REFERENCE DOCUMENT Annual Financial Report

Translation for informational purposes only

This Reference Document was filed with the Autorité des Marchés Financiers on April 17, 2014, pursuant to Article 212-13 of the General Regulations of the Autorité des Marchés Financiers . This Reference Document can be used in connection with an offering of securities if accompanied by a Note d’opération approved by the Autorité des Marchés Financiers. This document was prepared by the issuer and its signees are responsible for its content.

CONTENTS 1. RESPONSIBLE PERSONS ...... 5 1.1. Persons responsible for information ...... 5 1.2. Declaration by the responsible person ...... 5 2. STATUTORY AUDITORS ...... 6 3. SELECTED FINANCIAL DATA...... 7 4. RISK FACTORS ...... 8 4.1. Risks specific to the Company ...... 8 4.1.1. Risks related to the therapeutic approaches selected by the Company ...... 8 4.1.2. Risks related to clinical trials ...... 8 4.1.3. Risks related to commercial-scale production ...... 10 4.1.4. Risks related to product adverse side effects ...... 10 4.1.5. Risks related to the funding of the Company’s development and activities ...... 10 4.1.6. Risks related to previous and future losses ...... 11 4.1.7. Specific risks related to development, manufacturing and marketing partnerships ...... 11 4.1.8. Dependence on qualified personnel ...... 12 4.2. Risks related to the Company’s business segment ...... 12 4.2.1. Risks related to competition and technological progress ...... 12 4.2.2. Specific risks related to patents and third-party intellectual property rights ...... 12 4.3. Financial risks ...... 13 4.3.1. Exchange rate risk ...... 13 4.3.2. Interest rate risks ...... 14 4.3.3. Liquidity risks ...... 14 4.3.4. Share risks ...... 15 4.4. Legal risks ...... 15 4.4.1. Specific risks related to patents ...... 15 4.4.2. Specific risks related to patent litigation ...... 16 4.4.3. Product liability ...... 16 4.4.4. Specific risks related to the use of hazardous products and those that are harmful to the environment ...... 17 4.5. Insurance and Risk Coverage ...... 17 4.6. Regulatory risks ...... 17 4.6.1. Risks related to the Company’s regulatory environment ...... 18 4.6.2. Risks related to obtaining marketing authorizations ...... 18 4.6.3. Risks related to changes or announcements about drug reimbursement policies ...... 19 5. INFORMATION ABOUT THE ISSUER ...... 20 5.1. History and development of the Company ...... 20 5.1.1. Legal Name and Commercial Name ...... 20 5.1.2. Place of Registration and Registration Number ...... 20 5.1.3. Date of Incorporation and Duration ...... 20 5.1.4. Registered Office, Legal Form and Applicable Law ...... 20 5.1.5. Significant Events in the Development of the Company’s Business ...... 20 5.2. Investments ...... 22 6. BUSINESS OVERVIEW...... 23 6.1. Principal activities ...... 23 6.1.1. Nature of Business ...... 23 6.1.2. Research and Development ...... 23 6.1.3. Production ...... 25 6.1.5. Other products ...... 33 6.2. Principal Markets ...... 34 6.2.1. Cancer ...... 34 6.2.1.1. Non-small cell lung cancer ...... 35 6.2.1.2. Hepatic cancers ...... 35 6.2.1.3. Cancers caused by the Human Papilloma Virus (HPV) ...... 35 6.2.2. Chronic infectious diseases ...... 36 2 6.2.2.1. Hepatitis C Virus Infection ...... 36 6.2.2.2. Hepatitis B Virus Infection ...... 37 6.2.3. Competition ...... 37 6.3. Exceptional events ...... 38 6.4. Dependence of the Company on patents, licenses and trade agreements ...... 38 6.5. Competitive advantages ...... 38 7. ORGANIZATIONAL CHART ...... 39 7.1. Relationship with the Institut Mérieux Group ...... 39 7.2. Subsidiaries and investments ...... 40 8. PROPERTY, PLANT AND EQUIPMENT...... 42 8.1. Property and equipment ...... 42 8.2. Environment ...... 42 9. REVIEW OF FINANCIAL CONDITION AND RESULTS ...... 44 9.1. General ...... 44 9.2. Major accounting principles...... 44 9.3. Financial position ...... 45 10. CASH FLOW AND CAPITAL RESOURCES ...... 48 11. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES ...... 49 12. TREND INFORMATION ...... 50 13. PROFIT FORECASTS OR ESTIMATES ...... 51 14. ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES ...... 52 14.1. Composition ...... 52 14.1.1. Board of Directors ...... 52 14.1.2. Management Committee ...... 56 14.2. Conflicts of Interest ...... 57 14.3. Declaration concerning the administrative and management bodies...... 57 15. COMPENSATION AND BENEFITS ...... 58 15.1. Compensation paid to directors and corporate executives ...... 58 15.2. Total amount of pension provisions ...... 61 16. ROLE OF ADMINISTRATIVE AND MANAGEMENT BODIES ...... 62 16.1. Dates and expiration of term ...... 62 16.2. Service contracts between the issuer and the members of the Board of Directors...... 62 16.3. Audit Committee and Nominations and Compensation Committee ...... 62 16.4. Corporate Governance ...... 62 Chairman’s Report as provided by Article L.225-37 of the Commercial Code ...... 62 Statutory Auditors’ Report, prepared pursuant to Article L. 225-235 of the Commercial Code, on the report by the Chairman of the Board of Directors of Transgene S.A...... 70 17. EMPLOYEES ...... 71 17.1. Personnel ...... 71 17.2. Stock options ...... 71 17.2.1. Stock option history ...... 71 17.3. Free allocation of shares ...... 72 17.4. Profit sharing ...... 73 18. PRINCIPAL SHAREHOLDERS ...... 74 18.1. Name of any person not a member of an administrative or management body, directly or indirectly 3 holding more than 5% (statutory and legal reporting threshold) of the Company’s capital or voting rights ...... 74 18.2. Special voting rights of major shareholders ...... 75 18.3. Controlling shareholder...... 75 18.4. Agreement that may result in a subsequent change of control of the Company ...... 75 19. RELATED PARTY TRANSACTIONS ...... 76 20. FINANCIAL INFORMATION CONCERNING COMPANY ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS ...... 78 20.1. Historical financial information ...... 78 20.1.1. Consolidated financial statements and notes ...... 78 Statutory Auditors’ Report on the consolidated financial statements ...... 106 20.1.2. Transgene SA annual financial statements and notes ...... 108 Statutory Auditors’ general report on the annual financial statements of Transgene SA ...... 127 20.2. Pro forma financial information ...... 129 20.3. Financial statements ...... 129 20.4. Verification of annual financial information ...... 129 20.5. Date of latest financial information ...... 129 20.6. Interim financial information ...... 129 20.7. Dividend policy...... 129 20.8. Legal and arbitration proceedings ...... 129 20.9. Significant change in the Company’s financial or trading position ...... 129 21. ADDITIONAL INFORMATION ...... 130 21.1. Share capital ...... 130 21.1.1. Issued capital ...... 130 21.1.2. Shares not representing capital ...... 130 21.1.3. Shares held either by the Company itself, on its behalf or by its subsidiaries ...... 130 21.1.4. Convertible securities, exchangeable securities or securities with warrants ...... 130 21.1.5. Conditions governing any acquisition rights and/or obligations attached to subscribed but not paid-in capital or an undertaking to increase the capital ...... 130 21.1.6. Information about the capital of any member of the group which is under option or agreed conditionally or unconditionally to be put under option ...... 131 21.1.7. Changes to Share Capital: ...... 131 21.2. Articles of incorporation and statutes ...... 132 21.2.1. Corporate Purpose (Article 2 of the Statutes) ...... 132 21.2.2. Company management ...... 132 21.2.3. Share classes ...... 133 21.2.4. Shareholder rights ...... 133 21.2.5. General meetings (Article 21 of the Statutes) ...... 134 21.2.6. Provisions having the effect of delaying, deferring or preventing a change of control ...... 134 21.2.7. Ownership thresholds (Article 7 of the Statutes) ...... 134 21.2.8. Conditions imposed by the articles of incorporation and statutes, a charter or regulation, that govern changes in capital when said conditions are stricter than legal provisions ...... 134 22. MATERIAL CONTRACTS ...... 135 23. THIRD PARTY INFORMATION, STATEMENTS BY EXPERTS AND DECLARATIONS OF INTEREST ...... 138 24. DOCUMENTS ON DISPLAY ...... 139 25. INFORMATION ON SHARE HOLDINGS ...... 140 26. ADDITIONAL INFORMATION ...... 141 26.1. Auditors’ fees ...... 141 27. Management report for fiscal year 2013 ...... 142

Pursuant to Article 28 of European Commission Regulation No. 809/2004, the 2011 consolidated financial statements and related audit report, set out respectively on pages 68 to 92 of the Reference Document for 2011 filed with the AMF on April 24, 2012 under No. D.12-0394 and the 2012 consolidated financial statements and related audit report set out respectively on pages 79 to 107 of the Reference Document for 2012 filed with the AMF on April 9, 2013 under No. D.13-0315 are incorporated by reference in this Reference Document.

The parts not included in these documents are either not relevant for investors or are covered elsewhere in the Reference Document.

1. RESPONSIBLE PERSONS

1.1. Persons responsible for information

Philippe Archinard Chairman and Chief Executive Officer

Stéphane Boissel Executive Vice President and Chief Financial Officer

Ghislaine Gilleron Corporate Secretary

Telephone: 03 88 27 91 21 Fax: 03 88 27 91 11 www.transgene.fr

1.2. Declaration by the responsible person

I hereby certify, after having taken all reasonable care to ensure that such is the case, that the information contained in the Reference Document is to the best of my knowledge in accordance with the facts and contains no omissions likely to affect its import.

I hereby certify that, to my knowledge, the financial statements have been drawn up in accordance with applicable accounting standards and give a true and fair view of the assets, financial position and profits and losses of the Company and of all the companies within the scope of consolidation, and the management report on pages 149 to 172 includes a statement setting out a true and fair view of the business, profits and financial position of the Company and of all the companies within the scope of consolidation and a description of the principal risks and uncertainties they face.

I have received an audit completion letter from the statutory auditors in which they state that they have verified the information regarding the financial position and financial statements presented in this document and that they have reviewed the entire document.

The historical financial information presented in this document is described in reports by the statutory auditors, which contain no remarks, on pages 111, 112, 133 and 134.

Philippe Archinard Chairman and Chief Executive Officer

2. STATUTORY AUDITORS

Statutory Auditors

ERNST & YOUNG et Autres Commissariat Contrôle Audit - C.C.A 1/2, place des Saisons 112 rue Garibaldi 92400 Courbevoie - Paris-La Défense 69006 Lyon represented by Marc-André Audisio represented by Hubert de Rocquigny du Fayel

Ernst & Young et Autres is a member of the Compagnie Régionale des Commissaires aux Comptes de Versailles and the Ernst & Young group.

Commissariat Contrôle Audit – C.C.A. is a member of the Compagnie Régionale des Commissaires aux Comptes de Lyon and the PricewaterhouseCoopers network.

Dates of Appointment and Expiration of Term

Appointed on May 29, 1996, renewed on February Appointed on February 16, 1998 and renewed on 16, 1998, then on June 9, 2004 and June 17, 2010 June 9, 2004, then on June 17, 2010 until the end of until the end of the shareholders’ meeting called to the shareholders’ meeting called to deliberate on the approve the financial statements for fiscal year 2015. financial statements for fiscal year 2015.

Alternate Statutory Auditors

Auditex Diagnostic Révision Conseil Tour Ernst & Young 112 rue Garibaldi 1/2, place des Saisons 69006 Lyon 92400 Courbevoie - Paris-La Défense

Dates of Appointment and Expiration of Term

Appointed on June 17, 2010 until the end of the Appointed on February 16, 1998 and renewed on shareholders’ meeting called to deliberate on the June 9, 2004, then on June 17, 2010 until the end of financial statements for fiscal year 2015. the shareholders’ meeting called to deliberate on the financial statements for fiscal year 2015.

6 3. SELECTED FINANCIAL DATA

December 31 (In thousands of Euros, except number of shares per share data) 2013 2012 2011 (Consolidated financial statements, IAS/IFRS) IAS/IFRS IAS/IFRS IAS/IFRS

Income statement data:

Operating income 15,735 13,061 14,446

Research and development expenses (50,063) (48,679) (53,048) General and administrative expenses (6,769) (6,610) (6,226) Other revenue and expenses (101) 93 -

Net operational expenses (56,933) (55,196) (59,274)

Operating income (41,198) (42,135) (44,828)

Interest income (expense), net (730) (585) 1,427

Share of income from equity affiliates (930) (474) (224) Tax on profits - - -

Net loss (42,858) (43,193) (43,626) Diluted loss per share (1.34) (1.36) (1.38)

Average number of shares outstanding 31,874,858 31,762,134 31,694,282

Cash, cash equivalents and other current 47,862 92,915 139,507 financial assets Total assets 125,850 160,464 193,585 Equity 56,622 98,220 141,416

Net cash flow generated by (used in) (50,185) (49,925) (44,162) operations

7 4. RISK FACTORS

The Company conducted a review of the risks that could have a material adverse effect on its activity, financial position or earnings (or its ability to achieve its goals) and believes that there are no significant risks other than those presented. Investors should carefully consider the following risk factors. They must also take note of the other information provided in this Reference Document, in particular information related to the financial statements and notes thereto. In light of the Company’s business segment and the early stage of development of its products, it is not generally possible to assess and quantify the probability of the materialization of a specific risk and its individual impact on the Company’s prospects.

4.1. Risks specific to the Company

4.1.1. Risks related to the therapeutic approaches selected by the Company

The Company is developing immunotherapy products to treat cancer and infectious diseases. These products are primarily therapeutic vaccines and oncolytic viruses. At the date of this Reference Document, there are very few authorized immunotherapy products on the market. The most representative examples are a cellular therapy product to treat prostate cancer, approved in the United States in 2010 (Provenge® (sipuleucel-T), from the U.S. company Dendreon) and a monoclonal antibody against melanoma authorized in the United States in 2011 (Yervoy® (ipilimumab), from the U.S. company Bristol-Myers Squibb). The products developed by the Company are medical technologies for which preclinical and clinical data on safety and efficacy are still limited. Many uncertainties therefore willremain in terms of the development and profitability prospects of products resulting from these technologies until their safety, effectiveness and acceptance by patients, physicians and health authorities and payers have been established.

As of the date of this Reference Document, no Company product has reached an advanced stage of development. All are in research, pre-clinical testing or the first and second phases of clinical trials, for which there are three phases. Not only do animal tests not necessarily predict results obtained in humans, but positive results in early clinical stages obtained on a limited number of patients may not be borne out in later phases on a larger number of patients.

In such cases, the development of the product candidate would not be continued and this could have a material adverse effect on the Company’s earnings, financial position and development.

4.1.2. Risks related to clinical trials

Prior to marketing a product in Europe or the United States, a product must undergo rigorous pre-clinical testing and clinical trials, as well as an extensive regulatory approval process with the European Medicines Agency (EMA), the French Agence Française de Sécurité Sanitaire des Produits de Santé or the U.S. Food and Drug Administration (FDA). These clinical trials are performed in three successive phases pursuant to specific regulations referred to as “Good Clinical Practices.” In Phase I, clinical trials usually involve a limited number of subjects to establish a preliminary profile of the product’s safety, drug administrationand metabolism. In Phase 2, clinical trials are conducted on larger groups of patients suffering from a specific disease, in order to further evaluate the product’s safety and evaluate the product’s efficacy by seeking the optimal dosage and administration schedule. In Phase 3, comparative clinical trials on a more extensive scale are conducted at multiple medical centers on patients suffering from a target disease in order to obtain sufficient data to conduct a valid statistical analysis of efficacy and safety.

These approval processes are lengthy and expensive, and approval is never certain. Approval by a regulatory authority in one country does not ensure approval in any other country. Factors that affect the uncertainty of obtaining these regulatory approvals include:

- immunotherapy as a treatment approach is still developing;

- the regulatory requirements that govern immunotherapy, including therapeutic vaccines and oncolytic viruses, are uncertain and may change; and

- data from pre-clinical studies and clinical trials may results in differing interpretations that delay, limit or prevent the granting of approval.

Other risk factors are involved in the conduct of clinical trials:

8 - the clinical protocols that describe the study objectives, as well as the parameters to be used to measure safety and efficacy, must be approved by the regulatory authorities of the country in which the clinical studies are conducted. Additionally, each clinical study must be approved by the independent ethics committee of the establishment or study center. The ethics committee specifically evaluates the suitability of the study, the safety of the persons to be enrolled in the trial and the potential liability of the medical center. The ethics committee is also responsible for the supervision of the application of the protocols approved for clinical trials in progress. The ethics committee may require modifications to a protocol, and there is no guarantee that it shall authorize the initiation or continuance of a trial. This procedure may be conducted in parallel with the approval procedure before national regulatory authorities but can cause considerable delays and more costs in addition to those related to the regulatory examination procedure. Most countries have also created special committees to study recombinant DNA protocols before allowing their implementation (the Haut Conseil des Biotechnologies in France, the National Institutes of Health’s Recombinant DNA Advisory Committee in the USA and the Gene Therapy Advisory Committee in the United Kingdom).

- the recruitment of patients for inclusion in the trials: trials with the Company’s products in development are conducted with people suffering from the target diseases; the number of patients who can and want to participate in a clinical trial is limited and recruitment can be a difficult and slow process. The Company has already faced this risk, which may occur again, leading to excessive delays in conducting trials. In order to mitigate this problem, the Company may need to increase the number of clinical centers, which adds to the complexity of follow-up and increases the cost of the trial.

- access to appropriate clinical sites may be difficult, preventing the initiation or conduct of the trial within a reasonable timeframe.

- as a product advances through clinical trials, each stage represents a significant risk of failure that may hinder the product’s continued development: the product may be poorly tolerated, may provide little or no therapeutic benefit, or may cause undesirable side effects so serious as to prohibit its use. The competent regulatory authorities may put clinical trials on hold at any time if they believe patients are exposed to unacceptable risks to their health or if they identify deficiencies in the clinical trial process or in their audits.

- in the field of immunotherapy to which the Company’s products belong, the search for biomarkers (particular biological characteristics) in patients, in order to determine their response to treatment, has become indispensable. The Company is currently developing two so-called companion diagnostic tests for its immunotherapy product against non-small cell lung cancer with companies specializing in the development of this type of diagnostic. The biomarkers identified in this way will be incorporated into diagnostic tests, called companion diagnostics, which will then accompany the treatment so that it can be administered to those most likely to benefit. Validation of companion diagnostic tests is an entirely separate clinical development process that happens concurrently with the clinical trials for a treatment and adds a level of complexity and additional costs. It may happen that a biomarker identified retrospectively in a clinical trial cannot be verified or cannot be confirmed as a predictive tool of the benefit of treatment for patients with this biomarker. In this case, it may be that the treatment under development does not achieve the quantitative criteria of positive clinical results necessary to obtain marketing authorizations;

- the cost per patient of clinical trials is particularly high, especially in immunotherapy, which makes the later clinical testing phases (Phase 3) particularly costly in indications that require a large number of patients to prove a therapeutic benefit, such as, for example, lung cancer. These costs could exceed the Company’s available cash resources and the Company would then need to seek financing, for example through partnerships with the pharmaceutical industry. There is no guarantee that the Company will be able to enter into such partnerships.

If one or more of these risks were to occur, it could have a material adverse effect on the Company’s business, earnings, financial position and development.

9 4.1.3. Risks related to commercial-scale production

The Company’s manufacturing unit does not have sufficient capacity to guarantee commercial-scale production of its products beyond the initial phase. To manufacture the products that it markets, or have them manufactured, the Company will need to incur additional substantial costs to increase its manufacturing capacity or have its products manufactured by third parties. In this case, new clinical studies may be required by regulatory authorities specifically related to manufacturing. Consequently, it could face delays in production or be unable to set competitive prices for its products, which would have a significant impact on its business, results, financial situation and development.

The Company’s product manufacturing processes use raw materials from various suppliers, some of which are the only source of a specific item. The Company qualifies its suppliers pursuant to pharmaceutical Good Manufacturing Practices. If one of these unique suppliers were to default, the Company would have to find another source and qualify it, but the identification and qualification of such a provider could take several months before its products could be implemented in the Company’s processes. Moreover, the current volumes ordered by the Company do not allow it to negotiate agreements guaranteeing a supply of certain key raw materials from qualified critical suppliers. The Company therefore cannot ensure that it could be supplied by certain critical suppliers, that it could secure a second supplier or that it could do so in a timely manner.

This would have a material adverse effect on the Company’s business, results, financial situation and development.

4.1.4. Risks related to product adverse side effects

The commercial success of the Company’s products will depend, for the most part, on the public and medical profession’s acceptance of the use of immunotherapy products to treat human diseases. This acceptance could be negatively affected by adverse side effects caused by the products developed by the Company and others. These adverse side effects may cause the regulatory authorities to limit or prohibit the use of these products or similar products and thereby limit the potential market for the Company’s products.

This could have a material adverse effect on the Company’s business, earnings, financial position and development.

4.1.5. Risks related to the funding of the Company’s development and activities

The Company needs, and shall continue to require, substantial funds to continue its research and development activities, including pre-clinical and clinical testing of future products, to update its processes and establish commercial-scale manufacturing processes and facilities, and to expand quality control, regulatory, marketing, sales and administrative capabilities. It shall also require substantial funds to distribute any products approved for commercial sale. If the Company is unable to obtain funding on a timely basis, it may be required to significantly curtail one or more of its research and development programs or to cease operations altogether. Its future capital requirements will depend on many factors, including the following:

- continued progress in research and development programs and the magnitude of such programs;

- the scope and results of its pre-clinical studies and clinical trials;

- the time and costs involved in obtaining regulatory approvals;

- its ability to enter into partnership agreements to continue developing certain products;

- the cost of large-scale manufacturing and effective distribution;

- the timing, receipt, and amount of payments from collaborative partners;

- the timing, receipt, and amount of sales and royalties from its future products;

- the costs of preparing, filing, prosecuting, maintaining and enforcing patent claims and other intellectual property rights; and

- the cost of obtaining and maintaining licenses to use patented technologies.

The Company has limited sources of funding. As a result, it is required to finance itself primarily through the issuance of new shares. Historically, the financing of the Company was provided, for the most part, by its majority shareholder, due in particular to the shareholder’s interest in maintaining its level of investment and control. The financing of the Company by future capital increases could be complicated by poor capital market conditions, and, even if financing transactions are successful, shareholders may be exposed to a dilution of their shareholdings.

This could have a material adverse effect on the Company’s business, earnings, financial position and development.

4.1.6. Risks related to previous and future losses

For several years, the Company has reported operating losses. At December 31, 2013, the total cumulative deficit since 1993 amounted to €443 million under IAS/IFRS, as a result of significant investments in research and development programs and the absence of significant revenues (see the table of consolidated changes in equity on page 85). Further substantial operating losses are forecast for future years as the Company’s research and development activity, pre-clinical studies and clinical trials continue. None of its products have yet generated sales or revenue. The only anticipated sources of revenue in the short term will not be achieved through the marketing of products, but rather from payments made by partner companies under certain agreements (See Section 22) and, if applicable, public financing and investment revenue. The Company cannot guarantee that it will generate revenue in the short term from the sale of products and achieve profitability.

This could have a material adverse effect on the Company’s business, earnings, financial position and development.

4.1.7. Specific risks related to development, manufacturing and marketing partnerships

The Company’s strategy in terms of the research, development and marketing of some of its products is based on partnership agreements being entered into with partner companies or third parties (See Section 22). As of the date of this Reference Document, the Company has entered into four such agreements for three of its products under development:

- a partnership agreement with Roche concerning TG4001 (entered into in April 2007) and terminated by Roche in February 2011, with all rights to TG4001 returned to the Company. A partnership with the European Cooperative Group EORTC was entered into in November 2012 to conduct a Phase 2b study with this product in a new indication, oropharyngeal cancer;

- an option license agreement with Novartis entered into in March 2010: Transgene granted Novartis an exclusive option license for the development and marketing of TG4010 for the first-line treatment of non- small cell lung cancer and other potential oncology indications. Transgene shall finance and keep control over the first part (Phase 2b) of the current stage of the product’s clinical development. This phase consists of a Phase 2b/3 global clinical trial to obtain market authorization for the product. The results of the IIb phase of the study are expected in 2013. Pursuant to the option agreement, Novartis has 90 days from the date these results are available to exercise its option. If the option is exercised, Novartis will pay all development costs and the regulatory and marketing expenses associated with the launch of TG4010 for all indications. Transgene will receive a non-refundable fee for granting the license to Novartis, after which Transgene will receive payments related to the completion of development stages, obtaining regulatory approval, and international sales thresholds, as well as royalties on international sales. Transgene will retain co-marketing rights for certain countries, including France and China, and will provide Novartis with the batches of TG4010 required for its clinical studies and marketing.

The development and marketing of some of its products could be affected if Novartis does not exercise its option or terminates the agreement, which is possible, after exercising its option, or if the Company were not able to enter into new collaboration agreements on acceptable terms.

This could have a material adverse effect on the Company’s business, earnings, financial position and development.

- the development and marketing agreement for Pexa-Vec entered into in August 2010 with Jennerex: Transgene obtained exclusive rights from Jennerex to develop and market Pexa-Vec in Europe, the Commonwealth of Independent States (CIS) countries and the Middle East, as well as manufacturing rights in its territories. Transgene and Jennerex will co-develop the product worldwide, and Transgene will assume development costs as well as marketing responsibility in its territories.

11 In addition to this partnership agreement, Transgene made an investment in the capital of Jennerex, taking a stake of approximately 8.5%, which was sold to the South Korean company SillaJen, Inc. in March 2014, as part of SillaJen’s acquisition of 100% of Jennerex capital. The development and marketing agreement for Pexa-Vec oncolytic virotherapy between Transgene and Jennerex, Inc., which is now a wholly owned subsidiary of SillaJen, Inc., is maintained and the partners are actively working on the development plan for this program. The development and marketing of Pexa-Vec, including in Transgene’s territories, could be affected if Jennerex were not to comply, or were unable to comply, with its regulatory obligations in its territories or with its contractual obligations with respect to Transgene and third parties.

This could have a material adverse effect on the Company’s business, earnings, financial position and development.

- the collaboration agreement signed in March 2013 with Sanofi for the creation of a new platform dedicated to the manufacture of immunotherapy products, including Transgene’s therapeutic products. The launch phase of the platform’s construction began in early 2014. The platform remains the exclusive property of Sanofi. If the construction were not completed in time, or if the qualification and validation phases of the unit and its teams were delayed, the platform might not be available for manufacturing the first market-stageTransgene product.

This could have a material adverse effect on the Company’s business, earnings, financial position and development.

4.1.8. Dependence on qualified personnel

The Company is highly dependent on the quality of its scientific personnel and management. It is in intense competition with other companies and academic institutions when recruiting qualified personnel. If it cannot attract and retain qualified personnel, its ability to market its products and processes could be impeded or delayed.

This could have a material adverse effect on the Company’s business, earnings, financial position and development.

4.2. Risks related to the Company’s business segment

4.2.1. Risks related to competition and technological progress

The Company is in competition with various other companies, including large pharmaceutical and biotechnology companies that develop treatments and prevention methods for the same diseases, including more traditional therapies. It could also be in competition with companies that have acquired or could acquire technologies developed by universities or research institutes or other companies. By developing their own technology, or using technology acquired from third parties, these companies could come to possess a portfolio of intellectual property rights that could prevent the Company from successfully marketing its products.

Other companies could succeed in developing products earlier, receive approvals more rapidly or develop more effective or less expensive products than the Company. Although the Company is attempting to increase its technological capacity to remain competitive, research and development activities conducted by others may make the Company’s products and technology obsolete or non-competitive. Furthermore, consumers and professionals might prefer other existing or new therapies developed by competitors.

This could have a material adverse effect on the Company’s business, earnings, financial position and development.

4.2.2. Specific risks related to patents and third-party intellectual property rights

The biotechnology industry is a growing industry that generates a large number of patents. There is a high risk that third parties may believe the Company’s products and technology infringe on their intellectual property rights. Discoveries are sometimes not published or patents applied for until months and often years later. The oversight put in place by the Company to protect itself against the risk infringement may not be sufficient due to

12 (i) publication periods for patent applications (18 months after the filing or priority date), (ii) the lack of publication in the United States of certain patent applications and (iii) the principle of issuance in the United States of the patent to the first inventor, not the first applicant, until the entry into force in March 2013 of the America Invents Act of September 16, 2011. Thus, the Company cannot be certain that third parties were not the first to invent products or to file patent applications for inventions also covered by its own patent applications or those of its partners. Any dispute or claim against the Company, regardless of outcome, could result in substantial financial and reputational costs. Some of its competitors with greater resources could be better able to withstand the costs of a complex proceeding. Any litigation of this type could seriously affect the Company’s ability to continue its business. More specifically, disputes over intellectual property could require it to:

- cease to sell or use any of its products that depend on the disputed intellectual property, which could reduce its revenues; or

- obtain a license from the holder of the intellectual property rights that could not be obtained under reasonable conditions, if at all.

This could have a material adverse effect on the Company’s business, earnings, financial position and development.

4.3. Financial risks

Financial risks are also mentioned in Note 21 to the consolidated financial statements.

4.3.1. Exchange rate risk

The Company publishes its consolidated financial statements in euros. However, a portion of its revenue and expenses is recognized in U.S. dollars. An increase or decrease in the euro exchange rate relative to the U.S. dollar could impact operating results.

The Company has U.S. dollar bank accounts. Net U.S. dollar disbursements totaled $9.9 million in 2013.

The following table shows the sensitivity of the Company’s expenses at a 10% change in the US dollar exchange rate during the years ended December 31, 2012 and 2013 (before tax and any hedging):

December 31 In thousands of Euros 2013 2012 Expenditures denominated in US dollars 9,948 7,520 Equivalent in euros based on exchange rate of EUR 1 = $1.333 7,463 5,825 Equivalent in euros in the event of an increase of 10% USD vs. 8,209 6,407 EUR Equivalent in euros in the event of a decrease of 10% USD vs. 6,717 5,243 EUR

The Group’s foreign exchange position at December 31, 2013 was as follows:

In thousands USD Assets 1,442 Liabilities (1,070) Net position 372 Adjusted 372 Off-balance sheet position -

4.3.2. Interest rate risks

The Company is exposed to market risks related to interest rates on its lease debt and its cash investment in mutual funds.

The Group contracted debt at the market rate (variable) in the context of a financial lease to finance its primary mixed-use office and laboratory building.

It is a 15-year agreement for the maximum sum of €16 million, which includes 25% in advances repayable at a very low interest rate, agreed by the local authorities. The effective date was January 1, 2009. An increase of 1% of the Euribor rate at 3 months would cause a correlated increase in annual financing costs of €120 thousand. In the first six months of 2009, the Group proceeded with partial coverage of the interest rate risk related to this financing according to the following terms:

Nominal value: €5.9 million (depreciable) Hedging instrument: Interest rate (swap) contract Residual maturity: 9 years and 9 months Underlying rate: 3 month Euribor Fixed rate: 3.46%

As the hedge is perfect, the variations in market value for the instrument are recognized at net value. At December 31, 2013, the market value for the hedging instrument totaled €500,000.

The Company also contracted debt at the market rate (variable) in the context of a financial lease to finance laboratory equipment. At December 31, 2013, the market value for the hedging instrument totaled €205,000.

4.3.3. Liquidity risks

The Company conducted a special review of its liquidity risk and believes that reserves in terms of liquid assets as of December 31, 2013 should enable it to fund its current operating expenses for the next 10 to 12 months, starting December 31, 2013 (see Note 2 to the consolidated financial statements).

On March 25, 2014, the Company announced that a total of €65.5 million would be raised via a capital increase in two stages: - a capital increase with pre-emptive subscription rights, which was launched on February 28, 2014 and raised gross proceeds of €45.5 million, and - a private placement made on March 24, 2014 of two million additional shares at a price of €10 per share, which raised €20 million. This placement was made in response to requests by many qualified, mostly foreign, investors.

With this capital increase, as of the date of this document, the Company believes that it now has sufficient reserves in terms of liquidity to fund its operating expenses beyond 2016, if Novartis exercises its option on the TG4010 product. If Novartis should not exercise its option on this program, the Company will seek another strategic partner. Its liquidity horizon would extend at least until the end of 2015, even without a partner for TG4010.

The Group monitors risks related to the management of its cash assets through centralized follow-up and approval procedures. Cash assets are invested in highly rated marketable securities.

14 establish commercial scale manufacturing processes and facilities, to expand quality control, regulatory, marketing, sales and administrative capabilities. It shall also require substantial funds to manufacture and market any products that are approved for commercial sale.

The Company has limited access to debt due to the Group’s losses and the high-risk nature of the business sector (pharmaceutical research and development) under which it operates. The Company plans to finance operations mainly through equity until its profitability situation changes such that it has access to debt instruments.

4.3.4. Share risks

As is the case with many other biotechnology companies, the share price of the Company is particularly volatile. The following factors, among others, could have a material adverse effect on the share price:

- reactions to press releases and financial analyst reports; and - more generally, market conditions with regard to biotechnology shares.

The Company does not have any interests in listed companies and its cash is invested primarily in common shares of short-term money market funds not directly exposed to equity market risk.

4.4. Legal risks

Neither the Company nor the Group are currently parties to a significant dispute, with the exception of two proceedings by employees before the Industrial Tribunal in Strasbourg, which were subject to a total provision of approximately €100,000 in the Company’s financial statements on December 31, 2013. See also Section 20.8. “Legal and arbitration proceedings” of this Reference Document.

4.4.1. Specific risks related to patents

The Company’s success will depend largely on its ability to obtain patents for its products and processes in order to be able to benefit from the exclusive use of inventions. Its success will also depend on its ability to prevent third parties from using its intellectual property rights. Additionally, it will have to conduct its activity without infringing on intellectual property rights belonging to third parties, failing which, the Company might be unable to successfully market its products.

Transgene has filed, and intends to continue to file, numerous patent applications to cover different aspects of its business (viral vectors and their preparation and administration methods, genes and combinations of genes, monoclonal antibodies, biomarkers, etc.). The Company believes that, in some cases, these patent applications cover important technologies for the future marketing of its products and benefit from priority dates that precede those of competitors. However, due to the length of application examination procedures, particularly in the field of biotechnology, the date of the decision to approve or reject an application cannot be determined. Nor is there any certainty that a specific application will result in a patent or, if a patent is granted, that its scope will provide the Company with a competitive advantage, or that it will not be contested or bypassed.

The Company’s position in terms of patents, like that of biotechnology and pharmaceutical companies, is particularly uncertain. The standards used by the European Patent Office (EPO), the United States Patent and Trademarks Office (USPTO) and other patent offices to grant patents are not always applied in a foreseeable manner and may change. Furthermore, there is no single worldwide policy for these rights, the scope of claims granted or applied for in the field of biotechnology patents and the level of protection offered to patent holders.

Transgene believes that several elements of its program involve technology, processes, know-how, data, including culturing and production processes, as well as purification technology, which cannot be patented.

With regard to technology, know-how and data that cannot be patented or only potentially patented, or processes other than production for which compliance with patents would be difficult to ensure, Transgene has decided to protect its interests by confidentiality agreements entered into by its employees, consultants and some of its co- contracting partners. All of its employment contracts include confidentiality clauses. These confidentiality clauses do not provide sufficient protection and may be terminated. In such a case, the Company believes no reparation would be adequate. Its manufacturing secrets could be revealed and used independently by its competitors.

15 The occurrence of one or more of these risks could have a material adverse effect on the Company’s business, prospects, financial condition, performance and development.

4.4.2. Specific risks related to patent litigation

Obtaining and protecting intellectual property rights can be costly. In the United States, a procedure referred to as “interference” conducted before the USPTO aims to determine who has priority in terms of an invention when various patent applicants seek a patent at the same time. Participation in an interference procedure is very costly in terms of time and money.

In Europe, opposition proceedings conducted before the European Patent Office (EPO) allow any person to contest the validity of a patent granted by the EPO and the patent can be revoked or its scope limited. Opposition is an administrative proceeding and not litigation.

The Company is, at the date of this Reference Document, engaged in several opposition proceedings against third- party patents before the EPO as described below:

- on May 2, 2006, against a European patent held by Bavarian Nordic, related to an MVA lyophilization process, with another opponent. The oral proceedings took place on December 16, 2008. The patent was maintained under a modified form. An appeal was submitted in June 2009 by the patent holder and Transgene. The appeal hearing was held October 24, 2013 and the patent was revoked;

- on August 28, 2008, with three other opponents against a European patent held by Bavarian Nordic, related to an MVA production process. The oral proceedings took place on June 23, 2010. The patent was maintained in a modified form. An appeal was submitted in September 2010 by the patent holder and by two opponents, including Transgene;

- on January 23, 2009, with four other opponents against a European patent held by Bavarian Nordic, related to a culture medium for the production of MVA. The oral proceedings took place on January 26, 2011. The patent was maintained in a modified form. The decision of the Opposition Division, when it is issued, will open the possibility for each of the parties to lodge an appeal. An appeal was submitted in May 2011 by the patent holder, as well as by a group of opponents, including Transgene;

- on December 8, 2010, with another opponent to a European patent of ProBioGen, relating to the use of duck cells for the replication of the MVA virus. The oral proceedings, in which Transgene did not participate because it entered into an agreement with ProBioGen, took place on July 17, 2013 and the patent was maintained; and

- on October 4, 2011, with another opponent, against a European patent held by Merck & Co. related to an adenovirus purification method; this patent was revoked after the appeal hearing on October 23, 2013.

An unfavorable outcome in an interference proceeding, an opposition proceeding against a Company patent, or in an opposition proceeding by the Company against a third party patent, could deprive the Company of protection for its own products and oblige it to stop using the relevant technology or to seek license rights from third parties. Its business could be adversely affected if a third party having priority does not grant license rights or grants them under conditions the Company could not accept.

This could also lead to an obligation to obtain the license rights under dispute from third parties. The Company’s business would be affected if it could not obtain the license or if the conditions in which it obtained the license were considered unacceptable. The same would apply if it were unable to redefine the products or processes in order to avoid an infringement proceeding.

The occurrence of one or more of these risks could have a material adverse effect on the Company’s business, prospects, financial condition, performance and development.

4.4.3. Product liability

The Company is exposed to liability related to products and other claims related to its processes. These risks are inherent in the control, manufacturing and marketing of human therapeutic products. It is also liable in relation to products it manufactures for third parties. Were the Company sued for damages caused by its products or processes, its liability could exceed its insurance policy and threaten all of its assets.

16 This could have a material adverse effect on the Company’s business, earnings, financial position and development.

4.4.4. Specific risks related to the use of hazardous products and those that are harmful to the environment

The Company’s research and development programs, pre-clinical studies and clinical trials require controlled storage and the use and disposal of dangerous substances and chemical and biological matter. The Company is subject to the laws and regulations related to the use, manufacturing, storage, handling and disposal of substances and waste. Although it believes its safety procedures related to the handling and disposal of these dangerous substances comply with legal and regulatory standards, the contamination and personal accidental injury risks related to these dangerous substances cannot be fully set aside. In the case of an accident, the Company could be held liable for any damage resulting from these substances and its liability could exceed the limits of its insurance policy or fall outside its field of application. It may not be able to maintain its insurance policy under acceptable conditions, if at all. It may incur significant costs to comply with regulatory terms related to current and future environmental law. As of the date of this Reference Document, the Company has made no specific provision for industrial and environmental risks.

The occurrence of one or more of these risks could have a material adverse effect on the Company’s business, prospects, financial condition, performance and development.

4.5. Insurance and Risk Coverage

The Company has an insurance policy for the principal insurable risks in amounts it considers compatible with its cash flow needs. The total premiums paid for all insurance policies in effect in 2013 totaled €284,000, compared with €305,000 in 2012 and €296,000 in 2011. These policies have limited excesses. In the absence of damages claimed against the Company or appropriate indicators of claimed damages in the same business sector, it is not able to determine the coverage rate for risks presented by this insurance and the degree of risk remaining with the Company, in particular in terms of civil liability.

The Company’s main policies are as follows:

- “Multi-risk” insurance that typically covers fire, water damage, theft and machine breakdown risks for its establishments with a maximum commitment by the insurers of €36 million. This policy also covers the Company’s business losses, with a maximum commitment by the insurers of €20 million. As the does not have significant sales, this warranty is intended specifically to provide the Company with the means to continue work in progress that would be destroyed by a loss and the payment of general and operating costs for a year. The Company has implemented limited procedures to store its proprietary biological materials and computer data;

- Civil liability insurance that covers the Company’s civil liability and that of its agents arising from operations, as well as product-related liability, with an annual ceiling of €10.7 million. Furthermore, the Company’s liability in terms of its clinical trials is covered by specific contracts attached to the civil liability policy, the rates and warranty amounts of which depend on local regulations applicable to the relevant clinical investigation center, as is the case, for example, in France where the Public Health Code provides for an insurance obligation incumbent on clinical trial sponsors, as well as the conditions for said insurance. The total amount of the premiums and coverage for the trials therefore depends on the number of trials and their geographic location.

The Company also purchased insurance to cover its directors and officers’ civil liability when the same is called in warranty in the exercise of their role, with a total annual warranty ceiling of €15 million in 2013.

Since coverage of risks cannot be perfect, the occurrence of any one of the risks covered by the insurance policies mentioned above could, despite the coverage purchased, have a material adverse effect on the Company’s business, earnings, financial position and development.

4.6. Regulatory risks

The main regulatory risks are as follows:

17 4.6.1. Risks related to the Company’s regulatory environment

As of the date of this Reference Document, none of the Company’s products has yet received market authorization from a regulatory agency. It cannot be guaranteed that the Company will receive the necessary approvals to market any of its products. Its products are subject to extensive and strict legislation, and regulatory requirements are complex, sometimes difficult to apply and subject to change. The Agence Nationale de Sécurité du Médicament et des Produits de Santé (ANSM), the European Medicines Agency (EMA) and the Food and Drug Administration (FDA), as well as their counterparts in other countries, regulate, among other things, research and development, pre-clinical studies, clinical trials, manufacturing, safety, efficacy, archiving, labeling, marketing and distribution of pharmaceutical products. In particular, without FDA approval, it would be impossible for the Company to access the U.S. market, which is the largest pharmaceutical market in the world in value. The regulatory approval process for new pharmaceutical products requires the submission of detailed product, manufacturing process and control descriptions, as well as pre-clinical and clinical data and information to establish the safety and efficacy of the product for each indication. It may also require ongoing studies after marketing authorization, as well as controls on manufacturing quality. These regulatory actions are costly and can take many years, and the result is unpredictable.

In addition, authorities may carry out inspections to ensure that the development of a drug candidate is conducted in accordance with the regulations in force. During an inspection, authorities could find a significant regulatory gap which could cause a delay in or discontinuation of a development program and even, in the worst-case scenario, result in the suspension of the Company’s business.

In Europe, the United States and in other countries, regulation may:

- delay and/or significantly increase the Company’s development, testing, manufacturing and marketing costs;

- limit the indications for which the Company is authorized to market its products;

- impose strict new requirements, suspend the authorization of its products, or require the cessation of clinical trials or marketing, if unexpected results are obtained during testing by other researchers on products similar to the Company’s; or

- impose burdensome labeling.

Finally, if the Company does not comply with the laws and regulations governing its activities, it could be subject to penalties, which could include a refusal to allow pending requests, product recalls, sales restrictions, temporary or permanent suspension of its operations as well as civil or criminal proceedings.

The occurrence of one or more of these risks could have a material adverse effect on the Company’s business, prospects, financial condition, performance and development.

4.6.2. Risks related to obtaining marketing authorizations

To obtain a marketing authorization for one or more of its products, the Company or its partners must demonstrate to the competent regulatory authorities the pharmaceutical quality of their products, their safety in use and their effectiveness in the targeted indications. Although the Company is not immediately affected by a marketing authorization issue, a marketing authorization application is built for the entire duration of development of a drug candidate and the Company ensures its compliance with good practices to avoid jeopardizing its chances of obtaining future marketing authorization under good conditions.

The Company’s ability to obtain a marketing authorization for its products will depend on several factors, including:

- the possibility of continuing the development of its products that are, as of the date of this Reference Document, in early clinical phases or of getting its products, as of the date of this Reference Document, in pre-clinical development to the clinical stage;

- if the Company or its partners were unable to carry out clinical trials in a timely manner and with the human, technical and financial resources originally planned;

- whether its products have previously received marketing authorization for another indication; and

18 - whether its competitors announce clinical results that may cause the competent regulatory authorities to modify their evaluation criteria.

If the Company does not obtain marketing authorizations, it will not be able to market its product. In addition, its product may not obtain a marketing authorization in a given geographic area, which could significantly restrict marketing.

The occurrence of one or more of these risks could have a material adverse effect on the Company’s business, prospects, financial condition, performance and development.

4.6.3. Risks related to changes or announcements about drug reimbursement policies

The Company’s ability to successfully market its products will depend in part on the setting by public authorities, private health insurers and other organizations in Europe and the United States of reimbursement rates sufficient for its medications and the treatments associated with them. Third-party payers increasingly challenge prices of pharmaceutical products and medical services. Measures to control costs that health care providers and reimbursement organizations establish and the effect of potential health system reforms could adversely affect the Company’s operating profit. It could also not obtain satisfactory reimbursement for its products, which would adversely affect their acceptance by the market, in which case it would be unable to earn a sufficient return on its investment in research and development.

