RATIONALE: Immunosuppressive therapies, such as anti-thymocyte globulin and cyclosporine, may improve bone marrow function and increase blood cell counts. PURPOSE: This phase II trial is studying how well giving anti-thymocyte globulin together with cyclosporine as first-line therapy works in treating patients with severe aplastic anemia.

PRIMARY OBJECTIVES: To determine the response rate of r-ATG and CsA in the first line setting. SECONDARY OBJECTIVES: To determine the level of IS as assessed by Immuknow assay in responders and compare it to non-responders. OUTLINE:Patients receive anti-thymocyte globulin IV over 4-24 hours daily on days 1-5. Beginning on day 6, patients receive oral cyclosporine twice daily for 6 months followed by a taper. Treatment continues in the absence of disease progression or unacceptable toxicity.

Inclusion Criteria:

• All patients with sAA as defined by Camitta who are candidates for IS therapy; these criteria include bone marrow cellularity < 25% or 25-50% with < 30% of hematopoietic cells; it should also have two of the following three parameters: peripheral blood neutrophils < 0.5 x 10^9/L, platelets < 20 x 10^9/L and reticulocytes < 60 x 10^9/L in anemic patients
• If cytogenetic testing has been done, it should show normal karyotype or be not informative
• Patients should be either unwilling or otherwise ineligible (age, comorbidities, lack of donor) for bone marrow transplantation as a therapeutic modality
• Not previously treated with ATG for sAA
• Patients must have ECOG performance status of 0, 1, or 2
• Vitamin B12 and folic acid deficiency must be ruled out by measurement of serum levels
• Patients must have had a bone marrow biopsy examination in the three months prior to enrolling in the study
• Must be able to provide informed consent
• Systemic and other hematologic causes of pancytopenia, based on clinical presentation, must have been ruled out

Exclusion Criteria:

• Patients with clinically evident congestive heart failure, serious cardiac arrhythmias; symptoms of coronary artery disease must be cleared by cardiology prior to therapy
• Patients who have had chemotherapy, radiotherapy, or immunotherapy or other investigational drug use within 3 weeks prior to study entry
• Pregnant women
• All females of childbearing potential must have a blood test or urine study within two weeks prior to induction registration to rule out pregnancy
• Women of childbearing potential are strongly advised to use an accepted and effective method of contraception
• Patients who have medical, psychological, or social conditions that may interfere with the patient's participation in the study or evaluation of the study results

The endpoints of this study evaluated response only. As such, data on non-serious adverse events were not collected or reported for any patients on this trial. Data regarding serious adverse events were collected and reported according to FDA and IRB policies and regulations.