RATIONALE: Transurethral resection is a less invasive type of surgery for bladder cancer and may have fewer side effects and improve recovery. Drugs used in chemotherapy use different ways to stop tumor cells from dividing so they stop growing or die. It is not yet known whether transurethral resection plus AD 32 is more effective than transurethral resection alone for bladder cancer.

PURPOSE: Randomized phase III trial to compare the effectiveness of transurethral resection surgery followed by AD 32 with that of transurethral resection alone in treating patients who have newly diagnosed or recurrent bladder cancer.

OBJECTIVES: I. Assess the efficacy of adjuvant AD 32 following complete transurethral resection versus transurethral resection alone in patients with newly diagnosed or recurrent superficial transitional cell carcinoma of the bladder. II. Assess the toxicity of AD 32 in these patients.

OUTLINE: This is an open label, randomized, multicenter study. Patients are randomized to receive surgery with AD 32 or surgery alone. Arm I: Patients undergo surgery to remove bladder tumors. AD 32 is administered by catheter into the bladder within 2-24 hours after surgery. Patients must hold the AD 32 liquid in the bladder for 90 minutes. Arm II: Patients undergo only surgery to remove bladder tumors. Patients with T1 or Tis disease may receive BCG therapy once weekly for 6 weeks, followed by 6 weeks of rest. Patients are followed every 3 months for 2 years.

PROJECTED ACCRUAL: This study will accrue approximately 300 patients.

DISEASE CHARACTERISTICS: Histologically diagnosed stage 0 (Ta), stage I, or recurrent superficial transitional cell carcinoma of the bladder Must have at least 2 papillary appearing bladder tumors by cystoscopic examination Patients with recurrent disease must have no history of Tis tumor

PATIENT CHARACTERISTICS: Age: 18 and over Performance status: SWOG 0-2 Life expectancy: Not specified Hematopoietic: WBC greater than 4000/mm3 Platelet count at least 100,000/mm3 Hepatic: Bilirubin no greater than 2 times upper limit of normal (ULN) SGOT no greater than 2 times ULN Renal: Creatinine no greater than 2 times ULN Other: Not pregnant or nursing Fertile patients must use effective contraception

PRIOR CONCURRENT THERAPY: Biologic therapy: No concurrent biological response modifiers for bladder cancer Chemotherapy: No prior or concurrent chemotherapy for bladder cancer No prior AD 32 therapy for bladder cancer Endocrine therapy: Not specified Radiotherapy: No prior or concurrent radiotherapy Surgery: At least 9 months since any complete transurethral resection of the bladder