Transgene Corporate Outlook: Key TIME Approaches

Transgene’s (TNG) two lead products, TG4010 and Pexa-Vec, could enter Phase III development in FY14 depending on clinical data in H213. Results from the first part of the Phase II/III TIME study due in Q313 are particularly important as they could lead to Novartis exercising its licensing option on TG4010 and paying Transgene a substantial upfront fee in Q413. The data from the Phase II TRAVERSE trial in Q413 could also trigger a major re-rating of the shares. We value Transgene at €480m or €15.08 per share.


Data from Phase II/III TIME trial due in Q313
Over 70% of patients for initial stage of the Phase II/III TIME trial have been recruited to date, so that the study remains on schedule to report the PFS data (primary endpoint for the Phase II stage) in Q313. After receipt of this data, Novartis has 90 days to exercise its option to in-license the global rights to TG4010, which would trigger a significant upfront payment to Transgene.

Pexa-Vec Phase II TRAVERSE data due in Q413
In a Phase IIa study in hepatocellular carcinoma (HCC), patients receiving a high dose of Pexa-Vec (JX594/TG6006) had a median overall survival of 13.8 months compared to 6.7 months in those receiving a low dose. If this level of efficacy is repeated in the Phase II TRAVERSE trial, data due in Q413, and Pexa-Vec is still well tolerated, it could enter Phase III development in FY14.

Cautious about prospects for TG4040 despite data
The final data from the Phase II trial with TG4040 in patients with chronic HCV infections, reported at the EASL conference in April, suggests that TG4040 is an efficacious and safe treatment for HCV. But we consider the further development of TG4040 is unlikely due to commercial considerations. Novel HCV products are targeting the creation or oral-only treatments and TG4040 needs to be injected.

Valuation: DCF valuation of €480m
We have reduced our valuation by €95m to €480m, as we no longer include potential royalties for TG4040. However, there is still over 70% upside and our valuation could increase to €630m in FY13 if there is positive data on TG4040, Pexa-Vec and Novartis in-licenses TG4010. Transgene had €80.1m in cash at Q113, which should allow it to operate until Q414 and potentially into FY16 if TG4010 is partnered to Novartis or another company.

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