Transgene: 2006 Annual Results and 2007 Outlook



    STRASBOURG, France, March 6 /CNW/ -- Transgene S.A. (Eurolist Paris:
FR0005175080) announces today its achievements in operations, financial
performance for 2006 and outlook for 2007.
    "In 2006, we maintained a stable net cash expenditure by increasing our
revenues in order to offset increased investments in research and development
linked to the maturing of our portfolio of product candidates," said Philippe
Archinard, Chief Executive Officer of Transgene. "In 2006, we achieved
significant positive clinical results with our therapeutic vaccine candidate
TG 4001 for which we are actively seeking to establish a partnership. The year
2007 should be key to Transgene with planned clinical results for three of our
product candidates (TG 4010, TG 1042 and TG 4040). On this basis, we expect to
further accelerate our development and take a step forward in achieving our
strategic objective of becoming one of the world leaders in the field of
cancer and infectious diseases immunotherapy."

    2006 Highlights: TG 4001 established proof of concept for therapeutic
vaccination clinical efficacy.

    
    (*) Clinical pipeline advances :
       --  TG 4001 (MVA-HPV-IL2) for the treatment of precancerous cervical
           lesions caused by the Human Papilloma Virus (HPV) infection: the
           final Phase II trial results published in April 2006 have shown
           efficacy of the vaccine at month 6 after administration.
           Sustainability of the results at month 12 after administration was
           confirmed in November 2006.
       --  TG 4010 (MVA-MUC1-IL2) in first line therapy for Non Small Cell
           Lung Cancer (NSCLC) in combination with chemotherapy: the
           inclusion of 140 patients in the Phase IIb controlled trial,
           initiated at the beginning of 2006, should be completed by April
           2007 (100 patients recruited to date).
       --  TG 1042 (Ad-IFNg) for the treatment of relapsing cutaneous
           lymphoma:
           the regulatory approvals have been obtained in the U.S. and Europe
           for a Phase II trial with 41 cutaneous B-cell lymphoma (CBCL)
           patients. The first clinical centers have been opened at the end
           of 2006 to commence recruitment in the first quarter of 2007.
       --  TG 4040 (MVA-HCV) in patients chronically infected by the
           hepatitis C virus: preclinical development was completed in 2006
           and enabled the launch of a 15-patient Phase I trial in France at
           the beginning of 2007.

    (*) euro 14.3 million raised through the exercise of 76% of the warrants
      issued as part of the capital increase in July 2005.

    (*) euro 25 million multi-year grant from the French Agency for
      Industrial Innovation (Agence Francaise de l'Innovation Industrielle --
      AII) for funding Transgene's participation in the ADNA ("Advanced
      Diagnostics and New therapeutic Approaches") project, subject to the
      approval of the European Commission. The majority of this funding will
      be dedicated to pharmacogenomics research and new product development
      in the field of chronic HPV carriers.

    (*) Biomanufacturing agreement reached with the French AIDS Research
      Agency (Agence Nationale de Recherches contre le SIDA et les hepatites
      virales / ANRS) and the French Institut for Health and Medical Research
      (Institut National de la Sante et de la Recherche Medicale / Inserm) to
      construct and manufacture a clinical batch of an AIDS vaccine candidate
      (800 thousand euros).

    2007 Outlook: A year rich in clinical results.

    (*) TG 4001 (MVA-HPV-IL2): in parallel with discussions to establish a
      product development partnership, Transgene is preparing for the launch
      of Phase III trials in Europe and the U.S., with regulatory approvals
      expected during the second quarter of 2007.

    (*) TG 4010 (MVA-MUC1-IL2): interim results of the controlled Phase IIb
      trial are expected in the fourth quarter of 2007.

    (*) TG 1042 (Ad-IFNg): Phase II results from a first group of 13 patients
      should be available by the end of 2007. Transgene plans to discuss with
      the health authorities the acceptability of this Phase II trial to
      support an accelerated marketing authorization application for the
      treatment of relapsing CBCL, an orphan disease for which optimal
      medical treatment has yet to be established.

