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Transgene investors need strong eyesight


Source Company EP Vantage Transgene Related: Novartis, Roche Story Focus Comment Date February 24, 2011 With shares in Transgene trading at two-year lows, investors are increasingly being required to take a long term view on the French biotechnology company.

Either through its own strategic moves or because of decisions made by other parties yesterdays news that Roche is handing back the rights to a midstage immunotherapy, for example Transgene is shouldering the bulk of the development risks of its pipeline. This also means it will benefit greatly from the rewards success might bring. But with significant milestones still some way in the future, strong eyesight and a bit of patience is required. New opportunity Strategic reasons were blamed for Roches decision to hand back rights to TG4001/RG3484, a therapeutic vaccine in trials to treat pre-cancerous cervical lesions. Data from an ongoing phase IIb study are due towards the end of this year so the timing is slightly strange Roche could have waited for the trial to read out and then made a decision. A pipeline sweep out amid the pharma giants ongoing operational review seems a likely explanation. Assuming the study succeeds a new deal will be sought for the product, Philippe Archinard, chief executive of Transgene, told analysts on a conference call yesterday, but this time on different terms. Given the companys strategy to become a fully integrated pharmaceutical company, Transgene will give less away this time, possibly retaining commercial rights for Europe and China and seeking partners elsewhere. Roche previously owned worldwide rights. This echoes last year's deal making, when Transgene chose to try to capture more future value when it sold Novartis an option over its lung cancer immunotherapy, TG 4010 (Transgene deal disappoints but were expectations too high?, March 10, 2010).

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The terms of this deal massively disappointed investors shares in the company plunged 14% from a nine-year high of 22 when it was announced. The cancer vaccine space is high-risk and expectations were arguably too high, but the fact that Transgene would retain all the risks of the project for another two years was for some a nasty shock. Shares in the company are currently trading at 12, down 18% on Roche's decision. On the hook Novartis has a 90-day window to decide whether to exercise its option on the receipt of phase IIb data for TG 4010, which are slated to appear at the end of 2012. Until then, Transgene is on the hook for development costs, and has only received 10m from the Swiss company. Mr Archinard has argued that this deal means Transgene will retain a lot more of the value of this project, over the longer term. It sounds like he has similar plans for TG4001. Early data on TG4001 has been encouraging but further proof is required, and will come with phase IIb data due later this year. An ongoing study has enrolled 195 of the targeted 200 women, who have severe lesions - described as CIN2/3 lesions and who are infected with HPV16, a strain of the human papilloma virus that causes cervical cancer. TG4001 works by alerting the immune system to the infected cells. Although surgical methods currently employed to remove these lesions are very effective, 30-40% of cases recur, according to Transgene, and a less invasive more long term treatment for the condition is required. Paying dividends Of course, Mr Archinard benefits from having a fully supportive majority shareholder, which is content to take a long term view. Institut Mrieux owns 55% of the company, maintaining that stake when Transgene raised 152m ($196m) by selling shares last year (Transgene settles down for the long haul but did they miss an opportunity?, May 10, 2010). And sentiment around the therapeutic cancer vaccine and immunotherapy space is certainly improving, prompted by clinical progress from a number of candidates and Dendreons success with Provenge. Meanwhile Amgens acquisition of BioVex last month was another sign that the worlds biggest drug makers are increasingly willing to commit big bucks to the space (EP Vantage Interview - Amgen infected with enthusiasm for new cancer vaccine, January 31, 2011). So this strategy could certainly pay big dividends in the future. But for now, other investors will be understandably wary that Transgene is

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wholly exposed to the waxing or waning of its two lead products, and will continue to be so for the next couple of years.

This content is written, edited and published by EP Vantage and is distributed by EvaluatePharma Ltd. All queries regarding the content should be directed to: news@epvantage.com EP Vantage is a unique, forward-looking, news analysis service tailored to the needs of pharma and finance professionals. EP Vantage focuses on the events that will define the future of companies, products and therapy areas, with detailed financial analysis of events in real-time, including regulatory decisions, product approvals, licensing deals, patent decisions, M&A. Drawing on EvaluatePharma, an industry-leading database of actual and forecast product sales and financials, EP Vantage gives readers the insight to make value-enhancing decisions. EP Vantage SM

2011 EP Vantage Ltd

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