Commonwealth Biotechnologies, Inc., a provider of contract research services, has formed a joint venture with Venturepharm Laboratories Ltd. to establish two state-of-the-art chemistry facilities in Jiangsu province, China, to service the growing global demand for discovery chemistry services.

Funded by VPL with local and federal Chinese government support, experienced staff from CBI's Exelgen and Mimotopes drug discovery services groups will guide the construction and build-out of the new chemistry facilities. CBI expects to fully integrate the new facilities with its existing production sites in Australia, Europe and the United States to provide seamless project management locally to clients.

Said CBI CEO Paul D'Sylva: "We believe that the need for increasing numbers of drug candidates and the tight economic conditions in the U.S. have prompted pharma and biotech companies to increasingly use reliable, cost-effective outsourcing to drive their drug discovery programs. This exciting initiative gives CBI, VPL and our clients an opportunity to benefit from this growing trend by significantly expanding CBI's capacity and global reach in China at a significantly lower cost base. We believe that the minimal capital investment required by CBI and the profit-sharing arrangement with VPL can provide our clients and our shareholders with a low-risk and high-reward entry to the thriving Chinese marketplace."

Bacon's bottom line: This is a good deal for CBI, a major step to build the company into a global player in pharmaceutical and biotech research. But it also shows the challenges the Richmond region is facing in trying to build its own biotech cluster: Even R&D is becoming a commodity that can be outsourced to China. It's hard to compete for laboratory work, even sophisticated laboratory work, against a country that turns out scientists by the thousands and pays them a fraction of the salaries prevailing in the United States.

As Richmond companies search for a sustainable competitive advantage in the global marketplace, we may discover that our ability lies not in our R&D capabilities, but in combining scientific knowledge with an ability either to (a) manage complex processes in a global environment and/or to (b) introduce new products successfully into a global market. As CBI undertakes few of its own research projects, it would appear to be a good example of the former.

For details about the CBI deal, click here.