Transgene SA added €20 million (US$27.6 million) to its balance sheet by completing the second leg of a two-part capital increase that took in €65 million in total and unveiled plans, together with development partners Sillajen Co. Ltd. and Lee’s Pharmaceutical Holdings Ltd., for a phase III trial in liver cancer of its oncolytic immunotherapy Pexa-Vec (JX-594, pexastimogene devacirepvec).

Shareholders responded positively to the news, pushing the Strasbourg, France-based company’s share price (PARIS:TNG) up as much as 13.5 percent to €12.98 during trading Wednesday. Some of the analysts who follow Transgene exhibited even more exuberance. Mickael Chane-Du, at Gilbert Dupont, upped his target price on the stock from €18.50 to €26.

Much of the optimism hangs on a looming decision from Novartis AG to exercise an option on Transgene’s therapeutic vaccine TG4010, which comprises a modified Vaccinia ankara (MVA) virus encoding the MUC1 antigen and the cytokine interleukin 2 (IL-2). TG4010 recently missed the primary endpoint – of progression-free survival (PFS) – in the phase IIb portion of a combined phase IIb/III trial in patients with metastatic MUC1-positive non-small-cell lung cancer (NSCLC). (See BioWorld Today, Jan. 10, 2014.)

The primary analysis was based on stratifying patients into four subgroups, according to a new biomarker based on their baseline levels of triple-positive activated lymphocytes. An alternative analysis confirmed a positive effect of TG4010 on PFS seen in an earlier phase II study. Basel, Switzerland-based Novartis has 90 days in which to exercise its option, following its receipt of the phase IIb data package in mid-January. So before the end of next month, Transgene will know whether the deal – which has some €700 million in attached development, regulatory and commercial milestones across several indications – is a runner.

If it’s not, the company plans to progress TG4010 into a phase III trial with an alternative partner.

“We are moving forward and preparing for the phase III with very strong confidence we will convince somebody else, if not Novartis,” Transgene CEO and chairman Philippe Archinard told a conference call audience. “We are extremely confident that by the end of the year at the latest, we will have somebody on board.”

The phase IIb trial confirmed the validity of its predictive biomarker for selecting which patients would benefit from TG4010, although the stratification would be performed differently in a phase III trial. It now has sufficient fire power to enable it to press ahead without delay. “We now have approximately €100 million in the bank,” Archinard said.

This week’s transaction, a private placing of 2 million shares priced at €10 per share, followed a fully subscribed rights issue it completed last month, in which it raised €45.5 million by issuing 4,553,551 new shares (also at €10 per share) to existing investors. The company reported that it exited 2013 with €47.9 million in cash, having burned around €45 million during the year.

A phase III trial of Pexa-Vec in liver cancer is due to start in mid-2015. The study will enroll about 600 patients, who will be randomized in a 1:1 ratio to receive either Pexa-Vec followed by Nexavar (sorafenib; Bayer AG, Amgen Inc.) or Nexavar alone. Transgene will pick up 40 percent of the costs or about €16 million. Around the same time, Transgene, Busan, South Korea-based Silljen and Hong Kong-based Lee’s will also evaluate the therapy in several other combinations, including immune checkpoint inhibitors, and in several other tumor types.

Originally developed by Jennerex Biotherapeutics Inc., Pexa-Vec failed to attain the primary endpoint of overall survival in a phase IIb trial in patients with advanced liver cancer. Even though expectations were never high in that setting, given the status of the patients involved, it triggered the sale of the therapy’s original developer, San Francisco-based Jennerex, to Silljen, as Jennerex was no longer able to raise cash. The trio of development partners will now evaluate Pexa-Vec in the first-line setting. (See BioWorld Today, Sept. 5, 2013, and Nov. 27, 2013.)

Shares in Transgene closed Wednesday at €12.40, up 8.4 percent.