Targeted Genetics reports net income of $1.8M for fourth-quarter 2009 compared to net loss of $10.8M in 2008

Jun 1 2010

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.