One area biotech company believes it has an edge on a potential cancer treatment and that its product will challenge some of the assumptions of the new genetic engineering industry.

Interleukin-2 Inc., based in Alexandria, was founded in 1983 to produce a substance called interleukin-2 (IL-2), a chain of amino acids that regulate and stimulate certain activities of the immune system.

The company believes its product could be used to strengthen the immune system of patients undergoing chemotherapy and may assist the body's defenses against some forms of cancer. It may also be a weapon against diseases that result as a failure of the immune system, such as AIDS (acquired immune deficiency syndrome), leprosy and possibly aging, according to the firm.

Cancer researchers have focused increased attention on the workings of the immune system, and many biotech companies have been born with hopes of using new methods of gene splicing to produce the substances involved.

Cetus Corp., Immunex Corp., and Chiron Corp. are among several biotech firms working on IL-2. Genentech Inc. successfully manipulated genes to produce the substance but decided against developing a commercial product. Genex Corp. did the same under contract to Yoshitomi Pharmaceuticals of Japan.

Interleukin-2, Inc. estimates its product may be worth more than $500 million by 1990, depending on the uses approved. But other firms and some independent researchers question the company's claims about the superiority of its approach.

Most of the major biotech firms working on IL-2 are concentrating on producing commercial quantities of the substance through gene splicing, or inserting a gene for the protein into a single-celled creature that will then act like a tiny organic factory producing the substance.

The advantage, many biotech firms believe, is that this process produces natural substances instead of chemical or animal-produced substitutes.

Interleukin-2 Inc., however, is betting the genetic engineers are going in the wrong direction. It contends that gene splicing may not be the best way to produce some naturally occurring substances.

The Alexandria company uses live mammalian cells to produce IL-2 and contends that its method produces a substance that is closer to natural protein and, therefore, is more effective.

The difference is that the naturally occurring IL-2 molecule is produced with sugar attachments, while the genetically-engineered substance lacks the sugars. Interleukin-2 Inc. believes this difference will affect the medical success of the product.

"Normal mammalian cells produce a substance identical with, not just near to, the natural product found in the bloodstream, and scientists today are beginning to believe that only identical substances will function properly in the body," the company said in a statement last year announcing its first U.S. patent on interleukin-2.

The company said it also believes that its product may be better tolerated by patients -- that it is less likely to be perceived as an invader and attacked by antibodies than other forms of interleukin-2.

"We will have to compete with the genetic engineering folk until they get knocked out of the bucket -- and they will," said Edwin A. Shalloway, the company's patent counsel and secretary of the board of directors.

The company is testing its product on cancer and AIDS patients at St. Thomas's Hospital Medical School in London, plans to begin work on U.S. patients within nine months and expects to have a product commercially available before 1990. Many of the company's operations are in Europe although its headquarters is here.

Other researchers in the field disagree about Interleukin-2 Inc.'s contentions. Some say the Alexandria firm is wrong; others say the evidence is not there to prove or disprove their contentions.

"Preposterous," said Jeff Price, Cetus's vice president of research and development, of Interleukin-2's claim that its product is superior. "We have shown, as have other investigators, that genetically-engineered IL-2 in animal models of cancer, behaves identically to natural IL-2." Price also said "there is no evidence" linking antibody production to the degree of sugar molecules attached to IL-2. "They are speculating. They're just making this up."

Cetus, of Emeryville, Calif., is conducting tests on patients in eight medical centers and expects to have a product on the market by 1988.

The National Cancer Institute is studying IL-2 and planning to support a program of clinical trials at the University of Illinois. According to NCI's Ronald B. Herberman, the two forms of IL-2 may have different effects.

"There is as yet no clear indication that the genetically-engineered IL-2 preparations can be used interchangeably" with the sugared forms grown in cell culture, Herberman wrote in an article on the subject.

Of major concern, he wrote, is the possibility that IL-2, particularly the genetically-engineered form, may be attacked by antibodies.

E.I. du Pont de Nemours & Co. is studying IL-2 and has found "no significant difference" in the effectiveness of the various forms, said Richard J. Robb, a DuPont research leader.

He stressed, however, that DuPont has studied the substance in tissue cultures, not humans. As studies move to patient studies, new problems could emerge, he said.

So far, IL-2 is the firm's only product, but others are being considered, Shalloway said.