Transgene: Annual Results 2012 and Business Update

  Transgene: Annual Results 2012 and Business Update

  Solid operational performance in 2012, in preparation of key milestones in
   2013 with the possible start of two phase 3 clinical trials for our most
                              advanced products

Cash consumption in line with expectations and cash position of €92.9 million
                                 at end 2012

Business Wire

STRASBOURG, France -- March 21, 2013

Regulatory News:

Transgene SA (Paris:TNG) (Euronext Paris: FR0005175080) today announced the
company’s financial results for 2012 and provided a business update.

The year 2012 was marked by the publication of a number of clinical results,
by the start of important clinical trials, by the strategic partnership
concluded with the EORTC, a leading cancer research cooperative group, and by
the start of activities in China.

“2012 was a year in which we substantially invested in clinical trials, key
for the immediate future of Transgene” stated Philippe Archinard, Chairman and
Chief Executive Officer of Transgene. He added: “We now have excellent
visibility on our next milestones and by the end of 2013 we should have the
necessary clinical results to be able to decide the start of phase 3 studies,
the last development phase before registration, for TG4010 in lung cancer and
Pexa-Vec (JX594/TG6006) in liver cancer. We await the attainment of these
milestones with a great deal of enthusiasm”.

The consolidated financial results for 2012 consisted mainly in a stable net
loss of €43.2 million (to be compared with €43.6 million in 2011) and a cash
consumption of €46.6 million (compared to €40.8 million in 2011).

As of 31 December 2012, the company had €92.9 million in cash. Transgene
expects a cash consumption of around €50 million in 2013.

“2012 financial numbers are in line with our expectations” stated Stéphane
Boissel, Executive Vice President and Chief Financial Officer of Transgene. He
added: “At the end of 2012, Transgene had a cash runway of close to two
years”.

The company will host a conference call and webcast in English tomorrow,
Friday,
March 22^nd, at 02:30pm CET. The dial-in numbers are:

+44(0)20 7136 2050 (UK)

+33(0)1 70 99 43 01 (FR)

+1646 254 3364 (US)



Confirmation Code: 7934677



The weblink for the webcast is:

http://www.media-server.com/m/p/yp2gm6vc



Key2012 numbers:

Annual consolidated financial statements for 2012 can be summarized as
follows:

  *€13.1 million in revenue, compared with €14.4 million in 2011,
  *€48.7 million in R&D expenses, compared with €53.0 million in 2011,
  *€43.2 million in net loss, compared with €43.6 million in 2011, and
  *€46.6 million in cash consumption, compared with €40.8 million in 2011.

As of December 31, 2012, Transgene had €92.9 million in cash.

The following table presents the income statement for 2011 and 2012:

In thousands of euros                                12/31/2012  12/31/2011
Revenue from collaborative and licensing agreements  3,928       5,646
Government financing for research expenditures       9,133       8,800
Revenue                                              13,061      14,446
Research and development expenses                     (48,679)     (53,048)
General and administrative expenses                   (6,610)      (6,226)
Other income and (expenses), net                     93          -
Net operating expense                                (55,196)    (59,274)
Operating income                                     (42,135)    (44,828)
Interest income and (expenses), net                  (594)       1,426
Income/ (loss) before tax                            (42,729)    (43,402)
Income tax expense                                   -           -
Income from equity affiliates                        (474)       (224)
Net income/ loss                                     (43,203)    (43,626)
Net Income per share (€)                              (1.36)       (1.38)
Diluted earnings per share (€)                        (1.36)       (1.38)

The financial statements for 2012 as well as the management discussion on
those statements are attached to this press release (Appendixes A and B).

