As a precautionary measure, the FDA stopped further administration of tgAAC94 due to the uncertainty of the cause of a serious adverse event (SAE) that occurred in one subject enrolled in the study. Currently, there is insufficient information to draw conclusions as to the cause of the SAE, and therefore the study will remain on clinical hold while additional data is gathered and analyzed. Subjects already enrolled in the study will continue to be followed and monitored. Since the trial began in October 2005, 127 subjects have received an initial dose of active drug or placebo, and 74 subjects out of the total 127 have received a second dose of active drug.

"Our primary concern remains that of the safety of the patients, and we are working diligently with the study's Data Safety Monitoring Board and the FDA to determine the cause of this unexpected event as quickly as possible," said H. Stewart Parker, president and chief executive officer of Targeted Genetics.

The Phase I/II study is designed to assess the safety and potential efficacy of different doses of tgAAC94 administered directly to affected joints of subjects with inflammatory arthritis. tgAAC94 is an investigational therapy that utilizes an adeno-associated virus (AAV) vector to deliver the gene encoding a soluble form of the receptor for TNF-alpha (TNFR:Fc). The TNFR:Fc protein is a potent inhibitor of tumor necrosis factor-alpha (TNF-alpha), a key mediator of inflammation. In March 2006, the Company received approval from the FDA to amend its protocol for the tgAAC94 clinical trial to include a higher dose group and increase the number of patients. 127 adults have been randomized into three dose levels to receive a single intra-articular injection of either tgAAC94 or placebo into the knee, ankle, wrist, metacarpophalangeal or elbow, followed by an open-label injection of tgAAC94 after 12 to 30 weeks, depending on when arthritis symptoms in the target joint meet criteria for re-injection.

The interim data reported by our investigators at leading scientific meetings in June 2006, November 2006 and June 2007, support the safety and tolerability of single and repeat intra-articular injections of tgAAC94 to affected joints at doses up to 1x10(13) DNase Resistant Particles per milli-liter (DRP/mL) of joint fluid in subjects with and without systemic TNF-alpha antagonists. This interim data also suggest that treatment with tgAAC94 may lead to improvements in signs and symptoms of arthritis in injected joints.

About tgAAC94

tgAAC94 is being developed as a supplemental therapeutic to systemic anti-TNF-alpha protein therapy for use in patients with inflammatory arthritis who have one or more joints that do not fully respond to systemic protein therapy. The product candidate uses Targeted Genetics' recombinant AAV (rAAV) vector technology to deliver a DNA sequence that encodes a soluble form of the TNF-alpha receptor (TNFR:Fc). Soluble TNFR:Fc inhibits the immune stimulating activity of TNF-alpha. Direct injection of tgAAC94 into affected joints leads to the localized production of secreted TNFR:Fc within joint cells, reducing the activity of TNF-alpha within the joint and, potentially, leading to a decrease in the signs and symptoms of inflammatory disease and inhibition of joint destruction. The Company's rAAV technology platform is used to deliver genes and is based on AAV, a naturally occurring virus that has not been associated with any disease in humans.

About Targeted Genetics

Targeted Genetics Corporation is a biotechnology company committed to the development of innovative targeted molecular therapies for the prevention and treatment of acquired and inherited diseases with significant unmet medical need. Targeted Genetics' proprietary Adeno-Associated Virus (AAV) technology platform allows it to deliver genes that encode proteins to increase gene function or RNAi to decrease or silence gene function. Targeted Genetics' product development efforts target inflammatory arthritis, AIDS prophylaxis, congestive heart failure and Huntington's disease. 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 release contains forward-looking statements regarding the data to be collected in this trial, the cause of the SAE and the impact, if any, on the timing continuance or results of this trial, establishment or determination of efficacy endpoints from the data collected in the trial, the timely and complete accrual of patients in the trial and our ability to commercialize tgAAC94 and other statements about our plans, objectives, intentions and expectations. These statements, involve current expectations, forecasts of future events and other statements that are not historical facts. Inaccurate assumptions and known and unknown risks and uncertainties can affect the accuracy of forward-looking statements. Factors that could affect our actual results include, but are not limited to, our ability to obtain, maintain and protect our intellectual property, our ability to raise capital when needed, our ability to recruit and enroll suitable trial participants, the timing, nature and results of research and clinical trials, potential development of alternative technologies or more effective processes by competitors, and, our ability to obtain and maintain regulatory or institutional approvals, as well as other risk factors described in Item 1A. Risk Factors in our report on Form 10-K for the year ended December 31, 2006 and updated in Item 1A. Risk Factors in our Form 10-Q for the quarter ended March 30, 2007. You should not rely unduly on these forward-looking statements, which apply only as of the date of this release. We undertake no duty to publicly announce or report revisions to these statements as new information becomes available that may change our expectations.

SOURCE: Targeted Genetics