Targeted Genetics Reports Second Quarter 2008 Financial Results

Conference Call Today at 10:30 a.m. ET

SEATTLE, WA–(EMWNews – August 6, 2008) – Targeted Genetics Corporation (NASDAQ: TGEN)

today announced its financial results for the second quarter ended June 30,

2008. The Company will hold a conference call with analysts and investors

to discuss its financial and business results at 10:30 a.m. ET today.

For the quarter ended June 30, 2008, the Company reported a net loss of

$3.8 million, or $0.19 per common share, compared to net loss of $4.2

million, or $0.31 per common share, for the second quarter of 2007.

Revenue for the second quarter of 2008 was $2.2 million, compared to $3.0

million for the same quarter in 2007. The decrease in revenue for the

second quarter of 2008 primarily reflects a decrease in research and

development and manufacturing activities under the NIAID-funded HIV/AIDS

vaccine program and partially offset by higher research and development

activities under the Company’s collaboration with Celladon. Revenue for

the six months ended June 30, 2008 was $4.7 million, even with revenue for

the same period in 2007 as increases in 2008 Celladon product development

efforts were offset by lower 2008 HIV/AIDS vaccine program activities.

Based on completion of planned development activities for funded projects

and licensed technology, the Company expects revenue from collaborative

partners of approximately $8.0 million to $9.0 million for the year ending

December 31, 2008, compared to $10.3 million in 2007. The revenue plan for

2008 includes the expectation that Targeted Genetics, and its partners,

achieve their respective 2008 product development work plans.

Research and development expenses for the second quarter of 2008 decreased

to $4.2 million, compared to $5.3 million in the same quarter of 2007.

Research and development expenses decreased to $8.1 million for the six

months ended June 30, 2008 compared to $9.0 million for the same period in

2007. The decreases in both periods reflect lower clinical trial costs as

the Company’s Phase 1/2 inflammatory arthritis clinical trial reaches

completion. The R&D expense decreases in both periods were partially offset

by increased activity related to the partnered heart failure product

candidate.

General and administrative expenses for the three months ended June 20,

2008 were $1.8 million, compared to $1.6 million for the same period in

2007. General and administrative expense increased to $3.6 million for the

six months ended June 30, 2008, compared to $3.1 million for the same

period in 2007. The increases in both periods reflect higher intellectual

property charges related to patent costs and higher legal fees as compared

to the first half of 2007.

The Company’s cash balance was $12.7 million at June 30, 2008, compared to

$16.4 million at December 31, 2007. The Company’s guidance for its

estimated burn rate for 2008 remains at a range of $12 to $14 million, and,

based on its current cash balances, the Company expects its cash horizon to

extend into the first quarter of 2009.

“This was a quarter of solid product development progress for the Company

and its collaborative partners,” said H. Stewart Parker, president and

chief executive officer of Targeted Genetics. “We were excited to be

recommended for government funding for a project targeting Amyotrophic

Lateral Sclerosis, or ALS, more widely known as Lou Gehrig’s disease, a

devastating disease with significant unmet need, potentially adding up to

$2.4 million to fund the project’s preclinical development costs. Also,

research from two of our partnered programs was presented and published

this quarter. Dr. Robin Ali’s team at University College of London

reported promising results in an early stage AAV-based clinical trial in

Leber’s Congenital Amaurosis (LCA), an inherited eye disease that impairs

vision and eventually causes blindness and was published in the New England

Journal of Medicine. Dr. Beverly Davidson, at University of Iowa, was

recognized in PNAS for advances in delivery of small interfering RNA to the

brain, and represents a significant advance in addressing this treatment

method in Huntington’s disease.”

In April, the Company reported data showing proof of principle and early

clinical benefit from its Phase 1/2 clinical study in LCA. The study

treated three young adults between the ages of 17 and 23 years of age with

early-onset severe retinal dystrophy utilizing an Adeno-Associated Virus

(AAV) vector containing the RPE 65 coding sequence, resulting in consistent

improvement in visual function as measured by visual field tests and

improvement in subjective tests of visual mobility. There were no adverse

events. Targeted Genetics, a leader in the development and manufacture of

AAV-based product candidates, manufactures the vector that is being used in

this trial.

“Additional studies are underway in order to assess this approach fully,

but these initial results suggest that AAV-based delivery of genes in the

eye can be accomplished safely and with promise,” added Parker.

The Company also announced during the quarter, the publication of

preclinical data characterizing the novel use of Adeno-Associated Viral

(AAV) vectors to deliver small interfering RNA (siRNA) for the treatment of

Huntington’s disease in the Proceedings of the National Academy of Sciences

(PNAS). The goal of this research is to assess the use of interfering RNA

to silence the mutant huntingtin gene and thus, reduce the level of the

defective protein.

The paper reported on findings that AAV-RNAi vectors efficiently abrogate

disease in mouse models of Huntington’s disease and that they support a new

approach to RNAi delivery that has the potential to effectively overcome

delivery limitations of RNAi related to off target effects and resulting

non-specific toxicity. “These new AAV-RNAi vectors, embedded in synthetic

micro-RNA structures, retain the efficiency of delivery and biologic

efficacy, while having a greatly enhanced safety profile,” said Barrie J.

