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Corridor to the Future.

Corridor To The Future

It isn't a done deal yet, but a decade-long dream of creating a biotech corridor in central Arkansas will get a "new beginning" if Transgenic Sciences Inc. says later this month, as expected, that it's coming to the state.

Publicly held TSI, based in Worcester, Mass., plans to buy and occupy Intox Laboratories, a three-story, $10 million building at Redfield that has been vacant most of the last six years, mocking the efforts of a handful of Arkansans to make their state a major player in biotechnology - the next industrial frontier.

The corridor concept, born at a 1981 meeting in Hot Springs, is based on the view that central Arkansas, like a planned shopping mall, already has two anchor "department stores" - the National Center for Toxicological Research at Jefferson at the south end and the University of Arkansas for Medical Sciences in the north. However, both need strengthening, along with the kind of interactive dynamics that big stores bring to a thriving mall.

Until recently, NCTR was the only one making progress. Now, NCTR is stumbling because Congress has refused to provide $3.5 million for a National Biotechnology Cooperative there. While U.S. Sen. Dale Bumpers vows he'll continue to try to get funding, UAMS is surging and broke ground last month for a new Biomedical Research Center that was paid for by a tax on mixed drinks.

TSI will be a welcome addition to the corridor in the eyes of such persons as Dr. John Ahlen and Alice Rumph Smith of the Arkansas Science and Technology Authority and Art Norris, NCTR's deputy director. TSI also will occupy a building that long has been a monument to Arkansas' failure in biotechnology.

NCTR Was Mismanaged

Early in the eighties, Dr. Morris Cranmer Jr. was fired for mismanaging NCTR and narrowly escaped criminal charges. He later was re-assigned by the Food and Drug Administration, then left the government. In 1983, he erected the 57,000-SF Intox building as a state-of-the-art preclinical testing facility and operated it for several months in 1984 before it folded due to undercapitalization.

First Commercial and Simmons First National Bank foreclosed on Intox and Cranmer later was convicted in federal court on two fraud counts for statements he made to win federal guarantees for loans. He was sentenced to nine months at St. Francis House, a halfway facility, and two years on probation, according to Assistant U.S. Attorney Brent Bumpers, the senator's son who prosecuted Cranmer.

In the mid-1980s, Battelle Memorial Institute set up shop in the Intox building for about 18 months. Battelle was counting on a $25 million Army contract to develop antidotes to biochemical warfare poisonings, but that hope died in the first year of the Gramm-Rudman-Hollings federal budget cuts. "At least, that was the convenient excuse given," ASTA's Ahlen says skeptically.

"For its brief life there, Battelle had all those scientific interactions we have been touting between it and NCTR and UAMS and the VA (Veterans Administration)," Smith recalls wistfully.

Leading The Way

Smith is ASTA's leading proponent on the biotech corridor and is paticularly strong on one facet of it - a proposed cooperative that will act as a kind of incubator. Private companies will be able to interact with NCTR's 110 Ph.D. scientists to cure one of the country's most haunting problems - converting research results into marketable products, which is a strength of the Japanese.

Transgenics is the newest of new technologies in a field that makes discoveries almost daily. The idea is to insert foreign DNA into laboratory animals like mice, rabbits and even pigs to alter their biochemistry so they react to pathogens and toxins the same way a human body does.

Because much of the cost of developing new drugs is in human testing (it costs an average of $125 million to develop a new drug), these tests on animals can save researchers money and time. Business Week quotes analysts as seeing a $1.5 billion market for transgenic animals within this decade.

Some of the excitement about TSI's likely move into Arkansas revolves around the firm's 34-year-old chairman and CEO, James P. Sherblom, whose "dynamics fill a room," according to ASTA's Jacqui Klodt.

Klodt did the "due diligence" research necessary for the state to put $750,000 from several agencies into TSI's expansion. The funding included $250,000 in "seed capital" from ASTA.

Sherblom Saved TSI

Sherblom, a boyish-looking Harvard Business School graduate, helped transform Genzyme Corp. of Boston into one of the nation's few successful biotechnology companies. TSI, founded in 1987, recruited him in January 1989 after cash flow problems threatened its closure in six weeks.

By May 1989, Sherblom had taken TSI public and raised $3.7 million. Then he began looking for companies to buy that could fit TSI's strategy and put it on solid financial ground. A year ago, TSI acquired EG&G's Mason Research Institute of Worcester for $7 million, picking up its client base for testing services and increasing the company's revenue eight-fold so that it can continue long-term research into transgenic animals.

TSI now can boast that it's one of the few biotechnology companies turning a quarterly profit - albeit a modest one - of $29,000 on revenues of $2,966,000 in the quarter that ended last April.

Simmons First National Bank of Pine Bluff, which owns the Intox building through foreclosure, has approved an $800,000 long-term mortgage. TSI has set aside $200,000 needed for a down payment and state agencies have committed equity and working capital. "It looks like it's coming together," Sherblom says.

He spends most of a telephone interview, however, singing the praises of "miracle coordination" by state agencies, Gov. Bill Clinton's office and Bumpers.

"I have never seen a group of state agencies and others working so well together," he says, adding that it "could have been a real headache" and TSI otherwise would have shunned Arkansas.

(ASTA's people credit the coordination to Derrill Pierce, director of development at the Jefferson County Industrial Foundation. JCIF won't talk about anything but "done deals," and Pierce says only that he encountered "nothing but the highest degree of interest, cooperation, and creativity" from the various agencies.)

