TRANSGENE : September 5, 2016 - Transgene Provides an Update on its Development Strategy and on its First Half-Year 2016 Financials

• Programs progressing in line with strategy
• Significant reduction of net loss: €12.2 million compared to €28.1 million in H1 2015
• €33.4 million in cash and cash equivalents as of June 30, 2016
• Cash burn guidance confirmed around €35 million in 2016

Conference call scheduled in English on September 6th, 2016 at 06:00 PM CET (12:00 PM EST)

In parallel with this progress in our clinical development activities, our research teams have been able to showcase Transgene's capacity to be at the forefront of innovation in the immunotherapy space.

Philippe Archinard, Chairman and Chief Executive Officer of Transgene said: "With its focus on research and development activities, Transgene has all the elements needed to position itself as an acknowledged leader in the field of immunotherapy. We are actively working to deliver the improved treatment options that patients with severe diseases clearly need, and to materialize development partnerships."

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1. Therapeutic Vaccines

   TG4010: development focused on Phase 2 clinical trials in combination with ICIs

   TG4010 is a therapeutic vaccine that induces an immune response against MUC1 expressing tumors, such as non-squamous non-small cell lung cancer (NSCLC). TG4010's mechanism of action and excellent safety profile make it a very suitable candidate for combinations with other therapies.

   TG4010's development plan aims at positioning Transgene in all relevant settings of either first or second line treatment of NSCLC patients by the end of 2017. Transgene will focus exclusively on Phase 2 studies that can generate a comprehensive data package as early as 2017. The Company has decided that the Phase 3 study of TG4010 in combination with chemotherapy in first line treatment will not be launched, in order to focus initially on "PD-L1 negative1" patients.

   Recent clinical trials in NSCLC have shown that a number of ICIs deliver efficacy in first line treatment. However, only about 30% of patients respond to these therapies. Therefore, in first line treatment, where chemotherapy is currently the standard of care, there still remains a significant need for improved therapeutic options, notably for "PD-L1 negative" patients. In second line treatment where ICIs have been approved, there also remains a significant need to improve the prognosis and to increase the number of patients that respond to treatments. Transgene's products could be instrumental in achieving these goals.

   In line with its strategy, Transgene intends to capitalize on the recent developments in lung cancer treatment to make TG4010 the ideal candidate for combination regimens with current and future standards of care.

   TG4010 + Opdivo® (nivolumab) Phase 2	Non-small cell lung cancer (NSCLC) - 2nd line
   TG4010 + ICI Phase 2	Non-small cell lung cancer (NSCLC) - 1st line

   • Trial expected to start in H2 2016 (NCT02823990) and first readout expected in 2017

   • Trial of TG4010 in combination with Opdivo®, conducted by UC Davis Medical Center (USA)

   • Preparation for Phase 2 clinical trials (in patients expressing low or undetectable levels of PD-L1)

   • Trials expected to start in H1 2017

   1 A molecule called PD-1 can be found at the surface of T cells. It binds with another molecule, PD-L1 that can be found on the surface of certain cancer cells. This interaction prevents T cells from attacking the abnormal cell, and allows the development of the tumor. By inhibiting PD-1 or PD-L1, ICIs help the immune system to eliminate cancer cells again. Nevertheless, these markers can be expressed at different levels in cancer patients. ICIs have demonstrated a significant efficacy in "high PD-L1" patients. ICIs have to date not been able to demonstrate a sufficient efficacy in patients with low or undetectable levels of PD-L1 ("PD-L1 negative" patients).

   TG4001: preparation of a Phase 2 clinical trial in combination with ICI

   TG4001 is a therapeutic vaccine that has already been administered to more than 300 patients with high grade cervical intra-epithelial neoplasia (CIN 2/3). It has demonstrated good safety, a significant HPV clearance rate and promising efficacy results. Its mechanism of action and good safety profile make TG4001 an appropriate candidate for combinations with other therapies, such as ICIs.

