LONDON - PPL Therapeutics plc, co-developer of Dolly the cloned sheep, has signed its first major commercial deal, worth up to $40 million. The move triggered the release of a funding package for the construction of a large-scale manufacturing plant.

The deal with Bayer Corp. is for alpha-1 antitrypsin (AAT) produced in the milk of transgenic rabbits. Bayer, which already markets Prolastin, an AAT derived from human plasma, will take on all development and commercialization costs of an aerosol formulation to treat congenital AAT deficiency. The partners hope the project will be awarded orphan drug status by the FDA.

Ron James, managing director of PPL, told BioWorld International, "I am delighted with the deal with Bayer. They are the perfect partner because they already have a product and know the market better than anyone else. The sales force is already in place and we have had a collaboration with them before."

Bayer is making an equity investment of $15 million, and will make milestone payments of $15 million up to the approval of the product for AAT deficiency-related emphysema, with a further $10 million to be paid for a second registration, in cystic fibrosis, and for meeting sales targets. PPL will have exclusive responsibility for manufacturing and will receive royalties on sales.

Finding a development partner is a condition of a package of loans and grants agreed by PPL in February to establish a manufacturing facility near the company's headquarters in Edinburgh, Scotland. James said the deal with Bayer validated PPL's strategy of doing its own manufacturing alongside drug development. "Taken together, the royalties and production revenues equate to a substantial share of end product sales."

PPL will be pioneering large-scale extraction of human proteins from the milk of transgenic animals. "We hope the production facility we have agreed the finance for will be the foundation for a larger manufacturing plant. It is designed to be flexible, and could be used for more than one product, but if we reach the volumes of AAT that may be needed, it will be fully committed to that."

AAT has completed Phase II in the treatment of AAT deficiency, and the partners are planning a Phase III trial expected to begin in the fourth quarter. James said the scale and scope of the Phase III is not yet known, but PPL has stockpiled AAT from its pilot manufacturing plant for this trial. "It will be a biggish trial, but not in the thousands [of patients]. Our planning assumes two years for recruitment and the trial and one year for approval - in other words, to reach the market by 2004."

An aerosol formulation of AAT is expected to improve patient compliance over Prolastin, which is administered intravenously. In addition, producing the protein in the milk of transgenic animals will increase supplies of the product, making the therapy more widely available. PPL said it will have the capacity to meet market demand of 1.5 million grams per year.

The $15 million equity investment gives Bayer 9 percent of the company and brings PPL's cash reserves to #18 million (US$26.8 million). "This will take the pressure off the immediate need to think about a further fund raising, though in the absence of funding from another collaboration, there is a gap [before the company expects to reach profitability] when we may need to raise more," said James.

In November 1999 PPL scaled back its activities to concentrate on three products: AAT, fibrinogen and bile salt stimulated lipase. James said the company already is moving these products as fast as it can, meaning the new money cannot be used to speed development.

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