New venture promises to deliver

Department of Health's Medicines Control Agency, it offered the East

Kilbride company conditional approval to market its first product line.

The product is a polymer pessary designed to deliver precise amounts

of prostaglandin over an eight-hour period directly to the cervix of

pregnant women in labour. The hormone, which relaxes the opening to the

womb, helps ease delivery.

Controlled Therapeutics' product should reduce the incidence of

Caesarean sections by offering a more targeted delivery of precise

amounts of prostaglandin throughout labour. The system's other great

virtue is that treatment can be interrupted by the simple expedient of

removing the pessary. It will be launched within two months.

The official green light for this sophisticated drug delivery system

is a significant milestone in a complex story, involving the research

skills of Scottish academics, the market vision of an American

entrepreneur, and investment support from the Scottish Development

Agency.

Today, less than three years after setting up in East Kilbride,

Controlled Therapeutics is a 75-strong company -- two-thirds qualified

scientists who might otherwise have been forced to emigrate to deploy

their skills fully -- with three more products already heading for

launch and ambitions to build a major presence in a highly profitable

pharmaceutical niche.

In an industry where development programmes stretch over decades,

risks run into mega-bucks, and the small player is always in danger of

being trampled by the big boys, this is a start-up of real promise.

The story, in more ways than one, starts at Strathclyde University.

That was where Jim Pickard trained as a pharmacist before going off to

work for the mighty Sandoz corporation in Switzerland and for a

Norwegian pharmaceuticals group in Oslo. Strathclyde is also the

university where Professor Neil Graham developed hydrogels, polymers

related to the substances used to make soft contact lenses, which can

absorb drugs or human biomolecules and release them later within the

body at precisely designed rates and without adverse tissue reactions or

toxic side effects.

Professor Graham's work was carried out under the auspices of the

British Technology Group, and the market potential of the patent BTG

held was seized on by an American, Dr Art Michaelis, working at the time

for SmithKline Beckman.

He persuaded SmithKline to undertake a market evaluation of the

delivery system's potential. ''Great little product,'' the

multinational's analysts concluded, but not big enough to breach the

minimum profit boundaries pharmaceutical giants like SmithKline work to.

That was in 1984, and according to Dr Pickard that boundary could be

as high as $25m even then. But if $25m was a fleabite to the kind of

profits that would stir the SmithKline boardroom, it was more than

enough for Dr Michaelis to sign up the BTG patent rights for himself.

He also decided, early on, to put the operations base of his start-up

company as close as possible to where the concept had originated. So he

came looking for Dr Pickard, with whom he had worked in Switzerland, to

help get the company launched.

By this time Jim Pickard was back in the UK. He was, he says, paying

the mortgage by working as a consultant, designing pharmaceutical

plants, and, at the same time, trying to get his own niche business off

the ground in Durham.

Dr Pickard was torn by the offer to join Dr Michaelis in the new

venture. He had invested a lot of effort and considerable amounts of

money in his own fledgling venture. Eventually he agreed to roll his own

company into Controlled Therapeutics, maintaining development of one

particular product with strong commercial promise -- a simple-to-use,

tablet-based technique for caring for contact lenses.

Dr Michaelis won funding support from Montgomery Medical Ventures, the

Californian backers who are also behind the planned private hospital at

Clydebank. The SDA put their money where their mouth is, to the tune of

some #556,000.

The size of that investment, the sixth biggest in the agency's

last-published portfolio, is all the more daring when you realise that

Controlled Therapeutics' corporate headquarters, from the start, was

based in Philadelphia. But its first product development and

manufacturing base, as Dr Michaelis had always intended, is on East

Kilbride's Peel Park campus.

Dr Pickard has signed up the rights to further patents flowing from

Professor Graham's work at Strathclyde. Apart from the prostaglandin

pessary and lens care product (which is about to be launched in Ireland

and should be available in the UK by the beginning of next year),

Controlled Therapeutics is developing a morphine suppository for pain

management in terminally ill cancer patients and a wound care product

which will exploit the polymer's ability to absorb large quantities of

fluid to clean up bedsores and other wounds.

The way Dr Pickard describes it, Controlled Therapeutics is trying to

chart a profitable middle way in a very competitive industry. The Glaxos

and SmithKlines of this world invest vast sums in the search for new

wonder drugs. The rewards for success are high. But the cost of entry to

new players is now prohibitive.

At the other end of the pharmaceutical industry is the easily accessed

generic business, where margins are cutthroat and success depends on

achieving high volume.

Controlled Therapeutics cannot afford the former and has no interest

in the latter. Drs Michaelis and Pickard see their opportunity in taking

established drugs that are out of patent and human biomolecules, which

cannot be patented, and designing patent-protected delivery systems that

increase efficacy or reduce toxicity or in other ways improve their

impact.

The development costs are high. But if they succeed the rates of

return Controlled Therapeutics can command will rival those of the

majors.

Sensibly, the company has decided to concentrate its energies and take

its return from the development and manufacture of its product range.

Established pharmaceutical players -- the French-owned Roussel

Laboratories in the case of the pessary and Bausch & Lomb from the US

for the lens care product -- are being signed up as trading partners to

market each successive product.

There are, in fact, two group factories at Peel Park. One, Polysystems

Healthcare, is jointly owned by Controlled Therapeutics, the SDA, and

Polysystems, Professor Graham's own university spin-off business. It

makes the delivery polymers.

The Controlled Therapeutics plant, just up the road, refines them

(delivery rates are, in part, a function of geometry) and adds the drug,

hormone, or other treatment.

This unusual start-up has itself been undergoing something of a

corporate shake-up recently. At Easter the Controlled Therapeutics

holding company in the US and a quoted American shell company, Fidata

Corporation, were backed into a new vehicle, Advanced Medical

Technologies.

So the SDA is now a significant shareholder in a business with an

American listing. That means the wisdom of this particular healthcare

initiative is measurable, on a daily basis. Judging by the optimism at

East Kilbride, that share price is set to rise.