Washington Editor

Tenuous economic conditions have prompted Targeted Genetics Corp. to reduce expenses by eliminating jobs and placing certain projects on the backburner, the company's president and CEO said.

The company will reduce its research and administrative staff by 25 percent (45 out of 175 employees) and intends to suspend Phase I trials of tgDCC-E1A in ovarian cancer and head and neck cancer. The moves are expected to save Targeted Genetics $2.5 million per quarter, beginning in the fourth quarter.

Seattle-based Targeted Genetics develops gene therapy products for treating acquired and inherited diseases. Gene therapy has fallen out of favor during the past several years because of delivery difficulties, clinical trial set backs and the desire of pharmaceutical companies to exit the field.

Targeted Genetics' stock (NASDAQ:TGEN) fell 26 cents Wednesday, or 25.5 percent, closing at 76 cents.

"We can't guarantee that we can go back and raise money in the future and we don't see what triggering event, from an economic standpoint, is going to turn the stock market around," H. Stewart Parker, Targeted Genetics' president and CEO, told BioWorld Today. "The key to success in biotechnology is survivability, so we felt it appropriate to prune the organization, to a certain extent, to be able to deliver for our shareholders and allow us to focus on the key programs that are driving values."

Those key programs are in hemophilia, AIDS prophylaxis, arthritis and cystic fibrosis. The cystic fibrosis program is the company's most advanced, currently in Phase II studies.

As of June 30, Targeted Genetics had $17.3 million in cash and cash equivalents. In addition, the company has about $10.9 million available to it under loan and equity commitments from partners. Also, according to a prepared statement, the company is expecting about $12.4 million in research and development reimbursement payments from various partners during the next 15 months.

Targeted Genetics and Cambridge, Mass.-based Biogen Inc. two years ago entered a deal in which Targeted Genetics would develop four gene therapy products. The contract gives Targeted Genetics access to $10 million through a stock purchase agreement with Biogen. Biogen, however, is prohibited from owning more than 20 percent of Targeted Genetics. Parker said because Targeted Genetics' stock is not performing well now, Biogen would violate its 20 percent limit if it bought $10 million in stock. (See BioWorld Today, Aug. 10, 2000.)

"The agreement doesn't expire until next September, so it is possible that if the stock increases, we would be able to do this," she said. "We are trying to be conservative right now."

Also, the company had anticipated $9 million in debt financing from Elan Corp. plc to support the companies' joint venture, Emerald Gene Systems. But due to problems Elan has faced in the past year, Parker said it is not likely that Dublin, Ireland-based Elan will continue with the deal. (See BioWorld Today, July 27, 1999.)

Elan has had a series of difficulties this year, including an investigation into its accounting practices by the Securities and Exchange Commission and suspension of clinical dosing for an Alzheimer's drug being developed in conjunction with Wyeth-Ayerst Laboratories of Radnor, Pa. (See BioWorld Today, Feb. 11, 2002, and June 11, 2002.)