Targeted Genetics Corp. is cutting its work force by 27 percent and reducing its burn rate to push its lead inflammatory arthritis candidate, a locally administered anti-tumor necrosis factor-alpha product, through clinical trials as quickly as possible.

The move is intended to streamline the company's operations to put nearly all of its efforts on clinical development of tgAAC94, as well as advancing collaborations in HIV and congestive heart failure.

Twenty-six of the company's approximately 100 employees will be laid off, with most of those coming from early stage research and development areas, though President and CEO H. Stewart Parker said there will be "some pruning cuts" in general and administrative and other areas.

"But there will be no cuts in clinical, no cuts in manufacturing or product development infrastructure," she added.

The firm is providing outplacement services for all employees affected by the restructuring.

"Like all small companies, we tend to be a little cash constrained," she told BioWorld Today, "and we just felt that it was prudent to go ahead and do this now to maximize our chances of moving our lead product along."

Following the restructuring, Seattle-based Targeted Genetics expects its cash burn for 2006 to be 20 percent to 25 percent less than the $20 million to $22 million projected for 2005. Exact 2005 figures will be reported during the company's fourth-quarter and full-year earnings call March 1.

Targeted Genetics, which discontinued development of its lead cystic fibrosis drug last March after a disappointing Phase IIb study, plans to focus most of its resources going forward on tgAAC94. That product is in a 40-patient Phase I/II program in patients with inflammatory arthritis, and preliminary results are expected around the middle of the year.

TgAAC94, which delivers a gene encoding the TNF-alpha antagonist TNFR:Fc directly into cells using the company's adeno-associated viral (AAV) vector technology, is designed to complement existing systemic anti-TNF protein therapies, such as Thousand Oaks, Calif.-based Amgen Inc.'s Enbrel (etanercept) or Malvern, Pa.-based Centocor Inc.'s Remicade (infliximab). Targeted Genetics' product is aimed at patients who are having success with those drugs, but still have residual disease in major joints.

About 20 percent to 40 percent of anti-TNF responders fall into that category.

"So what we're treating is really the remaining disease in those joints," Parker said. "By giving the product locally into those joints, we're essentially creating a local factory where the AAV delivery system introduces the gene into the cells, causing the cells to just pump out soluble TNFR:Fc in a way to soak up excess TNF and reduce inflammation."

The company plans to take tgAAC94 through Phase II on its own before seeking a partner to help with development and commercialization costs.

Targeted Genetics has used its AAV vector technology to develop several other drugs, including its HIV/AIDS vaccine, tgAAC09, which is in a Phase II trial in South Africa to evaluate its safety and immunogenicity. The vaccine is based on HIV subtype C, which is most prevalent in southern and eastern Africa. It is being developed in collaboration with the International AIDS Vaccine Initiative and Columbus Children's Research Institute.

That program is not affected by the company's recent cuts. Neither is its ongoing collaboration with Celladon Corp., of La Jolla, Calif., to develop gene therapies in congestive heart failure. A Phase I study in CHF is expected to begin this year.

The company also is partnered with San Francisco-based Sirna Therapeutics Inc. to combine its AAV delivery technology with Sirna's RNA silencing technologies to develop therapies for Huntington's disease.

Along with its clinical goals for 2006, Targeted Genetics also plans to seek additional collaborations and to raise funds. Its last financing was a public offering in February 2004 that brought in $25.5 million. (See BioWorld Today, Feb. 3, 2004.)

For the third quarter, the company reported a net loss of $5.7 million, or 7 cents per share. As of Sept. 30, it had cash and cash equivalents totaling about $17.2 million. Its stock (NASDAQ:TGEN) rose 1 cent Wednesday to close at 47 cents.