Key 2012 events and short term news-flow:

In 2012, Transgene presented or published scientific and clinical data for 4
out of its 5 most advanced products:

  *Pexa-Vec (liver, colorectal and renal cancers):
    Clinical data obtained in liver cancer were presented at ILCA^1 (Berlin,
    September 2012). They illustrate the safety of the intravenous injection
    of Pexa-Vec followed by Sorefanib, the standard of care in the indication.
    This opens new perspectives for the clinical development of the product.
    Promising survival benefit data were also published in early 2013 in
    Nature Medicine. In a small group of patients (30), those data showed a
    doubling in average overall survival for patients having received high,
    therapeutic, dose of Pexa-Vec compared to patients having received low,
    placebo-like, dose of the product.

  *TG4040 (hepatitis C):
    During the EASL^2 congress of 2012 (Barcelona, April 2012), additional
    data from the phase 2b HCVac study were presented. They showed a
    prolongation of benefits of TG4040 under treatment. Primary endpoint of
    the trial was met. Final data will be orally presented by Transgene during
    the EASL congress of 2013 (Amsterdam, April 2013). An update on the TG4040
    development strategy will then be made.

  *TG4001 (cancer of the oropharynx):
    Phase 2b data showing significant superior efficacy of the therapeutic
    vaccine over placebo in HPV-related CIN 2/3 cervical neoplasia patients
    were communicated in May 2012. Detailed data were then presented by
    Roche^3 in the context of the 28^th international papillomavirus
    conference (Puerto Rico, December 2012). Those data are not sufficient to
    move the product in phase 3 in this indication. However, they represent a
    strong proof of concept for the product and enabled Transgene to enter
    into a strategic collaboration with EORTC, a leading cancer research
    cooperative group, for the conduct of a large phase 2b evaluating TG4001
    in combination with radio-chemotherapy in HPV-related cancer of the
    oropharynx. This study will be initiated in 2013 and the first patient is
    expected to be randomized in early 2014.

  *TG1050 (hepatitis B):
    During the EASL congress of 2012 (Barcelona, April 2012), first
    pre-clinical data with TG1050 were presented. They allowed us to move the
    product into IND enabling studies. Additional data will be presented
    during the EASL congress of 2013. TG1050 should enter clinical trials in
    2014. Transgene intends to enter into a collaborative partnership with
    TG1050 before the start of clinical trials.

In 2012, Transgene started important clinical trials for its two lead
products, TG4010 (lung cancer) and Pexa-Vec (liver cancer).

To date, around 70% of patients have been randomized in the phase 2b part of
the phase 2b/3 trial with TG4010 in lung cancer. First data are expected in Q4
2013 and Novartis could exercise its option in late 2013 or early 2014.

To date, around 60% of patients in the TRAVERSE study (phase 2 b trial with
Pexa-Vec in second line advanced liver cancer, or HCC) have been randomized.
This study should give its first data by the end of 2013. With its partners,
including Jennerex, Inc., Transgene has also started (i) a phase 2a clinical
trial evaluating an intravenous injection-only protocol in liver cancer
patients as well as (ii) a phase 1/2 evaluating Pexa-Vec in combination with
chemotherapy in metastatic colorectal cancer. Data from the various ongoing
clinical trials should enable the partners to decide on starting a phase 3
clinical trial by the end of 2013. A first patient in phase 3 could be
randomized in early 2014.

^1 ILCA = International Liver Cancer Association.
^2 EASL = European Association for the Study of the Liver.
^3 Roche had exclusive rights to TG4001 until February 2011 when rights were
granted back to Transgene. Roche is sponsor of the still ongoing clinical
data.

About Transgene:

Transgene (NYSE-Euronext: TNG), a member of the Institut Mérieux Group, is a
biopharmaceutical company. It creates, develops and manufactures targeted
immunotherapeutics for the treatment of cancers and infectious diseases.
Transgene’s products are major technological breakthroughs. They use well
tolerated viruses to indirectly or directly kill infected or cancerous cells.
Its four most advanced products have generated proof of concept data in
randomized clinical studies: in lung cancer (TG4010), liver cancer (Pexa-Vec),
hepatitis C (TG4040) and HPV-related cervical lesions (TG4001). Transgene has
concluded strategic agreements for the development of three of these products:
an option agreement with Novartis for the development of TG4010, an
in-licensing agreement with US-based Jennerex, Inc. to develop and market
Pexa-Vec and a strategic collaboration with EORTC to develop TG4001 in cancer
of the oropharynx. With 280 employees, it is based in Strasbourg, France, and
has operations in Lyon, China and the USA. Additional information about
Transgene is available at www.transgene.fr.

