Plus Update on Celladon Heart Failure Clinical Data and Business Strategy
SEATTLE–(Business Wire)–
Targeted Genetics Corporation (PINKSHEETS: TGEN) (the “Company”) today announced
its financial results for the fourth quarter and full year ended December 31,
2009.

For the fourth quarter of 2009, the Company reported net income of $1.8 million,
or $0.08 per common share, compared to a net loss of $10.8 million, or $0.54 per
common share, for the fourth quarter of 2008. For the year ended December 31,
2009, the Company reported net income of $7.9 million, or $0.39 per common
share, compared to a net loss of $20.7 million, or $1.04 per common share, for
the year ended December 31, 2008. Per share results for 2008 include a non-cash
goodwill impairment charge of $7.9 million recognized in the fourth quarter of
2008.

The Company`s results for 2009 reflect the September 2009 sale and license of
certain assets, including manufacturing technologies and adeno-associated viral
vector (AAV) technologies to Genzyme Corporation, delivery of MYDICAR product
candidate to its partner Celladon Corporation and the successful settlement of
the Company`s Bothell, Washington facility lease.

Revenue for the fourth quarter of 2009 rose to $3.1 million, compared to $2.2
million for the same quarter in 2008, as a result of installment revenue earned
from Genzyme connected to the successful completion of transfer plan
deliverables. This increase in fourth quarter revenue was offset, in part, by
reduced revenue from the Celladon heart failure collaboration as the Company
completed the manufacture of the MYDICAR product candidate in the second quarter
of 2009. Revenue increased to $12.2 million for the year ended December 31,
2009, from $8.7 million for 2008, primarily as the result of revenue earned for
the transfer of manufacturing technologies and other AAV vector technology under
the Genzyme asset purchase agreement, as well as increased revenue generated
from both pre-manufacturing and manufacturing efforts in the Celladon
collaboration. This increase in revenue was partially offset by decreases in
2009 revenue for the HIV/AIDS vaccine project, as 2008 results included revenue
from a vaccine product candidate manufacturing campaign and higher vaccine
project pass-through costs.

Research and development expenses for the fourth quarter of 2009 decreased to
$553,000, compared to $3.9 million for the same quarter in 2008. Research and
development expenses for the year ended December 31, 2009, decreased to $6.1
million, compared to $15.2 million for the same period in 2008. The decreases in
both periods reflect lower costs for support of the Celladon heart failure
program and lower activity on the NIAID-funded HIV/AIDS vaccine subcontract
partially offset by expenses incurred for support of the sale to Genzyme of
manufacturing and other AAV technology. For the full year period, research and
development expenses were also lower reflecting lower employee costs, lower
operations costs and lower clinical trial costs as the Company completed most of
a Phase 1/2 inflammatory arthritis program clinical trial by mid-2008.

General and administrative expenses for the fourth quarter of 2009 decreased to
$653,000, compared to $957,000 for the same quarter in 2008. General and
administrative expenses for the year ended December 31, 2009, decreased to $4.4
million, compared to $5.8 million for the same period in 2008. The decrease for
the fourth quarter, compared to the prior year fourth quarter, primarily
reflects lower employee costs resulting from reductions in force and lower
intellectual property costs resulting from the Company`s return of licensed
patent rights and cessation of prosecution of patents that were not specific to
its current development program efforts. The decrease in general and
administrative expenses for the full year period primarily reflects lower
intellectual property costs, lower employee costs, lower stock-based
compensation charges and lower shareholder annual meeting-related costs
partially offset by management incentive bonuses earned in 2009 in connection
with the successful execution of the Genzyme transaction.

During 2009 the Company’s shareholders` equity balance increased from a deficit
of $3.8 million as of December 31, 2008 to positive balance of $4.5 million as
of December 31, 2009 and working capital improved from $1.7 million to $4.4
million. The Company`s cash balances were $5.1 million at December 31, 2009,
compared to $5.2 million at December 31, 2008. In the first quarter of 2010 the
Company received an additional $1.0 million installment payment upon completion
of all of the specified Genzyme transfer plan deliverables and also received an
additional $750,000 pursuant to a patent license agreement between the Company
and Amsterdam Molecular Therapeutics, or AMT, which was triggered by AMT’s
filing for marketing approval of Glybera(R), a product candidate for the
treatment of lipoprotein lipase deficient patients. The Company finished the
first quarter ended March 31, 2010 with approximately $5.5 million of cash and
based upon current business plans the Company currently anticipates completing
2010 with a cash balance of approximately $3 million. The Company had
approximately 21.3 million shares outstanding as of May 31, 2010.

Ms. Robinson commented, “We continue to carefully steward the Company`s
resources as we evaluate and explore opportunities to maximize the value of our
business and technology. Included in our consideration process are the recent
positive results from our licensing partner Celladon Corporation from their
first Phase II trial of MYDICAR for the treatment of advanced heart failure.”
Celladon presented the trial data on May 30, 2010 (see the Company`s press
release dated May 30, 2010) at the annual meeting of the Heart Failure
Association and showed that patients treated with MYDICAR experienced
improvements in clinical outcomes and disease markers. Ms. Robinson continued,
“Our restructuring efforts from last year have positioned us well to capitalize
on our interest in Celladon`s MYDICAR product candidate and other licensing
relationships. We continue to evaluate options for the future strategic
direction of the Company including continued and new product development
efforts, selling the company or liquidation with potential future licensing
revenue distributed to shareholders. We will move forward on one of these paths
when we have sufficient information from licensing partners, product development
efforts and business discussions now underway to determine the highest value
direction for our shareholders.”

