The Scottish company involved in the creation of Dolly the sheep will today begin a mass slaughter of its flock in an effort to cut costs in the face of mounting financial problems.

PPL Therapeutics, the Midlothian-based biotechnology company, is to destroy up to 3,000 transgenic sheep at two farms in East Lothian as it struggles to survive after Bayer, the German pharmaceutical giant, pulled the plug on joint drug trials.

The genetically modified sheep – kept in farms near Wallyford and Ormiston – were being monitored under the trials involving AAT, a drug which could slow the progress of diseases such as hereditary emphysema and cystic fibrosis.

The sheep produced milk containing AAT but the cost of the trials has proved prohibitive. The sheep must be continually monitored for potential infections that could contaminate the flock, while there is additional expense in electronic tagging and keeping computerised records on the history and health of each animal.

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