TGEN Tecogen Inc

Targeted Genetics Corporation (Nasdaq:TGEN) today announced its financial results for its second quarter ended June 30, 2006. As previously announced, the Company will hold a conference call with analysts at 10:30 AM EDT today. The call will be broadcast live over the Internet and can be accessed, along with replay information, at www.targetedgenetics.com. Revenue for the three months ended June 30, 2006 was $1.4 million, compared to $1.5 million for the second quarter of 2005, and was $3.8 million for the six months ended June 30, 2006, compared to $3.5 million for the same period in 2005. Revenue in 2006 consists primarily of development revenue earned under a congestive heart failure collaboration agreement with Celladon and the HIV/AIDS vaccine collaboration with the International AIDS Vaccine Initiative (IAVI). Revenue in 2006 also includes development revenue from the NIAID contract to develop AAV-based HIV/AIDS vaccines. Revenue in 2005 primarily consisted of development revenue earned under the IAVI collaboration. "We are off to a good start for the first half 2006 revenue and on track to reach our 2006 revenue guidance of $9 million from our partnered programs," said H. Stewart Parker, president and chief executive officer of Targeted Genetics. "Our partnerships not only provide substantial revenue and upside to the Company, but also validate the broad applicability of our AAV manufacturing and development capabilities in multiple disease settings. We continue to pursue additional strategic partners as a key element of our business strategy in 2006 and beyond." During the quarter the Company recorded a non-cash goodwill impairment charge of $23.7 million. As a result, net loss for the quarter ended June 30, 2006 was $27.9 million or $2.83 per share as compared to a second quarter of 2005 net loss of $5.3 million or $0.62 per share. Net loss for the six months ended June 30, 2006 was $31.6 million or $3.37 per share as compared to a net loss of $9.7 million or $1.16 per share in the second quarter of 2005. Total operating expenses for the quarter ended June 30, 2006, increased to $29.3 million from $6.6 million for the second quarter of 2005; while operating expenses for the six months ended June 30, 2006 increased to $35.5 million, compared $13.2 million for the same period in 2005 with the increase in both periods primarily reflecting the $23.7 million second quarter 2006 non-cash goodwill impairment charge partially offset by lower research and development and general and administrative expenses. The Company's goodwill balance originated with the acquisition of Genovo, Inc. in 2000. The size of the Company's market capitalization at the end of the quarter triggered a requirement under Statement of Financial Accounting Standard No. 142 "Goodwill and Other Intangible Assets" to perform an interim goodwill impairment test. This impairment test resulted in the recognition of a non-cash loss on impairment of goodwill in the amount of $23.7 million. Please refer to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2006 for more detailed information about the goodwill analysis. Research and development expenses in the second quarter of 2006 decreased to $3.7 million compared to $4.8 million for the same period in 2005. This decrease reflects lower preclinical costs as a result of our restructuring efforts in the first quarter of 2006, which were implemented to reduce expenses and concentrate resources on key product development activities. Research and development costs for the six months ending June 30, 2006 decreased to $7.4 million from $9.3 million for the same period in 2005. This decrease reflects lower costs related to the HIV/AIDS vaccine in addition to the effect of our restructuring efforts in the first quarter of 2006. General and administrative expenses in the second quarter of 2006 decreased to $1.6 million from $1.7 million for the same period in 2005. General and administrative expenses decreased to $3.0 million for the six months ended June 30, 2006 compared to $3.5 million for the same period in 2005. The decrease in G&A expenses is due to lower payroll expenses related to the first quarter restructure efforts and lower patent costs compared to the prior year. The decrease in R&D and G&A expenses are offset by an increase in restructuring charges for the six months ending June 30, 2006 which increased to $1.4 million in 2006 from $.3 million in 2005. This increase is due to changes in our expectations in regards to our Bothell facility as well as termination costs incurred in connection with the first quarter restructuring. Parker added, "We continue to demonstrate steady progress in our clinical programs. Most notably, we reported encouraging data demonstrating evidence for sustained improvement in signs and symptoms of disease in patients with inflammatory arthritis from an ongoing Phase I/II clinical study. We are moving the program forward at a good pace and plan to report additional data in the fourth quarter, which we believe will further demonstrate the progress and potential of our lead clinical program. Also in the quarter, we entered into a new, more robust, agreement with IAVI underscoring the commitment to our HIV/AIDS vaccine development program. We continue to advance our multi-faceted HIV/AIDS vaccine program and will present additional data from the Phase I trials in Europe and India at the AIDS Vaccine 2006 Conference in Amsterdam later in August. Although we achieved many milestones, we fully appreciate that we have a great deal of work ahead of us and are intently focused on achieving a number of additional milestones in the remainder of the year." Second quarter and recent highlights include: -- Reported encouraging interim Phase I/II data and complete Phase I results on the use of tgAAC94 in the treatment of inflammatory arthritis; -- Highlighted Targeted Genetics' promising inflammatory