8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) September 1, 2005

Targeted Genetics Corporation

(Exact name of registrant as specified in its charter)

Washington	0-23930	91-1549568
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
1100 Olive Way, Suite 100, Seattle, Washington		98101
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number, including area code   (206) 623-7612

Not Applicable

(Former name or former address if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

     Effective September 1, 2005, Targeted Genetics entered into an amendment to a Funding Agreement with Biogen Idec, Inc., together with two Amended and Restated Promissory Notes, to restructure the repayment of outstanding debt in principal amounts of $10.0 million and $650,000, respectively. Under the amended agreements, Targeted Genetics made an initial payment on September 1, 2005 to Biogen Idec of $2.5 million, and agreed to make additional payments of approximately $3.1 million in August 2007 and $2.5 million in each of August 2008 and August 2009. In addition, Biogen Idec will receive one-third of certain up-front milestone payments received by the Targeted Genetics as prepayments of the remaining outstanding debt to be applied first to the payment of any accrued and unpaid interest on the principal being repaid and second to the payment of outstanding principal in reverse order of maturity (starting with the outstanding principal due on the latest payment date set forth above). In addition, Targeted Genetics granted Biogen Idec a right of co-sale in certain equity financings approved by Targeted Genetics’ board of directors before November 30, 2005 and Biogen Idec agreed not to sell any of its shares of Targeted Genetics common stock until the earlier of November 30, 2005 and the completion of such a financing. Biogen Idec also agreed to enter into an additional lock-up agreement if Targeted Genetics completes an equity financing before November 30, 2005. A press release announcing the debt restructure is attached as an exhibit to this Report.

     The Amendment No. 2 to Funding Agreement and the Amended and Restated Promissory Notes are attached as exhibits 10.1, 10.2 and 10.3 and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits:

10.1	Amendment No. 2 to Funding Agreement, dated September 1, 2005, between Targeted Genetics and Biogen Idec
10.2	Amended and Restated Promissory Note of Targeted Genetics dated September 1, 2005 (issued to Biogen Idec in principal amount of $10,000,000)
10.3	Amended and Restated Promissory Note of Targeted Genetics dated September 1, 2005 (issued to Biogen Idec in principal amount of $650,000)
99.1	Press Release of Targeted Genetics, dated September 1, 2005

2

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Targeted Genetics Corporation
	By:	/s/ H. Stewart Parker
		H. Stewart Parker
Dated: September 1, 2005		Chief Executive Officer and President

3

INDEX TO EXHIBITS

10.1	Amendment No. 2 to Funding Agreement, dated September 1, 2005, between Targeted Genetics and Biogen Idec
10.2	Amended and Restated Promissory Note of Targeted Genetics dated September 1, 2005 (issued to Biogen Idec in principal amount of $10,000,000)
10.3	Amended and Restated Promissory Note of Targeted Genetics dated September 1, 2005 (issued to Biogen Idec in principal amount of $650,000)
99.1	Press Release of Targeted Genetics, dated September 1, 2005

4

EX-10.1

                                                                    Exhibit 10.1


                      AMENDMENT NO. 2 TO FUNDING AGREEMENT

      This Amendment No. 2 (this "Amendment") to the Funding Agreement dated
August 8, 2000, as amended July 14, 2003 (together, the "Funding Agreement"),
between Targeted Genetics Corporation, a Washington corporation ("Targeted"),
and Biogen Idec MA Inc., a Massachusetts corporation ("Biogen"), is made as of
September 1, 2005.

                                    AGREEMENT

      1. Definitions. Capitalized terms used but not defined in this Amendment
shall have the meanings given to them in the Funding Agreement.

      2. Amendments. The Funding Agreement is hereby amended as follows:

            (a) The complete text of the definition of "Maturity Date" in
"Article One, Definitions" is hereby deleted.