Carter, Ph.D., Executive Vice President and Chief Scientific Officer of the

Company.

“We believe this new design concept is of great importance to the entire

RNA therapeutic field and that the use of AAV vectors for the delivery of

expressed RNAi has proven advantages over alternative RNAi delivery

approaches due to AAV’s long-term expression capabilities, stability and

safety profile,” said Parker. “These results in Huntington’s and in LCA

continue to support our beliefs that AAV delivery holds great promise in

the creation of a broad new class of innovative medicines and that Targeted

Genetics is well positioned to participate in this opportunity.”

“We continue to work diligently with our product development partners to

move our programs forward and are keenly focused on initiatives to extend

our cash horizon. We anticipate reporting data from our Phase 1/2 trial of

tgAAC94 for the treatment of inflammatory arthritis at the American College

of Rheumatology conference in October and Phase 1 data from our partnered

heart failure program at the American Heart Association Scientific Sessions

2008 conference in November.”

Conference Call and Webcast Information

The Company will host a conference call reviewing financial results, its

product development portfolio and other 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 found on the homepage of

the Company’s website at www.targetedgenetics.com or via telephone at

800.240.4186 (domestic) or 303.275.2170 (international).

Replay Access

Webcast replay will be available for approximately 30 days at

www.targetedgenetics.com; telephone replay will be available following

Wednesday’s call at approximately 9:30 a.m. PT through 11:59 p.m. PT,

Saturday, September 6, 2008, by calling 800.405.2236 (domestic) or

303.590.3000 (international); pass code 11117734#.

About Targeted Genetics Corporation

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, Leber’s congenital amaurosis, 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

liquidity and financial resources, its ability to fund ongoing and future

operations and its business strategy and product development, including

statements regarding the timing, nature and results of the Company’s

research and development programs, and the potential impact of the results

of such programs on the Company’s operations, the Company’s revenue plan,

the extent of the Company’s cash horizon, the Company’s ability to raise

capital when needed, the Company’s ability to obtain grant funding for the

ALS research program 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 and

cause actual results to differ materially from those expected or implied by

the forward-looking statements. Factors that could affect actual future

events or results include, but are not limited to, 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 when expected or at all, the risk

that the Company’s research and development programs are not successful or

are delayed or terminated, the risk that payments anticipated by the

Company under product development collaborations and contracts are not

earned or received when expected or at all, the risk that the Company will

not obtain grant funding for the ALS research program in the amount

expected or at all or that, even if obtained, such funding is delayed, and

the risk that the Company will not be able to maintain its listing on the

NASDAQ Capital Market as well as other risk factors described in “Item 1A.

Risk Factors” in the Company’s most recent quarterly report on Form 10-Q

for the period ended June 30, 2008 to be filed 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.

                      TARGETED GENETICS CORPORATION

              (in thousands, except per share information)





                              Quarter ended          Year-to-date ended

                                June 30,                  June 30,

                        ------------------------  ------------------------

Statement of Operations

Information:                2008         2007         2008         2007

                        -----------  -----------  -----------  -----------

                        (unaudited)  (unaudited)  (unaudited)  (unaudited)

Revenue:

  Collaborative

   agreements           $     2,237  $     3,008  $     4,736  $     4,669

                        -----------  -----------  -----------  -----------

     Total revenue            2,237        3,008        4,736        4,669



Operating expenses:

  Research &

   development                4,156        5,270        8,102        8,966

  General &

   administrative             1,752        1,575        3,641        3,127

  Restructure charges           199          442          401          626

                        -----------  -----------  -----------  -----------

     Total expenses           6,107        7,287       12,144       12,719

                        -----------  -----------  -----------  -----------

Loss from operations         (3,870)      (4,279)      (7,408)      (8,050)



Investment income                73           93          198           28

Interest expense                  -           (1)           -           (1)

                        -----------  -----------  -----------  -----------

Net loss                $    (3,797) $    (4,187) $    (7,210) $    (8,023)

                        ===========  ===========  ===========  ===========



Net loss per common

 share                  $     (0.19) $     (0.31) $     (0.36) $     (0.61)

                        ===========  ===========  ===========  ===========



Shares used in

 computation of net

 loss per common share       19,902       13,408       19,858       13,138

                        ===========  ===========  ===========  ===========







                      TARGETED GENETICS CORPORATION

                              (in thousands)





                                                   June 30,    December 31,

Balance Sheet Information:                           2008          2007

                                                 ------------  ------------

                                                  (unaudited)



Cash and cash equivalents                        $     12,701  $     16,442

Other current assets                                      582         2,854

Property and equipment, net                             1,304         1,052

Other assets                                            8,126         8,126

                                                 ------------  ------------

  Total assets                                   $     22,713  $     28,474

                                                 ============  ============



Current liabilities                              $      5,983  $      4,657

Long-term obligations and other liabilities             7,265         7,577

Shareholders' equity                                    9,465        16,240

                                                 ------------  ------------

  Total liabilities and shareholders' equity     $     22,713  $     28,474

                                                 ============  ============

Investor and Media Contact: Stacie D. Byars WeissComm Partners on behalf of Targeted Genetics Corporation Phone: 206.660.2588