PPL Therapeutics is best known for cloning Dolly the sheep in 1996, but its first major breakthrough in the laboratory came six years earlier with the birth of Tracy the transgenic sheep, whoproduced human protein in her milk.

Tracy passed away in 1998 and Dolly was put to sleep in February this year, after suffering from a progressive lung disease. Now it seems the end is nigh for PPL itself, as the firm has hoisted the For Sale sign over its Roslin headquarters after failing to secure shareholder support for a management rescue plan.

Thanks to its high-profile successes – including the birth of cloned lambs and piglets – under the leadership of former chief executive Ron James and Roslin Institute scientist Ian Wilmut, PPL was once the darling of Scotland’s burgeoning biotech sector. But the Midlothian firm has struggled to transform its innovative research into a profitable business.

In June, the company unveiled plans to shed more than 100 staff after its partner, the German pharmaceuticals giant Bayer, put development of a key lung disorder treatment on hold, leaving PPL with a workforce of 55.

Since slashing its headcount, PPL’s net running costs have been reduced to a little over GBP 250,000 a month, down from GBP 600,000 previously, and the remaining staff are awaiting developments to see if their jobs will be saved.

Any further job cuts would be another body blow to the local biotech industry, which was rocked earlier this year when Ethicon said it was transferring production of surgical stitches and needles abroad, with the loss of more than 800 jobs in Edinburgh.

But NMT, the Livingston-based safety syringe maker, was saved at the 11th hour after agreeing a supply deal with Swiss drugs giant Roche.

The company had faced an uncertain future last year after failing to agree “acceptable commercial terms” with Roche, but the pair thrashed out a new deal last October. The West Lothian firm will supply Roche with its syringes for at least two years, safeguarding around 130 jobs.

The delays to the Bayer deal forced PPL to pull out of plans to build a new GBP 42 million manufacturing plant at Gowkley Moss, which would have produced recAAT, a treatment for hereditary emphysema and cystic fibrosis. The company was forced to write off its GBP 7.5m investment in the Midlothian facility, where up to 200 jobs would have been created.

Interim results released yesterday showed PPL made a pre-tax loss of GBP 12.8m for the six months to the end of June, compared with a GBP 5.5m deficit for the same period last year, and its net funds had fallen to GBP 8.8m, from GBP 11.8m at the beginning of the first half.

Faced with widening losses, the company was forced to consider a number of options, including a restructuring to focus its efforts on developing a business around the blood-clotting treatment Fibrin 1, or put itself up for sale.

The management team decided on the latter option, after the majority of shareholders failed to give their backing for the former.

As a result, chief executive Geoff Cook, together with product development director Martyn Breeze, manufacturing director Gordon Wright and non-executive directors Dr Arthur Hale and Dr Roger Brimblecombe stood down from the board with immediate effect, and will be followed by the executive directors “in due course”.

KPMG Corporate Finance has been appointed to help manage the sale of PPL, which will be led by a thinner board consisting of two non- executive directors and two executive directors.

A spokesman for PPL says: “The board believes there is the potential for significant long-term value to be created from the Fibrin 1 product as part of a broader sealants business.

“Although the majority of PPL’s major institutional shareholders were supportive of the sealants plan, the required level of support to go forward was insufficient.

“Hence, the board is recommending an orderly sale of the business in order to maximise the short-term value of its assets for the benefit of all shareholders.”

Paul Scott, of shareholder action group Willowdrive, is scathing in his assessment of PPL’s management, and describes the current situation as a “disaster” for all concerned. “I set up this action group for shareholders last autumn with the specific aim of asking the company to put themselves up for sale while they still had a business,” he says.

“The way it’s been handled has just been horrendous, as nearly everyone has lost their jobs and it didn’t need to happen.

“The writing was on the wall a year ago and if they’d just put their egos and self-interest to one side, we wouldn’t be in this mess.”

Mr Scott says he is not confident a buyer will be found, as he believes there is “negligible value left in the company, apart from the cash and freehold property”. He says: “At the end of June they had net cash of around GBP 8.8m, but I reckon they’ve since burned another GBP 1m, and I believe there will be around GBP 7m left in the pot to distribute.” Mr Scott’s Willowdrive action group represents around eight per cent of PPL’s private shareholders, and he holds little hope that investors will get back anything above the current share price if a buyer does come forward.

“We gave up any hope of making any money from this a long time ago.”

Mr Scott says he expects investors to salvage around 6p per share from the sale of the company – a far cry from their 1997 high of almost 460p.

The company’s management strategy came under fire at a stormy annual meeting in June, and its future was further called into question when its largest shareholder, hedge fund Metage Capital, doubled its stake to nearly 21 per cent and said it was seeking clarification of the company’s intentions. Metage failed with its resolution to have corporate financier Bill McCall appointed to the board at the annual meeting, but the former Singer & Friedlander director eventually secured a seat in August – only to resign earlier this month.

In a previous bid to stay afloat, PPL sold its pig-cloning and regenerative medicines business to the University of Pittsburgh for GBP 638,000 in April, retaining a 22.2 per cent stake in the business, which now trades under the name Regenecor Medicines.

Keith Redpath, an analyst with Panmure, says: “I think there’s a feeling they tried to be all things to all men rather than focusing on one project.”

PPL’s woe follows an extended period of financial uncertainty at Dutch rival Pharming and the collapse of British biotech firms Bioglan and Weston Medical.

While Mr Redpath says European biotechs are no more prone to failure than their rivals in the United States, he believes the industry on this side of the Atlantic seems weaker because it lacks success stories on the scale of US firms such as Amgen and Genentech.

Mr Redpath says the biotech industry is younger in Europe than in the US, and has therefore been less resilient to the plunge in investor confidence following the bursting of the technology bubble in 2000.

Since establishing its corporate headquarters in 1993, PPL has become one of Scotland’s best-known companies thanks to its innovative genetic technology. Shareholders will now be hoping a buyer will come forward to inject some new life into the company.