Transgene can be followed on Twitter (@TransgeneSA) and LinkedIn.

Disclaimer:

This press release contains forward-looking statements notably referring to
the anticipated cash consumption for 2013. The Company’s anticipated cash
consumption for 2013 is based on currently anticipated costs for on-going and
planned product development and testing, but may increase in the event of
unanticipated expenses. For further information on the risks and uncertainties
involved in the testing and development of Transgene’s product candidates, see
Trangene’s Document de Référence on file with the French Autorité des marchés
financiers on its website at http://www.amffrance.org and on Transgene’s
website at www.transgene.fr .

               APPENDIX: 2012 CONSOLIDATED FINANCIAL STATEMENTS

Consolidated 2012 financial statements were approved by the Board of Directors
on March 20, 2013, and will be submitted for approval by the shareholders of
the Company during its next annual general meeting, on June 19, 2013. Audit
procedures have been performed and the auditors’ report is dated March 21,
2013.

                    Appendix A: 2012 Financial Statements

                      Consolidated balance sheet (IFRS)
                           (in thousands of euros)

ASSETS                                              12/31/2012  12/31/2011
                                                              
Current assets                                                 
Cash and cash equivalents                              6,137        1,733
Other current financial assets                         86,778       137,774
Cash, cash equivalents and other financial             92,915       139,507
assets
Receivables                                            2,012        624
Inventories                                            1,107        1,093
Other current assets                                2,340       2,560
Total current assets                                98,374      143,784
                                                              
Non-current assets
Property, plant and equipment                          24,805       25,507
Intangible assets                                      1,497        1,581
Financial assets                                       7,382        6,175
Equity consolidated affiliates                         3,932        544
Other non-current assets                            24,474      15,993
Total non-current assets                            62,090      49,800
                                                              
Total assets                                        160,464     193,584

EQUITY AND LIABILITIES                              12/31/2012  12/31/2011
                                                              
Current liabilities                                            
Payables                                               9,587        10,840
Financial liabilities                                  961          955
Provisions for risk                                    2            3
Other current liabilities                           8,853       9,319
Total current liabilities                           19,402      21,117
                                                              
Non-current liabilities
Financial liabilities                                  38,006       27,374
Defined benefit obligations                            3,226        2,794
Other non-current liabilities                       252         883
Total non-current liabilities                       41,484      31,051
                                                              
Total liabilities                                   60,886      52,168
                                                              
Equity
Share capital                                          72,886       72,523
Share premiums                                         427,258      426,041
Retained earnings                                      (356,655)    (313,030)
Net loss for the year                                  (43,203)     (43,626)
Other comprehensive income                          (709)       (492)
Total equity and reserves attributable to equity    99,578      141,416
holders of the Company
                                                              
Total equity and liabilities                        160,464     193,584

                     Consolidated income statement (IFRS)
                (In thousands of euros, except per share data)

                                                   12/31/2012  12/31/2011
Revenue from collaborative and licensing            3,928       5,646
agreements
Government financing for research expenditures      9,133       8,800
Revenue                                             13,061      14,446
Research and development expenses                      (48,679)     (53,048)
General and administrative expenses                    (6,610)      (6,226)
Other income and (expenses), net                    93          -
Net operating expense                               (55,196)    (59,274)
Operating income                                    (42,135)    (44,828)
Interest income and (expenses), net                 (594)       1,426
Income/ (loss) before tax                           (42,729)    (43,402)
Income tax expense                                  -           -
Income from equity affiliates                       (474)       (224)
Net income/ loss                                    (43,203)    (43,626)
Net income per share (€)                               (1.36)       (1.38)
Diluted earnings per share (€)                         (1.36)       (1.38)

