"We Don't do musicals," was producer-director Louis Scheeder's response last year when a new production was offered to the Folger Theatre Group.

Nonetheless, the company did the musical last spring -- an improbable thing called "Charlie and Algernon" about an idiot who becomes a genius and a laboratory mouse who does the same thing rodent-style.

Now, after the Folger's "Charlie and Algernon" finishes its second run at the Kennedy Center, the Shakespeare Library's resident drama company will be setting another precedent with the same show -- sending a production to Broadway for the first time. The Folger's best-laid plans of mice and men seem to be going well.

"Back By Popular Demand," say the billboards outside the Eisenhower Theatre, where "Charlie and Algernon"will be playing for the next four weeks. But no one will see "Held Over By Popular Demand," pasted over the notice. Trucks will be waiting outside the Kennedy Center when the show closes its final performance on Aug. 30, and the loading of scenery will begin; before the curtain calls are ended.

The show is scheduled to open four days later at the Helen Hayes Theatre in New York, with a day off in the interim for Labor Day. The Helen Hayes stage is slightly smaller than the one at the Eisenhower, but the production will fit: "snugly," according to Scheedner; "with a shochorn," according to the ones who have to do the actual fitting. The scenary at the Eisenhower could have been about five feet wider than it is, but it would have been too tight for its next home -- where the Folger group hopes to keep it for a few years.

The show is the fifth incarnation of material that began as a science-fiction short story by Daniel Keyes, grew into a novel, "Flowers for Algernon," in the mid-60s and then became a film, "Charly," starring Cliff Robertson. it was adapted into a play by David Rogers for the Dramatic Publishing Company, which leases scripts for performances (largely by schools and other nonprofessional groups) all over the country.

The script became one of the company's five top sellers, and one day Rogers proudly showed it to a friend, Broadway composer Charles Strouse, whose credits inclued "Bye Bye Birdie," "Applause" and "Annie," as well as less-known opeas and symphonic music.

"After he read it," Rogers recalls, "he came back and said, 'I want to make a musical of this,' and I told him, 'You're crazy.' But we started working and there it is."

Mental retaration, the morality of scientific experiments on animals and human beings, the differneces between idiocy and genius as reflected in the lifestyle of a man who goes from one to the other and back again -- these are not, in fact, the kind of entertainment Broadway likes to offer too tired businessmen. But they are the basic ingredients in the story of Charlie, who goes temporarily from an Iq of 68 to genius-level and then sinks back-and of Algernon, the mouse who has had the same operation before him and in whose rise and fall Charlie can read his own future. If it was not quite crazy, Strouse thought, it would probably not be commercial the way "Annie" was. "I did this one as a labor of love," says Strouse. "My expectation was that it would never really work in a house of more than 500 to 700 seats -- it's too intimate, and anyway people have to be able to see the mouse."

They will be able to see the mouse both in the Eisenhower and the Helen Hayes, Scheeder and Shechan took P.J. Benjamin (who plays himself) into both houses and watched from the rear balconies while they did their climatic song-and-dance routine on stage. "We had no trouble at all seeing al," Sheehan reports.

Al has an understudy, Fulber, who presumably paces about his cage hoping for the star to have a small mishap so hat he can get a moment in the show's timy mouse-spotlight. Both mice live with Benjamin, who trained them and has establised the kind of rapport that is essential for partners in a song-and-dance routine. Benjamin's contract includes a clause allowing him to keep the mice (who were saved from a laboratory) after the show has finished its run. Benjamin's understudy, Philip Alan Whitt, also has two understudy mice who live with him .

The show had already been tried out in Canada and England before it had its American premiere in the Folger production last March, and it was still undergoing the usual pre-Broadway changes during rehearsals for the second Washington run. The number of instrumental musicians has been raised from seven to none because the musicians' union insists that nine must be hired for any musical at the Helen Hayes whether they are used or not. A song called "Some Bright Morning" has been dropped, "One Step at a Time" has been added, the rhythm has been changed in "Midnight Riding" and some now opens and closes with Charlie riding on a swing, and the thematic love song, "Whatever Time There Is," has been removed from an indoor to an outdoor setting. But the version that will be going to Broadway is almost the same as the production that played here last spring, with almost all of the original cast.

There is currently a shortage of theaters for new productions in New York.

At least two shows are closing "out of town" this summer because they can't get a home on Broadway. Once they had nailed down the Eisehower for August, the co-producers, Scheeder and Michael Sheehan, had to scramble to find and appropriate house in New York for early September.

"It was a real domino-type situation" says Sheehan in a lightning fast, name-studded monologue that sounds like an old Danny Kaye routine.

"At first, we didn't think it would fit technically into the Hayes, which was where we wanted to do it, so we began to look at other houses. The Royals would have been the right size, and it has a good name because 'Grease' ran there forever. But 'Days in Hollywood, Nights in the Ukraine' was playing next door at the Golden, which is a touch smaller place, and the management was holding the Royale open in case the show became a hit and wanted a place with more seats.

"Then we looked at the Plymouth, 'Ain't Misbehaving'' was playing there, but they were thinking of going to a bigger theatre -- but that was uncertain. At the Barrymore,'Romantic Comedy,' with Mia Farrow and Tony Perkins, was doing okay, and the owner had a commitment with Jean Kerr that her new comedy directed by Mike Nichols would have either the Barrymore or the Plymouth. So it was all up in the air.

"We couldn't fit in, the Ambassador technically, and ANTA wasn't the right kind of house for this show, so we ended up at the Helen Hayes, the first place we had looked at.

As Scheeder and Sheehan talk about their search for a playhouse, the conversation turns to Broadway folklore and superstition, the "good houses" and "bad hauses," even good streets and bad streets -- legendary theatres that "have never had a hit" and other that are specially desirable because the public still remembers a great show that played there 10 or 15 years ago.

Producers in search of a theatre watch ticket sales to see which shows are likely to be moving out and to feel the pulse of the public. "There was a dip in ticket sales last spring -- a very substantial dip -- and nobody could figure out why," says Sheehan. "Finally we decided that people just didn't want to go to the theatre as much in the first week after daylight-savings time began. Some times of year are harder than others for booking a theatre. As you approach the time for the Tony Awards, plays that are marginal will hang on, hoping for a Tony to boost ticket sales."

An earlier Folger production, "Creeps," played off-Broadway a few years ago, but "Charlie and Algernon" marks the first time a production originating with the Shakespeare library has gone to Broadway. The estimated cost of the trip will be somewhere between $425,000 and $475,000 -- about one fifth what it cost for "Forty-Second Street." the last musical to head north from the Eisenhower. Funding for the production is being provided jointly by the Kennedy Center and the Fisher Theatre Foundation, and it comes at a time when Folger producitons are beginning to find audiences elsewhere: "Castles" in Stanford, Conn., for example, and "Love Letters on Blue Paper" in

"Folger productions have been starting to travel in the past year," says Scheeder, "and naturally we welcome this development. But we try to concentrate on producing our seven-play season. We haven't started looking around to see which productions we can send to Broadway -- that would be crazy."

Crazy like setting "Flowers for Algernon" to music.