TG4001 first efficacy data presented at ESMO

Transgene 4 October 2019 Update
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Transgene

TG4001 first efficacy data presented at ESMO

Clinical trial data

Pharma & biotech

4 October 2019

Price

€1.85

Market cap

€154m

Gross cash and short-term investments (€m) at 30 June 2019 (excluding gross €48.7m raise and $10m AZN upfront)

12.8

Shares in issue

83.3m

Free float

40%

Code

TNG

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

7.3

(23.1)

(37.1)

Rel (local)

8.0

(20.6)

(35.6)

52-week high/low

€3.18

€1.65

Business description

Transgene is a French drug discovery and development company focused on the treatment of cancer and infectious diseases with immunotherapies. Its products are TG4010, TG4001, TG1050, TG6002 and TG4050.

Next events

TG4010 + nivolumab + chemo efficacy data in first-line NSCLC

December 2019

Start of clinical trials with TG4050 in ovarian cancer and HPV-negative head and neck cancer

Q419

TG6002 Phase I safety data

Q419

Analysts

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Dr Sean Conroy

+44 (0)20 3077 5700

Transgene is a research client of Edison Investment Research Limited

At the 2019 European Society for Medical Oncology (ESMO) conference, Transgene presented the first efficacy data for TG4001 in combination with avelumab (Bavencio) in patients with human papillomavirus (HPV) positive cancers. In the Phase I trial, three out of nine patients treated demonstrated a durable partial response, and no dose-limiting toxicities were observed among the nine patients. All patients had metastatic disease and had previously undergone multiple lines of therapy. The tumour types selected have historically demonstrated low response rates to immune checkpoint inhibitors and we view this early data as positive for TG4001. We retain our valuation of Transgene at €287m (€3.45/share).

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(€)

Yield
(%)

12/17

8.1

(35.0)

(0.53)

0.0

N/A

N/A

12/18

42.9

(36.8)

(0.45)

0.0

N/A

N/A

12/19e

16.9

(15.9)

(0.21)

0.0

N/A

N/A

12/20e

4.9

(27.6)

(0.33)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

ESMO data hints at potential of ICI combinations

TG4001 is a therapeutic vaccine based on an MVA vector engineered to express HPV 16 antigens E6 and E7, in addition to IL2. It is currently being tested in a Phase II portion of a Phase Ib/II trial in patients with HPV positive cancers. The Phase Ib data was presented at ESMO and highlighted the treatment of nine patients across two dose cohorts with oropharyngeal (five), anal (two), cervical (one) or vaginal (one) cancer. Patients had refractory or metastatic cancers and had received at least two prior treatment regimens. No dose-limiting toxicities or serious adverse events (AEs) were observed. Three out of the nine patients had a partial response (PR). Phenotypic and gene findings supported the idea of a shift in tumours from a ‘cold’ state to an immunologically ‘hot’ state in some patients.

Efficacy readout of TG4010 ICI combo in Q419

Efficacy data from the Phase II TG4010 (+nivolumab +chemotherapy) trial in first-line NSCLC is due in December and will be central to determining Transgene’s long-term immune oncology (IO) strategy. Transgene continues to progress its technology; notably, in H119 it announced a partnership with AZN to develop five novel armed oncolytic viruses ($10m upfront, potential future milestones and royalties). Additional early-stage development continues with the advancement of the first product candidate (TG4050) from the company’s myvac platform into the clinic (initiating clinical trials in Q419).

Valuation: €287m (€3.45/share)

We retain our valuation of Transgene at €287m (€3.45/share) based on a risk-adjusted NPV model of TG4010, TG4001, TG1050 and TG6002, in addition to assumed net cash of €55.5m (boosted by the recent €48.7m capital raise and the $10m AZN upfront). For a full overview of our valuation, please see our recently published outlook note PHOCUS turns to earlier-stage assets.

TG4001 high dose demonstrates promising efficacy

In the Phase Ib trial, TG4001 was administered subcutaneously (SC) weekly for six weeks, every two weeks up to month six, and every 12 weeks thereafter. Additionally, all patients one week after the first TG4001 dose received avelumab at 10mg/kg and continued to receive it subsequently every two weeks. Three patients received a low dose (5×106 plaque forming units (pfu)) of TG4001 and the other six a high dose (5×107 pfu). Across cohorts, patients’ mean age was 57.8 (range: 39–78) and they had undergone a median of two rounds of chemo (range 1–3). All patients had distant metastases. No treatment-related serious adverse events were observed, with the majority of reported AEs mild to moderate in nature (grade 1–2). Only two grade 3 AEs were observed in the study, and they both occurred in the same patient in the lower dose group.

