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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-33192
[LOGO OF TARGETED GENETICS]
4,313,184 Shares
TARGETED GENETICS CORPORATION
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Common Stock
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The selling shareholders listed on page 6 may offer for sale up to 4,313,184
shares of Targeted Genetics' common stock from time to time. We will not
receive any proceeds from the sale of these shares.
The selling shareholders may sell the shares in transactions on the Nasdaq
National Market, in privately negotiated transactions or otherwise.
Our common stock is quoted on the Nasdaq National Market under the symbol
"TGEN." On March 24, 2000, the last reported sales price of our common stock
was $13.38 per share.
Investing in this stock involves risks.
See "Risk Factors" beginning on page 2.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
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The date of this prospectus is March 27, 2000.
<PAGE>
RISK FACTORS
If we are unable to secure financing on terms acceptable to us for future
capital needs, we will be unable to fund continuing operations.
Developing and commercializing our potential products will require
substantial additional financial resources. Because we cannot expect internally
generated cash flow to fund development and commercialization of our products,
we will look to outside sources for funding. These sources could involve one or
more of the following types of transactions:
. technology partnerships;
. technology sales;
. technology licenses;
. issuing debt; or
. equity arrangements.
If we cannot obtain additional financing when needed or on acceptable terms,
we will be unable to fund continuing operations. In addition, if we raise
additional funds by issuing equity securities, our shareholders will likely
experience significant dilution of their ownership interest.
We have a history of losses and may never become profitable, which could result
in a decline in the value of our common stock and a loss of your investment.
We have generated small amounts of revenue and incurred significant net
losses since we began business. As of December 31, 1999, we have incurred
losses totaling $103.5 million. We expect to continue to incur substantial
additional losses in the future, due primarily to the following factors:
. all of our products are in a testing phase and have not received
regulatory approval; and
. we will likely spend significant amounts on operating expenses.
We may never generate profits, and if we do become profitable, we may be
unable to sustain or increase profitability on a quarterly or annual basis. As
a result, the trading price of our stock could decline and you could lose all
or part of your investment.
If our clinical trials are unsuccessful or we do not receive regulatory
approval for our products, which are in the early stage of product development,
we may be unable to generate sufficient revenues to maintain our business.
We do not yet have products in the commercial markets. All of our potential
products, including tgAAV-CF, our cystic fibrosis product candidate, and tgDCC-
E1A, our cancer product candidate, are in research and development or in early-
stage clinical trials. We cannot apply for regulatory approval of our potential
products until we have performed additional research and development and
testing. Our clinical trials may not demonstrate the safety and efficacy of our
potential products, and we may encounter unacceptable side effects or other
problems in the clinical trials. Should this occur, we may have to delay or
discontinue development of the potential product that causes the problem. After
a successful clinical trial, we cannot market products in the United States
until we receive regulatory approval. If we are unable to gain regulatory
approval of our products after successful clinical trials and then
commercialize and sell those products, we may be unable to introduce and sell a
quantity of products sufficient to maintain our business or secure additional
financing to fund our operations.
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Delays or unexpected costs in obtaining approval of our products or complying
with governmental regulatory requirements could decrease our ability to
generate revenue and make funding our operations more difficult.
The regulatory process in the gene and cell therapy industry is costly, time-
consuming and subject to unpredictable delays. Accordingly, we cannot predict
with any certainty how long it will take or how much it will cost to obtain
regulatory approvals for clinical trials or for manufacturing or marketing our
potential products. Delays in bringing a potential product to market or
unexpected costs in obtaining regulatory approval could decrease our ability to
generate revenue and make it more difficult to obtain additional financing
necessary to fund our operations. In addition, all manufacturing operations are
subject on an ongoing basis to the current Good Manufacturing Practices
requirement of the Food and Drug Administration. While we currently anticipate
that we will be able to manufacture product that meets this requirement, we may
be unable to attain or maintain compliance with current or future Good
Manufacturing Practices requirements. If we discover previously unknown
problems after we receive regulatory approval of a potential product or fail to
comply with applicable regulatory requirements, we may suffer restrictions on
our ability to market the product, including mandatory withdrawal of the
product from the market. This, or an unexpected increase in the cost of
compliance, could decrease our ability to generate revenue.
Failure to recruit patients could delay or prevent clinical trials of our
potential products, which could cause a delay or inability to introduce
products to market and a resulting decrease in our ability to generate revenue.