    (*) TG 4040 (MVA-HCV): preliminary Phase I results should be available by
      year end 2007.

    (*) Decision of the European Commission on the ADNA grant is expected by
      the second quarter of 2007 and, if approved, would be immediately
      followed by a first payment.

    (*) Due to TG 4010 Phase IIb trial disbursements and the launch of
      clinical trials with TG 1042 and TG 4040, the Company's net cash
      expenditures should amount to approximately euro 25 million in 2007
      (without taking into account potential partnership revenues or the
      possible grant from ADNA).

    2006 Financial Results

    Revenues:

    (figures in millions euros)                    2006      2005     Trend


    Manufacturing contracts                         1.4       1.5       - 7 %
    Contract with the French Muscular
     Dystrophy Association                          1.7       1.3      + 30 %
    Licensing revenues                              0.6       0.7      - 15 %
    Research and development grants                 0.3         -          -
    Research and development tax credit             1.5       0.7     + 115 %

    Total                                           5.5       4.2      + 31 %
    

    For the 12 months ended December 31, 2006, revenues increased 31% to euro
5.5 million from euro 4.2 million in 2005.
    Revenues from manufacturing services in 2006 were comparable to 2005, at
euro 1.4 million. However, cash received from manufacturing contracts
increased from euro 1 million in 2005 to euro 2.7 million in 2006. The cash
received in 2006 will be recorded as revenue following delivery and acceptance
by clients expected in 2007 (deferred revenues thus amounted to euro 2.1
million at December 31, 2006).
    Billings to the French Muscular Dystrophy Association for the Myodys
programme increased by 30% to euro 1.7 million due to higher external costs
for the project. These costs included new plasmid manufacturing and animal
muscle functionality studies.
    
    Licensing revenues slightly decreased in 2006 to euro 600 thousand.
    
    In 2006, Transgene recorded euro 0.3 million in grants relating mainly to
the hepatitis C programme. Research and development tax credits doubled to
euro 1.5 million in 2006, in line with the doubling of the rate applicable to
eligible research expenses from 5% in 2005 to 10% in 2006. The research tax
credit will be reimbursable to the Company in 2010, less any amounts applied
to offset taxes due.

    
    Research and Development Expenses:
    
    Research and development expenses amounted to euro 24.2 million in 2006
compared to euro 20.9 million in 2005. The increase was mainly due to:

    
    -- increased expenses of euro 0.6 million for the Myodys programme (which
       are billed to the French Muscular Dystrophy Association);
    -- higher manufacturing costs linked to third party contracts and
       clinical batches eligible for Phase III trials (+ euro 0.5 million);
    -- higher expenses for clinical trials (+ euro 0.3 million);
    -- a full-year of expenses for the infectious disease research team
       (hepatitis C programme) taken over by Transgene in the third quarter of
       2005 (+ euro 0.6 million); and
    -- increase in personnel costs (+ euro 0.5 million).

    General and Administrative Expenses :
    

    General and administrative expenses were euro 3.9 million in 2006
compared to euro 4.6 million in 2005. The decrease was mainly due to:

    
    -- a decrease in personnel costs (- euro 0.3 million); and
    -- external costs savings linked to the delisting from the Nasdaq in
       2005.

    Interest and Other Income:
    

    Interest income was euro 0.5 million in 2006, compared to euro 0.4 in
2005.

    Net Loss:
    Transgene reported a net loss of euro 22 million in 2006 compared to euro
21 million in 2005. Basic loss per ordinary share amounted to euro 1.41 in
2006 compared to euro 1.72 in 2005, due to the increase in outstanding shares
following the exercise of warrants in July 2006.

    Liquidity and Capital Resources
    In 2006 cash expenditures, excluding the exercise of warrants and stock-
options, amounted to euro 20.6 million compared to euro 20.7 million in 2005.
    As of December 31, 2006, cash, cash equivalents and short-term
investments totalled euro 20.3 million.

