Q&A with Dr. Paul D'Sylva

In continuation of its growth strategy, CBI is in the final stages of acquiring Mimotopes Pty Ltd, a drug discovery services company based in Melbourne, Australia. The final step is shareholder approval of the transaction, scheduled for a vote on Feb., 9, 2007. The CBI Board of Directors has unanimously and enthusiastically endorsed the acquisition, not only for the enhanced revenue and profit potential of the Mimotyopes enterprise but for a number of intangibles that add value to the transaction. These have been communicated directly to shareholders in the attached letter.

One of these “intangibles” is that, upon closing, Dr. Paul D’Sylva, co-founder and Managing Director of PharmAust Ltd and Executive Director of Mimotopes Pty Ltd will join CBI’s Board of Directors and its management team as Chief Executive Officer. He has more than seven years senior executive experience managing biotechnology and pharmaceutical R&D enterprises within industry and university. In what follows, Dr. D’Sylva answers questions about his plans for CBI on completion of the Mimotopes acquisition.

Paul, what is your strategy for CBI after the Mimotopes acquisition?

The strategy for CBI is to build a leading contract drug-discovery solutions house. This will be achieved by:

• Building leading positions in selected growth markets;
• Nurturing a collaborative sales culture focusing on preferred supplier agreements and partnerships;
• Targeting larger contracts;
• Providing centralized support to enable business unit pursuit of growth;
• Expanding chemistry and biology services

CBI’s expertise in proteomics, immunology and functional genomics coupled with Mimotopes’ expertise and proprietary technologies in the development and synthesis of peptide libraries provides an excellent foundation upon which to grow an integrated research services company targeting the fast growing markets of pre-clinical chemistry and biology.

The business model for CBI will be to maintain a disciplined approach to providing dedicated research services to the drug discovery industry on a fee-for-service basis in order to maximize revenue and profit growth. In time, however, CBI will move to take an equity interest in selected discovery companies to whom it provides research services in order to: (1) share in the rewards of the down-stream commercialization of these companies technologies as an investor; and (2) value-add to the development of these companies drug development programs by bringing to bear the proprietary know-how and technology of CBI.

What do you see as the major factors shaping the drug discovery outsourcing market?

The pharmaceutical and biotechnology industries serve a global market and similarly source from a global market for contract research services. The adoption of outsourcing in drug discovery has been driven by three major factors:

1. Speed. Faster discovery results accelerate the time to fail or advance a drug through the development pipeline. Eliminating bad leads early or shaving weeks or months from the time it takes to get a drug to market can mean millions of dollars in cost savings and added revenues.
2. Quality. All the advantages of an accelerated drug discovery program can be lost if the results do not meet the strict quality standards of the pharmaceutical industry. High quality results depend on quality control, quality equipment and quality people.
3. Cost. Speed and Quality are necessary but insufficient conditions for success. The economic scarcity problem of unlimited wants and needs and limited resources applies to drug discovery outsourcing as well. The more suppliers can offer for less the more successful they will be.

The market for drug discovery outsourcing was US$4.1b in 2005 and expected to grow at 15% p.a. to reach US7.2b in 2009 (Kalorama, 2006). Lead-optimization and Biology are the two fastest growing segments (over 20% pa), followed by Chemistry (10% pa) and Screening (6% pa). Market growth is spurring investment in contract research organizations (“CROs”) and attracting new providers to the market, many from low cost territories such as Asia.

CBI will be well positioned to compete in this growing market with over 100 highly trained staff located in two world-class laboratories, one based in Richmond, Virginia, and the other in Melbourne Australia. The time difference between the U..S and Australia, means that CBI will be operating 24 hours, 6 days a week across its two primary research sites. CBI’s links, through Mimotopes, to preferred suppliers in Asia, means that the customers can access the best mix of fast, secure, high quality, and innovative research services at globally competitive prices.

As CEO, what is your strategy for driving shareholder value?

I will be focusing on the following four steps to improve shareholder returns and deliver share price growth:

• Strengthen Board and Management
• Increase revenues
• Increase margins
• Increase market understanding

One of the drivers for the deal between CBI and Mimotopes was the complimentary skills set between the two management teams. Post transaction there will be a strong commercial, scientific and operational management team in place to lead the parent company and the operating subsidiary businesses: CBI services, Mimotopes, and Fairfax ID Laboratories. I anticipate bringing in additional expertise to the Board of CBI to maximize the Company’s links and profile with big pharma and biotech.

Revenue growth will be achieved by organic growth across all business units and potential earnings accretive acquisitions in the area of chemistry and biology services. Margin growth will be achieved by a strategy to: (1) be first-in-class in the markets in which the Company operates; (2) improve utilization rates of staff and facilities; and (3) implement a cost-control/profit-enhancement program managed by head-office. Finally, improved market understanding will be achieved by increasing stock analyst/research coverage and continued marketing activities to enhance CBI brand equity.

Any additional comments?

I am delighted at the way in which this acquisition has progressed. The consolidation of these two well respected companies provides an excellent platform on which to create a leading integrated research services company. I welcome the opportunity to work with the management team at CBI in order to lead the Company in the delivery of its ambitious growth plans over the coming years.