Identifying and qualifying patients to participate in testing our potential
products is critical to our near-term success. The timing of our clinical
trials depends on the speed at which we can recruit patients to participate in
testing our products. Delays in recruiting or enrolling patients to test our
products could result in increased costs, delays in advancing our product
development, delays in proving the usefulness of our technology or termination
of the clinical trials altogether. If we are unable to timely introduce
potential products to market after successful clinical trials, our ability to
generate revenue may decrease and we may be unable to secure additional
financing.
We may be unable to adequately protect our proprietary rights, which may limit
our ability to compete effectively.
Our success depends in part on our ability to protect our proprietary rights.
We own or have licenses to patents on a number of genes, processes, practices
and techniques critical to our present and potential products. If we fail to
obtain and maintain patent protection for our technology, our competitors may
market competing products that threaten our market position. The failure of our
licensors to obtain and maintain patent protection for technology they license
to us could similarly harm our business. Patent positions in the field of
biotechnology are highly uncertain and involve complex legal, scientific and
factual questions. Our patent applications may not result in issued patents.
Even if we secure a patent, the patent may not afford adequate protection
against our competitors.
We also rely on unpatented proprietary technology. Because this technology
does not benefit from the protection of patents, we may be unable to
meaningfully protect this proprietary technology from unauthorized use or
misappropriation by a third party.
Intellectual property claims and litigation could subject us to significant
liability for damages and invalidation of our proprietary rights.
As the biotechnology industry expands, the risk increases that other
companies may claim that our processes and potential products infringe on their
patents. Defending these claims would be costly and would likely divert
management's attention and resources away from our operations. If we infringe
on another company's patented processes or technology, we may have to pay
damages or obtain a license in order to continue manufacturing or marketing the
affected product or using the affected process. We may be unable to obtain a
license on acceptable terms.
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Our potential tgAAV-CF product uses our proprietary AAV delivery technology
to deliver a normal copy of a CFTR gene to which we have rights under a
nonexclusive license. The United States Patent and Trademark Office has
declared an interference proceeding to determine the priority of invention of
this gene. While we do not expect to directly participate in the CFTR gene
interference proceedings, we have an interest in the outcome. If the eventual
outcome does not favor our licensor, we would have to secure a license to the
CFTR gene from the prevailing party to continue with development of tgAAV-CF.
The costs of licensing the CFTR gene could be substantial and could include
royalties greater than those we currently pay. If we cannot secure this license
on acceptable terms and on a timely basis, we may be unable to develop or
deliver our potential tgAAV-CF product, which could result in decreased ability
to generate revenue and difficulty in obtaining additional financing to fund
our operations.
If we or our business partners are unable to successfully market and distribute
our products, our business will fail.
We have no experience in sales and marketing. To market any products that may
result from our development programs, we will need to develop marketing and
sales capabilities, either on our own or with others. We intend to enter into
collaborations with corporate partners to utilize the mature marketing and
distribution capabilities of our partners. While we believe that these
collaborative partners will be motivated to market and distribute our potential
products, our current and potential future partners may not commit sufficient
resources to commercializing our technology on a timely basis. Furthermore, our
present or future collaborators may pursue the development or marketing of
competing products. If our business partners do not successfully market and
distribute our products and we are unable to develop sufficient marketing and
distribution capabilities on our own, our business will fail.
The intense competition and rapid technological change in our market may result
in pricing pressures and failure of our products to achieve market acceptance.
We presently face competition from other companies developing gene and cell
therapy technologies and from companies using more traditional approaches to
treating human diseases. Most of our competitors have substantially more
experience and financial and infrastructure resources than we do in the
following areas:
. research and development;
. clinical trials;
. obtaining Food and Drug Administration and other regulatory approvals;
. manufacturing; and
. marketing and distribution.
Consequently, our competitors may be able to commercialize new products more
rapidly than we do, or manufacture and market competitive products more
successfully than we do. This could result in pricing pressures or the failure
of our products to achieve market acceptance.
In addition, gene and cell therapy are new and rapidly evolving fields and
are expected to continue to undergo significant and rapid technological change.
Rapid technological development by our competitors could result in our actual
and proposed technologies, products or processes losing market share or
becoming obsolete.
If we do not attract and retain qualified personnel and scientific
collaborators, we will be unable to successfully and timely develop our
potential products and may be unable to generate sufficient revenue to maintain
our business.
Our future success depends in part on our ability to attract and retain key
employees. We have programs in place to retain personnel, including programs to
create a positive work environment and competitive compensation packages.
Because competition for employees in our field is intense, however, we may be
unable
4
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to retain our existing personnel or attract additional qualified employees. If
we experience turnover or difficulties recruiting new employees, our research
and development could be delayed and we could experience difficulties in
generating sufficient revenue to maintain our business.