The Company and Celladon first entered into collaboration and manufacturing
agreements in 2004. In 2009, Targeted Genetics licensed its AAV vector serotype
and manufacturing technology to Celladon and manufactured clinical supplies of
MYDICAR. Under the 2009 license agreement between Targeted Genetics and
Celladon, if MYDICAR is developed and commercialized by Celladon, then Targeted
Genetics could receive multiple milestone payments totaling up to $20 million,
starting with a $5 million milestone payment if a MYDICAR Phase III human
clinical trial commences. In addition, the Company could receive a 10% royalty
on commercial sales of MYDICAR, subject to certain reductions in some cases.
Alternatively, if Celladon enters into a partnering transaction for MYDICAR or a
sale transaction of Celladon or its MYDICAR assets, the Company could receive a
$5 million milestone at the start of Phase III plus 10% of future partnering
revenue or sale proceeds received by Celladon and, subject to certain reductions
in some cases, a royalty of 10% on sales of MYDICAR.

About Targeted Genetics Corporation

Targeted Genetics Corporation is a biotechnology company committed to the
development and commercialization of innovative therapies for the prevention and
treatment of diseases with significant unmet medical need. To learn more about
Targeted Genetics, visit Targeted Genetics’ website at www.targetedgenetics.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:

This press release contains certain forward-looking statements concerning the
Company`s financial position, results of its operations, cash flow expectations
and its licensee`s clinical trial including without limitation references to
expected cash balances, cash flow activity, operating results and our licensee`s
product development efforts, and the potential future impact of our licensee`s
product development efforts, if any, on the Company. These forward-looking
statements involve significant risks and uncertainties. Although the Company
believes that the expectations reflected in such forward-looking statements are
based on reasonable assumptions, readers are cautioned that the Company can
provide no assurances that such expectations will prove correct and that actual
results and developments may differ materially from those conveyed in such
forward-looking statements. Factors that could cause actual results to differ
materially from the expectations reflected in the forward-looking statements in
this press release include, but are not limited to, the risk that the Company’s
current financial resources and future financial resources (if any) will be
insufficient to enable the Company to fund continuing operations, the risk that
the Company will not receive anticipated future revenue streams, the risk that
the Company will run out of cash earlier than expected, the risk that the
Company will not receive milestone or other payments from the Company`s product
development partners and collaborators or that the Company`s and its
collaborators` product development efforts will be unsuccessful, the risk that
Celladon`s MYDICAR program data will not support further development of the
product, that MYDICAR product development will be unsuccessful or not continue
as planned, on the timeline anticipated, or at all and the risks of
accomplishing the Company`s business plan, as well as those factors described in
the Company`s quarterly report on Form 10-Q for the quarter ended September 30,
2009, filed November 16, 2009 with the Securities and Exchange Commission. In
addition, the Company has deregistered its common stock and is no longer subject
to certain periodic financial reporting obligations with the Securities and
Exchange Commission. Accordingly, the financial data available to the public in
respect to the Company are dated, the Company is under no current obligation to
update such data, and such data cannot be relied upon to accurately reflect the
Company`s current or future financial condition or results of operations.

TARGETED GENETICS CORPORATION
(in thousands, except per share information)

Quarter ended Year-to-date ended
December 31, December 31,
Statement of Operations Information: 2009 2008 2009 2008
Revenue:
Collaborative agreements $ 3,077 $ 2,240 $ 12,171 $ 8,718
Total revenue 3,077 2,240 12,171 8,718

Operating expenses:
Research & development 553 3,889 6,079 15,183
General & administrative 653 957 4,402 5,822
Restructure (reversal) charges 7 357 (6,417 ) 954
Goodwill impairment charge – 7,926 – 7,926
Total expenses 1,213 13,129 4,064 29,885
Income (loss) from operations 1,864 (10,889 ) 8,107 (21,167 )

Investment income – 28 12 279
Other income 12 12 12 91
Loss on disposal of assets (125 ) – (183 ) –
Gain on debt restructure – – – 77
Net income (loss) $ 1,751 $ (10,849 ) $ 7,948 $ (20,720 )

Net income (loss) per common share $ 0.08 $ (0.54 ) $ 0.39 $ (1.04 )

Shares used in computation of net
income (loss) per common share 20,653 20,100 20,564 19,954

TARGETED GENETICS CORPORATION
(in thousands)

December 31, December 31,
Balance Sheet Information: 2009 2008

Cash and cash equivalents $ 5,071 $ 5,216
Other current assets 239 449
Property and equipment, net 143 1,285
Other assets – 200
Total assets $ 5,453 $ 7,150

Current liabilities $ 917 $ 3,986
Long-term obligations and other liabilities – 6,936
Shareholders’ equity 4,536 (3,772 )
Total liabilities and shareholders’ equity $ 5,453 $ 7,150

Targeted Genetics Corporation
David J. Poston, Chief Financial Officer
Phone: 206.521.7881

Copyright Business Wire 2010