Transgene in 2007: Partnership and Refinancing Position the Company for its Future Development



    STRASBOURG, France, March 11 /CNW/ - Transgene (Euronext Paris:
FR0005175080) announces today its achievements in operations, financial
performance for 2007 and outlook for 2008.
    "2007 was a breakthrough year for Transgene, marked by two major
accomplishments: the signing of a partnership agreement with Roche in the
domain of therapeutic vaccines for the treatment of diseases caused by the HPV
virus, and the successful completion of a EUR100.1m capital increase on
European markets," declared Philippe Archinard, Managing Director of
Transgene.
    Key financial highlights include:

    
    -   Total revenues for the year were EUR28million compared to EUR5.5m in
        2006.
    -   Transgene closed the year with a net loss of EUR5.5m compared to a
        net loss of EUR22m a year earlier.
    -   Basic loss per ordinary share was EUR0.28 versus EUR1.41 in 2006.
    -   Research and development expenditures were EUR28.8m compared to
        EUR24.2m in 2006.
    -   In 2007, net cash expenditure, excluding capital increase, was
        EUR5.5m compared to EUR20.7m in 2006.
    -   At the end of 2007, the company held cash and cash equivalents of
        EUR111.3m, which should enable it to finance some four years of
        operating costs.
    

    Major Accomplishments of 2007:

    Partnership Roche/Transgene: announced in April 2007, an exclusive world
wide license agreement aimed at the development, registration and
commercialisation of Transgene's therapeutic vaccines developed to fight
diseases caused by the Human Papilloma Virus. Transgene received an upfront
payment and a regulatory milestone of EUR23m in June 2007 and may receive
further payments of up to EUR195m covering clinical development milestones and
commercial milestones based on future sales of HPV products, stemming from
Transgene's research. Under the terms of the agreement, Transgene is also
entitled to receive progressive, double digit royalties on all future sales.
    Strengthening of the Equity Base: In July 2007, the company raised
EUR100.1m (EUR96.4m net of costs) from European equity markets in an
institutional rights offering involving the issue of 5,484,977 shares at a
price of EUR18.25 per share. Fifty-five percent of the issue was subscribed by
TGSH (Groupe Merieux Alliance), Transgene's major shareholder. Overall, the
offering was five times oversubscribed.

    Outlook for 2008:

    "With EUR111.3m of cash as of year-end 2007, and strengthened by a major
validating partnership agreement, Transgene has a solid platform to accelerate
the development of its pipeline and growth of the company. We should report
strong newsflow throughout 2008 including clinical trial results on three of
our vaccine candidates in the pipeline: (i) TG4010, for non-small cell lung
cancer, in phase IIb - an independent central radiological reading has
recently confirmed the observed difference in favour of the combination of our
vaccine with chemotherapy; (ii) TG1042, for relapsed cutaneous B-cell
Lymphoma, where we expect phase II interim results at the end of the 2nd
quarter due to slower than anticipated patient recruitment and (iii) TG4040,
for chronic hepatitis C, in phase I where initial tolerance and efficacy data
are expected shortly," Philippe Archinard added.
    "Further to our clinical results newsflow, Roche expects to enter
TG4001/R3484 into Phase III clinical trials by the end of 2008. Moving
forward, thanks to its continuous internal research efforts, Transgene is
broadening its technological base and intends to expand its clinical
portfolio. Our objective is to move one new product candidate into clinical
development each year. We believe that Transgene is ideally positioned to
become a leader in the field of cancer and infectious diseases immunotherapy,"
concluded Philippe Archinard.

    
    Main Developments in the Product Portfolio:

    -   TG4001/R3484 (MVA-HPV-IL2) for the treatment of precancerous cervical
        lesions caused by the HPV virus. According to the terms of our
        partnership agreement signed in April 2007, Roche will be responsible
        for the development and commercialisation of the vaccine worldwide.
        Phase II trials have been completed and Roche expects TG4001/R3484 to
        enter into phase III clinical trials by the end of 2008. A further
        development milestone payment will be triggered upon the treatment of
        the first patient in the phase III clinical study.

