Targeted Genetics needed a lifeline and it got one at the last possible minute. The Seattle-based mainstay of gene therapy, which has been running on fumes for months, has struck an 11th-hour deal to stay alive another year by selling off its most valuable intellectual property for $7 million to Genzyme (NASDAQ: GENZ).
Many of the remaining 15 employees at Targeted Genetics (NASDAQ: TGEN) were happy to hop on a flight to San Diego last night to start handing over intellectual property to Genzyme’s Southern California operation that handles gene therapy manufacturing. Targeted Genetics, which only had enough money to operate through August, will now get $3.5 million right away, and another $3.5 million when all the intellectual property and proprietary know-how is handed over by the end of this year. That should be enough cash for Targeted Genetics to operate through 2010, says CEO Susan Robinson.
“We’re back from the brink,” Robinson says.
The Targeted Genetics story is a notable one because the company is one of the diehards of gene therapy—one of the most promising, and most snakebitten, fields within biotechnology. 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. Back in the early 1990s, it was hyped as the ultimate cure-all for any number of diseases, and surely the place where the next Amgen or Genentech would be found. Targeted Genetics, a spinoff from Seattle-based Immunex in 1992, was part of that early generation of more than 100 companies that rose on that enthusiasm, and then crashed when the research failed to live up to the hype.
Seventeen years later, the Targeted Genetics track record is not pretty. The company never cured anything, and didn’t prove the concept of gene therapy as a superior method of medicine. It has never made a profit, and has burned through more than $315 million in investor capital. It has, however, populated Seattle biotech with many talented alumni, as I described late last month.
Yet Genzyme, one of the biggest and most successful biotechs in the industry’s history, saw something it wanted in the ashes of Targeted Genetics. Genzyme, the world’s largest maker of enzyme replacement therapies for genetic disorders, has been pursuing gene therapy since those heady early days in 1991. Like Targeted Genetics, it still has no approved drugs to show for it, or even a promising final-stage clinical trial result.
What Targeted Genetics had accumulated of value were a lot of patents and proprietary know-how on manufacturing of adeno-associated viruses (AAV). These are tiny viruses that don’t cause illness in humans, like the more common adenovirus. For this reason, AAVs are thought by many researchers to be the ideal delivery vehicle to efficiently transmit genes into cells. By purchasing intellectual property around these AAVs, Genzyme could apply these techniques to its own pipeline of experimental gene therapies, which includes one early-stage treatment for Parkinson’s disease.
“Genzyme has a substantial commitment to advancing gene therapy as a solution to many complex diseases,” said David Meeker, executive vice president for Genzyme’s therapeutics, biosurgery and transplant businesses, in a statement.. “The acquisition of the intellectual property from Targeted Genetics will add depth to our program and overall gene therapy capabilities.”
The deal also isn’t putting Targeted Genetics out of business by forcing it to hand over the store. Targeted Genetics will retain the development rights to its own pipeline of gene therapies, which includes treatments for a rare form of blindness known as Leber’s Congenital Amaurosis, Huntington’s disease, and inflammatory arthritis. The blindness treatment wowed gene therapy researchers and landed ink in the New England Journal of Medicine based on the first few patients.
The results were so impressive that when researchers gathered in San Diego at the American Society of Gene Therapy in June, they had sober talks about what would happen to the drug if Targeted Genetics ran out of cash; ultimately researchers concluded it would still go on. But because the company has raised money from Genzyme, Targeted Genetics will now be around long enough to see results from another clinical trial at University College London that will generate more results in 2010, Robinson says.
Robinson knew all about Genzyme’s interest in gene therapy, having once worked there previously as the director of business development for its molecular oncology business before she joined Targeted Genetics. She took over as Targeted Genetics’ CEO when founder H. Stewart Parker resigned in November of last year. Within weeks, Genzyme was one of the companies Robinson talked to first about a possible partnership or deal to keep her company afloat.
Those talks ended up dragging on for about nine months, right when Targeted Genetics’ back was up against the wall. She sounded relieved on the other end of the phone last night.
“For me, the important thing is to be out of crisis mode,” Robinson says. “Now we can say all of this intellectual capital and know-how isn’t going to be lost.”
That’s good news for gene therapy researchers, and may give Genzyme an edge it needs to sustain an interest in gene therapy amid all the failures. For Targeted Genetics as a company, $7 million isn’t nearly enough to develop a new drug. What matters is that it now has a chance to really get back on its feet. “We can now look forward,” Robinson says.
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