The occurrence of one or more of these risks could have a material adverse effect on the Company’s business, prospects, financial condition, performance and development.

5. INFORMATION ABOUT THE ISSUER

5.1. History and development of the Company

5.1.1. Legal Name and Commercial Name

Transgene S.A.

5.1.2. Place of Registration and Registration Number

The Company is registered with the Commercial Registry of Strasbourg under number RCS B 317 540 581. Its economic activity code (APE) is 7211Z (Biotechnology research and development).

5.1.3. Date of Incorporation and Duration

The Company was founded in December 1979 for a period of 99 years that expires on December 31, 2078.

5.1.4. Registered Office, Legal Form and Applicable Law

A French public limited liability company (“société anonyme”) with a board of directors, subject to the provisions of the Commercial Code.

Transgene S.A. 400 boulevard Gonthier d’Andernach – Parc d’Innovation 67400 Illkirch-Graffenstaden France Tel. + 33 3 88 27 91 00

5.1.5. Significant Events in the Development of the Company’s Business

Transgene was founded in 1979 to apply emerging techniques in genetic engineering in the context of contract research for industrial groups in the fields of molecular and cellular biology, virology, immunology and protein chemistry. In the 1980s, under the scientific direction of Dr. Jean-Pierre Lecocq, Transgene acquired significant experience in the fields of human and animal health and the agri-food industry.

The Company was listed on the Paris and NASDAQ stock exchanges in 1998. It voluntarily delisted from NASDAQ in September 2005.

The Company’s activities are focused on human health and, in particular, the research and development of immunotherapy products, including therapeutic vaccines and oncolytic viruses in the field of cancer and infectious diseases.

In March 2010, Transgene signed an agreement with the Swiss group Novartis for an exclusive option license for the development and marketing of the Company’s targeted immunotherapy product TG4010 for the first-line treatment of non-small cell lung cancer and other potential oncology indications (See Section 22). Upon signing, Transgene received a non-refundable amount of $10 million. Transgene may receive payments up to a total of €700 million if Novartis exercises its option and subject to the achievement of development, regulatory authorization and worldwide sales threshold milestones.

Transgene will finance and manage the first part (Phase 2b) of the next stage of the product’s clinical development. The results of Phase 2b of the study were announced in January 2014. Pursuant to the option agreement, Novartis has 90 days from the date these results are available to exercise its option. As of the date of this Reference Document, Novartis had not exercised its option.

If the option is exercised:

20 - Transgene shall preserve co-marketing rights for certain countries, including France and China; and - Transgene shall provide Novartis with the TG4010 batches required for the clinical studies and commercialization.

In September 2010, the Company completed its own portfolio of oncolytic viruses by acquiring from the U.S. company Jennerex, Inc. certain rights for the development and marketing of Pexa-Vec, an oncolytic virus developed for the treatment of solid tumors. Jennerex, Inc., which specializes in the development of this type of product, was acquired in March 2014 by SillaJen, Inc., to which have been transferred all the contractual rights and obligations of Jennerex, Inc. (See Section 22).

Pexa-Vec is the most advanced Jennerex product, and Phase 1and Phase 2 clinical trials conducted with Pexa- Vec to date have demonstrated its anti-cancer activity and a good safety profile. An objective tumor response was demonstrated in various cancers, including liver, colon, kidney and lung cancer and melanoma.

Jennerex has granted Transgene the exclusive development and marketing rights to Pexa-Vec in Europe (41 countries), the Commonwealth of Independent States (CIS) (11 countries) and the Middle East (10 countries). As part of the overall development plan for Pexa-Vec, the two companies are jointly developing the product worldwide, with Transgene assuming the development and clinical costs in its exclusive territories. Transgene is assuming responsibility for marketing and has production rights in its territories. Jennerex may receive up to US$116 million in payments for the development and marketing authorization stages as well as double-digit sales royalties on a staged basis. Jennerex also has the option to promote the product jointly in the five largest countries in Europe.

Pexa-Vec has been injected in approximately 300 patients in eight different clinical studies. The product showed signs of activity in the first-line treatment of advanced liver cancer. In contrast, a study in second-line treatment for the same disease did not yield positive results. In March 2014, the partners, including Transgene, announced a new development plan for Pexa-Vec. This plan includes a Phase 3 study in the first-line treatment of advanced liver cancer, which should start in 2015. The plan also includes several Phase I or II studies intended to better understand the product’s mechanism of action, document the product’s activity in other indications or document the activity of the product combined with other therapies, including immune checkpoint inhibitor antibodies.

Transgene has developed a number of monoclonal antibodies, none of which has, as of the date of this Reference Document, reached the clinical trial stage. Given the magnitude of investment in its most advanced clinical programs, the Company has opted for a cautious approach and decided to invest in resource-intensive clinical phases in association with industrial and financial partners. As such, in 2013, the Company invested in ElsaLys Biotech SAS, a company founded by former Transgene executives whose mission is to develop monoclonal antibodies. Transgene’s investment in ElsaLys Biotech SAS is a minority interest.

The concomitant development of these different product categories is the strategic direction selected to achieve the Company’s objective, while increasing the probability of success and generating new opportunities for the sale of high-quality research assets.

This strategy requires a long-term investment in key areas:

- production capacity on a commercial scale, alone or through partnerships; - skills to manage the final stages of clinical development ; - the creation of a dedicated sales force in certain territories.

This model reinforces organic development for key indications, as well as a greater vertical integration allowing Transgene to retain a greater part of the future value. This does not exclude potential searches for external growth opportunities, like its partnership with Jennerex, Inc. or licensing to strengthen the portfolio or improve cash flow.

21 5.2. Investments

The main investments in tangible and intangible assets made by the Company during the past two years are as follows:

Thousands 2013 Principal Investments of Euros Tangible 1,902 Maintenance equipment or improvement of the pilot production unit and laboratory equipment. None had a unit value higher than €0.2 million. Intangible 222 Licenses and software

Thousands 2012 Principal Investments of Euros Tangible 1,719 Maintenance investments in the production unit and laboratory equipment Intangible 261 Licenses and software. None had a unit value higher than €0.2 million.

The projected budget for tangible and intangible investments for 2014 is €2.0 million. This budget includes current operating capital investments and improvement of equipment and facilities.

Investments in financial assets made over the last three years consisted of investments in capital increases of companies:

- Jennerex, Inc. (€1.9 million in 2013 and €1.3 million in 2011). - Platine Pharma Services SAS (€0.3 million in 2013 and €0.6 million in 2011), - ElsaLys Biotech SAS (€0.5 million in 2013) - Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd. (€0.5 million in 2013) - Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. (€5.2 million in 2012, including €2.6 million cash contribution).

22 6. BUSINESS OVERVIEW

6.1. Principal activities

6.1.1. Nature of Business

Transgene is a biopharmaceutical company that designs and develops immunotherapy and virotherapy products for the treatment of cancer and infectious diseases and aims to become an integrated biopharmaceutical company with operations in the production, research, development, marketing and sale of its products.

Transgene’s competitive advantages include various products in pre-clinical and clinical development, a diversified technologiy platform, integrated skills in research and development, an extensive portfolio of intellectual property and the ability to manufacture batches of biopharmaceutical products.

As of the date of this Reference Document, Transgene has three anti-cancer immunotherapy products (for lung cancer, liver cancer and cancer of the oropharynx) and two anti-infective immunotherapy products (for hepatitis B and C) in development. The Company also has earlier-stage projects.

Transgene’s activity is highly regulated

Research and development, pre-clinical tests, clinical trials, premises and equipment, and the manufacturing and marketing of therapeutic products are governed by extensive regulations established by numerous governmental authorities in France, Europe, the United States and other countries. The European Medicines Agency (EMA), the Agence Nationale de Sécurité du Médicament et des Produits de Santé (ANSM), the U.S. Food and Drug Administration (FDA) and other regulators require compliance with strict conditions for the manufacturing, development and marketing of products like those Transgene is developing, in particular at their pre-clinical and clinical stages.

In the European Union, biotechnology products fall under a centralized procedure for obtaining marketing authorizations, thereby avoiding a submission to each Member State. In the United States and the European Union, the average time required to obtain this authorization is approximately one year from the date the request is submitted.

The information required for the authorization of a clinical trial or marketing is standard for all medications and must meet quality, safety and efficacy requirements.

6.1.2. Research and Development

The technology platform: vectors and gene transfer

Methods for treating or preventing disease that involve the transfer of genes into patients’ cells in order to produce specific therapeutic proteins required to fight the relevant disease are currently grouped together under the general term of “gene therapy,” although, in reality, they cover two major categories of treatment:

- those that aim to have a protein directly produced by the patient’s cells or to stimulate the immune system against the disease. The TG4010, TG4001, TG4040 and TG1050 therapeutic vaccines developed by Transgene fall into this category;

- and those that aim to compensate for an absent or defective gene in the patient; Transgene has no products under development in this category.

Genes are segments of deoxyribonucleic acid (DNA) present in each cell that provide the information required to produce proteins. The production of proteins starts in the cell’s nucleus when the gene is copied. The process that results in the cells producing a gene is called “gene expression.”

The development of gene transfer methods that are safe, reliable and adaptable is a key element in the development of effective therapies. A therapeutic gene must be included in a delivery system (or “vector”) that, associated with the gene, transports it into the patient’s cells. Gene transfer therapies are currently divided into two distinct approaches:

- the in vivo (inside the body) approach consists of directly administering to the patient a pharmaceutical compound that contains the therapeutic gene and a “vector” responsible for conveying the gene towards the patient’s target cells. Transgene products fall into this category;

- the cellular or ex vivo therapy (outside the body) approach consists of removing cells from a patient, cultivating them in appropriate laboratory conditions by using a vector to introduce the functional gene into the cells, and re-implanting the modified cells into the patient. Transgene does not develop cellular therapy products.

The Company believes that in vivo transfer will be a useful treatment method where no other treatment exists, such as therapeutic vaccination against certain types of cancer or infectious diseases, and even in combination with other treatments, such as chemotherapy or recombinant proteins, when therapeutic synergies are required to fight the disease.

Transgene’s research on molecular biology techniques for gene transfer and gene therapy has resulted in the development of various vector technologies. Efforts are now focused on the poxvirus family for in vivo administration: MVA (Modified Vaccinia Ankara virus) and oncolytic VV (Vaccinia Virus).

To be effective, a vector must be able to:

- transport the gene of interest;

- transfer the gene to a sufficient number of target cells;

- transport the gene to the target cell nucleus; and

- allow for gene expression to produce the therapeutic protein for a sufficiently long period to ensure treatment success.

This type of vector must also be safe. The delivery approach of genes used most often until today is based on gene transfer by viral vectors in which modified viruses of various types are used to transfer the genetic material to the patients’ cells.

Transgene’s research programs on vector technology aim at providing vectors with features that will lead to an optimization of performance and safety through:

- research on potential interactions by combining different vectors for more effective vaccination protocols;

- the insertion of the gene of interest into the most appropriate vector genome site;

- the generation of viral vectors able to multiply selectively in the tumors, thereby locally increasing the therapeutic protein level delivered by the gene;

- the evaluation of combinations of immunotherapy products and Transgene’s anti-cancer vaccines with traditional treatments; and

- the generation of new cell lines for large-scale production.

Poxviruses are a family of viruses that includes the vaccinia virus broadly used in smallpox vaccinations. Vaccinia vectors administered in vivo have demonstrated a significant ability to induce an immune response against certain types of passenger antigens. This feature may provide a specific advantage for cancer treatment.

Transgene has developed a new generation of poxviral vectors based on a strain of the Modified Vaccinia Ankara virus (MVA) that does not propagate in the cells of humans or other mammals and is therefore incapable of causing an infection in humans. This strain is therefore particularly safe, as has been demonstrated by its intensive use as a human smallpox vaccine. As of the date of this Reference Document, the MVA vector is currently in Phase 2 clinical trials for anti-cancer and anti-infectious vaccines.

Oncolytic virus therapy (virotherapy)

The initial approach of virotherapy consisted of obtaining vectors carrying a foreign gene and capable of replication in humans, despite the presence of this gene in their genome.

Transgene was a pioneer in the development of replicative viruses with, in particular, a vaccinia virus that carries a gene of the rabies virus able to orally vaccinate (distribution of vaccine-impregnated bait) wild animals, in

24 particular foxes, to prevent rabies, sold by Mérial, one of the world leaders in animal health. Replicative viruses are highly effective, but often at the price of significant side effects. Transgene’s oncolytic vector program intends to solve this difficulty by developing new generations of vaccinia viruses deleted in certain genes to increase tolerance while maintaining effectiveness.

Oncolytic viruses constitute a new class of cancer treatments. Unlike products that use MVA, oncolytic products replicate in cancerous cells, leading to the destruction of these cells, while healthy cells suffer almost no damage. These products are activated by genetic factors present in the vast majority of cancers in humans. This mechanism is unlike that of conventional treatments such as chemotherapy, tyrosine kinase inhibitors, antibodies and radiotherapy, and therefore these oncolytic products could be used in combination with these other treatments or alone in the treatment of resistant cancers.

Furthermore, these viruses could, for example, be armed with suicide genes such as FCU1, thereby improving their efficacy, or be modified to improve their specificity. From an industrial perspective, there is a genuine synergy between the production of oncolytics and that of MVA.

Monoclonal antibody therapy

Monoclonal antibodies are key successes among the biological drugs with major markets in oncology and autoimmune diseases.

Antibodies have been identified for over a century: they were used successfully in therapy and prophylaxis in infectious diseases before being replaced by antibiotics. By the mid 1970s, there appeared the first generation of monoclonal antibodies of animal origin (murine) and therefore of limited use due to their immunogenicity. Progress in molecular biology in the 1980s led to the production of chimeric antibodies (murine/human) first, then humanized antibodies.

Monoclonal antibodies are unique; they recognize an infectious or tumoral antigen (for example, CD115 for the Transgene TG3003 monoclonal antibody). They have three potential modes of action: blocking the action of molecules or specific receptors, targeting specific cells, and/or operating as signaling molecules.

In 2013, the Company invested in ElsaLys Biotech SAS, a company founded by former Transgene executives whose mission is to develop monoclonal antibodies. Transgene’s investment in ElsaLys Biotech SAS is a minority interest. The Company also maintains the rights to TG3003, which is currently in research.

6.1.3. Production

Transgene has a manufacturing unit for clinical batches that operates based on European and U.S. Good Manufacturing Practices for drugs. This unit has been operational since 1995 and was one of the first units built to manufacture gene transfer products in Europe. Regularly inspected by the French pharmaceutical authorities, this unit provides Transgene with the ability to produce its own vectors of clinical quality for its clinical trials and create a production structure prior to an industrial system, which should allow it to meet its needs for Phase 3 clinical trials and, in the future, the initial commercial launch of a first product.

In parallel to its clinical batch production and production process development activities, Transgene has acquired its own expertise in quality control and quality assurance. A dedicated quality control laboratory has different areas for virology, bacteriology, molecular biology and biochemistry. Transgene’s objective is to conduct most end product and intermediary product controls internally. The quality control laboratory operates pursuant to Good Manufacturing Practices. The specifications the products must fulfill, as well as the methods used for analyses, were submitted to various regulatory authorities for examination of authorization requests for clinical trials.

The quality assurance system was designed to satisfy regulatory requirements for the quality and safety of pharmaceutical products for human use. Quality assurance personnel are responsible for compliance with good manufacturing practices; they conduct regular audits of the system to ensure it complies with the Good Manufacturing Practices application guide and regularly monitor the evolution of applicable regulations.

With its production unit, teams to develop processes, manufacturing, quality assurance and control, as well as medical and regulatory affairs teams, Transgene believes that it can function independently, from conducting research to developing pharmaceutical products for clinical trials and the initial commercialization of products. Most of the raw materials that Transgene uses are available from numerous suppliers at reasonable commercial terms.

25 The agreement with Novartis (See Section 22) stipulates that Transgene shall supply TG4010 product batches for the first few years of marketing. The first sales are expected by 2017 subject to market authorizations being issued by health authorities. The Company shall therefore need to have adequate production capacity in terms of quantities, process productivity and regulatory compliance.

Considering the deadlines for clinical results and the time needed to prepare and verify such capacities, the Company has established a staggered investment plan, which includes the modification of its current production unit and the construction of a commercial grade material production unit, the building of equipment dedicated to quality control of future commercial batches and the construction of a pharmaceutical preparation unit (distribution, small bottle manufacturing, and packaging). These investments shall be undertaken for the most part when the Company has obtained greater visibility regarding the future of its major products, especially when at least one product enters Phase 3 clinical testing. The costs will mostly be incurred by third parties under long-term contractual commitments.

6.1.4. Principal Investments

The table below summarizes the status of Transgene’s product portfolio as of early 2014:

TG4010: lung cancer and other solid tumors

Description and mechanism of action

TG4010 is a subcutaneously administered immunotherapy product. TG4010 consists of a vector, the Modified Vaccine Ankara (MVA) virus that expresses the MUC1 antigen and interleukin-2 IL2), a cytokine that stimulates the immune system. It has been demonstrated that the MVA virus, which cannot propagate in human cells and therefore cannot cause an infection in humans, is safe to use in smallpox vaccinations. Laboratory experiments have highlighted its effectiveness in improving immune responses against antigens.

26 The MUC1 antigen is usually expressed in a large number of healthy cells in the human body. However, MUC1 is expressed abnormally in cancerous cells in most patients suffering from breast, prostate, lung and other types of cancer. The objective of the vaccine approach is to help the organism’s immune system identify the cancerous cells that carry the MUC1 antigen as targets to be destroyed. The encoding sequence for the IL2 cytokine is added to stimulate the specific response of the T lymphocytes.

The MUC1 gene was obtained under license from Imperial Cancer Technology Ltd., the technology transfer unit of the Imperial Cancer Research Fund (see Chapter 22). This is a worldwide license, exclusive for the use of the MUC1 gene in gene transfer applications using viral vectors.

Lead therapeutic indication

TG4010 is currently being developed as a first-line treatment for metastatic non-small cell lung cancer (NSCLC) in combination with chemotherapy.

Phase 2 clinical trials were conducted on patients suffering from NSCLC and prostate cancer in Europe and the United States. Despite encouraging data from the prostate cancer trials, the Company decided to focus its current development efforts on lung cancer. Developments in other indications are planned, should trials underway produce positive results.

Key clinical results

From 2006 to 2009, the Company conducted a randomized, controlled Phase 2b clinical trial to evaluate TG4010 in combination with standard chemotherapy (cisplatin/gemcitabine), compared with chemotherapy alone. Approximately 148 patients were recruited for the trial at 27 clinical centers located in France, Germany, Poland and Hungary. Patients had either “wet” Stage IIIB (8%), or Stage IV (92%) NSCLC of any histology, including squamous cell carcinomas, and expressing the MUC1 antigen and had not received prior systemic treatment for these advanced stages of disease. Half of the patients received TG4010 plus chemotherapy (experimental group), and the other half received chemotherapy alone (control group).

The main objective of the study was to achieve a minimum level of 40% of patients in whom there was no progression of disease in the experimental group six months after randomization. This objective was achieved, with a survival rate without progression at six months of 43% in the experimental group compared to 35% in the control group.

The trial confirmed that the vaccine was well tolerated in combination with chemotherapy: most of the side effects were considered related to the chemotherapy or the underlying disease. Hematological toxicity was the same in both patient groups. The main side effects related to TG4010 were classic post-vaccination reactions (reactions at the injection site and asthenia).

On May 31, 2009 in Orlando, Transgene presented additional data on TG4010 at the annual conference of the American Society of Clinical Oncology (ASCO), which confirms the positive results.

After 24 months’follow up, these data established that patients who presented, at the time of their inclusion in the trial, a normal activated NK (“Natural Killer”, a group of lymphocytes with cytotoxic activity) cell level in the blood had a median survival rate significantly longer (about six months) in the experimental group compared to the control group: 17.1 months in the experimental group compared with 11.3 months in the control group. All other evaluation criteria (response rate, survival rate without progression at six months, period before progression) also confirmed an increased clinical benefit in patients of this sub-population treated with TG4010. This sub-population represented 101 patients out of 138 evaluable patients for the immunological analyses. This biomarker (called TrPAL) was measured by flow cytometry, a technique routinely used in hospital laboratories.

The latest data therefore validates the identification of the rate of activated NK cells as a predictive marker of a positive response to treatment with TG4010 in non-small cell lung cancer.

Furthermore, the analysis of blood samples conducted after six injections with TG4010 demonstrated prolonged survival for patients treated with the TG4010/chemotherapy combination that presented a greater rate of activated T lymphocytes (p=0.026), which confirmed the product’s expected mechanism of action .

The full results of the study were published in a major scientific journal, The Lancet Oncology , in November 2011.

In January 2014, Transgene announced topline preliminary results from the Phase 2b part of the Phase 2b/3

27 TIME trial evaluating TG4010 MUC-1 targeted immunotherapy in combination with chemotherapy versus placebo plus chemotherapy in the first-line treatment of MUC-1 positive advanced non-small cell lung cancer (NSCLC) patients. The primary objective of the Phase 2b part of the study was to validate the triple-positive activated lymphocytes (TrPAL) predictive biomarker 1; the safety and efficacy of TG4010 in combination with various chemotherapy regimens in this patient population were also assessed.

The predictive value of the TrPAL biomarker, which was identified in an earlier Phase 2 study in advanced NSCLC patients (the TG4010.09 study) 2, was assessed by comparing progression-free survival (PFS) between the two arms in two subgroups of patients according to their TrPAL level (normal or high) at the time they entered the trial (baseline). A total of 210 patients (170 normal TrPAL level, 40 high TrPAL level) were enrolled in the study, and the current analyses were conducted per protocol after 89 progression events had occurred in the normal TrPAL group. For the primary analysis, a patient’s TrPAL level was determined using a threshold based on an assessment of TrPAL levels in healthy people, a so-called “upper limit of normal” (ULN) threshold. The study did not meet its primary endpoint when the ULN threshold was used.

However a second pre-planned PFS analysis, described below, was performed on the entire study population using a quartile approach similar to the one performed in the prior TG4010.09 study. This analysis and the data generated, which is discussed below, will lead to a refined threshold, which is different than the ULN threshold, for the Phase 3 part of the trial.

With this threshold the quartile analysis showed that, in the 75% of patients having the lower baseline level of TrPAL (i.e., the three lowest quartiles) and who received TG4010, there was a clinically meaningful improvement in PFS, as indicated by a greater than 25% reduction in the risk of progression or death compared to placebo. Conversely, in the 25% of patients with the higher level of TrPAL (highest quartile) and who received TG4010 there was no improvement In PFS. These initial results are generally consistent with the results of the previous TG4010.09 study and support both the activity of TG4010 in this setting as well as the predictive value of the TrPAL biomarker. Additionally, in subgroup analyses using the quartile approach, an even larger improvement in PFS was obtained in patients with non-squamous tumors not treated with bevacizumab 3 (73% of initial study population); in general this is a large and growing subgroup of NSCLC and so will warrant further investigation.

TG4010 was well tolerated, and the nature and incidence of adverse events in the TG4010 arm were consistent with previous Phase 2 clinical trials. The data from the trial continue to mature; detailed results are expected to be presented at major medical meetings during 2014.

Phase 3 Next stages of development

The Phase 3 portion of the TIME study is expected to start in the second half of 2014. At the date of this Reference Document, the Company was beginning its discussions with regulatory authorities in preparation for the Phase 3 portion of the TIME study, in particular the TrPAL threshold to use as a predictive biomarker for selecting patients for inclusion in this part of the trial.

The data for the Phase 2b part of the TIME study were sent to Novartis. The results should provide a basis for Novartis to make its decision whether or not to exercise its exclusive option on this product. Novartis is expected to decide on its option by the end of April 2014. In the event that Novartis does not exercise its option, the Company will continue the development of TG4010 in preparation for the signing of a new partnership for that product.

Marketing outlook

If the current development plan is adhered to, the first filing for marketing approval for TG4010 could take place in 2017 or 2018.

1 The TrPAL biomarker measures at baseline the level of triple positive (CD16+, CD56+, CD69+) circulating lymphocytes, a phenotype of activated NK cells. 2 In the TG4010.09 study, for the normal TrPAL group, a better clinical outcome was noted with TG4010 plus chemotherapy compared with chemotherapy alone contrary to the high TrPAL group. Lancet Oncol. 2011 Nov;12(12):1125-33 3 Bevacizumab (Avastin®) is an antibody against the vascular epithelial growth factor (VEGF), a soluble factor involved in tumor neoangiogenesis. Bevacizumab is approved in multiple indications including non-small cell lung cancer in combination with first-line chemotherapy.

28 Pexa-Vec oncolytic virus: liver cancer and other solid tumors

Description and mechanism of action

In September 2010, Transgene acquired the development and marketing rights for Europe, the CIS and the Middle East for Pexa-Vec, an oncolytic virus derived from the poxvirus strain (the vaccine’s virus family), from Jennerex, Inc. 4 (see Chapter 22).

The poxvirus strain from which Pexa-Vec is derived naturally targets cancer cells due to the presence of genetic defects in these cells. The safety profile and cancer cell selectivity were strengthened by the removal of the thymidine kinase (TK) gene, thus making it dependent on the constant high-level expression of the TK gene in cancer cells. To further improve efficacy, Pexa-Vec was also modified to express the GM-CSF protein, an addition intended to enhance cell lysis, thus causing a cascade of events resulting in tumor necrosis, disruption of vascularization and an immune response against the tumor.

Pexa-Vec “attacks” the tumors via three mechanisms of action: cell lysis by the selective replication of the virus in tumor cells, blocking of the blood supply to the tumor and the stimulation of the immune response against the tumor (active immunotherapy).

Lead therapeutic indication

Most cancers carry the mutations and genetic alterations Pexa-Vec needs to be active.

Phase 1 and 2 clinical trials in various tumor types have shown that Pexa-Vec, when injected into tumors or administered by infusion, is well tolerated by patients and causes a reduction in tumor mass and/or tumor necrosis. Objective responses were observed in a number of tumors, in particular in the liver, colon, kidney, lung and skin (melanoma). Pexa-Vec has a favorable safety profile with predictable and generally mild side effects such as flu-like symptoms that resolve themselves in two or three days. The lead indication in the current development plan for the product is liver cancer (hepatocellular carcinoma, or HCC).

Key clinical results

In November 2011, the final results of a randomized Phase 2 study evaluating two dose levels (high and low) of Pexa-Vec in patients with advanced liver cancer between were announced at the Congress of the American Association for the Study of Liver Diseases (AASLD). These results showed that patients receiving the higher dose had a statistically significant clinical improvement in terms of overall survival compared to the group receiving the low dose. The risk of death for patients who received the high dose of Pexa-Vec was decreased significantly (by almost 60%; hazard ratio = 0.41) compared with the risk for patients in the control group receiving the low dose (one tenth of the high dose). Median overall survival was respectively 14.1 months in the high dose group and 6.7 months in the low dose group (p= 0.029 for the improvement in the high dose group). The percentage of patients alive after one year was 66% in the high dose group versus 23% in the other group (Kaplan-Meier estimate). Pexa-Vec was well tolerated, with patients exhibiting transient flu-like symptoms that usually resolved themselves within 24 hours. For this study, 30 patients were recruited in the United States, Canada and South Korea.

The final results of this study were published in the journal Nature Medicine in February 2013.

A randomized Phase 2b placebo-controlled clinical trial in patients with hepatocellular carcinoma (HCC) whose treatment with sorafenib (Nexavar®) had failed was conducted in 2012 and 2013. This trial (the TRAVERSE study), which was conducted by Jennerex’s partners in North America, Europe and Asia, evaluated the survival of patients with advanced HCC whose disease had progressed after treatment with sorafenib (the current standard of care) as well as of patients who did not receive this treatment.

In September 2013, Transgene announced that a per-protocol efficacy analysis had been performed for the TRAVERSE study. The main objective of the study, overall survival of patients treated with Pexa-Vec plus best supportive care compared to best supportive care alone, was not achieved. Pexa-Vec was generally well tolerated, with an adverse event profile in line with previous Pexa-Vec studies in patients with advanced liver cancer (hepatocellular carcinoma, or HCC).

4 Green Cross Corporation, a Korean company specializing in the production, development and marketing of vaccines and other biological products, holds the rights for Pexa-Vec in South Korea. Lee Pharma, a Hong Kong company, holds similar rights for China and Hong Kong. Jennerex, Inc. owns the rights to the product in other territories, including the United States.

The Company intends to continue developing the product for advanced liver cancer, but as a first-line reatment (i.e., in patients not previously treated with sorafenib (Nexavar®)) (see below).

Final acquisition of Jennerex, Inc., developer of Pexa-Vec, by SillaJen, Inc.

In March 2014, the Company announced it had sold its stake of about 8.5% in the capital of Jennerex, Inc. on a fully diluted basis to SillaJen, Inc. Following this transaction, Transgene is eligible for a payment of approximately USD 3.8 million, which was recognized in the first quarter of 2014. Transgene may also receive an additional amount of up to USD 8.9 million if all future clinical and regulatory milestones are achieved.

The development and marketing agreement for Pexa-Vec oncolytic virotherapy between Transgene and Jennerex, Inc., which is now a wholly owned subsidiary of SillaJen, Inc. is unchanged and the partners are collaborating actively on the program’s development plan. The development plan is expected to include a global Phase 3 trial in first-line hepatocellular carcinoma (liver cancer) and Phase 2 exploratory studies in different types of cancer with other therapies, including immune checkpoint inhibitors.

Next stages of development

In March 2014, Transgene and its partners SillaJen, Inc. and Lee’s Pharmaceutical announced a new clinical development plan for Pexa-Vec.

The lead program of this new plan will be a Phase 3 clinical study that will assess Pexa-Vec followed by sorafenib in the first-line treatment of patients with advanced hepatocellular carcinoma (HCC). This global study will be conducted in Europe, Asia and North America and is expected to enroll approximately 600 patients. Patients will be randomized into two arms to receive either PexaVec immediately followed by sorafenib, or sorafenib alone. Sorafenib (Nexavar®) is currently the only product approved for first-line treatment of advanced HCC. Recruitment for this study should begin by mid-2015. Preparations were in progress at the date of this Reference Document.

In addition to the Phase 3 study, a study evaluating Pexa-Vec in combination with cyclophosphamide administered in small doses (“metronomic”), mainly in breast cancer and soft-tissue sarcomas, is expected to begin in 2014. This study will be part of a program funded by INCa (the French National Cancer Institute) and is sponsored by the Institut Bergonié (Bordeaux, France). Cyclophosphamide administered continuously in small doses is used in combination with immunotherapy treatments to potentiate their activity.

Further studies are planned to complement and strengthen the program:

- A study with Pexa-Vec before surgery in solid tumors to study the activity of Pexa-Vec in the actual tumor environment. - A study evaluating Pexa-Vec in combination with immune checkpoint inhibitors based on the rationale of gaining synergy in combining two classes of immunotherapy. This type of combinatorial approach is considered very promising in the field of oncology. - Possibly a Phase I/II study in combination with sunitinib (Sutent®) in patients with renal cancer.

Marketing outlook

At the date of this Reference Document, Pexa-Vec had been injected in approximately 300 patients in eight clinical trials. According to the product’s current development plan for the first-line treatment of advanced liver cancer, Pexa-Vec’s first filing for marketing approval could take place in 2018 or 2019, not in 2016 or 2017 as previously anticipated, due in particular to delays related to the results of the TRAVERSE study and the acquisition of partner Jennerex by SillaJen, Inc.

TG4001: cancers caused by the Human Papilloma Virus (HPV)

Description and mechanism of action

TG4001 immunotherapy is composed of a vector, the MVA vaccine virus expressing both antigens of the human papilloma virus (HPV) of the 16 type (HPV16) and interleukin-2 (cytokine also present in TG4010).

30 Lead therapeutic indication

After it was initially developed in pre-cancerous lesions of the cervix (cervical intraepithelial neoplasia CIN2/3), the product was shifted in 2012 to cancers induced by infection with the HPV virus. A clinical trial in oropharyngeal cancer caused by HPV infection is in preparation.

In previous studies, TG4001 showed a good safety profile, with mild reactions at the injection site as the most common side effects associated with the therapeutic vaccine. No serious side effect associated with the vaccine was observed. In particular, in the last Phase 2b study in patients with CIN2/3, these data were obtained with only three injections of TG4001 as a monotherapy, unlike other studies by Transgene with other products using MVA as a viral vector. This is, therefore, a solid proof of concept of immunotherapy product activity in a pathology induced by HPV and, as such, these results are extremely encouraging for TG4001 and the entire MVA platform. However, since the study did not reach the set goal of advancing into Phase 3, Transgene decided to pursue the development of TG4001 in pathologies with greater unmet medical need, such as certain cancers of the head and neck or cervical cancer associated with infection by HPV. In fact, in these indications, whose potential market is larger than CIN2/3, the product could be effectively combined with chemotherapy, and a synergistic effect between MVA therapeutic vaccines and chemotherapy has been shown in other studies.

The decision to shift the focus of the product’s development resulted in a partnership with the European Cooperative Group EORTC to conduct a randomized Phase 2b study for cancer of the oropharynx (see below), which was announced in November 2012. Next stages of development

A randomized Phase 2b study with TG4001 is planned in patients who have developed oropharyngeal cancer5 after infection with the human papilloma virus (HPV). The clinical trial, which is expected to start in 2014 or 2015, will be a multinational, randomized, placebo-controlled study in which TG4001 will be administered in combination with radio-chemotherapy, the current standard of care for patients whose cancer is locoregional, non-metastatic. The main purpose of this study will be to demonstrate a reduction in the relapse rate in the group treated with the combination of a therapeutic vaccine and chemoradiotherapy. More than 200 HPV16-positive patients are planned to be enrolled in this study.

Marketing outlook

Transgene is not currently able to provide information on the timing to file for marketing approval of this product.

TG4040: viral hepatitis C

Description and mechanism of action

TG4040 is an anti-infective immunotherapy composed of a vector, the MVA vaccine virus expressing non- structural proteins of the hepatitis C virus (NS3, NS4 and NS5B).

Therapeutic indication

TG4040 (MVA-HCV) is intended for the treatment of chronic hepatitis C.

Key clinical results

After two Phase 1 clinical trials in France and Canada in 2007 and 2008 and in 2010 and 2011, Transgene conducted a Phase 2 trial with TG4040 in combination with standard therapy (pegylated interferon α + Ribavirin). One hundred and fifty-three patients with chronic genotype 1 HCV infections were treated in this trial (the HCVac study).

The interim results of this study were made public in November 2011 at a meeting of the American Association for the Study of Liver Diseases (AASLD). The final results of this study were presented in a speech at the 2013 EASL (European Association for the Study of the Liver) conference in Amsterdam, The Netherlands, in April 2013.

5 Oropharyngeal cancers include all malignant tumor proliferations of the oropharynx (throat). As a result, it can affect the amygdala, soft palate and/or base of the tongue. It represents a quarter of cancers of the upper aerodigestive tract.

31 This randomized 6 open label 7 trial evaluated 153 patients and two dosing regimens of TG4040 in combination with the standard treatment of Peg-IFN-alpha combined with ribavirin (Arm B and C) compared with standard therapy alone (Arm A). Arm B consisted of six injections of TG4040 beginning four weeks after administration of standard therapy. Arm C was to evaluate pre-treatment with TG4040, beginning 12 weeks before the start of standard therapy (13 total injections).

The improvement with TG4040 is clearly demonstrated in Arm C. In this arm, the benefit of pre-treatment was observed in the first week after the start of standard treatment with a 40% decrease in the average viral load. The primary endpoint of the trial was reached in Arm C, with an early complete response of 64%, compared to 30% in the control arm (p = 0.0037).

Finally, the virologic response in Arm C was sustained and sustainable (24 months after the end of treatment) with a rate of 58%, compared to 48% in the control arm.

Immunologically, in Arm C, the main results were based on the induction of a cellular response involving T lymphocytes specifically directed against the MVA and viral proteins expressed by TG4040. This response was particularly important during pre-treatment with TG4040, prior to the administration of standard therapy. Accordingly, the observed antiviral response in the arm was possible despite the development of an anti-MVA response related to the viral vector itself.

Safety was broadly similar in all three arms (in terms of both the number of observed adverse reactions and their severity). An analysis of four cases of severe blood toxicity concluded that TG4040 could amplify a known immune side effect associated with the use of interferon in patients with a predisposition to autoimmune diseases.

Next stages of development

With the rapid advent of new antiviral oral treatments that are of shorter treatment duration and more effective, the treatment of hepatitis Chas become very competitive. Transgene’s therapeutic vaccine might be tested again in the future in combination with any one of the new therapies expected to become standard of care over the short term (2014 or 2015).

Given the current challenges for the Company, most of whose resources must be devoted to the two most advanced products, TG4010 and Pexa-Vec, such a development should occur in a manner that would reduce the risk for Transgene through strategic partnerships with a pharmaceutical company or cooperative groups, as was done in 2012 for TG4001 (partnership with the EORTC).

Marketing outlook

Transgene is not currently able to provide information on the timing to file for marketing approval for this product.

TG1050: Chronic hepatitis B

Description and mechanism of action

TG1050 is an immunotherapy based on a serotype 5 human adenovirus. This non-replicative virus (it is unable to multiply in the patient’s body) expresses several antigens for the hepatitis B virus: the DNA which allows HBV to enter the cells it infects, and the HBV capsid protein, which is the protein component that surrounds the structure of the viral genome. Once produced in the body via the adenovirus vector, these HBV proteins will activate the patient’s immune system and induce HBV-specific T lymphocytes that can recognize infected cells and eliminate them. Consequently, according to the product’s expected mechanism of action, patients’ viral load should diminish and ideally become undetectable.

Therapeutic vaccination

TG1050 is for treatment of chronic hepatitis B.

6 Patients are selected by lot before being divided into different groups. 7 Physicians and their patients are informed of the treatment received.

32 Despite the introduction during the decade of effective new drugs, nucleoside (NUC) analogs and pegylated interferon alpha (PEG-IFN α) to treat chronic hepatitis B, these treatments only rarely eliminate the infection, i.e., cause the HBV surface antigen (HBsAg) to disappear together with a measurable antibody response against the same antigen, or seroconversion 8 against HBsAg.

In combination with standard treatment, TG1050 could increase the level of seroconversion against HBsAg, compared with current standard treatments alone, thus providing a new option for curing this disease.

Key results

At the EASL conference mentioned above, in April 2012, Transgene announced that it had achieved pre-clinical proof of concept with TG1050, a new immunotherapy product candidate against chronic hepatitis B virus (HBV) infection. Key data presented at EASL for this candidate vaccine included:

- A strong and broad immune response (T-cell response) in pre-clinical models after one or more injections of TG1050; - A powerful in vivo cell lysis (cytolysis 9) effect against several epitopes 10 ; and - Genetic stability.

Additional data were unveiled at the 2013 EASL (European Association for the Study of the Liver) conference in Amsterdam, The Netherlands, in April of that year. The new data presented confirmed the ability of TG1050 to trigger a T-cell response directed specifically against the hepatitis B virus (HBV) that persists over time (T-cell memory).

These experiments were conducted primarily in two mouse models: a transgenic mouse for the hepatitis B virus (University of Ulm) whose liver cells express the entire genome of the virus and another mouse model using a viral vector called the “adeno-associated virus” that encodes for the HBV genome (the Institut Pasteur’s AAV- HBV), which also allows the expression and replication of HBV in the liver of mice. In both models, especially in the AAV-HBV model, a single injection of the TG1050 vaccine induces the production of HBV-specific functional T-lymphocytes in the liver without causing liver inflammation. Research has shown that, in the AAV- HBV model, these lymphocytes are detected concomitantly with a reduction in viral load.

Next stages of development

The pharmaceutical development of TG1050 and preparation of toxicity studies are currently underway. Transgene expects to initiate a first-in-humans clinical trial in late 2014.

Marketing outlook

Transgene is not currently able to provide information on the timing to file for marketing approval for this product.

6.1.5. Other products

Transgene is making a major investment in its next generation of products. Its main research interests are oncolytic viruses for cancer (TG6002) and immunotherapeutic products for infectious diseases (tuberculosis in particular).

TG6002: treatment of solid tumors

TG6002 is an oncolytic immunotherapy developed for the treatment of solid tumors. The program is well advanced in preclinical testing and is expected to enter clinical testing during 2015.

Marketing outlook

Transgene is not currently able to provide information on the timing to file for marketing approval for this product.

8 Seroconversion is the development of specific antibodies against microorganisms in detectable amounts in the blood, in response to infection or immunization. 9 Cytolysis is cell death caused by rupture of the cell membrane due to the action of cells of the immune system. 10 An epitope, or “antigenic determinant”, is the part of an antigen recognized by the immune system, such as T-cells.

33 Tuberculosis program

In October 2013, the Company announced that its new tuberculosis immunotherapy program would receive funding of USD 5 million from the U.S. National Institute of Allergy and Infectious Diseases (NIAID, part of the U.S. National Institute of Health or NIH) in a grant to Emergent BioSolutions Inc. (NYSE:EBS), with which the Company will collaborate.

The Transgene tuberculosis program focuses on the development of a targeted immunotherapy to treat active tuberculosis, including drug-resistant tuberculosis. It uses Transgene’s viral vector technology, inserting into vectors proteins that are expressed by mycobacterium during both the latent and active phases of infection.

An immunotherapy approach should help to improve the effectiveness of current treatments (especially for patients whose infection has become resistant to treatment) by correcting the response of the patient’s immune system to the disease and stimulating it to eradicate the latent tuberculosis infection against which treatments are currently ineffective. Several product candidates were generated by Transgene and are being evaluated to determine which one will be used in the next stages of development. The first program data are expected to be presented in 2014.

As part of this funding, the Company entered into a collaboration agreement with Emergent BioSolutions for the development of a cell line production process and the manufacturing of the anti-tuberculosis immunotherapy product that the Company has chosen to develop. Emergent BioSolutions’ significant expertise in this area supplements the capabilities and expertise of the Company, which retains all rights associated with the development and marketing of candidates generated by this NIAID-funded program.

Marketing outlook

Transgene is not currently able to provide information on the timing to file for marketing approval for this product.

6.2. Principal Markets

At the date of this Reference Document, none of Transgene’s products is on the market.

6.2.1. Cancer

Cancer Treatment

Today, surgery and radiotherapy are considered to offer the best chances of success for the treatment of cancer. Once a cancer has metastasized, i.e., spread to other parts of the body after first treatment of the initial tumor, the patient’s chances of survival decrease. Chemotherapy and hormone therapy are mainly used to treat metastatic cancer. However, except in the case of less common types of cancers such as acute childhood leukemia, Hodgkin’s disease and testicular cancer, few patients are cured by these treatments and it has even been difficult to improveme survival of patients with more common types of cancer. Recently, this arsenal has been enriched by a class of monoclonal antibodies with certain immunotherapy mechanisms.

Transgene’s cancer programs mainly target the stimulation of the immune system to induce tumor rejection (therapeutic vaccines TG4010, TG4040, TG4001 and TG1050) or the destruction of tumor cells by special viruses called oncolytics (Pexa-Vec).

The immune system is the human body’s natural defense against foreign molecules (referred to as antigens). The immune system, which is regulated by various proteins called cytokines, attacks the foreign antigen in two ways: humoral immune response and cellular immune response. The humoral response generates proteins called antibodies that act against the antigens. The cellular response uses specialized cells referred to as cytotoxic T lymphocytes (CTLs) to eliminate cells that are infected or have become cancerous. Transgene’s products under development seek to stimulate the patient’s generation of antibodies and CTLs to attack cancerous cells.

Transgene has selected, in particular, therapies to induce a specific response against an antigen (active immunotherapy). Active immunotherapy is used in cases where the tumor antigen is well-known and present in many patients. The encoding gene for this antigen is incorporated into the vector and induces an immune response that is both humoral and cellular against the antigen throughout the body. The therapeutic vaccine, composed of the vector and gene, may be administered subcutaneously to elicit a systemic reaction against the foreign antigen.

34 The oncolytic virus approach consists of administering a virus (in this case the vaccine virus), which will attack the tumor from three angles: it will target tumor cells, selectively replicate itself and induce their destruction (cell lysis); it will also deprive the tumor of its blood supply (blockage of blood supply), and finally, it will stimulate the immune system (active immunotherapy).

Cancers (in particular digestive, bronchopulmonary and gynecological cancers) are, along with cardiovascular disease, the leading cause of mortality in developed countries. Epidemiological developments are similar in developing economies, especially in countries “in transition” or moderate-income countries, such as those in South America and Asia. Cancer is the cause of 7.6 million deaths annually, or around 13% of mortality worldwide (Source: WHO).

The annual incidence of cancer in developed countries will increase from 11.3 million (in 2007) to 26.4 million in 2030, with the prime etiological factors being the growth and aging of the population and increased exposure to risk factors such as tobacco and alcohol. Moreover, a 115% increase in the number of deaths from cancer worldwide is projected from 2007 to 2030 (from 7.9 million to 17 million) (source: WHO).

The global anti-cancer treatment market was valued at USD51.7 billion in 2009 and will grow to USD77.3 billion by 2015, assuming an annual average growth rate of 8.4% (sources: Business Insights, IMS Health).

Cancer treatment is currently based on a therapeutic arsenal that mainly includes surgery, chemotherapy, radiotherapy and monoclonal antibodies. Immunotherapy aims to complete this arsenal, at times in combination with other treatments. As immunotherapies target cancer treatment and not prevention, their cost should be similar to that of other cancer treatments.

