Transgene Stock Drops on Novartis Decision to Bypass Drug

Transgene SA (TNG) shares had the steepest decline in more than three years after Novartis AG (NOVN) decided not to buy the rights to the French drug developer’s experimental lung cancer therapy TG4010.

The biotechnology company’s stock fell 15 percent, the biggest drop since Feb. 2011, to 9.29 euros in Paris trading today.

“Novartis’s decision increases uncertainty around Transgene and the valuation will mainly rely on the ability to strike a new deal for TG4010,” Mathieu Chabert, an analyst at Bryan Garnier & Co. in Paris, wrote in a note today.

Transgene, based in Illkirch, France, stood to get as much as 700 million euros ($967 million) from Novartis. The French company will immediately start seeking a new partner for the experimental treatment, Chief Executive Officer Philippe Archinard said in a telephone interview yesterday.

“We will be talking to more parties,” the CEO said. “We know who to talk to, and we will initiate these calls as of tomorrow.” The company is targeting a new partnership by the end of the year, Archinard said, adding that Novartis didn’t give a reason for its decision.

Preliminary results of an intermediate trial, released in January, suggested the drug known as TG4010 is well-tolerated by non-small cell lung cancer sufferers and showed researchers how to refine the criteria used to select patients. Transgene reiterated yesterday it will move ahead with advanced tests of TG4010 after a mid-stage trial helped determine which people are most likely to respond.

Data Strength

“What we know for sure, and nothing has changed since, is the strength of the data,” Archinard said in the interview. “We are confident on the data and we are confident there is a strong appetite for immune-therapeutics in the world.”

Novartis evaluated the program based on strategic considerations including clinical data, costs of proceeding to the next study and probability of success, a spokeswoman for the Basel, Switzerland-based drugmaker said by e-mail. The review and decision not to exercise the option weren’t related to Novartis’s announcement last week of a planned acquisition of GlaxoSmithKline Plc (GSK)’s cancer medicine business for as much as $16 billion, she said.

Partnership Difficulty

“It will be a difficult day for Transgene,” Frederic Gomez, an analyst at Pharmium Securities in Paris, said yesterday in a telephone interview. It may be “hard to find another partner for the product,” he added.

TG4010 is often described as a vaccine because it’s designed to stimulate the immune system to fight cancer. The number of new lung cancer cases in the U.S. probably will reach 224,210 this year, according to estimates by the American Cancer Society. Non-small cell lung cancer is the most common form of the disease.

Transgene, controlled by the billionaire Merieux family, will discuss with regulators the next stage of tests, which the company wants to start as soon as possible, Archinard said.

The product may generate as much as $1 billion in annual sales, Transgene Chief Financial Officer Stephane Boissel had said in a July interview.

Transgene won’t need to go back to the market for financing “in the short term,” Archinard said.

To contact the reporter on this story: Albertina Torsoli in Geneva at atorsoli@bloomberg.net

To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net Sara Marley, David Risser, Kim McLaughlin

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