A World War II-Era Company Reshapes Itself as a Biotech Powerhouse

Southern Research

Southern Research's headquarters in Birmingham, Alabama/Photo by Tyler Patchen

Original story published Dec. 21:

Much of the biotech activity in the U.S. has been concentrated in coastal California or in East Coast metro areas such as Boston, New York or North Carolina’s Research Triangle. A new White House effort seeks to spur technology development, including biotech, in different areas of the country through its Regional Innovation and Technology Hubs Program, overseen by the Department of Commerce’s Economic Development Administration.

“The Tech Hubs will bring the benefits and opportunities of scientific and technological innovation to communities across the country, with nearly three-quarters significantly benefitting small and rural areas and more than three-quarters directly supporting historically underserved communities,” the White House’s October announcement of the plan said.

According to Birmingham, Alabama–based Southern Research, Birmingham’s metropolitan service area is one of 31 regions across the country that has been designated as a federal Tech Hub. Southern Research spearheaded the application for the designation along with a coalition of regional and state partners. The designation and this competition are the first phase of the Tech Hubs program, so Birmingham is in the running for Tech Hub implementation funds, although the designation does not itself translate into funding.

According to Southern Research, coalitions that received Tech Hub designations are now applying for funding as part of the second phase of the program. Only 5–10 of the 31 designated Tech Hubs will receive $40–$70 million.

With or without Tech Hub funding, Southern Research has big plans to reshape itself and make waves in the biotech world. BioSpace sat down with CEO Josh Carpenter to discuss the company’s goals in the biotech world.

History

While to many, Birmingham may conjure images of the Civil Rights Movement of the 1950s and 1960s, the city was also a steel industrial powerhouse known as the “Pittsburg of the South.” As the steel industry declined, Birmingham’s economy shifted to include significant banking and medical sectors.

Southern Research was founded in 1941 as a nonprofit research institute tasked with translating research into commercial products. Carpenter said the facility has had a research, and now academic, affiliation with the University of Alabama at Birmingham, which hosts one of the state’s largest hospitals and medical schools and receives $775 million in annual research funding.

In addition to the local business and academic communities, Alfred Sloan and Charles Kettering, of Memorial Sloan Kettering fame, and other national business leaders supported Southern Research’s founding. Other research institutes that date to that era include the Southwest Research Institute in San Antonio, TX, the Midwest Research Institute in Kansas City and RTI International in North Carolina.

“We have 50% of all chemotherapies in the United States that were either developed or tested at Southern Research right now, and we have 20 drugs that were approved by the FDA; seven of those are in the oncology space,” Carpenter noted.

But the company has also dipped into many other industries in its history, maintaining a presence in the aerospace and energy sectors with locations in North Carolina, Texas and Maryland. When Carpenter became CEO in 2021, he noted that it was difficult to simultaneously be competitive in the aerospace, energy and biotech industries. He decided to specialize, selling or winding down parts of the business to focus solely on biotech.

Carpenter said several factors went into determining the direction of Southern Research’s pivot, including its strong reputation in the biotech sector and the high capital it takes to be in the aerospace industry. A spokesperson also noted that the research organization has a “strong reputation” in the biotech sector. “The idea is still to take the basic science research at the molecular level and translate it into something that’s commercializable and ready for the clinic,” Carpenter said.

Southern Research’s Biotech Push

Carpenter said that Southern Research has raised about $100 million by selling off its non-essential assets and has garnered another $90 million from the state and local governments. It is using these funds to construct more facilities in order to expand its biotech efforts, investing about $120 million into 200,000 square feet of new lab and office space.

As the company focuses on crafting novel healthcare solutions, Birmingham’s robust research ecosystem is a significant boon for Southern Research’s future, Carpenter said. “Birmingham, I think, is the eighth highest funded city on a per capita basis by the NIH. . . . We’re up there with cities like San Francisco, San Diego and Boston,” he noted.

Carpenter added that the cost of doing preclinical work in Birmingham is much lower than in areas such as Boston or the Bay Area. Southern Research plans to continue work in general drug discovery and development. The organization also has capabilities in medicinal analytical chemistry and screening that enable it to engage in molecular design in drug discovery, Carpenter said, and the discovery efforts, especially those harnessing AI, allow the company to act as “a mini-CRO” and offer more custom options for small and large pharma clients.

Southern Research will also be making more moves in the personalized medicine space, Carpenter said, with an emphasis on patients in Alabama. In addition, the company will use its research capabilities to make waves in the rare disease space and in oncology and infectious diseases, he said, and will make a push into the diagnostic sphere with the aim of benefiting the state of Alabama.

“Some of the bigger venture guys, and the folks on the coast, steer away from diagnostics because of the ultimate [low] yield on the development,” Carpenter said. “But that’s not all we’re here to solve for; we think faster, more effective diagnostics could move or lower the overall cost of health care. And as a nonprofit, that’s something that I’m interested in developing.”

Integrating AI

Artificial intelligence played a starring role in Southern Research’s Tech Hubs funding proposal, and it is already applying AI to its discovery efforts.

While Carpenter acknowledged that AI is now a buzzword, he noted that Southern Research has been leveraging the technology for years for virtual screening and molecular docking, which predicts how molecular structures fit together. This modelling is done in parallel to lab experiments. “Our medicinal chemists can look literally over the shoulder of our computational chemists and then run the experiments, which I think is unique and powerful,” Carpenter said.

Southern Research is also interested in applying AI further down the drug discovery pipeline, in clinical trials. “We see AI being useful in patient stratification for traditional researchers like those at Southern Research or universities, but also ultimately for companies . . . who want to more rapidly identify patients that would be qualified for clinical trials,” he said.

The Next Step

While Southern Research expects to hear back in Q4 of 2024 or Q1 of 2025 about whether Birmingham gets the funding, the company has big plans regardless of the outcome. Carpenter said that as Southern Research pushes for partnerships, it aims to be a more niche player in the world of discovery, development and clinical trials.

“As the world of drug discovery and drug development shifts to that more personalized touch, we have a real role to play as a custom preclinical development group,” he said.

Tyler Patchen is a staff writer at BioSpace. You can reach him at tyler.patchen@biospace.com. Follow him on LinkedIn.

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