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Executive Summary

SERAGEN PREPARING IND FOR INTERLEUKIN-2 "FUSION TOXIN" FOLLOW- ON, the company said in a Feb. 11 prospectus for an initial public offering. Seragen's lead fusion toxin, DAB[486]IL- 2 is currently in Phase I/II trials for treatment of unresponsive leukemias and lymphomas, severe rheumatoid arthritis, and recent onset type I diabetes. The R&D firm is preparing an IND for an "improved version," DAB[389]IL-2, which it "believes has the potential to supersede the DAB[486]IL-2 version of the product," the prospectus says. Seragen's fusion toxins are drugs designed to deliver the diphtheria toxin to kill cells expressing a certain target receptor -- a high affinity IL-2 receptor in the case of the company's lead compounds. "The presence of high affinity IL-2 receptors is a pivotal event marking the activation of the immune system that occurs when the cell is exposed to foreign substances, such as viruses, bacteria or transplanted organs, or when the cell recognizes self-antigens as foreign, as in the case of autoimmune diseases," the prospectus states. "The IL-2 receptor is also present on the surface of certain cancerous cells." The company's follow-on product, DAB[389]IL-2, has shown "increased binding affinity for the IL-2 receptor" and improved efficacy in preclinical models compared to the lead compound. In addition to the indications under study for DAB[486]IL-2, Seragen intends to study DAB[389]IL-2 for some solid tumors, AIDS and prevention of transplant rejection. DAB[486]IL-2 entered clinical trials in 1989. A 37-patient Phase I trial in refractory IL-2-expressing leukemias and lymphomas showed that the drug was "generally well tolerated" and produced sustained remission in three patients, one with B- cell lymphoma, one with cutaneous T-cell lymphoma and one with bone marrow transplant-refractory Hodgkin's disease. The company intends to focus development on these three cancers, the prospectus says. A multicenter Phase II trial has treated 66 more patients and preliminary data suggest efficacy in the three target cancers, the company said. The National Cancer Institute started a Phase II trial in mid-1991 that has enrolled nine patients to date, with completion slated for the end of this year, the prospectus adds. A Phase I/II trial of DAB[486]IL-2 in severe rheumatoid arthritis, completed in 1991, studied 19 patients who did not respond to methotrexate. Side effects were "transient and well-tolerated" and 11 of 12 patients receiving the higher doses showed signs of improvement, the prospectus says. A full Phase II trial began at the end of 1991. An ongoing Phase I/II trial of DAB[486]IL-2 in recent-onset type I diabetes has shown preliminary efficacy and safety, the prospectus says, with the trial scheduled to end in mid-1992. Seragen has five other fusion toxins in preclinical development. DAB[389]EGF targets epidermal growth factor receptor and the company intends to file an IND in 1993 to treat EGF-expressing malignancies which constitute a "large percentage" of solid tumors. The other fusion toxins target IL-4 receptor, melanocyte stimulating hormone receptor, IL-6 receptor and CD4 receptor (the gp120 protein of HIV). Seragen estimates net proceeds of over $50 mil. from the offering of 3 mil. shares at an estimated price of $18.50 per share. The company will use $10 mil. to retire its existing bank debt, and believes the remainder will fund operations for two years. Goldman Sachs and Kidder Peabody are the underwriters. Hopkinton, Mass.-based Seragen was formed in 1979 by Boston University and some of its faculty. It was majority owned by Hafslund Nycomed until August 1987 when Boston University acquired the majority interest. Seragen also divested its diagnostics business at that time. Boston University owns 92.2% of Seragen, 70.2% after the offering. The university has been funding Seragen's operations since 1987. Seragen Chairman James Howell, PhD, was formerly chief economist for the Bank of Boston and is a member of the Boston University Board of Trustees. President and CEO Richard Svriuga was a cofounder of Summit Technology. Clinical and Regulatory Affairs Director Thasia Woodworth, MD, was formerly an assistant medical director for Hoffmann-La Roche. Boston University President John Silber, PhD, sits on Seragen's board. The company has 126 employees.

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