By Mary Welch

Targeted Genetics Corp. got a new lease on life thanks to a $13 million private placement.

The Seattle-based company handled the transaction internally. GeneChem Technologies Venture Fund LP, a Canadian-based investment fund, was the lead investor. Other participants were The Equitable Life Assurance Co., of New York; Sofinov Societe Financiere D'Innovation, of Montreal; and existing investor International Biotechnology Trust plc, a U.K.-based fund managed by Rothschild Asset Management Ltd., of London.

The group purchased 8.7 million Targeted Genetics shares at $1.50 a share, the closing bid price on the company's stock Thursday. For every two shares purchased, the investors received a warrant to purchase another share for $2. The company will have 28.9 million shares outstanding when the transaction closes in a few weeks.

"We're glad to get it done," said James Johnson, chief financial officer. "This will provide us with cash that will see us through at least the middle of 1999, even if no other cash flows in. It will actually take us much further given the number of opportunities related to corporate partnerships that we are continuing to pursue that will bring in more cash. It gives us the base we need to get them done."

Targeted Genetics' stock (NASDAQ:TGEN) closed Monday at $1.906, down $0.093.

The case infusion couldn't have come at a better time. The company posted a loss of $14.2 million for 1997 and ended the year with $5 million in cash. Targeted Genetics' fourth quarter 1997 loss was $4.2 million which was partially attributable to higher operating expenses from clinical trial costs and an expanding intellectual property portfolio. Targeted Genetics laid off 24 of its 90 workers in February to conserve cash.

"The reorganization allowed us to focus on our key issues," said Johnson. "It took a while to get through it and to deal with the changes, but it will allow us to meet all our major program milestones."

Indeed, the company seems to be on target with its three lead product development programs.

"We've got a lot of products underway and the money will certainly help move them along," said Johnson. Admitting that the company will have a large number of shares outstanding, he nevertheless sees no problem. "I feel quite good about the quality of the shareholders. They are in this for the long term."

Currently in a Phase II trial is tgAAV-CFTR, a gene therapy designed to correct the genetic defect responsible for cystic fibrosis. Johnson said Phase II is close to completion. AAV stands for adeno-associated viral vectors, and CFTR refers to the cystic fibrosis transmembrane conductance regulator. The treatment involves transferring to lung cells the gene encoding CFTR, which is missing or mutated in cystic fibrosis patients.

Monday the company released Phase I results of its gene therapy for the treatment of breast and ovarian cancer at the 89th annual meeting of the American Association for Cancer Research (AACR), in New Orleans.

The study, done with 12 patients with metastatic or recurrent breast and ovarian cancers who received weekly injections of an E1A gene incorporated into a liposome, showed the gene's ability to penetrate human cells. The first three evaluated patients all showed E1A gene expression in both cancer and non-cancer cells. All three also showed decreased levels of surrogate tumor markers.

Targeted Genetics said the E1A gene, a tumor inhibitor, has been shown "to suppress metastases, induce apoptosis and reverse overexpression of Her-2/neu," an oncogene.

The company is conducting similar research for head and neck cancer and expects to enter Phase II trials in the second half of 1998.

A number of other firms also released news at the AACR meeting:

* Matritech Inc., of Newtown, Mass., reported study results indicating its NMP179 test may allow physicians to detect pre-cancerous cervical irregularities before cervical cancer develops. NMP179 was found in 20 of 20 cervical tumors and none of the 10 normal tissue samples. Researchers then tested the marker using a monoclonal antibody in a study involving 322 cervicovaginal specimens. NMP179 detected 97 percent of precancerous high grade or advanced cervical dysplasia and 82 percent of precancerous low grade or early stage dysplasia, with an estimated specificity of 64 percent. The test is one of a series based on the Matritech's nuclear matrix protein (NMP) technology, which correlates levels of NMPs in body fluids to the presence of cancer. Matritech also said it regained all rights to the diagnostic from its former partner, Bayer AG, of Leverkusen, Germany.

* Vion Pharmaceuticals Inc., of New Haven, Conn., presented preclinical data demonstrating the ability of the firm's Tumor Amplified Protein Expression Therapy (TAPET) to inhibit tumor growth in an in vivo lung adenocarcinoma mouse model. TAPET consists of an avirulent, genetically modified Salmonella that delivers a prodrug-converting enzyme to tumors, followed by administration of a nontoxic prodrug, which is converted in tumors to a cytotoxic anti-cancer agent.

* Cell Pathways Inc., of Horsham, Pa., reported preclinical murine data on FGN-1 (exisulind) suggesting the oral drug may help prevent lung cancer in smokers. To model smoking, researchers exposed mice to nitrosamine, a tobacco-derived carcinogen. The number of mice subsequently developing tumors decreased in a dose-dependent manner ranging from 96 percent in the mice receiving no FGN-1 to 67 percent in those receiving the highest dietary concentration of FGN-1. The drug is designed to induce selective apoptosis in precancerous and cancerous cells without affecting normal cells.

* ImClone Systems Inc., of New York, has developed a monoclonal antibody that blocks in vitro binding of vascular endothelial growth factor (VEGF) to the human KDR receptor and inhibits VEGF-stimulated growth of endothelial cells. Preliminary data suggest the antibody also inhibits the growth of human tumor-associated blood vessels. ImClone said the findings support an expected 1999 investigational new drug application filing with the FDA.

* EntreMed Inc., of Rockville, Md., reported preclinical findings in which its recombinant human Angiostatin protein expressed in engineered yeast cells inhibited B16-BL6 melanoma in a murine model of metastasis. Three days following injection of melanoma cells, mice began an 11-day course of treatment with the drug and were then examined for cancer metastases in the lungs. The number of metastases decreased 60 to 80 percent in mice treated with the protein. Angiostatin is a naturally occurring protein believed to inhibit tumor growth by blocking new blood vessel formation.

* AntiCancer Inc., of San Diego, said it has created a mouse model that can be used to visualize angiogenesis as it begins. The company also developed cancer cell lines that have been genetically engineered with the jellyfish green fluorescent protein gene, which causes the cells to fluoresce. After the cells are implanted into a special strain of mice where they grow and metastasize, researchers can use staining techniques to visualize the formation of new blood vessels in the fluorescent tumors. *

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