Financing Restructured

Sherblom recalls in particular a two-hour meeting at which he told officials from ASTA, the Arkansas Industrial Development Commission, the Arkansas Development Finance Authority, Arkansas Capital Corporation, and the Small Business Development Center at the University of Arkansas at Little Rock that their traditional financing approach wouldn't do for TSI and had to be restructured.

"They rolled up their sleeves and went to work," he says, and within days the team flew to Worcester on a jet borrowed from Arkansas Power & Light Co. to present the kind of plan TSI needed.

Sherblom has tapped Mark Paradise to be the Arkansas operation's assistant general manager. Paradise interrupted house-hunting in Little Rock recently to explain that he's been in accounting and finance.

The Arkansas venture, he says, will give him operations experience, including recruiting someone with scientific credentials to be his immediate boss. Paradise, his wife and infant son plan to be settled in Little Rock by Jan. 1. TSI is to be up and running by March 1 with 25 to 30 employees and eventually will have as many as 150.

Sherblom is a founder, a former president, and a current director of the Massachusetts Biotechnology Council. He says he will repeat this performance in Arkansas - "pulling resources together" to help develop the biotech corridor. In fact, he began this job last week when he addressed a National Institutes of Health panel in Washington and is helping to improve what initially looked like a slow start for the biotech corridor.

Cooperative Is Feasible

A poorly publicized 1989-90 study by the national firm of Ernst & Young says a biotech cooperative at NCTR is feasible. The study suggested that government regulators could help private company scientists devise proper "front-end" tests for possible products rather than sending them back to the drawing board afterward to correct oversights and mistakes.

Bumpers persuaded the Senate to include $2.5 million in the Agriculture Department's new appropriation bill so the Food and Drug Administration can renovate 100,000 of the 400,000 SF for the cooperative at NCTR and $1 million for operations. The House wouldn't go along, saying NCTR needed at least another year to "fine tune" its plan.

"I fully intend to go back to the Appropriations Committee as often as necessary to get this project funded, although it is increasingly difficult to get federal funds for new projects," Bumpers declares.

It's even harder to get funding when House Appropriations Committee Chairman Jamie Whitten of adjacent Mississippi opposes it. According to the NCTR's Norris, Whitten is "a real enemy" who caught heat from envious constituents when he helped NCTR get $500,000 to build housing for visiting scientists.

Lots Of Competition

William H. Bowen, the soon-to-retire CEO of First Commercial Bank, says rivalries and "enormous competition" are a key reason for Arkansas' troubles developing the corridor concept. No fewer than 45 biotech initiatives are underway, he points out, including some as close as Texas A&M and at Northwestern University in Illinois.

Bowen is one of only two private sector leaders whose support for the biotech corridor goes back to 1981 and has never wavered. The other is fellow-banker Louis Ramsay of Pine Bluff. Both are ASTA Board veterans.

NCTR's Norris concedes the biotech cooperative plan needs a better description of how it will work - who or what will manage it and the structure of the board and its makeup - and he intends to have the plan "defined" and "fine tuned" by the end of the year.

Norris is convinced that a private, nonprofit consortium rather than the state or federal government must manage the cooperative because bureaucracy is too cumbersome in an industry that is moving at such a dizzying pace.

Though he's part of a bureacracy, Norris says bureaucracy "jumps out first at whatever level" as an obstacle to the corridor. "It's so difficult to put a concept into practice. When we take one step, 10 more steps become visible, particularly from the federal side," Norris says. "It takes a lot of convincing and there are so many people in the chain that it's easy to get discouraged."

Ahlen coins the acronym FLAW (Faith, Leadership, Aggressiveness, and Work) to describe the effort to create a biotech corridor.

Faith, he explains, has to do with the traditional values of Arkansas that "make it difficult for the general public to appreciate and understand the intrinsic value of this new high-technology field. Without understanding, the only way to believe in it is to have faith."

Leadership has come from a few such as Clinton, who Ahlen says sponsored the plan that "is coming together a piece at a time." Others are Bumpers, former U.S. Rep. Ray Thorton (who originated the task force that recommended creating ASTA), and U.S. Rep. Beryl Anthony Jr. of El Dorado, who got $13.5 million in federal funds to renovate a big part of NCTR.

"If that facility hadn't been renovated, we wouldn't be doing any of this," Ahlen says. NCTR formerly was the country's biological warfare laboratory.

Ahlen attributes some of the progress on the corridor to Smith's aggressiveness. Smith contacted Bumpers and got him to add language on the Senate floor to the Technology Transfer Act of 1986. The change made it clear to the FDA that NCTR was to be allowed to have "working agreements" like other federal laboratories with private companies.

As a result, TSI has such an agreement with NCTR and that's how it learned about the availability of the Intox building.

To illustrate what he means by the word "work" in his FLAW acronym, Ahlen repeats Highway Commissioner Rodney Slater's favorite story about the ant that slaves to move a piece of bread at a picnic. Failing, the ant leaves, only to return with an army of ants that works with him and hauls away the bread.

As Ahlen tells the ant story, a light of sudden comprehension glows on Smith's face and she comments: "Well, I guess we haven't abandoned the work to look for the the army of ants."

PHOTO : FIRMING UP BIOTECH PLANS: Art Norris of the National Center for Toxicological Research at Jefferson says plans for the biotech corridor will be fine-tuned by the end of the year.

PHOTO : PROMOTING CORRIDOR IDEA: Alice Rumph Smith of ASTA has worked to gain support for the for the biotech corridor.
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Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:includes related article; Dream of biotechnical research park in Arkansas may become reality
Author:Griffee, Carol
Publication:Arkansas Business
Date:Nov 5, 1990
Previous Article:Let's Gator.
Next Article:Building Arkansas.

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