PARIS - Transgène SA is seeking simultaneous listings on France's Nouveau Marché and the Nasdaq in an initial public offering (IPO) aimed at providing it with around FFr427 million of fresh capital. The offering is expected to be complete March 31.
The company has proposed selling 1.125 million shares at a price between FFr228 and FFr265 per share. At the same time, two existing shareholders, bioMérieux Alliance and the French Anti-Myopathy Association (Association Française Contre les Myopathies), have agreed to purchase 125,000 and 35,798 additional shares, respectively, while 15,000 shares are being reserved for company staff.
In addition, Human Genome Sciences Inc. (HGS), of Rockville, Md., with which Transgène signed a 10-year research collaboration agreement March 2, will purchase 542,916 shares, equivalent to a 10.4 percent interest, at the offering price.
Following the IPO, two companies controlled by chairman Alain Mérieux will have a majority holding of 58.3 percent (down from 86.5 percent before), while HGS will be the second largest shareholder.
Not counting the overallotment option of 168,750 shares for the financial institutions handling the IPO, the operation will raise the total number of Transgène shares issued to 5,215,442 and value the company at between FFr1.2 billion and FFr1.38 billion.
After the last major increase in capital in December 1994, when existing shareholders put up FFr240 million, the company was valued at FFr480 million to FFr490 million.
Most of that funding round was used up by the end of 1997, when Transgène's holdings of cash and liquid assets amounted to FFr93.3 million. The company reported a net loss of FFr77.4 million in 1997, when revenues from the services it still provides to the pharmaceutical industry amounted to FFr43.9 million, down from FFr54.8 million in 1996.
Total operating costs rose to FFr139.4 million (including R&D spending of FFr117 million) in 1997 from FFr122.3 million in 1996 and FFr114.1 million in 1995.
R&D outlays are expected to rise to around FFr150 million in 1998, resulting in a further increase in the net loss to more than FFr100 million, according to Lehman Brothers, the bank in charge of the public offering. Lehman estimated Transgène will not receive its first royalties until 2003 and will not move into profit until 2004.
Five Gene-Therapy Vectors Developed
Transgène's financial director, Bernard Davitian, said the funds raised through the IPO would be sufficient to finance the company's R&D activities through to the end of 2000. But he added that the company expects to conclude further collaboration agreements that would generate additional funding.
In that regard, Transgène's managing director, Bernard Gilly, told BioWorld International the company currently was negotiating with three major pharmaceutical firms in Europe and the U.S. Transgène currently employs about 200 people, including 160 researchers, but Gilly said there would be no significant increase in the work force in the foreseeable future.
Transgène's long-standing objective of going public was made possible by the research collaboration agreements it signed with HGS and Schering-Plough Corp., of Madison, N.J., in early February. (See BioWorld International, Feb. 11, 1998, p. 6.)
The agreement with HGS provides for Transgène to pay HGS licensing and R&D fees equal in value to the amount paid by the U.S. company for its 10.4 percent stake in Transgène. The two companies are to collaborate over a 10-year period in the identification of new genes of potential interest for gene therapy using HGS' database of human gene sequences. Transgène will make milestone payments to HGS as well as paying for the genes it licenses. HGS also will receive royalties from product sales under license and from sublicensing agreements.
In the deal with Schering-Plough, on the other hand, which Gilly described as “the biggest gene therapy collaboration agreement yet signed by the U.S. drug maker and the largest ever concluded by a European company,“ Transgène will be on the receiving end of financial flows.
The agreement calls for Schering to make an up-front payment of $8 million to Transgène for exclusive rights to use the latter's adenoviral systems for delivering the p53 tumor-suppressor gene, and further payments of as much as $80 million could follow in the form of R&D funding and the acquisition of additional licenses over the five-year term of the agreement.
Transgène has developed and validated five different types of gene therapy vectors, more than any other company in the world, according to Gilly. Two in vivo cancer therapies have demonstrated their worth in Phase I trials and either are undergoing or will soon start Phase II trials.
One is a non-specific immunotherapy using monkey Vero cells to deliver the cytokine interleukin-2 (IL-2), which is currently in Phase II trials for the treatment of melanoma and other solid tumors. The other involves the delivery of IL-2 using the vaccinia virus MUC1, which will be tested in Phase II trials for breast, prostate and other cancers in Europe and Israel later this month and in the U.S. later in the year.
Furthermore, Phase I trials nearly are complete of an AdCFTR therapy for mucoviscidosis in cystic fibrosis patients using an aerosol spray to transfer a healthy copy of the cystic fibrosis transmembrane conductance regulator (CFTR) gene into lung cells. Lastly, trials are under way of an Ad-IL-2 therapy for gastrointestinal and lung cancer, and the same therapy is due to be tested in metastatic liver cancer. *