By Brady Huggett

Targeted Genetics Corp. is doing what was once done to it - spinning out a wholly owned subsidiary with plans to let it go further as it grows.

Targeted Genetics, a spin-off itself from Immunex Corp., said it will package its cell-therapy related assets and intellectual property into CellExSys, making the announcement in conjunction with its presentation Wednesday at the Techvest LLC Second Annual Conference on Tissue Repair, Replacement and Regeneration in New York City.

"This intellectual property came in with us and, as the in vivo technology evolved, Targeted Genetics has focused on that," said Stephanie Seiler, director of communications at Targeted Genetics. "At the same time, the value of ex vivo technology has increased, and we felt it makes the most sense for it to be its own separate business. And our shareholders will benefit because it is wholly owned."

Targeted Genetics, of Seattle, got its start in 1989 when Immunex turned it loose. It gained its independence in June 1992 when it raised more than $17 million in a private placement and it went public about a year later. The route that Targeted Genetics has taken could be the path CellExSys follows, too, Seiler said. (See BioWorld Today, April 1, 1994.)

"A good model for CellExSys is Immunex spinning out Targeted Genetics," Seiler said. "Gaining independence in concert with a private financing. That is one of the things we might see happen down the road."

CellExSys will initially be funded by Targeted Genetics until it completes a financing sometime in 2001, said David Schubert, senior director, strategic initiatives at Targeted Genetics. At the outset it will be managed by Targeted Genetics, but will be evaluated later. The core management, when it is formed, will be a mix of new blood and people from Targeted Genetics, and CellExSys will be housed in Targeted Genetics' existing facility in Seattle, although it should move into its own space sometime in the future.

"David [Schubert] will take a big role in managing CellExSys in the beginning," Seiler said. "One of the things that speaks to the power of this technology is the people who believe in this company and who move over to [CellExSys]."

CellExSys will focus on antigen-specific cell therapy and research applications of rapid expansion method (REM) technology - a technology with a related patent awarded to the Fred Hutchinson Cancer Research Center and exclusively licensed to Targeted Genetics. The REM technology enables key effector cells in the immune system to be expanded quickly and more cost effectively, circumventing a problem associated with cell therapy, Seiler said.

"A challenge of cell therapy has been how to grow cells that are antigen specific," Seiler said. "The power of the REM technology is it grows large populations that maintain their antigen specificity. And you can grow them very quickly and in a commercially viable manner."

Targeted Genetics recently acquired Genovo Inc., of Sharon Hill, Pa., and at the same time signed a potential $125 million collaboration deal with Biogen Inc., of Cambridge, Mass., extending a previous deal between Biogen and Genovo. As a result, it is considering its next move. (See BioWorld Today, Aug. 10, 2000.)

"We completed the Genovo acquisition in September and we are in the process of evaluating what is in our pipeline and deciding what we want to push forward," Seiler said. "We are a small company and we need to decide which areas are best for us to focus on."

Targeted Genetics has lead clinical development programs targeting cystic fibrosis and cancer, and a preclinical pipeline of product candidates focused on hemophilia A, arthritis, cancer, cardiovascular disease and AIDS prophylaxis.

"We plan to be in two Phase II trials by the end of the year," Schubert said. "One in cystic fibrosis and then another in head and neck cancer with radiation."

Schubert said CellExSys will be looking to form lateral partnerships at first, but after initial work, should be able to attract pharma partners. He added that the spin-out of CellExSys says something about the distance Targeted Genetics has traveled.

"We think this is a great day for Targeted Genetics and CellExSys provides a great opportunity for the shareholders as we grow [CellExSys] over the next year or so," Schubert said. "Doing the spin-out is really a hallmark of where the company has come to."

Targeted Genetics' stock (NASDAQ:TGEN) closed unchanged Wednesday at $10.25.

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