By Randall Osborne

Expecting to line up a partner for the continued development of its lead product, Zadaxin (thymosin alpha 1) against hepatitis B and hepatitis C, SciClone Pharmaceuticals Inc. nailed down an equity-line deal with an institutional investor that gives the company up to $32 million over a two-year period.

"The investors are patient, and that's what we need: patient money," said Shawn Singh, senior vice president of San Mateo, Calif.-based SciClone. The fund is managed by the Palladin Group LP, of New York, through which SciClone raised $4 million earlier this year.

Under terms of the credit line, SciClone is not required to draw down a minimum amount, but may take up to $4 million per quarter through stock sales.

Zadaxin, approved in seven countries outside the U.S. as a monotherapy for hepatitis B, generated $2.2 million in sales for SciClone last year. Nineteen regulatory approvals are pending in Asia, Latin America and the Middle East.

In the U.S., the focus is on Zadaxin with alpha interferon for hepatitis C. A Phase III study showed the combination was a superior treatment to alpha interferon alone.

"Last year, we went to the FDA with the data, and [the agency] said the goal posts had been moved," Singh told BioWorld Today. "They wanted to see 12 months of therapy instead of six months."

The credit line should help lure partners for further studies in the U.S. and overseas, in areas such as Denmark, the U.K. and the Netherlands, Singh noted. "It shows we're not going away," he said, adding the company had $11.5 million in cash at the end of May, with a burn rate of about $1 million per month.

Last year, SciClone acquired the European patent for Zadaxin as a treatment of hepatitis C.

In April, the company paid $1.84 million to Sclavo SpA, of Siena, Italy, for rights to marketing approval in Italy of Zadaxin as an influenza vaccine adjunct. The agreement also gave SciClone rights to Sclavo's marketing application in Italy for Zadaxin to treat non-small-cell lung cancer and to Sclavo's Zadaxin development rights in Spain and Portugal.

In May, Schering Plough K.K., the Japanese subsidiary of Madison, N.J.-based Schering-Plough Corp., launched a pivotal Phase III hepatitis B study of Zadaxin in Japan. Studying 300 patients, the trial is the largest randomized, double-blind clinical study to date using the drug.

"We're staging a prospective partnering agreement for the U.S. and Europe," Singh said. "We now have a very strong package."

Zadaxin also is approved in Argentina as a vaccine adjunct.

"There's a strategy to get approval any way you can, and then expand your label through additional trials," Singh said.

SciClone acquired rights to Zadaxin in 1994 from Alpha 1 Biomedicals Inc., of Bethesda, Md., which had failed to reach statistically significant results in a Phase III trial.

In 1996, SciClone reported disappointing results with Zadaxin as a monotherapy against hepatitis B in Taiwan, but early positive results from a Phase III trial of the drug with alpha interferon in hepatitis C patients. (See BioWorld Today, Aug. 2, 1996, p. 1.)

The latest financing "gives us another option," Singh said, adding he could not predict how much of the credit line might be drawn down.

"We'll go whichever route gives us the least cost of capital," he said. "We didn't pay any cash out the door [for the credit line], and that's as good as we can get it."

SciClone's stock (NASDAQ:SCLN) closed Wednesday at $3.75, up $0.187. *

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