6.2.1.1. Non-small cell lung cancer

Globally, lung cancer has the highest incidence of any cancer, with 1.2 million new cases diagnosed per year. This type of cancer is a major cause of death throughout the world, with 1.4 million cases per year. Some 45% of patients with lung cancer will still be alive one year after being diagnosed. After five years, this rate decreases to 15% (Sources: WHO, Business Insights, Datamonitor). Non-small cell lung cancer (NSCLC) represents approximately 80% of all lung cancers. The MUC1 protein, which TG4010 targets, is overexpressed in 60% of cases. The effectiveness of current NSCLC treatments is limited. TG4010, in combination with chemotherapy, is intended for the first-line treatment of metastatic NSCLC, which represents 56% of occurrences (source: SEER).

6.2.1.2. Liver cancers

Primary tumors

Hepatocarcinoma (HCC) represents the third largest cause of cancer mortaly worldwide, with 700,000 deaths per year (Sources: WHO, Datamonitor). Most HCC occurs in patients suffering from liver cirrhosis (90% of diagnosed HCCs) due to alcoholism or chronic hepatitis B or C infection.

Some 85% of patients with hepatocarcinoma are not eligible for surgery or transplants (around 450,000 cases worldwide) (Sources: Datamonitor, Business Insights). Locoregional treatments or chemotherapy may be offered for these patients, who are in a palliative care situation from the outset and for whom the three-year survival rate does not exceed 8%. The eligible market for Pexa-Vec includes patients diagnosed at an advanced stage, representing 25% of the overall incidence, or approximately 20,000 patients for all markets in Europe and the Middle East. These patients currently benefit from only one type of chemotherapy. This targeted therapy (sorafenib) has demonstrated longer patient survival of only three months, thus making it possible to survive a total of ten months (Source: Sorafenib, SHARP clinical trial).

Secondary tumors: liver metastases of colorectal cancer (CRC)

Colorectal cancer is the second most frequent type of cancer worldwide (Sources: WHO, Business Insights, Global Data). It is estimated that the incidence of colorectal cancer worldwide is around 1 million (Source: Globocan). It is responsible for 610,000 deaths per year worldwide (Sources: WHO, Business Insights).

Thirty to forty percent of patients present liver metastases at the outset at the time of diagnosis. For other patients, who are eligible for colon resection, 40% to 50% will develop liver metastases within three years of the operation (Sources: Datamonitor, Pubmed). Only 15% of patients presenting liver tumors are operable. The other 85% (around 500,000 patients worldwide) can only receive palliative care (Sources: Datamonitor, Pubmed).

6.2.1.3. Cancers caused by the Human Papilloma Virus (HPV)

Some types of human papilloma virus or HPV, especially genotypes 16 and 18, have been identified as the main cause of cervical cancer. In addition, the ability of these viruses to infect cells of the mucous membranes and their role in so-called “head and neck” cancers (Sources: OMS, INcA) has also been demonstrated, particularly in oropharyngeal cancers, or cancers of the oral cavity and larynx (Source: Kreimer et al., 2005).

In recent decades, with the exception of technical developments in radiotherapy and the development of targeted therapies, some major advances have been made in the treatment of cancers of the head and neck. The current therapeutic strategy consists of a choice between radio-chemotherapy or surgical resection with or without adjuvant radiotherapy and is dependent on the extent of the tumor, the functional loss associated with predictable resection, and the wishes of the patient. The identification of HPV infection as a proven risk factor for development of head and neck cancers, as well as smoking and alcohol consumption, suggests long-range implications for the development of targeted therapies.

HPV-positive patients currently undergo the same treatment regimensas other patients. However, these patients most often present with an intermediate stage tumor, known as locoregional, and are not eligible for surgery, thus requiring the development of new targeted drug approaches (Ang et al. , 2010).

In 2020, head and neck cancers carrying the HPV16 virus and diagnosed at a localized stage will represent approximately 22,000 cases in the European, North American and Japanese markets. Analyses of trends in incidence rates show a marked increase in the number of cancer cases related to this virus (Source: Globocan, INcA). Given that 70% of patients cannot undergo surgery, the size of the eligible market for the immunotherapy product TG4001 in this indication can be estimated at approximately 15,000 patients per year.

6.2.2. Chronic infectious diseases

6.2.2.1. Hepatitis C Virus Infection

Hepatitis C, an inflammation of the liver caused by a specific virus (HCV), is the most widespread chronic infectious disease transmitted by blood in developed countries. According to the WHO, 170 million people are chronically infected worldwide. Ten million people are infected in Europe and the United States. Each year, three to four million people are newly infected worldwide (Source: WHO).

The usual treatment consists of a combination of pegylated interferon-alpha and ribavirin, an antiviral drug. The standard treatment has significant side effects. Only a minority of patients chronically infected with HCV are eligible for standard care and about half of those treated do not respond.

In 2011, two new antiviral agents (protease inhibitors) obtained market authorization, thus changing the standard of care for hepatitis C from a dual therapy to a triple therapy (pegylated interferon, ribavirin, protease inhibitors). These protease inhibitors are telaprevir and boceprevir. They can increase the effectiveness of treatment because ~70% of subjects receiving the new triple therapy fail to permanently eliminate HCV (this rate was ~40% with dual therapy). However, protease inhibitors are not well tolerated and cause adverse events such as severe rashes and anemia (telaprevir) or anemia and dysgeusia (boceprevir), in addition to the adverse events with interferon (flu-like symptoms, depression) and ribavirin (anemia). Thus, approximately 10% of subjects who begin treatment do not follow it to term. Even subjects who continue treatment, commonly fail to follow all the prescriptions due to these side effects, a situation that limits the effectiveness of treatment and promotes the emergence of viral resistance. In addition, combination therapies are extremely expensive (about €50,000/patient). Finally, 30% of patients who do not respond to triple therapy constitute a class of patients who are difficult to treat and to date have no alternative, thus condemning them to a worsening condition. In addition, the side effects of interferon are a major reason why 22% of patients delay or refuse treatment (Source: Datamonitor).

All of this information emphasizes the major public health problem posed by HCV infection worldwide and the importance of developing new approaches and therapeutic concepts. Accordingly, treatments based on interferon- free, effective and safe combinations of new antiviral drugs are the current target of drug manufacturers. Such combination therapies of interferon-free antiviral drugs could be marketed starting in 2015.

The combination of an immunotherapeutic product, such as TG4040, with antivirals would allow the substituting interferon while including a drug with immunomodulating properties. In addition, difficult-to-treat populations could benefit from a therapeutic approach that includes a product of a different pharmacological class such as an immunotherapy.

36 6.2.2.2. Hepatitis B Virus Infection

According to the World Health Organization (WHO), 350 million people worldwide are affected by chronic hepatitis B (2009 data). Hepatitis B is more common in some parts of the world, especially in China and other Asian countries, where it is suspected that more than 10% of the population is now carrying this chronic infection. Chronic hepatitis B is responsible for one million deaths each year due to complications of the disease: liver failure, cirrhosis or hepatocellular carcinoma (liver cancer).

In Europe and other developed countries, infection with the hepatitis B virus (HBV) most often affects young adults, with infection occurring primarily through sexual contact or through the use of contaminated needles for injecting drugs. In highly endemic regions such as China, transmission perinatally or by contact with infected people in the immediate environment also plays an important role (Source: WHO).

Currently, various active anti-HBV antiviral compounds are available, including Tenofovir from Gilead and Entecavir from BMS, whose primary therapeutic target is to inhibit virus replication. However, these antiviral treatments allow recovery of patients in only 3% of cases at best (Source: EASL HBV guidelines). Therefore, the current challenge is the development of new therapeutic approaches.

The competitive environment for immunotherapy products is low:

- the most advanced developments are being conducted only in emerging countries (China, Bangladesh, etc.), and - only two products are currently in Phase I clinical trials in key markets.

The first positioning considered for Transgene’s TG1050 immunotherapy product is a combination with one of the antivirals currently on the market. The objectives are to increase the cure rate and reduce the duration of antiviral-based treatment. Synergy is expected between the mechanism of action of TG1050 and the antivirals.

In seven major markets, the treated population totals (Source: Datamonitor):

- 150,000 patients in total in the United States, Germany, France, Italy, Spain and the UK, and - 200,000 patients in Japan.

The eligible Chinese market currently represents 500,000 patients and is expected to grow to two million patients per year in 2030 (Source: Decision Resources).

Treatment time is long; on average, it is 15 years in developed countries and, for many patients, throughout their lifetime.

6.2.3. Competition

For a company like Transgene, competition is multifaceted. It can come from technologies (other immunotherapy approaches in the indications being targeted by Transgene or other indications) or different technology approaches for the same condition (such as the treatment of lung cancer by a monoclonal antibody-like approach that would compete directly with TG4010).

Transgene products face competition from products already on the market developed as a franchise, i.e., commercially successful products developed for a variety of other indications. or products at more advanced stages of clinical development. The Company may also face competition from products that, although at a less advanced stage at any given moment, could later be developed more quickly due to greater efficacy in early clinical studies.

In addition, the nature of the Company’s competitors is varied. Its main competitors are large pharmaceutical (Johnson & Johnson, Bristol Myers Squibb, Roche, etc.) and biopharmaceutical (Amgen, Gilead, Vertex, etc.) companies, each of which annually invests hundreds of millions of euros in R&D in the cancer and infectious diseases. These companies are both competitors and potential partners. Companies smaller in size, such as Bavarian Nordic AS, Oncothyreon, Oxford BioMedica, Ltd., NovaRx or Oncolytics Biotech ( Sources: websites of relevant companies, general and specialized press – Nature, Science , etc. – press releases, presentations at medical conferences – ASCO, AACR, etc.) are also competitors and potential partners.

Even though there is currently no effective treatment to cure cancer, there are other recognized methods of treatment, such as chemotherapy. For the past few years, other targeted therapy approaches comprised of monoclonal antibodies or small molecules have improved treatments for patients. These medications are therefore competing products. However, over the past few years only incremental improvement has been observed for drugs

37 that belong to these therapeutic categories. The market is therefore awaiting new products that present innovative breakthroughs and are able to provide significant therapeutic benefits. The products developed by Transgene are an integral part of this progress.

6.3. Exceptional events

None.

6.4. Dependence of the Company on patents, licenses and trade agreements

(see Chapter 4 – Risk factors – Specific Risks related to Product Marketing Partnerships – Specific Risks Related to Intellectual Property Rights for Genes and Technologies to be Acquired – Specific Risks Related to Patents – Specific Risks Related to Litigation in Patent Matters.)

6.5. Competitive advantages

The MVA vector technology platform

The MVA vector platform is one of Transgene’s technology platforms and is designed to allow for a maximum number of gene transfer applications. It makes available delivery techniques for differentiated genes, suited to distinct clinical situations, specifically in the field of cancer.

This technology platform presents the following potential advantages:

- Safety: MVA is a live attenuated vaccinia virus obtained from a viral strain unable to propagate into human cells.

- Easy to administer: Transgene’s technology principally focuses on the development of products in ampoules or vials, ready for use and for direct administration to the patient; and

- Manufacturing efficiency: production processes that allow for the application of practical cell culture and purification methods, ready for the production of commercial batches, have been developed.

Integrated skills from research to development

Transgene relies on its three decades of recognized scientific expertise. The Company has worked since 1992 in the field of gene transfer therapy and immunotherapy and has also significantly increased its know-how in key development areas: virology, the manufacturing of clinical batches pursuant to Good Manufacturing Practices (GMP), biological control techniques, the conduct of clinical trials and regulatory affairs.

An extensive portfolio of patents

Transgene has applied for patents and continues to do so to protect its products, vector technologies and related processes and other technologies. As of the date of this Reference Document, Transgene owns more than 170 patents granted both in Europe and the United States. In addition to its patent portfolio, Transgene has licenses for third-party patents and the use of third-party processes and technologies.

Manufacturing capacity for biopharmaceutical products

Transgene has a production unit on its Illkirch-Graffenstaden site that currently produces clinical batches of its products under development. This comprehensive unit was designed to operate in compliance with U.S. and European regulations for good manufacturing practices and the rules governing the confined utilization of genetically engineered organisms. In parallel to the production process, the Company has acquired its own expertise in quality control and quality assurance. The quality control laboratory allows for a major portion of quality control activities to be performed internally, both during the production process and on the end products. A quality assurance program was established to fulfill requirements related to the quality and safety of pharmaceutical products intended for human use.

38 7. ORGANIZATIONAL CHART

7.1. Relationship with the Institut Mérieux Group

Transgene is 54.9% owned by TSGH, a financial holding company, which is in turn 98.66% owned by Institut Mérieux (formerly Mérieux Alliance), itself 99.8% owned by Compagnie Mérieux Alliance, which is 68% owned by the Mérieux family and 32% owned by the Fondation Christophe et Rodolphe Mérieux. Philippe Archinard, the Chairman and Chief Executive Officer of Transgene, is the Chief Executive Officer of TSGH, in which he holds a 1.34% stake, and a director of ABL, Inc., a TSGH subsidiary, and bioMérieux SA, a subsidiary of Institut Mérieux.

Within this group, Mérieux NutriSciences has a services business in food security and health, bioMérieux in clinical diagnostics and Transgene in immunotherapy research and development.

7.2. Subsidiaries and investments

Transgene Inc.

The Company has a subsidiary in the United States, Transgene, Inc., located in Rockville, Maryland, and owns 100% of its capital and voting rights. This subsidiary represents Transgene S.A. before various organizations, regulatory authorities and study centers for its clinical trials in the United States. In this context, it comes under the operational control of Transgene S.A., charges its costs to Transgene S.A. and owns no significant assets. Philippe Archinard, the Chief Executive Officer of Transgene, and Stéphane Boissel, Deputy Chief Executive Officer, are directors of Transgene Inc.

Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd

Transgene also has a subsidiary in China, Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd., located in Shanghai, in which it holds 100% of the capital and voting rights. This company was established in 2012 to accommodate academic research collaborations conducted by Transgene in Chinese territory. In this context, it comes under the operational control of Transgene S.A., charges its costs to Transgene S.A. and owns no significant assets. Philippe Archinard, Stéphane Boissel and Xia Meng, Chief Executive Officer of Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd., are directors of this company. Jean-Philippe Del is its supervisor.

The Company also holds equity stakes in Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. (50% of the capital), Platine Pharma Services SAS (33.26% of the capital) and ElsaLys Biotech SAS (37%).

Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd.

Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. is a Chinese corporation created in 2010 to develop and ultimately sell biotechnology products, including Transgene products, in China. This company is jointly owned with Tasly Pharmaceutical Group, which is based in Tianjin, China. Philippe Archinard and Thibault du Fayet are directors of Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd., and Stéphane Boissel is its supervisor.

Platine Pharma Services SAS

Founded in March 2011, Platine Pharma Services SAS brought together the immuno-monitoring activities (measurement of the immune response to the injection of immunotherapy products) of Innate Pharma SA and Transgene. These activities were previously carried out independently by each company but also as part of a collaborative program that received FUI public funding. These activities were non-strategic for the business, but essential as services and centers of significant costs. Innate Pharma SA and Transgene decided to unite to streamline these activities and provide these services to third parties. Both companies are major customers of Platine Pharma Services SAS.

On June 24, 2013, Transgene announced the acquisition by Platine Pharma Services SAS of the immuno- monitoring activities of Indicia Biotechnology S.A. On July 31, 2013, the General Meeting of Platine Pharma Services SAS, in which Transgene SA had a 49.62% stake, approved the transaction, which was carried out through a partial asset contribution by Indicia Biotechnology SA to Platine Pharma Services SAS. Prior to this transaction, the equity of Platine Pharma Services SAS was reconstituted by a capital increase via a partial incorporation of current account receivables of Transgene SA and Innate Pharma SA shareholders in the amount of €677,000 (of which €339,000 was for the Company).

After these transactions, the Company’s interest in Platine Pharma Services SAS amounted to 33.26%. Transgene, represented by Philippe Ancian and Stéphane Boissel as directors, does not intend to remain a major shareholder in Platine Pharma Services SAS.

ElsaLys Biotech SAS

On May 17, 2013, Transgene acquired a stake of approximately 37% in the capital of ElsaLys Biotech SAS. ElsaLys Biotech SAS was founded by former executives of Transgene and Sofimac Partners investment fund (which also owns 37% of ElsaLys Biotech SAS) to develop monoclonal antibodies, a new field of research that Transgene does not wish to continue in the immediate future considering its commitments to the development of viral vectors. Transgene has not precluded returning to this activity in the future. By participating in the financing of ElsaLys Biotech SAS, Transgene retains an interest in this area while sharing the short-term

40 financing of this activity with third-party investors. Transgene is the Chairman and a directeor and is represented by Stéphane Boissel

41 8. PROPERTY, PLANT AND EQUIPMENT

8.1. Property and equipment

The Company has a headquarters and two annex sites.

The main site is the registered headquarters located in the Innovation Park in Illkirch, a suburb of Strasbourg, with three buildings:

- the first, built in 2008, with an area of approximately 6,800 m², houses the registered headquarters, research, process development, quality control and clinical development activities; this building is held under a financial lease that was still in effect as of the date of this Reference Document;

- the second, with an area of approximately 1,500 m², is dedicated to the production of clinical batches; this building, which was completed in 1995, has been fully owned since October 2009; and

- the third, attached to the production building, with an area of approximately 770 m², is a logistics annex containing offices and storage facilities; this building, which was completed in 2012, is fully owned.

The annex sites consist of office space of 300 m² in the Illkirch Innovation Park and a laboratory and office space of 300 m² in Lyon within the Lyon Gerland Center for Infectious Diseases. These two sites are leased.

The Company owns nearly all of the equipment used in its research and development and production activities.

8.2. Environment

The products designed and developed by the Company result from biological sciences (specifically, molecular and cellular biology) and use biotechnology processes (such as cell cultures and purification processes) to enable the transition from laboratory work to the production of quantities of products controlled and approved for human clinical trials.

The processes to realize these products are extremely complex and require materials that present potential risks to individuals and the environment in the case of accidental exposure. These processes occur within several levels of containment.

Accordingly, for example, the research and manufacturing laboratories are designed and equipped both to protect the product being produced from potential outside contamination and to protect employees from accidental exposure to harmful products. The Company’s activities are governed by pharmaceutical standards (Good Laboratory, Manufacturing and Clinical Practices) and the provisions of the Environment Code relating to the use of genetically modified organisms in a confined space. As such, it is subject to the approval of the administrative authority issued on the approval of the French High Council of Biotechnologies for the viral constructs it produces. The approval includes the classification of these constructs and the containment conditions for their handling. The Company’s investments in the quality of its products have a safety and protection dimension, but are not necessarily recorded as specific costs related to this issue.

The Company believes that its biopharmaceutical research and development has very little impact on the environment. However, for the transition to industrial-scale manufacturing of its products for the market, the Company was required to anticipate the application for authorization to operate an industrial production unit under Environmental Code (legislation on Installations Classified for the Protection of the Environment). In January 2011, it received an authorization decree issued by the prefectural authority after a process that took several months.

The impact of this activity on the environment is controlled in two ways:

- by the strict application of pharmaceutical quality standards that allow for control and follow-up at all stages of activity (air control and treatment, quality of matters used, matter and personnel traffic),

- by compliance with environmental regulations in effect for aspects not directly impacted by these standards (classification of research with regard to the regulations governing genetically engineered organisms, containment of operations, waste and wastewater management, etc.).

The Company’s activity generates various forms of waste that require sorting for special treatment. The Company has entered into special contracts with competent service providers for removal and processing, in accordance with

42 the standards and rules that govern these various categories.

See also Chapter 27 – Corporate Social Responsibility (pages 156 to 168).

9. REVIEW OF FINANCIAL CONDITION AND RESULTS

9.1. General

Transgene is a biotechnology company that develops innovative products in the field of immunotherapy treatment of cancers and infectious diseases. Transgene is a vertically integrated company: it has production facilities for its product batches used in research and development and quality control and research laboratories. Through a strategic partnership with Sanofi, Transgene will have access to commercial-scale production capacities by 2016. The Company intends to develop its own sales and marketing channels in certain territories. At the date of this document, Transgene has eight products in development, including four products in Phase 2 clinical development: TG4010, a therapeutic vaccine initially being developed for lung cancer, Pexa-Vec, an oncolytic virus initially being developed for liver cancer, TG4040, a therapeutic vaccine for hepatitis C, and TG4001, a therapeutic vaccine being developed potentially for oropharyngeal cancer caused by human papilloma virus infection. Other programs are in earlier stages of development.

9.2. Major accounting principles

Revenue recognition

At the date of this Reference Document, with no products on the market, Transgene generates revenue from (i) collaboration and licensing agreements signed with other companies in its sector (see Chapter 22) and (ii) public funding of research expenses (subsidies and research tax credits).

Some collaboration and licensing agreements provide for research or manufacturing services by the Company, with obligations to customers. The Company invoices its services at a contractually defined price that is generally based on time spent, and billings are recorded in operating income as and when the services are performed. Some of these contracts provide for manufacturing services with a performance obligation. In these cases, services are recorded in operating income in the income statement after satisfactory quality control and customer acceptance. The corresponding amounts collected, but not yet recognized in income in accordance with the principles outlined above, are recorded in “Deferred income” on the balance sheet until they meet the criteria for recognition in operating income. Products from patent licenses generally consist of access to technology paid upon signing of the agreement and non-refundable fees, financing by milestone payments and other payments such as royalties on sales.

The Company may be required to grant an option right for a license. Income associated with this right is recorded as “Deferred income” on the balance sheet and recognized in income linearly, until the estimated date of exercise of the option by the beneficiary. The expected date of exercise of the option is reviewed periodically.

In the event that the Company has not committed to perform work for the development of technology after signing, the non-refundable technology access rights paid upon the signing of collaboration and licensing agreements are recognized as operating income upon the fulfillment of the contractual obligations. In the event that the Company should continue some development work in the technology after signature, or if it has a higher obligation to deliver the product, these rights are recognized in deferred operating income over the period of development or delivery of the product.

The milestone payments received under collaboration and licensing agreements are recognized in income when the operative event has occurred and conditions are no longer precedent to its payment by the third party that must be exercised by Transgene. Operative events are generally the scientific or clinical results obtained by Transgene, the beginning of studies or external factors such as regulatory approvals.

Royalties on sales received under collaboration and licensing agreements are based on sales by licensees of products or technologies. They are recognized on the basis of the license terms, when the sales can be reliably measured and recovery of the related receivables is reasonably assured.

Certain expenses on research and development in France are entitled to a research tax credit recognized at the end of the year in which the expense was recorded and the tax credit claimed. The tax credit may be redeemed in accordance with the tax provisions where it could not be used by allocation to a tax charge. Research tax credits are recognized in the income statement under “Government grants” in accordance with IAS 20.

44 Research and development expenses

Research and development expenditures are recognized as an expense in the income statement in the period in which they are incurred. Development expenses are capitalized only when IAS 38 requirements are met. At the current development stage of its products, the Company believes that, at the date of this document, these conditions were not met, and therefore, it did not capitalize its development expenses.

Payment in shares

The Company distributes stock options and bonus shares to its officers and employees. The charge for these distributions is evaluated and spread over time, according to the principles of IFRS 2.

Benefits at retirement

In accordance with the prevailing laws and practices in France, Transgene SA offers certain advantages that ensure eligible employees are paid a lump sum upon retirement (benefit plan at retirement). In accordance with the obligations and regulations, these defined benefit plans may be funded by investments in various instruments. The rights acquired by active staff are estimated using actuarial valuations, based on probability of death and continued employment by the Company, as well as expected future salary. The benefit obligation is measured by the projected unit credit method. This provision does not apply to employees of entities located abroad.

9.3. Financial position

The Company has incurred losses since 1993 and expects to continue to incur more losses over the next few years, due to costs incurred by its research and development programs and preclinical and clinical trials. In previous years, the main sources of Transgene revenue were the remuneration of research and bio-manufacturing contracts for third parties and government subsidies. Future revenues should be limited to payments related to existing and future strategic partnerships with pharmaceutical companies, third party manufacturing contracts, current license agreements, investment income from cash investments and public funding.

Comments on Operating Results (IFRS standards)

Fiscal years ended December 31, 2013 and 2012

Income statement:

December 31, December 31, In thousands of Euros 2013 2012* Revenue from collaboration and licensing agreements 3,849 3,928 Public funding of research expenses 11,886 9,133 Operating revenue 15,735 13,061 Research and development expenses (50,063) (48,679) Overhead expenses (6,769) (6,610) Other revenue and expenses (101) 93 Net operating expenses (56,993) (55,196) Operating income (41,198) (42,135) Interest income (costs), net (731) (585) Loss bef ore tax (41,928) (42,720) Tax on profits - - Income from equity affiliates (930) (474) Net loss (42,858) (43,193) Net income per share ( €) (1.34) (1.36) Diluted earnings per share (€) (1.34) (1.36) *2012 financial statements modified according to IAS19 revised effective retroactively from January 1, 2013. (Note 1.8.3)

Revenue:

During the periods under review, revenues from collaborations and licensing agreements mainly included the

45 following:

- Production or research services for third parties (including Jennerex, Inc. for Pexa-Vec, which amounted to €2.2 million in 2013 (€1.8 million in 2012),

- “Upfront payment” or “milestone” income from product development (option given to Novartis in 2010 for TG4010), which amounted to €1.0 million in 2013 (€1.4 million in 2012), and

- Income related to commercial use of technologies or products provided under license by Transgene, which amounted to €0.6 million in 2013 (€0.7 million in 2012).

The amount received from Novartis under the option agreement signed between Transgene and that company in March 2010 pertaining to the product TG4010 (€7.4 million) is recognized in income in a staggered and linear manner over the period from the date of signing of the option agreement to 31 March 2014, the deadline estimated (by the Company) to exercise this option. The impact on the Company’s revenues in 2013 amounted to €1.0 million (€1.4 million in 2012), and the balance (€0.2 million) is therefore to be recorded as revenue in the first quarter of 2014.

At December 31, 2013, public funding of research expenses corresponded to grants received and receivable, as well as the research tax credit. Research grants amounted to €3.1 million in 2013 (€0.7 million in 2012). In 2013, subsidies were provided mainly by the ADNA program (“Advanced Diagnostics for New Therapeutic Approaches”) funded by OSEO. Transgene could collect up to €1.2 million in additional funding over the remaining duration of the program until 2016 (€0.3 million of additional revenue).

The research tax credit (CIR) totaled €8.9 million in 2013 (€8.4 million in 2012). The basics of eligible expenses (net subsidies received during the fiscal year) amounted to €29.6 million in 2013 and €27.6 million in 2012. The change in the net basis of expenses eligible for the research tax credit between 2012 and 2013 is attributable to both the growth of eligible expenses and cuts in public funding for research expenses. The growth of eligible spending on research and development between 2012 and 2013 (€33.1 million in 2013, against €32.0 million in 2012) is related to the increase in external expenses for clinical trials (use of CROs or Contract Research Organizations) and the outsourcing of eligible research (€9.8 million in 2013 versus €9.3 million in 2012), as well as an increase in personnel and operating expenses eligible for the CIR (€21.9 million in 2013versus €21.0 million in 2012). Public funding for research expenses removed from the basis for calculating the research tax credit amounted to €3.5 million in 2013, compared to €4.4 million in 2012.

Operating expenses:

Research and development expenditures (“R&D”) amounted to €50.1 million in 2013, an increase of about 3%, compared to 2012 (€48.7 million). As noted above, this increase is mainly due to increased spending on clinical trials.

The following table details research and development expenses by type:

December 31, December 31, Change In millions of Euros 2013 2012 Employee benefits expenses 19.4 19.5 -1% Payment in shares 0.6 0.7 -14% Expenses on intellectual property and licensing costs 1.7 1.6 +6% External expenses on clinical projects 12.5 11.7 +7% External expenses on other projects 3.9 3.2 +22% Operating expenses 9.3 9.2 +1% Depreciation and provisions 2.7 2.8 -4% Research and development expenses 50.1 48.7 +3%

Staff costs allocated to R&D (salaries, expenses and related expenditures), amounted to €19.4 million in 2013, compared to €19.5 million in 2012. The Company’s R&D workforce remained relatively stable in 2013 (246 full-time equivalents in 2013 versus 247 in 2012).

Expenses on intellectual property and licensing amounted to €1.7 million in 2013, compared to €1.6 million in 2012.

46 External expenses for clinical trials amounted to €12.5 million in 2013, compared to €11.7 million in 2012. This increase (7%) is explained by the progress in clinical studies for key products: patient recruitment in the Phase 2b part of the Phase 2b /3 trial with TG4010 in lung cancer accelerated in 2013 (€8.1 million in 2013, compared to €6.1 million in 2012) and recruitment of patients increased in Pexa-Vec clinical trials (€3.4 million in 2013, against €2.7 million in 2012). Conversely, the phase 2b study of TG4040 in hepatitis C is being closed and the associated external expenses decreased in 2013 (€1.0 million in 2013, against €2.8 million in 2012).

Other external expenses, including expenses on research, preclinical and industrial projects, amounted to €3.9 million in 2013, compared to €3.2 million in 2012. This change was mainly due to new production and research services, including the pharmaceutical development of TG1050, an immunotherapy product for hepatitis B.

Operating expenses, including the cost of operating research laboratories and the production unit, amounted to €9.3 million in 2013, compared to €9.2 million in 2012.

The following table breaks down overhead expenses by type of expense:

December 31, December 31, Change In millions of Euros 2013 2012 Employee benefits expenses 3.2 2.7 +19% Payment in shares 0.2 0.2 NS Professional and management fees 2.3 2.6 -12% Other overhead expenses 0.9 1.0 -10% Depreciation and provisions 0.2 0.1 +100% Overhead expenses 6.8 6.6 +3%

Staff costs amounted to €3.2 million in 2013, compared to €2.7 million in 2012. This increase was primarily due to the strengthening of the Company’s business development and investor relations teams in the United States, as well as severance payments. Support activity staff increased slightly between 2012 and 2013 (27 full-time equivalents in 2013 versus 25 in 2012).

Professional and management fees amounted to €2.3 million in 2013, compared to €2.6 million in 2012.

Interest income and (expenses), net:

Interest expenses, net of interest income, amounted to €0.7 million in 2013 (€0.6 million in 2012).

Financial income (investment income) amounted to €0.7 million in 2013 (€0.5 million in 2012).

The majority of interest expenses were bank interest on the research tax credit refinancing (€0.4 million), bank interest related to ADNA (€0.5 million) and a write-off of a debt owed by Platine Pharma Services SAS, an affiliate (€0.2 million).

Net loss:

Net loss amounted to €42.9 million in 2013 (€43.2 million in 2012). Net loss per share was €1.34 in 2013 (€1.36 in 2012).

47 10. CASH FLOW AND CAPITAL RESOURCES

To date, the Company has been funded by capital increases. Historically, the Company has mainly been financed by its majority shareholder, due to that shareholder’s wish to maintain its level of participation and control (see 4.3.3. Financial liquidity risk related to cash requirements).

Investments:

Tangible and intangible investments amounted to €2.1 million in 2013 (€2.0 million in 2012).

Transgene SA participated in the capital increases of Jennerex, Inc. and ElsaLys Biotech SAS, respectively for amounts of €1.9 million and €0.5 million. The Company also partially converted the current account to the capital of Platine Pharma Services SAS for €0.3 million.

Repayable loans and advances:

In 2013, Transgene received €2.9 million in repayable advances for the ADNA program, which receives public funding from OSEO. Since the start of the ADNA program, the Company has received €12.5 million in repayable advances under this program. The Company may receive up to €3.4 million in additional repayable advances over the remaining term of the ADNA program, i.e., until 2016.

Liquidity and Capital Resources:

The cash assets are invested in very short-term mutual funds or invested at market conditions in a cash pool organized by Institut Mérieux, the majority shareholder of Transgene.

At December 31, 2013, the Company had €47.9 million in cash (€92.9 million at December 31, 2012).

On March 25, 2014, the Company announced that a total of €65.5 million had been raised via a capital increase in two stages:

- a capital increase with pre-emptive subscription rights, launched on February 28, 2014, which raised gross proceeds of €45.5 million, and - a private placement made on March 24, 2014, in response to requests by qualified, mostly foreign, investors, which raised €20 million.

At the date of this Reference Document, the Company had no bank debt subject to covenants. Following the financing transactions completed in March 2014, the Company has cash and equivalents of approximately €100 million.

Cash flow:

The Company’s cash flows amounted to €45.0 million in 2013 (€46.6 million in 2012).

11. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

All of the Company’s activities relate to pharmaceutical research and development of innovative compounds. These activities are described in detail in Paragraph 6.

49 12. TREND INFORMATION

At the date of this Reference Document, the Company expects cash consumption of €50 million to €55 million in 2014 in the absence of the exercise of the option for TG4010 by Novartis.

50 13. PROFIT FORECASTS OR ESTIMATES

None.

51 14. ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES

14.1. Composition

14.1.1. Board of Directors

Transgene is headed by a Board of Directors, currently composed of ten members, six of whom are considered to be independent. The term of office of the directors is three years. Each director must hold at least one share in the Company if he or she is not independent and at least a number of shares corresponding to the investment of six months of directors’ fees if he or she is independent.

The table below summarizes the mandates and roles of the members of the Board of Directors:

Philippe Archinard Principal role outside of the Company 54 years old Director of the Immunotherapy Unit at Institut Mérieux

First appointment: 2004 Management experience and expertise: Expiration of mandate: 2014 Graduated from the Management Program at Harvard Business School Director of bioMérieux Inc. [3][4] Primary role in the Company: Deputy Chief Executive Officer at bioMérieux S.A. [4] Chairman and Chief Executive Officer – Chief Executive Officer of Innogenetics BV from 2000 to 2003 Director Other mandates held: [3] Number of Company shares held: 6,500 Permanent representative of TSGH on the board of ABL, [3][5] Number of Company options held: 236,361 Inc. , Representative of Lyon Biopôle on the Boards of Directors of the FINOVI Association and the Fondation Synergie Lyon Cancer.

Director: bioMérieux S.A. [3] [4] ; ERYtech Pharma Chairman: Lyon Biopôle Association [6] Chief Executive Officer TSGH [3] Vice Chairman Association BioAster [6]

Jean-Luc Bélingard Principal role outside of the Company: 65 years old Chairman and Chief Executive Officer of bioMérieux SA (a listed company) First appointment: 2013 Expiration of mandate: 2016 Other directorships and positions held in any company at December 31, 2013: Director of: LabCorp of America (USA) Stallergenes (France – a Primary role in the Company: Director listed company), AES Chemunex SA (end of term: December a 31, 2013), Pierre Fabre SA, Institut Mérieux Number of Company shares held: 0 Number of Company options held: 0 Former directorships held during the last five years: Director of Applera Corp. (USA) (end of term: 2008), NicOx (end of term: 2011), Celera Corporation (United States) (end of term: 2011), AES Laboratoire Groupe SA a (end of term: 2012), Chairman and Chief Executive Officer of IPSEN (end of term: 2010)

Jean-Pierre Bizzari Principal role outside of the Company: 59 years old Senior Vice-Chairman Clinical Development at Celgene [5]

First appointment: 2008 Management experience and expertise: Expiration of mandate: 2016 Doctor of medicine 30 years clinical experience in oncology (held clinical development management positions) Primary role in the Company: Independent director [2] Other mandates held: Member of the international scientific committee of the National Number of Company shares held: 5,000 Cancer Institute. Number of Company stock options held: 0

Arnaud Fayet Principal role outside of the Company: 72 years old Company director

First appointment: 2000 Management experience and expertise: Expiration of mandate: 2013 Member of the Executive Committee at Wendel Investments since 1995 Was Chief Executive Officer, Vice-Chairman and director at Carnaud Metalbox Primary role in the Company: Graduated from the Ecole Centrale de Paris Independent director [2] Holder of an MSA from Stanford University Member of the Audit Committee (Chairman) Other mandates held Number of Company shares held: 5,501 Director: Vaucrains Participations Number of Company stock options held: 0

Benoît Habert Principal role outside of the Company: 49 years old Chairman of Dassault Développement (SAS)*

First appointment: 2000 Management experience and expertise: Expiration of mandate: 2014 Holder of an M.B.A. from INSEAD and a Master’s degree in business law. Deputy Chief Executive Officer and Director, Groupe Industriel Marcel Dassault (GIMD) (SAS) Primary role in the Company: Independent director [2] Other mandates held: Member of the Audit Committee and Chairman: Habert Dassault Finance Compensation Committee (Chairman) Director: Groupe Figaro (SAS)*; Dassault Medias (SA)*; Sport 24 (SA); Merieux Nutriscience Corp (USA); Figaro classifieds Number of Company shares held: 62,859 (SA)*; Editions Dupuis [5] ; Dargaud (SA); ZEWAO (SAS); Number of Company stock options held: 0 Intigold [5] ; Eclosion [5] ; KTO TV [6] ; Fondation KTO [6] : Observer: Relaxnews(SA); UNOWHY (SAS) Member of the Supervisory Board: John Paul (SAS) Member of the Supervisory Committee: Cooltech applications (SAS)*

Former directorships held during the last five years Permanent GIMD representative to: bioMérieux S.A. [3][4]; Shanh. [3] , (ended 2009); Silliker [3]

* Controlled by GIMD

Pierre-Patrick Hurteloup Principal role outside of the Company: 64 years old Medical Director, Pierre Fabre Oncologie

First appointment: 2005 Management experience and expertise: Expiration of mandate: 2014 Chairman of various companies in the Pierre Fabre Group since 2000

Primary role in the Company: Other mandates held: Independent director [2] President and director of: Pierre Fabre Ltd; Concept [5] Member of the Compensation Committee Pharmaceuticals International Ltd ; Pierre Fabre Médicament Benelux [5] ; Pierre Fabre Farmaka AE [5] – Greece; Pierre Fabre [5] [5] Number of Company shares held: 390 Pharma Norden AB – Sweden; Tema Medical Pty Ltd South Number of Company options held: 0 Africa

Jean-François Labbé Principal role outside of the Company: 63 years old Managing Director of SpePharm Holding BV (Netherlands)

First appointment: 2010 Management experience and expertise: Expiration of mandate: 2016 Graduate of HEC 35 years of experience in financial management of pharmaceutical companies both in France and abroad. Primary role in the Company: Founder of specialty pharmaceutical companies (OTL and Independent director [2] SpePharm)

Number of Company shares held: 350 Other mandates held: Number of Company stock options held: 0 Director: NicOx SA [4]

Expired mandates: Drug Abuse Sciences (2009); Supervisory Board of Cavadis BV (Netherlands) (2010); Chairman of the Supervisory Board : Libragen SAS

Alain Mérieux Principal role outside of the Company: 75 years old Chairman and Chief Executive Officer of Institut Mérieux (SA)

First appointment: 1991 Management experience and expertise: Expiration of mandate: 2014 Graduated from Harvard Business School (1968) Chairman of bioMérieux from 1965 to 2011

Primary role in the Company: Other mandates held Director Chairman: Institut de Recherche Techonologique BioAster; Fondation Mérieux [6] ; Number of Company shares held 100 Director: bioMérieux (SA )[3][4] ; CIC Lyonnaise de Banque; Cie (excluding 19,987,011 shares held by TSGH, a Plastic Omnium SA [4] , Mérieux Nutrsciences [3][5] (USA); subsidiary of Institut Mérieux, ultimately bioMérieux Italia SpA [3][5] (Italy); controlled by the family of Mr. Mérieux) Administrator and Honorary Chairman : Fondation Christophe et Number of Company stock options held: 0 Rodolphe Mérieux [6] - Institut de France; Fondation Mérieux (Chairman) Director of foundations: Pierre Fabre, Pierre Vérots; Fondation pour l’Université de Lyon (Chairman)

Expired mandates: Shantha (India) (end 2009); Université Claude Bernard Lyon CENTAURE (end 2012); Synergie Lyon Cancer (Canceropôle) (end 2012); Ecole Vétérinaire de Lyon (end 2013)

TSGH [4] Principal role outside of the Company: 17, rue Bourgelat 69002 Lyon Director of ABL, Inc.

Primary role in the Company Director

First appointment: 2002 Expiration of mandate: 2014

Number of Company shares held: 19,987,011 Number of Company stock options held: 0

Represented by Principal role outside of the Company: Dominique Takizawa Corporate Secretary at the Institut Mérieux (since 2006) 57 years old Management experience and expertise: Primary role in the Company: graduated from the Ecole des Hautes Etudes Commerciales and Permanent TSGH representative [4] has a chartered accountant’s diploma Member of the Audit Committee Corporate Secretary at bioMérieux [3][4] (2004-2006), Chief Financial Officer and Controller at the Institut Mérieux, Ms. Takizawa holds no shares or options in the Mérial and Aventis Cropscience Company. Other mandates held: Director: ABL, Inc.(USA); ADOCIA; April; Mérieux Nutrisciences Corporation [3][5] (USA); Lyon Pôle Bourse [6] ; Lyon Place Financière et Tertiaire [6]

Expired mandates: TheraConseil (end 2009); MACSF (mutual) (end 2010); Shanh (end 2009) ; Shantha (end 2009); Avesthagen (end 2011); bioMérieux Benelux (end 2009)

Laurence Zitvogel Principal role outside of the Company: 50 years old Professor at the University Paris Sud in Immunology and Biology and Oncologist-researcher-immunotherapist at the Institut First appointment: 2013 Gustave Roussy Expiration of mandate: 2016 Management experience and expertise: Doctor of medicine Primary role in the Company: Director of Research and INSERM Unit (also known as Ligue Independent director contre le cancer) and co-director of the IGR/Curie/INSERM Biotherapy Clinical Investigation Centre Number of Company shares held: 469 Number of Company stock options held: 0 Other mandates held: None

[1] Directors’ mandates expire on the date of the general ordinary meeting held in the year indicated and approving the financial statements for the fiscal year ending at December 31 preceding said meeting. [2] Independent director according to the following criteria (MiddleNext Code of Corporate Governance): - not an employee or corporate officer of the company or of its affiliates (the Company and its subsidiaries) and not having been in the last three years; - not a referenceshareholder of the company; - not a significant customer, supplier or banker of the Company or its Group or for which the Company or its Group represents a significant part of activity; - no close family ties with a corporate officer or referenceshareholder; - not the statutory auditor of the Company over the last three years. [3] An Institut Mérieux Group company. [4] A listed French company. [5] A foreign company. [6] Associations, foundations, etc.

To the Company’s knowledge:

- there are no family ties between the directors;

- no conviction for fraud has been rendered over the past five years against any of the members of the Board of Directors;

- over the past five years, none of the members of the Board of Directors has been associated with a bankruptcy, sequestration or liquidation as a member of an administrative, management or supervisory body, or as chief executive officer;

- over the past five years, no conviction has been rendered against one of the members of the Board of Directors that includes prohibition from acting as a member of an administrative, management or supervisory body of an issuer or from participating in the management and business of an issuer; and

55 - no incrimination and/or official public penalty has been made against any of the members of the Company’s Board of Directors by statutory or regulatory authorities (including designated professional bodies).

No director has been elected by the employees to the Board of Directors. Two employees, one of whom represents managers, represent the workers’ council and participate in the Board of Directors meetings.

14.1.2. Management Committee

The table below lists the names of the Transgene’s management committee members, their current positions within the Company and the date they were appointed to the position.

Seniority in Name Age Current position the post Philippe Archinard 54 Chairman and Chief Executive Officer 2004

Stéphane Boissel 46 Executive Vice President 2010

Nathalie Adda 48 Vice President Medical and Regulatory 2012 Affairs Chief Medical Officer

Christophe Ancel 50 Qualified Person– Vice President Quality 2014 Deputy Chief Executive Officer

Thibaut du Fayet 46 Vice President, Marketing, Alliance 2008 Management and Project Management

Colin Freund 43 Chief Business Officer 2013

Patrick Mahieux 49 Vice President Industrial and 2010 Pharmaceutical Operations

Philippe Archinard was appointed Chairman and Chief Executive Officer of Transgene on June 17, 2010. was previously Chief Executive Officer of Innogenetics since March 2000. From 1985 to 2000, he held various positions within bioMérieux, including the management of bioMérieux, Inc. in the United States. He is a chemical engineer and has a PhD in Biochemistry from the University of Lyon and completed a management program at Harvard Business School. He is president of the Lyon-Biopôle “competitiveness” center in Lyon.

Stéphane Boissel joined Transgene in 2010 as Executive Vice President and Chief Financial Officer in charge of finance, structuring and negotiation of commercial and industrial agreements, administration (human resources, legal, IT and procurement) and investor relations. From 2002 to 2010, he served as Executive Vice President and Chief Financial Officer of Innate Pharma, where he was in charge of the IPO and negotiation of agreements. From 1995 to 2002, he worked as a venture capitalist and investment banker at Lazard Group, including four years in Singapore and Hong Kong. He began his career in 1990 as a financial auditor at PWC. Stéphane Boissel holds an MBA from the University of Chicago (Booth GSB), is a graduate in finance from the Universities of Lyon and Paris Dauphine and holds a diploma from the French Society of Financial Analysts (SFAF) and is a DSCG. He is a director of Platine Pharma Services SAS and Transgene Inc. and supervisor of Tasly (Tianjin) Biopharmaceutical Co. Ltd.

