Targeted Genetics Corporation Terminates Bothell Facility Lease Agreement

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Targeted Genetics Corporation today announced the termination of the lease for its facility in Bothell, Washington. The facility was originally leased in 2000 to establish a clinical and commercial manufacturing facility, but the Company never occupied or commenced construction of the facility. The lease covered 76,000 square feet of space and, under its terms, would have expired in September 2015.

Under the terms of the lease termination agreement, the Company will be released from up to approximately $12 million in estimated payment obligations and other liabilities under the lease in exchange for a termination fee of $500,000, to be paid in installments beginning at the execution of the agreement and continuing through July 2010. The termination agreement includes obligations to accelerate payments, in whole or in part, upon the occurrence of certain events that generate cash for the Company.

"This settlement reduces our monthly expenses and, more importantly, enables us to record a non-cash entry that reverses approximately $7 million of restructuring charge liabilities from our balance sheet," said B.G. Susan Robinson, president and chief executive officer of the Company. "This significantly increases our net worth and removes a considerable impediment to charting our path forward."

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 negotiations to reduce or eliminate its other facility costs.

Ms. Robinson added, "The settlement of our Bothell lease obligations is another important step in our restructuring efforts, adding to those accomplished over the last six months that have significantly reduced our estimated quarterly cash expenditures going forward. With this said, 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 revenue 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 settlement of lease obligations for its Bothell 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 the Bothell lease termination agreement, which would result in the Company not being released from its obligations under the Bothell lease, and the risk that the Company does not successfully settle or otherwise reduce its lease obligations for its other facilities, 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. Contact:

Investor and Media Contact: Stacie D. Byars 206.660.2588

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