            (b) The following shall be added as new definitions in alphabetical
order to "Article One, Definitions":

            "Final Maturity Date" means August 1, 2009, the date on which the
            final installment of principal and final payment of interest is due
            and payable under the Note. If the Final Maturity Date falls on a
            day that is not a business day, then the Maturity Date shall be
            extended to the next succeeding business day."

            "Milestone Payments" mean any and all payments and fees actually
            received in cash, cash equivalents, marketable securities or other
            liquid assets by Targeted or any of its subsidiaries from any
            licensee or sublicensee or from any person with which it has a
            collaborative, funding or marketing relationship for developing
            and/or commercializing any product, in each case, regardless of how
            such payment or fee may be characterized, other than: (i) revenue
            received by Targeted or any of its subsidiaries from a person with
            which it has a collaborative, funding or marketing relationship to
            the extent such payment is reimbursement of development costs
            actually incurred and paid by Targeted or such subsidiary in the
            course of such collaboration, funding or marketing agreement; (ii)
            reimbursements received by Targeted or any of its subsidiaries for
            out-of-pocket costs or expenses actually incurred and paid by them;
            (iii) amounts received by Targeted or any of its subsidiaries for
            the manufacture or supply of products or materials by them; (iv)
            reimbursements received by Targeted or any of its subsidiaries for
            expenses actually incurred and paid by them in the commercial sale
            of a product; and (v) the market value of equity or debt of Targeted
            or any of its subsidiaries (i.e., excluding any premium paid on
            equity or discount received on debt) purchased by such
            collaborative, funding or marketing partner."


                                       1

            (c) The last sentence of "Article Two, The Loan, Section 2.1 Terms
of the Loan, Subsection 2.1.2 Promissory Note" is hereby deleted and replaced in
its entirety to read as follows:

            "The principal amount of the Note shall be due and payable in
            installments in the amounts and on the dates set forth in Section
            2.1.5 of this Agreement.


            (d) The complete text of "Article Two, The Loan, Section 2.1 Terms
of the Loan, Subsection 2.1.5 Repayment" is hereby deleted and replaced in its
entirety to read as follows:

            "Accrued and unpaid interest on the Loan shall be paid annually on
            each August 31 (provided, that if such date would fall on a day that
            is not a business day, then the interest payment date shall be
            extended to the next succeeding business day) and on the Final
            Maturity Date. All outstanding principal of the Loan shall be due
            and payable in cash according to the following schedule:



               Payment Date               Principal Amount
               ------------               ----------------

                                       
              September 1, 2005              $2,500,000
              August 1, 2007                 $2,500,000
              August 1, 2008                 $2,500,000
              August 1, 2009                 $2,500,000



            In addition, Targeted agrees to pay Biogen, no later than the 10th
            business day following receipt thereof, an amount equal to one-third
            of any Milestone Payments received by Targeted or any of its
            subsidiaries (each such payment, a "Mandatory Prepayment"). Any
            Mandatory Pre-Payment shall be applied (i) first to the payment of
            any accrued and unpaid interest on the principal being repaid, and
            (ii) second to the payment of outstanding principal in reverse order
            of maturity (i.e. starting with the outstanding principal due on the
            latest payment date set forth in the above table).

            (e) The complete text of "Article Two, The Loan, Section 2.1 Terms
of the Loan, Subsection 2.1.6 Prepayment" is hereby deleted and replaced in its
entirety to read as follows:

            In addition to the Mandatory Prepayments, Targeted may prepay all or
            any portion of the Loan at any time without premium or penalty (any
            such payment, a "Voluntary Prepayment"). Any Voluntary Pre-Payment
            shall be applied (i) first to the payment of any accrued and unpaid
            interest on the


                                       2

            principal being repaid, and (ii) second to the payment of
            outstanding principal in reverse order of maturity (i.e. starting
            with the outstanding principal due on the latest payment date set
            forth in the table in Section 2.1.5).