Nathalie Adda joined Transgene in November 2012 as Chief Medical Officer, Vice President Medical and Regulatory Affairs.as . Nathalie Adda is a medical doctor who graduated from the Faculty of Medicine of Paris VII with a specialization in infectious diseases. She also graduated with a master’s degree in biostatistics. Nathalie Adda has over 15 years of experience in the United States in the pharmaceutical industry in clinical development, from early stages to the marketing authorization of new products. From 2006 to 2012, she served as Senior Medical Director at Vertex Pharmaceuticals in Cambridge, MA, USA, where she was responsible for clinical development and case file registration for Telaprevir, a drug that was approved in 2011 in the United States and Europe for the treatment of chronic hepatitis C. Previously, she held similar positions in clinical development at Gilead as Associate Medical Director and at Triangle Pharmaceuticals and Boehringer Ingelheim.

Christophe Ancel joined Transgene in February 2008 as Quality Management System and Compliance Manager and was appointed Responsible Pharmacist (Deputy Chief Executive Officer) on February 18, 2014 and Vice

56 President Quality. Christophe Ancel holds a Doctor of Pharmacy (Pharmaceutical Industry – 1989). He held various positions within the quality control departments of Alcon, Cardinal Health Laboratory, Eli Lilly, and from April 2013 was Vice President Operational Quality at Transgene.

Thibaut du Fayet joined Transgene in 2008. He is responsible for business development, alliance management and marketing for the Company. From 2007 to 2008, he was responsible for marketing at Stallergenes after having held a number of positions in strategy and business development at bioMérieux from 2003 to 2007 and Rhodia/Rhône Poulenc from 1999 to 2003. His extensive experience in the industry was preceded by six years in consulting at Bossard Consultant/Gemini Consulting. Thibaut du Fayet is a graduate of the ESSEC MBA management school and has an MA in International Finance from Brandeis University (Boston).

Colin Freund joined Transgene in October 2013. He previously served as Senior Vice President and Chief Business Officer at Agennix AG (2009-2013). From 2002 to 2009 he was Senior Vice President, Business Development of GPC Biotech AG. Previously, he was Vice President, Business Development of Double Twist, Inc., Oakland, California. He was responsible for alliances with genomics and proteomics companies. Before joining Double Twist, he was project leader at Boston Consulting Group in San Francisco and London, where he managed assignments in the healthcare and high technology practice areas. Colin Freund holds a Bachelor of Arts in economics and management from the University of Cambridge (UK) and an MBA from Stanford University (USA).

Patrick Mahieux joined Transgene in November 2010 to head industrial and pharmaceutical operations. He began his professional career at Pasteur Mérieux in 1993 and then held various positions within the Sanofi Aventis Group, including as director of large production units. From 2006 to 2010, he served as Director of Pharmacy of the Guerbet Group. Patrick Mahieux holds a Doctor of Pharmacy and a DEA in Pharmaceutical Technology and Biopharmacy. He is advisor to the President of the A3P Association.

14.2. Conflicts of Interest

No director has indicated the existence of an agreement with a major shareholder, client or supplier of the Company for which he is representative.

At the date of this Reference Document, and to the knowledge of the Company, there are no actual or potential conflicts between the private interests of the members of the Board of Directors and the management of the Company and the Company’s interests.

It is stated that Jean-Luc Bélingard, director of the Company since the General Meeting of June 19, 2013, is also Chairman and Chief Executive Officer of bioMérieux SA, of which Institut Mérieux held at December 31, 2012 58.90% capital and 71.56% of voting rights. Institut Mérieux holds 98.66% of the share capital and voting rights of TSGH SAS, which itself holds at the date of this Reference Document 51.99% of the capital and 66.38% of the voting rights of the Company. Philippe Archinard, Chairman and Chief Executive Officer of the Company, is also a director of bioMérieux SA and holds a 1.34% interest in TSGH.

14.3. Declaration concerning the administrative and management bodies

To the knowledge of the Company and at the date of this Reference Document, there are no family ties between members of the Board of Directors and the senior management of the Company, neither does there exist, to the knowledge of the Company at the date of this Reference Document, any arrangement or understanding with major shareholders, customers, suppliers or others, other than those listed in Chapter 19 of this Reference Document.

In addition, to the knowledge of the Company and at the date of this Reference Document, no member of the Board of Directors has been:

- convicted of fraud in at least the past five years; - subject to a bankruptcy, receivership or liquidation as a director or officer in at least the past five years; - indicted and/or officially and publicly sanctioned by statutory or regulatory authorities in at least the last five years.

Finally, to the knowledge of the Company and at the date of this Reference Document, no member of the Board of Directors has been prevented by a court from acting as a member of an administrative, management or supervisory body of an issuer or from acting in the management or conduct of affairs of any issuer during at least the last five years.

57 15. COMPENSATION AND BENEFITS

15.1. Compensation paid to directors and corporate executives

The tables below set out the information relating to the compensation of executive officers in compliance with AMF recommendations.

Note that in 2013, the Company did not pay compensation to Messrs. Bélingard and Mérieux or to TSGH and its permanent representative (Dominique Takizawa). Philippe Archinard received from Institut Mérieux gross compensation of €893,900 (including €450,000 in variable compensation and €8,900 in benefits in kind – vehicle), which were charged in part to the Company through a contract for services rendered by Institut Mérieux (see Note 18 to the financial statements). Alain Mérieux received from Institut Mérieux gross compensation of €362,300 (no variable compensation or payment in kind).

Table 1

Table summarizing compensation, options and shares assigned to each company executive (thousands of euros)

2012 2013

Philippe Archinard, Chief Executive Officer

Compensation payable for the year (details in Table 2) 70.7 72.2 Valuation of options assigned during the year (details in Table 4) None None Valuation of performance shares during the year (details None None in Table 6) TOTAL 70.7 72.2

Elisabeth Keppi, Responsible Pharmacist, Deputy Chief Executive Officer (until January 2014)

Compensation payable for the year (details in Table 2) 129.0 125.5 Valuation of options assigned during the year 40.3 None (details in Table 4) Valuation of performance shares assigned during the None None year (details in Table 6) TOTAL 169.3 125.5

Table 2

Summary of compensation of each executive officer (in thousands of euros)

2012 2013 Amount Amount Amount Amount due paid due paid

Philippe Archinard Chairman and Chief Executive Officer Fixed compensation 70.7 70.7 72.2 72.2 Variable compensation - - - - Exceptional compensation - - - - Director’s fees - - - - Payments in kind - - - - Share of Institut Mérieux 626.3 626.3 625.7 625.7 compensation charged to the Company TOTAL 697.0 697.0 697.2 697.2

Elisabeth Keppi Responsible Pharmacist, Deputy Chief Executive Officer Fixed compensation 98.5 98.5 100 100 Variable compensation 1.8 1.8 1.8 1.8 Exceptional compensation* 25.0 25.0 20 20 Director’s fees - - - - Payments in kind 3.7 3.7 3.7 3.7 TOTAL 129.0 129.0 125.5 125.5

*bonus based on personal objectives (mainly operational and qualitative) of the person concerned, fixed annually related to her role as Quality Assurance – Compliance and not to her status as a corporate officer.

Table 3 Table showing director’s fees and other compensation received by non-executive directors (in thousands of euros)

Non-executive directors Amount paid during 2012 Amount paid during 2013

Jean-Pierre Bizzari Director’s fees 9.5 9.5 Other compensation None None

Luc Bélingard [1] Director’s fees NA None Other compensation NA None

Arnaud Fayet Director’s fees 12.5 12.5 Other compensation None None

Benoît Habert Director’s fees 17.5 15.5 Other compensation None None

Pierre-Patrick Hurteloup Director’s fees 13.0 10 Other compensation None None

Jean-François Labbé Director’s fees 11.0 8 Other compensation None None

Alain Mérieux Director’s fees None None Other compensation None None

TSGH (Dominique Takizawa) [2] Director’s fees None None Other compensation None None

Laurence Zitvogel [3] Director’s fees NA 5.5 Other compensation NA None

TOTAL 63.5 61

[1] Since June 21, 2013 [2] Messrs. Bélingard and Mérieux, TSGH and Ms. Takizawa do not receive director’s fees or other compensation in relation to their directorship of the Company.

Tables 4 and 5 : see paragraph 17.2 below.

Table 6: performance shares allocated to each corporate executive: None. The Company did not allocate any performance share during the fiscal year nor any prior fiscal year.

Table 7: performance shares that became available during the fiscal year for each corporate executive: None (see comment above)

Tables 8 and 9 : see paragraph 17.2 below

Table 10

Compensation due Additional or that may become Compensation Employment Executive directors pension due as a result of related to a non- contract plan termination or compete clause change in positions

YES NO YES NO YES NO YES NO Philippe Archinard , Chief Executive Officer X X X X Dates of mandate: 2004 - 2014

To the Company’s knowledge:

- none of the directors benefit from an undertaking on the part of the Company or its subsidiaries in terms of elements related to compensation, indemnities or benefits of any kind which are or may be due in light of the employment, termination of employment or change in position, or afterwards;

- none of the directors have received compensation from TSGH, which directly controls Transgene, during the fiscal year.

15.2. Total amount of pension provisions

Provisions for pensions paid December 31, 2013 by the Company to executive officers amounted to €20,900 for Philippe Archinard and €100,800 for Elisabeth Keppi.

61 16. ROLE OF ADMINISTRATIVE AND MANAGEMENT BODIES

16.1. Dates and expiration of term

See 14. Administrative, Management and Supervisory Bodies (Table of Directors).

16.2. Service contracts between the issuer and the members of the Board of Directors.

There are no service contracts between members of the Board of Directors and the Company or its subsidiaries providing specific advantages to the Directors.

16.3. Audit Committee and Nominations and Compensation Committee

The Audit Committee is composed of Messrs. Fayet (Committee Chair) and Habert, independent directors, and Ms. Takizawa. Its operations are described in paragraph 16.4. Corporate Governance, and specifically involved the following during fiscal year2013:

- review of the consolidated and corporate financial statements for fiscal year 2012; - review of the consolidated accounts for the first half of 2013; - review of the 2013 budget; - determination of the statutory auditor fees; - initial review of the financial press releases; - definition of the cash investment and performance follow-up policy; and - review of financial risks and insurance policy.

The members of the Audit Committee also participated in the work of an ad hoc committee called the “Financing Committee”, which met several times during the second half of 2013 and developed the financial strategy of the Company, which was discussed and adopted by the Board. In March 2014, this strategy led to a capital increase with preferential subscription rights for shareholders and a private placement of shares that raised €65.5 million.

The Compensation Committee, composed of Messrs. Habert (Chairman of the Committee) and Hurteloup, independent directors, the operations of which are described in Paragraph 16.4. Corporate Governance, specifically evaluated manager and Executive Committee compensation during fiscal year 2013.

16.4. Corporate Governance

The Company complies in matters of corporate governance with the recommendations contained in the MiddleNext Code of Corporate Governance for mid- and small-cap companies of December 2009, with the exception of Recommendation R15 on the annual assessment by members of the Board of Directors of the work of the Board and the preparation of its work. This evaluation did not take place, due to the postponement of this item to the Board meeting in December 2013, which was further postponed to early 2014.

This paragraph fully repeats the Chairman’s Report provided by Article L.225-37 of the Commercial Code, which sets out the conditions for the preparation and organization of the Board of Directors’ tasks, as well as the internal control procedures the Company has put in place.

Chairman’s Report as provided by Article L.225-37 of the Commercial Code

The Company complies with the corporate governance recommendations contained in the MiddleNext Code of Corporate Governance for mid- and small-cap companies of December 2009 (“MiddleNext Code”). The MiddleNext Code can be viewed on the MiddleNext website.

This report was prepared by senior management and presented to the Audit Committee before being approved by the Board of Directors on March 24, 2014. Unless otherwise indicated, the scope it covers relates only to Transgene SA (hereinafter “the Company”).

1. Conditions related to the Preparation and Organization of the Tasks of the Board of Directors

14.1. Composition of the Board of Directors

Transgene is managed by a Board of Directors, currently composed of ten members, including nine individuals and TSGH, the majority shareholder. Two women participate in the Council: Ms. Dominique Takizawa, as Permanent Representative of TSGH, and Ms. Laurence Zitvogel, independent director. The position of the Board

62 with regard to Law No. 2011-103 of January 28, 2011 on the balanced representation of women and men on boards of directors and supervisory boards and professional equality is consistent with the obligations. The Board of Directors has adopted the principle of applications from women as and when current directorships end.

The term of the directors’ mandates is three years. The independent directors, who alone may collect directors’ fees, must hold a number of shares corresponding to the investment of a half-year of directors’ fees. The table below indicates the number of shares or options providing future rights to shares (stock options) held by each individual director:

Director Number of shares held Number of options Philippe Archinard 6,500 236,361 Jean-Luc Bélingard 0 none Jean-Pierre Bizzari 5,000 none Arnaud Fayet 5,501 none Benoît Habert 62,859 none Pierre-Patrick Hurteloup 350 none Jean-François Labbé 350 none Alain Mérieux 100* none Laurence Zitvogel 469 none * excluding 19,987,011 shares held by TSGH, a wholly owned subsidiary of Institut Mérieux, which itself is wholly owned by Compagnie Mérieux Alliance, which is controlled by Mr. Mérieux’s family.

In its current composition, the Board of Directors has six independent directors according to the criteria of definition of independence in accordance with Recommendation R8 of the Middlenext Code.

The full list of directors, dates and expiration of their terms, can be found in Paragraph 14.1 of the Company’s Reference Document.

In addition to the Statutory Auditors who participate in most Board meetings (and participated in three of the four meetings of the Board in 2013), the following also attend all meetings: the Executive Vice President, who is also the Chief Financial Officer, and the Secretary General, who acts as the secretary for the Board. The scientist and physician directors occasionally participate in ad hoc scientific or medical meetings with the scientists and medical, clinical and regulatory teams of the Company to discuss issues related to product development.

14.1. Board Practices

The Board of Directors met four times in 2013, with an 85% average attendance. At each of these meetings, the Board was informed in detail of the Company’s situation in terms of the evolution of its business, the progress of its research projects, clinical programs and its financial situation. In addition to exercising its statutory powers related to closing the annual and interim financial statements and preparing for and convening the General Shareholder Meeting, the Board deliberated on the Company’s strategic issues. In 2013, the Board also referred to two ad hoc committees, each of which was comprised of directors and outside experts: a financing committee, comprised of members of the Audit Committee, which studied the financial strategy of the Company, and a business strategy committee that evaluated the capabilities and expertise of Transgene to implement a business development approach. The Board regularly speaks with the Audit Committee and Compensation Committee and deliberates on recommendations they make. The functions of Chairman of the Board and senior management of the Company are held by the same person. The Board has determined that this approach best serves the size of the Company and the stage of development of its projects.

In accordance with Recommendations R6 and R7 of the MiddleNext Code, the Board of Directors has adopted internal rules (available on the website of the Company: www.transgene.fr ). A securities trading code, following the recommendations of the MiddleNext Guide, “Management of inside information and the prevention of insider trading,” was adopted by the Board and posted on the Company intranet site for all employees.

In 2013, the Company did not comply with Recommendation R15 of the MiddleNext Code regarding the annual review by the Board members of the Board’s operation and the preparation of its work. This evaluation took place in 2012, and the evaluation scheduled for the December 2013 Board meeting did not take place due to the postponement of the meeting to early 2014.

63 14.1. Committees

The Board of Directors is assisted by two committees:

- The Audit Committee is composed of three directors, including two independent members of the Board of Directors. The Executive Vice President attends each meeting to present the Company’s financial information and answer the committee’s questions. The Statutory Auditors attend all committee meetings. The committee is responsible for preparing the work of the Board of Directors on financial and accounting issues and advising it, in particular regarding financial statements, their audit and their compliance with accounting standards, the selection, renewal methods and fees for the statutory auditors, and internal controls. It approves the internal audit and monitors its progress. Furthermore, the Audit Committee monitors the cash investment policy. The Audit Committee met three times during 2013, with at least two members present at each meeting. The Audit Committee’s operations are governed by a charter that is regularly reviewed and adapted to the evolution in corporate good governance practices. In 2013, the committee regularly reported on its work and provided recommendations to the Board of Directors after each of its meetings.

- The Compensation Committee is comprised of two independent directors. The committee reviews the proposed compensation (salaries and bonuses, and granting of stock options) for executives and key personnel at the Company. It also reviews the overall compensation policy implemented by the Company regarding the set up of stock option plans and bonus share allocation plans. It meets and deliberates, by telephone conference if necessary, and has met twice in 2013, with all its members present (in person or by telephone). More specifically, in 2013, the Compensation Committee conducted an evaluation to find a method other than stock options to provide the Company’s management a stake in changes in its valuation. Accordingly, it submitted a plan to the board for a bonus with a maturity of three to five years, based on the progress of the market valuation of the Company. This plan aligns the interests of managers and shareholders without any dilutive effect. The plan was implemented, after adoption by the Board, on January 1, 2014.

14.1. Limitations to the Powers of the Chief Executive Officer

No specific limits have been placed on the powers of the Chief Executive Officer, except for the following, which require the Chief Executive Officer to seek the Board’s approval for:

- the strategic plan of the Company and its subsidiaries; - the annual budget and, on a quarterly basis, its implementation and, if necessary, revision; - any strategic transaction (acquisition, sale, disposal of Company assets, trading, transaction, creation of security interests, regardless of the terms of financing, etc.) not described in the strategic plan, or whose budget impacts cash consumption in relation to projected cash consumption more than 5%.

14.1. Participation by shareholders in the General Meeting

The Company has not set any particular terms and conditions for participating in General Meetings, as the Statutes refer to the legal provisions of the Commercial Code on this matter.

14.1. Information relating to the capital structure and elements that may influence a public offering

This information is set out and expanded upon in the Board’s management report and in Chapter 21 of the Company’s Reference Document.

14.1. Compensation paid to corporate executives

In this report, a distinction is made between the compensation of non-executive directors and executive directors (Chairman, Chief Executive Officer and Deputy Chief Executive Officer).

Non-executive directors: only independent directors receive directors’ fees. These consist of an annual lump sum of €5,000, plus an amount related to the actual attendance of directors at the Board meetings of €1,500 per meeting (in accordance with Recommendation R14 of the MiddleNext Code). Additional compensation of members of the Audit Committee and the Compensation Committee are €1,500 and €1,000 per committee meeting, respectively. No other form of compensation, including deferred compensation, such as share allocations, warrants or purchase options or stock options, was paid by the Company to these directors.

The gross sums for directors’ fees paid over the past two years to acting directors at December 31, 2013 are

64 listed in Paragraph 15.1 of the Company’s Reference Document.

Executive directors: the Chairman and Chief Executive Officer has no employment contract with the Company. They receive compensation from the Company for performing their duties. Any changes thereto are determined by application of the Company’s total compensation policy as amended following mandatory annual negotiations. This policy has set the individual maximum increase for employees at €1,500 gross for 2013, excluding reassignment or internal promotion within the Company. This policy includes members of the Management Committee. The Chief Executive Officer also receives compensation from Institut Mérieux in his capacity as Director of the Immunotherapy Division within the company, part of which is recharged to the Company under a regulated agreement for management fees between Institut Mérieux and the Company.

The Responsible Pharmacist, who was appointed Deputy Chief Executive Officer pursuant to the provisions of the Public Health Code, holds an employment contract as Vice President of Quality Assurance and Compliance. The Board believes that the continuation of this employment contract is justified in this particular case, as the term of office of the Responsible Pharmacist is a regulatory requirement. The Responsible Pharmacist receives a salary under his employment contract and no additional compensation for the corporate office. Changes in wages follow the rules set out for all Management Committee members and are fully individualized, based on personal performance against annual targets for each executive. The salaries and bonuses for members of the Management Committee are determined at the recommendation of the Chairman and Chief Executive Officer and after being approved by the Compensation Committee, which also endorses proposals for deferred compensation in the form of stock options. Given the adoption of the new special bonus plan, the Board decided not to implement new stock option plans.

The Board believes that the terms for setting the salaries of its two corporate executives comply with the principles defined in Recommendation R2 of the MiddleNext Code of Corporate Governance. For option plans already awarded, the Board decided not to subject the exercise of options granted to corporate executives to performance conditions to be satisfied over a number of years. The analysis by the Compensation Committee, which was adopted by the Board, concludes that this rule is not suitable for the Company whose growth, in the absence of recurring revenue generated by its activities, remains subject to a high technological risk, the random nature of which is already taken into account by making the options unavailable for four to five years, a decision taken by the Board at its meeting on December 7, 2010 for allocations from this date. This five-year period subsequent to allocation is a medium-term horizon, in itself sufficient to represent an incentive for long-term performance.

2. Internal control procedures

The Company has implemented operating procedures, in particular related to the control of the commitment of financial and human resources, thereby creating a control environment. As it has evolved, the Company has adjusted its control objectives and methods, in particular to control its cash assets, which are its main financial resource, its key performance risks associated with the management of its projects and strategic partnerships, and, more generally, its compliance with regulatory duties applicable to biopharmaceutical companies and to listed companies.

2.1. Internal Control Objective and Definition

Internal control is a Company system, defined and implemented on its own responsibility, which aims to ensure:

- compliance with applicable regulations and laws; - the application of instructions and guidelines fixed by senior management; - the proper functioning of the Company’s internal processes, particularly those designed to protect its assets; - the reliability of financial information.

Generally speaking, the Company’s internal controls contribute to controlling its activities, the effectiveness of its operations and the efficient use of resources. By contributing to the prevention and control of risks of not achieving the Company’s objectives, the internal control system plays a key role in the conduct and management of the Company’s various activities. However, internal controls cannot provide an absolute guarantee that the Company’s objectives will be achieved.

Transgene has adopted the internal control reference framework provided by the AMF for mid- and small-cap companies.

65 2.2. Control environment

2.2.1. Internal control bodies and contributors at Transgene

Board of Directors and its committees

The first part of the report describes the conditions under which the Board of Directors contributes to the optimization of the Company’s activities. The Audit Committee oversees the internal control process, specifically with respect to validation of the internal control action plan and the Company’s financial communications. To this end, before each interim and annual report, it reviews the group’s financial statements and related notes.

Management Committee (Codir)

The Management Committee was reorganized in early 2013, with a reduction in the number of members and the integration of tasks previously assigned to a project management committee (Comap), which was eliminated. The Management Committee is led by the Chairman and Chief Executive Officer and composed of seven management members, who meet each month. Other than tasks related to project management, it considers the Company’s operations, monitors all aspects of management in terms of the operating plan and objectives assigned by the Board of Directors, and deliberates on all organizational and operational strategy items placed on the agenda by its members. It monitors financial and contractual commitments on a monthly basis.

“Project” organization

Transgene’s organization is based on functional departments, the coordination of which is ensured via a strong “project” strategy. Research programs, products under development and subcontracting are managed by project, headed by a project leader, and are the subject of reports. The project leader is responsible for coordinating, leading and optimizing the various cross-functional tasks required to ensure the project’s success. The project leader prepares a development plan and schedule and provides monthly reports on the milestones achieved and unanticipated difficulties. Each project is allocated resources which are monitored through computerized timesheets filled out by all Company researchers and technicians. Within the Project Management Department, the “Strategic Planning and Project Control” unit is responsible for providing organizational support to project leaders.

Since February 2013, “project” organization has been under a new governance model composed of four bodies (Management Committee, Project Steering Committee, Project Team and Implementation Team) whose levels of responsibility and missions are distinct.

An annual review of projects is now organized to define portfolio priorities that are in line with the Company’s strategy, resources and constraints.

Since late 2009, the Company has used project management software that is collaborative and shared by all businesses whose main functions are:

- Consolidated management of the project portfolio; - Detailed planning of projects and resources; - Progress tracking for tasks and time spent;

Finance Department

The objective of the Finance Department, under the authority of the Chief Financial Officer, is to support operational departments in their administrative and budgetary operations, provide senior management with management analyses for effective financial steering and ensure compliance with accounting and financial regulations, in particular in the context of a publicly listed company . Within this department, a Financial Controller is responsible for establishing and improving accounting and financial procedures and monitoring the action plan drawn up following the annual audit.

Corporate Secretary

The Corporate Secretary monitors the legality of the Company’s activities and ensures compliance with the laws and regulations in effect and also supervises internal controls and risk management.

66 The control environment in the pharmaceutical industry

Research and development, pre-clinical tests, clinical trials, premises and equipment, and the manufacturing and marketing of therapeutic products are governed by extensive regulations established by numerous governmental authorities in France, Europe, the United States and other countries. The European Medicines Agency (EMA), Agence Nationale de Sécurité du Médicament et des produits de santé (ANSM), U.S. Food and Drug Administration (FDA) and others require compliance with strict conditions for the manufacturing, development and marketing of products like those being developed by Transgene. Pharmaceutical companies are subject to regular visits by these bodies to identify deficiencies and appropriate remedies.

An internal control organization capable of ensuring compliance with standards must be in place to face this strict control environment. To this end, the Company has created:

- a Quality Assurance and Compliance Department, the objective of which is to fulfill regulatory requirements related to the quality and safety of pharmaceutical products for human use. It has developed an extensive documentation system, including procedures, instructions and schedules, which it strictly manages (issuance, modifications, and cancellations). It conducts regular audits of the system to verify that it complies with the Good Manufacturing Practices application guide and regularly monitors the changes to the applicable regulations. The Quality Assurance and Compliance Department also performs clinical study audits. This Department also oversees a significant amount of internal quality training;

- managers within the Medical Affairs Department responsible for pharmacovigilance and the quality of clinical operations who conduct audits of the documentation and the application of procedures in the field of clinical studies. Transgene complies with the rules described in the Good Clinical Practices of the International Conference on Harmonization or national regulations, if the latter are stricter;

- a Toxicology and Research and Development Quality Assurance manager who is part of the Research Department, integrating the ‘Quality’ approach upstream of product development;

- Supplier Quality Assurance within the Purchasing department, with a more stringent evaluation and certification process for critical and strategic suppliers;

- a Qualification, Measurement and Validation department for computer and automated equipment and systems within the Industrial Development and Operations Department.

The control environment within the Institut Mérieux Group

Since late 2010, member companies of the Institut Mérieux Group have been participating in a comprehensive internal control program coordinated by the Institut Mérieux. Each group company analyzes its risks and approves its own audit program. The audit itself is performed by a cross-functional team of internal auditors from group companies who are specially trained in internal audit techniques. An internal audit was conducted at Transgene in late 2012; an action plan, which was drafted at the end of the audit and placed under the responsibility of the Financial Controller, was completed and all actions implemented in 2013.

2.2.2. Internal control procedures implemented

Procedures have been developed and implemented within the Company to ensure that the principal risks are managed internally in compliance with the policies and objectives set by management.

Determination of priority risks and processes

a) Risk management procedure

The Company has identified the principal risk factors liable to significantly affect its activities and prospects. These are described in Chapter 4 of its Reference Document. It therefore carries out an annual review listing the risks and the procedures to be set up to manage them and presents the result of this review annually to the Audit Committee.

Transgene believes that certain operational and financial risks are significant either due to the probability of their occurrence or by their impact on the Company. They are the subject to the following procedures:

• Protection of the integrity of strategic scientific, medical and computerized data; protection of

67 strategic biological materials and equipment

Backup of the Company’s strategic data takes place primarily through archiving, duplication and separate storage procedures. In 2013, the Company completed the full outsourcing of this storage by contracting with a specialized operator with access to a private infrastructure that has a higher level of protection than the Company could implement with its own data servers (risk of obsolescence of equipment and protection of premises). However, the Company maintained equipment for local backups of the most critical data.

• Protection of cash and cash equivalents

Cash and cash equivalents are the Company’s main financial assets. The controls in place are intended to ensure the proper use and safety of the funds invested, in particular:

- preparation of a detailed budget by section and quarterly budgetary control; - establishment of a cash flow position; - determination of the investment policy by the Audit Committee.

The Company’s cash is currently invested in mutual funds, directly or through centralized management within the Institut Mérieux Group. This cash pool is under the supervision of a committee of treasurers (for Transgene: the Chief Financial Officer) of the group, that meets monthly to review the status of participants (lenders/borrowers), yields and investment decisions. The Audit Committee provides an update on the cash position at each of its meetings.

b) Reliability of financial and accounting information

To ensure the quality and reliability of the financial and accounting information it generates, the Company relies on terms of reference consisting of accounting policies and standards, as well as on a management reporting system that analyses accounting data as follows: by cost center, by the nature of the costs and revenues, and by project.

In order to externalize a portion of the financial cost of operational risks, the Company has taken out an insurance policy for the principal insurable risks in amounts it considers compatible with its cash flow needs. The insurance program is presented annually to the audit committee.

c) Managing relations with strategic partners

The Company has entered into licensing and development partnerships for the final development stages of its products and their marketing. In order to maintain the highest level of collaboration with its partners and thus ensure optimum development of the product, a dedicated project leader ensures that the program is run properly, under the supervision of a monitoring committee that meets monthly. In addition, strategic partnerships are under special governance, usually in the form of a joint steering committee that meets regularly, or on an ad hoc basis to make key decisions (new strategic directions, new commitments, management of differences, etc.) throughout the life of the agreement.

A progressive approach to the evaluation of internal controls

For several years, the Company has taken a long-term approach to formalize its internal control practices in written form. An internal controls procedures manual is being prepared.

The internal controls improvement plan, based in part on the annual audit of the Group, is overseen by the Financial Controller and presented to the Audit Committee each year.

The gradual computerization of task flows related to purchases and payment of invoices has helped to expand the scope of internal control procedures within the Company.

2.3. Internal Controls related to the Preparation of Accounting and Financial Information

The Group prepares its annual consolidated financial statements under IAS/IFRS, as well as the individual financial statements for Transgene S.A. The Group prepares interim consolidated financial statements under IAS/IFRS that are given a limited review by the statutory auditors. The consolidation process does not present any specific complexity to the extent that the scope of consolidation, in 2013, included Transgene S.A. and its single wholly owned subsidiary, Transgene, Inc., whose activity represents Transgene S.A. to the U.S. health authorities (three employees at the end of 2013) and a wholly owned subsidiary located in Shanghai, Transgene

68 Biopharmaceutical Technology (Shanghai) Co. Ltd., which hosts academic research collaborations conducted by Transgene on Chinese territory (five employees at the end of 2013). The Company’s interests in ElsaLys Biotech SAS (France), Platine Pharma Services SAS (France) and Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. (China) are accounted for by the equity method.

The Reference Documents filed on an annual basis with the Autorité des Marchés Financiers are jointly prepared by the Financial Director and Corporate Secretary. They are reviewed by the Group’s legal counsel and auditors, under the responsibility of the Chairman and Chief Executive Officer.

The closing of the accounts is performed with the financial IT system (ERP). ERP manages procurement and supplies, warehouses, general and analytical accounting, as well as budgetary reporting. It allows for dividing up tasks by means of individual user profiles, while ensuring the integrity of the information. Computerized hierarchical approval procedures for purchases, travel authorizations and expense reports are in place.

ERP provides for the integration and traceability of restatement entries under IAS/IFRS standards, which limits the risk of error.

A list of tasks and controls to be effected by the accounting department for each closing ensures the appropriate rollout of closing procedures.

Quarterly reporting is prepared by the Finance Department and presented to the Management Committee. This report is composed of the various Company activity financial and operational monitoring reports and analyzes actual and projected accounting data.

The budgetary process is prepared and coordinated during the fourth quarter by the Management Control Department and the Chief Financial Officer, in close collaboration with project leaders and operational managers. A managing controller is fully dedicated to the collection and monitoring of financial information relating to projects.

The budget process is based on the validation of project priorities based on the annual portfolio review and on the project management software that ensures financial and human resources are adequate to meet project requirements and schedules. The budget is presented for validation by the Management Committee, which then submits it to the Board of Directors, after it has been reviewed by the Audit Committee. The budget is adjusted every six months and a re-forecast is presented to the Board of Directors during the third quarter.

69 Statutory Auditors’ Report, prepared pursuant to Article L. 225-235 of the Commercial Code, on the report by the Chairman of the Board of Directors of Transgene S.A.

COMMISSARIAT CONTROLE AUDIT ERNST & YOUNG et Autres 112, rue Garibaldi 1/2, place des Saisons 69006 Lyon 92400 Courbevoie - Paris-La Défense 1 S.A.S. à capital variable Statutory auditors Member of the Compagnie Statutory auditors Régionale de Lyon Member of the Compagnie Régionale de Versailles

Dear Shareholders,

In our capacity as Statutory Auditors for Transgene S.A. and pursuant to the terms of Article L. 225-235 of the Commercial Code, we present our report on the report prepared by the Chairman of your company, pursuant to the provisions of Article L.225-37 of the Commercial Code for the fiscal year ended December 31, 2013.

The Chairman is responsible for preparing a report describing the internal control and risk management procedures established within the Company, and submitting this report for approval by the Board of Directors. They are also responsible for providing any other information required by Article L.225-37 of the Commercial Code, including information relating to the corporate governance system in particular.

Our role is to: - provide you with our comments on the information provided in the Chairman’s Report on the internal control and risk management procedures related to the preparation and treatment of accounting and financial information, and - certify that this report contains the other information required by Article L.225-37 of the Commercial Code, given that it is not our responsibility to verify the fair presentation of this other information.

We performed our tasks in accordance with professional standards applicable in France.

Information concerning the internal control and risk management procedures related to the preparation and treatment of accounting and financial information

Good professional practices require that diligence be applied when evaluating the accuracy of the information provided in the Chairman’s Report on the internal control and risk management procedures related to the preparation and treatment of accounting and financial information. This specifically involves:

- identifying the internal control and risk management procedures related to the preparation and treatment of accounting and financial information underlying the information provided in the Chairman’s Report and in the existing documentation;

- identifying the work carried out in the preparation of this information and existing documentation;

- determining if any major deficiencies with the internal control related to the preparation and treatment of accounting and financial information that we note in the context of our mission have been properly reported in the Chairman’s Report.

On the basis of this study, we have no observations to make on the information provided concerning the Company’s internal control and risk management procedures related to the preparation and treatment of accounting and financial information included in the Chairman of the Board of Directors’ Report, prepared pursuant to the terms of Article L.225-37 of the Commercial Code.

Other information

We certify that the Chairman of the Board of Directors’ Report includes the other information stipulated by Article L.225-37 of the Commercial Code.

Lyon, April 15, 2014 Statutory Auditors COMMISSARIAT CONTROLE AUDIT ERNST & YOUNG et Autres Hubert de Rocquigny du Fayel Marc-André Audisio

70 17. EMPLOYEES

17.1. Personnel

The Company’s personnel and that of its subsidiaries totaled 295 employees at December 31, 2013 (306 at December 31, 2012 and 299 at December 31, 2011). At the end of 2013, the Company’s subsidiaries, Transgene Inc. and Transgene Biopharmaceuticals Technology (Shanghai) Co. Ltd., employed full-time, respectively, three people (two people at the end of 2012 and one person at the end of 2011) and five people (five people at the end of 2012 and no one at the end of 2011).

17.2. Stock options

17.2.1. Stock option history

As of the date of this Reference Document, five stock option plans have been authorized by the general shareholders meeting, in 2001, 2004, 2006, 2008 and 2010 respectively, and were implemented by the Board of Directors. The status of these plans at December 31, 2013 is summarized in the following table.

No stock options were awarded in 2011. Ninety thousand options were awarded in 2012 and no options were awarded in 2013.

STOCK OR PURCHASE OPTION ALLOCATION HISTORY INFORMATION ON STOCK OR PURCHASE OPTIONS Plan No. 2 Plan No. 3 Plan No. 4 Plan No. 5 Plan No. 6 Shareholders’ meeting date 02/08/2001 06/09/2004 06/09/2006 06/09/2008 06/17/2010 Date of Board of Directors’ meeting 04/24/2002 02/09/2005 12/06/2006 12/16/2008 12/17/2010 04/23/2003 05/18/2005 10/04/2007 12/09/2009 12/13/2012 03/02/2004 01/01/2006 12/19/2007 12/07/2010 12/06/2006 12/16/2008 Total number of shares to be subscribed or purchased 300,000 300,000 450,000 250,000 400,000 Of which, number that can be subscribed by

- corporate executives: Michel Dubois, Chairman (until June None 30,182 None None None 2010) Philippe Archinard, Chairman and Chief None 120,725 70,424 35,212 None Executive Officer Elisabeth Keppi, Managing Pharmacist, 10,061 None 12,073 8,049 10,000 Deputy Chief Executive Officer

- the ten employees with highest number of options granted: 132,000 126,000 113,000 60,500 153,000 First date to exercise the options 2006 2009 2010 2012 2015 2007 2010 2011 2013 2017 2008 2012 2015 Expiration date 2012 2015 2016 2018 2020 2013 2016 2017 2019 2022 2014 2018 2020 Subscription price (EUR) (equal to the 8.35 6.54 11.05 11.37 14.67 average of the market price of the 20 trading 7.12 16.64 17.69 8.12 days prior to the grant date, excluding 7.57 15.52 14.67 discount) adjusted following the capital 11.05 11.37 increase with subscription rights in 2010, in accordance with the French commercial code. Method of exercising (if the plan comprises None None None None None several parts)

Number of shares subscribed in 2013 0 10,768 0 0 0 Total number of options cancelled or forfeited 53,725 12,000 33,135 15,010 12,500 Of which: allocated and cancelled options 17,000 12,000 33,135 15,010 12,500 4 Number of options remaining at the end of the fiscal year 3,167 168,830 471,680* 243,731** 385,800 *including the balance on Plan No. 3 awarded by the Board on 12/06/2006 - **including balances on Plan No. 4 awarded by the Board on 12/16/2008.

Pursuant to Article L.225-185 Para.4 of the Commercial Code, the Board has set the number of shares from the

71 exercise of allocated options as from December 2007 that a corporate executive must keep registered at 10% until he leaves his position.

Stock options granted to or exercised by corporate executives during fiscal year 2013: None

Stock or purchase options allocated during the fiscal year to each company executive by the issuer and by any company in the Group

Name of company Plan No. Type of Valuation Number of Exercise Exercise executive and date option in euros per options price period option granted in euros

Philippe Archinard - - None - - - Elisabeth Keppi - - - None - - TOTAL N/A N/A N/A N/A N/A N/A

Stock or purchase options exercised during the fiscal year by each company executive

Name of company Plan No. and Number of options Exercise price executive date exercised during the year Philippe Archinard - None - Elisabeth Keppi - None - TOTAL N/A N/A N/A

General information on stock options granted to the ten non-manager employees who received the highest number of options and options they exercised during 2013: None

OPTIONS GRANTED TO THE TEN NON-MANAGER EMPLOYEES WHO Total number Average Plan No. RECEIVED THE HIGHEST NUMBER of options weighted price and date OF OPTIONS AND OPTIONS THEY allocated in euros EXERCISED Options granted during the fiscal year by the issuer and any company included in the scope of the attribution of options to the 10 non- None - - manager employees of the issuer and any company included in this scope who received the highest number of options Options held on the issuer and the previously mentioned companies exercised during the year by the ten non-manager employees of 707 €6.54 3 the issuer and these companies who received the highest number of options

Individual information on the options granted by the issuer and by any company included in the scope of the attribution of options to the ten non-manager employees of the issuer and any company included in this scope who received the highest number of options and number of shares subscribed by the ten people who subscribed to the most shares during the year: only one employee exercised 707 options at a unit price of €6.54.

17.3. Free allocation of shares

Two free share allocation plans had been authorized as of the date of this Reference Document by the shareholders’ general meeting, in 2008 and 2010, and implemented by the Board of Directors. The Board of Directors decided to reserve these allocations to employees and to exclude members of the Management Committee, officers and directors. It issued an initial general award reserved for all employees under open-ended contracts at December 16, 2008. Two categories of beneficiaries and two levels of awards were determined: 108 managers received 450 shares each and 84 non-managers received 300 shares each. The shares in question were newly issued shares. In December 2009, the Board of Directors awarded an additional 11,100 shares to 30 employees who had an open-ended contract at the date of the award.

On December 7, 2010, the Board of Directors decided to issue a new general allocation under the same rules as

72 in 2008: all employees under an open-ended contract as of December 7, 2010 (excluding members of the Management Committee, officers and directors) at a rate of 450 bonus shares for managers (126 people) and 350 for non-managers (99 people). No free shares were awarded in 2011.

In December 2012, the Board allocated new bonus shares according to the same principles as above: all Company employees with open-ended contracts as of December 13, 2012 (excluding members of the Management Committee, officers and directors), at a rate of 200 free shares for managers (154 people) and 130 bonus shares for non-managers (104 people).

No free shares were awarded in 2013.

The status of these plans at the end of 2012 is summarized in the following table:

Plan No. 1 Plan No. 2 Shareholders’ meeting date 06/09/2008 06/17/2010 Total number of shares to be subscribed or purchased 100,000 120,000 Of which allocations granted, during the year, by the issuer and by any company None None included in the scope of the allocation to corporate executives Options granted during the fiscal year by the issuer and any company included in

the scope of the attribution of options to the ten non-manager employees of the - 2,000 issuer and any company included in this scope who received the highest number

of options. 12/16/2008 12/07/2010 Date of Board of Directors’ meeting 12/09/2009 12/13/2012 12/07/2010 73,800 74,900 Total number of bonus shares allocated 11,100 44,320 15,100 Of which: number of shares allocated to corporate executives and members of the Management Committee None None 12/15/2012 Date of final allocation and expiration date of the retention period (as both 12/06/2014 12/08/2013 periods are taken into account) 12/12/2016 12/06/2014 €12.10 €14.37 Share value on the date of allocation (opening price on the date of allocation) €19.67 €8.36 €14.37

17.4. Profit sharing

A profit-sharing agreement has existed since 1993, pursuant to the regulations in effect. In light of the Company’s deficit situation, no profit has been shared with employees under this agreement as of the date of this Reference Document.

73 18. PRINCIPAL SHAREHOLDERS

18.1. Name of any person not a member of an administrative or management body, directly or indirectly holding more than 5% (statutory and legal reporting threshold) of the Company’s capital or voting rights

The table below shows the distribution of capital and voting rights of the Company at December 31, 2013, to the knowledge of the Company and the distribution thereof at the end of 2011 and 2012. Following the capital increase carried out in late March 2014, only the position of TSGH is precisely known, i.e., a holding of 19,987,011 shares representing 51.99% of the capital and 66.38% of the voting rights, and of the Société Hospitalière d’Assurances Mutuelles, which still holds 430,000 shares representing 1.12% of capital and 1.52% of voting rights. The Company has requested an analysis of bearer holdings in order to determine its shareholders subsequent to the capital increase. At the date of this Reference Document, the results are still unknown.

December 31, 2011 December 31, 2012 December 31, 2013 (3) Shareholder % of % of % of Number of % of Number of % of Number of % of voting voting voting shares capital (2) shares capital (2) shares capital (2) rights rights rights TSGH 17,488,634 55.18 67.53 17,488,634 54.90 67.25 17,488,634 54.87 69.78 (1) Dassault Belgique aviation 1,645,,440 5.19 3.74 1,645,440 5.17 3.73 1,645,440 5.16 3.30 Moneta Assets Management LLC (4) 657,400 2.07 1.50 544,000 1.71 1.23 550,000 1.73 1.10 Polaris Capital Management (4) LLC 1,358,300 4.29 3.09 1,358,300 4.26 3.08 518,600 1.63 1.04 Pro BTP Finance (4) 441,800 1.39 1 441,800 1.39 1 441,800 1.39 0.89 CDC Medium sized enterprises (4) 439,600 1.39 1 439,600 1.38 1 439,600 1.38 0.88 Société Hospitalière d’Assurances Mutuelles (4) 430,000 1.36 0.98 430,000 1.35 0.97 430,000 1.35 1.57 Other shareholders (4)(5) 9,234,708 29.14 21.16 9,506,716 29.84 21.74 10,360,784 32.50 21.43 Total 31,695,882 100 100 31,854,490 100 100 31,874,858 100 100

Dilutive impact stock-options + free shares awarded (4)(6) N/A N/A N/A N/A N/A N/A 1,393,862 4.19 3.07 Total 33,268,720 (4) diluted

(1) On July 18, 2013, TSGH declared a crossing of thresholds to adjust its voting rights, which went below 65% (to 64.73%) in June 2010, due to an increase in capital, then above the threshold of 65% (to 67.18%) in July of the same year, due to the allocation of double voting rights.

(2) Article 8 of the bylaws grants double voting rights to all fully paid registered shares, registered in the name of the same shareholder for at least three years. Pursuant to Article L. 233-8 of the Commercial Code, on a monthly basis, Transgene publishes (if the information has changed since the last monthly publication) the total number of shares and voting rights on the AMF website and its own website, www.transgene.fr. At December 31, 2013 the total number of shares was 31,874,858 and the total number of voting rights was 43,986,700. No limitation was imposed on voting rights. The double voting rights attached to a share disappears the day the security is assigned or converted to the bearer.

(3) In 2013, 20,368 new shares were created as a result of the final allocation of 9,600 bonus shares and 10,768 stock options exercised.

(4) Data from IPREO surveys in November 2011, October 2012 and October 2013.

74 (5) There are not, to the knowledge of the Company, other shareholders that hold, directly or indirectly, alone or together, more than 5% of the capital or voting rights. The Company does not own any of its own shares. The total percentage held by employees is less than 0.5%. Since it is insignificant, the Company does not monitor employee shareholdings. There are not, to the knowledge of the Company, any concert parties or agreements between shareholders.