            Consolidated statement of comprehensive income (IFRS)
                           (In thousands of euros)

                                               12/31/2012  12/31/2011
Net income/(loss)                               (43,203)    (43,626)
Foreign exchange gains / (losses)                11           (1)
Reevaluation of hedging instruments             (227)       (270)
Other comprehensive income                      (216)       (271)
Comprehensive income                            (43,419)    (43,897)
Of which, Equity holders of the parent company   (43,419)     (43,897)
Of which, minority interests                     -            -

                        Statement of cash flows (IFRS)
                           (In thousands of euros)

                                                     12/31/2012  12/31/2011
Cash flows from operating activities                             
Net Income                                             (43,203)     (43,626)
Elimination of financial result                        594          (1,426)
Elimination of non-cash elements
Income from equity affiliates                          474          224
Changes in provisions                                  282          260
Depreciation and amortization of tangible and          2,763        2,740
intangible assets
Payments in shares                                     856          1,441
Others                                                (1,233)     5
Net cash generated from/(used in) operating
activities before change in working capital and       (39,467)    (40,382)
other operating cash flow
Change in operating working capital
Receivables                                            (1,620)      685
Inventories                                            (14)         (121)
Research tax credit                                    (8,418)      (7,786)
Other current assets                                   606          219
Payables                                               (1,283)      2,292
Prepaid income                                         (1,080)      (1,678)
Accrued Employee benefits expenses                     459          39
Other current liabilities                             (477)       714
Net cash generated from/( used in) operating          (51,294)    (46,018)
activities
Cash flows from investing activities
(Purchase) /disposal of property, plant and            (1,379)      (3,302)
equipment
(Purchase)/ disposal of intangible assets              (566)        (548)
Other (purchases) /disposals                          (2,631)     (1,668)
Net cash used in investing activities                 (4,576)     (5,518)
Cash flows from financing activities
Collected net financial result                         194          1,856
Gross proceeds from issuance of share capital          725          254
Fees paid in relation to capital increase              -            -
Conditional subsidies                                  3,116        3,103
(Acquisition)/ disposal of current financial assets    50,582       41,143
Research tax credit financing                          6,601        6,465
Repayment of finance lease liabilities                (955)       (930)
Net cash generated from /(used in) financing          60,263      51,891
activities
Effect of change in exchange rates on cash and cash   11          (1)
equivalents
Net increase (decrease) in cash and cash equivalents  4,404       354
cash and cash equivalents at beginning of period      1,733       1,379
Closing cash and cash equivalents                     6,137       1,733
Investments in other financial assets                 86,778      137,774
Cash, cash equivalents and other financial assets     92,915      139,507

             Appendix B: Management Discussion on 2012 Financials

Revenue:

During 2012, revenue from collaborative and licensing agreements were composed
principally of:

  *Revenue from collaborative research and manufacturing activities for
    strategic partners (such as for Jennerex, Inc. in connection with Pexa-Vec
    (JX594/TG6006) in 2012 and 2011, and Roche, for TG4001, in 2011),
    amounting to €1.8 million in 2012 (€2.8 million in 2011),
  *Milestone or upfront payments on products partnered-out (such as the
    option payment from Novartis in connection with TG4010), amounting to €1.4
    million in 2012 (€2.1 million in 2011), and
  *Royalties on sales of technologies or products out-licensed by Transgene,
    amounting to €0.7 million in 2012 (unchanged).

The $10.0 million (€7.4 million) received from Novartis in March 2010 for the
payment of the exclusive option for an exclusive license to TG4010, was spread
over the expected duration period of the option. This period runs from
signature date up to March 31, 2014. Revenue recognized on this option
amounted to €1.4 million (€2.1 million in 2011). The balance (€1.2 million)
will be recognized in revenue in 2013 and 2014.