      3. Additional Agreements. The parties further agree as follows:

            (a) Co-Sale Right. If before November 30, 2005, the Board of
Directors of Targeted resolves to offer for sale shares of its common stock
("Common Stock") in a public or private offering in which net proceeds to
Targeted is expected to equal or exceed $10,000,000 (after consideration of any
reduction resulting from any co-sale by Biogen) (a "Qualified Offering"):

                  (i) Targeted shall deliver notice of such proposed offering to
Biogen at least 5 business days before Targeted commences directly, or
indirectly through an underwriter, placement agent or broker-dealer, to solicit
investors for such proposed offering.

                  (ii) At the request of Biogen given by Biogen's written notice
to Targeted within 2 business days after receipt of notice from Targeted,
Targeted shall permit Biogen to participate in such offering by selling shares
of Common Stock held by Biogen in an amount of not less than 1,000,000 shares
(which minimum amount shall be subject to reduction if the managing underwriter
or managing placement agent of the offering in its reasonable discretion
determines that inclusion of all 1,000,000 shares held by Biogen would create a
substantial risk that Targeted will not successfully raise net proceeds of at
least $10,000,000 in the offering) and up to a maximum of 2,000,000 shares
(which maximum amount may be subject to increase, with the consent of each of
Targeted and Biogen in their respective sole discretion, if the managing
underwriter or managing placement agent of the offering determines that
inclusion of a greater amount would be compatible with the ability of Targeted
to successfully raise net proceeds of $10,000,000 or more in the offering). In
the event the managing underwriter or managing placement agent recommends a
reduction in the number of shares of Common Stock held by Biogen included in the
offering, Biogen shall be permitted to include in the offering such number of
shares of Common Stock held by it as would not, in the opinion of such
underwriter, agent or initial purchaser create a substantial risk that Targeted
will not successfully complete the offering and thereby raise net proceeds of at
least $10,000,000. Targeted agrees to use its best efforts to structure the
offering so that Biogen is able to participate in it by selling shares of Common
Stock held by Biogen in an amount of not less than 1,000,000 shares.

                  (iii) Except as set forth below, the participation of Biogen
in the offering as contemplated by Section 3.1(a)(ii) shall be on the specified
terms and conditions of such offering as agreed upon by and among Targeted and
the underwriters or placement agents in such offering and Biogen shall (1)
deliver or arrange for delivery of such usual and customary documents and
instruments related thereto and (2) provide any information required for
inclusion in the offering documents regarding Biogen, in each case as may be
reasonably requested by such underwriters or placement agents:

                        (1) Targeted shall pay all expenses and fees in
connection with the offering whether or not the offering is completed,
including, without limitation, all


                                       3

registration statement or other filing fees, the fees and expenses of counsel
and accountants to Targeted, all out-of-pocket expenses of the underwriters or
placement agents, all printing costs, the cost of any filings with the National
Association of Securities Dealers or any stock exchange or securities quotation
system, the cost of listing any securities on any stock exchange or authorizing
any securities for trading on any quotation system and all reasonable
out-of-pocket expenses incurred by Biogen in connection with the offering
(including the reasonable fees and expenses of counsel to Biogen in an amount
not to exceed $40,000), but excluding the underwriters' discounts and
commissions, brokerage fees or placement agent fees payable in respect of the
shares of Common Stock sold by Biogen in the offering, which discounts,
commissions, brokerage fees or placement agent fees shall be the responsibility
of Biogen.

                        (2) Targeted shall not include any information in the
documents for the offering regarding Biogen without the prior written consent of
Biogen, which shall not be unreasonably withheld or delayed.

                        (3) Biogen shall not be required to make any
representations or warranties to any person in connection with the offering
regarding Targeted.

                        (4) Biogen shall not be required to indemnify (or
provide contribution to) any person in connection with the offering, except to
indemnify Targeted, the underwriters, placement agents or initial purchasers for
any untrue (or alleged) statement of a material fact in the information
regarding Biogen that Biogen has specifically provided in writing to be included
in the Registration Statement, prospectus or offering memorandum for the
offering and for any breaches of its representations, warranties or agreements.

