7th November 2019

LYSOGENE CORPORATE
Fair Value
Coverage Initiated

EUR11

Share price EUR1.67

Bloomberg /
LYS FP/LYS.PA
Reuters
Healthcare Biotech

The Genes for Success

Lysogene is a French biotech present in the gene therapy
area. It is focused on rare genetic diseases affecting the CNS
and more particularly lysosomal storage disorders. Gene
therapy is an exciting new field as illustrated by the more
than 300 drugs under development and the M&A deals that
have been concluded for significant amounts (Novartis/AveXis
for USD8.7bn or Roche/Spark Therapeutics for potentially
USD4.8bn). Lysogene has developed significant know-how in
this field and is the most clinically advanced gene therapy
company in Europe.
LYS-SAF302 has sales potential of about EUR300m.
Sanfilippo syndrome (or MPS III A) is a rare neurological
disease caused by the accumulation of heparan sulfate in
neurons due to the absence of a gene producing an enzyme in
charge of their elimination. LYS-SAF302 has been developed
to bring this gene to the neurons and restore production of
the enzyme. The drug candidate has just started a phase III
trial and should be on the market in 2022. Around 2,000
children are estimated to be affected by MPS III A in Europe
and in the US.
LYS-GM101, earlier in its development but fully owned by
Lysogene. The second project developed by Lysogene aims to
treat another rare CNS disease, GM1 gangliosidosis. The drug
is in phase I and the target population is smaller than MPS III
A with approximately 1,000 children affected (Europe & the
US). We estimate its peak sales at about EUR260m.
Fully financed until 2021 - FV: EUR11/share. Following an
agreement signed with Sarepta in September 2018, the
development of LYS-SAF302 is fully financed until its launch.
Lysogene has kept the commercial rights to Europe while
Sarepta owns those outside Europe. Our SOTP valuation for
the two main drug candidates and the potential voucher
attached to LYS-SAF302 point to a FV of EUR11/share.

Jean-Jacques Le Fur, PharmD |33(0) 70.36.57.45| jjlefur@bryangarnier.com E. Le Berrigaud |33 (0) 1 56 68 75 33 | eleberrigaud@bryangarnier.com
LYSOGENE Fiscal year end 31/12 2018 2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e
Financial Summary
EPS (EUR) -0.87 -0.79 -0.81 -0.89 5.08 5.10 4.98 14.36 15.24

BUY Coverage Initiated Restated EPS (EUR) -0.87 -0.79 -0.81 -0.89 5.08 5.10 4.98 14.36 15.24
% change -42.8% -9% -3% -10% - 0% -2% 188% 6%
FCF (EUR) 0.66 -0.02 -2.70 -0.94 4.62 5.05 4.93 14.31 15.18
Fair Value EUR11 Net dividend (EUR) 0.00 0.00 0.00 0.00 1.45 1.55 1.65 2.00 2.50
Average yearly Price 2.47 - - - - - - - -
Share price EUR1.67 Avg. Number of shares,
dil t d ( )Entreprise
13.55 13.59 13.59 13.59 13.59 13.59 13.59 13.59 13.59
Historical 9.41 - - - - - - - -
l (EUR )
Valuation (x)
Market Cap. EUR23m EV/Sales NM NM NM NM NM NM NM NM NM
EV/EBITDA NM NM NM NM NM NM NM NM NM
EPS 3Y CAGR NM EV/EBIT NM NM NM NM NM NM NM NM NM
P/E NM NM NM NM NM NM NM NM NM
FCF yield (%) NM NM NM NM NM NM NM NM NM
Sales vs. EBIT Net dividend yield (%)
Profit & Loss Account
0.0% 0.0% 0.0% 0.0% 86.8% 92.8% 98.8% 119.8% 149.7%

(EUR )
450 350 Revenues 6 6 6 4 126 128 136 339 358
Change (%) 121.2% 1.6% 0.0% -26.3% 2723.4% 2.2% 6.1% 149.0% 5.7%
400
300 R&D 10.71 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00
350
250 Adjusted EBITDA -11 -10 -10 -12 99 99 97 279 296
300 EBIT -11 -10 -10 -12 99 99 97 279 296
250 200 Change (%) -36.4% -7.3% -3.0% -10.4% - 0.4% -2.3% 187.4% 6.1%
200 150
Financial results 0 -1 -1 -1 -1 -1 -1 -1 -1

