By Mary Welch

Enzon Inc. raised $19 million in a private placement so the Piscataway, N.J., company can take its PEG technology into the third generation and can start a development program to analyze compounds based on its single-chain antigen-binding protein technology.

The private placement was priced at the June 24 closing stock price of $4.75 per share. Participants included current investors and new ones, with the deal led by SBC Warburg Dillon Read Inc., of New York. The company has 31 million shares outstanding.

The PEG (polyethylene glycol) process is a drug delivery technology that reduces immunogenic reactions to therapeutic proteins and enables the proteins to remain in the bloodstream longer.

Enzon has added improvements to its patented process, such as a modification that disguises a drug from the immune system and prevents antibodies from binding to the protein molecule, thus lowering its immunogenic potential and extending the circulating half-life of a drug.

Protein drugs that are not PEG-modified are frequently vulnerable to the immune system, which recognizes the molecules as foreign. If the compounds aren't modified, the immune system will bind to these compounds, destroying them and reducing their potency.

The company has two FDA approved products that use the first-generation PEG technology. Adagen (pegademase bovine) was developed and marketed by the company for patients with adenosine deminase-deficient severe combined immunodeficiency disease (better know as the "Bubble Boy disease").

The second is Oncaspar (pegaspargase), which is a PEG-modified version of the enzyme L-asparaginase, for acute lymphoblastic leukemia. Oncaspar is marketed in the U.S. and Canada by Rhone-Poulenc Rorer Pharmaceuticals Inc., of Collegeville, Pa.

"You could say that the second-generation PEG simply works better and opened up more proteins for use in more applications," said Kenneth Zuerblis, vice president of finance and chief financial officer.

The third-generation development, which will benefit greatly from the private placement, will be a prodrug technology that will modify PEG to include small molecule compounds as well as proteins. It also provides increased solubility. This technology may become useful in anti-fungal and anti-cancer diseases, Zuerblis said.

"Not only will the financing allow us to develop the third-generation technology, but it will allow us to hold on to the products longer before we license them to strategic partners. By holding on to them longer, we create more value."

More Than A Dozen Firms License SCA Proteins

The second area where the capital will be targeted will allow the company to do its own research on compounds using its single-chain antigen-binding (SCA) proteins.

Enzon obtained the SCA protein technology with the acquisition of Genex Corp., of Gaithersburg, Md., in October 1991. The dominant patent position extends through the year 2013 and additional applications have been filed.

"Anyone who is doing research in single-chains has to get a license from us," said Zuerblis. "We never did anything with the technology except to license it to others and there's more than a dozen companies using it. With this funding, we'll get some compounds and do some development on our own."

SCA proteins, like monoclonal antibodies, deliver therapeutic agents to targeted disease sites. But SCA proteins have advantages over monoclonal antibodies, he said.

"First off, SCA proteins are easier to produce and they're human, so you don't have to go through the "humanization" process," Zuerblis observed.

Nine products using SCA protein technology are in various stages of clinical trials in the areas of gene therapy, cancer therapy, cardiovascular indication and AIDS.

Enzon posted fiscal 1997 revenues of $12.72 million. Its fiscal year ends June 30. For the first nine months of fiscal 1998, revenues totaled $11.5 million and the company's net loss was $1.25 million.

Enzon's stock (NASDAQ:ENZN) closed Friday at $5.62, down $0.062. *