                        (5) Except as set forth in Section 3(b) hereof, Biogen
shall not be required to enter into any lock-up agreement or other restriction
with respect to its transactions in or related to securities of Targeted.

         (b) Lock-up

                  (i) During the period from the date hereof through the earlier
of (1) November 30, 2005 and (2) the consummation of a Qualified Offering (the
"Initial Lock-up Period"), Biogen hereby agrees that, other than pursuant to
Section 3(a), it will not, directly or indirectly, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant for the sale of, or
otherwise dispose of or transfer any shares of Common Stock or any securities
convertible into or exchangeable or exercisable for Common Stock, whether now
owned or hereafter acquired by Biogen or with respect to which Biogen has or
hereafter acquires the power of disposition (collectively, the "Lock-Up
Securities") or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Lock-Up Securities, whether any such
swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise. In addition, in the event Targeted consummates
a public or private offering of Common Stock (including without limitation a
Qualified Offering) prior to November 30, 2005, Biogen further agrees, at the
request of the managing underwriter or managing placement agent of such
offering, to enter into a customary form of lock-up agreement ("Biogen's Lock-up
Agreement") containing terms


                                       4

substantially similar to the terms set forth above and for a lock-up period of
not more than 90 days after the consummation of such offering (the "Offering
Lock-up Period"); provided, that in the event Biogen sells at least 1,000,000
shares of Common Stock held by it in such offering, the Offering Lock-up Period
shall be increased by an additional 45 days for each 500,000 shares of Common
Stock Biogen sells above 1,000,000. The lock-up provided for in Biogen's Lock-up
Agreement shall terminate immediately if the Qualified Offering is abandoned by
Targeted at any time.

                  (ii) Targeted agrees to use its best efforts to cause each
director, officer and holder of 10% or more of its Common Stock to enter into a
customary form of lock-up agreement with the managing underwriter or managing
placement agent of the Qualified Offering containing terms substantially similar
to the terms set forth in Section 3(b)(i) above. Biogen's Lock-up Agreement
shall provide that if the managing underwriters or placement agents for the
offering consent to or otherwise permit a transaction by an officer, director or
stockholder with respect to all or a portion of their shares of Common Stock,
which action would not otherwise be permitted by the lock-up agreement of such
officer, director or stockholder, Biogen shall be permitted to take a similar
action with respect to the same proportion of its shares of Common Stock.

         (c) Waiver of Registration Rights. Biogen hereby waives its
registration rights set forth in Sections 3.6.2 and 3.6.3 of the Funding
Agreement with respect to any offering by Targeted consummated before November
30, 2005, including without limitation any registration effected pursuant to any
registration rights granted to purchasers in the event such offering is a
private placement.

         (d) Indemnification and Contribution.

                  (i) Targeted agrees to indemnify and hold harmless Biogen,
each person, if any, who controls Biogen within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, each officer, director,
agent and employee of Biogen and each officer, director, agent and employee of
each such controlling person, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses incurred in connection with defending or investigating any such action
or claim) arising out of, relating to, or based upon any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement, preliminary or final prospectus, preliminary or final offering
memorandum, offering circular or other offering document used in connection with
the Qualified Offering, or any amendment or supplement thereto, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, other
than any statement or omission based on information concerning Biogen supplied
by Biogen in writing to Targeted expressly for inclusion therein.

                  (ii) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 3(d)(i) hereof, such person (the
"indemnified party") shall promptly notify Targeted in writing and Targeted,
upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and any
others Targeted may designate in such proceeding and shall pay the reasonable
fees and disbursements of such


                                       5

counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i)
Targeted and the indemnified party shall have mutually agreed to the retention
of such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the Targeted and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. Targeted shall not, in
respect of the legal expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all such indemnified parties and agrees that all such fees and
expenses shall be reimbursed promptly as they are incurred. Any counsel to the
indemnified parties shall be designated in writing by Biogen. Targeted shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, Targeted agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment. Targeted
shall not, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding and does not impose any monetary
or other obligation or restriction on the indemnified party.

