PPL hits the rocks as Bayer jumps ship

Transgenic drug production company PPL Therapeutics has been rocked by a decision by Germany's Bayer to walk away from their protein development partnership, placing the future of the Scottish firm at risk.

PPL is best known for its historic cloning of Dolly the sheep, the first animal to be cloned using an adult mammalian cell but which died prematurely earlier this year. The company has been striving to develop a business focused on using genetically-engineered herds to produce therapeutic proteins in their milk, and the Bayer partnership, focusing on recombinant alpha-1 antitrypsin, was its most advanced project.

PPL informed 140 staff at its Roslin site that they would most likely lose their jobs, and 20 other positions at its sheep rearing facility in New Zealand are also likely to go.

The German group's decision does not come as a complete surprise, as the recAAT project had already experienced difficulties. Last year, PPL was forced to delay its development program for the drug and conduct additional clinical trials, and this led to a renegotiation of its agreement with Bayer.

Importantly, earlier this year PPL decided against building a £42 million production facility for recAAT in Scotland, as had been agreed under the terms of its original contract with Bayer. It is understood that PPL asked Bayer to bring forward some milestone payments in order to help progress the programme, but instead the German firm took the opportunity to withdraw from the partnership. Given its current position, PPL can take little comfort from Bayer's suggestions that it may be in a position to return to the project in three years' time.

PPL's shareholders are being consulted about the possibility of selling the company's assets or liquidating it, according to chief executive Geoff Cook, who was brought in last year to get the firm back on track. He has already divested PPL's regenerative medicines business.

Cook is hoping to re-invent PPL as a smaller-scale product development company focusing on the development of another protein, fibrin I, as a tissue sealant to stop bleeding during surgery. The company is currently sitting on cash reserves of around £10 million (€13.8m).

In one piece of good news for the company, PPL has just signed a manufacturing agreement for fibrin I with Instituto Grifols, in which the latter firm will scale up the manufacturing process for the protein to an industrial scale and supply it to PPL for clinical development and marketing.

Meantime, PPL's directors are set to come under the cosh from shareholders later today at the firm's annual general meeting. Metage Capital, a major investor in the firm with a stake in excess of 10 per cent, has tabled a resolution seeking the appointment of a new non-executive director to oversee shareholder interests.