The reemergence of smallpox by release of variola virus, which was declared to be eradicated as a natural threat to humans in the late 1970s, is one of the most feared bioterrorist scenarios. Therefore, there is a strong need to develop potent antiviral therapeutics that would be easily administered to exposed individuals and would curtail or eliminate the development and spread of the disease. Because of the high degree of similarity between variola (VAR) and vaccinia (VV) viruses, such drugs are also likely to be efficacious in the treatment of post-vaccination complications that may arise. It would also be of public health benefit to develop a safe and efficacious treatment for Molluscum contagiosum (MCV), another poxvirus that infects humans and causes long-Iived skin lesions that are uncomfortable, somewhat disfiguring, and contagious. This proposal is being submitted in response to PAR-02-026, which requires a partnership between an academic laboratory and a commercial entity. The PI is an established poxvirologist; the industrial partner, CEPTYR, Inc. is a biotechnology company whose drug discovery programs are focused exclusively on protein phosphatases. The vaccinia dual specificity phosphatase VH1 is essential for viral infectivity, thus validating poxvirus phosphatases as drug targets. The specific aims of the proposal are: AIM 1: Identification of small molecule inhibitors of the variola phosphatase and the Molluscum contagiosum phosphatase through high-throughput screening of a small molecule chemical compound library. These inhibitors will have IC50 values in the low mu M range and will additionally pass a battery of secondary assays specifically designed for this family of enzymes. AIM 2: Lead optimization: development of small molecule inhibitors with improved chemical properties, potency, and biological activity. We will apply iterative rounds of organic chemistry to increase the potency, selectivity and bioavailability of the compounds isolated in Aim 1. Compounds will be tested in both biochemical and cellular assays. Compounds that significantly affect viral infectivity in cellular assays will have high potential for study in animal models and for further development to human therapeutics.