By Lisa Seachrist

Washington Editor

WASHINGTON -- Following positive Phase III clinical results, Seragen Inc. has submitted a biologics license application (BLA) to the FDA for its Interleukin-2 (IL-2) Fusion Protein to treat recurrent or persistent cutaneous T cell lymphoma (CTCL).

The filing, Seragen's first, is a major technical achievement for the cash-strapped Hopkinton, Mass.-based company, which lost its listing on the Nasdaq National Market in September due to inadequate equity.

"Our feeling in general is that this company is beginning to shape up on the technology front," said Reed Prior, Seragen's CEO. "But there still remains a number of business hurdles because the company is underfinanced."

IL-2 Fusion Protein, or DAB389IL-2, is a diphtheria toxin fragment A-fragment B genetically fused to human IL-2 through amino acid 389 on the toxin chain. The construct targets high-affinity IL-2 receptors on activated T lymphocytes. Once bound, it enters the cell, where fragment A of the toxin acts to inhibit protein synthesis, thus killing the cell.

Seragen's BLA is based on accumulated data from Phase I/II and a Phase III trial of two dose levels of the drug in 71 patients with CTCL who were no longer benefiting from other therapy. The company will be presenting the Phase III data today at the annual meeting of the American Society of Hematology in San Diego.

Expedited FDA Review Expected

Seragen has requested expedited review on the basis that there is no drug approved that has a specific CTCL indication. CTCL is a disfiguring form of non-Hodgkin's lymphoma that manifests initially in the skin but can eventually affect other organs. The median survival for late-stage patients is less than three years.

The decision to accept the application and review it under an expedited process is expected to come from the FDA over the next several months.

Seragen is developing DAB389IL-2 in collaboration with Eli Lilly and Co., of Indianapolis, and will manufacture the drug for a target price to Eli Lilly should it receive marketing approval.

Reed pointed out that the arrangement is akin to a royalty payment, as Seragen will earn revenue based upon Lilly's sale of the drug. However, the market for CTCL is expected to be small. Seragen is conducting and financing a Phase II trial of DAB389IL-2 as a treatment for psoriasis with an eye to other autoimmune diseases as well.

In addition, the drug may also have a role in treating HIV. When HIV is replicating in a T cell, the cell expresses a large number of these high-affinity IL-2 receptors. In vitro studies indicate that the drug kills these infected T cells.

Reed noted Seragen will be looking for collaborators for these other indications, but that such a deal will be difficult to structure so that new collaborators won't be competing with Lilly, which has rights to the molecule only for CTCL. Once a drug has been approved by the FDA, doctors can use the product for any indication.

Seragen has a collaboration with U.S. Surgical Corp. of Norwalk, Conn., worth up to $32 million, to develop another fusion protein to prevent restenosis after cardiovascular procedures. DAB389EGF -- an epidermal growth factor fusion protein -- has been evaluated in a Phase I safety study in humans with solid tumors and could move into clinical testing for restenosis in the next year.

"This filing is a turnaround for the company," Reed said. "This is a company that has a technology that is safe and efficacious, but financially it is having difficulty. It needs fixing and we are certainly trying very hard to make that happen."

Seragen's stock (OTC Bulletin Board:SRGN) closed Monday at $0.49, up $0.01. *