Under the terms of the lease amendment, the Company's rent will be reduced for a three-month period, from June through August 2009. The Company then has the option to continue the lease under its current terms by making a $45,000 payment of additional rent and providing reasonable credit assurances if asked by the landlord to do so by August 31, 2009. If the Company cannot provide such reasonable assurances, then the facility owner has the right to terminate the lease effective October 31, 2009. Alternatively, the Company may elect to terminate the lease as of August 31, 2009, releasing the Company from up to approximately $4 million in estimated payment obligations and other liabilities under the lease, in exchange for a termination fee of $45,000 by August 31, 2009 and subject to the Company having paid the reduced rent for June through August.

"We expect our facility requirements to be significantly reduced compared to our requirements for supporting past activities, and we consider it important to have the option to scale down our facility utilization and obligations in alignment with our smaller business structure," said B.G. Susan Robinson, president and chief executive officer of the Company. "This amendment better provides us with the flexibility to tailor our facility requirements to our business strategy."

As previously reported, the Company has significantly restructured its operations over the last nine months and is no longer supporting an infrastructure to manufacture AAV vector candidates for clinical trials. Instead, the Company plans to enable a contract manufacturing organization to manufacture vector using the processes transferred by the Company. The number of Company full-time-equivalent employees has been reduced to approximately 15 employees at August 1, 2009 from approximately 70 at September 30, 2008.

The Company continues to pursue additional capital through strategic transactions, licensing or selling technology, product development collaborations, and sales of stock. The Company also continues its cost reduction efforts, including negotiations to reduce or eliminate the cost of its remaining 5,000 square foot administrative office facility, located adjacent to its headquarters facility.

Ms. Robinson added, "This lease amendment, together with the settlement of our Bothell lease obligations, is an important element in our efforts to provide ourselves with flexibility to significantly reduce our cash expenditures going forward. Even with the significant reduction in operating costs we have achieved, it is imperative that we execute on one or more cash-generating transactions in order to either continue our operations or enable continued development of AAV-based gene therapeutic products through another entity. We continue to evaluate the best way to maximize value for our shareholders."

As previously reported, the Company finished the first quarter ended March 31, 2009 with $3.9 million in cash and cash equivalents and a working capital balance of $185,000. The Company believes that its current financial resources, together with the cash it expects to receive from collaborators, will only be adequate to fund its operations into August 2009. If the Company is not successful in securing additional capital sufficient to support ongoing operations, it will wind down its business or otherwise cease its operations.

About Targeted Genetics Corporation

Targeted Genetics Corporation is a biotechnology company committed to the development of innovative therapies for the prevention and treatment of diseases with significant unmet medical need. A key area of focus for Targeted Genetics is applying its proprietary adeno-associated virus (AAV) technology platform to deliver genetic constructs to increase gene function or silence gene function. Targeted Genetics' lead product development efforts target ocular and neurological indications, two therapeutic areas where AAV delivery may have competitive advantages over other therapeutic modalities. To learn more about Targeted Genetics, visit its 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 liquidity and financial resources, its ability to fund ongoing and future operations, and its product development and business strategies, including statements regarding the Company's modification of lease obligations for its headquarters facility and other facilities, the Company's ability to continue its operations, raise additional capital or secure other financial resources in the near term, the extent of the Company's cash horizon, the possibility that the Company may cease its operations or otherwise wind up its business 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, the Company's actual expenses, the risk that the Company will run out of cash earlier than expected, the risk that the Company will not be able to raise capital or secure other financial resources in the very near term, the risk that the Company will not be able to enter into one or more strategic transactions and/or to sell or otherwise monetize its assets, the risk that the Company will not be able to maintain its listing on the NASDAQ Capital Market or that an over-the-counter market will not trade the Company's shares if the NASDAQ Capital Market delists the Company, the risk that the Company will be unable to meet its obligations under its Bothell lease termination agreement, which would result in the Company not being released from its obligations under the Bothell lease, the risk that the Company will be unable to meet its obligations under the headquarters lease amendment, which would result in the Company's inability to terminate the lease without further obligations or continue the lease if desired, and the risk that the Company does not successfully settle or otherwise reduce its lease obligations for its administrative office facility, as well as other risk factors described in the section entitled "Item 1A. Risk Factors" in Part II, Item 1A of the Company's quarterly report on Form 10-Q for the period ended March 31, 2009, filed with the Securities and Exchange Commission on May 7, 2009, and in other filings with the SEC. 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
206.660.2588
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SOURCE: Targeted Genetics