TxCell announces first-half 2018 financial results and update on the proposed acquisition by Sangamo Therapeutics, Inc.

Valbonne, France, September 19, 2018, 5:45pm CEST – TxCell SA (FR0010127662 – TXCL), a developer of cellular immunotherapies based on regulatory T cells (Tregs) for inflammation, autoimmunity and transplantation, today announces financial results for the first half of 2018 and provides an update on the proposed acquisition by Sangamo Therapeutics, Inc.

The TxCell Half Year Financial Report as of June 30, 2018 is available on TxCell’s website www.txcell.com in the “Investors” / “Documentation” / “AMF regulated information” section.

On February 2, 2018, TxCell obtained a loan from Bpifrance for EUR 1.2 million for the partial financing of preclinical activities of TX200, its lead CAR-Treg program targeting HLA-A2 for the prevention of chronic rejection after solid organ transplantation.

On May 31, 2018, TxCell announced the execution of a Master Service Agreement (“MSA”) with Lonza Pharma & Biotech (“Lonza”) for the manufacturing of TX200 during a clinical trial expected to start in 2019. 

On June 21, 2018, TxCell announced the presentation of the first in vivo proof-of-concept data generated with a proprietary CD8+ CAR-Tregs in relevant animal models of graft-versus-host disease (GvHD) and skin graft. This was obtained in the context of a collaboration between TxCell and the Center of Research in Transplantation and Immunology (CRTI, Nantes, France).

During the first half of 2018, 66 warrants (“Tranche Warrants”) giving access to notes (“OCA”) with share subscription warrants attached (“BSA” and, together with the OCA to which they are attached, the “OCABSA”) have been exercised by Yorkville, upon request of TxCell. TxCell consequently issued 66 OCA to Yorkville for a total nominal amount of EUR 6.6 million, from which 550,000 BSA were detached. As at the date hereof, there are 56 outstanding OCA (representing a total nominal amount of EUR 5.6 million) that remain to be converted into TxCell shares.

The terms and conditions of the offer and the price of EUR 2.58 per share proposed in the simplified tender offer, representing an enterprise value for TxCell of approximately EUR 72 million on a debt free and cash free basis, will be subject in particular to the AMF's compliance decision on the proposed offer. For more information, please refer to the press release dated July 23, 2018.

Simultaneously, TxCell also announced an amendment of its OCABSA financing, subject to the completion of the Acquisition. The agreement entered into with Yorkville provides for (i) the early redemption of 50 percent of the 56 OCA currently held by Yorkville for a total redemption amount of EUR 3,080,000 (being 110 percent of their aggregate par value of EUR 2,800,000), (ii) the conversion by Yorkville of the remaining 28 OCA into 1,866,666 new TxCell shares at a fixed conversion price of EUR 1.50, and (iii) the buy back by TxCell of the 84 outstanding Tranche Warrants and the 1,236,350 BSA currently held by Yorkville for the lump sum of one euro, for cancellation. For more information, please refer to the press release dated July 23, 2018.

As of today, several conditions precedent to the Acquisition have been fulfilled, including the condition relating to regulations governing foreign investments in France. TxCell is therefore expecting the Acquisition to close in early October 2018. Sangamo would then file the proposed Tender Offer immediately after the completion of the Acquisition. 

In order to cover for working capital expenses of TxCell in the following months, Sangamo has granted a loan to TxCell of an amount of EUR 4.5 million pursuant to a loan agreement dated September 18, 2018.

The interim TxCell financial statements as of June 30, 2018, established according to IFRS standards, have been subject to a limited review by the statutory auditors and approved by TxCell’s Board of Directors on September 17, 2018. 

The financial statements as at June 30, 2018 have been prepared in accordance with the going concern principle, underpinned by the completion of the Acquisition, which is currently considered highly probable by TxCell.

TxCell’s 2018 half-year financial results mainly reflect the acceleration of the experiments necessary to develop the CAR-Treg platform: preclinical research programs and CAR-Treg manufacturing processes.

The results were characterized by a net loss of EUR 6.6 million, with a EUR 1.3 million increase compared with the first half of 2017, and can be summarized as follows:

• A EUR 0.5 million increase in research and development expenses, mainly related to the transfer of the TX200 manufacturing process to CMOs (Contract Manufacturing Organizations) and to CAR-Treg research programs conducted internally or through collaborative research and development agreements for the generation of preclinical proof-of-concept data;
• A EUR 0.4 million increase in general expenses, mainly due to non-recurring expense, notably commitment fees paid to Yorkville in the OCABSA draw in February 2018.

