By Mary Welch

Targeted Genetics Corp. could receive up to $54 million, including $16 million the first year, in its collaboration to develop and commercialize its cystic fibrosis (CF) drug, tgAAV-CF, with Medeva plc.

The deal puts Seattle-based Targeted Genetics "in a leadership position in the race to deliver a gene therapy to cystic fibrosis patients," said H. Stewart Parker, the company's president and CEO. "There are a number of companies in the race, but we feel that our approach offers the best long-term expression of the genes and no side effects."

Under terms of the agreement, Targeted Genetics will receive $5 million in technology license fees; clinical and regulatory milestone payments totaling $19 million; a $2 million loan; and a $3 million equity investment by London-based Medeva, which also will contribute up to $15 million in development funding over a three-year period.

Medeva will cover the costs of clinical and regulatory activities related to the product's development, and a total of $8.5 million is payable upon the signing of the agreement.

Equity payments will come in two phases. The first provides for the purchase of 750,000 shares of Targeted Genetics common stock at $2 per share. The second, which must take place six months after the collaboration — but no later than 18 months — involves a purchase at a premium of 20 percent.

In addition, Medeva may lend Targeted Genetics $10 million toward the building of a Good Manufacturing Practices facility for the production of tgAAV-CF.

The drug uses adenoassociated virus (AAV) technology to deliver a normal copy of the cystic fibrosis transmembrane regulator (CFTR) gene to CF patients. The CFTR cell surface protein acts as a chloride channel, moving fluids across the lungs, and studies have shown the disease results from the loss of function of the CFTR gene.

"AAV is naturally found in humans and never has had any side effects or disease associated with it," Parker said. "It is a natural to use in gene delivery."

Normally, the protein encoded by this gene is found in the respiratory passageways, pancreas, salivary and sweat glands, where it helps to regulate the cellular concentration of chloride ions and water. However, when it is not functioning, thick mucus is produced and builds up as a perfect home for bacteria. The mucus thickness prevents the clearance of the bacteria and reduces the efficacy of antibiotics, and repeated infections produce lung scarring that ultimately may result in the loss of respiratory function.

Aerosol Delivery Directed To Lungs

Some 60,000 persons suffer from CF, about 24,000 of them in the United States.

The company recently released early data on Phase II studies of tgAAV-CF. A Phase II study with 23 patients was designed to assess the safety of tgAAV-CF in preventing the recurrence of sinusitis. Each patient received the drug in one sinus cavity and a placebo in the other. Results are expected by the first quarter of next year. (See BioWorld Today, Oct. 19, 1998, p. 1.)

However, an earlier Phase I trial demonstrated that tgAAV-CF provided efficient gene transfer and gene persistence up to 70 days in the maxillary sinus. The company believes the efficacy of the product in preventing infections in the maxillary sinus might be a good model for lung disease, since both conditions result from thick mucus stemming from loss of CFTR function.

"In preclinical studies, we have seen long-term expression of about six months," Parker said, "but others have witnessed long-term expression of as much as one year. What is important to the CF community is that tgAAV-CF has the potential to treat the underlying cause of their illness, rather than those that just ameliorate their symptoms."

Unlike earlier studies, the pending trial will test an aerosolized formulation, which is expected to provide widespread delivery of tgAAV-CF to the airways in the lungs. The trial should last less than a year, but the company would not disclose any more details.

Under the agreement, three representatives from each company will oversee the formation and execution of the tgAAV-CF clinical development plan. Targeted Genetics will manage the Phase I studies in the U.S., and may, under certain conditions, manage the Phase II trials as well. Medeva will manage all other trials and will be responsible for worldwide registration of tgAAV-CF. At that point, the company will handle the worldwide marketing.

"We think that this is the first of a number of partnerships that will be based on our AAV technology platform," Parker said. "This collaboration adds a great deal to our credibility."

Targeted Genetics' stock (NASDAQ:TGEN) closed Tuesday at $1.75, up $0.125. Medeva's stock (NYSE:MDV) closed Tuesday at $7.437, down $0.062. *

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