We demonstrated that cloned hepatitis B virus (HBV) DNA directs the synthesis of a 700-base RNA (HBV 700) by RNA polymerase III in a cell-free transcription system. HBV 700 is the only transcript known to originate from the viral short strand and has been mapped to the region between roughly 1,635 and 954 base pairs on the viral map, between the surface and core antigen coding sequences but overlapping and opposing the putative DNA polymerase and B protein genes. The in vitro initiation sites for the HBV 700 and core antigen RNAs are only 50 bases apart, suggesting that these two genes may be coordinately regulated. Moreover, both of these initiation sites appear to lie within the approximately 300-base double-stranded region (the nick region) between the 5' end of the HBV short strand and the nick in the viral long strand. We found two unusual sequence elements in the nick region that are conserved between the human and woodchuck viruses.
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