreening and biology validation facilities will allow Chemical Diversity to significantly increase its research and development productivity, and so provide very competitive solutions for drug discovery.

- How many chemists and biologists will you ultimately have here?

During the 1st phase, CDRI has unified four of our Moscow laboratories with a total of 125 chemists (the most significant part of our 200+ strong chemistry team). Chemical Diversity?s computational chemistry, medicinal chemistry, chemoinformatics, inventory, logistics and formatting services, which employ over 400 people altogether, will be moved in Q2? 2004. We are especially pleased to realize this new milestone in our 12-year history of successful growth. It is worth mentioning that though we started as a pioneer in the discovery chemical libraries field, we have diversified to a full scale CRO organization while retaining a strong focus on chemistry.

It is also important that both the Russian government and the regional government of Moscow provide strong support for the development of biotechnology clusters and centers of excellence following examples set by the US, Europe and Japan. We are proud of being the first example of a world-class chemistry research organization built from scratch in the Moscow region. However, we do not see our Institute as an isolated example; instead, under the government policies supporting science and technology development that I just mentioned, we expect more investment to flow into the area enabling the development of biotechnology related research and services.

- How soon do you think you will be able to offer the high throughput screening (HTS) facility? Are you recruiting people, biologists, for this now?

We already have medium throughput screening and ADMET capabilities in our San Diego laboratory. Now we are testing the Beckman line of HTS equipment, and have established the transfer team, which will start bioscreening at the CDRI in 2004. We attracted staff scientists with western industrial experience to run our biology and HTS facility in Moscow. We are also fortunate to have very experienced and qualified biologists from Moscow State University to join our laboratory. We expect the same success transferring high throughput biology that we have had with transferring chemistry technologies from San Diego to Moscow.

- What will happen in San Diego now that you have this large extensive new facility here?

The reasons are different, but chemistry research is like real estate: it?s location, location, location. So San Diego will continue to be a head office, and an important part of our business organization. Over 50 researchers will be working actively in chemistry and biology research projects with greater emphasis on time and IP priorities. We also see an increasing need to use this part of the organization for the implementation and transfer of new discovery technologies.

Our CDRI facility now supports mainly generation of discovery chemistry in custom and internal programs, but as CDRI completes the relocation of all support and research services from their current locations, we will gradually move part of that team to hit to lead and lead optimization services.

- How do you see the trends worldwide for future outsourcing of chemistry services going forward?

We see an increase in outsourcing chemistry, biology and related services as part of the global trend for discovery technology and discovery services outsourcing. In our opinion, our Russia location enjoys some strategic advantages over other champions of outsourcing such as India, China, and South Korea. They include superior logistics and export /import infrastructures, a better integration with global transportation systems, and less bureaucratic red tape and corruption than in majority of the competing countries. Russia and especially Moscow with its top of the line communication and transportation infrastructure is strategically positioned as a trans-Eurasian hub. Such factors may significantly affect time-critical issue of reagents supply and delivery of project results.

The other important issue of intellectual property protection is again much better addressed in Russia than in other developing outsourcing areas, e.g. India. Russia supports and upholds international IP agreements including the PTC, the World Intellectual Property Organization (WIPO) Convention, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Bern Convention for the Protection of Literary and Artistic Works -- all ratified by the Soviet Union. The country has also has strong patent protections in its own legal system, including the Constitution, Russian Patent Law, the Law on Author?s and Neigbouring Rights, and the Civil Code.

Russia is known for its superb system of fundamental scientific education, especially in chemistry. While the research infrastructure of the former USSR was underfunded in the years of political transition and suffered a severe bureaucratic management crisis, we believe this situation is currently changing for the better. There are tangible changes in state investment and structural policies, the influx of western know how and most importantly, people with industrial experience in research and management.

We predict that chemistry outsourcing will most likely be fragmented into the centers of technology excellence. Active Pharmaceutical Ingredient producers, which are historically concentrated in India and China, can more easily diversify into single compound and building block synthesis services areas. It is unlikely that Russia will attract or produce a lot of competing CRO services any time soon, both because of the high level of specific expertise and capital investment necessary and the high risk related to periodical overcapacity spikes. On other hand, Russia has been supporting the business of discovery and optimization chemical libraries - an area where Chemical Diversity is an undisputed leader. It unlikely that most Chinese or Indian companies would be able to successfully challenge our area of expertise, as this would necessitate a high level of investment with even higher risk. A model based simply on low production cost does not work for this aspect of the chemistry business, as libraries require much more intensive and volatile design and know how related elements. These factors are directly related to the quality of biological and medicinal chemistry research, which is developed to higher standards in Russia due to educational and other structural reasons.

We are currently seeing quite a few Russian chemists and biologists who left to pursue education or jobs in the United States or Europe returning to Russia. They seek opportunities to start small research businesses or join larger companies and state funded research programs. This shall be another advantage for Russia in the competition for research outsourcing business.

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