Targeted Genetics, Mainstay of Gene Therapy, Faces Likely Shutdown

5/7/09Follow @xconomy

Targeted Genetics, one of the diehards in the field of gene therapy, appears to be near the end of the road. The Seattle-based biotech company said if it is unable to improve its finances by the end of next month, “We plan to begin the process of ceasing operations, seeking bankruptcy protection or otherwise winding up our business,” according to its quarterly filing with the SEC.

Based on “considerable efforts” to raise money in recent months, and the short deadline to bring in more cash, “we believe it is increasingly unlikely we will be able to secure additional financial resources in time,” the company said. Targeted, which has no marketed products, has run up a deficit of $322.7 million since its founding in 1992.

Targeted Genetics (NASDAQ: TGEN) has been trying to cut costs and craft a new strategy to build value for the last few months, since it founder, CEO, and spiritual leader H. Stewart Parker resigned in November. The company has worked to advance its programs for heart failure, an HIV vaccine, and a treatment for Lou Gehrig’s disease.

Gene therapy is about modifying viruses to carry copies of genes into cells where they can replace missing or faulty genes at the root cause of certain diseases. This technique was hyped in the early 1990s as a panacea for many ills beyond the reach of conventional medicine. Time magazine published a cover story in 1994 titled “Genetics: The Future is Now.” More than 100 biotech companies were formed with dreams of becoming the next Amgen or Genentech. Targeted Genetics was one of those companies, spun out of Seattle-based Immunex in 1992, during the early booms days. It rode the wave of enthusiasm to an IPO just two years later.

Yet right as the field reached its hopeful peak in 1999—around the time of the dotcom and genomics stock bubble—the field collapsed when Arizona teenager Jesse Gelsinger died of a massive inflammatory response in a gene therapy clinical trial at the University of Pennsylvania. This sparked a global ethical debate about informed consent in clinical trials, prompted the FDA to put all gene therapy clinical trials on hold temporarily, and has scared away many investors to this day.

Through it all, Targeted Genetics has forged on. Gene therapy has always used modified viruses as the most efficient delivery vehicle to shuttle genes into cells. Earlier generations of gene therapy used retroviruses or adenoviruses, which didn’t work, and raised some safety concerns. Targeted Genetics made its bet early on in adeno-associated viruses, which don’t cause any cold or flu like symptoms in nature.

Targeted Genetics has also suffered a couple of painful setbacks in the past few years. Cystic fibrosis, a deadly lung disease caused by a single deficient or malfunctioning gene, was thought to be one of the first and easiest targets for gene therapy. The company invested 15 years of effort, and at least $40 million from investors and partners in that program before pulling the plug in March 2005. A clinical trial of 102 patients showed the treatment failed to help patients breathe better, even for a month.

The company moved on from that setback to rheumatoid arthritis. Targeted Genetics, using intellectual property dating to its original spin-out from Immunex, shifted its resources to a gene therapy that would deliver copies of the TNF receptor, which soaks up excess inflammatory proteins. Amgen and Wyeth currently sell etanercept (Enbrel), the world’s best-selling biotech drug with more than $5 billion in global sales, but this drug circulates throughout the bloodstream, and doesn’t work for everybody with rheumatoid arthritis. Targeted Genetics theorized that a gene therapy to deliver the TNF receptor, given directly into a “stubborn” joint or two, might help many of the millions of patients worldwide with the disease.

This treatment ran into trouble as well in August 2007. Jolee Mohr, a 36-year-old mother of a five-year-old daughter, died after receiving treatment in the gene therapy trial sponsored by Targeted Genetics—a story that was widely publicized by the Washington Post. A later investigation by the FDA, and confirmed by an expert panel of the National Institutes of Health found no reason to say the drug was responsible for Mohr’s death. Mohr, who was taking other immune-suppressing drugs at the time, died from an opportunistic fungal infection, disseminated histoplasmosis, researchers concluded.

But the cause of Mohr’s death wasn’t really settled until December 2007, when the National Institutes of Health held its recombinant DNA advisory committee. The damage had already been done to Targeted Genetics’ stock price, seriously limiting its ability raise new investment capital. The company’s stock price has been consistently below $1 in the last year, and its market capitalization had diminished to under $6 million. The company had 35 employees left on May 1, according to its quarterly report.

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