    -   TG4010 (MVA-MUC1-IL2) for the treatment of non small cell lung cancer
        in combination with chemotherapy. The recruitment of 148 patients in
        the controlled study of phase IIb initiated at the beginning of 2006
        was completed in May 2007. Local radiological evaluations realised in
        the clinical centres showed a difference in favour of the combination
        of our vaccine with chemotherapy compared to chemotherapy alone. This
        difference was confirmed by a recently completed independent central
        radiological reading. Full interim results of the trial data
        (response rate, progression-free survival and overall survival)
        should be released on the occasion of a major scientific conference
        organised for the end of the 2nd quarter. We will be announcing final
        results by the end of 2008.

    -   TG1042 (Ad-IFN(lowercase gamma)) for the treatment of relapsed
        cutaneous B-cell lymphoma (CBCL). A phase II trial was launched end
        2006 in France, Switzerland and the United States. The objective was
        the recruitment of 41 patients suffering from relapsed cutaneous B-
        cell lymphoma after treatment with radiotherapy. CBCL, a malignant
        disease of the skin is a rare illness which affects between 10,000
        and 15,000 patients in Europe and the United States. Recruitment of
        patients has proven to be slower than anticipated for the phase II
        trial of this orphan indication. As a consequence we expect a delay
        in the interim results data which is now anticipated for the end of
        the 2nd quarter 2008.

    -   TG4040 (MVA-HCV) for the treatment of hepatitis C: a phase I trial
        began in France in the 1st quarter 2007. Fifteen patients were
        recruited who had not received any previous treatment for their
        infection. Patients received one subcutaneous injection per week for
        3 weeks of TG4040 at doses of 106 pfu (3 patients), 107 pfu
        (3 patients) and 108 pfu (9 patients). The patients treated with the
        higher dose receive a complementary injection ('boost') at six
        months. The tolerance and efficacy data after the first injections
        are expected shortly. The complete efficacy results of the clinical
        study (after the full treatment schedule including boost) are
        expected in the 4th quarter 2008. We have extended the ongoing
        clinical trial to include patients with more advanced stages of liver
        disease, in order to potentially enlarge the target patient
        population, and also to assess shortened administration schedules of
        the vaccine (2 and 4 month intervals between prime and boost
        injections).

    In parallel a phase I study is in progress in Canada, co-financed by the
University of Montreal, involving patients who have relapsed after having
received standard of care treatment (Ribavirine and Interferon Alpha). Results
of this study should be available in the first half of 2009.

    Expanding the Pipeline:

    In 2005, we took the decision to focus resources on fewer clinical
developments to accelerate the establishment of proof of concept and the
subsequent signing of strategic partnership agreements. At the same time, with
the goal of bringing one new product into clinical development each year, we
carried out a major reorganisation of our research group with three
objectives:

    -   To broaden our technological base in the field of immunotherapeutics;

    -   To develop a superior "biomarker" platform in order to maximise
        probability of success and efficiency of our clinical developments;
        and

    -   To reinforce the medical and market-oriented drive of our research
        activities.

    The company has achieved these goals and is now in a position to
reactivate the clinical development of products that were put on hold, and to
initiate the development of new therapeutic vaccines and passive
immunotherapeutics, either specific or non specific. The company intends to
disclose details of its preclinical and clinical programmes at an R&D
presentation, which we plan to schedule for mid-year 2008.

