West Coast Editor

With more than $10 million in hand from a direct offering priced earlier this month, SciClone Pharmaceuticals Inc. is forging ahead with Phase III hepatitis C trials in the U.S. and Phase III hepatitis B trials in Japan for the immune-system booster Zadaxin thymosin alpha 1 (thymalfasin).

The direct offering to institutional investors, for which A.G. Edwards & Sons in St. Louis acted as placement agent, was filed in November of last year and declared effective in May. About 4.08 million shares of SciClone common stock were priced at $2.60 per share, raising about $10.62 million.

San Mateo, Calif.-based SciClone already had "enough money to get to where we're going," said Donald Sellers, president and CEO. "But when we get to where we're going, we don't want to be breathing fumes. This was a little bit of insurance cash."

Zadaxin, although yet to win approval in the U.S., already is a success elsewhere in the world as a treatment for hepatitis B, hepatitis C and as a vaccine adjuvant for patients with weakened immune systems. The drug is available for those indications variously in 27 countries.

Hepatitis B is especially prevalent in Asia, and the drug is sold in Argentina, Cambodia, the People's Republic of China, Kuwait, Mexico, Myanmar, Peru, the Philippines, Singapore, Venezuela and Vietnam for the treatment of chronic hepatitis B or as a vaccine adjuvant.

"Our initial indication was hepatitis B, and there's more in Taipei than in the U.S. and Europe combined," Sellers said. "Now, we're chasing hepatitis C with a vengeance, but we've got to do it according to Hoyle."

At the start of last year, SciClone began the pivotal U.S. Phase III hepatitis C clinical program for Zadaxin in combination with Pegasys, or pegylated interferon alfa-2a. (See BioWorld Today, Jan. 11, 2001.)

The study targets hepatitis C patients in the U.S. not responding to standard therapy (alpha-interferon or alpha-interferon plus ribavirin), most of whom are infected with genotype 1 of the hepatitis C virus.

"It's two confirmatory studies with 1,000 patients in all, and they're already being enrolled and injected," Sellers said. "We'll have our one-thousandth patient by the end of the year, and we'll have data by mid-2004."

In Japan, the last patients will come out of observation in the Phase III hepatitis B trial at the end of this year, he added. Zadaxin is partnered there with Schering-Plough K.K., the Japanese affiliate of Schering-Plough Corp., of Madison, N.J.

More people are dying of hepatitis C and its consequences than from HIV, Sellers noted, and the number is growing.

"The worst type of hepatitis C is genotype 1, and 75 [percent] to 80 percent of the population infected in the U.S., Europe and Japan is carrying that genotype," he said. "If you had genotype 3, you'd respond quite well to interferon and ribavirin, but there's no approved therapy out there for the people we're targeting. It's a very nice niche. We'll be assembling [the new drug application] as we go along."

For the U.S. trial, Sellers said, Nutley, N.J.-based Hoffmann-La Roche Inc. is supplying $20 million worth of the pegylated interferon at no charge.

"We're conceding the right for them to look at the data," Sellers told BioWorld Today. "Obviously, they may think they're in the front row, but we haven't given them rights of first refusal or anything like that."

Zadaxin, he said, "is a sequence of 28 amino acids found in people all the time. It's in almost all animal life forms, form the starfish up the chain. We make it synthetically and inject it back into people who have a compromised immune system."

For hepatitis, he said, "interferon and ribavirin are excellent, but then you have to mount an immune response to clear out the infected cells," and that's where Zadaxin comes in.

In the world market, Sellers noted, "there are only two players - Schering [with interferon] and Roche [with ribavirin]. We're next, and anything else is five years behind."

Zadaxin is also being studied for cancer in Europe. SciClone's partner, Sigma-Tau S.p.A., of Rome, has launched a Phase II/III program in metastatic melanoma. Sigma-Tau was among participants in the most recent financing.

"They put more money into it, and that's always nice - to have a pharmaceutical company putting their money where their mouth is," Sellers said.

"I look at so many biotech companies with $100 million in the bank and nothing in the clinic," he added.

Sellers called Sigma-Tau "one of the last big private pan-European companies left." He said SciClone chose that firm, rather than trying to work with Roche, for example, or Basel, Switzerland-based Novartis AG, or Pfizer Inc., of New York, for a reason.

"We've maintained, probably to our disadvantage at the current time but to our advantage later, our independence in the U.S. market," he said, and one of the other pharmaceutical firms probably would have insisted on more of a share in the U.S.

SciClone actively pushes Zadaxin in 10 or 12 countries, China being the largest market, and the drug sells about $16 million per year, Sellers said. In the first quarter of this year, it sold more than $3.9 million, and SciClone had about $16.5 million in cash.

"Obviously, we could sell more [Zadaxin] if we spent $10 million in smaller markets," he added. "I often say, even if you've got a cure for death, you've got to tell people about it."

SciClone didn't acquire U.S. rights to the drug until 1998 from Alpha 1 Biomedicals Inc., of Bethesda, Md., which had failed to reach statistically significant results in a Phase III trial. Even in the U.S., where the drug has yet to be approved, SciClone has not been wildly self-promoting, Sellers said.

"The company's a pretty well kept secret, and we're trying to change that," he said. SciClone's stock (NASDAQ:SCLN) closed Friday at $2.65, up 18 cents.