Our success also depends on the continued availability of outside scientific
collaborators to perform research and develop processes to advance and augment
our internal research efforts. Competition for collaborators in gene and cell
therapy is intense. If we are unsuccessful in recruiting or maintaining our
relationships with scientific collaborators, we could experience delays in our
research and development or loss of access to important enabling technology.
Our limited manufacturing capability may limit our ability to successfully
introduce our potential products.
We currently do not have the capacity to manufacture large-scale clinical or
commercial quantities of our potential products. To do so, we will need to
expand our current facilities and staff or supplement them through the use of
contract providers. We may be unable to obtain or develop the necessary
manufacturing capabilities. If we cannot, we will be unable to introduce
sufficient product to sustain our business.
Our use of hazardous materials to develop our products exposes us to liability
risks and the risk of regulatory limitation of our use of these materials,
either of which could reduce our ability to generate revenue and make it more
difficult to fund our operations.
Our research and development activities involve the controlled use of
hazardous materials. Although we believe that our safety procedures for
handling and disposing of these materials comply with applicable laws and
regulations, we cannot eliminate the risk of accidental contamination or injury
from hazardous materials. If a hazardous material accident occurred, we would
be liable for any resulting damages. This liability could exceed our financial
resources. Additionally, hazardous materials are subject to regulatory
oversight. Accidents unrelated to our operations could cause federal, state or
local regulatory agencies to restrict our access to hazardous materials needed
in our research and development efforts. If our access to these materials is
limited, we could experience delays in our research and development programs.
Paying damages or experiencing delays caused by restricted access could reduce
our ability to generate revenues and make it more difficult to fund our
operations.
The costs of product liability claims and product recalls could exceed the
amount of our insurance, which could significantly harm our results of
operations or our reputation and result in a decline in the value of our stock.
Our business activities expose us to the risk of liability claims or product
recalls and any adverse publicity that might result from a liability claim
against us. We currently have only limited amounts of product liability
insurance, and the amounts of claims against us may exceed our insurance
coverage. Product liability insurance is expensive and may not continue to be
available on acceptable terms. A product liability claim not covered by
insurance or in excess of our insurance or a product recall could significantly
harm our financial results or our reputation. Either of these could result in a
decrease in our stock price, and you could lose all or part of your investment.
Market fluctuations or volatility could cause the market price of our common
stock to decline.
In recent years the stock market in general and the market for biotechnology-
related companies in particular have experienced extreme price and volume
fluctuations, often unrelated to the operating performances of the affected
companies. Our common stock has experienced, and is likely to continue to
experience, these fluctuations in price, regardless of our performance. These
fluctuations could cause the market price of our common stock to decline.
5
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SELLING SHAREHOLDERS
The following table provides information regarding the selling shareholders
and the number of shares of common stock they are offering. The percentage
ownership data is based on 36,344,346 shares of our common stock outstanding as
of March 10, 2000. Under the rules of the Securities and Exchange Commission,
beneficial ownership includes shares over which the indicated beneficial owner
exercises voting and/or investment power. Shares of common stock subject to
warrants that are currently exercisable or will become exercisable within
60 days are deemed outstanding for computing the percentage ownership of the
person holding the warrants, but are not deemed outstanding for computing the
percentage ownership of any other person. The information regarding shares
beneficially owned after the offering assumes the sale of all shares offered by
each of the selling shareholders.
