By Brady Huggett

Targeted Genetics Corp., just a day after making news by spinning off its cell therapy programs into a subsidiary, CellExSys, entered a collaboration with Genetics Institute Inc. in the hemophilia field that could earn it as much as $80 million.

Targeted Genetics will receive an up-front payment of $5 million and $15 million over three years for development of a Factor VIII product for the treatment of hemophilia.

"We feel hemophilia is an ideal target for gene therapy," said Stephanie Seiler, director of communications at Targeted Genetics. "We think this is a great collaboration between the leader in the AAV [adeno-associated virus] development field and the leader in the hemophilia field."

Under the terms, Targeted Genetics, of Seattle, will use its AAV vector technology to deliver a functional Factor VIII protein for hemophilia A and potentially a Factor IX protein for hemophilia B. Genetics Institute, the biotech research division of Wyeth-Ayerst, a division of American Home Products Corp., will provide expertise and will manage any clinical trials and related regulatory filings required for product approval and marketing.

Targeted Genetics develops gene therapy products for acquired and inherited diseases. It has preclinical product candidates in hemophilia A, arthritis, cancer, cardiovascular disease and AIDS prophylaxis, and lead clinical product development programs for cystic fibrosis and cancer.

Genetics Institute, based in Cambridge, Mass., is engaged in the discovery, development and commercialization of human pharmaceuticals through recombinant DNA and other technologies. It was the first to clone and produce recombinant Factor VIII, associated with hemophilia A, and Factor IX, associated with hemophilia B.

Although the companies will collaborate on the research, H. Stewart Parker, president and CEO of Targeted Genetics, said Genetics Institute will be responsible for the clinical end of products and worldwide sales.

Besides the up-front payment and research money, Targeted Genetics has the option for a $10 million loan for manufacturing facility expansions, bringing the total committed funding to $30 million. Seiler said the funding for expansion does not include any facility needs for its new spin-off, CellExSys. (See BioWorld Today, Nov. 9, 2000.)

"[The expansion] is defined as manufacturing space," Seiler said. "If we need more manufacturing space, then we will have the financial resources for it."

The rest of the potential $80 million comes from milestone payments for clinical steps taken and a supply agreement under which Targeted Genetics will manufacture product for clinical trials and for commercial use, if approved.

Seiler said the collaboration also gave Targeted Genetics a window into the hemophilia community.

"[Genetics Institute] has worked very closely with the hemophilia community," Seiler said. "We think that is going to be very important. Our ability to work with them will help develop the best product possible."

Targeted Genetics' stock (NASDAQ:TGEN) moved up $1.25 Thursday, or about 12 percent, to close at $11.50 in a market jostled by the drawn-out presidential election.

When asked about the stock jump and the confidence of investors, Seiler responded: "There is so much going on with the outcome of the election - I know companies have been up and companies have been down - but we feel this is a great deal we have done with the leader in the hemophilia field."

Parker pointed not only to this collaboration, but to others as a sign of Targeted Genetics' increased stature in the industry.

"This is the third AAV corporate collaboration we have done this year," Parker said. "These companies can do collaborations with anyone or any of our competitors, so it is a validation of the work we have done in the field and the work we are capable of doing."

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