(6) The stock options were attributed to employees of the Company and its subsidiary Transgene, Inc., including members of the Management Committee and two executive directors (Philippe Archinard, Chairman and Chief Executive Officer, and Elisabeth Keppi, Responsible Pharmacist and Deputy Chief Executive Officer). As indicated in the Reference Document, Section 17.2., Philippe Archinard held a total of 226,361 stock options and Elisabeth Keppi, 40,183 stock options. There were no stock option distributions in 2013. Bonus shares were granted only to employees of the Company and its wholly-owned subsidiary Transgene, Inc., excluding any officer and any member of the Management Committee.

18.2. Special voting rights of major shareholders

There are no different voting rights for major shareholders. Pursuant to Article 8 of the corporate bylaws, double voting rights are granted to all fully paid registered shares registered in the name of the same shareholder for at least three years, regardless of the number of shares held by the holder.

18.3. Controlling shareholder

The Company’s capital is owned 51.99% (66.38% of voting rights) by TSGH SAS, which is in turn owned 98.66% by Institut Mérieux, which is owned by the Mérieux family. No specific measure limits the powers of the principal shareholder. The Company complies with the Code of Corporate Governance for small- and mid-cap companies. The Board of Directors includes a significant proportion of independent directors.

Concerning measures taken to ensure that control of the Company is not abused, since the appointment of Ms. Zitvogel to the Board of Directors at the General Meeting of June 19, 2013, the Company has six out of ten directors (instead of five previously) considered to be independent, one of whom (Mr. Habert) is related to the Dassault Group, stockholder of more than 5% of the Company, through a family connection and as Chairman and a member of the Dassault Strategic Development Committee. In addition, a majority of the Audit Committee is comprised of independent directors (two out of three members) and the Compensation Committee is comprised exclusively of independent directors.

18.4. Agreement that may result in a subsequent change of control of the Company

To the knowledge of the Company, as of the date of this Reference Document, there is no agreement whose implementation could, at a subsequent date, result in a change in control or extra-statutory agreement with anti- OPA provisions and specific powers of representation or appointment to management bodies.

75 19. RELATED PARTY TRANSACTIONS

Transactions with companies related to the Company are listed in Chapter 20.1.1, Note 17.

Special report of the Statutory Auditors on regulated agreements and commitments

ERNST & YOUNG et Autres COMMISSARIAT CONTROLE AUDIT Statutory Auditors Statutory Auditors Member of the Compagnie Member of the Compagnie Régionale de Versailles Régionale de Lyon

1/2, place des Saisons 112, rue Garibaldi 92400 Courbevoie – Paris-La Défense 69006 LYON

TRANSGENE S.A. General meeting to approve the financial statements for the year ended December 31, 2013

Dear Shareholders,

In our capacity as Statutory Auditors of your company, we hereby present our report on related party transactions and undertakings.

It is our duty to inform you, on the basis of the information we were given, of the essential features and terms of the agreements and commitments of which we have been advised or that we discovered during our mission, without any comment on our part on their usefulness and appropriateness or identification of such other agreements and commitments. Pursuant to the terms of Article R. 225-31 of the Commercial Code, you are responsible for evaluating the potential interest of entering into these agreements and undertakings with a view to their approval.

Moreover, it is our responsibility, if necessary, to provide you with the information specified in Article R.225-31 of the Commercial Code relating to the performance during the year most recently ended of the agreements and commitments already approved by the General Meeting.

We have applied all the due diligence that we believe necessary with regard to the professional doctrines of the Compagnie Nationale des Commissaires aux Comptes in relation to this mission. These diligences consisted of verifying the conformity of the information we received with the source documents from which said information arises.

AGREEMENTS AND COMMITMENTS SUBMITTED FOR APPROVAL TO THE GENERAL MEETING

Agreements and undertakings authorized during the fiscal year

We inform you that we have not been given notice of any agreement or commitment authorized during the year to be submitted to the approval of the general meeting, pursuant to the provisions of Article L. 225-38 of the Commercial Code.

AGREEMENTS AND COMMITMENTS APPROVED BY THE GENERAL MEETING

Agreements and commitments approved during previous years a) whose performance was continued during the year most recently ended

Pursuant to Article R. 225-30 of the Commercial Code, we were informed that the performance of the following agreements and commitments already approved by the General Meeting during previous fiscal years continued during the financial year just ended.

With INSTITUT MÉRIEUX

Interested parties: Alain Mérieux, Philippe Archinard, Christian Brechot, and Georges Hibon.

76 Contract for the provision of services

Nature and purpose: Your company signed an agreement for the provision of services with Institut Mérieux which came into effect on January 1, 2002 and was amended twice in 2007.

Terms:

- According to the first amendment, compensation depends on the services rendered by Institut Mérieux (personnel costs and charges increased by 8%) and is divided between the companies in the Institut Mérieux Group according to scales based on the respective weights of assets, sales and payroll.

- The second amendment deals with the terms for cost sharing for bonus shares, if the recipient employee was transferred within the Institut Mérieux Group during the vesting period. The Institut Mérieux Group company, that allocates bonus shares, rebills without margin costs related to the bonus shares in proportion to the time spent by the employee concerned in each company during the vesting period.

For the year ended December 31, 2013, your Company recorded a charge of €1,188,811. b) not implemented during the year most recently ended

In addition, we were informed of the following agreements and commitments already approved by the General Meeting in previous years that were not implemented during the year most recently ended.

With INSTITUT MÉRIEUX, BIOMÉRIEUX and MÉRIEUX NUTRISCIENCE CORP.

Interested parties: Alain Mérieux, Philippe Archinard, Christian Brechot and Georges Hibon.

Agreement to share the cost of contract termination fees related to the departure of one of the Group’s employees.

Nature and purpose: Sharing of the financial consequences in the event of the termination of the employment contract of an employee who has worked in more than one of the companies in the Institut Mérieux Group.

Terms: The company that dismisses the employee pays all the “contract termination fees” to the employee concerned, then divides these “fees” between the other companies in proportion to the compensation paid by each company since the employee started working for the group.

This agreement has had no effects for the year ended December 31, 2013.

Lyon, April 15, 2014

Statutory Auditors

ERNST & YOUNG et Autres COMMISSARIAT CONTROLE AUDIT Marc-André Audisio Hubert de Rocquigny du Fayel

20. FINANCIAL INFORMATION CONCERNING COMPANY ASSETS AND LIABILITIES, FINANCIAL POSITION AND PROFITS

20.1. Historical financial information

20.1.1. Consolidated financial statements and notes

Consolidated balance sheet, IFRS, (in thousands of euros) December 31, December 31, ASSETS Notes 2013 2012*

Current assets: Cash and cash equivalents 2 5,138 6,137 Other current assets 2 42,724 86,778 Cash, cash equivalents and other current financial assets 2 47,862 92,915 Accounts receivable 1,896 2,012 Inventories 975 1,107 Other current assets 3 10,616 2,340 Total current assets 61,349 98,374

Non-current assets: Property, plant and equipment 4 23,988 24,805 Intangible assets 5 1,329 1,497 Financial assets 6 9,937 7,382 Equity investments in affiliates 6 3,841 3,932 Other non-current assets 7 25,406 24,474 Total non-current assets 64,501 62,090

Total assets 125,850 160,464

December 31, December 31, LIABILITIES AND EQUITY Notes 2013 2012*

Current liabilities: Suppliers 9,364 9,587 Financial liabilities 8 8,830 961 Provisions for liabilities 103 2 Other current liabilities 9 5,699 8,853 Total current liabilities 23,996 19,402

Non-current liabilities: Financial liabilities 8 40,788 38,006 Employee benefits 10 4,444 4,584 Other current liabilities 9 - 252 Total non-current liabilities 45,232 42,842

Total liabilities 69,228 62,244

Equity: Capital 11 72,933 72,886 Issue premium and reserves 428,023 427,258 Deficit (399,849) (356,655) Profit and loss (42,858) (43,194) Other comprehensive income (1,627) (2,075)

Total equity attributable to shareholders 56,622 98,220

Total liabilities and equity 125,850 160,464 *2012 financial statements modified according to IAS19 revised effective retroactively from January 1, 2013. (Note 1.8.3)

78 Consolidated Income Statement (in thousands of Euros, except for per share data)

December 31, December 31, Notes 2013 2012* Revenues from collaboration and licensing agreements 12 3,849 3,928 Public funding for research expe nses 12 11,886 9,133 Operating income 15,735 13,061 Research and development expenses (50,063) (48,679) Overhead expenses (6,769) (6,610) Other revenue and expenses 13 (101) 93 Net operational expenses (56,933) (55,196) Operating income (41,198) (42,135) Interest income (expense), net 14 (730) (585) Loss before tax (41,928) (42,720) Tax on profits 15 - - Income from equity affiliates (930) (474) Net loss (42,858) (43,193) Net income per share ( €) 11 (1.34) (1.36) (1.34) (1.36) Diluted earnings per share (€) 11

*2012 financial statements modified according to IAS19 revised effective retroactively from January 1, 2013. (Note 1.8.3)

Consolidated statement of comprehensive income, IFRS (in thousands of Euros)

December 31, December 31, 2013 2012* Net loss (42,858) (43,194) Exchange gains and losses (16) 11 Revaluation of derivative currency hedging instruments 217 (227) Other elements of comprehensive income (201) (216) subsequently restated as income Actuarial gains and losses on provision for retirement 247 (1,367) benefits Other elements of comprehensive income 247 (1,367) subsequently non-recyclable as income Other comprehensive income 448 (1,583) Net comprehensive income (42,410) (44,777) Of which, attributable to parent company: (42,410) (44,777) Of which, attributable to minority interests: - -

*2012 financial statements modified according to IAS19 revised effective retroactively from January 1, 2013. (Note 1.8.3)

Cash flow statement, IFRS, (in thousands of Euros)

December 31, December 31, Notes 2013 2012* Cash flows from operating activities: Net loss (42,858) (43,194) Cancellation of financial income 731 594 Elimination of non-cash items Earnings from equity affiliates 930 474 Provisions 97 1,639 Depreciation 4,5,6 2,911 2,763 Payment in shares 16.2 742 855 Other 13 191 (1,233) Net cash used by operations before changes in working capital (37,256) (38,102) requirements and other operating items: Change in operating working capital requirements: Current receivables and prepaid expenses 20 188 (1,614) Inventories and work in progress 133 (14) Research tax credits 12.2 (9,073) (8,418) Other current assets 3 (614) 606 Payables 20 (156) (1,283) Deferred income 9 (3,126) (1,080) Employee benefits 10 (111) 459 Other current liabilities 8 (170) (477) Net cash used in investing activities: (50,185) (49,925) Cash flows from investing activities: (Acquisitions) / disposal of fixed assets 4 (1,962) (1,688) (Acquisitions) / disposals of intangible assets 5 (222) (261) Other (acquisitions) disposals 6 (2,446) (2,631) Net cash used in investing activities: (4,630) (4,578) Cash flows from financing activities: Net financial income proceeds 14 244 194 Gross proceeds from issuance of share capital 14 70 (642) Share issue expenses - - Conditional grants 12.2 2,929 3,116 (Acquisitions) / disposal of other financial assets 2 43,931 50,582 Net amount received for funding of research tax credit 8 7,418 6,601 Financial leases 8 (760) (955) Net cash provided by / (used in) financing activities: 53,832 58,896 Exchange rate differences on cash and cash equivalents (16) 11 Increase / (decrease) in cash and cash equivalents: (999) 4,404 Cash and cash equivalents at beginning of period: 6,137 1,733 Cash and cash equivalents at end of period: 5,138 6,137 Investments in other current financial assets 42,724 86,778 Cash, cash equivalents and other current financial assets: 47,862 92,915

*2012 financial statements modified according to IAS19 revised effective retroactively from January 1, 2013. (Note 1.8.3)

80 Statement of changes in equity, IFRS (In thousands of euros)

Common shares Total Other Profit (loss) attributable Issue premium comprehen Deficit for the to Company Number of and reserves sive Capital period * shareholders shares income * * At December 31, 2011 31,695,882 72,523 426,040 (313,029) (492) (43,626) 141,416 Payment in shares - - 856 - - - 856 Issue of shares 158,608 363 362 - - - 725 Allocation of net income - - - (43,626) - 43,626 - 2011 Net loss 2012 - - - - - (43,194) (43,194)

Fair value gains on available- - - - - 11 - 11 for-sale financial assets

Actuarial gains and losses on - - - - (1,367) - (1,367) IDR provision Rate Swap - - - - (227) - (227) Overall net profit - - - - (1,583) (43,194) (44,777) At December 31, 2012 31,854,490 72,886 427,258 (356,655) (2,075) (43,194) 98,220 Payment in shares 9,600 22 765 - - - 787 Issue of shares 10,768 25 - - - - 25 Allocation of net income - - - (43,194) - 43,194 - 2012 Net loss 2013 - - - - - (42,858) (42,858)

Fair value gains on available-for-sale financial assets - - - - (16) - (16)

Actuarial gains and losses on IDR provision - - - - 247 - 247

Rate Swap - - - - 217 - 217 Overall net profit - - - - 448 (42,858) (42,410) At December 31, 2013 31,874,858 72,933 428,023 (399,849) (1,627) (42,858) 56,622

*2012 financial statements modified according to IAS19 revised effective retroactively from January 1, 2013. (Note 1.8.3)

81 Notes to the consolidated financial statements (in thousands of Euros, unless otherwise stated)

Foreword

The consolidated financial statements of Transgene (the “Company”) at December 31, 2013 were prepared in accordance with the principles and methods defined by IFRS (International Financial Reporting Standards) as adopted by the European Union. They were approved by the Board of Directors on 24 March 2014.

The consolidated financial statements include: - The balance sheet and statement of comprehensive income (including the income statement), - The statement of cash flows, - The statement of changes in net position, and - The notes to the financial statements.

Note 1 – Accounting policies

1.1 Accounting reference

The accounting principles used to prepare the consolidated financial statements comply with IFRS standards and interpretations as adopted by the European Union at December 31, 2013 and are available on the website http://ec.europa.eu/internal_market/accounting/ias_en.htm#adopted-commission .

New standards / amendments effective for annual periods beginning on or after January 1, 2013 in Europe:

Date of application Date of application provided by the in the European Union Standard / Interpretation IASB (annual periods beginning on (financial years or after) beginning on or after) Amendment to IAS 1 – July 1, 2012 July 1, 2012 Presentation of Financial Statements – Presentation of Comprehensive Income IFRS 13 – Fair value January 1, 2013 January 1, 2013

IAS19 – Employee Benefits January 1, 2013 January 1, 2013

Amendment to IFRS 7 – January 1, 2013 January 1, 2013 Provisions, Contingent Liabilities and Contingent Assets Annual Improvements to IFRS January 1, 2013 January 1, 2013 (2009-2011) IAS 1 – Presentation of January 1, 2013 January 1, 2013 Financial Statements IAS 16 – Property, plant and January 1, 2013 January 1, 2013 equipment IAS 32 – Financial instruments: January 1, 2013 January 1, 2013 Presentation IAS 34 – Interim Financial January 1, 2013 January 1, 2013 Reporting

The impact of the application of these amendments is not significant.

IFRS 13 “Fair value” presents an evaluation framework for fair value measurements and disclosures in notes to financial statements. The standard does not require fair value measurements other than those already required or permitted by other IFRS. The methods used by Transgene are therefore not impacted.

Other standards / amendments adopted by the IASB but not yet applicable at December 31, 2013:

Standard / Interpretation Date of application Date of application in provided by the IASB the European Union (annual periods (periods beginning on beginning on or after) or after) IFRS 9 – Financial Instruments January 1, 2015 Not endorsed IFRS 10 – Consolidated Financial Statements January 1, 2013 January 1, 2014 IFRS 11 – Joint Arrangements January 1, 2013 January 1, 2014 IFRS 12 – Disclosure of Interests in Other Entities January 1, 2013 January 1, 2014 IAS 28 – Investments in associates January 1, 2013 January 1, 2014 Amendment to IAS 32 – Offsetting Financial January 1, 2014 January 1, 2014 Assets and Financial Liabilities Amendment to IFRS 10, IFRS 12 and IAS 27 – January 1, 2014 January 1, 2014 Investment Entities Amendment to IFRS 10, 11, 12 – Transitional January 1, 2014 January 1, 2014 Provisions Amendment to IAS 36 – Disclosure of the January 1, 2014 January 1, 2014 recoverable amount of non-financial assets Amendment to IAS 39 – Novation of derivatives January 1, 2014 January 1, 2014 and maintenance of hedge accounting Annual improvements, 2010-2012 cycle Endorsement expected Q2 2014 IFRIC 21 – Fees and charges January 1, 2014 Endorsement expected Q2 2014 Amendments to IAS 19 – Defined Benefit Plans, July 1, 2014 Endorsement contributions of staff expected Q3 2014 Annual improvements, 2011-2013 cycle Endorsement expected Q3 2014

The Company is currently finalizing its analytical work relating to the implementation of the new IFRS 10, IFRS 11, IFRS 12 and IAS 28 as amended. The Company has not identified any significant impact from the application of IFRS 10.

For the other standards and interpretations above, Transgene is currently analyzing the impacts and practical implications of their application.

1.2 Basis of preparation of financial statements

The consolidated financial statements were prepared according to the general IFRS principles: a fair presentation, operational continuity, the commitment accounting method, permanence of the presentation, relative importance and aggregation. They have been prepared using the historical cost convention, except for available-for-sale financial assets, which are measured at fair value.

In order to prepare financial statements in conformity with IFRS, Transgene’s management has made estimates and assumptions, concerning in particular preliminary estimates and deferred tax assets that may have an impact on assets and liabilities and the reported amounts of income and expenses for the year. Actual results may be significantly different from these estimates.

In view of the Company’s business, management considers that all property, plant and equipment and intangible assets form part of a single cash-generating unit. At each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. In the presence of such a presumption, or when annual impairment testing is required for an asset, the Company makes an estimate of the recoverable amount of the asset. The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs to sell and its value in use. The recoverable amount is determined for an individual asset, unless the asset generates cash inflows that are largely dependent on other assets or groups of assets. If the carrying amount of an asset exceeds its recoverable amount, the asset is deemed to have lost some of its value and its carrying amount is reduced to its recoverable amount. Value in use corresponds to the estimated future cash flows expected to be derived from the

83 asset, discounted at a pre-tax rate that reflects current market expectations of the time value of money and the specific risks associated with the asset.

1.3 Basis of consolidation

The consolidated financial statements include the financial statements of Transgene SA, Transgene Inc. and Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd. (“Transgene Shanghai”), wholly owned subsidiaries whose headquarters are located respectively in Rockville, Maryland (USA) and Shanghai (China). These companies are fully consolidated.

Equity investments of Transgene SA in Platine Pharma Services SAS companies, Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. and ElsaLys Biotech SAS, respectively owned 33.26%, 50% and 37%, are accounted for by the equity method.

Intragroup balances and transactions are eliminated in consolidation, together with intragroup profits included in the carrying amount of assets.

1.4 Presentation of the consolidated income statement

The consolidated income statement is presented by function (research and development expenses and overhead expenses). The following tables detail these expenses by type.

1.4.1 Research and development expenses

Decemb er 31, December 31, Change In millions of Euros 2013 2012 Employee benefits expenses 19.4 19.5 -1% Payment in shares 0.6 0.7 -14% Expenses for intellectual property and licensing costs 1.7 1.6 +6% External expenses for clinical projects 12.5 11.7 +7% External expenses f or other projects 3.9 3.2 +22% Operating expenses 9.3 9.2 +1% Depreciation and provisions 2.7 2.8 -4% Research and development expenses 50.1 48.7 +3%

1.4.2 General and administrative expenses

December 31, December 31, Change In millions of Euros 2013 2012 Employee benefits expenses 3.2 2.7 +19% Payment in shares 0.2 0.2 NS Professional and management fees 2.3 2.6 -12% Other fixed costs 0.9 1.0 -10% Depreciation and provisions 0.2 0.1 +100% General and administrative expenses 6.8 6.6 +3%

1.5 Account conversions of foreign subsidiaries

The currency used by the Company for the preparation of the consolidated financial statements is the euro.

The financial statements of Transgene, Inc. are prepared in U.S. dollars.

The financial statements of Transgene Shanghai are prepared in Yuan.

The balances of Transgene Inc. and Transgene Shanghai have been converted into euros using the exchange rate at the balance sheet date and in the income statement using the exchange rate of the month

84 of accounting. Differences arising from conversion are recognized in equity.

1.6 Foreign currency transactions

Foreign currency transactions are converted into euros at the average exchange rate for the month in which the transaction takes place.

At the balance sheet date, foreign currency cash and cash equivalents, receivables and payables are converted into euros at the exchange rate on the balance sheet date. The resulting conversion differences are recognized in the income statement.

Transgene did not use any currency hedging instruments in 2013 and 2012.

1.7 Current assets

1.7.1 Cash and cash equivalents

Transgene’s cash reserves are invested mainly in low volatility and highly liquid, highly rated mutual funds (net asset value known daily). They are classified in assets as cash equivalents and evaluated at fair value in the income statement if their sensitivity and volatility to changes in interest rates is less than 0.5 and 1.0 respectively. In all other cases, they are classified as available-for-sale financial assets and valued at their fair value under equity.

1.7.2 Receivables

Receivables are measured at nominal value. All receivables are exclusively short term.

1.7.3 Inventories

Inventories consisting mainly of chemicals and laboratory supplies are measured at the lower of cost and market. Cost is determined by the weighted average cost method.

1.7.4 Other current assets

These are cash investments with the Institut Mérieux, the principal shareholder of Transgene, under a “Group” cash management agreement.

1.7.5 Other current assets

Prepaid expenses and the other current assets are initially recognized at cost and are subsequently measured at the lower of cost and net realizable value.

1.8 Non-current assets

1.8.1 Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses, in accordance with the benchmark treatment under IAS 16.

Straight-line depreciation is recorded based on the useful life of the asset by the Group, according to the following periods:

Period of Type of asset depreciation Buildings 20 to 50 years Fixtures and fittings 10 to 20 years Machinery and equipment (machinery and laboratory equipment) 5 to 10 years Office equipment and furniture 5 to 10 years IT equipment 3 to 5 years

Intangible asset elements and their residual value are accounted for in the depreciation if the value thereof is deemed significant. 85

Property, plant and equipment are tested for impairment whenever there is an indication that their recoverable amount may be less than their carrying amount.

In accordance with IAS 17, assets held by finance leases are capitalized and amortized over the life of the asset. The corresponding depreciation charges are recognized in the income statement under “Depreciation and amortization expenses”.

1.8.2 Intangible assets

Straight-line depreciation is recorded based on the useful life of the asset by the Group, according to the following periods:

Type of intangible asset Period of depreciation Computer software and licenses 1 to 5 years Patents acquired 5 years

Purchased intangible assets

Intangible assets consist of the acquisition costs of software and intellectual property licenses that are capitalized and amortized over their useful lives. The elements of intellectual property acquired are recognized as assets in accordance with IAS 38.

Internally developed intangible assets

Research expenses are expensed in the income statement in the period in which they are incurred.

Development costs incurred for the development of pharmaceutical products are capitalized when the requirements of IAS 38 are met. Given the nature of its products, the Company believes that the six criteria set out in IAS 38 Intangible assets are deemed to be met only at the time of the filing of an application for market authorization. The development expenses capitalized will be appropriately amortized over their useful life.

Patents and licenses acquired in connection with internal R&D projects are also recognized according to an identical principle. They are recognized as an expense during the research phase and are capitalized during the development phase when IAS 38 criteria are met.

1.8.3 Financial assets

Financial assets consist of deposits and guarantees concerning leased assets or debt mobilized from a financial institution, as well as equity securities. They are recorded at cost and depreciated, as needed, if their carrying value exceeds their recoverable amount as estimated by the Company.

The valuation of investments is based on analysis by the discounted cash flow method (DCF). This valuation is periodically reviewed at each balance sheet date.

Equity securities mainly consist of a minority interest (less than 10%) in the capital of Jennerex, Inc.

The value of Jennerex, Inc. is now essentially tied to the value of its core asset, Pexa-Vec. In addition to the discount rate for future cash flows of Jennerex, Inc., its value depends essentially on discounted cash flow assumptions made to valuate Pexa-Vec.

These estimates mainly concern the probability of technical and regulatory success (“PTRS”) and its market potential. The market potential is regularly reviewed by the Company. PTRS, which depends on the stage of product development, is calculated from reference publications in the field.

For the valuation of Jennerex, Inc. securities at December 31, 2013, the Company referred to the terms of the merger agreement signed on 15 November 2013 between Jennerex, Inc. and its principal shareholder, the Korean company SillaJen, Inc. The agreement contains a number of future payments, the occurrence of which was rated according to probability. The amounts thus rated were then updated. The transaction had not been completed by the balance sheet date of the financial statements.

1.8.4 Equity consolidated affiliates

Equity consolidated affiliates consist of the stakes held by Transgene SA in Platinum Pharma Services SAS, Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. and ElsaLys Biotech SAS, (33.26%, 50% and 37%, respectively), which are accounted for using the equity method. These securities are recorded at cost less the share of losses attributable to Transgene SA.

The valuation of investments is based on an analysis using the discounted cash flow method (DCF). This valuation is periodically reviewed at each balance sheet date.

Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd.

The value of Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. is currently, for the most part, related to its cash flow as well as a project in pre-clinical development. This value therefore depends mainly on the discounted cash flow assumptions used to value the product.

These estimates mainly concern the probability of technical and regulatory success (“PTRS”) of the product and potential market. The potential market is regularly reviewed by the Company. The PTRS, which depends on the stage of development of the product, is calculated from reference publications in the field.

ElsaLys Biotech SAS

The value of ElsaLys Biotech SAS is currently, for the most part, tied to the value of its programs, which are at a very early stage of development. This value therefore depends mainly on the discounted cash flow assumptions adopted to value the products.

These assumptions mainly concern the probability of signing a license agreement for these products in the short or medium term, as well as agreement to the financial terms of such license agreements.

Platine Pharma Services SAS

The value of Platine Pharma Services SAS is currently mainly tied to its business prospects and profitability.

1.8.5 Deferred taxes

Transgene uses the balance sheet method for recognizing deferred taxes. Using this method, deferred taxes are calculated on the basis of the temporary differences between the tax values and the carrying amount of assets and liabilities presented in the balance sheet.

Deferred taxes are evaluated using the liability method, on the basis of the tax provisions and tax rates applied when these differences invert.

Deferred tax assets are recognized for all deductible temporary differences, as well as for unused tax loss carry-forwards, carryback credits and other tax credits when it is probable that sufficient taxable profit shall be available against which the unused tax losses or unused tax credits can be used. Their posting is limited to the amount of deferred tax liabilities.

Deferred tax liabilities are recognized for all taxable temporary differences.

The carrying amount of deferred tax assets is reviewed at each period end and reduced to the extent that it is no longer probable that a taxable profit will be available to allow the deferred tax asset to be used. To assess the likelihood that taxable income will be available, consideration was given to the history of the results of previous years, forecasts of future results, non-recurring items not likely to recur in the future and the entity’s fiscal policy. As a result, assessing the probability that unused tax losses or tax credits can be used involves a degree of judgment on the part of management. If the Group’s future taxable results were considerably different from those anticipated, the Company would be obliged to revise the carrying value of deferred tax assets upward or downward, which could have a significant effect on the Group’s balance sheet and results.

Deferred taxes on items recognized directly in equity are also recorded in equity without affecting the

87 income statement.

1.9 Non-current liabilities

1.9.1 Share issue costs

Capital increase expenses net of deferred tax where applicable are charged directly against the issue premium, once the increase is completed.

1.9.2 Conditional advances

Conditional advances are only reimbursed if the research and development projects that they finance are successful. They are recognized under long-term financial debt in accordance with IAS 20.

1.9.3 Employee benefits

In accordance with the prevailing laws and practices in France, Transgene SA offers certain benefits to ensure eligible employees receive a lump sum payment at the time of retirement (severance retirement plan). The Group’s obligation under these defined benefit plans may be funded by plan assets consisting of various instruments, in line with the relevant government regulations.

The rights acquired by active staff are estimated using actuarial valuations based on the probability of death and continued employment by the Company, as well as expected future salaries. Commitments are valued using the projected credit unit method.

The application of revised IAS 19 is retroactive, so the financial statements at December 31, 2012 presented have been restated as follows:

- past actuarial gains unfunded at December 31, 2011 were recorded against consolidated reserves for their amount at January 1, 2012, for €468,000;

- actuarial gains and losses in 2012 (a loss of €9,000) were presented in other comprehensive income for fiscal year 2012; and

- actuarial gains and losses in 2013 (a loss of €53,000) were presented in other comprehensive income for fiscal year 2013.

The financial statements at December 31, 2012 shown in comparison to December 31, 2013 therefore differ from the financial statements published.

1.9.4 Provisions for liabilities and charges

Provisions are made to cover liabilities and expenses related to the Group’s operations.

1.10 Operating income

1.10.1 Revenue from collaboration agreements and licensing

Transgene has entered into certain contracts for the provision of research or manufacturing services on a best-efforts basis. Transgene bills for its services at a contractually defined price, which is generally based on time spent, and billings are recorded in operating income as and when the services are performed.

Revenue from these contracts is recognized when the services are performed. In these cases, the services are recorded in operating income in the income statement after satisfactory quality control and customer acceptance.

Cash receipts corresponding to income not yet recognized in income in accordance with the principles outlined above are recorded in Deferred income on the balance sheet, until they meet the criteria for recognition in operating income.

Income from patent licenses generally consists of fees for access to technology paid and non-refundable on the signing of the agreement, and financing by milestone payments and other payments such as

88 royalties on sales.

Right of option agreement

Transgene may be required to grant a right of option agreement. Income associated with the concession is registered in Deferred income on the balance sheet and recognized in income linearly until the estimated date of exercise of the option by the beneficiary. The expected date of exercise of the option is reviewed periodically.

Non-refundable fees for technology usage rights paid when the license is signed

In the event that Transgene is not committed to perform work for the development of technology after signature, these rights are recognized in operating income upon the fulfillment of the contractual obligations.

In the event that Transgene continues some technology development work after signature or Transgene has a higher obligation to deliver the product, these rights are recognized in operating income to be deferred over the period of development or delivery of the product.

Milestone payments

Milestone payments under collaborative arrangements are recognized in revenue upon achievement of the incentive milestone events and when Transgene has no future performance obligations related to the payment. Operative events are usually the scientific or clinical results obtained by Transgene, the commencement of studies or external factors such as regulatory approvals.

Royalties on sales

Royalties on sales are based on sales by licensees of products or technologies. They are recognized on the basis of the license terms, when the sales can be reliably measured and recovery of the related receivables is reasonably assured.

1.10.2 Public funding for research expenses

Certain research and development expenses in France are entitled to a research tax credit recognized at the end of the year in which the expense was recorded and the tax credit claimed. If it has not been used by allocation to a tax charge, the tax credit may be redeemed in accordance with the tax provisions.

Research tax credits are recognized in the income statement under “Government grants” in accordance with IAS 20.

1.11 Research and development costs

Research costs are expensed in the income statement in the period in which they are incurred. Development costs are capitalized only when the requirements of IAS 38 are met (see Note 1.4.1).

1.12 Payment in shares

Transgene distributes options to its officers and employees to subscribe to shares and bonus shares. The corresponding expense for these distributions is evaluated and spread over time, according to the principles of IFRS 2.

1.13 Basic loss per share

Earnings per share are calculated on the basis of the weighted average number of shares outstanding during the period.

1.14 Contribution to Value Added Enterprises (CVAE)

The CVAE is recorded, if any, in operating expenses under Overhead expenses .

1.15 Tax credit for Competitiveness and Employment (CICE)

89 The CICE, if any, is recognized as a decrease under Employee benefits expenses .

Note 2 - Cash, cash equivalents and other current financial assets

December 31, December 31, In thousands of Euros 2013 2012 Cash 852 469 Marketable securities 4,286 5,668 Cash and cash equivalents 5,138 6,137 Other current assets 42,724 86,778 Total 47,862 92,915 Impact of applying the fair value recognized in financial income to the income: 0.5 0.8

Marketable securities are composed of short-term mutual fund units.

Other current financial assets consist of investments made with the cash pool established by the Institut Mérieux Group.

Note 3 – Other current assets

December 31, December 31, In thousands of Euros 2013 2012 Research tax credit, current portion 7,871 - State – recoverable VAT and tax receivables 562 822 Accrued credit notes 200 57 Employee benefits expense 53 57 Accrued subsidies 1,103 370 Prepaid expenses, current portion 827 1,034 Total 10,616 2,340

The 2010 research tax credit should be repaid by the State in the first half of 2014 (see Note 7).

Note 4 – Property, plant and equipment

December 31, December 31, In thousands of Euros 2012 Increase Decrease 2013 Acquisition costs Buildings under finance leases 19,653 - - 19,653 Land, buildings and fixtures 6,869 491 (14) 7,346 Laboratory equipment 15,329 1,262 (297) 16,294 Vehicles, office and computer equipment 2,254 84 (170) 2,168 Assets under construction 580 1,149 (1,077) 652 Total 44,685 2,986 (1,558) 46,113 Depreciation and provisions Buildings under finance leases (6,562) (1,109) - (7,671) (2,611) Land, buildings and fixtures (320) 14 (2,917) Laboratory equipment (9,391) (887) 110 (10,168) Vehicles, office and computer equipment (1,316) (218) 165 (1,369) Total (19.880) (2,534) 289 (22,125) Net 24,805 452 (1,269) 23,988

90 Depreciation expense for property, plant and equipment is reported in Transgene’s income statement under the following captions:

December 31, December 31, In thousands of Euros 2013 2012 Research and development expenses 2,476 2,378 General and administrative expenses 58 55 Total depreciation expenses 2,534 2,433

Disbursements for acquisitions of tangible fixed assets totaled €1.895 million in 2013 (€1.718 million in 2012).

Note 5 – Intangible assets

December 31, December 31, In thousands of Euros 2012 Increase Decrease 2013 Cost Intangible assets 3,353 597 (5) 3,945 Intangible assets in progress 541 189 (564) 166 Total 3,894 786 (569) 4,111 Depreciation and provisions Other intangible assets (2,397) (390) 5 (2,782) Total (2,397) (390) 5 (2,782) Net 1,497 396 (564) 1,329

Transgene’s amortization expense recorded in its income statement is broken down as follows:

December 31, December 31, In thousands of Euros 2013 2012 Research and development expenses 365 319 General and administrative expenses 25 26 Total amortization expenses 390 345

Disbursements for acquisitions of intangible assets amounted to €222,000 (€261,000 in 2012).

Note 6 – Financial assets

6.1 Financial fixed assets

December 31, December 31, In thousands of Euros 2012 Increase Decrease 2013 Acquisition costs Financial fixed assets 2,275 1,183 (566) 2,892 Investments in non-consolidated 7,074 5,136 1,938 - companies Total cost 7,411 3,121 (566) 9,966 Provisions for loss (29) - - (29) Total (29) - - (29) Net 7,382 3,121 (566) 9,937

The increase of €1.183 million in financial assets in 2013 mainly corresponds to retention of €825,000 with respect to refinancing over the first half of 2013 of the 2012 research tax credit, as well as an advance on the current account granted to Platine Pharma Services SAS for €330,000.

In May 2013, Transgene participated in a capital increase for Jennerex, Inc. in the amount of €1.934 million. In June 2013, Transgene exercised 577,976 options to purchase shares (warrants) of the capital of Jennerex, Inc. at a price of $0.01 per share, for a total of €4,000. These options were allocated as part of its participation in the recent capital increase of Jennerex, Inc. in May 2013. After these transactions, Transgene held 3,184,453 shares of Jennerex, Inc., or an interest of around 10%.

91 The value of the Transgene investment in Jennerex, Inc. totaled €7.044 million at December 31, 2013.

This valuation is subject to review as part of the closing of accounts at December 31, 2013. For the valuation of Jennerex, Inc. securities at December 31, 2013, the Company referred to the terms of the merger agreement signed on 15 November 2013 between Jennerex, Inc. and its principal shareholder, the Korean company SillaJen, Inc. The agreement contains a number of future payments, the occurrence of which was rated according to probability. The amounts thus rated were then updated.

The discount rate for future cash flows of Jennerex, Inc. is calculated from the weighted average cost of capital (WACC), which is itself based on a so-called market-comparable approach. A change of a 1 percentage point increase in the WACC would have a negative impact of about 1% on the value of Jennerex, Inc. A change of a 10% decrease in the probability used for the occurrence of future payments would have a negative impact of about 11% on the value of Jennerex, Inc.

At December 31, 2013, the Company believed that the balance sheet value for its interest in Jennerex, Inc. reflected its fair value and reasonably possible changes in key assumptions would not lead to a fair value lower than the balance sheet value.

6.2 Equity investments in affiliates

December 31, Increase Decrease December 31, In thousands of Euros 2012 2013 Transgene Tasly (Tianjin) 3,875 - (357) 3,518 Biopharmaceutical Co. Ltd Platine Pharma Services SAS 57 338 (313) 82 ElsaLys Biotech SAS - 501 (260) 241 Total 3,932 839 (930) 3,841

The table below shows the gross amounts (acquisition cost), provisions for impairment, and income for the above equity affiliates:

December 31, December 31, In thousands of Euros Increase Decrease 2012 2013 Acquisition costs Transgene Tasly (Tianjin) 3,976 - - 3,976 Biopharmaceutical Co. Ltd Platine Pharma Services SAS 655 338 - 993 ElsaLys Biotech SAS - 501 - 501 Total acquisition costs 4,631 839 -- 5,470 Share of income of Transgene Tasly (101) - (357) (458) (Tianjin) Biopharmaceutical Co. Ltd Share of income of Platine Pharma (598) - (313) (911) Services SAS ElsaLys Biotech SAS - - (260) (260) Total loss and shares of income (699) - (930) (1,629) attributable to Transgene

Net value of equity investments in 3,932 839 (930) 3,841 affiliates

At December 31, 2013, Transgene held 50% of Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. and the net valuation of its interest stood at €3,518 thousand.

This value was subject to review as part of the closing of accounts at December 31, 2013. This review was based on an analysis using the discounted cash flow method (DCF) as described in Note 1.7.4.

The discounted cash flow of Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. is calculated from the weighted average cost of capital (WACC), which is in turn based on a so-called market-comparable approach. A change of a 1 percentage point increase in the WACC would have a negative impact of about 15% on the valuation of Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. A change of a 5% decrease in the PTRS used for the two most advanced products have a negative impact of about 50% on the valuation of Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd.

92 At December 31, 2013, the Company believed that the balance sheet value for its interest in Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. reflected its fair value and reasonably possible changes in key assumptions would not lead to a fair value lower than the balance sheet value. In June 2013, Platine Pharma Services SAS announced the acquisition of the immuno-monitoring company Indicia Biotechnology as part of a partial asset contribution. The transaction was approved by shareholders of both companies on 31 July 2013 with retroactive effect from 1 April 2013. As part of this transaction, Transgene has made a partial conversion of its current account to the capital of Platine Pharma Services SAS for €338,000 and a partial debt write-off of €206,000. After the transaction, the interest of Transgene in the capital of Platine Pharma Services SA amounted to 33.26%. At December 31, 2013, the net value of the interest in Platine Pharma Services SA was €82,000 and Transgene also had an associated current account of €200,000 in the company.

In May 2013, Transgene participated in a capital increase of ElsaLys Biotech SAS, a company founded by former executives of the Company to develop monoclonal antibody-based immunotherapy products.

At December 31, 2013, Transgene held 37% of ElsaLys Biotech SAS and the net valuation of its interest was €241,000.

This value was subject to review as part of the closing of accounts at December 31, 2013. This review was based on an analysis using the discounted cash flow method (DCF) as described in Note 1.7.4.

The discounted cash flow of ElsaLys Biotech SAS is calculated from the weighted average cost of capital (WACC), which is in turn based on a so-called market-comparable approach. A change of a 1 percentage point increase in the WACC would have a negative impact of about 2% on the valuation of ElsaLys Biotech SAS. A change of a 10% decrease in the probability used to sign a valuation agreement for the company’s products in future would have a negative impact of approximately 23% on the valuation of ElsaLys Biotech SAS.

At December 31, 2013, the Company believed that the balance sheet value for its interest in ElsaLys Biotech SAS reflected its fair value and reasonably possible changes in key assumptions would not lead to a fair value lower than the balance sheet value.

Note 7 – Other non-current assets

December 31, December 31, In thousands of Euros 2013 2012 Research tax credit, non-current portion 25,051 24,059 CICE, non-current portion 210 - Prepaid expenses, non-current portion 145 415 Other non-current assets 25,406 24,474

At December 31, 2013, the Company had a receivable of €32.922 million (of which €25.261 million was a non-current portion) for the research tax credit for 2010, 2011, 2012 and 2013 (€25.051 million) and CICE 2013 (€210,000). This amount can be used to offset income tax payments. In the event of non-use, a refund in cash can be requested according to the following schedule, in accordance with the tax rules in force (in thousands of euros):

Reference years Planned repayment December 31, December 31, years 2013 2012 Current portion 2010 2014 7,871 - Total current portion 7,871 - Non-current portion 2010 2014 - 7,871 2011 2015 7,894 7,894 2012 2016 8,289 8,294 2013 2017 8,868 - Total non-current portion 25,051 24,059 Total 32,922 24,059

93 Note 8 – Financial liabilities

The following table outlines financial liabilities by maturity:

December 31, December 31, In thousands of Euros 2013 2012 Financial liabilities, current portion 8,830 961 Financial liabilities, non-current portion 40,788 38,006 Financial liabilities 49,618 38,967

At December 31, 2013, the main financial liabilities related to the funding of research tax credits in 2010, 2011 and 2012, the property financial lease (headquarters and main research and development laboratories) and repayable BPI advances.

8.1 Financial liabilities, current portion

December 31, December 31, In thousands of Euros 2013 2012 Property leasing (see Note 8.2) 906 961 Equipment leasing 53 - Funding of research tax credit in 2010 (see Note 8.2) 7,871 - Financial liabilities – current portion 8,830 961

Equipment leasing

Transgene acquired equipment under a financial lease in 2013.

Funding of research tax credit

See Note 8.2

8.2 Financial liabilities, non-current portion

December 31, December 31, In thousands of Euros 2013 2012 Property leasing 10,200 11,106 Equipment leasing 147 - Interest rate swaps - fair value (see Note 21) 501 718 Conditional advances 13,802 10,417 Funding of research tax credit in 2011 and 2012 16,138 15,765 Financial liabilities – non-current portion 40,788 38,006

Equipment leasing

In December 2008, Transgene consolidated all of its teams on the Illkirch site, in the suburbs of Strasbourg. The project consisted of transferring all activities that had been located in the center of Strasbourg to a new building of approximately 6,900 m² of offices and laboratories in order to meet space requirements and improve working conditions. Construction and land costs totaled €15.6 million. This investment was financed by a 15-year financial lease, signed with a banking consortium in October 2007, with a residual value of €1.1 million. The first lease payment was made on January 1, 2009.

The balance of the principal amount at December 31, 2013 was €11.106 million, compared to €12.067 million at December 31, 2012. The following table shows the breakdown of this debt, based on the maturity, financial costs and present value of individual payments:

94 December 31, December 31,

2013 2012 Present value Minimum Minimum Present value of of the payments payments the payments payments Due within one year 1,033 1,002 1,098 1,068 Due in one to five years 4,401 3,949 4,289 3,887 Total future minimum lease 11,852 9,904 12,947 10,856 payments Finance costs included in 745 658 879 778 total Outstanding capital: 11,107 9,246 12,067 10,079 - of which current 906 878 961 934 - of which non-current 10,201 8,368 11,106 9,145

Conditional advances

At December 31, 2013, conditional advances concerned repayable advances received under the ADNA (“Advanced Diagnostics for New Therapeutic Approaches”) program, which receives public funding from OSEO, for €13.802 million.

The Company may receive up to €3.4 million in additional repayable advances over the remaining term of the ADNA program, i.e., 2016.

Funding of the research tax credit

The table below shows the components of the bank financing of receivables for the Company’s research tax credit:

ASSETS LIABILITIES ASSETS Receivables Funding Security Pre-numbered interests Other assets Financial liabilities deposit Other assets

Gross Bank Current Non- Current Non- Financial asset Current Non- amount financing portion current portion current portion current portion portion portion CIR 2010 7,871 Yes 7,871 - 7,871 - 787 103 - CIR 2011 7,894 Yes - 7,894 - 7,894 789 155 116 CIR 2012 8,288 Yes - 8,288 - 8,244 824 - - CIR 2013 8,869 No - 8,869 - - - - - TOTAL 32,922 7,871 25,051 7,871 16,138 2,401 258 116

Note 9 – Other liabilities

9.1 Other current liabilities

December 31, December 31, In thousands of Euros 2013 2012 Tax and social liabilities 4,987 5,098 Deferred income 643 3,517 Of which, Novartis option right 252 1,009 Grants 338 1,822 Other 53 686 Other short-term payables 69 238 Total 5,699 8,853

95 9.2 Other non-current liabilities

December 31, December 31, In thousands of Euros 2013 2012 Deferred income (Novartis option right ) - 252 Total - 252

At December 31, 2013, the estimated latest date for the exercise of the option on TG4010 by Novartis was estimated to be 31 March 2014.

Note 10 – Employee benefits In accordance with French law, Transgene SA participates in the funding of pensions for employees in France through the payment of contributions calculated on the basis of wages to bodies that manage retirement programs. Transgene is also involved in the funding of pensions of certain employees in France by contributing, also based on wages, to private supplementary pension organizations. There are no other obligations related to these contributions.

