PPL plans Kiwi farm clone

The firm behind Dolly the sheep is expanding in NZ, even though it dislikes our red tape, writes ANNA FIFIELD*.

It might seem false economy for a Scottish company to genetically engineer sheep in New Zealand just to transport their milk back to Scotland.

But for PPL Therapeutics, Godzone is a great place to do business.

PPL, which clones animals to produce human proteins for therapeutic and nutritional purposes, plans to expand its New Zealand operations by buying another farm.

Managing director Dr Ron James said the London Stock Exchange-listed company would issue shares to raise up to £45 million ($158 million) to fund development until its first drug hits the market in late 2004, with part of the cash earmarked for the new farm.

PPL already has a property at Whakamaru, southwest of Tokoroa, where it keeps 4000 sheep, including up to 1000 transgenic animals which contain a genetically engineered segment of human DNA.

The sheep produce human gene protein in their mammary glands and PPL collects the protein from the sheep milk for its lead product, alpha-1-antitrypsin (AAT), a potential treatment for cystic fibrosis.

Dr James said PPL would expand its existing operations onto the new farm, partly because it needed more space, but also to reduce the risk of disease and other threats. It has yet to decide on a location.

PPL chose New Zealand for its operations because of its superior health status, said Dr James.

It is one of the few countries free of diseases such as scrapie and BSE, and the foot-and-mouth epidemic currently sweeping through Britain had reinforced this decision.

But while PPL's prime motivation for establishing operations in New Zealand is the country's disease-free status, there are also economic drawcards. Animal husbandry and labour costs are cheaper in New Zealand, and the weak Kiwi dollar also contributes to cheaper operations.

But it is not a one-way street.

PPL research director Dr Alan Colman said New Zealand benefited from PPL's presence by being associated with a pioneering and high-tech company.

It had also created jobs in New Zealand and would have created many more if it had decided to build its manufacturing plant here.

PPL freezes milk from its transgenic ewes and transports it to a manufacturing plant, where the milk is purified to isolate the human proteins. It wanted to build the plant in New Zealand but could not attract the necessary funding, one of the disadvantages of trying to expand in a small, traditionally old-economy setting.

"It would have been nice to build the manufacturing plant in New Zealand but it is a small country and is risk-averse," Dr Colman said.

PPL instead raised £42.5 million through British bank loans and will build the plant near its headquarters at the Roslin Institute outside Edinburgh.

In December, PPL teamed up with Celentis, the new commercial arm of AgResearch, New Zealand's largest crown research institute. The two companies are producing pharmaceutical proteins in the milk of transgenic cloned cattle in New Zealand.

"The joint venture is the payoff for New Zealand - we've set that up to do the really high-tech things," said Dr Colman.

The joint venture will initially develop cattle producing a protein with the potential to help treat multiple sclerosis. A second programme will produce founder cattle making human serum albumin, used to treat burns and other trauma injuries. A third project has yet to be approved by the Environmental Risk Management Authority (Erma).

While there are clear benefits from operating in New Zealand, there are also frustrations for PPL, and Erma is one of them.

"The New Zealand Government has been permissive - I wouldn't say they have bent over backwards for us," said Dr Colman. "The regulatory approval system is very bureaucratic and it takes a long time to get anywhere.

"For every new protein product we want to make in a transgenic animal, we have to go through Erma."

PPL would prefer regulatory approval similar to Britain, where companies such as PPL are granted generic or blanket permission and then notify the authorities before they start projects.

"One of my concerns is that for every new product we have to try and attract a new partner, and potential partners will be put off by the unknown delay between wanting to start a project and getting permission."

PPL has also encountered opposition from the Greens, who have lobbied against its projects and want them halted while an inquiry into genetic engineering is conducted, and Maori groups have told Erma they find the idea of mixing species' genes culturally offensive.

Asked whether the company would recommend New Zealand to other high-tech companies, Dr Colman said appropriately trained staff were in short supply here.

"There's not much of a pharmaceutical labour force so the number of people you could recruit is quite limited. The shortage of relevant skills is because there has not been a tradition of investment in these skills."

But PPL had found that the benefits of operating in New Zealand outweighed the disadvantages.

However, Dr James had some advice for New Zealand and Britain: "UK and New Zealand agriculture need to encompass the advantages of genetic engineering that can be done safely and properly."

* Anna Fifield is in London on a HSBC/UK Link Foundation Business Journalism Fellowship.