By Lisa Seachrist

Washington Editor

WASHINGTON — Aiming to produce a slew of small molecules to treat autoimmune diseases, cancer, cardiovascular disease and nervous system conditions by controlling gene expression via intracellular signaling pathways, Signal Pharmaceuticals Inc. has filed for an initial public offering (IPO) of 2.5 million shares at between $11 and $13 per share.

At the middle range of $12 per share, the offering would raise $30 million for the San Diego-based company.

In conjunction with the IPO, corporate collaborator DuPont Merck Pharmaceutical Co., of Wilmington, Del., will purchase $2 million worth of Signal's common stock in a private placement concurrent with the closing of the IPO. The DuPont Merck shares will be purchased at IPO price.

Signal intends to use the proceeds of the IPO to fund operating expenses and capital requirements through the end of 2000. The company anticipates continued and increased expenditures for research and development; purchase of additional laboratory and other equipment; the purchase of technology, compound libraries and product rights; and the repayment of debt.

Signal's drug discovery program integrates biochemical and whole cell screening assays with robotics-based, high-throughput screening, and combinatorial and computational chemistry. The company aims its efforts at the intracellular signaling pathways that control gene expression. Thus far, six compounds have made it to the lead optimization stage in diseases ranging from rheumatoid arthritis to osteoporosis to cardiovascular disease to cancer.

Company Focus On Gene Regulating Pathways

Signal is focusing on several gene regulating pathways — cascades of protein messengers that control the expression of certain genes. The NF-KB pathway regulates a broad set of inflammatory genes, including those that express tumor necrosis factor, interleukin-1 and cell adhesion molecules. Signal researchers and collaborators have identified three drug targets that regulate NF-KB: IKK1, IKK2, and IkB ligase. Corporate partner Ares-Serono Group, of Geneva, has obtained the rights to an additional target, NIK.

Signal also has a program in the mitogen-activated protein kinase (MAP kinase) pathways, which are vital to inflammatory processes, bone metabolism, and neurological and cardiovascular activity. Signal has identified nine drug targets in the MAP program.

Signal has programs in the JNK gene regulating pathway, the p38 gene regulating pathway and the c-Fox gene regulating pathway. The JNK pathway controls autoimmune and inflammatory genes, including interleukin-2 and gamma interferon; the p38 pathway controls genes that regulate the development and proliferation of cells in response to disease and tissue injury; the c-Fox gene controls the development and activation of certain bone-resorbing cells.

In addition, the company has programs in the estrogen-related gene pathway and viral gene regulating pathways.

The programs have spawned five corporate partnerships. Ares-Serono signed a $59 million deal with Signal to identify small molecule inhibitors of the NF-KB gene regulation pathway in November 1997.

Roche Bioscience of Palo Alto, Calif., initiated a research agreement with the company for the development of human peripheral nervous system cell lines in August 1996. Roche Bioscience is a division of Hoffmann-LaRoche AG, of Basel, Switzerland.

Organon Teknika Corp., a wholly-owned subsidiary of Akzo Nobel Pharma Group, of Arnhem, the Netherlands, is funding research into cardiovascular, neurological, gynecological and other diseases at Signal.

In January, Signal signed a $25 million deal with DuPont Merck to develop drugs that inhibit the gene-regulating targets of the hepatitis C virus and HIV. And, in February, Signal entered into a development and marketing partnership with Nippon Kayaku Co. Ltd., of Tokyo, to develop a drug for treating peripheral neuropathies.

As part of the IPO, Signal has granted to the underwriters an option to purchase 375,000 additional shares to cover overallotments. The IPO will be managed by Hambrecht & Quist, of New York; BancAmerica Robertson Stephens, of San Francisco; and Lehman Brothers, of New York. *