The volume of accumulated training hours corresponding to rights acquired under the Individual Right to Training (DIF) was 24,155 hours at December 31, 2013 (based on hours approved on January 1, 2014). 1,333 hours of training were taken during 2013. The corresponding provision at December 31, 2013 amounted to €100,000.

Transgene is also liable for statutory length-of-service awards payable to employees in France upon retirement. The compensation benefits are due only to employees on the Company’s payroll at the time of retirement. The assumptions used to calculate the pension liabilities were as follows:

December 31, December 31,

2013 2012

Discount rate 3.00% 2.75% Rate of future salary increases 2.50% 2.50%

Retirement age: ° Managers: 62 (voluntary retirement) ° Non-managers: 62 (voluntary retirement)

96 The following table summarizes the conditions and amounts of actuarial pension obligations at December 31, 2013 and 2012 according to IAS 19 revised:

December 31, In thousands of Euros 2013 2012 Change in the value of commitments: Projected benefit obligation at January 1, 4,481 3,170 Cost of services rendered for the year 345 262 Cost of discounting 113 150 Change in assumptions (125) 910 Reductions/terminations (288) - Actuarial (gain) or loss (121) (11) Benefits paid during the year (61) - Projected benefit obligation for retirement 4,344 4,481

Defined benefit cost for the year: Cost of services rendered for the year 345 262 Cost of discounting 113 150 Reductions/terminations (288) - Cost of services and discounting 171 412

Revaluations of net liabilities / (assets): Actuarial losses (gains) related to changes in demographic assumptions 2 1 Actuarial losses (gains) related to changes in financial assumptions (127) 910 Actuarial losses (gains) related to experience (121) (11) Total (246) 900

Change in net liabilities / (assets): Liability / (asset) at beginning of year 4,481 3,170 Amount recognized in the income statement 171 412 Disbursements (61) - Amount recogni zed in other comprehensive income (247) 899 Liability / (asset) at end of year 4,344 4,481

Accumulated amounts recognized in other comprehensive income Accumulated amounts recognized at beginning of year 899 - Revaluations of net liabilities / (assets) for the year (247) 899 Accumulated amounts recognized at end of year 652 899

Deferred taxes (224) (309) Net cumulative amounts recognized as income at end of year 427 589

Note 11 – Equity

11.1 Capital

At December 31, 2013, the number of outstanding shares of Transgene were 31,874,858, representing share capital of €72,932,920.

Shareholders have a pre-emptive right to subscribe to share issues, pro rata to their existing interests. This right may be waived in certain circumstances by a resolution voted in an Extraordinary General Meeting. Pre-emptive subscription rights that have not been waived are negotiable during the subscription period.

In 2013, the following capital increases related to the exercise of stock options and the issue of new shares took place:

- issue of 10,768 new shares at an exercise price of €6.54 per share, - issue of 9,600 new free shares to employees of the Company.

11.2 Basic loss per share

The following table reconciles basic and diluted loss per share. The number of shares is calculated on a prorated basis.

December 31, December 31, In thousands of euros, except per share data 2013 2012* Basic loss per share Available net income Group share (42,858) (43,194) Average number of shares outstanding 31,874,858 31,762,134 Basic loss per share (in euros) (1.34) (1.36) Diluted loss per share (in euros) (1.34) (1.36) *2012 financial statements modified according to the new IAS19 revised effective retroactively from January 1, 2013. (Note 1.8.3)

At December 31, 2013 and 2012, instruments granting rights to deferred capital (stock options and free shares) were considered anti-dilutive since they resulted in an increase in earnings per share from continuing operations. As a result, the diluted earnings per share in 2013 and 2012 were the same as basic earnings per share for the year concerned.

11.3 Stock option plans

Summary table of stock option plans:

Plan No. 2 Plan No. 3 Plan No. 4 Plan No. 5 Plan No. 6 Shareholders’ meeting February 8, 2001 June 9, 2004 June 9, 2006 June 9, 2008 June 17, 2010 date Date of Board of Directors’ April 24, 2002 February 9, 2005 December 6, 2006 December 16, 2008 December 7, 2010 meeting April 23, 2003 May 18, 2005 October 4, 2007 December 9, 2009 December 13, 2012 March 2, 2004 January 1, 2006 December 19, 2007 December 7, 2010 December 6, 2006 December 16, 2008 Total number of shares to be subscribed or purchased 300,000 300,000 450,000 250,000 400,000 First date to exercise the 2006 2009 2010 2012 2015 options 2007 2010 2011 2013 2017 2008 2012 2015 Expiration date 2012 2015 2016 2018 2020 2013 2016 2017 2019 2022 2014 2018 2020 Subscription price (EUR) 8.35 6.54 11.05 11.37 14.67 (equal to the average of the 7.12 16.64 17.69 8.12 market price of the 20 trading 7.57 15.52 14.67 days prior to the grant date, 11.05 11.37 excluding discount) adjusted following the capital increase with subscription rights in 2010, in accordance with the French commercial code.

98 Options outstanding and exercisable options at December 31, 2013:

Number of shares Options outstanding at December 31, 2012 1,287,976 Options exercisable at period-end 827,538

Options awarded in 2013 0 Options exercised in 2013 (10,768) Cancelled or expired options in 2013 (14,966) Options outstanding at December 31, 2013 1,262,242 Options exercisable at period-end 882,242 E xpense calculated for share-based payments:

The fair value of employee services is recognized as an expense over the option vesting period (3 years). The expense amounted to €421,000 in 2013 and €551,000 in 2012.

11.4 Bonus share allocation plans

Summary table of share plans:

Plan No. 1 Plan No. 2 Shareholders’ meeting date June 9, 2008 June 17, 2010 Total number of shares to be subscribed or 100,000 120,000 purchased Date of Board of Directors’ meeting December 16, 2008 December 7, 2010 December 9, 2009 December 13, 2012 December 7, 2010 Total number of bonus shares allocated 73,800 74,900 11,100 44,320 15,100 Date of final allocation and expiration date December 15, 2012 December 6, 2014 (as both periods are taken into account) December 8, 2013 December 12, 2016 December 6, 2014 Share value on the date of allocation €12.10 €14.37 (opening price on the date of allocation) €19.67 €8.36 €14.37

Free shares granted and acquired at December 31, 2013:

Number of shares Bonus shares allocated at December 31, 2012 216,370 Free shares vested by the beneficiaries in 2012 (71,550)

Free shares cancelled in 2013 (5,970) Free shares granted in 2013 - Bonus shares allocated at December 31, 2013 138,850 Free shares vested by the beneficiaries in 2013 (9,600)

Expense calculated for share-based payments:

The fair value of employee services is recognized as an expense over the option vesting period (3 years). The expense amounted to €320,000 in 2013 and €305,000 in 2012.

Note 12 – Operating income

12.1 Revenue from collaboration and licensing agreements

In thousands of Euros December 31, December 31, 2013 2012 Revenue from research and development production and collaboration 2,246 1,818 License fees and royalties 1,603 2,110 Total 3,849 3,928

99 12.2 Public funding for research expenses

In thousands of Euros December 31, December 31, 2013 2012 Research and development grants 3,083 729 Research tax credits 8,803 8,404 Total 11,886 9,133

Note 13 – Other operating income and expenses

December 31, December 31, In thousands of Euros 2013 2012 Investment subsidies 15 15 Income from sale of assets 175 5 Other revenue 146 1,470 Total revenue 336 1,490 Net carrying value of disposals of fixed assets (194) (4) Other expenses (243) (1,393) Total expenses (437) (1,397) Total (101) 93

At December 31, 2013, Other income related mainly to rebilling of services rendered to equity affiliates.

At December 31, 2013, Other expenses were mainly composed of expenses for business development operations.

Note 14 – Financial income

December 31, December 31, In thousands of Euros 2013 2012* Investment income 663 533 Debt servicing costs (702) (639) Net interest income (39) (106) Other financial income and expenses (770) (489) Exchange gains and losses 79 10 Total (691) (479) Finance cost (730) (585) * 2012 financial statements modified according to the new IAS19 revised effective from January 1, 2013 retroactively. (Note 1.8.3)

Note 15 – Income tax

15.1 Current taxes

Since the Company is in a tax loss position, its current tax charge is zero. The US and Chinese subsidiaries did not recognize any current tax income or expense in 2012 and 2013.

15.2 Deferred taxes

Net deferred tax assets were zero at December 31, 2013 due to non-recognition of deferred tax assets related to the uncertainty of taxable profits in the coming three years.

100 The difference between the standard corporate income tax rate in France and the Company’s effective tax rate can be explained as follows:

December 31, In thousands of Euros 2013 2012* Standard income tax rate in France 34.43 34.43 Unrecognized deferred tax assets (39.24)% (40.21)% Other 6.7% 6.0% Effective tax rate 0% 0% Loss before tax (42,858) (43,194) Income tax expense - - *2012 financial statements modified according to the new IAS19 revised effective retroactively from January 1, 2013. (Note 1.8.3)

At December 31, 2013, Transgene had loss carry-forwards in France, which will be carried forward indefinitely, totaling €490.486 million. Transgene has no loss carry forwards from its US and Chinese subsidiaries.

Transgene’s deferred tax assets broke out as follows:

December 31, In thousands of Euros 2013 2012* Tax loss carry-forwards 490,486 440,683 Capitalized licensing costs not yet deducted 21 23 Provisions for pensions and other post-employment benefits 3,436 3,124 Severance benefits to the retired IAS 19 as amended (150) (9) Provisions for contingencies and charges 467 32 Share of income from equity affiliates 1,628 698 Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd (1) 178 Contribution in kind to Transgene Tasly (Tianjin) 1,234 1,234 Biopharmaceutical Co. Ltd. Other 115 136 Total tax base 497,236 446,100 Tax rate 34.43% 34.43% Deferred tax assets 171,198 153,592 Unrecognized deferred tax assets (1) (170,856) (153,233) Recognized deferred tax assets 342 359 (1) Deferred tax assets have not been recognized in full as the Company is not certain of generating sufficient taxable profit in the next three years to permit their use. * 2012 financial statements modified according to IAS19 revised effective retroactively from January 1, 2013. (Note 1.8.3)

Transgene’s deferred tax liabilities broke out as follows:

December 31, In thousands of Euros 2013 2012 Finance leases 995 1,043 Other - - Total tax base 995 1,043 Tax rate 34.43% 34.43% Deferred tax liabilities 342 359

Note 16 – Employee information

16.1 Personnel

The Company’s registered staff totaled 295 employees at December 31, 2013, including three with Transgene Inc. and five with Transgene Shanghai. The Company had 306 employees at December 31, 2012.

101 At December 31, 2013 Men Women Total Managers 68 107 175 Other grades 28 92 120 Total 96 199 295* * including 262 open-ended contracts at December 31, 2013.

16.2 Employee benefits expenses

Employee benefits expenses included in the Company’s income statement (payroll taxes, pension costs, ancillary costs) were as follows:

December 31, December 31, In thousands of Euros 2013 2012 Research and development expenses 19,389 19,580 General and administrative expenses 3,221 2,720 Total employee benefits expense 22,610 22,300

Expenses relating to share-based payments amounted to:

December 31, December 31, In thousands of Euros 2013 2012 Research and development expenses 561 661 General and administrative expenses 182 194 Total employee benefits expenses 743 855

Note 17 – Related party transactions

Transgene has signed a cash pooling agreement with Institut Mérieux. Available cash placed in the Institut Mérieux cash pooling represented a debt of €42.724 million at December 31, 2013, and the resulting interest income was €46,000 at December 31, 2013.

The table below does not include these cash items.

December 31, 2013 In thousands of Euros Receivables Payables Institut Mérieux (2) - 36 Thera Conseil - - Platine Pharma Services SAS 200 - Transgene Tasly Biopharmaceutical Co. ltd 114 - BioMérieux S.A. - 5 BioMérieux Shanghai - 24 BioMérieux Inc. - - Advance Bioscience Laboratories, Inc. - 230 ElsaLys Biotech SAS 597 34 Total 911 329

December 31, 2013 In thousands of Euros Revenue Costs BioMérieux S.A (1) - 80 Thera Conseil - 25 BioMérieux Shanghai - 139 Institut Mérieux (2) 33 1,973 BioMérieux, Inc. - 0 Advance Bioscience Laboratories, Inc. (3) - 510 Platine Pharma Services SAS - 133 Transgene Tasly Biopharmaceutical Co. ltd (4) 338 - ElsaLys Biotech SAS (5) 547 28 Total 918 2,999

(1) Revenue corresponds to research operations and expenses related to purchases of laboratory equipment and supplies. (2) The costs correspond to the agreement for services rendered by Institut Mérieux. (3) Costs correspond to the agreement for services, re-invoicing of staff and rent between Transgene, Inc. and

102 Advance Bioscience Laboratories, Inc. (4) Revenue corresponds to the agreement for services and re-invoicing of staff concluded between Transgene SA and Transgene Tasly Biopharmaceutical Co. ltd. (5) Revenue corresponds to the agreement for services rendered by Transgene SA. Costs correspond to an agent agreement between ElsaLys Biotech and Transgene SA.

Note 18 – Off-balance sheet commitments

On 1 April 2009, Transgene signed an occupancy agreement with Lyonbiopôle for its Lyon teams. This agreement, which had an initial term of three years, was renewed in 2012. The annual rent was €347,000 (including charges) in 2013.

As of 1 May 2010, Transgene has offices at the Parc d'Innovation, Illkirch. A “3/6/9” commercial lease was signed on 1 May 2010. The annual rent was €61,000 (including charges) in 2013.

Transgene is also bound by contracts with subcontractors. These contracts may affect several accounting periods. At December 31, 2013, the Company believed its financial commitments under these contracts to be approximately €14 million in current value.

Under licensing or option agreements, third parties, including Novartis, have promised to make milestone payments or pay royalties to the Company that are dependent upon future events whose probability remains uncertain as of the balance sheet date. The Company has promised, with respect to a number of third parties, to pay royalties or milestone payments under collaboration or licensing agreements that are dependent upon future events whose realization remains uncertain as of the balance sheet date.

In return for the refinancing of research tax credits in 2010, 2011 and 2012, the Company gave bank guarantees amounting to €2,401 million.

Note 19 – Segment reporting

The Company conducts its business exclusively in the research and development of therapeutic vaccines and immunotherapeutic products, none of which is currently on the market. Its main partners, with whom it generates income, are the Swiss group Novartis and the US company Jennerex Inc. Its operations are located mainly in France. The Company therefore uses only one sector for the preparation and presentation of its financial statements.

Note 20 – Breakdown of assets and liabilities by maturity

December 31, 2013

More than one Assets (in thousands of Euros) Gross amount One year or less year Financial fixed assets 9,736 787 8,949 Receivables 1,896 1,896 - Research tax credits 33,132 7,871 25,261 Recoverable VAT and income tax 562 562 - receivables Amounts due to/from employees 54 54 - Prepaid expenses 973 828 145 Grant receivable 1,103 1,103 - Other receivables 200 200 - Total 47,656 13,301 34,355

103 More than one Liabilities (in thousands of Gross One year or year and less than More than Euros) amount less or equal to five five years years Payables 9,364 9,364 - - Property leasing 11,106 906 4,001 6,199 Equipment leasing 200 53 147 - Conditional advances 13,802 - - 13,802 Funding of research tax credit 24,008 7,871 16,137 - Provision for risks and liabilities 103 103 - - Provisions for retirement 4,344 217 1,540 2,587 Provision for DIF 100 100 - - Accrued employee benefits and 4,987 4,987 - - tax expense Deferred income 643 643 - - Other liabilities 570 70 - 500 Total 69,227 24,314 21,825 23,088

Note 21 – Financial risk management objectives and policies

Hedging operations

The Company is not engaged in any foreign exchange hedges.

In the first half of 2009, the Company partially hedged the interest rate risk related to the financial leasing of its administrative and research building in Illkirch (see Note 8), according to the following terms:

° Nominal value: €5.9 million (depreciable) ° Hedging instrument: interest rate contract ° Residual maturity: 9 years and 9 months ° Underlying rate: 3 month Euribor ° Fixed rate: 3.46%

As the hedge is perfect, the variations in market value for the instrument are recognized at net value. At December 31, 2013, the market value of the instrument amounted to €500,000. The market value is the amount that the Company would have had to pay if it decided to liquidate the hedge at December 31, 2013.

Exchange rate risk

The Company has U.S. dollar bank accounts. Net disbursements totaled US$9.9 million in 2013.

The following table shows the sensitivity of the Company’s expenses at a 10% change in the US dollar rate during the years ended December 31, 2012 and 2013 (before tax and any hedging):

December 31, In thousands of Euros 2013 2012 Expenditures denominated in US dollars 9,948 7,520 Equivalent in euros on the basis of an exchange rate of EUR 1 = 7,463 5,825 $1.333 Equivalent in euros in the event of an increase of 10% USD vs. 8,209 6,407 EUR Equivalent in euros in the event of a decrease of 10% USD vs. 6,717 5,243 EUR

104 The Group’s foreign exchange position as at December 31, 2013 is as follows:

In thousands USD Assets 1,442 Liabilities (1,070) Net position 372 Adjusted 372 Off-balance sheet position -

Risks related to cash needs

The Group monitors the risks related to the management of its cash assets through centralized follow-up and approval procedures. Cash assets are invested in highly rated marketable securities.

Cash invested at December 31, 2013 in mutual funds, directly or through the centralized management of the Institut Mérieux Group, amounted to €47.9 million. The Company needs, and shall continue to require, substantial funds to continue its research and development activities, including pre-clinical and clinical testing of future products, to establish commercial scale manufacturing processes and facilities, to expand quality control, regulatory, marketing, sales and administrative capabilities. It shall also require substantial funds to manufacture and market any products approved for commercial sale.

Capital management

Note 22 – Subsequent Events

In January 2014, the Company made the decision to launch the construction phase of a new viral vector production unit in collaboration with Sanofi. The companies will jointly invest around €10 million over two years in the production unit, with Transgene’s portion amounting to approximately €5 million. Sanofi will act as the Contract Manufacturing Organization (CMO) and Transgene will be a privileged customer of the platform until 2028. This dedicated platform will be the exclusive property of Sanofi and will produce a new therapeutic class of active pharmaceutical ingredients (viral vectors).

On March 18, 2014, the Company announced the completion of the acquisition of its partner for Pexa- Vec, the US company Jennerex, Inc., by SillaJen, Inc., a Korean biotechnology company. Transgene sold SillaJen, Inc. its stake of the capital of Jennerex, Inc. of approximately 8.5% on a diluted basis. The development and marketing agreement for the oncolytic virotherapy product Pexa-Vec entered into between Transgene and Jennerex, which is now a wholly owned subsidiary of SillaJen, Inc., is not affected by this transaction. Under the terms of the contract, Transgene’s portion of the sale price breaks down as follows:

- An initial payment of US$3.8 million (US$3.2 million net of fees and sequestration of a portion of the sale price) at the closing of the transaction, which was recorded in the first half of 2014; - Additional payments based on the achievement of clinical and regulatory milestones of up to approximately US$9 million.

On February 28, 2014, Transgene announced the launch of a capital increase with pre-emptive subscription rights amounting to €45.5 million through the issuance of 4,500,000 new shares at a price of €10. The operation might be followed by a private placement of up to two million additional new shares. These transactions had not been concluded as of the balance sheet date by the Company’s Board of Directors on March 24, 2014.

105 Statutory Auditors’ Report on the consolidated financial statements

COMMISSARIAT CONTROLE AUDIT ERNST & YOUNG et Autres 112, rue Garibaldi 1/2, place des Saisons 69006 Lyon 92400 Courbevoie - Paris-La Défense 1 S.A.S. à capital variable

Statutory Auditors Statutory Auditors Member of the Compagnie Member of the Compagnie Régionale de Lyon Régionale de Versailles

Transgene

Year ended December 31, 2013

Report of the Statutory Auditors on the consolidated financial statements

Dear Shareholders,

In compliance with the mission entrusted to us by your General Meeting, we hereby present our report for the year ended December 31, 2013, on:

- the auditing of Transgene’s consolidated financial statements, as attached to this report; - justification of our assessments; - the specific verification required by Law.

The consolidated financial statements were approved by the Board of Directors. Our role is to express an opinion on these financial statements based on our audit.

I. Opinion on the consolidated financial statements

We conducted our audit in accordance with the professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We certify that the consolidated financial statements fairly present the results of operations for the year and the financial position and assets of the consolidated companies at that date, in accordance with IFRS as adopted by the European Union.

II. Justification of our assessments

In accordance with the requirements of Article L. 823-9 of the French Commercial Code relating to the justification of our assessments, we draw your attention to the following matters:

- Note 1.7.2 to the consolidated financial statements describes the accounting rules and methods for intangible assets, including research expenses. In the context of our assessment of the accounting policies and rules followed by your company, we have verified the appropriateness of the accounting methods referred to above and the information given in Note 5 to the financial statements and we are satisfied that they have been applied correctly.

- At each balance sheet date, your group conducts tests for impairment of equity securities, as described in Notes 1.7.3 and 1.7.4 of the Notes to the consolidated financial statements. We have examined the terms of the implementation of these impairment tests and estimates of cash flows and assumptions used, and we have verified that Note 6.1 to the consolidated financial statements provides appropriate information.

The assessments were made in the context of our audit of the consolidated financial statements, taken as a whole, and therefore contributed to the formation of the unqualified opinion expressed in the first part of this report.

106 III. Specific verification

We also performed specific verifications provided by law, in accordance with professional standards applicable in France of information relating to the group given in the management report.

We have no matters to report concerning the fairness of this information or its consistency with the consolidated financial statements.

Lyon, April 15, 2014

Statutory Auditors

COMMISSARIAT CONTROLE AUDIT ERNST & YOUNG et Autres Hubert de Rocquigny du Fayel Marc-André Audisio

107

20.1.2. Transgene SA annual financial statements and notes

BALANCE SHEET - ASSETS (in thousands of Euros)

Notes 12/31/2013 12/31/2012

Intangible assets, at cost 4,261 4,044 (accumulated depreciations and provisions) (2,932) (2,547) Intangible assets – net 11 1,329 1,497 Property, plant and equipment: Land 650 650 Fixtures and fittings 6,958 6,481 Laboratory equipment 15,918 15,193 Vehicles, office and computer equipment 2,158 2,244 Work in progress 653 580 Total property, plant and equipment, at cost 26,337 25,148 (accumulated depreciation and provisions) (14,640) (13,429) Property, plant and equipment – net 10 11,697 11,719 Financial assets – net 12 17,099 13,639 Total fixed assets 30,125 26,855

Inventories 6 975 1,107 Receivables 7 1,896 2,012 Research tax credits payable 20 25,261 24,059 Recoverable VAT and income tax receivables and other 822 8,432 tax receivables Other receivables, including centralized treasury 8 44,080 87,262 Available cash, cash equivalents 5 4,675 5,901 Total current assets 85,319 121,163

Prepaid expenses 17 968 1,445 Exchange rate gains - -

Total assets 116,412 149,463

108

BALANCE SHEET - LIABILITIES (in thousands of Euros)

Notes 12/31/2013 12/31/2012 Subscribed capital, 72,933 72,886 Share premiums 424,775 424,726 Reserves 555 580 Deficit (396,737) (356,300) Profit and loss (41,454) (40,436) Statutory provisions - - Equity 13 60,072 101,456

Financial liabilities 24,009 15,765 Conditional advance 13,802 10,417 Other equity 14 37,811 26,182 Provisions for pensions 3,374 3,124 Other provisions for contingencies and charges 103 2 Provisions for contingencies and charges 15 3,477 3,126 Payables 9,365 9,587 Accrued employee benefits and tax expense 4,970 5,081 Other expenses payable 70 237 Payables 14,405 14,905 Deferred income 17 643 3,769 Exchange rate losses 4 25 Liabilities 56,340 48,007

Total liabilities and equity 116,412 149,463

109 INCOME STATEMENT (in thousands of Euros)

Notes 12/31/2013 12/31/2012 Revenue Revenues from collaborative and licensing agreements 2.1 3,849 3,928 Research and development grants 2.2 3,083 729 Other revenue 2.2 1,193 632 Total revenue 8,125 5,289 Operating costs Research and development expenses (49,410) (47,965) General and administrative expenses (6,645) (6,455) Other expenses (1,349) (1,805) Total operating costs (57,404) (56,225)

Operating loss (49,279) (50,936)

Financial income 3 669 537 Financial expense 3 (1,773) (921) Exchange rate difference 3 85 (5)

Current income before tax (50,298) (51,325)

Net extraordinary income (expenses) 4 (19) 2,470 Income tax expense 20 8,863 8,419

Net loss (41,454) (40,436)

110 NOTES TO THE FINANCIAL STATEMENTS (for the fiscal year ended December 31, 2013)

The notes and tables presented below are an integral part of the annual financial statements. The financial statements at December 31, 2013 show a balance sheet total of €116.412 million and a net loss of €41.454 million.

Note 1 - Nature of activity and summary of accounting principles

1.1. Nature of activity

Transgene (“the Company”) is a French limited liability company (“Société Anonyme”) governed by the provisions of French law. It was created in 1979 to apply emerging techniques in genetic engineering in the context of contract research for industrial groups in the fields of molecular and cellular biology, virology, immunology and protein chemistry. The Company designs and develops immunotherapy products for treating cancer and infectious diseases.

1.2. Significant accounting policies and changes to methods

The annual financial statements have been prepared in accordance with significant accounting policies generally accepted in France, in compliance with the Law of April 30, 1983 and the Decree of November 29, 1983 relating to the National Accounting Code (“PCG”), and to Regulation 99-03 of April 29, 1999 relating to the PCG “1999 rewrite”.

The new regulations on assets (CRC 02-10 and 04-06) have been in application since January 1, 2005.

1.3. Establishment of revenue

Transgene’s revenue is comprised of revenues from patent licenses and collaborations in research (including the reimbursement of costs incurred by Transgene), development and production.

1.3.1 Patent licenses

Revenue from patent licenses generally consists of rights to access technology, paid on signing of the agreement and which is not reimbursable, financing by milestone payments and other payments, such as royalties.

Non-refundable fees for technology usage rights paid when the license is signed

When Transgene is not committed to continuing to develop a technology after a license is signed, the fees are recognized as revenue when the Company’s contractual obligations have been fulfilled.

When Transgene is committed to continuing to develop a technology after a license is signed or has a future obligation to deliver products, the fees are recognized as revenue over the development period or the product delivery period.

Milestone payments

Milestone payments under collaborative agreements are recognized as revenue upon achievement of the incentive milestone events and when Transgene has no future performance obligations related to the payment. Milestone payments are triggered either by the results of Transgene’s research efforts or by events external to Transgene, such as regulatory approvals, the commencement of clinical trials or selection of candidates for drug development.

Royalties

Royalties are based on the licensee’s sales of products or technologies. They are recognized on the basis of the license terms, when the sales can be reliably measured and recovery of the related receivables is reasonably assured. Provisional estimates of royalties receivable are based on sales statistics and trends.

1.3.2 Service and manufacturing contracts

Transgene has entered into certain contracts for the provision of research or manufacturing services on a

111 best-efforts basis.

Transgene bills its services at a pre-agreed rate, generally on a time-spent basis, and billings are recorded as revenue as and when the work is done.

Revenue from these contracts is recognized when the services are performed. Revenue from contracts for manufacturing services, where the Company has an obligation to achieve a specified result, is recognized as revenue on the income statement when a product has successfully undergone quality controls and has been accepted by the customer.

Revenue received but not yet recognized in the income statement based on the above principles is recorded as a liability under “Deferred revenue” and is reclassified to the income statement when the revenue recognition criteria are met.

1.4. Research tax credits

Research and development costs entitled the Company to a research tax credit, which is recognized at the end of the fiscal year in which the costs are recognized and the credit is claimed. Unused research tax credits are refundable from the fourth year. The 2010, 2011, 2012 and 2013 research tax credits will be reimbursed in 2014, 2015, 2016 and 2017, respectively. Since 2011 (for the research tax credit in 2010), the Company has bank refinanced its research tax credit to optimize its cash management.

Research tax credits are recognized in the income statement under “Taxes”.

1.5. Cash and cash equivalents

The Company considers cash and cash equivalents as highly liquid investments, which can be bought or sold at any time based on prices that are determined on a daily basis, and which have no material interest or risk. Theyare in mutual funds mostly invested in underlying monetary assets, bonds and long-term government bonds. Marketable securities are valued at a cost, which is the lower of the first in/first out method or market value.

1.6. Inventories

Inventories consisting mainly of chemicals and laboratory supplies are measured at the lower of cost or market value. Cost is determined by the weighted average cost method. A provision for obsolescence or low rotation may be recognized.

1.7. Property, plant and equipment

Property, plant and equipment are measured at cost. Depreciation is recognized in the income statement according to the probable useful lives, as follows:

Depreciation Type of asset Period method Buildings Straight-line 20 to 50 years Fixtures and fittings Straight-line 10 to 20 years Machinery and equipment (machinery and laboratory Straight-line 5 to 10 years equipment) Office equipment and furniture Straight-line 5 to 10 years IT equipment Straight-line 3 to 5 years Transport equipment Straight-line 4 to 5 years

The application of the new regulations on assets (CRC 02-10 and 04-06) has had no impact on the financial statements. In fact, as with all of its fixed assets, their breakdown level has not resulted in changes in the values of the assets or amortization schedules.

Fixed asset components that have a useful life significantly different from the main asset, have their own depreciation schedule, provided the value of these components represents at least 15% of the value of the whole asset.

112 1.8. Costs of issuing new shares

Share issue costs are charged to share premiums.

1.9. Research and development costs

Research costs are recognized as an expense on the income statement for the period in which they are incurred. Development costs are capitalized when the required conditions are met.

The Company believes that the costs incurred in developing its pharmaceutical products are equivalent to research costs until a marketing authorization request is filed with regulatory authorities. After that, they are considered to be development costs.

1.10. Other intangible assets

Intangible assets mainly comprise licenses, acquired patents and computer software.

Period of Type of intangible asset Depreciation method depreciation Computer software and licenses Straight-line 1 to 5 years Patents acquired Straight-line 5 years

1.11. Investments in non-consolidated companies

Investments in non-consolidated companies are recorded at cost and depreciated, as needed, if their carrying value exceeds their recoverable amount as estimated by the Company.

The valuation of investments is based on an analysis using the discounted cash flow method (DCF). This valuation is reviewed periodically.

For investments to develop immunotherapy products (as with Jennerex, Inc.), the assumptions used for the DCF valuation mainly involve the probability of technical and regulatory success (PTRS) and the market potential of portfolio products. The market potential is regularly reviewed by the Company. PTRS, which depends on the stage of product development, is calculated from reference publications in the field.

The discount rate for future Jennerex, Inc. cash flows is calculated using the weighted average cost of capital (WACC), which is based on a so-called market-comparable approach.

1.12. Other financial assets

Other financial assets are comprised of deposits and guarantees regarding property rentals and the holdback related to the assignment of debt under the RTC. Deposits and guarantees are measured at cost and depreciated as needed to reflect their net realizable value.

1.13. Prepaid expenses and other current assets

Prepaid expenses and the other current assets receivable are measured at cost and may be depreciated to reflect their net realizable value.

1.14. Provisions for risks and liabilities and provisions for employment benefits

Provisions are recorded to cover contingencies and charges arising in the course of the Company’s business. With regard to provisions for pensions and other post-employment benefits, in particular, the rights acquired by serving employees are estimated according to actuarial evaluations, taking into account mortality rates, future salary levels and the probability of employees remaining with the Company until retirement.

Actuarial gains or losses related to experience and changes in assumptions are amortized in future expenses over the remaining probable average active period for employees after applying a corridor of 10% of the greater of the value of commitments and the value of the hedging asset.

113 1.15. Foreign exchange

Cash liquidity in currency is converted into euros at the exchange rate on the balance sheet date. The resulting conversion differences are recognized in the income statement.

Receivables and payables in foreign currencies are converted into euros at the exchange rate on the balance sheet date. The resulting conversion differences are recognized under “exchange rate gains/losses” on the balance sheet (under assets for unrealized losses, under liabilities for unrealized gains).

Unrealized losses are booked in a provision for risks under expenses for the year.

1.16. Income tax expense

Income tax expenses correspond to taxes due calculated at the standard rate in use at year end, taking into account the research tax credit (see Note 1.4.).

The underlying tax position is calculated on the basis of the differences between the tax values and carrying amount of assets and liabilities presented in the balance sheet. These differences are determined according to the tax provisions and discounted tax rates when these differences are inverted.

Note 2 - Operating income

2.1. Revenue from collaborative and licensing agreements

December 31 In thousands of Euros 2013 2012 Bioproduction and other collaborative projects 2,246 1,818 License fees and royalties 1,603 2,110 Total 3,849 3,928

2.2. Other revenue

December 31 In thousands of Euros 2013 2012 Research and development grants 3,083 729 Other 1,193 632 Total 4,276 1,361

Note 3 - Interest income (expense)

December 31 In thousands of Euros 2013 2012 Revenue Revenues from marketable securities 663 532 Revenues from capitalized accounts receivable - - Discounts received - - Other interest income 6 5 Total financial interest income 669 537 Expenses Other interest expense (1,212) (503) Interest expense related to debt (561) (418) Total financial expenses (1,773) (921) Exchange rate differences Exchange rate gain 112 27 Exchange rate loss (27) (32) Total exchange rate differences 85 (5) Net interest income and other interest income and expense (1,019) (389)

Note 4 – Extraordinary income (expense)

At December 31, 2013, extraordinary income (expense) was exclusively comprised of losses realized on the disposal of assets.

114

At December 31, 2012, extraordinary income (expense) wasmainly related to the contribution in kind of the rights to TG3003 by Transgene, as part of the Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. capital increase valued at €2.470 million.

Note 5 - Cash and marketable securities

December 31 In thousands of Euros 2013 2012 Cash 389 233 Marketable securities 4,286 5,668 Total 4,675 5,901 Unrecorded unrealized gains 0.5 0.8

In 2013, marketable securities were composed of short-term mutual fund units.

Note 6 - Inventories

December 31 In thousands of Euros 2013 2012 Raw materials 157 251 Laboratory supplies 820 962 Total cost 977 1 213 Provision for obsolescence (2) (106) Total net 975 1,107

Note 7 - Receivables

December 31 In thousands of Euros 2013 2012 Total cost 1,896 2,012 Provision for loss - - Total net 1,896 2,012

Note 8 - Other liabilities

December 31 In thousands of Euros 2013 2012 Institut Mérieux centralized cash (cash pool) 42,724 86,778 Accrued credit notes (trade credit) 200 57 Employee benefits expense 53 57 Accrued subsidies 1,103 370 Total 44,080 87,262

Contractually, investments made by the Company as part of the centralized cash management at Institut Mérieux are liquid within a maximum period of four business days and bear interest based on a rate equal to Euribor +0.15% when Institut Mérieux is in a net borrowing position at the group level and Euribor - 0.15% when Institut Mérieux is in a net surplus at the group level.

Note 9 - Accrued revenue

December 31 In thousands of Euros 2013 2012 Accrued income 1,612 698 VAT credit 444 458 Trade receivables 171 23 VAT on accrued invoices 187 338 Social organizations - accrued revenue 7 7 Total 2,421 1,524

115 Note 10 - Property, plant and equipment

In thousands of Euros 12.31.2012 Increase Decrease 12.31.2013 Cost Land, buildings and fixtures 7,131 491 (14) 7,608 Laboratory equipment 15,193 1,022 (297) 15,918 Vehicles, office and computer 2,244 84 (170) 2,158 equipment Assets under construction 580 1,149 (1,076) 653 Total 25,148 2,746 (1,557) 26,337 Depreciation and provisions Land, buildings and fixtures (2,799) (435) 14 (3,220) Laboratory equipment (9,323) (847) 110 (10,060) Vehicles, office and computer (1,360) (1,307) (218) 165 equipment Total (13,429) (1,500) 289 (14,640) Total net 11,719 1,246 (1,268) 11,697

Note 11 - Intangible assets

In thousands of Euros 12.31.2012 Increase Decrease 12.31.2013 Cost Licenses and acquired patents 1,788 - - 1,788 Other intangible assets 1,715 596 (4) 2,307 Assets under construction 541 189 (564) 166 Total 4,044 785 (568) 4,261 Depreciation and provisions Licenses and acquired patents (1,146) (173) 2 (1,317) Other intangible assets (1,401) (219) 5 (1,615) Total (2,547) (392) 7 (2,932) Total net 1,497 393 (561) 1,329

Note 12 - Financial assets

In thousands of Euros 12.31.2012 Increase Decrease 12.31.2013 Investments in non-consolidated companies - Transgene Tasly (Tianjin) 5,211 - - 5,211 Biopharmaceutical Co. Ltd. - Jennerex, Inc. 5,106 1,938 - 7,044 - Platine SAS 655 338 - 993 - Transgene Biopharmaceutical 375 500 - 875 Technology (Shanghai) Co. Ltd - Transgene Inc. 23 - - 23 - Access Investment, Inc. 29 - - 29 - ElsaLys Biotech SAS - 501 - 501 Total 11,399 3,277 - 14,676 Guarantees and deposits 1,855 842 (10) 2,687 Platine SAS current account 415 330 (545) 200 Depreciation (29) (435) - (464) Total (at historical cost) 13,640 4,014 (555) 17,099

In May 2013, Transgene participated in a capital increase for Jennerex, Inc. in the amount of €1.934 million. In June 2013, Transgene exercised 577,976 options to purchase shares (warrants) of the capital of Jennerex, Inc. at a price of $0.01 per share, for a total of €4,000. These options were allocated as part of its participation in the May 2013 capital increase of Jennerex, Inc. After these transactions, Transgene held 3,184,453 shares of Jennerex, Inc., or an interest of around 10%.

The value of the Transgene investment in Jennerex, Inc. totaled €7.044 million at December 31, 2013.

This valuation was reviewed as of the December 31, 2013 balance sheet date.

116 This review is based on an analysis using the discounted cash flow (DCF) method described in Note 1.7.3. The discounted cash flow rate of Jennerex, Inc. is calculated on the basis of the weighted average cost of capital (WACC), which is itself based on a so-called market-comparable approach.

A 10% decrease in the PTRS would have a negative impact of about 20% on the value of Jennerex, Inc. A 1 percentage point increase in the WACC would have a negative impact of about 1% on the value of Jennerex, Inc.

In May 2013, Transgene participated in a capital increase of Elsalys Biotech SAS, a company founded by former executives of the Company to develop monoclonal antibody-based immunotherapy products. At December 31, 2013, Transgene owned 37% of ElsaLys Biotech SAS.

In June 2013, Platine Pharma Services SAS, which was 49.5% owned by Transgene as of June 30, 2013, announced the acquisition of the immuno-monitoring activities of Indicia Biotechnology as part of a partial asset contribution. The transaction was approved by shareholders of both companies on July 31, 2013 retroactive to April 1, 2013. As part of this transaction, Transgene partially converted its current account to the capital of Platine Pharma Services SAS for €338,000 and partially wrote off debt of €206,000. After the transaction, the interest of Transgene in the capital of Platine Pharma Services SA was 33.26%. Transgene also had an associated current account of €200,000 in the company.

At December 31, 2013, the impairment affected Access Investement, Inc. shares in the amount of €29,000 and Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd. shares in the amount of €435,000.

Note 13 - Equity

13.1. General

At December 31, 2013, the number of Transgene shares in circulation totaled 31,874,858, representing (unrecognized) share capital of €72,932,920 (recognized in January 2013).

13.2. Preferential subscription rights

13.3. Stock options

Summary table of stock option plans: Plan No. 2 Plan No. 3 Plan No. 4 Plan No. 5 Plan No. 6 Shareholders’ meeting date 02/08/2001 06/09/2004 06/09/2006 06/09/2008 06/17/2010 Date of Board of Directors’ meeting 04/24/2002 02/09/2005 12/06/2006 12/16/2008 12/07/2010 04/23/2003 05/18/2005 10/04/2007 12/09/2009 12/13/2012 03/02/2004 01/01/2006 12/19/2007 12/07/2010 12/06/2006 12/16/2008 Total number of shares to be subscribed or purchased 300,000 300,000 450,000 250,000 400,000 First date to exercise the options 2006 2009 2010 2012 2015 2007 2010 2011 2013 2017 2008 2012 2015 Expiration date 2012 2015 2016 2018 2020 2013 2016 2017 2019 2022 2014 2018 2020 Subscription price (EUR) (equal to the 8.35 6.54 11.05 11.37 14.67 average of the market price of the 20 trading 7.12 16.64 17.69 8.12 days prior to the grant date, excluding 7.57 15.52 14.67 discount) adjusted following the capital 11.05 11.37 increase with subscription rights in 2010, in accordance with the French commercial code.

117 Options outstanding and exercisable options at December 31, 2013:

Number of shares Options outstanding at December 31, 2012 1,287,976 Options exercisable at end of period 827,538

Options awarded in 2013 - Options exercised in 2013 (10,768) Cancelled or expired options in 2013 (14,966) Options outstanding at December 31, 2013 1,262,242 Options exercisable at end of period 882,242

13.4. Bonus share allocation plans

Summary table of share plans

Plan No. 1 Plan No. 2 Shareholders’ meeting date 06/09/2008 06/17/2010 Total number of shares to be subscribed or 100,000 120,000 purchased 12/16/2008 12/07/2010 Date of Board of Directors’ meeting 12/09/2009 12/13/2012 12/07/2010 73,800 74,900 Total number of bonus shares allocated 11,100 44,320 15,100 12/15/2012 12/06/2014 Date of final allocation and expiration date 12/08/2013 12/12/2016 (as both periods are taken into account) 12/06/2014 €12.10 €14.37 Share value on the date of allocation €19.67 €8.36 (opening price on the date of allocation) €14.37

Free shares granted and acquired at December 31, 2013

Number of shares Bonus shares allocated at December 31, 2012 216,370 Free shares vested by the beneficiaries in 2012 (71,550)

Free shares cancelled in 2013 (5,970) Free shares granted in 2013 - Bonus shares allocated at December 31, 2013 138,850 Free shares vested by the beneficiaries in 2013 (9,600)

13.5. Changes in equity

Premiums Share Carry Statutory and Result Equity capital forward provisions In thousands of Euros reserves At 12.31.2012 72,886 425,306 (356,300) (40,436) - 101,456 Appropriation of loss Net income (loss) 2012 - - (40,436) 40,436 - - Net income (loss) 2013 - - - (41,454) - (41,454) Increase in capital (exercise of stock options and final 47 23 - - - 70 allocation of free shares) At 31.12.2013 72,933 425,329 (396,736) (41,454) - 60,072

In 2013, the following capital increases related to the exercise of stock options and the issue of new shares took place:

118 - issuance of 10,768 new shares at an exercise price of €6.54 per share, - issuance of 9,600 new free shares to employees of the Company.

Note 14 - Other equity

14.1. Financial liabilities

At December 31, 2013, financial liabilities related to bank financing of the 2010 research tax credit (current liability) and the 2011 and 2012 research tax credits (non-current liabilities). Transgene received the amount of the tax debt less a financing cost and a holdback of 10%.

14.2. Conditional advances

At December 31, 2013, conditional advances related to repayable advances received under the ADNA (“Advanced Diagnostics for New Therapeutic Approaches”) program, which receives public funding from the BPI, for €13.802 million.

The Company may receive up to €3.4 million in additional repayable advances over the remaining term of the ADNA program, i.e., until 2016.

Note 15 - Provisions for contingencies and charges

Reversals Expenses for for the fiscal Exercise of Amounts at Amounts at the fiscal year the December January 1 year (not provision 31 In thousands of Euros applicable) Exchange rate - - differences Risk of charge 2 102 (1) - 103 Pension obligations 3,124 311 - (61) 3,374 Total provisions for 3,126 413 (1) (61) 3,477 charges Of which allocations and

reversals - Operating 3,126 413 (1) (61) 3,477 - Financial - Extraordinary

The above provisions for pension obligations correspond to the estimated current value of the share capital equivalent to accrued future payments, depending on length of service and level of compensation when an employee retires, on the basis of the following calculation assumptions at December 31, 2013:

12.31.2013 12.31.2012

Discount rate 3.00% 2.75%

2.50% 2.50% Rate of future salary increases

Retirement age: ° Managers: 62 (voluntary retirement) ° Non-managers: 62 (voluntary retirement)

The provision entered on the balance sheet concerns only retirement payments for serving employees.

119 The following table summarizes the conditions and amounts of actuarial pension obligations at December 31, 2013 and 2012:

December 31 In thousands of Euros 2013 2012 Change in the value of commitments: Projected benefit obligation at January 1 4,481 3,170 Cost of services rendered for the year 345 262 Cost of discounting 113 150 Change in assumptions (125) 910 Reductions/terminations (288) Actuarial (gain) or loss (121) (11) Benefits paid during the year (61) - Projected benefit obligation for retirement 4,344 4,481 Unrecognized actuarial losses (970) (1,357) Unrecognized past service cost - - Total unrecognized items - - Provision for retirement 3,374 3,124

Changes in actuarial obligations recognized on the liabilities side of the balance sheet for 2013 and 2012 break down as follows:

In thousands of Euros 2013 2012 Defined benefit cost for the year: Cost of services rendered for the year 345 262 Cost of discounting 113 150 Net actuarial loss recognized in the year 54 9 Reductions/terminations (201) Cost of services and discounting 311 421

Note 16 - Accrued liabilities

In thousands of Euros December 31 Breakdown of accrued charges 2013 2012 Suppliers - accrued invoices 7,162 6,347 Accrued credit notes - - Employee-related liabilities 1,506 1,563 Social organizations 1,460 1,323 VAT on accrued income 11 12 VAT on trade receivables 16 3 Other liabilities 7 7 Total 10,162 9,255

Note 17 - Accruals

Deferred revenue and expenses relate exclusively to items recognized under operations.

