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Will pig clones save biotechs bacon?

January 3, 2002 Posted: 1014 GMT

LONDON (CNN) -- The Scottish company that helped create Dolly, the world's first cloned sheep, has stirred a new debate in the biotechnology and healthcare sectors.

PPL Therapeutics (PTH) said on Wednesday it had produced five piglets genetically modified to provide organs for human patients.

The company said the piglets, named Noel, Angel, Star, Joy and Mary which were born on Christmas Day, do not carry the gene that causes the human immune system to reject organs from other animals.

The announcement sent PPL's share price soaring by almost 50 percent in London. But it did more than shore up PPL's stock. It also raised the hopes of investors in the pharmaceutical and biotech sectors, as well as those people waiting in long queues to have organ transplants.

  The risk from viruses is an unanswered question -- and it won't be answered until you have had organs transplanted into humans over many years.  
  Ian Smith
Lehman Brothers

While industry experts say the cloning technique marks significant breakthrough in the area of transplants, it has yet to be independently reviewed and still faces years of clinical tests before reaching the public. And that could take more than a decade.

For investors, the jump in PPL's shares shows the market is hungry for positive news from the biotech sector, after years of often unrealistic expectations.

"What you could potentially see right now is the seeds of a new boom being created," according to Ross Greenwood, editor of Shares Magazine. "This is another sort of small step along the way and there will be other breakthroughs coming as well."

Indeed, already other companies are lining up behind PPL in the controversial area of xenotransplantation, or animal-to-human transplants.

They include U.S.-based Immerge BioTherapeutics, a joint venture between Swiss pharmaceutical giant Novartis and Nasdaq-listed BioTransplant, which has been working on miniature pigs.

PPL's announcement has helped to refocus investors attention on biotech companies.

The sector had a mixed year in 2001, with the Nasdaq biotechnology index ending down last year. Still, the fourth quarter of the year saw huge investment in biotechs and a rash of mergers and acquisitions in December. The biggest deal was the $16 billion merger between Amgen and Immunex.

Industry experts expect more mergers and acquisitions in 2002, with the major companies such as Novartis and U.S.-based Merck moving to scoop up their smaller biotech and medical research rivals.

"I think that will happen quite a bit this year," Crispin Kirkman, chief executive of the UK's Biotech Industry Association, told CNN.

Kirkman said pharmaceutical companies will be looking to team up with biotech companies to provide pipelines to get their products to market, while biotechs will be joining forces to market their own products.

He said the focus for investors in 2002 should be on companies with good management and good growth potential.

  I doubt there's a commercial thrust to this at the moment. Its biggest effect is to spark awareness and debate of what is becoming possible.  
  Andy Clark
Biotech Fund Manager
Reabourne/Close Brothers

Among the most popular will be companies researching and producing vaccines for anthrax and other so-called biodefence stocks in the aftermath of the September 11 attacks in the U.S.

Analysts also point to small companies that have tie-ups with large global corporations.

In Europe, these include Decode Genetics, an Icelandic company listed on the Nasdaq, which studies genetic links to diseases and has been working closely with Swiss drug giant Roche. Another is Lion Bioscience, a German-based company that trades on the Neuer Markt, which has been sharing its biotech database analysis with IBM.

But as always with sectors, the big pharmaceuticals are still the ones to watch.

"Investors feel more at home with bigger companies," Andy Clark, a biotech fund manager at Reabourne/Close Brothers. "So if you want you keep going you have to get bigger."

As for the breakthroughs, such as the one announced by PPL, Clark said: "The real value is the ability to produce a large number of identical animals in a relatively short period.

"I doubt there's a commercial thrust to this at the moment. Its biggest effect is to spark awareness and debate of what is becoming possible."

The impact on the healthcare sector will be minimal in the near term. "We're still a long way away from doing [cloned] organ transplants," he said, adding that human clinical trials are at least 10 years off.

In the meantime, there are also serious health issues related to non-human organ transplants that need to be considered.

"The risk from viruses is an unanswered question -- and it won't be answered until you have had organs transplanted into humans over many years," Ian Smith, a biotechnology analyst at Lehman Brothers, told Reuters.

Some scientists are worried that porcine endogenous retroviruses could spread to transplant patients, although the risk that they would harm patients is at the moment only theoretical.



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