   TG4001 + ICI Phase 2

   HPV positive head and neck cancer - 2nd line

   • Trial expected to start in H1 2017

   • Prof. Christophe Le Tourneau, Institut Curie, principal investigator

   • Transgene will be the sponsor of the trial

   TG1050: ongoing Phase 1/1b trial

   TG1050 is a therapeutic vaccine for the treatment of chronic hepatitis B. Transgene has initiated, in 2015, a first-in-man study (NCT02428400) evaluating the safety and tolerability of TG1050 in patients who are currently being treated for chronic HBV infection with standard-of-care antiviral therapy. TG1050 is also being developed in China, where Transgene operates a joint-venture with Tasly Biopharmaceutical Technology.

   TG1050 + Standard-of- Care Antiviral Phase 1/1b

   Chronic hepatitis B

   • Phase 1/1b clinical trial is progressing following positive recommendation of the Safety Review Committee in July 2016

   • IND number granted in China

   • First data readout in H2 2017

2. Oncolytic viruses

   Pexa-Vec: launch of the Phase 3 trial, preparation of the Phase 2 clinical trials in combination with ICIs

   Pexa-Vec is an oncolytic virus designed to selectively destroy cancer cells through the lysis (breakdown) of cancer cells through viral replication, the reduction of the blood supply to tumors through vascular disruption, and the stimulation of the body's immune response against cancer cells. Its mechanism of action and its safety profile make it an appropriate candidate for combinations in solid tumors.

   Pexa-Vec + sorafenib (PHOCUS) Phase 3	Advanced liver cancer (hepatocellular carcinoma - HCC) - 1st line
   Pexa-Vec + ipilimumab Phase 2	Solid tumors
   Pexa-Vec + nivolumab Phase 2	Advanced liver cancer (hepatocellular carcinoma - HCC) - 1st line

   • 1st patient included and opening of clinical centers is progressing

   • Poster presentation at ASCO annual meeting

   • Clinical trial conducted by SillaJen, Inc., Transgene's partner

   • First data readout expected in 2019

   • Preparation of Phase 2 clinical trial with Centre Léon Bérard, the sponsor of the trial

   • Trial expected to start in H2 2016 and first readouts in 2017

   • Preparation of Phase 2 clinical trial (USA + Europe)

   • Trial expected to start in H1 2017

   TG6002: preparation of first-in-human trial

   TG6002 is the next generation of oncolytic immunotherapy. It has been designed to induce the breakdown of cancer cells (oncolysis) and express the FCU1 gene in cancer cells it has infected. The expression of this gene causes these cancer cells to transform the non-cytotoxic pro-drug, flucytosine (5-FC), into 5-FU, a widely used chemotherapy. Because this mechanism of action is different from standard therapies, TG6002 could potentially be used both in combination or as a monotherapy once a cancer becomes resistant to standard therapy.

   TG6002 Phase 1

   Glioblastoma

   • Preparation of a Phase 1 clinical trial with AP-HP (Pr Delattre principal investigator), with the support of INCA (French national cancer institute)

   • Trial expected to start in H1 2017

3. Preclinical portfolio

   During the first six months of 2016, Transgene has focused its preclinical research on two key topics:

   • The design of new, highly innovative oncolytic viruses with embedded payloads such as ICIs, or enzymes, either prodrug-activating enzymes or enzymes that can degrade immunosuppressive compounds. These novel viruses are expected to modulate the tumor microenvironment and to improve the potency of the anti-tumor immune response;

   • The development of innovative modalities for the preclinical screening, of new mode of administration, and the further characterization of our new candidate products.

     Several posters have been presented at key conferences, which allowed the Company to introduce its most recent results in the fields of onco-immunology and chronic infectious diseases. For example, at the last AACR (American Association for Cancer Research) meeting, Transgene presented a poster reporting the features of an oncolytic vaccinia virus expressing an anti-PD-1 antibody, thus demonstrating our capacity to engineer advanced multifunctional viruses in a so called "2 in 1" approach.

     Transgene expects that the integration of advanced therapeutic payloads within an oncolytic virus will allow it to generate several new drug candidates.

     Corporate

   • Restructuring plan and sale of the production asset to ABL Europe for €3.5 million finalized. Annualized savings are estimated to be approximately €15 million.

   • Management team strengthened: Maud Brandely, MD, PhD appointed Chief Medical Officer, and John Felitti, JD, LLM appointed General Counsel & Corporate Secretary