Note 18 - Related party transactions

120 The table below does not include these cash items.

2013 In thousands of Euros Receivables Payables Institut Mérieux (2) - 36 Thera Conseil - 0 Transgene, Inc. - 231 Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd - - Platine Pharma Services SAS - - Transgene Tasly 114 BioMérieux S.A. - 5 BioMérieux Shanghai - 24 ElsaLys Biotech SAS 597 34 Platine 200 - Total 911 330

2013 In thousands of Euros Revenue Expenses BioMérieux S.A. (1) - 80 Thera Conseil - 25 Institut Mérieux (2) 33 1,470 BioMerieux China - - BioMérieux Shanghai - 139 Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd - - Transgene Inc. (3) - 621 Platine Pharma Services SAS - 133 Transgene Tasly. (4) 338 - Elsalys Biotech SAS 547 28 ABL - 510 Total 918 3,006 (1) Revenue corresponds to research operations, and costs to the procurement of materials and laboratory consumables and services provided. (2) Revenue corresponds to financial products, the costs correspond to the agreement for the provision of services rendered by Institut Mérieux. (3) Expenses relate to the re-invoicing of administrative and personnel expenses by Transgene Inc. (4) Revenue corresponds to the contribution in kind of TG3003 product rights and invoicing of employees.

Note 19 - Receivables and payables

More than one Receivables (in thousands of Euros) Gross amount One year or less year Other financial assets 2,687 787 1,900 Customers 1,896 1,896 - Research tax credit and tax credit for Competitiveness and Employment 33,132 7,871 25,261 Recoverable VAT and income tax 562 562 - receivables Amounts due to/from employees 54 54 - Other receivables 1,274 1,274 - Prepaid expenses 968 823 145 Total 40,573 13,267 27,306

More than one One year or year and less than More than five Gross amount Payables less or equal to five years (in thousands of Euros) years Payables 9,365 9,365 - - Pension obligations 3,374 169 1,196 2009 Accrued employee benefits and tax expense 4,970 4,970 - - Total 17,709 14,504 1,196 2,009

121 Note 20 - Income tax

20.1. Current taxes

Current taxes for 2013 include research tax credits generated over the year as well as research tax credit adjustments of €8.869 million and an accrual of a research tax credit generated in 2012.

The Company had a government grant of €32.922 million at December 31, 2013 in the form of the research tax credit. This amount can be used to offset income tax payments. The Company may be asked to repay it in cash, if it is not used, within four years of it being granted. The research tax credits can be reimbursed according to the schedule below:

In thousands of Euros Planned repayment years 2013 2012 2014 7,871 7,871 2015 7,894 7,894 2016 8,288 8,294 2017 8,869 - Total 32,922 24,059

20.2. Deferred taxes

Deferred taxes indicate a potential reduction in future tax expenses of €168.874 million, which mainly corresponds to tax-loss carryovers.

Temporary differences between accounting and taxation:

BASE TAXES Net At Net At variations December variations At January 1 in income At 31 – in income Decembe – for the January 1 receivable for the r 31 receivables fiscal year s fiscal year (payables) – revenue (payables) In thousands of Euros (expense) Provision for exchange (1) (1) (2) - - - losses Mutual aid social security 8 (2) 5 3 (1) 2 contribution Provisions for pensions and other post- 3,124 311 3,436 1,075 107 1,182 employment benefits Cost of acquired patents 23 (2) 21 8 (1) 7 not yet deducted Provision for impairment 29 435 464 10 - 10 of equity security Provisions for loss 3 - 3 1 - 1 Unrealized capital gains ------on marketable securities Translation gains or 26 (21) 5 9 (7) 2 losses Tax loss carryforwards 440,683 49,803 490,486 151,727 17,147 168,874 Total 443,895 50,523 494,418 152,833 17,245 170,078

Note 21 - Management compensation

Directors’ fees paid to members of the administrative bodies amounted to €61,000.

In 2013, the Company did not pay any compensation to TSGH and its permanent representative. In 2013, the Company paid its Chairman and Chief Executive Officer, Mr. Philippe Archinard, gross compensation of €72,200.

122 In 2013, Philippe Archinard received gross compensation of €893,900 (including €450,000 in variable compensation and €8,900 in payment in kind corresponding to the use of a company car) from Institut Mérieux, re-invoiced in part to the Company pursuant to a contract for services rendered by Institut Mérieux (see Note 18).

In 2013, the Company paid the Responsible Pharmacist, who holds the position of Deputy Chief Executive Officer, compensation totaling €125,500, including €25,500 in variable compensation.

No advances or credits were allocated to executives.

Note 22 - Off-balance sheet commitments

For the acquisition of a property located in Illkirch, in which the Company installed its main administrative and research buildings, Transgene signed a finance lease with a banking pool. This contract, which is for an amount of €15.6 million, has a term of 15 years. The quarterly rent was determined on January 1, 2009. The financing rate is indexed to the Euribor rate at 3 months. Transgene engaged in a partial interest rate hedge (Note 23.1). The Company has a purchase option on the land and buildings at the end of the financing agreement for the sum of €1.1 million.

The table below summarizes the main residual obligations of the Company under this contract:

In thousands of Euros 2013 2012 Property leasing – outstanding charges 10,759 11,852 – residual purchase price 1,094 1,094

Under the terms of the real estate financing lease for the acquisition of its administrative and research building in Illkirch (Note 23.2), Transgene has a pledge granted by Banque Populaire to Alsabail, one of the lessors, for an amount of €1.6 million. In the first six months of 2009, the Company proceeded with partial coverage of the interest rate risk related to this financing, according to the following terms:

° Nominal value: €5.9 million (depreciable) ° Hedging instrument: interest rate contract ° Residual maturity: 9 years and 9 months ° Underlying rate: 3 month Euribor ° Fixed rate: 3.46%

On April 1, 2009, Transgene signed an occupancy agreement with Lyonbiopôle for its Lyon space. This agreement, which had an initial term of three years, was renewed in 2012. The annual rent was €347,000 (including charges) in 2013.

As of May 1, 2010, Transgene has offices at the Parc d'Innovation, Illkirch. A “3/6/9” commercial lease was signed on May 1, 2010. The annual rent was €61,000 (including charges) in 2013.

123 The table below summarizes key financial commitments made by the Company:

Payments due by period From More Gross One year one to than five amount or less five years In thousands of Euros years Finance lease obligations (real estate) 10,759 1,033 4,402 5,324 Finance lease obligations (non-real estate) 205 58 147 - Other long-term obligations (reimbursable 13,802 - - 13,802 advances) Total 24,766 1,091 4,549 19,126

Under licensing or option agreements, third parties, including Novartis, have promised to make milestone payments or pay royalties to the Company that are dependent upon future events whose probability was uncertain as of the balance sheet date. The Company has promised, with respect to a number of third parties, to pay royalties or milestone payments under collaboration or licensing agreements that are dependent upon future events whose realization was uncertain as of the balance sheet date.

The volume of accumulated training hours corresponding to rights acquired under the Individual Right to Training (DIF) was 24,155 hours at December 31, 2013 (based on hours approved on January 1, 2014). At December 31, 2013, the market value of the instrument amounted to €100,000.

The Company has not made any material commitment (guarantees, collateral, etc.).

Note 23 - Employees

At December 31, 2013, the Company had 287 employees, compared with 299 at December 31, 2012.

Men Women Total Managers 66 101 167 Other grades 28 92 120 Total 94 193 287

Employee benefits expense (salaries, payroll taxes, pension costs and related expenses) for 2012 and 2013 totaled €21.205 million and €21.588 million, respectively.

Note 24 - Identity of the consolidating company

The Company’s financial statements were fully consolidated by Compagnie Mérieux Alliance, 17 rue Bourgelat, 69002 Lyon.

Note 25 - Subsequent Events

On February 28, 2014, Transgene announced the launch of a capital increase with retention of subscription rights, amounting to €45.5 million through the issuance of 4,500,000 new shares at a price of €10. The transaction was followed by a private placement of 2,000,000 new shares. These transactions were not completed at the balance sheet date by the Board of Directors of the Company on March 24, 2014. Both of these transactions raised a total of €65.5 million.

On March 18, 2014, the Company announced the completion of the acquisition of its partner for Pexa-

124 Vec, the U.S. company Jennerex, Inc., by SillaJen, Inc., a Korean biotech company. Transgene sold to SillaJen, Inc. its interest of approximately 8.5% of the capital of Jennerex, Inc. on a fully diluted basis. The development and marketing agreement for the oncolytic virotherapy product Pexa-Vec between Transgene and Jennerex, now a wholly-owned subsidiary of SillaJen, Inc., is not impacted by this operation. Under the terms of the agreement, the sale price for the portion going to Transgene breaks down as follows:

- An initial payment of USD 3.8 million (USD 3.2 million net of fees and sequestration of a portion of the sale price) at the close of the transaction, which was recorded in the first half of 2014; - Payments based on the achievement of clinical and regulatory milestones, up to nearly USD 9 million.

Note 26 - Premiums and reserves

The distribution options offered by the accumulated premiums and reserves were as follows:

Reimbursable or available for Not available for In thousands of Euros Total distribution distribution Premiums 424,775 424,775 - Legal reserve 247 - 247 Unavailable reserve 307 - 307 Total 425,329 424,775 554

125 Note 27 - Table of subsidiaries and ownership:

(In local currency) Carrying amount of securities held Loans and Amount of Income (in EUR) advances Sales before Dividends Proportion guarantees (profits or Financial Share capital granted by the tax for the cashed of capital and losses for the Information Capital other than Company not previous during the Comments held undertakings previous fiscal capital Gross Net yet fiscal year fiscal (as a %) given by the year) reimbursed year Company

Transgene Inc. 5510 Nicholson Lane USD 30,000 – 100% 23,114 23,114 None None None - None – Kensington, Maryland 20895 -1078 USA Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd RMB 7,206,186 RMB 3,576,485 100% 875,000 440,000 None None None RMB 2,100,532 None - Rm 317,379 Bao Tun Lu, Shanghai 200011,China Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. Chenhuan Tower, Tianjin RMB 85,000,000 RMB 7,034,222 50% ,,5,210,821 5,210,821 None None None RMB 5,952,276 None - Medicine and Medical equipment indus.parc, Sas ElsaLys Biotech* 321 avenue Jean Jaurès – EUR 77,148 EUR 295,287 37% 500,724 500,724 None None EUR 50,454 EUR (649,015) None - 69007 LYON Platine SAS* 321 avenue Jean Jaurès – EUR 1,752,300 EUR (1,980,124) 33.26% 992,334 992,334 EUR 200,000 None EUR 1,324,726 EUR (1,211,697) None - Bâtiment Domilyon - Gerland 69007 LYON * Figures from accounts unaudited to date.

126 Statutory Auditors’ general report on the annual financial statements of Transgene SA

COMMISSARIAT CONTROLE AUDIT ERNST & YOUNG et Autres 112, rue Garibaldi 1/2, place des Saisons 69006 Lyon 92400 Courbevoie - Paris-La Défense 1 S.A.S. à capital variable

Statutory Auditors Statutory Auditors Member of the Compagnie Member of the Compagnie Régionale de Lyon Régionale de Versailles

Transgene Fiscal year ended December 31, 2013

Statutory Auditors’ Report on the annual financial statements

Dear Shareholders,

In compliance with the mission entrusted to us by your General Meeting, we hereby present our report for the year ended December 31, 2013, on:

- the auditing of Transgene’s annual financial statements, as attached to this report; - the justification for our assessments; - the specific verifications and information required by Law.

The annual financial statements were approved by the Board of Directors. Our role is to express an opinion on these financial statements based on our audit.

I. Opinion on the annual financial statements

We conducted our audit in accordance with the professional standards applicable in France. Those standards require that we plan and perform the audit in order to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the annual financial statements. It also consists of assessing the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We certify that the annual financial statements, under the terms of the significant accounting policies and rules applicable in France, present a true and fair view of the results of operations for the year ended as well as the Company’s financial position and assets at the end of this fiscal year.

II. Justification of our assessments

In accordance with the requirements of Article L. 823-9 of the French Commercial Code relating to the justification of our assessments, we draw your attention to the following matters:

- Note 1.9 to the consolidated financial statements describes the accounting rules and methods relating to the treatment of research and development costs. In the context of our assessment of the accounting policies and rules followed by your company, we have verified the appropriateness of the accounting methods referred to above and we are satisfied that they have been applied correctly.

- The equity securities listed in your company balance sheets are valued as described in Note 1.11 to the annual financial statements. Our work consisted of assessing the data and assumptions on which these estimates are based. We verified that Note 12 to the annual financial statements provides appropriate information.

The assessments were made in the context of our audit of the annual financial statements, taken as a whole, and therefore contributed to the formation of the unqualified opinion expressed in the first part of this report.

127 III. Specific verifications and information

We also performed specific verifications provided by law in accordance with professional standards applicable in France.

We have no matters to report concerning the fairness or consistency with the annual financial statements of the information given in the Board’s management report and in the documents sent to shareholders on the financial position and the annual financial statements.

With regard to the information provided, pursuant to the terms of Article L. 225-102-1 of the French Commercial Code on compensation and benefits paid to corporate executives and undertakings made in their favor, we have verified consistency thereof with the statements or data used to prepare these statements and, if applicable, the items collected by your company from companies controlling your company or that are controlled by it. On the basis of this work, we certify the accuracy and fairness of this information.

In accordance with French law, we are satisfied that the various information relating to the interests and identity of the holders of the share capital and voting rights has been provided to you in the management report.

Lyon, April 15, 2014

Statutory Auditors

COMMISSARIAT CONTROLE AUDIT ERNST & YOUNG et Autres Hubert de Rocquigny du Fayel Marc-André Audisio

128

20.2. Pro forma financial information

None.

20.3. Financial statements

See Note 20.

20.4. Verification of annual financial information

See Note 20.

20.5. Date of latest financial information

December 31, 2013 and June 30, 2013.

20.6. Interim financial information

None.

20.7. Dividend policy

The Company has not distributed a dividend since its formation. In the coming years, it plans to use all available funds to finance the business and future growth.

20.8. Legal and arbitration proceedings

In the normal course of business, the Company is involved or may be involved in a number of administrative or judicial proceedings. As part of some of these proceedings, financial claims are or may be made against the Company.

Two proceedings have been brought by employees against the Company before the Arbitration Tribunal of Strasbourg, under which the Company recorded a total provision of about €100,000. Otherwise, there are to date, to the knowledge of the Company, no exceptional act or governmental, legal or arbitration proceedings (including any proceedings of which the Company is aware or are pending or threatened) that may have or have had, in the last twelve months, significant effects on the financial position or profitability of the Company and/or Group.

20.9. Significant change in the Company’s financial or trading position

On March 25, 2014, the Company announced that a total of €65.5 million was raised via a capital increase in two steps:

- a capital increase with subscription rights launched on February 28, 2014, which raised gross revenue of €45.5 million and resulted in the issuance of 4,553,551 shares. All 4,553,551 new shares were subscribed by shareholders and purchasers of subscription rights. The exercise of subscription rights on an irreducible basis affected 4,378,903 shares. The remaining shares were subscribed on a reducible basis. Institut Mérieux, through its subsidiary TSGH, exercised all of its irreducible subscription rights (2,482,574 shares for a total amount of €24,825,740);

- a private placement completed on March 24, 2014, to respond positively to requests by a number of qualified investors, many of whom were foreign, for 2,000,000 additional shares acquired at a price of €10 per share, which raised €20 million. The private placement was made pursuant to Article L. 225-136 of the Commercial Code and the Twelfth Resolution of the Shareholders’ Meeting of June 19, 2013, with investors as defined in Article L. 411-2 II of the Monetary and Financial Code (qualified investors and/or accredited investors acting on their own behalf) in France and outside France, including the United States.

129

21. ADDITIONAL INFORMATION

21.1. Share capital

21.1.1. Issued capital

€87,964,029.39, fully paid at the date of this Reference Document.

21.1.1.1. Number of shares issued

38,444,106 shares, all of the same category and all fully paid. No unpaid shares have been issued. The share has no par value.

21.1.2. Shares not representing capital

None.

The Company has no knowledge of pledges or other security interests related to its shares at March 31, 2014.

21.1.3. Shares held either by the Company itself, on its behalf or by its subsidiaries

None.

21.1.4. Convertible securities, exchangeable securities or securities with warrants

None.

21.1.5. Conditions governing any acquisition rights and/or obligations attached to subscribed but not paid-in capital or an undertaking to increase the capital

Capital Authorized and Not Issued

On March 31, 2014, the number of shares that may be issued because of stock options distributed (1,275,347 – figure adjusted from figure for the end of 2013 due to the mandatory adjustment in volume and price of options following a capital increase, with subscription rights by shareholders to guarantee that recipients of options have rights equivalent to their prior rights) and bonus shares attributed (129,250) totaled 1,404,597, representing approximately 3.5% of Company capital on a fully diluted basis (39,848,703 shares).

The Extraordinary General Meeting of June 19, 2013 granted the Board of Directors the following delegations of authority each under a separate resolution:

Maximum amount of Nature of the delegation granted Amount used by the Board delegation and expiration date Authorization to increase the share 20% of share capital with a 2,000,000 new shares issued capital of the Company in favor of price not less than the average on March 24, 2014 at a price qualified investors or investors who price of three trading sessions of €10, or 6% of capital belong to a small circle of investors with with a maximum discount of cancellation of their preemptive 5% subscription rights to their benefit 10% of share capital in the event of a price with maximum discount of 20%

Expiration: Annual General Meeting called to approve the financial statements for fiscal year 2013 Free allocation of shares in the 100,000 existing or new shares None Company to employees of the Company to be issued and the group, with cancellation of subscription rights Expiration: August 19, 2016

130 The Extraordinary General Meeting of June 21, 2012 granted the Board of Directors the following delegations of authority, each under a separate resolution:

Maximum amount of Nature of the delegation granted Amount used by the Board delegation and expiration date Capital increase with shareholders’ 15 million shares in one or more Issue of preemptive subscription rights tranches 4,553,551 shares through a capital increase with Expiration: August 21, 2014 preferential subscription rights in March 2014 Capital increase with cancellation of 11.1 million shares in one or None shareholders’ preemptive subscription more tranches (included in the rights ceiling of 15 million shares)

Expiration: August 21, 2014 Determination of issue price of shares in 10% of the capital per year None the event of cancellation of preferential subscription rights in accordance with Expiration: August 21, 2014 Article L. 225-136 1° para. 2 of the Commercial Code Capital increase with cancellation of 10% of the company capital None preemptive subscription rights to compensate the contribution of Expiration: August 21, 2014 securities, in the case of an exchange offer or contribution in kind applicable to corporate securities

21.1.6. Information about the capital of any member of the group which is under option or agreed conditionally or unconditionally to be put under option

None.

21.1.7. Changes to Share Capital:

Capital Evolution over the Past Three Years

Issue Total Fiscal Type of Number of Capital premium Total share Total capital number of year transaction shares increase € per share premiums € € shares € 2011 Capital increase (1) 13,232 30,276 6.59 87,186,77 72,523,405 31,695,882 2012 Capital increase (2) 71,550 163,714 - 72,687,119 31,767,432 2012 Capital increase (3) 87,058 199,198 6.04 525,914,63 72,886,317 31,854,490 2013 Capital increase (4) 9,600 21,965 - - 72,908,282 31,864,090 2013 Capital increase (5) 10,768 24,638 6.54 45,784,44 72,932,920 31,874,858 2014 Capital increase (6) 15,697 35,916,33 5.02 78,934,08 72,968,836,33 31,890,555 2014 Capital increase (6) 6,553,551 14,995,192,04, 7,71189817 50,540,317,96 87,964,029,39 38,444,106 (1) Capital increase in 2011 through exercise of stock options (2) Capital increase in 2012 through allocation of shares to company employees (3) Capital increase in 2012 through exercise of stock options during the fiscal year (4) Capital increase in 2013 through allocation of shares to company employees (5) Capital increase in 2013 through exercise of stock options during the fiscal year (6) Capital increase in 2014 through exercise of stock options in February 2014 (7) Capital increase in 2014 through issuance of new shares.

Change in shareholding over the last three years (see Section 18.1. “Name of any person not a member of an administrative or management body directly or indirectly holding more than 5% (statutory and legal reporting threshold) of the Company’s capital or voting rights”)

131 21.2. Articles of incorporation and statutes

21.2.1. Corporate Purpose (Article 2 of the Statutes)

The Company’s purpose, both in France and abroad, for its own account and that of third parties, is as follows:

- All research, development, development studies for production and commercialization processes, pre- clinical and clinical development, product manufacturing and commercialization of all products and processes in the bio-industry, biotechnology and, more specifically, genetic engineering fields, in particular to research, develop and use drugs for human and veterinary medicine and, more generally, all sciences and techniques that may contribute to the development of these products and processes;

- The creation, acquisition by all means, and use in all forms, of all companies directly or indirectly related to these activities, as well as equity participation by any means in said companies;

- And, more generally, all commercial, industrial, property, asset, security and financial transactions that may directly or indirectly relate to the above purpose or may assist the realization, extension or development thereof.

21.2.2. Company management

Board of Directors (excerpts and summaries from the relevant Statute Articles and regulations)

The Company is managed by a Board of Directors composed of at least three members and at most fifteen members who are chosen from among the shareholders and elected at the general meeting.

The directors are appointed for a period of three years. Their directorship ends at the end of the ordinary general meeting approving the financial statements for the prior year, which is held during the year in which their term expires. The Board ensures that the number of terms expiring is as regular as possible each year.

Directors may be re-elected; they may be revoked at any time at the general meeting. Should one or more directorships be vacant, the Board may, under conditions defined by law, proceed with the co-opting of nominations as a temporary measure; a director thus appointed only sits as a director for the time that remains on his predecessor’s mandate; the nomination must be ratified at the next general meeting.

During the period of his mandate, each director must own at least one of the Company’s shares.

The Board of Directors elects, among its individual members, a Chairman and potentially one or more Vice- Chairmen and defines the length of chairmanship or vice-chairmanship, which must not exceed the period of directorship or the time remaining from nomination, until the end of the ordinary general meeting to approve the financial statements for the fiscal year during which the individual turns 67 years of age.

However, the Board may under exceptional circumstancesextend the period, fiscal year by fiscal year, as long as this extension does not exceed two fiscal years.

Should the Chairman be absent or detained, the Board designates a session Chair among the Vice-Chairmen, failing which, among the directors.

The Board may also appoint a Secretary, who may or may not be a shareholder.

The Board of Directors proceeds with the controls and verifications it deems appropriate. Directors receive all of the information required to accomplish their mission and may request any document they consider useful. The Chairman of the Board represents the Board of Directors. He organizes and directs its work and reports back to the general meeting. He ensures the proper operations of the Company’s bodies, and, specifically, that the directors are capable of fulfilling their duties.

Subject to the powers that the law specifically grants shareholder meetings, as well as the special powers it reserves for boards of directors, and within the limits of the corporate purpose, they are invested with the broadest powers to act in the name of the Company in any circumstance.

Any limitation of their powers by a decision of the Board of Directors cannot be enforced against third parties.

Subject to the terms of the paragraphs above, the Board of Directors may delegate to one or more of its members

132 or third parties, whether or not they are shareholders, any type of specific mandate for one or more specific objects, under conditions it defines, with or without potential substitution, to proceed with all studies and inquiries. When this occurs, the Board defines compensation, both fixed and proportional. If a director is granted a remunerated mandate, the terms of Articles L. 225-38 and following of the Commercial Code apply.

If the Board of Directors decides to separate the roles of president and chief executive officer, subject to the powers that the law expressly attributes to shareholder meetings and the power it specifically reserves for the board of directors, and within the scope of its corporate purpose, the chief executive officer is invested with the broadest power to act in the name of the company in any circumstance and to represent it in its relations with third parties.

On the recommendation of the chief executive officer, the Board of Directors may appoint one or more individuals to assist the chief executive officer, with the title of deputy chief executive officer.

The number of deputy chief executive officers shall not exceed five.

If they are directors, the mandates of the chief executive officer and deputy chief executive officer shall not exceed the period of their directorship.

Compensation of the Chairman of the Board of Directors, the chief executive officer and, if applicable, the deputy chief executive officers, are defined by the Board of Directors and may be fixed or fixed and variable.

Pursuant to Article L. 225-39 of the Commercial Code, agreements between the company and a director, the Chairman of the Board or the chief executive officer entered into in normal conditions must be communicated by the relevant party to the Chairman of the Board of Directors. The list and object of said agreements are communicated by the Chairman to the members of the Board of Directors and statutory auditors. Shareholders are entitled to be informed of the list and the object of these common agreements.

All means may be used to call directors to the Board of Director meetings, even by oral notice. The Board’s rule of procedure may provide for the adoption of resolutions by electronic means.

Deliberations take place in quorum and majority conditions set out by law. In the case of a split vote, that of the meeting Chair prevails.

A director may give his power of attorney to another director to represent him at a meeting of the Board of Directors.

Minutes are prepared and copies and excerpts of deliberations are issued and certified as defined by law.

The Responsible Pharmacist, registered in Table “B” of the Order and whose diploma has been registered on behalf of the Company, is responsible for the Company’s compliance with the rules imposed by law and the regulations governing the exercise of the pharmacist’s profession.

The Responsible Pharmacist is endowed by law with all powers required to ensure direct contact with all competent authorities or bodies to constitute all files, solicit approvals or authorizations, control raw materials and authorize their use, freely access laboratories and supervise manufacturing, and has the sole authority to authorize the use and commercialization of finished products; furthermore, the Responsible Pharmacist approves the hiring of pharmacists and other technical department heads called upon to exercise their profession within the company.

Should a conflict arise between the Chairman and Responsible Pharmacist, the Board of Directors shall arbitrate, but has no power to impose a decision contrary to legal or regulatory provisions and may engage the Pharmacist’s liability.

21.2.3. Share classes

Only one class of shares exists. Each share gives right to a proportional share of the proportion of capital it represents of the ownership of corporate assets, share of profits and dividends.

21.2.4. Shareholder rights

Shareholder rights may only be modified, as provided by law, by an extraordinary general meeting subject to the quorum and majority rules imposed by the Commercial Code. There is no more restrictive term in the statutes.

133 The company capital may be changed pursuant to the terms of the law.

21.2.5. General meetings (Article 21 of the Statutes)

General meetings are called and deliberate pursuant to the terms of the law. The meetings take place either at the registered office, or at another location specified in the notice of meeting.

Pursuant to Article R.225-85 of the Commercial Code, the right to participate in general meetings is justified by the entry into the accounts of securities in the name of the shareholder, or the intermediary registered on their behalf, on the third business day prior to the meeting, at midnight, Paris time, either in the registered shareholder account held on behalf of the Company by its authorized agent, Société Générale, or in the bearer shareholder account held by the accredited financial intermediary who keeps the share account.

The posting of securities in the bearer shareholder account held by the accredited financial intermediary who keeps the share account is registered by a certificate delivered by the accredited financial intermediary (or by e-mail, under the conditions stipulated in Article R.225-61 of the Commercial Code) attached to:

- the voting by correspondence form; - the proxy vote; - the admission card application in the shareholder’s name or on behalf of the shareholder represented by registered intermediary.

A shareholder may be represented by another shareholder or by his or her spouse, or any other person (natural or legal) of his or her choice under the conditions prescribed by Article L.225-106 of the Commercial Code. The Chairman of the Board of Directors chairs the meeting or, in his or her absence, a Vice-Chairman or a director specifically empowered to this end by the Board, failing which the meeting elects its own chair. Minutes are prepared and copies certified and delivered pursuant to the terms of the law.

A double voting right in favor of shares registered in the name of the same person for at least three years was adopted at the extraordinary general meeting of June 9, 2004 and has been included in the statutes (Article 8).

21.2.6. Provisions having the effect of delaying, deferring or preventing a change of control

None.

21.2.7. Ownership thresholds (Article 7 of the Statutes)

Any individual or entity, acting alone or with others, and who acquires in any fashion whatsoever, within the meaning of Articles L. 233-14 et seq. of the Commercial Code, a number of securities that immediately or in the future represent a fraction at least equal to 5% of the capital and/or voting rights at the meetings, or any multiple of said percentage, even if said multiple exceeds the legal limit of 5%, must inform the Company of the total number of securities he/she/it possesses by registered letter with acknowledgment of receipt sent to the company’s head office within a period of fifteen days from the day the threshold was met or exceeded, or by any other similar means for security holders residing outside of France.

This information duty applies in the same conditions as those set out above each time the proportion of company capital and/or voting rights held falls below the threshold referred to above.

In a case of non-compliance with the above stipulations, the shares that exceed the threshold and give rise to a declaration shall be deprived of their voting right if same is requested by one or more shareholders possessing together or separately at least 5% of the capital and/or voting rights in the Company, pursuant to the conditions set out in Article L. 233-7, last paragraph, of the Commercial Code. In the case of an adjustment, the related voting rights may not be exercised until the expiration of the period provided by the law or regulations in effect.

21.2.8. Conditions imposed by the articles of incorporation and statutes, a charter or regulation, that govern changes in capital when said conditions are stricter than legal provisions

None: no such terms exist for the Company.

134

22. MATERIAL CONTRACTS

Consortium agreement in the context of the ADNA (Advanced Diagnostics for New Therapeutic Approaches) project

Transgene is a partner in a research program run by Institut Mérieux, which brings together bioMérieux, Transgene, Genosafe and the Genethon Association, whose aim is to develop a new generation of diagnostics and therapies that focus on cancers and infectious and genetic diseases. This program is called “ADNA” (Advanced Diagnostics for New Therapeutic Approaches). It is supported by the Agence de l’Innovation Industrielle, which merged with OSEO in 2007 and became BPI in 2013.

In this context, Transgene will receive grants and repayable grants of up to €8.3 million and €15.9 million, respectively, over the program period, from 2008 to 2017. If successful, as defined by the launch of a supported product and achieving minimum revenues, Transgene would have to reimburse, under certain conditions, the repayable grant in installments, and then may have to pay an incentive (1.75% of the revenue) for a predefined period. The aid agreement was endorsed by the European authorities on October 22, 2008.

Option license agreement with Novartis

In March 2010, Transgene granted Novartis an exclusive worldwide option license for TG4010 (MVA-MUC1-IL2) rights and received a non-refundable amount of $10 million in return. Transgene is eligible to receive payments up to a total of €700 million if Novartis exercises the option and subject to the achievement of development, regulatory authorization and worldwide sales threshold milestones.

Transgene will finance and keep control over the first part (Phase 2b) of the next stage of the product’s clinical development. This stage consists of a global Phase 2b/3 clinical study to obtain authorization to market the product. This study is in progress at the date of this Reference Document. The first results of the Phase 2b part of the study were announced on January 8, 2014. Pursuant to the option agreement, Novartis has 90 days from the date these results are available to exercise its option.

If the option is exercised:

- Novartis shall finance all of the development, regulatory and commercial launch costs for TG4010 for all indications; - Transgene shall receive a non-refundable amount related to the grant of the license to Novartis, then payments related to the achievement of development, regulatory authorization and worldwide sales threshold milestones; - Transgene shall also receive royalties on worldwide sales; - Transgene shall preserve co-marketing rights for certain countries, including France and China; - Transgene shall provide Novartis with the TG4010 batches required for clinical studies and commercialization.

Collaboration agreement with Ventana Medical Systems (“Ventana”)

In June 2010, Transgene signed a collaboration agreement with Ventana for the development by Ventana of an immunohistochemistry (IHC) diagnostic to identify tumor cells expressing MUC1 (“MUC1 Test”).

The development of this MUC1 Test, which will be used initially to select TG4010 patients and ultimately be added to the NK Test, is funded by Transgene. Ventana will be responsible in particular for providing MUC1 Tests for the TG4010 Phase 3 pivotal trial.

In the event of positive results at the end of the clinical development of TG4010, a marketing authorization application will be filed by Transgene or its licensee, and at the same time, Ventana will file an application for special authorization in the United States for in vitro diagnostics for the related MUC1 IHC test (Pre-Market Approval for a Class III IVD Device, a procedure required for tests associated with the selection of patients eligible for a treatment). Once regulatory approvals are obtained, the MUC1 Test would be used by physicians to identify patients likely to be treated with TG4010.

The terms for the marketing and promotion of the MUC1 Test with TG4010 are being negotiated between the parties at the date of this Reference Document.

135 Licensing agreement with Jennerex, Inc. (“Jennerex”)

In August 2010, Transgene and Jennerex entered into an exclusive partnership agreement for the development and marketing in Europe, the Commonwealth of Independent States (CIS) and the Middle East of the oncolytic virus, Pexa-Vec, from Jennerex for the treatment of solid tumors.

Under the terms of this agreement, Transgene obtained exclusive rights to develop and market Pexa-Vec in Europe, the CIS and the Middle East, as well as manufacturing rights for its territories.

As part of the overall Pexa-Vec development plan, Transgene and Jennerex will co-develop the product worldwide, with Transgene assuming (a) the costs of development and clinical costs in its exclusive territories and (b) the responsibility for marketing with production rights in its territories. As part of this partnership agreement, Transgene made an investment in the capital of Jennerex.

Under the terms of the agreement, Transgene is required to pay Jennerex up to $116 million for the achievement of development and regulatory milestones, as well as royalties on sales of Pexa-Vec by Transgene and its sub- licensees. Jennerex also has an option to co-promote the product in the five major European countries in the exclusive territory of Transgene.

The development plan will initially focus on the treatment of hepatocellular carcinoma (HCC), first and second line, and colorectal cancer. Transgene and Jennerex intend to launch a large controlled Phase 2b/3 clinical program in patients suffering from hepatocellular carcinoma. A Phase 2 study in patients with refractory colorectal cancer or who are intolerant to Erbitux® is also scheduled.

The agreement to develop and market Pexa-Vec for oncolytic virotherapy between Transgene and Jennerex, Inc., now a wholly-owned subsidiary of SillaJen, Inc., remains unchanged, and the partners are collaborating on the development plan for the program.

Development agreement with Laboratory Corporation of America Holdings (“LabCorp”)

In July 2011, Transgene and LabCorp entered into a framework agreement on the development of a companion diagnostic test, which will be available and used in reference laboratories, for measuring activated NK cells for selecting patients for treatment with TG4010.

Transgene is financing the various stages of development and implementation of the test in reference laboratories by entering into contracts implementing the framework agreement.

Under the terms of this agreement, the parties must agree on the terms of marketing by LabCorp of the services of reference laboratories that will market the services using the NK Test, against payment of royalties to Transgene.

Collaboration and Licensing Agreement with VIVALIS

In July 2011, Transgene and Vivalis signed a collaboration and commercial licensing agreement for the development of a production process using the Vivalis EB66 ® cell line, suitable for the production of Transgene MVA therapeutic vaccines.

As part of this agreement, Transgene made an initial payment to Vivalis and could be required to make milestone payments at certain stages of clinical development and pay royalties related to sales of Transgene products made from Vivalis EB66 ®. Vivalis will also receive income related to GMP manufacturing of initial clinical batches.

Collaboration agreement with EORTC

Transgene and the cooperative cancer research group EORTC (European Organization for Research and Treatment of Cancer) signed a letter of intent in November 2012 to conduct a randomized Phase 2b clinical trial evaluating TG4001 plus chemotherapy in patients with loco-regional oropharyngeal cancer caused by infection with the human papilloma virus. The trial is to be run by the EORTC.

Agreement with SANOFI

In March 2013, Transgene announced the signing of a collaboration agreement for the creation of a new advanced platform dedicated to the manufacturing of immunotherapy products, including Transgene therapeutic products. The platform will be built on the Genzyme Polyclonals site in Lyon, in the Gerland district, with an

136 investment of €10 million, funded equally by Sanofi and Transgene . The platform will remain the exclusive property of Sanofi.

Sanofi and Genzyme will act as Transgene’s Contract Manufacturing Organization (CMO) to manufacture clinical and commercial batches of drug substance for Transgene’s immunotherapy products, including its MVA therapeutic vaccines 11 . Transgene will be a preferred customer of the commercial manufacturing platform for 15 years.

Construction, certification and approval of the manufacturing site began in January 2014 and should be completed in the first quarter of 2015. The first batches of commercial products should be available in 2015. Transgene plans to submit its first Biologics Licensing Application (BLA 12 ) in 2016.

License agreement with ASCEND

In July 2013, Transgene granted Ascend BioPharmaceutical (“Ascend”), a new biotechnology company based in Australia, a license for the immunotherapy product TG1042 to treat a common form of skin cancer, basal cell carcinoma (BCC), and two other cancer indications, with Transgene retaining rights to other potential indications.

TG1042 was previously licensed to another Australian company, Virax Holding Ltd. Transgene recovered full rights to it in 2012, following that company’s entry into receivership.

Agreement with EMERGENT

In October 2013, Transgene announced that its new immunotherapy program in tuberculosis would receive funding of $5 million of the U.S. National Institutes of Allergy and Infectious Diseases (NIAID, part of the U.S. National Institutes of Health or NIH 13 ) granted by the latter to Emergent BioSolutions Inc. (NYSE:EBS).

As part of this funding, Transgene has entered into a cooperation agreement with Emergent BioSolutions for the development of a method of cell line production and manufacturing for the anti-tuberculosis immunotherapy product that Transgene has chosen to develop.

Transgene retains all rights associated with the development and marketing of candidates generated by this program funded by the NIAID.

11 MVA = modified vaccinia virus Ankara. MVA is a modified vaccinia virus used as vectors in the production of recombinant proteins. It is widely regarded as the prime vaccinia virus strain for clinical research because of its excellent safety profile. 12 BLA = Biologics Licence Application . 13 The project described is supported by award No. R01AI098911 from the National Institutes of Allergy and Infectious Diseases (NIAID) of the National Institutes of Health (NIH). Transgene is solely responsible for the content of this communication, which does not necessarily represent the official view of the NIH.

137

23. THIRD PARTY INFORMATION, STATEMENTS BY EXPERTS AND DECLARATIONS OF INTEREST

None.

138

24. DOCUMENTS ON DISPLAY

Throughout the validity period of this Reference Document, the following documents may be consulted:

- The corporate statutes: - All the reports, correspondence and other documents, background financial information, evaluations and declarations prepared by experts at the Company’s request, a portion of which is included or referred to in the registration document; - The Company’s background financial information and that of its subsidiary for each of the two fiscal years preceding the publication of the Reference Document; - The Board’s rules of procedure.

These documents are available at: www.transgene.fr or from Stéphane Boissel, Chief Financial Officer.

139 25. INFORMATION ON SHARE HOLDINGS

Table of subsidiaries and ownership: (In local currency)

Loans and advances Amount of Income (profits or Proportion Carrying amount of securities held Sales before tax Financial granted by the guarantees and losses for the Dividends cashed Share capital of capital (in EUR) for the previous Information Capital Company not yet undertakings given previous fiscal during the fiscal Comments other than capital held fiscal year reimbursed by the Company year) year (%) Gross Net

Transgene Inc. 5510 Nicholson Lane USD 30,000 – 100% 23,114 23,114 None None None - None – Kensington, Maryland 20895 -1078 USA Transgene Biopharmaceutical Technology (Shanghai) Co. RMB 7,206,186 RMB 3,576,485 100% 875,000 440,000 None None None RMB 2,100,532 None - Ltd Rm 317,379 Bao Tun Lu, Shanghai 200011,China Transgene Tasly (Tianjin) Biopharmaceutical Co. Ltd. Chenhuan Tower, Tianjin RMB 85,000,000 RMB 7,034,222 50% 5,210,821 5,210,821 None None None RMB 5,952,276 None - Medicine and Medical equipment indus.parc, Sas ElsaLys Biotech* 321 avenue Jean Jaurès – EUR 77,148 EUR 295,287 37% 500,724 500,724 None None EUR 50,454 EUR (649,015) None - 69007 LYON Platine SAS, 321 avenue Jean Jaurès – Bâtiment Domilyon - EUR 1,752,300 EUR (1,980,124) 33.26% 992,334 992,334 EUR 200,000 None EUR 1,324,726 EUR (1,211,697) None - Gerland 69007 LYON * Figures from accounts not audited to date.

140 26. ADDITIONAL INFORMATION

26.1. Auditors’ fees

Ernst & Young et Autres C.C.A. Amount Amount In thousands of Euros % % (before tax) (before tax) 2013 2012 2013 2012 2013 2012 2013 2012

Audit − Statutory Auditors, certification, examination of

individual and consolidated financial statements ° Issuer 60.1 58.3 66.7% 27.3% 21.1 20.5 100% 65% ° Fullyconsolidate ------d subsidiaries − Other due diligence and services directly related to the audit ° Issuer 30.0 155.2 33.3% 72.7% - 11.0 - 35% ° Fullyconsolidate d subsidiaries ------

Sub-total 90.1 213.5 100% 100% 21.1 31.5 100% 100%

Other services provided by networks to fullyconsolidated subsidiaries − Legal, tax and social ------− Other (to be specified if > 10% of the audit ------fees)

Sub-total ------

Total 90.1 213.5 100% 100% 21.1 31.5 100% 100%

141

27. Board of Directors’ management report for fiscal year 2013

NOTA BENE: this report is supplemented by references to certain sections of this Reference Document, which was filed with the Autorité des Marchés Financiers on April 17, 2014 and can be viewed on the AMF (www.amf-france.org) and Transgene (www.transgene.fr) websites.

TRANSGENE S.A.

MANAGEMENT REPORT

for the fiscal year ended December 31, 2013

Ladies and Gentlemen,

We have called this Ordinary General Meeting to rule on the financial statements for the fiscal year ended December 31, 2013 and sundry other resolutions.

This management report, as well as its compulsory statements, gives an overview of our Company’s activities during the course of the last fiscal year, summarizes the highlights, analyses the financial statements and formulates the prospects for the 2014 fiscal year.

The year 2013 and the beginning of 2014 were marked by the announcement of significant data for each of our products in development, as well as the strengthening of our equity, which now allows us to have a cash flow of €100 million. This news is summarized below:

• TG4010

On January 8, 2014, the Company announced major preliminary results from the Phase IIb part of the TIME study, a PPhase 2b/3 trial evaluating TG4010 in combination with chemotherapy in lung cancer. TG4010 is the Company’s most advanced drug development candidate. Novartis has an exclusive option to license the program. Overall, these results support the use of a predictive biomarker based on TrPAL cells. Based on these results, the initiation of the Phase 3 part of the trial is planned. Novartis has been sent the results, will form the basis for Novartis’ decision whether or not to exercise its option within 90 days.

• Pexa-Vec

Development of Pexa-Vec:

Several clinical studies have been conducted with this product, both in patients with advanced liver cancer and in patients with treatment failure after whose treatment has failed following treatment with sorafenib (Nexavar®), including the Phase 2b “TRAVERSE” study. On September 3, 2013, the Company announced that the main objective of the TRAVERSE study had not been reached. However, Pexa-Vec was generally well tolerated, with an adverse event profile in line with that of previous Pexa-Vec studies in patients with advanced liver cancer (hepatocellular carcinoma, or HCC). Product development will be pursued only in the first-line treatment of patients with advanced liver cancer. On February 25, 2014, the Company announced the preparation of a Phase Ib/II study with Pexa-Vec. This study will be part of a program funded by INCa (French National Cancer Institute).

Interest in Jennerex, Inc. the company developing Pexa-Vec:

On November 26, 2013, the Company announced its support for the proposed acquisition of Jennerex, Inc. by the Korean company SillaJen, Inc. This support was demonstrated by the commitment of the Company to contribute its 8.5% interest in Jennerex, Inc. to the transaction and its acceptance of the terms of the definitive merger agreement between SillaJen, Inc. and Jennerex, Inc. Since the responsibilities of Jennerex, Inc. are being transferred to SillaJen, Inc., this transaction does not affect the Pexa-Vec development and marketing agreement between the Company and Jennerex, Inc.

142 • TG4040

On April 29, 2013, in conjunction with the 2013 conference of the EASL (European Association for the Study of the Liver) held in Amsterdam, the Netherlands, the Company announced the final data from the PPhase 2 “HCVac” trial with its TG4040 immunotherapy in the treatment of chronic hepatitis C genotype 1. Although the results of the study were satisfactory, recent treatment developments in the field of chronic hepatitis C are causing the Company to review and assess options for the future clinical development of TG4040.

• TG1050

On November 5, 2013, the Company presented preclinical data on the candidate TG1050, a targeted immunotherapy for the treatment of chronic hepatitis B, at the 64th Annual Meeting of the American Association for the Study of Liver Diseases (AASLD) in Washington DC, USA, and during the 2013 International Meeting on Molecular Biology of Hepatitis B Viruses held in Shanghai, China. The preclinical data presented by the Company demonstrate, in addition to antiviral activity, the capacity of TG1050 to induce a robust, broad and durable response and cross-reactive T lymphocytes, with characteristics similar to those observed in patients who spontaneously eliminate infection. Pharmaceutical development and preparation of toxicity studies are currently underway. Transgene expects to initiate a first in humans clinical trial in late 2014.

• TG1042

On July 3, 2013, the Company announced that it had granted Ascend BioPharmaceutical a license for the immunotherapy product TG1042 to treat a common form of skin cancer, basal cell nodular carcinoma, and two other cancer indications, with the Company retaining rights to other potential indications.

