Dolly the sheep had two 'parents' - one private, the other public. Olga Wojtas talks to the MD who saw that cloning could be profitable

The science story of 1997 was undoubtedly the cloning of Dolly the sheep. Much of the subsequent publicity has focused on controversy over the possibility of cloning human embryos, reinforced last week by the claims of Richard Seed in the United States that he planned to start a human cloning clinic. Doubt has been shed on the practical and ethical ramifications of Dr Seed's plan. But the reality is that the cell nucleus transfer technology that led to Dolly is now close to commercial exploitation, with the prospect of creating therapeutic proteins to combat a range of problems, such as cystic fibrosis, and deep vein thrombosis.

The cloning of Dolly was carried out jointly by scientists from the Roslin Institute and PPL Therapeutics, a company formed in 1987 to commercialise technology developed by Roslin, which is part of the Biotechnology and Biological Sciences Research Council. But the two organisations have radically different objectives, stresses PPL's managing director, Ron James.

"There are a number of things that a company will have to do that a research organisation is not interested in. It shows that something works in principle. We need to show it will work at an economic level, that it is reproducible, and that production is repeatable from year to year and animal to animal," he says.

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"Everything that our scientists do is commercially relevant. We don't study questions to which it would be interesting to have the answers, but which don't have any obvious commercial payback. We allow academics to do blue skies research, and if anything interesting drops out, we'll look at it. "

The original Roslin technology allows the introduction of human genes into the genetic make-up of sheep, cows, pigs and rabbits in such a way that the transgenic females produce additional proteins in their milk. These proteins have therapeutic value in treating, for example, lung diseases, haemophilia and digestive disorders. But the academics' interest does not extend to questions of how the proteins can be produced cost effectively, and purified so that they can be given to humans, says Dr James.

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"One of the commonly held misconceptions is that it's wrong to make money out of treating people's diseases. But there's no cure that leaves an academic group and goes straight into a patient," he says.

"When the academics left off at Roslin, the research was nowhere near being in a state where you could treat anybody. It needed a lot more work and a lot more money." PPL's products will ultimately be sold through major pharmaceutical companies. It has already raised Pounds 65 million from investors to support its work.

Dr James began his professional life as an industrial chemist, but then became a venture capitalist, working for the Prudential's technology investment fund. It is useful, he says, to be able to explain PPL's commercialisation strategy to venture capitalists in language they can understand.

Roslin's scientists made the initial breakthrough which enabled the transfer of cell nucleus material to work, but PPL then became involved, seeing it as a way of improving the method of making genetically modified animals, and also in making them more precisely by placing and deleting particular genes. PPL has put more than Pounds 1 million into Roslin in research funding, Dr James estimates, but it also carries out its own research.

"Roslin to my knowledge has never made a transgenic cow, but we have. Cows are even more expensive to work with than sheep." It has cannily moved its work on cows to the US, where cattle are cheaper, having acquired a spin-off company from a US agricultural university which was working on transgenic pigs.

And as well as having 150 staff in this country and 25 in the US, PPL also has five in New Zealand, where it keeps sheep. "All the sheep we have on our farm in Scotland originated in New Zealand, because scrapie doesn't exist there. We go to extraordinary lengths to keep it out. We don't feed the sheep any animal-based protein, all the staff have to shower before dealing with the sheep, and visitors must not have been anywhere near another animal for two days previously. That's to protect our animals, not the people."

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PPL was established alongside the Roslin Institute to be close to its scientists and one of its initial major investors, Scottish Enterprise. It has no plans to move, partly because the quality of life on the outskirts of Edinburgh helps to attract excellent scientists.

"We don't pay people as much as the big pharmaceutical companies, but they can make much more of an impact in PPL and influence its future. In big companies, nobody notices if you're brilliant or if you don't do anything. I'd like to think we have an entrepreneurial environment that encourages people to challenge the status quo," says Dr James.

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Another reason for staying in Scotland is its wealth of animal-based research. PPL's other links include ones with the Hannah Research Institute, which has been working on lactation, and the Moredun Animal Health Institute.

"We wanted to know, if a sheep picked up a particular virus, to what extent this got into the milk. Not only do we not have the skills in-house to do that, we wouldn't want to do it on our own farm because it would mean bringing in these infections. The Moredun did this work for us. "

There are also links with pharmaceutical companies, and with a major transplant centre, Imperial College of Science, Technology and Medicine at Hammersmith Hospital in London, on xenografts, making pigs' organs suitable for transplant into humans. Intellectual property rights must be sorted out upfront in any collaboration, says Dr James. PPL works under licence in some areas, as well as jointly owning some intellectual property rights with Roslin, wholly owning others, and, as licensee, paying royalties to the institute for intellectual property owned by Roslin. "We fund the prosecution of these patents around the world. Our annual patent bill is around a third of a million pounds."

All PPL's employees have share options, and stand to make "a reasonable amount of money", says Dr James. Its first product, a treatment for cystic fibrosis, is set to be marketed by 2001, when the company's turnover is expected to leap from Pounds 1 or Pounds 2 million "to tens of millions of pounds in a very short number of years".

Higher education has an obligation to commercialise its research, Dr James believes. "If you go to the US, you don't hear their research groups whingeing about not having enough funding. There are some very wealthy universities around, and much of this wealth is acquired from commercialisation."

Academics mistakenly believe there is a conflict between commercialisation and publishing, he says. "Commercialisation doesn't stop publication. The Dolly paper was published seven months after she was born.It was submitted 12 weeks after she was born, and in that period, a patent was filed."

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A percentage of university funding should be earmarked for patents, he suggests, and the rules of the research assessment exercise should be changed. "To base all funding solely on published papers which are reviewed solely by academics doesn't seem to me to be right. It isn't clearly wrong, it's just too simplistic. It shouldn't be the only measurement we do."