    2007 Financial Results


    Summary Statement of Operations

    (IAS/IFRS)
    (Amounts in thousands of
     euros except share and                  Twelve months ended December 31,
     per share date)                                2007                2006
                                              (unaudited)           (audited)

      Total revenues                              28 019               5 546

    Operating expenses
    Research and development                     (28 799)            (24 155)
    General and administrative                    (5 747)             (3 928)
    Other operating gains and losses                (931)                 23
      Total operating expenses                   (35 477)            (28 060)

      Profit (loss) from operations               (7 458)            (22 514)

    Interest and other income, net                 1 937                 483

    Profit (loss) attributable to
     equity holders of the parent                 (5 521)            (22 031)

    Basic profit (loss) per ordinary
     share                                         (0.28)              (1.41)




    Comments on 2007 Financial Results

    Revenues

    EUR million                                     2007      2006     Trend

    Third Party Manufacturing Contracts             1.4        1.4       0 %
    AFM Contract                                    0.7        1.7    - 59 %
    Revenues from Roche partnership                23.0          -      N/A
    Revenues from Licenses                          0.7        0.6    + 17 %
    Grants                                          0.5        0.3    + 66 %
    Research Tax Credits                            1.7        1.5    + 13 %

    Total                                          28.0        5.5   x 5.1
    

    In 2007 total revenues were EUR28m compared to EUR5.5m in 2006. The
substantial increase in revenues is a consequence of the payment of EUR23m
received from Roche as part of the licensing agreement.
    Revenues from third party manufacturing services remained stable at
EUR1.4m. Deferred revenues from manufacturing contracts amounted to EUR3m at
end 2007 and will be recorded as revenues in 2008 following delivery and
acceptance of the manufactured products by clients. Cash receipts tied to
these contracts have declined from EUR2.7m in 2006 to EUR1.8m in 2007. Third
party manufacturing contracts and their corresponding revenues will
progressively be replaced by the manufacture of the vaccine TG4001/R3484 which
will be invoiced to Roche.
    Billings to the French Muscular Dystrophy Association (AFM) have declined
by some 60% and reflect the decline in the workload on the preclinical Myodys
programme.
    Excluding revenues stemming from our partnership agreement with Roche
(EUR23m), license revenues slightly increased to EUR0.7m in 2007 against
EUR0.6m in 2006.
    Research grants progressed from EUR0.3m in 2006 to EUR0.5m in 2007. They
essentially relate to the hepatitis C programme.
    Research and development tax credits increased by 13% to EUR1.7m in 2007
as a result of an increase in eligible research expenses. The research tax
credit will be reimbursable to the company in 2011, less any amounts applied
to offset income taxes due. The French reform on research tax credits will
have a favourable impact on our research tax credit for 2008.

    Operating Expenses

    In 2007, Transgene made significant investments in new personnel. This
was consistent with having reached certain milestones: our partnership
agreement with Roche and late stage clinical development of our product
portfolio.
    Research and Development expenses amounted to EUR28.8m in 2007 compared
to EUR24.2m in 2006. The increase was mainly due to:

    
    -   Increase in personnel costs of EUR1.7m;
    -   The cost of clinical trials increased by EUR1.3m, largely due to the
        ongoing phase IIb clinical studies on TG4010;
    -   Higher bio-manufacturing activities (+ EUR0.7m);
    -   Acquisition and amortization of technological licences (+ EUR 0.5m);
        and
    -   An increase in non cash expenses of EUR0.5m (amortization of stock
        options)

    Administrative and general expenses reached EUR5.7m in 2007 against
EUR3.9m in 2006. The major reasons were:

    -   Increase in personnel costs of EUR0.3m;
    -   Expenses and taxes related to the licensing contract with Roche
        (+ EUR0.7m); and
    -   An increase in non cash expenses of EUR0.2m (amortization of stock
        options).
    

    Other Charges

    Other charges totalled EUR0.9m in 2007 and mainly reflected a provision
to cover the cost of leaving our rented office premises in Strasbourg.
Transgene has decided to regroup all the company's personnel at Illkirch, a
Strasbourg suburb where the current production site is located, and expects to
move there by the end of 2008. A new leased building of some 6 800 msquared is
currently under construction for mixed usage (laboratories and offices). The
objective is to optimize our R&D resources through the provision of more
suitable premises. Globally the cost of these premises will equal that of the
current rental costs, after initial expenditure on new equipment and other
service expenses.

