TNG Transgene SA

(Adds details and company comment.)

In an unusual move for a small biotechnology company, Transgene SA (TNG.FR) Wednesday acquired the European rights to develop and sell a cancer drug with blockbuster potential from another research company, San Francisco-based biotech group Jennerex.

Transgene shares jumped nearly 6% on the news.

Jennerex is a privately held developer of drugs, while Transgene is a part the French Merieux family holding, that also owns the diagnosis specialist bioMerieux SA (BIM.FR).

While biotech companies usually license their drugs to big pharma groups with deep pockets and a track record of launching successful new products, this partnership combines two small research companies with little revenue and which have yet to bring their first drugs to the market.

"It's quite exceptional, this is not the way business is usually done in the industry," Transgene Chief Executive Philippe Archinard said during a conference call with reporters.

But Transgene's knowledge in the field of cancer studies and its ties with the Merieux conglomerate "convinced Jennerex that we would be the most competent for this project," Archinard added.

The experimental drug, known as JX-594, has still to enter late stage Phase-3 clinical trials, But it has shown anti-cancer and well-tolerated safety properties, notably when applied to liver tumors, Transgene said.

The drug is designed to compete with U.S. pharma giant Bayer Inc.'s Nexavar, which Archinard said has over $800 million in annual European sales in a market with substantial medical needs.

"The first data (on JX-594) are very promising and superior to Nexavar's performance; but they still have to be confirmed by further studies," Archinard told Dow Jones Newswires in a telephone interview. He didn't elaborate.

Transgene agreed to pay up to $116 million to Jennerex for the JX-594 rights in Europe, the countries of the former Soviet Union and in the Middle East. It will also take a minority stake in its new U.S. partner for about $5 million. And it will fund some clinical studies related to the drug and give back to Jennerex an unspecified share of the JX-594 sales in those regions.

Transgene plans to launch a first Phase-3 trial of JX-594 in 2012 and apply for the drug's registration in Europe in 2014, with possible commercialization in 2015.

At 1230 GMT, Transgene shares were up 5.9%, or EUR0.84, a share from the previous close to EUR15.20 on the Euronext Paris exchange.

-Thomas Varela, Dow Jones Newswires; thomas.varela@dowjones.com; +331 40 17 17 72;