Inclusion criteria:

Subjects meeting all of the following criteria will be considered for entering the study:

1. Adult male or female, 18 to 70 years of age

   • Patient must have documented positive serum HBsAg for a minimum of 6 months prior to entry into study.

   • Patients must show evidence of HBV replication and hepatitis documented by

     • Positive serum HBV DNA within 3 months prior to entry (HBV DNA >100,000 copies/mL)
     • Positive serum HBeAg within 3 months prior to entry.
     • Documented presence of abnormal alanine aminotransferase (ALT) twice within 3 months prior to entry (2 to 10 folds above the upper normal level)
     • Liver biopsy finding shows evidence of chronic hepatitis without liver cirrhosis
     • Naïve to lamivudine

2. Compensated liver disease with the following minimum hematological and serum biochemical criteria:

   • Hemoglobin values of ≥ 12 gm/dL for both genders
   • WBC ≥ 3,000/mm3
   • Neutrophil count ≥ 1,500/ mm3
   • Platelets ≥ 100,000/ mm3
   • PT prolong < 3 sec, INR < 1.2
   • Total bilirubin ≤ 2 mg/dL
   • Albumin > 3.5 g/dL
   • Uric acid within normal ranges
   • Serum creatinine ≤ 123.76 mmol/L (≤ 1.4 mg/dL)
   • Hemoglobin A1C ≤ 8.5% for diabetic patients (whether on medication and/or controlled with diet)
3. Thyroid stimulating hormone (TSH), within normal ranges (subjects requiring medication to maintain TSH levels in the normal range are eligible if all other inclusion/exclusion criteria are met)
4. Negative serum antibody to hepatitis C (anti-HCV)
5. Negative antibody to human immunodeficiency virus (anti-HIV)
6. Alfa-fetoprotein within normal range (obtained within the previous year, or if elevated and <100 ng/ml, then a negative ultrasound for hepatocellular carcinoma within prior 3 months is required.)
7. Subject must be willing to give written informed consent and be able to adhere to dose and visit schedules

Exclusion criteria:

Subjects presenting with any of the following will not be included in the study:

1. Women who are pregnant or nursing
2. Prior treatment for hepatitis with any interferon, NA or other investigational agents
3. Prior treatment for hepatitis with immunomodulatory drug within previous 2 years
4. Suspected hypersensitivity to interferon
5. Have evidence of cirrhosis
6. History of severe psychiatric disease, especially depression
7. Concurrent malignancies (including hepatocellular carcinoma)
8. Unstable or significant cardiovascular diseases (e.g., angina, congestive heart failure, recent myocardial infarction, severe hypertension or significant arrhythmia; subjects with ECG showing clinically significant abnormalities)
9. Prolonged exposure to known hepatotoxins such as alcohol or drugs
10. History of thyroid disease poorly controlled on prescribed medication
11. Poorly controlled diabetes mellitus
12. Have suspected or confirmed significant hepatic disease from an etiology other than HBV (e.g., alcohol, autoimmune disease etc.)
13. Patients co-infected with hepatitis C and /or HIV
14. Severe renal disease or myeloid dysfunction
15. History of organ transplantation other than cornea and hair transplant
16. Any medical condition requiring, or likely to require during the course of the study, chronic systemic administration of steroids
17. Any other condition which in the opinion of the investigator would make the subject unsuitable for enrollment, or could interfere with the subject participating in and completing the protocol.