PARIS - Transgene SA reported a net loss of FFr36.7 million for the second quarter of 1998, up from FFr21 million in the corresponding quarter of 1997.

The Strasbourg, France, company attributed the 75 percent increase in net loss to higher R&D costs associated with the entry of some of its gene therapies into Phase II clinical trials.

R&D spending amounted to FFr30.8 million, an 8.2 percent jump from FFr28.4 million in the second quarter of 1997. Transgene spent a further FFr6.5 million on the “acquisition of licenses and R&D in progress“ under its agreement with Human Genome Sciences (HGS), of Rockville, Md. The FFr155.4 million payment Transgene made to HGS in the first quarter contributed to a net loss of FFr142.5 million.

Transgene has recorded this combined payment of FFr161.9 million to HGS as a non-recurring expense. For the first half of 1998 its overall net loss was FFr179.2 million.

Revenues in the second quarter of this year amounted to FFr4.1 million, compared with FFr12.5 million in the second quarter last year. The decrease reflects the virtual cessation of state R&D grants, which totaled FFr8.25 million during the second three months of 1997, as well as a drop in revenues from collaborative and licensing agreements to FFr3.1 million from FFr4.3 million a year ago.

But Transgene pointed out it continues to seek funding from both private and government sources.

The company's holdings of cash and cash equivalents stood at FFr477.1 million as of June 30, including proceeds from its initial public offering (IPO) in March, concurrent private placements and exercise of the underwriters' overallotment option on the IPO.

The Phase II trials under way are evaluating gene therapies for prostate cancer in the U.S. and for breast cancer and metastatic melanoma in Europe.

Transgene has developed five vectors for gene delivery, three of which are in clinical development for treatment not only of various cancers but also of cystic fibrosis.

In addition, Transgene has a five-year research collaboration and licensing agreement with Schering-Plough Corp., of Madison, N.J., covering development of gene therapy products using the pharmaceutical firm's p53 tumor suppressor gene and up to five other genes.

Transgene's 10-year collaboration agreement with HGS covers identification of genes using HGS' database of human gene sequences. *