By Julie Steenhuysen

CHICAGO, March 19 (Reuters) - An experimental pill appears to be helping a toddler who had a near-fatal skin reaction to his father's smallpox shot, doctors said on Monday.

The drug, an antiviral made by Siga Technologies <SIGA.O> called ST-246, worked when more conventional treatment failed, the doctors said.

The child, still in critical condition at the University of Chicago's Comer Children's Hospital, developed the rare, serious, reaction eczema vaccinatum after being with his father, a soldier vaccinated for deployment in Iraq.

"He's making slow improvement every day. He's still in the pediatric intensive care unit," said Dr. John Marcinak, pediatric infectious disease specialist at the hospital.

"His skin lesions appear to be slowly healing."

The 2-year-old Indiana native was admitted to the hospital on March 3, and the U.S. Centers for Disease Control and Prevention confirmed he was infected with the virus used in the smallpox vaccine.

Smallpox vaccines do not use the smallpox virus, but instead use a related virus called vaccinia that is weakened but can still infect some people.

The child was given an intravenous form of vaccinia immune globulin -- developed in the 1960s to treat complications of smallpox vaccinations. He also received a treatment of the antiviral drug cidofovir, made by Gilead Sciences Inc <GILD.O>.

But the child was still failing. His mother also had a rash but was not ill and his father reported no adverse reaction.

By then, Marcinak and his team were having daily conference calls with the CDC, various health departments and the Department of Defense. During one, the CDC suggested the hospital try the experimental drug.

The drug has helped monkeys infected with smallpox, but its effectiveness has not been proven in humans.

The child's case is the first report of the serious skin reaction since vaccination against smallpox resumed in 2002, CDC pox virus expert Dr. Inger Damon said. She said he may already have had eczema -- which makes patients especially vulnerable to a reaction to the smallpox vaccine.

The smallpox virus once killed 30 percent of its victims, and disfigured many others. A global vaccination campaign eradicated the disease in 1979.

But some samples remain in government freezers and experts believe it could be used as a biological weapon. The United States resumed vaccinating some people in 2002, including 40,000 civilian health workers and hundreds of thousands of military personnel.

SIGA shares closed up nearly 14 percent on NASDAQ on Monday, at $5.15 a share.

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