BioWorld International Correspondent

LONDON - The prospect of a commercial return from the technology that produced Dolly the cloned sheep was put on hold Wednesday when Bayer Healthcare announced it was temporarily pulling the plug on the development of alpha-1-antitripsin, being developed in a $40 million collaboration with PPL Therapeutics plc.

That follows the announcement by PPL in April that it was abandoning plans to spend £42 million (US$67 million) on a manufacturing plant for alpha-1-antitripsin (AAT), resulting in the write-off of £7.5 million it had already invested in the project.

Terms of the August 2000 collaboration between the companies called for Bayer to handle the costs of clinical development and marketing, while PPL agreed to be responsible for manufacturing. Without the promise of a manufacturing site, plus the delay between Phase II and III trials, forced Bayer Biological Products, the Research Triangle Park, N.C.-based division of Bayer Healthcare in charge of the project, to stop the project and regroup, Trish McKernan, a Bayer spokeswoman, told BioWorld Today.

In a prepared statement, Bayer said, "The resources required to move the project forward, combined with the decision not to build a commercial purification facility because of commercial risk, have led the companies to the decision to place the project on hold."

The decision is devastating for Edinburgh-based PPL, which now is considering eliminating 90 to 140 of its staff members working in both Edinburgh and New Zealand. Such a decision would leave the company with 25 to 30 people, who would focus on building a surgical sealants business around PPL's Fibrin I program, a PPL spokesman told BioWorld Today.

PPL has called in KPMG Corporate Finance to advise it on its options, but AAT was a major component of PPL's business, both in terms of its research and development activities and its pilot scale manufacturing. The actual number of lost jobs will depend on the outcome of KPMG's review, which will include an assessment of whether PPL has sufficient critical mass to maintain the viability of the transgenic technology platform.

Geoff Cook, PPL's CEO, could not be reached for comment, however, he released a prepared statement saying, "We are, of course, deeply disappointed to put this program on hold, one in which both companies have devoted major efforts.

"The company is taking immediate action to reduce its cash burn and is reviewing additional options to maximize value for shareholders," he said.

PPL's stock (LSE:PTH), which trades on the London Stock Exchange, fell 13 pence on Thursday to close at £6.13.

Once the collaboration is officially placed on hold, PPL will be excused from development, manufacturing and financial commitments. Both companies will retain existing intellectual property rights, but Bayer will retain its exclusive license to recombinant AAT in hereditary emphysema and cystic fibrosis. The companies are negotiating an agreement that would give Bayer the right to restart the project at a later date.

Bayer, a main supplier of plasma-derived AAT, signed the collaboration deal with PPL in August 2000. The partners were developing recombinant AAT, produced from the milk of transgenic sheep, as an inhaled product to be delivered directly to the lungs of cystic fibrosis and hereditary emphysema patients. The aim was to improve patient acceptability compared to the plasma-derived product, which is administered intravenously. However, development was held up last March when the FDA requested further analyses after patients withdrew from a Phase II safety study. (See BioWorld Today, Aug. 17, 2000.)

The PPL spokesman on Thursday wouldn't release specific details on the financial arrangements between the companies. However, when the deal was signed, Bayer agreed to handle costs of clinical development via its Bayer Biological Products unit. Bayer made an up-front equity investment of $15 million in PPL, paying $2.15 per share. Bayer was scheduled to provide milestone payments of up to $25 million to PPL, of which $15 million would have been paid by the time an emphysema product was cleared for marketing.

PPL underwent a massive restructuring last year to cut its burn from £900,000 per month to its current £600,000, focusing on its core technology of producing human proteins in the milk of transgenic animals. It sold off its xenotransplantation and stem cell programs. It has £10.2 million in cash and its current lead product, Fibrin I, a tissue sealant designed to stop bleeding during surgery, is expected to reach the market in 2006. (See BioWorld Today, April 11, 2003.)

Fibrin I is not based on the transgenic clone technology that made the company and Dolly famous, but derived from human plasma, though PPL does have a program to produce the compound transgenically. Thursday PPL said it signed an agreement with Instituto Grifols SA to manufacture Fibrin I using Grifols' plasma-derived fibrinogen. It is seeking to register Fibrin I as a medical device in Europe, a shorter regulatory trip than registering a new drug, and the company said it has sufficient funds to bring the product to market.

Cook said restructuring PPL "is a consequence not only of [the] decision on AAT, but also the significant opportunity offered by Fibrin I."