arthritis program, robust AAV product development platform and manufacturing leadership in 14 presentations at the 9th Annual Meeting of the American Society of Gene Therapy, and which included a Company-sponsored research featured as one of "Top Five Abstracts" at the meeting's Presidential Symposium; -- Entered into new agreement with the International AIDS Vaccine Initiative to support ongoing development in HIV/AIDS vaccine program; and -- Maintained listing on the Nasdaq National Markets by effecting a one-for-ten reverse stock split of the Company's common stock. As of June 30, 2006, the Company had $12.2 million in cash and cash equivalents, as compared to $14.1 million at December 31, 2005, "We started 2006 with approximately $14 million in cash. During the first quarter we received net proceeds of $4.8 million from the sale of approximately 1.3 million common shares and in the first half of 2006 we have used about $6.6 million to fund operations, net of funding from Celladon, IAVI and the NIAID," said David J. Poston, Vice President, Finance, and Chief Financial Officer. "For the full year of 2006, we are budgeted for approximately $9 million of revenue from these partnered programs and we are on plan with an estimated burn rate for the full-year 2006 in a range of $13 to $16 million." Note that all per common share amounts reflect the reverse stock split effected on May 11, 2006. Conference call and Webcast information The company will host a conference call reviewing financial results and its product portfolio, including an update on the development progress of the Company's inflammatory arthritis and other clinical and business developments, today beginning at 10:30 a.m. Eastern Time / 7:30 a.m. Pacific Time. You may access the live webcast via the "Events" section of the Company's website at www.targetedgenetics.com or via telephone at 866-250-3615 (domestic) or 303-262-2137 (international). Replay Access Webcast replay will be available for approximately 90 days at www.targetedgenetics.com; telephone replay will be available following today's call at 9:30 a.m. PT through 11:59 p.m. PT, Monday, September 11, 2006, by calling 800-405-2236 (domestic) or 303-590-3000 (international); passcode 11066751#. About Targeted Genetics Targeted Genetics Corporation is a biotechnology company committed to the development and commercialization of innovative targeted molecular therapies for the prevention and treatment of inflammatory arthritis and other acquired and inherited diseases with significant unmet medical need. The Company uses its considerable knowledge and capabilities in the development and manufacturing of gene delivery technologies to advance a diverse product development pipeline. The Company's product development efforts target inflammatory arthritis, AIDS prophylaxis, congestive heart failure, Huntington's disease and hyperlipidemia. To learn more about Targeted Genetics, visit the Company's 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, the Company's product development, the Company's liquidity and the Company's ability to meet the Company's ongoing financial obligations and other statements about the Company's plans, objectives, intentions and expectations. These unaudited results announced herein may differ from what the Company eventually files in its Annual Report on Form 10-K for the fiscal year ended December 31, 2006. In particular, the statements regarding the Company's future plans are forward-looking statements. 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 the Company's actual results include, but are not limited to, 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 it listing on the NASDAQ Capital Market and the Company's ability to obtain, maintain and protect the Company's intellectual property, as well as other risk factors described in "Item 1A. Risk Factors" in our most recent report on Form 10-K or Form 10-Q that we file with the SEC. 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 the Company's expectations. -0- *T TARGETED GENETICS CORPORATION (in thousands, except per share information) Quarter ended Year-to-date ended June 30, June 30, ----------------------- ----------------------- Statement of Operations Information: 2006 2005 2006 2005 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Revenue: Collaborative agreements $ 1,414 $ 1,462 $ 3,844 $ 3,462 ----------- ----------- ----------- ----------- Total revenue 1,414 1,462 3,844 3,462 Operating expenses: Research & development 3,683 4,808 7,360 9,347 General & administrative 1,568 1,660 3,049 3,545 Restructure charges 363 119 1,405 338 Goodwill impairment charge 23,723 - 23,723 - ----------- ----------- ----------- ----------- Total expenses 29,337 6,587 35,537 13,230 ----------- ----------- ----------- ----------- Loss from operations (27,923) (5,125) (31,693) (9,768) Investment income (loss) 170 (33) 321 67 Interest expense (123) (136) (236) (265) ----------- ----------- ----------- ----------- Net loss $(27,876) $(5,294) $(31,608) $(9,966) =========== =========== =========== =========== Net loss per common share $ (2.83) $ (0.62) $ (3.37) $ (1.16) =========== =========== =========== =========== Shares used in computation of net loss per common share 9,854 8,563 9,371 8,563 =========== =========== =========== =========== *T -0- *T TARGETED GENETICS CORPORATION (in thousands) June 30, December 31, Balance Sheet Information: 2006 2005 ----------- ------------- (unaudited) Cash and cash equivalents $ 12,171 $ 14,122 Other current assets 1,236 1,063 Property and equipment, net 1,440 1,747 Other assets 8,138 31,866 ----------- ------------- Total assets $ 22,985 $ 48,798 =========== ============= Current liabilities $ 4,001 $ 4,628 Long-term obligations and other liabilities 14,602 13,599 Shareholders' equity 4,382 30,571 ----------- ------------- Total liabilities and shareholders' equity $ 22,985 $ 48,798 =========== ============= *T