The main expected results for fiscal year 2014 regarding products under development are as follows:

• Novartis’ decision regarding its option to license TG4010 by the end of April and start of Phase 3 in the summer of 2014. In the event that Novartis should exercise this option, the Swiss group would become the exclusive licensee of the product, (with co-marketing rights retained by Transgene for some countries including France and China), and lead the development of TG4010 in Phase 3 for its registration. In the event that Novartis should not exercise its option, the Company will seek a new development partner, without delaying the start of the Phase 3 trial.

- Progress of the Pexa-Vec development program with a global Phase 3 trial in first-line hepatocellular carcinoma (liver cancer), as well as several Phase I or II exploratory studies in different types of cancer with other therapies, including immune checkpoint inhibitors.

- Launch of a Phase 2b study of TG4001 in oropharyngeal cancer, as part of the collaboration with the EORTC;

- Entry into the clinic of TG1050 in the treatment of chronic hepatitis B.

• Fundraising totaling €65.5 million

In March 2014, the Company completed a capital increase in two stages. The first stage consisted of a capital increase with subscription rights, raising gross revenue of €45.5 million and resulting in the issuance of 4,553,551 shares, fully subscribed by the exercise of subscription rights, on an irreducible and reducible basis. The second step consisted of a private placement of €20 million through the issuance of 2,000,000 shares with qualified investors and/or accredited investors acting on their own behalf, in France and outside France, including the United States. Now that it has a strong cash position of approximately €100 million, the Company has the means to take the next step and implement its strategy with confidence and serenity.

1. DEVELOPMENTS IN RESEARCH ACTIVITY

The majority of Transgene’s resources are used by its research and development activity.

In addition to a mission to identify new potential products to add to the Company’s product portfolio, much of the research is focused on current clinical development programs, with the expertise in molecular biology, cell culture, biochemistry, histology, etc. of the project teams of each product under development. The research teams are working to identify potential new products in the areas of second-generation oncolytic vectors, of

143 additives for MVA products and oncolytic viruses, and of infectious diseases (including tuberculosis).

In addition, the Company attaches great importance to a biomarkers identification program for its products (to increase the chances of success and efficacy of clinical trials). Research teams spend a significant part of their activity on this.

In this context, the Company is involved in collaborative programs such as a partnership with Ligue against cancer, the Immunocan international program on the identification of biomarkers in China, a collaborative program under the auspices of the Agence Nationale de la Recherche, and also conducts work in this field through its subsidiary in China, Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd., located in Shanghai.

Among the new candidates from Transgene’s research are an oncolytic virus and several projects in infectious diseases, including tuberculosis (TB). On October 30, 2013, the Company announced that its new tuberculosis immunotherapy program would receive funding of $5 million of the U.S. National Institutes of Allergy and Infectious Diseases (NIAID, part of the U.S. National Institutes of Health or NIH) granted by the latter to Emergent BioSolutions Inc. (NYSE:EBS), with which the Company will collaborate. As part of this financing, the Company entered into a collaboration agreement with Emergent BioSolutions for the development of a cell line production method and the manufacturing of the anti-tuberculosis immunotherapy product that the Company choses to develop. Significant Emergent BioSolutions expertise in this area complements the capabilities and expertise of the Company, which retains all rights to the development and marketing of candidates generated by this program funded by the NIAID.

The Company’s research is based on a technology platform with the goal of becoming a profitable biopharmaceutical companyand a leader in the field of immunotherapie to treatcancer and infectious diseases. In addition to products that use MVA, the oncolytic vectors coming out of the Company’s research programefforts are further extendingits product portfolio.

2. OTHER DEVELOPMENTS

On March 25, 2013, Sanofi and the Company announced the signing of a collaboration agreement for the creation of a new advanced platform dedicated to the manufacture of immunotherapy products including the Company’s therapeutic products. The platform will be built on the Genzyme Polyclonals site in Lyon, in the Gerland district, with an investment of €10 million funded equally by the Company and Sanofi. The platform will remain the exclusive property of Sanofi. The launch of the construction phase of this new platform was announced on January 29, 2014.

On May 17, 2013, the Company announced its investment in ElsaLys Biotech SAS Biotech, a new R&D company specializing in the development of therapeutic antibodies, as part of a first funding round of €2.1 million. The investment fund Sofimac Partners and the managers are the other shareholders.

On June 24, 2013, the Company announced that Platine Pharma Services SAS, one of its interests specializing in immuno-monitoring services (quantitative measure of response to treatment by products stimulating the immune system), acquired the immuno-assays activities of Indicia Biotechnology. The activities listed concern the development of custom tests and the Immunoline proprietary platform to predict the immunogenicity of a molecule. After the acquisition, the Company’s interest in Platine Pharma Services SAS was 33.26%.

The rest of this report refers to information provided in the Reference Document to which this report is attached

3. COMMENTS ON THE CONSOLIDATED RESULTS FOR 2013.

Highlights from the consolidated financial statements for 2013 are include:

− Operating expenses totaling €15.7 million in 2013, compared with €12.1 million in 2012, − R&D expenses totaling €50.1 million in 2013, compared with €48.7 million in 2012, − A net loss amounting to €42.9 million in 2013, compared with €43.2 million in 2012, − Cash burn of €45.0 million, compared with €46.6 million in 2012.

At December 31, 2013, the Group had €47.9 million in cash and cash equivalents.

144 The consolidated income statement for 2013, compared to 2012, is presented in the table below:

In thousands of Euros 12/31/2013 12/31/2012* Revenue from collaboration and licensing agreements 3,849 3,928 Public funding for research expenses 11,886 9,133 Operating income 15,735 13,061 Research and development expenses (50,063) (48,679) General and administrative expenses (6,769) (6,610) Other revenue and expenses (101) 93 Net operational expenses (56,993) (55,196) Operating income (41,198) (42,135) Interest income (expense) (731) (585) Loss before tax (41,928) (42,720) Tax on profits - - Share of i ncome from equity affiliates (930) (474) Net loss (42,858) (43,193) Net loss per share ( €) (1.34) (1.36) Fully d iluted loss per share ( €) (1.34) (1.36)

Revenue:

During the periods under review, revenues from collaborations and licensing agreements mainly included the following:

- Production or research services for third parties (including Jennerex, Inc. for Pexa-Vec, which amounted to €2.2 million in 2013 (€1.8 million in 2012),

- “Upfront payment” or “milestone” payments for product development (option given to Novartis in 2010 for TG4010), which amounted to €1.0 million in 2013 (€1.4 million in 2012), and

- Income related to commercial use of technologies or products provided under license by Transgene, which amounted to €0.6 million in 2013 (€0.7 million in 2012).

The amount received from Novartis under the option agreement signed with Transgene in March 2010 for TG4010 (€7.4 million) is recognized in income on a straight-line basis over the period from the date of signing of the option agreement to March 31, 2014, the deadline estimated (by the Company) to exercise this option. The impact on the Company’s revenues in 2013 was €1.0 million (€1.4 million in 2012), and the balance (€0.2 million) is to be recorded as revenue in the first quarter of 2014.

At December 31, 2013, public funding of research expenses included grants received and receivable, as well as a research tax credit. Research grants amounted to €3.1 million in 2013 (€0.7 million in 2012). In 2013, subsidies were provided mainly by the ADNA program (“Advanced Diagnostics for New Therapeutic Approaches”) funded by BPI. Transgene could collect up to €1.2 million in additional funding over the remainder of the program until 2016 (€0.3 million of additional revenue).

The research tax credit (CIR) totaled €8.9 million in 2013 (€8.4 million in 2012). The basis of eligible expenses (net subsidies received during the fiscal year) amounted to €29.6 million in 2013 and €27.6 million in 2012. The change in the net basis of expenses eligible for the research tax credit between 2012 and 2013 is attributable to both the increase in eligible expenses and cuts in public funding for research expenses. The growth of eligible spending on research and development between 2012 and 2013 (€33.1 million in 2013 versus€32.0 million in 2012) is related to the increase in external expenses for clinical trials (use of CROs or Contract Research Organizations) and the outsourcing of eligible research (€9.8 million in 2013 versus €9.3 million in 2012), as well as an increase in personnel and operating expenses eligible for the CIR (€21.9 million in 2013 versus €21.0 million in 2012). Public funding for research expenses removed from the basis for calculating the research tax credit amounted to €3.5 million in 2013, compared to €4.4 million in 2012.

Operating expenses:

Research and development expenditures (“R&D”) amounted to €50.1 million in 2013, an increase of about 3%,

145 compared to 2012 (€48.7 million). As noted above, this increase is mainly due to increased spending on clinical trials.

The following table outlines research and development expenses:

In millions of Euros 12/31/2013 12/31/2012 Change Employee benefits expenses 19.4 19.5 -1% Payment in shares 0.6 0.7 -14% Expenses for intellectual property and licensing costs 1.7 1.6 +6% External expenses for clinical projects 12.5 11.7 +7% External expenses for other projects 3.9 3.2 +22% Operating expenses 9.3 9.2 +1% Depreciation and provisions 2.7 2.8 -4% Research and development expenses 50.1 48.7 +3%

Intellectual property and licensing expenses amounted to €1.7 million in 2013, compared to €1.6 million in 2012.

External expenses for clinical trials were €12.5 million in 2013, compared to €11.7 million in 2012. This increase (7%) is due to progress in clinical studies for key products: patient recruitment in the Phase 2b part of the Phase 2b /3 trial with TG4010 in lung cancer accelerated in 2013 (€8.1 million in 2013, compared to €6.1 million in 2012) and recruitment of patients increased in Pexa-Vec clinical trials (€3.4 million in 2013, against €2.7 million in 2012). Conversely, the phase 2b study of TG4040 in hepatitis C is being closed and the associated external expenses decreased in 2013 (€1.0 million in 2013, against €2.8 million in 2012).

Other external expenses, including research, preclinical and industrial project expenses, amounted to €3.9 million in 2013, compared to €3.2 million in 2012. This change was mainly due to new production and research services, including the pharmaceutical development of TG1050, an immunotherapy product for hepatitis B.

Operating expenses, including the cost of operating research laboratories and the production unit, amounted to €9.3 million in 2013, compared to €9.2 million in 2012.

The following table outlines overhead expenses by type of expense:

In millions of Euros 12/31/2013 12/31/2012 Change Employee benefits expenses 3.2 2.7 +19% Payment in shares 0.2 0.2 NS Professional and management fees 2.3 2.6 -12% Other fixed costs 0.9 1.0 -10% Depreciation and provisions 0.2 0.1 +100% General and administrative expenses 6.8 6.6 +3%

Staff costs amounted to €3.2 million in 2013, compared to €2.7 million in 2012. This increase was primarily due to the strengthening of the Company’s business development and investor relations teams in the United States, as well as severance payments. Support staffing levels increased slightly between 2012 and 2013 (27 full-time equivalents in 2013 versus 25 in 2012)

Professional and management fees amounted to €2.3 million in 2013, compared to €2.6 million in 2012.

Interest income and (expenses), net:

Interest expenses, net of interest income, amounted to €0.7 million in 2013 (€0.6 million in 2012).

Interest income (investment income) amounted to €0.7 million in 2013 (€0.5 million in 2012).

The majority of interest expenses were bank interest on the research tax credit refinancing (€0.4 million), bank

146 interest related to ADNA (€0.5 million) and a write-off of debt owed by Platine (€0.2 million).

Net loss:

Net loss was €42.9 million in 2013 (€43.2 million in 2012). Net loss per share was €1.34 in 2013 (€1.36 in 2012).

Investments

Tangible and intangible investments amounted to €2.1 million in 2013 (€2.0 million in 2012).

Transgene SA participated in the capital increases of Jennerex, Inc. and Elsalys Biotech SAS, in the amounts of €1.9 million and €0.5 million, respectively. The Company also partially converted the current account to the capital of Platine Pharma Services SAS for €0.3 million.

Repayable loans and advances

In 2013, Transgene received €2.9 million in repayable advances for the ADNA program, which receives public funding from BPI. Since the start of the ADNA program, the Company has received €12.5 million in repayable advances under this program. The Company may receive up to €3.4 million in additional repayable advances over the remaining term of the ADNA program, i.e., until 2016.

Liquidity and capital resources:

Cash assets are invested in very short-term mutual funds or invested at market conditions in a cash pool organized by Institut Mérieux, the majority shareholder of Transgene.

At December 31, 2013, the Company had €47.9 million in cash (€92.9 million at December 31, 2012).

At the date of this Reference Document, the Company had no bank debt subject to covenants.

Cash burn:

The Company’s cash burn was €45.0 million in 2013 (€46.6 million in 2012).

Regulated agreements:

The Board of Directors did not authorize any new regulated agreements in 2013.

4. COMMENTS ON THE 2013 CORPORATE FINANCIAL STATEMENTS

Transgene S.A. financial statements, prepared on December 31, 2013 show:

- a net loss of €41.5 million; - equity of €60.1 million; - a balance sheet total of €116.4 million.

Changes to the consolidated financial statements were mainly:

- in assets, from the recognition of property investment leasing (€12.3 million); - in liabilities, from the recognition of real estate lease financing (€11.1 million); - in the income statement, from the recognition of stock options and bonus shares (€0.7 million) and the profit share of associates (€0.9 million).

We propose that the loss for the year of €41,454,267.89 be allocated to retained earnings, which would total, after the allocation, €438,190,295.05.

We remind you that the Company has not paid any dividends in the past three years.

5. CHANGES IN FINANCIAL POSITION

At December 31, 2013, Transgene SA had available cash and available-for-sale financial assets of €47.4 million.

147 Based on the research and development budget for 2013, the Company currently expects cash burn between €50 million and €55 million for 2014.

6. SIGNIFICANT EVENTS SINCE THE BALANCE SHEET DATE

In January 2014, the Company made the decision to launch the construction phase of a new viral vector production unit in collaboration with Sanofi. The companies will jointly invest equal amounts of approximately €10 million over two years in the production unit. Sanofi will act as the Contract Manufacturing Organization (CMO) and Transgene will be a privileged customer of the platform until 2028. This dedicated platform will be the exclusive property of Sanofi.

In early 2014, the Company signed cash bonus contracts with some executives that are conditional on Transgene’s stock price, which could lead to payment of additional compensation to beneficiaries from 2017. To date, the conditions for obtaining such payments have not been met.

On March 18, 2014, the Company announced the completion of the acquisition of its partner for Pexa-Vec, the U.S. company Jennerex, Inc. by SillaJen, Inc., a Korean biotechnology company. Transgene owns approximately 8.5% of the capital of Jennerex, Inc. on a fully diluted basis. The development and marketing agreement for the oncolytic virotherapy Pexa-Vec entered into between Transgene and Jennerex, which is now a wholly owned subsidiary of SillaJen, Inc., is not impacted by this transaction. Under the terms of the agreement, Transgene’s share of the sales price is broken down follows: - An initial payment of USD 3.8 million (USD 3.2 million net of fees and sequestration of a portion of the sale price) at the close of the transaction, which was recorded in the first half of 2014; - Additional payments based on the achievement of clinical and regulatory milestones, totaling up to nearly USD 9 million.

On March 25, 2014, the Company announced that it had raised a total of €65.5 million via a capital increase in two steps:

- a capital increase with preferential subscription rights launched on February 28, 2014, which grossed €45.5 million and resulted in the issuance of 4,553,551 shares. All 4,553,551 new shares were subscribed by shareholders and purchasers of preferential subscription rights. The exercise of subscription rights on an irreducible basis affected 4,378,903 shares. The remaining shares were subscribed on a reducible basis. Institut Mérieux, through its subsidiary TSGH, exercised all of its subscription rights on an irreducible basis, subscribing to 2,482,574 shares for a total amount of €24,825,740;

- a private placement completed on March 24, 2014, in response to to requests by a number of qualified investors, many of whom were foreign, for 2,000,000 additional shares acquired at a price of €10 per share, which raised €20 million. The private placement was made pursuant to Article L. 225-136 of the Commercial Code and the Twelfth Resolution of the Shareholders’ Meeting of June 19, 2013, with investors as defined in Article L. 411-2 II of the Monetary and Financial Code (qualified investors and/or accredited investors acting on their own behalf) in France and outside France, including the United States.

7. SOCIAL AND ENVIRONMENTAL RESPONSIBILITY

Unless otherwise indicated, the items stated below relate to the Company (Transgene SA) located in France, where most of its activity is conducted. Its two wholly owned subsidiaries have business operations (Transgene, Inc. based in the United States employed only three employees as of the end of 2013) or academic research collaborations (Transgene Biopharmaceutical Technology (Shanghai) Co. Ltd. based in China, had five employees) and have no commercial activity. Data are provided for 2011, 2012 and 2013, except when information for 2011 is not available or would require excessive research to report.

1. SOCIAL RESPONSIBILITY

a) Employment

- Total number and distribution of employees by sex, age and geographical region at December 31

148 Data for the Company and its two wholly owned subsidiaries

Geographical Men Women Total area and age 2012 2013 2012 2013 2012 2013 distribution France 97 93 202 194 299 287 Of which: Under 25 8 5 18 13 26 18 25 to 39 42 41 85 83 127 124 40 to 49 27 27 63 50 90 77 Over 50 20 20 36 48 56 68 United States - 1 2 2 3 Of which: Under 25 - - - 25 to 39 - - - 40 to 49 - 1 2 2 3 Over 50 - - - China 5 4 5 5 Of which: Under 25 - - - 25 to 39 1 2 3 3 40 to 49 - 2 2 2 Over 50 - - -

- Hires and departures

2012 2013 Hires 17 18

Departures 6 20

- Compensation and growth

The table below shows the distribution of average annual gross wages (salaries and bonuses) between men and women in euros for 2012 and 2013:

Businesses Senior (Classification Operator/ Assistant/ ARC / SI Dept. Heads Manager/ groups - collective Employees Technicians Engineer / Doctor / CTM Director / agreement of (2-3) in charge of: Supervisor / Researcher Senior pharmaceutical (4-5-6) (6-7) (7-8) Director companies) (8-9) Men 24,549 34,499 46,235 63,984 80,127 2012 Women 28,085 34,145 44,407 59,770 75,683 2013 Men 25,666 35,647 47,731 58,270 84,188 Women 27,589 34,904 47,307 59,709 76,533

Payroll for 2013 amounted to €21.4 million (€20.7 million in 2012 - €20.2 million in 2011), which includes €7.3 million in payroll taxes (€6.9 million in 2012 - €6.3 million in 2011).

b) Work organization

- Organization of working time

The current labor agreement in force in the Company’s establishments located in French territory provides for a reduction in the weekly work hours for non-managers to 37 hours and 40 minutes and the granting of nine days of work time reduction and, for managers, the annual attribution of 215 days. In 2003, a corporate agreement on flexible time for non-managers completed this structure.

An agreement was signed in December 2003, which completed the company agreement and was based on the collective agreement for the pharmaceutical industry relating to the treatment of overtime and exceptional overtime during nights, weekends and statutory holidays for non-manager employees.

149 - Absenteeism

The absenteeism rate was 3.70% in 2013, 4.70% in 2012 and 4.41% in 2011.

c) Labor relations

- Organization of social dialogue, including employee information and consultation procedures and negotiations with staff

Social dialogue takes place in accordance with the Labor Code, through the respective representative bodies, trade union delegation, works council and employee representatives based on the duties and tasks of each body. Due to the structure and size of the Company, it does not need to arrange specific procedures to inform, consult or negotiate with employees. Video- and teleconferencing equipment are available to employee representatives based in Lyon for active participation in meetings of bodies held at the head office.

- Collective bargaining agreements

In 2013, two new collective agreements were signed concerning 1)the system of technical restrictions on maintenance and2) the development of a supplemental defined contribution retirement plan.

d) Health and safety

- Health and safety conditions in the workplace

The Company’s policy regarding the safety and protection of individuals has the following main objectives:

- to guarantee the quality of the products to be administered to patients; - to ensure the safety of persons involved with the Company; and - to ensure the protection of the Company’s tangible and intangible assets.

For example, the laboratories are designed and equipped both to protect the product being manufactured from potential outside contamination and to protect employees as they work from accidental exposure to harmful products.

The Company’s activities are governed by pharmaceutical standards (Good Laboratory, Manufacturing and Clinical Practices) and the provisions of the Environment Code relating to the use of genetically modified organisms in a confined space. As such, it is subject to the approval of the administrative authority issued on the advice of the High Council of Biotechnologies for the viral constructs it produces. Authorization includes the classification of these constructs and the confinement conditions for their handling. The Company’s investments in the quality of its products have a safety and protection dimension, but are not necessarily recorded as specific costs related to this issue.

The Company applies strict equipment and operating standards in its facilities and is also committed to training its employees in procedures to ensure product quality and for the various safety requirements related to their job.

The Company has a Health, Safety and Environment Department composed of three individuals in charge of prevention within the Company.

The Health, Safety and Working Conditions Committee operates within the Company pursuant to the regulations in force.

- Review of agreements signed with trade unions or staff representatives on health and workplace safety

The Health, Safety and Working Conditions Committee (CHSCT) holds regular meetings each quarter, periodically visits the premises and installations, and may meet exceptionally after an accident or serious incident. In 2012 and 2013, the process for serious and imminent dangers was not implemented. Four analyses were performed in 2013 (six in 2012) as a result of workplace accidents.

150 - Workplace accidents, frequency and severity; occupational diseases

NUMBER OF ACCIDENTS (including on-site treatment) 2012 2013 Total company accidents 51 55 Number of accidents reported 9 11 - including travel accidents (home - workplace) 5 4 - workplace accidents 2 7 - travel accidents (missions outside of the workplace) 2 0 Number of accidents with work stoppage 3 7 Frequency rate (1) - 9.82 Severity rate (2) - 0.055 (1) Number of workplace accidents with stoppage (excluding during travel) multiplied by 1,000,000 and divided by the number of hours worked. (2) Number of days lost due to temporary disability (excluding during travel) multiplied by 1,000 and divided by the number of hours worked.

No occupational hazards were reported in 2013 (1 in 2012) and there have been no reports by the employer of processes capable of causing occupational hazards in 2012 and in 2013.

e) Training

- Training policies implemented

The initial level of education of the employees is high (75% of employees are graduates of higher education courses equivalent to high school + 2 years of higher education and more). The continued training of employees in technology-based knowledge and skills of the highest level is necessary to maintain the Company’s competitiveness. In order to retain and develop employees, the Company makes significant efforts in terms of continued education (4.34% of payroll in 2012, 4.35% in 2011; 2013 data not yet available) and the development of knowledge and expertise, in particular through a policy on attendance at international reference conferences and seminars and numerous collaborations with the scientific community, as well as a rich library of documents that is constantly updated.

- Total number of training hours

4,849 hours were devoted to vocational training in 2013 (5,855 in 2012 and 5,667 in 2011). Seventy-nine percent of employees attended at least one professional training session in 2013 (95% in 2012).

f) Equal treatment

- Measures taken to promote equality between men and women

In accordance with the Law of November 9, 2010, a company agreement on professional equality was signed on September 25, 2012 with the social partners.

Based on the findings of the comparative situation of men and women at Transgene, the agreement resulted in an action plan in four areas (promotion, training, compensation and balancing professional/family life). A number of key measures have been introduced, such as the establishment of systematic interviews upon departure or return from parenting-related leave (maternity leave, adoption leave, parental education leave, etc.) to ensure that these absences do not penalize the employees concerned, the offering of “women in leadership” training (taken by 10 women in 2013, for a total of 70 hours) or the ongoing development of a good meeting practices charter to find ways of organizing working time to better balance work and family obligations.

Since its inception, the Company has sought to implement a number of measures to facilitate balance between work and personal life for its employees: the option to work part-time (33 employees, including one male manager, in 2013; 38 employees, including 15 managers, in 2012; and 35 employees, including 15 managers, in 2011), continuation of full pay for maternity and paternity leave; funding for five people for nearby daycare (annual cost: €62,250) and a corporate concierge service so that employees may benefit from personal services (annual cost: €3,600).

- Measures taken to promote employment and integration of disabled workers

Under the terms of the pharmaceutical companies collective agreement (Leem) of September 25, 2008 to

151 promote the employment and retention of people with disabilities, as amended by the Protocol of September 24, 2009, Transgene has implemented a number of measures.

To encourage the hiring of disabled workers, the Company uses application management software on which it displays its non-discrimination policy, which allows disabled workers to identify themselves, if they wish, by checking a box. Their applications can be prioritized accordingly. In 2011 and 2012, the Company hired a disabled person for an apprenticeship as part of technical certification (BTS) and a disabled worker from the Meinau Services disabled employment center (ESAT). Collaboration with this ESAT continued in 2013, on the basis of specific actions for services.

In 2013, the Company employed eight employees with reported disabilities. The Company also uses three work assistance centers for various services and pays an additional contribution to Handi-Em.

In 2013, the Company conducted a communications effort for the fight against stereotypes related to disabilities based on three main concepts:

- Sponsorship against stereotypes: participation in “Sponsorship Against Stereotypes” in partnership with the association IMS Entreprendre pour la cité- Alsace. Sponsorship consists of providing personalized support to job seekers with disabilities who encounter employability difficulties. Company employees (sponsors) help their mentees understand the business world and assist them with job searches, and mentees help their sponsors discover the world of the disabled. Four sponsors were selected for the first year of the experiment;

- Company disability, which was held on November 22, 2013 with mentees in attendance;

- The provision of external consultations open to all employees on health issues, in consideration of illnesses and disabilities in the workplace for themselves or their families.

- Policy against discrimination

The Company has not established a policy against discrimination, but it believes that its practices are non- discriminatory.

g) Promotion and enforcement of the provisions of the fundamental conventions of the International Labor Organization

- Respect for freedom of association and the right to collective bargaining

The Company declares that it strictly upholds the freedom of association of employees. The right to collective bargaining is exercised in its institutions within the framework defined by the Labor Code.

- Elimination of discrimination in employment and professional life

See above f. Equal treatment .

- Elimination of forced or compulsory labor

The Company has no activities in a country where such practices would still exist. Effective abolition of child labor

The Company has no activities in a country where such practices would still exist.

2. ENVIRONMENTAL RESPONSIBILITY

a) General environmental policy

- Organization of the Company to take into account environmental issues and, where appropriate, approaches to environmental evaluation and certification

The products designed and developed by the Company result from biological sciences (specifically, molecular and cellular biology) and use biotechnology processes (cell culture, purification processes, etc.) to enable a transition from laboratory work to the production of quantities of products controlled and approved for human

152 clinical trials. These techniques fall under the regulation of activities involving genetically modified organisms and are subject to the prior approval of the Haut Conseil des Biotechnologies.

The Company believes that its biopharmaceutical research and development has very little impact on the environment, since operations relating to this activity take place in a confined environment.

At this stage, the Company has not taken steps to obtain environmental certification.

The impact of this activity on the environment is controlled in two ways:

- by the strict application of pharmaceutical quality standards that allow for control and follow-up at all stages of the activity (air control and treatment, quality of matters used, matter and personnel traffic), and

- Training and information for employees regarding environmental protection

The Company did not carry out any specific actions regarding training and information for employees with respect to environmental protection in 2012 or 2013.

- Resources devoted to the prevention of environmental risks and pollution

The Company has a Health, Safety and Environment Department, composed of three individuals. In addition, research and development takes place in a confined environment and resources and equipment dedicated to this function (air treatment filters, microbiological safety cabinets, autoclaves, effluent decontamination tanks, etc.) contribute to the prevention of environmental risks.

- Provisions and guarantees for environmental risks

The Company has made no provisions or guarantees of this kind.

b) Pollution and waste management

- Prevention, reduction and repair measures for air, water and soil discharges that seriously affect the environment

The Company’s research and development activity is conducted in a confined environment. This confinement is achieved through multiple levels of control and air treatment, including microbiological safety, air depressurization to prevent its exit, absolute filters on ventilation ducts, etc. Effluents from some areas are collected and subjected to heat treatment for decontamination before release into the sewage system.

- Prevention, recycling and waste disposal measures

The Company’s activity generates various types of waste that require sorting for special treatment. The Company has entered into agreements with qualified service providers for removal and treatment in accordance with the standards and rules that govern these various categories.

In addition, the Company conducts separate sorting and removal of non-hazardous waste and special waste requiring special precautions.

- Consideration of noise and other forms of pollution specific to an activity

Neither the activity nor the facilities of the Company generate noise pollution.

c) Sustainable use of resources

- Water use and water supply according to local restrictions

The Company’s activities involve the use of water. This use is directly related to changes in R&D projects and does not trigger relevant indicators. The water used comes from the urban network; there are no specific supply

153 constraints in the Alsace region.

Water (m 3) Year TUP 1 var. TUR 2 var. TOTAL var. 2011 24,873 - 6,185 - 31,058 - 2012 30,638 23% 6,044 -2% 36,682 18% 2013 27,371 -10.7% 8,401 -3.9% 35,772 -2.5% 1 Clinical batch manufacturing building 2 Offices and laboratories

- Consumption of raw materials and measures to improve efficiency of their use

The Company does not directly consume raw materials. The materials used in the development of its products are themselves manufactured.

- Energy consumption, measures to improve energy efficiency and use of renewable energy

The research laboratory equipment and manufacturing facilities for clinical batches operate exclusively on electricity and there is no option to use renewable energy sources. There is a very strict equipment maintenance plan to ensure optimal energy consumption.

Only the building for the manufacture of clinical batches uses municipal gas as an energy source for heating and hot water and process steam production.

The laboratory and office building use heat pumps for heating and cooling and electricity for steam production.

Electricity (kWh) Year TOTAL var. 2011 5,681,114 - 2012 5,799,039 +2% 2013 5,518,118 -5%

Gas (kWh) Year TUP var. 2011 4,544,696 - 2012 4,934,115 +2% 2013 5,048,929 +2%

- Land use

Not applicable to the Company’s business.

d) Climate change

- Greenhouse gas emissions

The air conditioning system fitted to the building for the manufacture of clinical batches was built in 1995 and originally equipped with a cooling system using gas classified as a greenhouse gas. A refrigerant replacement plan was completed in 2012.

- Adaptation to the impacts of climate change

The Company has no activity requiring special measures to adapt to climate change impacts.

e) Protection of biodiversity

- Measures to preserve or enhance biodiversity

Neither the activities nor the facilities of the Company have an impact on biodiversity.

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3. INFORMATION RELATING TO SOCIETAL COMMITMENTS TO PROMOTE SUSTAINABLE DEVELOPMENT

a) Territorial, economic and social impact of the Company’s business

- In employment and regional development

Since its inception in 1979, the Company has located most of its activities in Strasbourg and in the suburbs of that city. As the first company founded in France in the field of genetic engineering, it has a very attractive presence locally and provides job opportunities for scientists, researchers and technicians in the life sciences.

- Local or neighboring populations

The principal office of the Company is located in an area dedicated to scientific and technical activities, the Parc d’Innovation in Illkirch-Graffenstaden. There are therefore no immediate neighboring populations that its business could impact.

b) Relationships with persons or organizations interested in the Company’s activity, including associations for inclusion, educational institutions, environmental protection associations, consumer associations and local residents

- Conditions for dialogue with such persons or organizations

The Company is active locally, albeit on an informal basis and through some of its employees, with various associations such as Alsace Biovalley, an association for the development of activities related to life sciences in the Alsace Region, Strasbourg Sud Développement, which conducts actions to promote employment in this sector, or the Pôle Solidaire, which collects funds for children in the Parc d’Innovation.

- Partnerships or sponsorships

There are no formal partnerships or sponsorships.

c) Subcontracting and suppliers

- Consideration of social and environmental issues in the procurement policy

The Company has not established specific procedures for consideration of these issues in its procurement policy.

- Importance of subcontracting and consideration in relations with suppliers and subcontractors of their social and environmental responsibility

The Company relies on service companies specializing in the conduct of clinical trials and related benefits called Contract Research Organizations (CROs) for most of its clinical trials. The Company also uses subcontractors for certain production activities. These providers operate within a strictly regulated framework that aims to ensure the quality of the clinical trials conducted and are audited by the Company’s Quality Assurance group.

Compliance of subcontractors working for and/or in the Company in relation to their social obligations to personnel involved in the Company is part of their specifications.

d) Fair practices

- Actions taken to prevent corruption

The Company has not initiated specific actions to prevent corruption. It considers the internal control procedures for expenditure commitments related to the protection of its cash, at this stage of its development, effective prevention measures.

- Measures for consumer health and safety

The Company has no products on the market. Products in clinical development, or in research, are intended for the treatment of patients with cancer or chronic infectious diseases; they are the subject of clinical trials that fall within a strict regulatory framework whose purpose is to ensure the efficacy of therapeutic products. For the

155 Company’s products to be marketed, they must receive an authorization to market issued by the health authorities of the various countries in which they will be distributed.

- Other actions undertaken in this part 3 to promote human rights

The clinical trials being conducted for the Company’s products are conducted in strict compliance with the informed consent of the persons participating in biological research trials.

***

Methodologies - details and limitations

Methodologies for reporting social, environmental and safety indicators are likely to have certain limitations inherent in the practicalities of collecting and consolidating such information.

The definitions and reporting methodologies are suitable for the following indicators:

- Safety indicators

Frequency rate and severity of accidents with work stoppage

These indicators cover only activities of the Group located in France. The frequency rate of accidents with work stoppage equals the number of accidents with work stoppage of greater than or equal to one day occurring during a twelve-month period per million hours worked. The severity rate of workplace accidents is equal to the number of days lost due to temporary disability, excluding commuting accidents, occurring during a period of twelve months per thousand hours worked. Commuting accidents from the home to the workplace are excluded from the calculation of these indicators.

- Environment indicators

Indicators of the consumption of electricity, gas and water cover only the activities of the Group located in two buildings (TUP and TUR) at its establishment located in Illkich-Graffenstaden (France).

- Social indicators

Total workforce

This indicator covers all of the Group’s activities. Employees with an employment contract (permanent or temporary) with the Transgene Group as of the last calendar day of 2013 are considered part of the total workforce.

Hires and departures

These indicators cover only the activities of the Group located in France.

Temporary contracts are included in the reporting of these indicators. Employees under professional contracts and conversions from temporary to permanent contracts are excluded from the reporting of the data, for both hiring and departures.

Rate of absenteeism

Absenteeism is reported only for the employees located in France This is the number of working days of absence/number of working days worked theoretically.

Number of hours worked

These indicators cover only the activities of the Group located in France. The number of hours worked is reported on the basis of attendance recorded in the payroll system, with a working day of seven hours for executives and seven hours and 17 minutes for non-executives.

Consolidation

The data are consolidated under the responsibility of the General Secretariat.

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157 Report of independent third party on the consolidated social, environmental and societal information contained in the management report

Transgene Fiscal year ended December 31, 2013

Dear Shareholders,

In our capacity as an independent third party, whose admissibility of the application for certification was granted by the COFRAC under number 3-1050, and a member of the network of one of the statutory auditors of Transgene, we present our report on the consolidated social, environmental and societal information relating to the year ended December 31, 2013, presented in chapter 27.6 of the management report, hereinafter the “CSR Information” under the provisions of Article L. 225-102-1 of the Commercial Code.

Company responsibility

It is the responsibility of the Board of Directors to prepare a management report, including the CSR Information described in Article R. 225-105-1 of the Commercial Code, in accordance with the standards used by the Company (hereinafter the “Benchmarks”) as summarized in the introduction to chapter 27.6 of the management report and available on request from the company’s headquarters.

Independence and quality control

Our independence is defined in the regulations, the code of ethics of the profession, as well as the provisions of Article L. 822-11 of the Commercial Code. In addition, we have implemented a quality control system that includes documented policies and procedures to ensure compliance with ethical standards, professional standards and applicable legal and regulatory texts.

Responsibility of the independent third party

It is our responsibility, based on our work, to:

- certify that the CSR Information required is present in the management report or, if omitted, an explanation is given pursuant to the third paragraph of Article R. 225 105 of the Commercial Code (Certification of presence of CSR Information); - express a limited conclusion of assurance on the fact that the CSR Information, taken as a whole, is presented, in all material respects, accurately, according to the Benchmarks (Reasoned opinion on the accuracy of the CSR Information).

Our work was carried out by a team of four people between October 2013 and March 2014 for a period of approximately 25 weeks.

We conducted the work described below in accordance with professional standards applicable in France and the Order of May 13, 2013, determining the conditions under which the independent third party conducts its mission.

1. Certification of presence of CSR Information

We reviewed, based on interviews with officials of the relevant departments, the presentation of guidelines for sustainable development based on the social and environmental consequences of the activities of the company and its social commitments and, where appropriate, actions or programs arising therefrom.

We compared the CSR Information presented in the management report with the list described in Article R. 225- 105-1 of the Commercial Code.

In the absence of some consolidated information, we verified that the explanations were provided in accordance with Article R. 225-105, paragraph 3 of the Commercial Code.

We verified that the CSR Information covered the scope of consolidation (the company and its subsidiaries within the meaning of Article L. 233-1 of the Commercial Code and the companies it controls within the meaning of Article L. 233-3 of the same code) with the limits specified in the methodological note in Chapter 27.6 of the management report.

158 Based on this work, and given the limitations mentioned above, we confirm the presence in the management report of the required CSR Information.

2. Reasoned opinion on the accuracy of CSR Information

Nature and scope of work

We conducted five interviews with those responsible for the preparation of the CSR Information, in the departments in charge of the information gathering process and, if applicable, responsible for internal control procedures and risk management in order to:

- assess the appropriateness of the Benchmarks in terms of their relevance, completeness, reliability, neutrality and understandability, taking into account, where appropriate, industry best practices. - verify the implementation of a process of collecting, compiling, processing and control for the completeness and consistency of the CSR Information and obtaining an understanding of internal control and risk management procedures relating to the development of the CSR Information.

We determined the nature and extent of our tests and controls depending on the nature and importance of the CSR Information, in relation to the characteristics of the company, social and environmental challenges of its business, its guidelines on sustainable development and good industry practices.

For the CSR Information we considered to be most important 1: at the entity level, we consulted documentary sources and conducted interviews to corroborate the qualitative information (organization, policies, actions, etc.), we implemented analytical procedures and verified the quantitative information on the basis of tests, calculations and data consolidation and we verified its accuracy and consistency with the other information contained in the management report 2.

For more consolidated CSR Information, we assessed its consistency in relation to our knowledge of the company.

Finally, we assessed the relevance of the explanations, if any, for the total or partial absence of certain information.

We believe that the methods of sampling and sample sizes we used by exercising our professional judgment allow us to make a conclusion of moderate assurance; a higher level of assurance would have required a more extensive audit. Because of the use of sampling techniques, as well as other limits inherent in the operation of any information and internal control system, the risk of not detecting a material misstatement in the CSR Information cannot be completely removed.

Conclusion

Based on our work, we did not identify any material anomalies likely to call into question the fact that CSR Information, taken as a whole, is presented in an accurate way, in accordance with the Benchmarks.

Paris-La Défense, April 15, 2014 The Independent Third Party ERNST & YOUNG et Associés

Eric Duvaud Bruno Perrin Sustainable Development Partner Partner

1 Environmental and societal information: overall environmental policy, sustainable use of resources (energy, water consumption, etc.); territorial, economic and social impact (employment, regional development, etc.), the importance of subcontracting and consideration in the procurement policy and relations with suppliers and subcontractors of social and environmental issues, fair practices (actions taken to prevent corruption and measures to promote the health and safety of consumers). 2 Company information : employment (total employment and distributions, hiring and firing, compensation and dismissals, etc.), organization of working time, absenteeism, social relations (the organization of social dialogue), workplace health and safety conditions, workplace accidents, including their frequency and severity, the training policies implemented, the total number of hours of training, diversity and equality of opportunity and treatment (actions taken with regard to gender equality, employment and integration of disabled people, the fight against discrimination, etc.).

159

8. OTHER STATEMENTS

1. Information on Company ownership

At December 31, 2013, employees held less than 0.5% of the capital. This information is set out in Section 18 of the Reference Document.

2. Transactions by officers and directors in the Company’s securities

The Company was not informed and had no knowledge of such transactions in 2013.

In March 2014, TSGH, the Company’s majority shareholder and director, within the framework of the capital increase with preferential subscription rights that raised gross revenue of €45.5 million and led to the issuance of 4,553,551 shares, exercised all of its subscription rights on an irreducible basis, for a subscription of 2,498,377 shares for a total amount of €24,987,770. Following this capital increase and the private placement of two million shares completed in March 2014, TSGH held 51.99% of the capital and 66.38% of the voting rights of the Company.

3. Factors that may impact a public offering

Capital structure: the majority shareholder, as indicated above, is TSGH and only one other shareholder was identified as holding 5% or more of the capital, the Belgian company, Dassault Belgique Aviation, which held 5.17% of the shares and 3.78% of voting rights at December 31, 2013. The Company is therefore ultimately controlled by Alain and Alexandre Mérieux via Compagnie Mérieux Alliance, which owns 100% of Institut Mérieux, which holds 98.66% of TSGH. The Company does not directly or indirectly own its own shares and has not implemented any program to repurchase its shares.

Furthermore, the Company has not set up any measures, statutory or conventional, that may impact a public offering and has no knowledge of any agreements between shareholders likely to affect them.

Table summarizing delegations of authority and powers granted by the general meeting to the Board of Directors – See Section 21.1.1 Capital Authorized and Not Issued in the Reference Document. (Page 136)

Subsidiaries and shareholdings - See Chapter 25 INFORMATION ON SHAREHOLDINGS in the Reference Document. (Page 147)

Compensation amounts paid to directors and executive officers – See Chapter 15 COMPENSATION AND BENEFITS in the Reference Document. (Pages 62 to 65)

Composition of the Board of Directors – See Chapter 14 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES in the Reference Document. (Pages 55 to 61)

Description of the principal risks and uncertainties with which the Company is faced – See Chapter 4 RISK FACTORS in the Reference Document. (Pages 9 to 20)

SPECIAL REPORT ON OPERATIONS RELATED TO STOCK OPTIONS during the fiscal year ended December 31, 2013 – See Section 17.2. Stock options in the Reference Document. (Page 76)

SPECIAL REPORT ON OPERATIONS RELATED TO FREE ALLOCATION OF SHARES during the fiscal year ended December 31, 2013 – See Section 17.3. Free allocation of shares in the Reference Document. (Page 78)

INFORMATION ON SUPPLIER PAYMENT SCHEDULES

Article 21-I of the LME Law has introduced a new paragraph 9 into Article L. 441-6 of the Commercial Code that provides that the deadline agreed by the parties to settle the amounts due may not exceed forty-five days from end of month or sixty days from the date the invoice is issued. In the absence of an agreement, the maximum period is 30 days from the date of receipt of the merchandise or execution of services.

160 With regard to Transgene’s suppler invoices that were not paid at the end of the year, the breakdown by settlement date is as follows:

At December 31, 2013 At December 31, 2012 DUE DATE Euros % of total Euros % of total Due 695,263 32% 931,048 29% Between 1 and 30 days 1,412,335 64% 2,236,016 69% Between 31 and 45 days 65,572 3% 19,154 1% Between 46 and 60 days 29,082 1% 54,023 2% Between 61 and 75 days - - - - Between 76 and 90 days - - - - Between 91 and 105 days - - - - Between 106 and 120 days - - - - More than 120 days - - - - Total 2,202,252 100% 3,240,242 100%

161 TABLE SUMMARIZING THE COMPANY’S PROFIT AND LOSS FOR THE PAST FIVE YEARS

TRANSGENE COMPANY PROFIT AND LOSS FOR THE PAST FIVE YEARS (Articles R.225-81, R.225-83 and R.225-102 of the Commercial Code) (in thousands of Euros except for per share data)

NATURE OF INFORMATION 2009 2010 2011 2012 2013

1. FINANCIAL POSITION AT YEAR END

50,653 72,460 72,523 72,886 72,933 a) Share capital

b) Number of shares issued 22,137,555 31,668,200 31,695,882 31,854,490 31,874,858

2. OVERALL PROFIT/LOSS FROM OPERATIONS

a) Revenue excl. tax 4,909 1,726 3,020 2,362 2,958 b) Income before tax, accumulated depreciation and (28,813) (39,194) (47,898) (46,635) (47,782) provisions c) Income tax expense 4,806 7,824 7,821 8,463 8,901 d) Income after tax, accumulated (25,291) (33,078) (41,873) (40,436) depreciation and provisions (41,454)

e) Distributed income - - - - -

3. RESULT OF OPERATIONS PER SHARE

a) Income after tax, but before (1.08) (0.99) (1.26) (1.20) (1.22) depreciations and provisions b) Income after tax, accumulated (1.14) (1.04) (1.32) (1.27) (1.30) depreciation and provisions

c) Dividend paid on each share - - - - -

4. PERSONNEL a) Number of employees 244 291 298 299 287

b) Payroll 11,349 12,874 13,833 13,882 14,149

c) Employee benefits (social 5,798 6,661 6,836 7,324 7,439 security, social services, etc.)

162

RECONCILIATION WITH THE ANNUAL FINANCIAL REPORT

No. Information Reference Document 1 Annual financial statements 20.1.2 2 Consolidated financial statements 20.1.1 3 Statutory Auditors’ Report on the annual financial statements 20.1.2 4 Statutory Auditors’ Report on the consolidated financial statements 20.1.1 5 Management report including at least the information referred to in 27 articles L. 225-100, L.225-100-2, L.225-100-3 and L.225-211 Paragraph 2 of the Commercial Code 6 Auditors’ fees 26.1 7 Chairman’s Report on the internal audit 16.4 8 Statutory Auditors’ Report on the internal control 16.4

163