In total across both dose cohorts, three patients had a PR, three had stable disease and three had progressive disease. As observed in Exhibit 1, the largest changes in tumour size came at the highest dose of TG4001 of 5×107 pfu.

Exhibit 1: Tumour responses to TG4001 and avelumab

Source: Transgene ESMO TG4001 presentation

In addition to efficacy and safety, immunological data was recorded. Of note four out of five evaluable patients had a significant increase in PD-L1 expression, while T-cell ratios shifted towards a positive immune environment (increase in CD3 and CD8 cells).

In the expansion cohort (Phase II), 40 patients with HPV-positive head and neck squamous cell carcinoma (HNSCC) are being enrolled into a single-arm cohort. Patients are receiving the highest dose tested in the Phase Ib component of the trial. The primary outcome of the Phase II part will be efficacy as measured by objective response rate (ORR). Interim results are expected in H120. We note, the trial is funded by Transgene, while Pfizer and Merck will provide avelumab. Pfizer and Merck do not have exclusive rights to the data or TG4001, both of which remain Transgene’s.

Exhibit 2: Financial summary

€000s

2017

2018

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

8,144

42,919

16,887

4,936

Cost of Sales

0

0

0

0

Gross Profit

8,144

42,919

16,887

4,936

R&D expenses

(30,359)

(27,349)

(23,247)

(23,479)

G&A expenses

(5,674)

(6,991)

(7,061)

(7,132)

EBITDA

 

 

(26,352)

9,101

(12,045)

(24,291)

Operating Profit (before amort. and except).

 

(28,043)

7,368

(13,367)

(25,623)

Intangible Amortisation

0

0

(54)

(52)

Exceptionals (restructuring costs/discontinued operations)

0

0

0

0

Operating Profit

(28,043)

7,368

(13,421)

(25,675)

Other

0

0

0

0

Net Interest

(2,287)

(2,017)

(2,573)

(1,961)

Profit Before Tax (norm)

 

 

(35,048)

(36,786)

(15,940)

(27,584)

Profit Before Tax (IFRS)

 

 

(30,330)

5,351

(15,994)

(27,636)

Tax

0

0

0

0

Minority interest

(1,944)

2,675

0

0

Profit After Tax (norm)

(32,961)

(27,809)

(17,440)

(27,584)

Profit After Tax (IFRS)

(32,274)

8,026

(15,994)

(27,636)

Number of Shares Outstanding (m)

62.1

62.3

83.3

83.3

EPS - normalised (c)

 

 

(53.1)

(44.7)

(20.9)

(33.1)

EPS - IFRS (€)

 

 

(0.52)

0.13

(0.19)

(0.33)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

42,137

78,789

78,887

79,049

Intangible Assets

250

180

172

168

Tangible Assets

13,604

13,217

13,322

13,488

Other

28,283

65,392

65,392

65,392

Current Assets

 

 

58,736

29,754

51,915

26,605

Stocks

270

443

443

443

Debtors

2,564

784

6,477

1,893

Cash

41,405

16,900

33,368

12,642

Other

14,497

11,627

11,627

11,627

Current Liabilities

 

 

(16,866)

(19,537)

(14,688)

(12,358)

Creditors

(2,868)

(4,791)

(2,325)

(2,348)

Short term borrowings

0

0

0

0

Short term leases

(10,283)

(11,207)

(8,824)

(6,471)

Other

(3,715)

(3,539)

(3,539)

(3,539)

Long Term Liabilities

 

 

(55,918)

(52,305)

(42,177)

(41,612)

Long term borrowings

0

(10,000)

0

0

Long term leases

(51,717)

(38,369)

(38,241)

(37,676)

Other long term liabilities

(4,201)

(3,936)

(3,936)

(3,936)

Net Assets

 

 

28,089

36,701

73,937

51,684

CASH FLOW

Operating Cash Flow

 

 

(37,657)

(30,398)

(22,296)

(21,149)

Net Interest

2,287

2,017

(2,383)

(2,353)

Tax

0

0

0

0

Capex

(462)

(1,404)

(1,473)

(1,546)

Acquisitions/disposals

0

0

0

0

Financing

13,272

0

47,000

0

Dividends

0

0

0

0

Other

8,935

5,702

5,749

4,887

Net Cash Flow

(13,625)

(24,083)

26,596

(20,162)

Opening net debt/(cash)

 

 

6,794

20,595

42,676

13,697

HP finance leases initiated

(120)

2,033

2,383

2,353

Other

(56)

(31)

0

0

Closing net debt/(cash)

 

 

20,595

42,676

13,697

31,505

Source: Transgene accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Transgene and prepared and issued by Edison, in consideration of a fee payable by Transgene. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Transgene and prepared and issued by Edison, in consideration of a fee payable by Transgene. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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