The Commercial Appeal  Memphis, TN
                         Copyright 1996
                                
                      Tuesday, May 7, 1996
                                
                            Business
                                
     MEDICAL - Circumcision yielding skin for ulcerous feet
           Jaan VanValkenburgh  The Commercial Appeal

     Bioengineered skin cultured from the foreskin of circumcised
babies could be available by late next year to treat diabetics with
chronic foot ulcers, a Smith and Nephew plc spokesman said.

     The skin, called Dermagraft, is a medical breakthrough, the
world's first off-the-shelf bioengineered human tissue skin
replacement product, said Smith & Nephew, the health care company
whose North American headquarters is in Memphis.

     The United States market for chronic diabetic foot ulcers is
estimated at more than $1 billion, Smith & Nephew said. Worldwide,
it's estimated at $2.5 billion.

     The new skin also will be used on burn victims and ultimately
could treat other skin disorders, said Marie Burke, investor
relations director for Advanced Tissue Sciences, Inc. ATS developed
the product.

     Smith & Nephew plc will market and distribute 2-by-3-inch
tissues to diabetics. Each section will sell for about $375. The
treatment calls for using one piece each week for eight weeks,
meaning about $3,000 worth of tissue.

     ATS will market 4-by-7 1/2-inch tissue pieces targeted for
burn centers. These will sell for about $3,000 a square foot.

     A baby's foreskin usually is discarded, Burke said. ATS asks
new parents to sign a consent form donating it to ATS.

     The dermal cells are removed from the foreskin and grown in
bio-absorbable mesh inside transportable cassettes. It takes four
weeks for the cells to grow inside the cassette.

     "With one foreskin, you can grow about six football fields
worth of skin through current cell culture techniques," Burke said.

     ATS hasn't had to ask for a foreskin since 1989, she said.
Finding more is not a problem.

     The finished bioengineered skin product, frozen in the soft
cassette, can be shipped to doctors.

     When needed, the doctor cuts the Dermagraft to fit the wound,
then slips it out of the package, thaws it, lays it in place and
covers the wound with gauze.

     "Diabetics lack a lot of things (such as normal collagens) for
the healing process, and they exist in the living skin that we give
them," Burke said.

     The engineered skin forms the lower layer of skin, allowing
for the natural growth of the epidermis on top.

     Dermagraft has had a 50 percent success rate with diabetic
foot ulcer patients who were part of a pivotal clinical study.
Ulcers cured with Dermagraft have not recurred, Burke said.

     That's compared to the current practice of applying a saline
solution and dry gauze to the ulcers, a process that has only an 8
to 20 percent success rate, she said. And half those healed ulcers
recur within a year.

     Dermagraft for burn victims, called Dermagraft-TC, also has
proved better than current treatments, ATS said.

     Dermagraft-TC has a synthetic epidermis, unlike the skin made
for foot ulcer patients, and is an alternative to the cadaver skins
sometimes used temporarily to cover burn victim wounds.

     It's better than the skin of another human being because the
bioengineered skin will not be rejected by the body. Dermagraft and
Dermagraft-TC have no blood vessels. Instead, the patient's vessels
migrate into the new tissue.

     "Dermal tissue, by definition, is universal," unlike the outer
layer of skin, the epidermis, Burke said.

     Prolonged testing of the new skin has been done on burn
patients and diabetics, but Burke said Dermagraft might also work
on ulcers, like bedsores, on other parts of the body and on
patients who are not diabetic.

     Testing has begun using the same Dermagraft technology to grow
cardiovascular tissue, bone tendon ligaments and cartilage, Burke
said.

     Bioengineered cartilage is scheduled to be tested on human
beings next year, she said. In 1994, Smith & Nephew and ATS
combined to develop, manufacture and market engineered cartilage
for orthopedic applications. Initially, it will focus on the repair
or replacement of damaged articular and meniscus cartilage in the
knee.

     ATS is working to get Dermagraft and Dermagraft-TC to market
first because they both can save lives, Burke said. The Food and
Drug Administration said the review process for both new skin
products would be expedited.

     ATS will apply for FDA approval later this year for the ulcer
skin product, pending the successful outcome of an ongoing clinical
trial. In March, it submitted its request for approval for the skin
to be used on burn victims.

     There are an estimated 800,000 U.S. diabetic patients with
chronic foot ulcers each year, resulting in 55,000 limb amputations
annually, Smith & Nephew said. The three-year survival rate for
diabetes-related amputees is 50 percent.

     Dermagraft-TC is on schedule to be ATS's first commercial
product, and Dermagraft could be its second.

     The public, 10-year-old tissue engineering company will be
expanding into manufacturing and marketing to support its products.
It now has 159 employees, 70 percent of whom are researchers, Burke
said. The company is based in La Jolla, Calif., near San Diego.

     As part of Smith & Nephew's partnership with ATS, Smith &
Nephew paid ATS $10 million up front. Smith & Nephew will pay up to
an additional $60 million in incremental payments based on the
achievement of certain written milestones.

     Smith & Nephew spokesman Betty Cole said Memphis operations
would not be involved in the new product.