                  (iii) To the extent that the indemnification provided for in
Section 3(d)(i) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
Targeted under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of Targeted on the
one hand and the indemnified party or parties on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the indemnified parties on the one hand and the Company on the
other hand shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by Biogen or
by Targeted, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this Section 3(d)(iii) were determined by pro rata allocation or by any other
method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding this
Section 3(d)(iii), no indemnifying party shall be required to contribute any
amount in excess of the amount by which the net proceeds from the sale of
securities by it in the offering exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation


                                       6

(within the meaning of Section 11(f) of the Securities Act of 1933, as amended)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

                  (iv) The remedies provided for in this Section 3(d) are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity, hereunder, under the
Funding Agreement or otherwise. The indemnity and contribution provisions
contained in this Section 3(d) shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of Biogen or any person controlling Biogen,
and (iii) the sale of any Common Stock by Biogen.

            (e) Notification if Targeted Abandons Qualified Offering. If Target
determines to abandon a Qualified Offering at any time after providing the
notice to Biogen pursuant to Section 3(a)(i) hereof, Targeted shall promptly
notify Biogen.

      4. Effect of Amendment. Except as provided in this Amendment, all of the
terms and conditions of the Funding Agreement shall remain in full force and
effect.

      5. Counterparts. This Amendment may be executed in counterparts, each of
which when so executed shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument.

                            [signature pages follows]


                                       7

      IN WITNESS WHEREOF, Targeted and Biogen have caused this Amendment to be
duly executed as of the date first above written.


TARGETED GENETICS CORPORATION

By:    /S/ H. STEWART PARKER
       ---------------------------------
Name:  H. Stewart Parker
       ---------------------------------
Title: President and CEO
       ---------------------------------


BIOGEN IDEC MA INC.

By:    /S/ MICHAEL F. PHELPS
       ---------------------------------
Name:  Michael F. Phelps
       ---------------------------------
Title: Vice President & Treasurer
       ---------------------------------


                                       8

EX-10.2

                                                                    Exhibit 10.2

                      AMENDED AND RESTATED PROMISSORY NOTE

$10,000,000                                                   September 1, 2005

         This Amended and Restated Promissory Note (this "Note") amends and
replaces in its entirety that certain Promissory Note dated September 18, 2001.

         For value received, the undersigned, TARGETED GENETICS CORPORATION
("Targeted"), promises to pay to the order of BIOGEN IDEC MA, INC. ("Biogen"),
at 14 Cambridge Center, Cambridge, Massachusetts 02142, or such other place or
places as the holder of this Note may designate in writing, the principal sum of
Ten Million Dollars ($10,000,000), in accordance with the terms and conditions
of the Funding Agreement, dated as of August 8, 2000, as amended as of July 14,
2003 and as further amended as of September 1, 2005, by and between Targeted and
Biogen (together with all supplements, exhibits, amendments and modifications to
such agreement, the "Funding Agreement"). Targeted also promises to pay interest
on the unpaid principal balance of this Note in like money in accordance with
the terms and conditions of, and at the rate or rates provided in, the Funding
Agreement. All accrued and unpaid interest is payable annually on each August 31
(provided, that if such date would fall on an day that is not a business day,
then the interest payment date shall be extended to the next succeeding business
day) and on the Final Maturity Date. All principal is due and payable in full on
the Final Maturity Date or such earlier date as provided in the Funding
Agreement.