    Interest Income

    Interest income was EUR1.9m in 2007 compared to EUR0.5m in 2006. Interest
income consisted of investment income resulting from the proceeds of the
capital increase and the partnership agreement.

    Net Loss

    Transgene reported a net loss of EUR5.5m in 2007 compared to EUR22.0m in
2006. Basic loss per ordinary share amounted to EUR0.28 in 2007 compared to
EUR1.41 in 2006, due to the combined reduction in net losses and the increase
in the average number of shares in issue after the rights issue of July 2007.

    Liquidity and Capital Resources

    As of 31 December 2007, Transgene held EUR111.3m in cash and cash
equivalents compared to EUR20.3m a year earlier. Cash equivalents are invested
in short-term money market funds. A capital increase of EUR100.1m (EUR96.4m
net) was completed in June and July 2007 involving the issue of 5,484,977
shares at a price of EUR18.25 cents per share.
    The financing by OSEO/AII of the ADNA programme ( Advanced Diagnostics
for New Therapeutic Approaches ) is currently under review by the European
Commission and we expect a decision during the second quarter of 2008. The
specific aid sought, to be received over the life of the program, breaks down
into EUR8.6m of grants and of EUR9.8m repayable advances. The amount of aid
has been adjusted relative to the estimate of EUR25m announced on 24 November
2006. This is due to the exclusion of certain costs relative to the HPV
programme which is now licensed to Roche.
    In 2007, net cash expenditures, excluding the capital increase, were
EUR5.5m compared to EUR20.7m in 2006. Transgene currently anticipates a cash
burn for 2008 in the order of EUR20m to EUR25m depending on the outcome of the
requested aid to OSEO/AII.

    Telephone Conference Call

    A telephone conference call is organised today, 11th March 2008, in
English at 7pm Paris time (6pm London time). To participate in the conference
please dial one of the following numbers 10 minutes before the conference
begins.

    
                             +33(0)1-70-99-42-99

                                     or

                             +44(0)20-7806-1967
    

    About Transgene

    Transgene, based in Strasbourg, is a biopharmaceutical company dedicated
to the development of therapeutic vaccines and immunotherapeutic products in
oncology and infectious diseases. The company has one product which has
completed Phase II trials (TG4001/R3484), two compounds in Phase II trials
(TG4010 and TG1042) and one compound in Phase I studies (TG4040). Transgene
has concluded a strategic partnership agreement with Roche for the development
of its TG4001/R3484 therapeutic vaccine to treat HPV-mediated diseases.
Transgene has bio-manufacturing capacities for viral-based vectors and
technologies available for out-licensing. Additional information about
Transgene is available on the Internet at 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 vaccine candidates.
However, successful product development and clinical testing depend on a
variety of factors, including the timing and success of future patient
enrolment and the risk of unanticipated adverse patient reactions. Results
from future studies with more data may show less favourable 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. This press release also contains forward-looking statements
referring to potential future milestone payments under Trangene's partnership
agreement with Roche. However, the payment of such amounts requires
satisfaction of the relevant contractual conditions, which depends in part on
factors outside the control of the Company. For further information on the
risks and uncertainties involved in the testing of Transgene's product
candidates, and in connection generally with the development of its products,
see Trangene's Document de reference on file with the French Autorite des
marches financiers on its website at http://www.amf-france.org and Transgene's
website at http://www.transgene.fr.

