Targeted Genetics: Timeline of Key Catalysts - Seeking Alpha - Sent Using Google Toolbar

Targeted Genetics: Timeline of Key Catalysts - Seeking Alpha

The CEO of Targeted Genetics (TGEN), H. Stewart Parker, presented at an investor forum last week and presented an update on the Company and provided a timeline for investors of upcoming key catalysts aimed at removing a clinical hold on lead gene therapy drug candidate tgAAC94 in the treatment of inflammatory arthritis conditions that include rheumatoid arthritis, ankylosing spondylitis, and psoriatic arthritis.

Key upcoming catalysts include confirmatory test results from the University of Chicago due "shortly", an official response to the clinical hold letter to the FDA by "mid-October", and a decision by the FDA within 30 days to decide on the status of the clinical hold or request more information.

Ms. Parker expects confirmatory testing results into the patient death in the Phase 1/2 trial to demonstrate tgAAC94 played no role in the suppression of the patient's immune system which ultimately caused her death from an untreated, disseminated fungal infection called Histoplasmosis. This expectation is based on preliminary testing results from three tissue sites in mid-September which revealed that the level of vector DNA from tgAAC94 present in the patient's system was too low to have a systemic effect or cause suppression of the immune system. Also, the patient who died in this study was on systemic arthritis medications which are known to cause immune system suppression.

Assuming the clinical hold is ultimately lifted by the FDA, Ms. Parker expects to complete the second dosing round in the study well before the end of 2007. In addition, patients have continued to be monitored and data collection has been ongoing normally since the clinical hold was imposed in July by the FDA in response to the patient death in the trial. Gene therapy treatment candidate tgAAC94 is designed to be a local, add-on treatment option for the estimated 15% - 40% of patients with inflammatory arthritis conditions who are not adequately treated with one of three systemic anti-TNF-alpha treatments currently on the market, including Enbrel, Humira, and Remicade.

These three products represent an $8 billion market, but up to 40% of patients still complain of residual disease in one or more joints which creates up to a $3 billion market opportunity for Targeted Genetics and tgAAC94 as a local anti-TNF-alpha gene therapy treatment which is delivered only to the affected joint(s). Existing anti-TNF-alpha agents are not useful for local administration because their duration of action is much too short as they are quickly degraded by the body. However, in the current Phase 1/2 trial of tgAAC94 approximately 50% of patients who received an active dose of drug did not require a second dose after 30 weeks.

Additionally, interim data on the 127 patient database in this study revealed tgAAC94 was safe, well tolerated, and effective – with 33% of patients receiving the high dose of tgAAC94 experienced a significant reduction (a 66% decrease) in swelling versus 0% of patients who received placebo. Specific actions required by the Company to respond to the FDA's clinical hold letter include revising the informed consent document to include information about the patient death in this trial, obtaining approval from each clinical site & the institutional review board to continue the trial, and finally obtaining consent from around 50 patients remaining to receive a second dose of tgAAC94.

Beyond working to resolve the clinical hold, Targeted Genetics will present 12-week data on the 127 patients in this study at the American College of Rheumatology annual meeting, which is scheduled for November 6 – 11. Targeted Genetics also represents a hidden play on the hot area of RNA interference (RNAi), with a strong patent position for the adeno-associated virus [AAV] delivery of RNA therapeutics.

The Company has an ongoing collaboration with Merck (MRK ) through its acquisition of Sirna for the study of AAV delivery of RNAi in the potential treatment of Huntington's disease. AAV deliver of RNAi offers key advantages that include an infrequent dosing requirement and prolonged expression for long-lasting therapeutic effect in the treatment of chronic conditions. AAV also offers a delivery mechanism that can be tailored for either systemic or localized expression, depending on the condition being treated. Financially, Targeted Genetics has a strong cash position of $26 million at the end of the second quarter with an estimated burn rate of $13 - $16 million in 2007 on expected partnership revenues of around $10 million.

Approximately two-thirds of the Company's 19.8 million shares of common stock are owned by institutional investors or biotech/pharma companies, such as Biogen Idec ( BIIB) which still owns 2.17 million shares (approximately 11%) of Targeted Genetics. Last November, shares of Targeted Genetics soared after announcing an agreement with Biogen Idec to convert $5.65 million of debt into an equity investment of 1 million shares of common stock.

Following a $1.1 million payment made to Biogen Idec in July & August 2007, Targeted Genetics only owes a payment of $0.45 million which is due in August 2008 to complete their debt obligation. Since last Friday's after-hour announcement that Biogen Idec is officially up for sale, Targeted Genetics may find itself the focus of M&A activity as the Company's enterprise value is less than $20 million as of Friday's close at $2.23 per share despite expected near-term positive catalysts and a portfolio that includes gene therapy drug candidates and a potential RNAi delivery mechanism.

Disclosure: Author has a long position in TGEN