For year ending December 31, 2012, government financing for research
expenditures are composed of subsidies received or accrued and research tax
credit for the year 2012.

Subsidies amounted to €0.7 million in 2012, compared with €1.0 million in
2011. In 2012, subsidies were related principally to the ADNA program (a
program to develop biomarkers for new therapeutics), funded by French
innovation agency OSEO. Transgene expects to cash in another €1.4 million in
subsidies in relation to this program in the future (€3.0 million in revenue,
as part of this amount was already cashed-in).

Research tax credit amounted to €8.4 million in 2012 (€7.8 million in 2011).
Net eligible expenses amounted to €27.6 million in 2012 (€26.3 million in
2011). Variation in net eligible expenses between 2011 and 2012 (+5%) does not
reflect the change in research and development expenses (-8%). This is mainly
explained by a significant decrease, between 2011 and 2012, in non-eligible
expenses such as milestone payments to Jennerex, Inc. (zero in 2012 compared
to €6.9 million in 2011). Retreated of these milestone payments, research and
development expenses increased by €2.6 million (6%) between 2011 and 2012,
mostly due to an increase in external expenses on clinical trials.

Operating expenses:

R&D expenses amounted to €48.7 million in 2012, compared with €53.0 million in
2011, a decrease of 8%. This decrease was mainly due to the absence of
milestone payment to Jennerex, Inc. in 2012.

The table below lists research and development expenses per nature of expense:

In millions of euros                      12/31/2012  12/31/2011  Variation
Personnel costs                           19.5        18.9        +3%
Share-based payments                       0.7          1.1          -36%
Intellectual property expenses and         1.6          9.2          -83%
license costs
External costs on clinical projects        11.7         8.6          +36%
External costs on other projects           3.2          3.9          -18%
Operating costs                            9.2          8.6          +7%
Depreciation, amortization and            2.8         2.7         +4%
provisions
Research and development expenses         48.7        53.0        -8%

R&D staff costs amounted to €19.5 million in 2012, compared to €18.9 million
in 2011. This change (+3%) is explained by an increase in salaries (2% in
average) as well as by an increase in headcount (247 FTE in 2012 vs. 242 in
2011).

External intellectual property and licensing costs amounted to €1.6 million in
2012, compared to €9.2 million in 2011. This significant decrease is mostly
explained by the absence of payments made or due to Jennerex, Inc. in 2012
(€6.9 million in 2011 for clinical and production milestone achieved in 2011
with Pexa-Vec).

External expenses on clinical trials amounted to €11.7 million in 2012,
compared to €8.6 million in 2011. This increase (+36%) is explained by
clinical advancement in 2012 of our two most advanced products: start of
patient recruitment in the phase 2b part of a large phase 2b/3 clinical trial
with TG4010 in lung cancer (€6.1 million in 2012 vs. €3.1 million in 2011) and
patients recruitment in the TRAVERSE phase 2b clinical trial and other
clinical trials with Pexa-Vec (€2.7million in 2012 vs. €0.9 million in 2011).

External expenses on other projects, including research, pre-clinical and
industrial projects, amounted to €3.2 million in 2012, to be compared with
€3.9 million in 2011. This change is mostly explained by a decrease in
outsourcing activities on industrial development projects, in particular for
the development of novel manufacturing processes.

Internal/structure costs are expenses related to operating research and
production facilities, including but not limited to cost of the finance lease,
maintenance costs and supply of laboratory materials. These costs amounted to
€9.2 million in 2012, compared to €8.6 million in 2011. This change is mostly
explained by an increase in maintenance and qualification costs of our
production unit. This evolution is mostly driven by regulatory requirements.

The table below lists the general and administrative expenses per nature of
expense:

In millions of euros                      31/12/2012  31/12/2011  Variation
Personnel costs                           2.7         2.7         N/S
Share-based payments                       0.2          0.4          N/S
Fees and administrative expenses           2.6          2.1          +24%
Other fixed costs                          1.0          0.9          +11%
Depreciation, amortization and            0.1         0.1         N/S
provisions
Fixed costs                               6.6         6.2         +6%

G&A staff costs amounted to €2.7 million in 2012, unchanged, reflecting a
stable headcount.

