Molecular Tests Support That tgAAC94 Did Not Contribute to Immunosuppression Leading to Recent Serious Adverse Event

The Company also announced that final molecular test results from a fatal serious adverse event (SAE), which led to a clinical trial hold in July of this year, underscore initial observations that no amplification of viral vector occurred in the patient's body as a result of the investigational therapy and that only trace amounts of vector DNA were detected in tissues outside the treated joint. These data were presented at the 71st annual meeting of the American College of Rheumatology (ACR) in Boston, Massachusetts.

Inflammatory arthritis is a serious disease affecting more than two million people in the United States that can lead to debilitating chronic pain, permanent nerve, bone, and joint damage, and, in some cases, death. While medications are available to slow and sometimes stop symptoms, they can compromise the immune system and leave patients with side effects, such as chronic infections. The Company's tgAAC94 product candidate, a locally targeted therapy approach, is designed to reduce inflammation locally in the joints and avoid the potential for systemic side effects.

Philip J. Mease, M.D., clinical professor at the University of Washington School of Medicine, chief of rheumatology clinical research at the Swedish Medical Center, practicing physician with Seattle Rheumatology Associates and the lead investigator on the trial, reported data from 66 subjects enrolled in the Phase II portion of the trial who were given a self-administered patient questionnaire to determine improvements in joint symptoms and pain management. A higher percentage of subjects who received tgAAC94 reported improvement in joint symptoms, function and pain compared to the placebo injected group:

--  40% of tgAAC94 compared to 19% placebo injected patients reported a
    30% decrease in injected joint global symptoms on visual-analog scale
--  32% of tgAAC94 compared to 19% placebo injected patients reported a
    30% improvement in injected joint function on visual-analog scale
--  12% of tgAAC94 compared to 6% placebo injected patients reported 2-
    point decrease in injected joint pain on visual-analog scale

These interim data also indicated that tgAAC94 is well-tolerated for doses up to 5x1013 DNase Resistant Particle (DRP). The most common adverse events noted were injection site reactions, seen in 10% of patients treated.

Dr. Mease reviewed data generated in the investigation of the cause of the July SAE. "Results from the molecular tests indicate that tgAAC94 did not contribute to the patient's death, which was due to disseminated histoplasmosis and a severe retroperitoneal hematoma," said Mease.

Dr. Mease also presented additional supportive data regarding the SAE, including:

--  Vector DNA was detected in the injected joint as expected.
--  The other medications the subject was taking, adalimumab, methotrexate
    and prednisone, are known to be immunosuppressive and a risk factor for
    histoplasma infection.
--  There was no increase in TNF-a binding protein above what was expected
    based on the subject's ongoing background adalimumab therapy.
--  There was no detectable TNFR:Fc protein in serum tested from 16 of
    the16 other subjects who were not on any TNF-a antagonist therapy.

About Phase I/II Study Details

The ongoing 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. 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 into the knee, ankle, wrist, metacarpophalangeal or elbow, and 74 subjects out of the total 127 have received a second dose of active drug. Of those 74 subjects, 52 have received two doses of active drug.

"The new data are very encouraging and we are hopeful we can resume this clinical trial soon," said H. Stewart Parker, president and chief executive officer of Targeted Genetics. "Based on the clinical data generated and evaluated to date, we are now working with our advisory board to design the next phase of our clinical program."

The company previously reported interim aggregate data on the primary and secondary end-points from the first 61 subjects in the dose escalation portion (cohorts 1 to 3) of the Phase I/II clinical trial of tgAAC94 at the EULAR and ASGT conferences in June. At week 12 after treatment with tgAAC94, 13%, 14% and 33% of subjects receiving low, mid and high dose tgAAC94, respectively, achieved a two-point reduction in swelling compared to none in the placebo group. A trend in reduction of swelling in tgAAC94-injected joints compared to placebo was also observed in subjects with or without concurrent use of systemic TNF antagonist.

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.

About Histoplasmosis

Histoplasmosis is a fungal infection resulting from exposure to spores of the microscopic fungus, Histoplasma capsulatum. Clinical manifestations can vary from a mild flu-like illness that may not produce any noticeable symptoms to rapidly progressive, sometimes fatal, disseminated disease. The degree of symptoms experienced from this infection can be highly variable depending on a number of factors including the relative strength of the infected person's immune system. Many of the medications commonly prescribed to patients undergoing treatment for inflammatory arthritis, including those that were being taken by the patient, are recognized to have immunosuppressant effects.

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 Company's business strategy and product development, including statements regarding the data collected in the tgAAC94 program, the cause of the serious adverse event 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 the Company's 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 actual future events or results include, but are not limited to, payments anticipated by the Company under product development collaborations and contracts, the Company's actual expenses, the Company's ability to raise capital when needed, the timing, nature and results of the Company's clinical trials, potential development of alternative technologies or more effective products by competitors, the Company's ability to obtain and maintain regulatory or institutional approvals, the Company's ability to maintain its listing on the NASDAQ Capital Market and the Company's ability to obtain, maintain and protect its intellectual property, as well as other risk factors described in "Item 1A. Risk Factors" in the Company's most recent annual report on Form 10-K for the year ended December 31, 2006 filed with the SEC and in its most recently filed quarterly report on Form 10-Q for the quarter ended September 30, 2007. You should not rely unduly on these forward-looking statements, which apply only as of the date of this release. The Company undertakes no duty to publicly announce or report revisions to these statements as new information becomes available that may change the Company's expectations.

Investor and Media Contact:
Stacie D. Byars
Director, Communications
Targeted Genetics Corporation
206.521.7392
Cell: 206.660.2588

SOURCE: Targeted Genetics