SOURCE: Targeted Genetics

Targeted Genetics

March 02, 2009 07:30 ET

Targeted Genetics Provides Business Update and Announces Extended Cash Horizon

SEATTLE, WA--(Marketwire - March 2, 2009) - Targeted Genetics Corporation (NASDAQ: TGEN) today announced the continuation of a product-focused realignment strategy that includes a renegotiation of its relationship with Celladon Corporation and the transfer of its Adeno-Associated Viral (AAV) vector manufacturing know-how to contract manufacturing organizations (CMOs).

"While we have begun internal efforts in connection with our manufacturing campaign with Celladon that is expected to run through the first half of 2009 and continue to seek financing for our therapeutic development and manufacturing operations, we have concluded that accessing a CMO in addition to, or instead of, funding our own internal manufacturing capabilities could provide operational and financial flexibility in addressing future manufacturing needs," said B.G. Susan Robinson, president and chief executive officer of Targeted Genetics. "Relying on CMOs for future manufacturing needs could significantly reduce the funding we need to continue our operations."

As part of this strategy to transfer its manufacturing technology, Targeted Genetics has entered into new license and manufacturing agreements with Celladon that replace the prior agreements with Celladon.

Under the terms of the new agreements, Targeted Genetics granted Celladon exclusive use of certain proprietary Adeno-Associated Viral (AAV) vector technology in an expanded field, including heart failure, where changes in calcium cycling have contributed to or caused disease conditions. The agreements enable Celladon to manufacture MYDICAR®, a genetically-targeted enzyme replacement therapy for heart failure, through CMOs or a commercial product development partner. Celladon agreed to increase the payments to Targeted Genetics in the first six months of 2009 to support Targeted Genetics' manufacture of MYDICAR for phase III clinical studies. Targeted Genetics also granted Celladon control over CMOs it may use for future manufacturing of therapeutic product candidates in the permitted field. In addition, Celladon and Targeted Genetics agreed to a new milestone and royalty structure on development and commercialization of products in the permitted field. Celladon also has the right to terminate the agreement without cause on sixty days notice after June 30, 2009. If Celladon is successful in commercializing a product covered by the license agreement, Targeted Genetics could receive significant future revenue pursuant to the milestone and royalty provisions of the agreements.

Based on the increased Celladon revenue expected in 2009 in combination with reduced infrastructure costs, decreased external program support costs and other spending reductions, Targeted Genetics now projects adequate cash and short term investments to support operations through the first half of 2009.

As a result, the Company continues to seek financing for continued operations. Such efforts include equity financing, strategic transactions, and the sale of individual technology assets. If raised, the Company expects that funding would be utilized to support ongoing product development efforts in ocular and neurological indications and/or earlier stage opportunities identified by the company focusing on AAV to deliver RNA therapeutics, which include interfering RNA sequences and microRNAs. If the Company is not successful in the near-term with raising additional capital, it intends to phase out its manufacturing operations infrastructure following completion of the current Celladon manufacturing campaign. Such a reduction would include reducing its manufacturing headcount from approximately 35 full-time equivalent staff to five or fewer manufacturing-related staff and also include other infrastructure cost reductions. Targeted Genetics is also evaluating other alternatives if the Company is unable to secure sufficient funding for its continued operations.

Targeted Genetics' product development efforts are focused on a treatment for severe retinal dystrophies, most commonly diagnosed as Leber's Congenital Amaurosis (LCA), and additional programs in Huntington's Disease (HD) and Amyotrophic Lateral Sclerosis (ALS). The Company is also reaching the end of its current HIV/AIDS vaccine product candidate work with the Children's Hospital of Philadelphia as that program enters clinical testing, has suspended most external spending on its Company-funded programs and expects to advance its inflammatory arthritis candidate only with funding from a partner or collaborator.

Ms. Robinson added, "We believe the Targeted Genetics technology platform and product pipeline are built on a solid foundation of gene delivery intellectual property and on core capabilities in critical functions that include preclinical development, clinical and regulatory affairs and manufacturing of innovative gene-based product candidates. Although market conditions are challenging, our efforts continue to be focused on maximizing value for our stakeholders."

About Targeted Genetics Corporation

Targeted Genetics Corporation is a biotechnology company committed to the development of innovative therapies for the prevention and treatment of diseases with significant unmet medical need. A key area of focus for Targeted Genetics is applying its proprietary Adeno-Associated Virus (AAV) technology platform to deliver genetic constructs to increase gene function or silence gene function. Targeted Genetics' lead product development efforts target ocular and neurological indications, two therapeutic areas where AAV delivery may have competitive advantages over other therapeutic modalities. To learn more about Targeted Genetics, visit its website at www.targetedgenetics.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This release contains forward-looking statements regarding the Company's liquidity and financial resources, its ability to fund ongoing and future operations and its business strategy and product development strategy and manufacturing capabilities strategy, including statements regarding the Company's ability to continue its operations, raise capital or secure other financial resources in the near term, the extent of the Company's cash horizon, the potential benefits of the Company's agreements with Celladon and the potential impact of the results of such programs on the Company's operations, the nature and results of the Company's research and development programs and the potential impact of the results of such programs on the Company's operations, the Company's ability to monetize assets and other statements about the Company's plans, objectives, intentions and expectations. These statements involve current expectations, forecasts of future events and other statements that are not historical facts. Inaccurate assumptions and known and unknown risks and uncertainties can affect the accuracy of forward-looking statements and cause actual results to differ materially from those expected or implied by the forward-looking statements. Factors that could affect actual future events or results include, but are not limited to, the risk that the Company will run out of cash earlier than expected, the risk that the Company will not be able to raise capital or secure other financial resources in the near term, the risk that Celladon will not successfully commercialize a product covered by its license agreement with the Company or that such product development efforts will be delayed or terminated, the risk that payments under the agreements with Celladon are not received when expected or at all, the risk that Celladon will terminate the relationship with the Company' or that the relationship with Celladon will not be as successful as expected, the risk that the Company's research and development programs are not successful or are delayed or terminated, the risk that the Company will not successfully transfer its manufacturing processes and know-how to a third party contract manufacturing organization, the risk that payments anticipated by the Company under its product development collaboration, contracts and grant are not earned or received when expected or at all, the risk that the Company will not be able to sell or otherwise monetize its assets and the risk that the Company will not be able to maintain its listing on the NASDAQ Capital Market as well as other risk factors described in "Item 1A. Risk Factors" in the Company's most recent quarterly report on Form 10-Q for the period ended September 30, 2008 filed with the SEC. You should not rely unduly on these forward-looking statements, which apply only as of the date of this release. The Company undertakes no duty to publicly announce or report revisions to these statements as new information becomes available that may change the Company's expectations.

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