Research and development expenses remain the largest cost center for TxCell, representing 71 percent excluding expenses related to share-based payments. As of June 30, 2018, R&D expenses totaled EUR 4.7 million, compared to EUR 4.2 million as of June 30, 2017. For the first half of 2018, these R&D expenses were mostly invested in:

• CAR-Tregs manufacturing process development programs, including the transfer of the TX200 process to CMOs; and
• CAR-Tregs research programs conducted internally or through collaborative research and development agreements for the generation of preclinical proof-of-concept data.

As at June 30, 2018, the cash and cash equivalents amounted to EUR 4.4 million, after pre-financing of the 2018 Research Tax Credit for EUR 0.6 million and drawing of five monthly tranches of the OCABSA financing program for an aggregate nominal amount of EUR 6.6 million. 

Statement of net income (in thousands of euros)	06/30/2018	06/30/2017*
Revenue	-	-
Other income	1,047	1,292
Revenue and other income	1,047	1,292
Research and development expenses	(4,678)	(4,166)
General and administrative expenses	(1,935)	(1,561)
Expenses related to share-based payments	(152)	(587)
Current operating profit / (loss)	(5,717)	(5,022)
Other operating expenses	-	-
Other operating income	-	-
Operating profit / (loss)	(5,717)	(5,022)
Income from cash and cash equivalents	0	0
Cost of gross financial debt	(38)	(44)
Cost of net financial debt	(38)	(44)
Other financial income	1	2
Other financial expenses	(854)	(222)
Net profit / (loss) before tax	(6,608)	(5,286)
Income taxes	-	-
Net profit / (loss)	(6,608)	(5,286)

* During the second semester of 2017, TxCell fine-tuned the allocation of expenses by destination. The statement of net income at June 2017 is presented using the same analytical distribution method as the June 30, 2018 financial statements to enable comparisons between periods.

About TxCell – www.txcell.com 

TxCell is a biotechnology company that develops platforms for innovative, personalized T cell immunotherapies for the treatment of severe inflammatory and autoimmune diseases with high unmet medical need. TxCell is targeting transplantation as well as a range of autoimmune diseases (both T-cell and B-cell-mediated), such as multiple sclerosis, rheumatoid arthritis, inflammatory bowel diseases or inflammatory skin diseases.

TxCell’s cellular immunotherapies are based on regulatory T lymphocytes (Tregs). Tregs are a T cell population discovered in the nineties for which anti-inflammatory properties have been demonstrated. Contrary to conventional approaches based on non-specific polyclonal Tregs, TxCell is exclusively developing engineered antigen-specific Tregs, where the antigen specificity is brought by a Chimeric Antigen Receptor (CAR) (CAR-Treg cells). 

Based in Sophia-Antipolis, France, TxCell is listed on Euronext Paris and currently has 46 employees.

This press release contains certain forward-looking statements relating to the business of TxCell, which shall not be considered per se as historical facts, including TxCell’s ability to develop, market, commercialize and achieve market acceptance for specific products, estimates for future performance and estimates regarding anticipated operating losses, future revenues, capital requirements, needs for additional financing. In addition, even if the actual results or development of TxCell are consistent with the forward-looking statements contained in this press release, those results or developments of TxCell may not be indicative of their in the future.

In some cases, you can identify forward-looking statements by words such as "could," "should," "may," "expects," "anticipates," "believes," "intends," "estimates," "aims," "targets," or similar words. Although the management of TxCell believes that these forward-looking statements are reasonably made, they are based largely on the current expectations of TxCell as of the date of this press release and are subject to a number of known and unknown risks and uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or implied by these forward-looking statements. In particular, the expectations of TxCell could be affected by, among other things, uncertainties involved in the development of TxCell’s products, which may not succeed, or in the delivery of TxCell’s products marketing authorizations by the relevant regulatory authorities and, in general, any factor that could affects TxCell capacity to commercialize the products it develops, as well as, any other risk and uncertainties developed or identified in any public documents filed by TxCell with the AMF, included those listed in chapter 4 “Risk factors” of the 2017 document de référence (registration document) submitted to the AMF on April 25, 2018. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements made in this press release will in fact be realized. Notwithstanding the compliance with article 223-1 of the General Regulation of the AMF (the information disclosed must be “accurate, precise and fairly presented”), TxCell is providing the information in these materials as of this press release, and disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

This press release is for information purposes only and does not, and shall not, in any circumstances, constitute a public offering by TxCell nor a solicitation of an offer to subscribe for securities in any jurisdiction, including France. The persons in possession of this announcement shall then get knowledge of any local restrictions and shall comply with these restrictions.