<TABLE>
<CAPTION>
Shares
Number Beneficially
Number of Shares of Owned After
Beneficially Shares Offering
Owned Before Being --------------------
Name and Address Offering Offered Number Percent
---------------- ---------------- ------- --------- -------
<S> <C> <C> <C> <C>
Entities affiliates with
Deerfield Management Company... 400,000(1) 200,000 200,000 *
450 Lexington Avenue
New York, NY 10017
Franklin Biotechnology Discovery
Funds.......................... 928,571 928,571 -- --
777 Mariners Island Blvd.
San Mateo, CA 94404
International Biotechnology
Trust plc...................... 4,664,286(2) 214,286 4,450,000(2) 11.9%
Five Arrows House
St. Swithin's Lane
London EC4N 8NR
England
Entities affiliated with Lone
Pine Capital LLC............... 285,714(3) 285,714 -- --
Two Greenwich Plaza
Greenwich, CT 06830
INVESCO Health Sciences Fund.... 759,300 244,000 515,300 1.4
7800 East Union Avenue
Suite 1100
Denver, CO 80237
INVESCO VIF Health Sciences
Fund........................... 19,514 6,714 12,800 *
7800 East Union Avenue
Suite 1100
Denver, CO 80237
INVESCO Sector Funds, Inc.--
INVESCO Endeavor Fund.......... 110,000 110,000 -- --
7800 East Union Avenue
Suite 1100
Denver, CO 80237
INVESCO Global Health Sciences
Fund........................... 157,800 120,000 37,800 *
7800 East Union Avenue
Suite 1100
Denver, CO 80237
AIM Global Health Sciences of
AIM Global Fund Inc. .......... 88,000 16,600 71,400 *
7800 East Union Avenue
Suite 1100
Denver, CO 80237
</TABLE>
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<TABLE>
<CAPTION>
Shares
Beneficially
Number of Shares Number of Owned After
Beneficially Shares Offering
Owned Before Being ---------------
Name and Address Offering Offered Number Percent
---------------- ---------------- --------- ------- -------
<S> <C> <C> <C> <C>
AIM Fund Management Inc. on behalf
of AIM Global Health Sciences
Fund.............................. 182,500 38,400 144,100 *
7800 East Union Avenue
Suite 1100
Denver, CO 80237
Elan International Services,
Ltd. ............................. 2,148,899 2,148,899 -- --
102 St. James Court
Flatts
Smiths SL 04
Bermuda
</TABLE>
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* Less than 1%.
(1) Represents 105,200 shares held by Deerfield International Limited and
294,800 shares held by Deerfield Partners, L.P. Deerfield Management
Company is the general partner of Deerfield International Limited and
shares common control with Deerfield Capital L.P., the general partner of
Deerfield Partners, L.P., and thus is deemed to beneficially own the
shares held by Deerfield International Limited and Deerfield
Partners, L.P.
(2) Includes warrants to purchase 1,000,000 shares of common stock, all of
which are currently exercisable.
(3) Represents 10,286 shares held by Lone Spruce, L.P., 18,857 shares held by
Lone Sequoia, L.P., 22,571 shares held by Lone Balsam, L.P. and 234,000
shares held by Lone Cypress, Ltd. Lone Pine Capital LLC is the investment
manager of these entities and thus is deemed to beneficially own the
shares held by these entities.
We have established a joint venture with Elan International Services, Ltd.
named Emerald Gene Systems, Ltd., which is owned 80.1% by Targeted Genetics and
19.9% by Elan. As part of our agreements related to Emerald, Elan has purchased
$5 million of our common stock and $12 million of our preferred stock, has
agreed to purchase an additional $5 million of our common stock and has
provided us with a $12 million line of credit. The preferred stock can be
converted, at Elan's option, into our common stock or exchanged for an
additional 30.1% ownership in Emerald. Except as a shareholder, none of the
other selling shareholders has had any material relationship with Targeted
Genetics or any of our affiliates within the past three years. However, Jeremy
Curnock Cook, a director and the chairman of our board of directors, and James
D. Grant, a director, are both directors of International Biotechnology Trust
plc.
The selling shareholders have represented to us that they purchased their
shares for their own account, for investment only and not with a view toward
publicly selling or distributing them, except in sales either registered under
the Securities Act of 1933 or exempt from registration. In recognition of the
fact that the selling shareholders, even though purchasing their shares for
investment, may wish to be legally permitted to sell their shares when they
deem appropriate, we agreed with the selling shareholders to file a
registration statement to register the shares for resale and to prepare and
file all amendments and supplements necessary to keep the registration
statement effective until the earliest of
. March 13, 2002;
. the date on which the selling shareholders may resell all the shares
covered by the registration statement without registration and without
limitations under Rule 144 under the Securities Act; and
. the date on which the selling shareholders have sold all the shares
covered by the registration statement.
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PLAN OF DISTRIBUTION
The selling shareholders or their transferees or other successors-in-interest
may sell the shares of common stock offered by this prospectus from time to
time, in one or more transactions. The selling shareholders may sell the shares
at fixed prices that may change, at market prices at the time of sale or at
negotiated prices. The selling shareholders may sell the shares
. in the over-the-counter market through the Nasdaq National Market or any
other national securities exchange;
. in privately negotiated transactions;
. otherwise; or
. through a combination of these.
The selling shareholders may sell the shares to or through broker-dealers,
who may receive compensation in the form of discounts, concessions or
commissions from the selling shareholders or the purchasers. Any broker-dealer
may act as a broker-dealer on behalf of a selling shareholder in connection
with the offering of the shares. We will not receive any proceeds from the sale
of the shares by the selling shareholders.