         Targeted waives presentment for payment, demand, notice of nonpayment,
notice of protest and protest of this Note, and all other notices in connection
with the delivery, acceptance, performance, default, dishonor or enforcement of
the payment of this Note, except such notices as are specifically required by
this Note or by the Funding Agreement, and agrees that its liability shall be
unconditional without regard to the liability of any other party and shall not
be in any manner affected by any indulgence, extension of time, renewal, waiver
or modification granted or consented to by Biogen. Targeted consents to any and
all extensions of time, renewals or waivers that may be granted by Biogen with
respect to payment or other provisions of this Note and the Funding Agreement.

         This Note is the Note referred to in the Funding Agreement and as such
is entitled to all of the benefits and obligations specified in the Funding
Agreement. Reference is made to the Funding Agreement for provisions for the
repayment of this Note and the acceleration of the maturity of this Note.

         All capitalized terms used and not otherwise defined in this Note shall
have the meanings given to such terms in the Funding Agreement.

                                           TARGETED GENETICS CORPORATION

                                           By: /s/ H. Stewart Parker
                                              ------------------------
                                           Name: H. Stewart Parker
                                                ----------------------
                                           Its : President and CEO
                                                ----------------------


                                        1

EX-10.3

                                                                    Exhibit 10.3

                      AMENDED AND RESTATED PROMISSORY NOTE

$650,000                                                      September 1, 2005
Maturity Date:  August 1, 2007


         This Amended and Restated Promissory Note (this "Note") amends and
replaces in its entirety that certain Promissory Note dated September 15, 2000
(the "Original Note").

         For value received, the undersigned, TARGETED GENETICS CORPORATION
("Targeted"), promises to pay to the order of BIOGEN IDEC MA, INC. ("Biogen"),
at 14 Cambridge Center, Cambridge, Massachusetts 02142, or such other place or
places as the holder of this Note may designate in writing, the principal sum of
Six Hundred Fifty Thousand Dollars ($650,000). This Note shall not bear
interest. All principal is due and payable in full on the Maturity Date set
forth above. Targeted may prepay all or any portion of this Note at any time,
without premium or penalty.

         Targeted waives presentment for payment, demand, notice of nonpayment,
notice of protest and protest of this Note, and all other notices in connection
with the delivery, acceptance, performance, default, dishonor or enforcement of
the payment of this Note, except such notices as are specifically required by
this Note, and agrees that its liability shall be unconditional without regard
to the liability of any other party and shall not be in any manner affected by
any indulgence, extension of time, renewal, waiver or modification granted or
consented to by Biogen. Targeted consents to any and all extensions of time,
renewals or waivers that may be granted by Biogen with respect to payment or
other provisions of this Note.

         In the event that Targeted fails to pay the principal due and payable
on this Note within 10 business days of the Maturity Date, and after written
notice to Targeted from Biogen of such failure to pay, Biogen may, at its
option, charge interest on the principal balance of this Note at a rate of 13%
per annum, from the Maturity Date until this Note, and all interest accrued
pursuant to this provision, is repaid in full. All computations of interest
shall be based on a 365-day year for the actual number of days elapsed. The
total liability of Targeted payment of interest pursuant to this provision shall
not exceed the maximum amount of interest permitted by applicable law to be
charged, collected or received from Targeted. If any payments by Targeted
include interest in excess of that maximum amount, Biogen shall apply the excess
interest payment to reduce the accrued and unpaid interest on and principal
balance of the Loan, and any excess interest payment remaining after all
outstanding principal and accrued interest has been paid shall be returned to
Targeted.

         Upon receipt of a written notice of loss, theft, destruction, or
mutilation of this Note, and upon surrendering such Note for cancellation if
mutilated, Targeted shall


                                        1

execute and deliver to Biogen a new Note of like tenor in lieu of such lost,
stolen, destroyed or mutilated Note, provided that Biogen agrees to indemnify
and hold Targeted harmless from all claims, losses, and damages (including
reasonable attorneys' fees) incurred by Targeted as a result of loss, theft or
destruction of this Note.

