Targeted Genetics Corp. is cutting more than half its work force as part of a business strategy adjustment to extend its current operating capital for at least another year.

The company said it gave 67 employees a 60-day notice, after which Targeted Genetics will have a headcount of about 50. Included in the reduction is Targeted Genetics' plan to close its facility in Sharon Hill, Pa., acquired as part of its August 2000 purchase of Genovo Pharmaceuticals Inc. But the staff cutbacks will be felt across the company, which just four months ago went through a round of job cuts. At the time, Targeted Genetics lowered its then-175-person staff by about a quarter, dropping its headcount to about 120 employees. (See BioWorld Today, Aug. 8, 2002.)

"We gave notices to 67 people, but that's the worst case," Targeted Genetics President and CEO H. Stewart Parker told BioWorld Today. "We hope to get some things done over the next 60 days that will lessen the need to reduce our employment to quite such a degree."

The strategy shift aims to allow the Seattle-based firm to continue what it labels its most promising product development opportunities, which include furthering its lone clinical investigational product and advancing two other candidates into the clinic. Specifically, its near-term plans include advancing its clinical development program in cystic fibrosis and filing in the next year investigational new drug applications for its programs in rheumatoid arthritis and AIDS prophylaxis. The AIDS vaccine program continues in collaboration with the International AIDS Vaccine Initiative.

But continued development requires further capital investment, funds Targeted Genetics must seek elsewhere as old sources have dried up. Notably, Targeted Genetics lost out on funding expected as part of a collaboration that was canceled prematurely.

"One of the key changes in our business strategy came from the fact that we had a pretty major collaboration with Wyeth Pharmaceuticals in hemophilia," Parker said. "But Wyeth has gone through a restructuring itself because of declining sales of its hormone replacement therapy, so they cut the [hemophilia] program. And that was a significant chunk of revenue we were counting on, so we've had to adjust our own business strategy accordingly."

Upon entering the deal two years ago with Madison, N.J.-based Wyeth, Targeted Genetics said the agreement could earn it up to $80 million. (See BioWorld Today, Nov. 10, 2000.)

But Targeted Genetics obviously no longer is counting on such funds. Parker said the company has about $17 million in its coffers. She pointed to Targeted Genetics' internal fiscal slump as partially attributable to the country's general economic malaise and also to a market under-appreciation of gene therapy.

"But we haven't had a research failure," Parker said. "We've had great data, including really good cystic fibrosis data from a program we hope to move along. We've had great preclinical data in our hemophilia, AIDS vaccine and rheumatoid arthritis programs. We're just caught in the crunch like many other companies, and we have to scale back in order to keep moving."

Besides the layoffs, Targeted Genetics said it would continue to pursue partnerships to extract value from other programs. It plans to seek development partners for its hemophilia, oncology and cystic fibrosis programs. Earlier this month, Targeted Genetics regained full rights to the latter after its collaborative partner, Celltech Group plc, decided to terminate a four-year-old agreement, a deal initially entered with a company later acquired by Slough, UK-based Celltech. (See BioWorld Today, Dec. 8, 2002.)

Recent findings, including positive preliminary results showing a significant change in lung function from a Phase II trial of its tgAAVCF candidate reported at October's North American Cystic Fibrosis meeting in New Orleans, point to the company's desire to continue the program.

"We are looking at opportunities to re-partner our hemophilia program, and we're looking at opportunities to partner in particular European rights to our cystic fibrosis program," Parker said, adding that Targeted Genetics plans to retain its rheumatoid arthritis product in the near term in order to collect clinical proof of concept before considering possible partnerships.

The company said it also plans to save money by renegotiating leased space near its Seattle headquarters. At the same time, Parker said Targeted Genetics plans to earn money through its manufacturing facility - potentially through contract manufacturing work, or by selling the facility outright with an option to continue its own manufacturing onsite down the road. The company also might explore other options to raise capital, such as exercising an already effective shelf registration.

Targeted Genetics' stock (NASDAQ:TGEN) fell 4 cents Tuesday to close at 41 cents.