The selling shareholders may sell any shares covered by this prospectus that
qualify for sale under Rule 144 of the Securities Act in transactions complying
with Rule 144, rather than through this prospectus.
If required, we will distribute a supplement to this prospectus to describe
material changes in the terms of the offering. We have the right to suspend the
use of this prospectus for up to 30 days if we notify the selling shareholders
that our board of directors has reasonably determined that there is a
significant business purpose for the suspension.
Any broker-dealers who assist in the sale of the shares covered by this
prospectus may be considered "underwriters" within the meaning of Section 2(11)
of the Securities Act. Any commissions they receive or profits they earn on the
resale of the shares may be underwriting discounts and commissions under the
Securities Act. Subject to limited exceptions, we have agreed to bear all
expenses in connection with the registration and sale of the shares being
offered by the selling shareholders. We have also agreed to indemnify the
selling shareholders against liabilities they incur in connection with an
actual or alleged untrue statement or omission of a material fact in the
registration statement, including liabilities under the Securities Act.
The selling shareholders may be unable to sell any or all of the shares
covered by this prospectus.
VALIDITY OF COMMON STOCK
Perkins Coie LLP, Seattle, Washington has provided the selling shareholders
with an opinion that the shares of common stock offered by this prospectus are
duly authorized, validly issued, fully paid and nonassessable.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements included in our annual report on Form 10-K for the year ended
December 31, 1999, as described in their report, which is incorporated by
reference into this prospectus and elsewhere into the registration statement of
which this prospectus is a part. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their authority
as experts in accounting and auditing.
Ernst & Young Chartered Accountants, independent auditors, have audited the
financial statements of Emerald Gene Systems, Ltd. which are included in our
annual report on Form 10-K for the year ended December 31, 1999, as described
in their report, which is incorporated by reference into this prospectus and
elsewhere in the registration statement on which this prospectus is a part. The
financial statements of Emerald Gene Systems, Ltd. are incorporated by
reference in reliance on Ernst & Young Chartered Accountants' report, given on
their authority as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's website at http://www.sec.gov. The SEC's website contains
reports, proxy statements and other information regarding issuers, such as
Targeted Genetics, that file electronically with the SEC. You may also read and
copy any document we file with the SEC at its Public Reference Room at 450
Fifth Street, N.W., Washington, D.C. 20549. You may also obtain copies of the
documents at prescribed rates by writing to the Public Reference Section of the
SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of its Public Reference
Room.
The SEC allows us to "incorporate by reference" into this prospectus the
information we have filed with the SEC. The information incorporated by
reference is an important part of this prospectus and is considered to be part
of this prospectus. The information that we file subsequently with the SEC will
automatically update this prospectus. We incorporate by reference the documents
listed below and any filings we make with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, after the initial filing of
the registration statement that contains this prospectus and before the time
that all the securities offered by this prospectus are sold:
. Our annual report on Form 10-K for the fiscal year ended December 31,
1999; and
. The description of our capital stock contained in our registration
statement on Form 8-A, effective as of April 26, 1994, including any
amendment or report we have filed to update that description.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Targeted Genetics Corporation
Attention: Investor Relations
1100 Olive Way, Suite 100
Seattle, Washington 98101
(206) 623-7612
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this prospectus and in the documents
that are incorporated by reference into this prospectus. These forward-looking
statements, which include statements concerning our possible or assumed future
business success or financial results, are subject to risks and uncertainties.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of events that we are unable to predict
accurately or over which we have no control, including those described in "Risk
Factors" and elsewhere in this prospectus.
We undertake no obligation to publicly update any forward-looking statements
for any reason, even if new information becomes available or unexpected events
occur.
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You should rely only on the information contained in this prospectus.
Neither we nor any of the selling shareholders has authorized anyone to give
you different information or representations. This prospectus is an offer to
sell, and a solicitation of offers to buy, the shares offered by this
prospectus only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is correct only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or any
sale of the common stock offered by this prospectus.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Risk Factors................................................................ 2
Selling Shareholders........................................................ 6
Plan of Distribution........................................................ 8
Validity of Common Stock.................................................... 8
Experts..................................................................... 8
Where You Can Find More Information......................................... 9
Special Note Regarding Forward-Looking Statements........................... 9
</TABLE>
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4,313,184 Shares
[LOGO OF TARGETED GENETICS]
TARGETED GENETICS CORPORATION
Common Stock
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PROSPECTUS
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The date of this prospectus is March 27, 2000.
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