    About Transgene:
    Transgene is a France-based biopharmaceutical company dedicated to the
development of therapeutic vaccines and immunotherapeutic products in oncology
and infectious diseases. The company has three compounds in Phase II trials
and one compound in Phase I studies. Transgene has bio-manufacturing
production capacities for viral-based vectors and technologies available for
out-licensing. For further information about Transgene, please visit
http://www.transgene.fr

    Cautionary note regarding forward-looking statements
    This press release contains forward-looking statements referring to the
planned development and clinical testing of Transgene's therapeutic vaccine
candidates, the possibility of a partnership agreement for product development
and anticipated government grants. However, product development and clinical
testing depend on a variety of factors, including the timing and success of
patient enrollment and the risk of unanticipated adverse patient reactions.
Results from future studies with more data may show less favorable outcomes
than prior studies, and there is no certainty that product candidates will
ever demonstrate adequate therapeutic efficacy or achieve regulatory approval
or commercial use. In addition, discussions with potential partners for
product development does not ensure that a partnership agreement will be
reached, as final agreement depends on a broad range of economic, technical
and competitive factors, many of which are not under Transgene's control, as
well as the successful conclusion of negotiations. Finally, funding from
government grants cannot be certain and depends on factors such as final
government approvals (as noted above), competing grant requests, government
research priorities and availability of research dedicated resources. For a
more detailed description of the risks and uncertainties involved in the
development and testing of Transgene's product candidates, see Transgene's
Document de reference on file with the French Autorite des marches financiers
(AMF).


    Condensed Consolidated Statements of Operations

    
    (IAS/IFRS)
                                                     12 months ended
    (Amounts in thousands of euros except               December
     share and per share data)                             31,
                                                     2006       2005
                                                 (unaudited)  (audited)
    Revenues
    Revenues from collaborative and
     licensing agreements                             3 720       3 425
    Grants and tax credit received for
     research                                         1 826         727
        Total revenues                                5 546       4 152

    Operating expenses
    Research and development                        (24 155)    (20 913)
    General and administrative                       (3 928)     (4 636)
    Other operating gains and losses                     23          10
        Total operating expenses                    (28 060)    (25 539)

        Loss from operations                        (22 514)    (21 387)

    Interest and other income, net                      483         404
    Income tax                                            0          (4)
        Net loss                                    (22 031)    (20 987)

    Loss per ordinary share                           (1.41)      (1.72)
    Weighted average number of shares
     outstanding                                 15 629 588  12 190 448



                    Condensed Consolidated Balance Sheets


    (IAS/IFRS)
    (Amounts in thousands of euros)           December 31,   December 31,
                                                  2006           2005
                                               (unaudited)     (audited)
    ASSETS
     Fixed assets, net                               6 214          6 608
     Intangible assets, net                            200            226
     Financial assets, net                             213            206
     Other non-current assets                        2 934          1 390
       Total non-current assets                      9 561          8 430
     Cash and cash equivalents                      20 323         16 619
     Short term investments                              0          9 890
     Other current assets                            2 721          2 776
       Total current assets                         23 044         29 285
       Total assets                                 32 605         37 715


    LIABILITIES AND SHAREHOLDERS' EQUITY
     Shareholders' equity                           18 979         26 198
     Liabilities, non-current                        5 271          5 512
     Liabilities, current                            8 355          6 005
       Total liabilities and shareholders'
        equity                                      32 605         37 715

    




For further information:

For further information: Philippe Poncet of Transgene, + 33 3 88 27 91
21; or Mary Clark, or Halina Kukula, of Capital MS&L, +44 (0)20 7307 5330; or
Estelle Guillot- Tantay or Tiphaine Hecketsweiler, of Image 7, + 33 1 53 70 74
93 Web Site: http://www.transgene.fr/

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