Advisory and management fees amounted to €2.6 million in 2012, compared with
€2.1 million euros in 2011.

Interest income and (expenses), net:

Interest expenses, net of interest income, amounted to €0.6 million in 2012
(income of €1.4 million in 2011). Interest income on investments amounted to
€0.5 million in 2012 (€1.9 million in 2011). This change is explained by a
decrease in average invested amounts (€115 million in 2012 vs. €159 million in
2011), as well as by a decrease in monetary market rates (3-month Euribor
average at 0.57% in 2012, compared to 1.39% in 2011).

Interest expenses were mostly related to the interest on lease financing of
the main premises of Transgene (€0.4 million in 2012, unchanged).

Net loss:

Net loss amounted to €43.2 million in 2012, compared with €43.6 million in
2011. Net loss per share amounted to €1.36 in 2012 (€1.38 per share in 2011).

Investments:

Investment in tangible and intangible assets amounted to €2.0 million in 2012,
compared with €3.8 million in 2011.
Transgene also invested €3.8 million in Transgene Tasly (Tianjin)
Biopharmaceuticals Co. Ltd, including €2.6 million in cash payment and €1.2
million in contribution in intellectual property rights related to TG3003
product for the Transgene Tasly (Tianjin) Biopharmaceuticals Co. Ltd area
which is China, Hong Kong, Taiwan and Macao.

Borrowings and conditional subsidies:

In 2012, Transgene received €3.1 million in conditional subsidies from OSEO in
relation to the ADNA program (see above). The Company expects to receive
another €6.3 million in conditional loans up to the end of this program
(2016).

Cash, cash equivalents and other financial assets:

Cash is invested primarily in short term mutual funds or in a cash pooling
managed by the Institut Mérieux, its controlling shareholder. As of December
31, 2012, the Company had €92.9 million in cash, cash equivalents and other
financial assets, compared with €139.5 million as of December 31, 2011.

Elements of cash flow:

Excluding the investment made in the equity capital of Transgene Tasly
(Tianjin) Biopharmaceuticals Co. Ltd., cash consumption amounted to €44.0
million in 2012 (€39.6 million in 2011).

Including the €2.6 million investment made in the equity capital of Transgene
Tasly (Tianjin) Biopharmaceuticals Co. Ltd., cash consumption of Transgene
amounted to €46.6 million in 2012.

Post-closing events:

In March 2013, Jennerex, Inc. started a fundraising is the form of a rights
issue to its shareholders, including Transgene. The contemplated fundraising
is offered at a price per share which is below what Transgene has retained for
its equity stake in Jennerex, Inc. in its balance sheet. Given its nature,
i.e. a rights issue, Transgene considers that the contemplated fundraising
does not reflect Jennerex’ fair value, Inc. as of December 31, 2012. This
transaction was not completed at the time Transgene’s board of directors of
approved these financial statements.

Risk factors:

Risk factors are presented in Section 4 of the Document de Référence.

  Société anonyme au capital de 72.886.317 € – R.C. Strasbourg B 317 540 581
   400 boulevard Gonthier d’Andernach – Parc d’Innovation - CS80166 – 67405
                    ILLKIRCH GRAFFENSTADEN CEDEX (France)
             Tél: + 33 3 88 27 91 00 - Fax: + 33 3 88 27 91 11

Contact:

Transgene
Philippe Archinard, Chairman & Chief Executive Officer
Stéphane Boissel, Executive Vice President & CFO, +33 (0)3 88 27 91 02
Elisabetta Castelli, Director Investor Relations, +33 (0)3 88 27 91 21
or
MC Services
Raimund Gabriel, +49 89 210 228 30
Shaun Brown, +44 207 148 5998
 
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