         This Note represents the conversion of the aggregate amounts payable to
Biogen by Genovo, Inc., a Delaware corporation acquired by Targeted on the date
of the Original Note ("Genovo"), under (a) two promissory notes, dated February
9, 1998 and June 8, 1998, respectively, with an aggregate principal amount of
$500,000, and (b) the remaining outstanding principal balance on the Hajoca
building loan (collectively, "the Prior Notes") into the obligation of Targeted,
pursuant to Section 5.17 of the Agreement and Plan of Merger dated as of August
8, 2000, among Targeted, TGC Acquisition Corporation, a wholly owned subsidiary
of Targeted, Genovo and Biogen. The Prior Notes have been cancelled by Biogen
concurrently with Targeted's execution of the Original Note.

                                           TARGETED GENETICS CORPORATION

                                           By: /s/ H. Stewart Parker
                                              ------------------------
                                           Name: H. Stewart Parker
                                                ----------------------
                                           Its : President and CEO
                                                 ---------------------


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EX-99.1

                                                                    Exhibit 99.1

                           (TARGETED GENETICS LOGO)(R)

INVESTOR AND MEDIA CONTACT:

Stacie D. Byars
Director, Communications
Targeted Genetics Corporation
(206) 521-7392

                   TARGETED GENETICS RESTRUCTURES BIOGEN DEBT

SEATTLE, WA -- September 1, 2005 -- Targeted Genetics Corporation (Nasdaq: TGEN)
announced that it has entered into an agreement with Biogen Idec, Inc. (Nasdaq:
BIIB) to restructure the repayment of debt that was due over the next year
totaling approximately $10.7 million. Under the amended Funding Agreement and
related promissory notes, Targeted Genetics paid $2.5 million of the outstanding
debt on September 1, 2005 and agreed to make additional payments of
approximately $3.1 million in August 2007 and $2.5 million in each of August
2008 and August 2009.

"The successful renegotiation of this debt with Biogen Idec provides us a more
manageable debt structure and is clearly an important component of our overall
long-term financing strategy," said H. Stewart Parker, President and Chief
Executive Officer. "We are managing our cash position carefully and continue to
look for ways to leverage value from our capabilities to build additional
financial resources."

As part of the restructuring agreement, Targeted Genetics has agreed to apply
one-third of certain up-front or milestone payments received from potential
corporate collaborations to repayment of the outstanding debt, first to the
payment of any accrued and unpaid interest on the principal being repaid, and
second to the payment of outstanding principal in reverse order of maturity. In
addition, Targeted Genetics granted Biogen Idec a right of co-sale in certain
equity financings approved by Targeted Genetics' board of directors before
November 30, 2005 and Biogen Idec agreed not to sell any of its shares of common
stock until the earlier of November 30, 2005 and the completion of such a sale.
Biogen Idec also agreed to enter into an additional lock-up agreement if
Targeted Genetics completes an equity financing before November 30, 2005.

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. We use our considerable
knowledge and capabilities in the development and


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manufacturing of gene delivery technologies to advance a diverse product
development pipeline. Our product development efforts target inflammatory
arthritis, AIDS, congestive heart failure, Huntington's disease, and
hyperlipidemia. To learn more about Targeted Genetics, visit our website at
www.targetedgenetics.com.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995:
This release contains forward-looking statements regarding our business
strategy, our product development, ability to raise capital or complete an
equity financing, our ability to meet our obligations under the funding
agreement and outstanding promissory notes and other statements about our plans,
objectives, intentions and expectations. 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 our actual results include, but are not limited to,
the timing, nature and results of our clinical trials, potential development of
alternative technologies or more effective products by competitors, our ability
to obtain and maintain regulatory or institutional approvals, our ability to
obtain, maintain and protect our intellectual property and our ability to raise
capital when needed, as well as other risk factors described in the section
entitled "Factors Affecting Our Operating Results, Our Business and Our Stock
Price" in our Quarterly Report on Form 10-Q for the period ended June 30, 2005.
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 our expectations.

                                      # # #


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