Targeted Genetics Corp. on Thursday brought in $14 million througha public offering and acquired new gene therapy technologiesthrough its acquisition of RGene Therapeutics Inc.

The Seattle company paid, however, through stock dilution and adownturn in the market while its offering was pending. TargetedGenetics sold 3.5 million shares at $4 each. Its stock was trading at$5.07 on April 17, 1996, when it proposed the offering andannounced its intent to acquire RGene.

RGene shareholders will get 3.64 million Targeted Genetics shares,which will be locked up for a year and then be registered over theensuing two and a half years. That represents about 20 percent of thecombined company. RGene stockholders could realize another $5million in Targeted Genetics stock if certain milestones are met bythe end of 1998. (See BioWorld Today, April 18, 1996, p.1.)

Targeted Genetics (NASDAQ: TGEN) lost 88 cents Thursday toclose at $4.06 in trading of 1.5 million shares. At that price the stockis worth $14.8 million to RGene.

"I think it's a ridiculously cheap price given the company's progressand three lead programs in clinical trials," said H. Stewart Parker,president and CEO of Targeted Genetics. "We got caught in theNASDAQ downdraft and considered pulling the offering, but wedon't know how long the drought will last."

Underwriters Vector Securities International Inc., of Deerfield, Ill.,and Genesis Merchant Group Securities, of San Francisco, have anoption to purchase another 525,000 shares, which could increase theoffering $2.1 million.

Targeted Genetics on March 31, 1996, reported nearly $12 million incash, and is spending about $11 million per year. Parker said thefinancing should take the combined company into early 1998. Thatdoesn't take into account additional money from potential corporatecollaborations, which Parker expects.

"We've been getting a lot of interest from partnership candidates, inpart because we have the broadest technology platform in the genetherapy field," Parker said. Because of the RGene acquisition, "Iexpect we'll be able to finish a number of partnerships covering thetechnology base or our disease focuses."

The company's first major corporate collaboration came about earlierthis month when RGene agreed to a $25 million deal with GroupeFournier, of Paris, which gained European rights to an E1A tumorsuppressor product. It is in Phase I trials for cancers that express theHER-2/neu oncogene. (See BioWorld Today, June 10, 1996, p.1.)

RGene also has expertise in cationic lipids as a gene deliveryapproach. Those technologies now are combined with the workTargeted Genetics has ongoing in adeno-associated viral (AAV)vectors and cell therapies for cytotoxic T lymphocyteimmunotherapy. Targeted Genetics has a Phase I trial ongoing usingan AAV vector to deliver the cystic fibrosis transmembrane regulatorand a Phase I cell therapy study for HIV. n

-- Jim Shrine

(c) 1997 American Health Consultants. All rights reserved.