Analysts expressed mixed views on the value of Cetus Corp.'soncology portfolio, the centerpiece of the proposed mergerannounced Monday between Cetus and Chiron Corp.

Cetus' lead products are Proleukin interleukin-2 (IL-2),currently marketed in nine European countries for advancedrenal cell carcinoma, and macrophage colony stimulatingfactor (M-CSF), which is in Phase II trials for fungal infectionsand Phase I trials for cancer.

"In IL-2 and M-CSF, we're getting two products that willsurprise a lot of people," said Chiron spokesman Larry Kurtz."We think the analysts' estimates are very low. Beyond thesetwo products, we can't say what the potential is because therehaven't been trials in people. But we're impressed with thenumber of things in the pipeline."

Investors continued to take a negative view of the dealbetween the two Emeryville, Calif., companies. Cetus(NASDAQ:CTUS) closed down 63 cents at $15 on Tuesday, andChiron (NASDAQ:CHIR) closed down $3.25 at $51.50. Chironstock has lost $9.25 in the past two days.

Cetus isn't projecting market size for IL-2, which hasannualized European sales of about $15 million. But Cetusconsiders the U.S. market two to four times larger, due to moreaggressive cancer treatment in the United States and to higherreimbursement hurdles in Europe, said Ed Kenney, seniordirector of marketing for Cetus.

Although the company has been waiting a year for approval, Cetus still considers Proleukin its starproduct.

"We've barely begun to scratch the surface in all sorts ofdisease states, including cancer and infectious diseases," saidKenney. "IL-2 is likely to be more like interferon. Interferonstarted with only hairy cell leukemia. Over time, otherindications have been added as people find more user-friendlyways to administer the drug and have come to understand whatit's doing."

Analyst David Stone of Cowen & Co. in Boston, who said Chironis getting a good deal, predicted a combined U.S. and Europeanmarket of $100 million for the drug, which he said has nocompetition since F. Hoffmann-La Roche dropped its product.

Robert Kupor of Kidder, Peabody, who is among the naysayerson the merger, said IL-2 may sell $40 million in the third fullyear of U.S. sales. As for additional indications, he said, "inview of the fact that it's been tested for five years and longer,I'd be reluctant to assume that now."

M-CSF is Cetus' next lead product, but "it's not clear if itslargest potential is cancer or infectious diseases," saidKenney. Cetus has a royalty-free cross-license agreement withGenetics Institute Inc. of Cambridge, Mass.

There are indications the drug might work against melanomaand non-small cell lung cancer, both of which are largemarkets, but that has yet to be validated, he said.

"I haven't heard of any reports of direct anti-cancer activitywith M-CSF," Kupor said. He also noted that GM-CSF, currentlymarketed by Immunex Corp., has "many of the biologicalcharacteristics of M-CSF."

"M-CSF has the potential to become a substantial product, butthe exact size is tough to pin down right now," said Stone. "Wehave $200 million to $300 million penciled in, but it dependson whether it ends up being used only in infectious diseases orin cancer."

Stone said the real value of the deal resides elsewhere: inCetus' R&D, in its facilities and in its sales force.

"No one pays attention to Cetus' hospital-based sales force," hesaid. "But if they license in a product, which they've said theywill do, people will notice."

It's too early to predict efficacy or market size for otheroncology products. PEG-Proleukin, in Phase II trials for renalcell cancer, would share the IL-2 market, Kenney said.

Tumor necrosis factor retroviral gene vector is in Phase Itrials. The vector is added to white blood cells from apatient's tumor and reinfused into the patient. TNF is thenreleased inside the tumor. "It could be a fundamentaltechnology to allow cells to release other types of cytokines,"said Kenney. "But it's still pretty far down the road."

Also in trials are two licensed products for the Europeanmarket: OncoScint CR103 for imaging colorectal cancer andCardioxane to treat cardiotoxicity in chemotherapy patients.

The 2 B-1 bispecific antibody, which is nearing clinical trials,uses a monoclonal antibody that brings an oncogene productand a killer cell into proximity.

TNF convertase inhibitor, also in R&D, may prevent cachexia, awasting syndrome of cancer patients. IL-6 is a growth factorthat has been associated with cancers. IL-6 inhibitor mayprevent its release.

-- Karen Bernstein BioWorld Staff

(c) 1997 American Health Consultants. All rights reserved.