    
    Condensed Consolidated Balance Sheets

    (IAS/IFRS)
    (Amounts in thousands of euros)                December 31,  December 31,
                                                       2007           2006
                                                    (unaudited)     (audited)
    ASSETS

      Fixed assets, net                                  6 182         6 214
      Intangible assets, net                             1 669           200
      Financial assets, net                                383           213
      Other non-current assets                           3 957         2 934
        Total non-current assets                        12 191         9 561
      Cash and cash equivalents                        111 312        20 323

      Other current assets                               4 811         2 721
        Total current assets                           116 123        23 044
        Total assets                                   128 314        32 605

    LIABILITIES AND SHAREHOLDERS' EQUITY

      Shareholders' equity                             110 936        18 979
      Liabilities, non current                           5 996         5 271
      Liabilities, current                              11 382         8 355
        Total liabilities and shareholder's
         equity                                        128 314        32 605



    Condensed Consolidated Statements of Operations

    (IAS/IFRS)
    (Amounts in thousands           Six months             Twelve months
     of euros except share      ended December 31,       ended December 31,
      and per share date)      2007          2006       2007          2006
                           (unaudited)    (audited)  (unaudited)    (audited)
    Revenues

    Revenues from
     collaborative and
     licensing agreements       2 159        1 827       25 834        3 720

    Grants and tax credit
     received for research      1 115          934        2 185        1 826

      Total revenues            3 274        2 761       28 019        5 546

    Operating expenses
    Research and
     development              (15 722)     (12 435)     (28 799)     (24 155)

    General and
     administrative            (3 105)      (2 125)      (5 747)      (3 928)

    Other operating gains
     and losses                     7           12         (931)          23

      Total operating
       expenses               (18 820)     (14 548)     (35 477)     (28 060)

    Profit (loss) from
     operations               (15 546)     (11 787)      (7 458)     (22 514)

    Interest and other
     income, net                1 563          391        1 937          483

      Net profit (loss)       (13 983)     (11 396)      (5 521)     (22 031)

    Profit (loss) attribut-
     able to equity holders
     of the parent            (13 983)     (11 396)      (5 521)     (22 031)

    Basic profit (loss)
     per ordinary share         (0.63)       (0.69)       (0.28)       (1.41)

    Diluted profit (loss)
     per ordinary share         (0.63)       (0.69)       (0.28)       (1.41)

    Average number of
     outstanding shares    22 087 884   16 512 329   19 718 802   15 629 588



    CONSOLIDATED CASH FLOW STATEMENT

    (IAS/IFRS)
    (in thousands of Euros)
                                                         2007          2006
                                                       Unaudited     Audited
    Cash flows from operating activities
    Operating loss                                       (7 458)     (22 514)
    Adjustments for:

      Changes in provisions                               1 161          183
    Depreciation and amortization                         1 257        1 215
    Amortization of stock option costs                    1 053          376
    Change in operating working capital                       5          760
    Other                                                   (63)         (74)
    Net cash used in operations                          (4 045)     (20 054)
    Other operating cash flows
      Interest received                                   2 043          601
      Interest paid                                         (71)         (85)

    Net cash used in operating activities                (2 073)     (19 538)
    Cash flows from investing activities
      Purchases of property, plant and equipment           (992)        (745)
      Proceeds from sales of intangible assets           (1 645)         (42)

      Proceeds from disposals (purchases) of
       available-for-sale financial assets, net               0        9 890

    Other                                                  (171)          (6)
    Net cash from (used in) investing activities         (2 808)       9 097
    Cash flows from financing activities
      Proceeds from issues of share capital             100 940       14 487

      Transaction costs to issue shares                  (4 524)         (49)

      Repayments of lease liabilities                      (546)        (291)
    Net cash provided by financing activities            95 870       14 147

    Effect of changes in exchange rates on cash and
     cash equivalents                                        (1)          (2)

    Net increase (decrease) in cash and cash
     equivalents                                         90 988        3 704

    Cash and cash equivalents at 1 January               20 323       16 619
    Cash and cash equivalents at 31 December            111 312       20 323
    




For further information:

For further information: Press Contacts: Transgene Capital MS&L,
Philippe Poncet, Anna Mitchell, Finance Director, Phone: +44(0)20-7307-5346,
Phone: +33(0)3-88-27-91-21

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TRANSGENE S.A.

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