U of T embarrassed by 'corporate nature'
By ERIC MILLS
As of Friday, the University of Toronto become $26 million richer and a medical research division poorer when It sold the Connaught Laboratories to the Canada Development Corporation.
U of T's former Board of Governors' intention to sell the Connaught Medical Research Laboratories, part of U of T since its inception as the Antitoxin Laboratory In 1914, was first announced last May by Its chairmen Willam Harris.
Under the terms of agreement released at that time, research In both human and animal disease will continue to be an Important function of Connaught. Production of manufactured biological products will be continued, perhaps on en Increased scale, under the profit-oriented CDC.
Connaught has been described as "a major commercial operation" engaged In the development, manufacture, and sale of biological products. Named Connaught under the terms of a grant from Colonel Albert Goodarhem in 1917, the labs grew to do major work in the fields of diphtheria, smallpox, tetanus, whooping cough, and other diseases. It is perhaps bast known as a major producer of inexpensive insulin.
The CDC, in its first purchase since its creation in 1971, acquires 165 acres of land at the main Dufferin division and 500 acres at a Bolton farm, including over 90 buildings. Connaught now uses only a small part of its familiar building on Spadina Crescent.
In a press release announcing the sale, vice-president business affairs Alex Rankin stated as one reason for the sale, "The university will be unable to supply much needed capital for the improvement of manufacturing facilities and for the desired acquisition of allied operations." He added that the CDC proposal "appears to offer the most promising solution to the future growth and stability of Connaught."
Connaught director Dr. Robert Wilson told The Varsity that the labs wanted to be able to borrow money, In quantities which its profits, which have financed ell expansion since near the beginning of the labs, could not generate. The CDC is prepared to invest more money, he said.
[Picture of several women in lab coats and caps on a vaccine vial assembly line]
Woman work at packaging drugs, which along with manufacturing, is a dominant activity.
According to Harris, reports that the CDC is willing to invest $10 million are "more or less accurate."
However, It seams the main reason for the sale was that U of T was embarrassed by this division of the university that In many respects acted like a business-oriented corporation.
"It had to be self-supporting from the beginning," said Wilson, thus creating a strong incentive to make profits.
According to Rankin, Connaught is "primarily a manufacturing and packaging" operation, although much research is always going on. Former chairman Harris explained the Board "didn't feel the university should be actively engaged in business.
At the same time, the university said It was also embarrassed because as an aggressive sale corporation, under the U of T, Connaught was not subject to property or income taxes. Thus, it had an unfair advantage in competing with commercial firms. The Board felt that under taxable ownership, Connaught "could compete more aggressively."
The Board had been looking for a buyer for some time when the CDC Indicated interest last spring, added Harris. Conscious of both its and Connaught's public reputation, the Board wanted a benevolent buyer who would continue the public service aspects of the labs' operation, including research, relatively cheap production of drugs, and Canadian ownership.
Indeed, one of the stipulations of the agreement is that Connaught "will always remain under the control of Canadians". Another "guarantees the continuation of the present role of Connaught in the field of public health," according to the May press release.
Where will the $26 million from the sale go?
It hasn't been decided yet, vice-president Renkin said on the weekend. "It will probably go into a trust fund" under the direction of the Governing Council. He refused to state what ha would recommend It be used for.
Along with the sale price, a trust fund built up by past profits of Connaught will remain with U of T. The amounts of neither the fund nor Connaught's normal profits could be determined, as financial data of the labs has never been published in the U of T's president's annual report, even as part of the overall university statement.
Rankin indicated that the reason for this is the U of T's dislike of being thought of as a financial giant, when compered to other universities.
Wilson said he hopes the fund will be used as in the past, mainly for research. Its former function of providing expansion money will, of course, be discontinued.
The Board believed the sale to the CDC "would ensure the continuation of close collaboration with the university". The primary means of collaboration will be in the research and teaching fields. U of T will benefit by the continuation of cross-appointments of research personnel as teachers.
There are about six researchers at Connaught at the present who teach at the university, said Wilson. Although the university only pays them a token salary, about $500, he believes the CDC is willing to subsidize teaching.
Rankin believes that the Canada Development Corporation, although by its charter committed to investing to make profits, will continue this practice. Advantages to the corporation of "close collaboration" Include access to the university's library.
The staff of the labs, which has numbered between 750 and 900 since 1945, is expected to remain at Its present level of about 800.
[Ariel view of the Connaught farm]
Connaught has been primarily located at its Dufferin division, with 165 acres, for several years.