150
Pre-Tax profits -11 -11 -11 -12 99 99 97 279 296
100 Exceptionals 0 0 0 0 0 0 0 0 0
100
50
Tax 0 0 0 0 30 30 29 84 89
50
Net profit -11 -11 -11 -12 69 69 68 195 207
0 0 Restated net profit -11 -11 -11 -12 69 69 68 195 207
Change (%) -38.6% -2.1% -2.8% -9.9% - 0.4% -2.3% 188.4% 6.1%
Sales EBIT Cash Flow Statement
(EUR )
Operating cash flows 9 0 -36 -12 63 69 68 195 207
Change in working 18 11 -25 0 -6 0 0 0 0
it l
Capex, net 0 -1 -1 -1 -1 -1 -1 -1 -1
Shareholders Free Cash flow 9 0 -37 -13 63 69 67 194 206
Financial investments, 0 0 0 0 0 0 0 0 0
t
Dividends 0 0 0 0 0 -20 -21 -22 -27
InnoBio
12% Capital increase 2 0 0 0 0 0 0 0 0
Sofinnova Other 0 0 0 0 0 0 0 0 0
26% Novo A/S Change in net debt 11 0 -37 -13 63 49 46 172 179
12%
Net debt (+)/cash (-) -24 -24 13 26 -37 -86 -132 -304 -483
Balance Sheet (EURm)
Tangible fixed assets 0 1 1 2 3 4 4 5 6
Sarepta Intangibles assets 0 0 0 0 0 0 0 0 0
Therapeutics Cash & equivalents 25 25 -12 -25 38 87 133 305 484
7%
current assets 1 1 1 1 0 0 0 0 0
Other assets 2 2 2 2 2 2 2 2 2
Total assets 29 29 -7 -19 44 93 140 313 492
L & ST Debt 1 0 0 0 0 0 0 0 0
Karen Aiach Provisions 0 0 0 0 0 0 0 0 0
12% Others Others liabilities 28 39 14 14 7 7 7 7 7
31%
Shareholders' funds 0 -11 -22 -34 35 85 131 304 484
Total Liabilities 29 28 -8 -20 42 91 138 311 491
Ratios
Gross margin 100.0% 100.0% 100.0% 100.0% 91.6% 91.5% 91.2% 90.3% 90.2%
EBITDA margin -184.3% -168.2% -173.2% -259.6% 78.8% 77.5% 71.4% 82.4% 82.7%
TEAM : Net debt/EBITDA (x) 2.20 2.35 -1.23 -2.22 -0.37 -0.86 -1.36 -1.09 -1.63
Operating margin -184.3% -168.2% -173.2% -259.6% 78.8% 77.5% 71.4% 82.4% 82.7%
E. Le Berrigaud
Tax rate 0.4% 0.4% 0.4% 0.3% 30.0% 30.0% 30.0% 30.0% 30.0%
33 (0) 1 56 68 75 33 eleberrigaud@bryangarnier.com
Net margin -183.8% -177.2% -182.1% -271.7% 54.9% 54.0% 49.7% 57.6% 57.8%
J.J. Le Fur, PharmD ROE - 100.0% 50.7% 35.8% 196.0% 81.7% 51.5% 64.2% 42.8%
33 (0) 1 70 36 57 45 jjlefur@bryangarnier.com ROCE 54.7% 33.3% 222.0% 288.2% 3142.8% 2396.3% 1886.6% 4541.3% 4142.8%
H. Solvet Gearing - 223% -59% -76% -106% -101% -100% -100% -100%
33 (0) 1 56 68 75 57 hsolvet@bryangarnier.com Dividend payout 0.0% 0.0% 0.0% 0.0% 28.6% 30.4% 33.1% 13.9% 16.4%

Olga Smolentseva, PhD

+44 020 733 225 05|
osmolentseva@bryangarnier.com Source: Company Data; Bryan, Garnier & Co ests.
+44(0)7 590 452 695

V. Floc’h
33 (0) 1 70 36 57 01 vfloch@bryangarnier.com
EXECUTIVE SUMMARY
Lysogene is a French biotech present in the gene therapy
area. It is focused on rare genetic diseases affecting the CNS
and more particularly lysosomal storage disorders. Gene
therapy is an exciting new field as illustrated by the more
than 300 drugs under development and the M&A deals
concluded for significant amounts (Novartis/AveXis for
USD8.7bn or Roche/Spark for potentially USD4.8bn). While
the cost of the drug may seem expensive (>USD1m), the
advantage of gene therapy is that it may cure a disease
(when targeting non-replicating cells like neurons), or at
least have very long-term efficacy (multiple years) after one
administration (hemophilia for example). In Europe, Lysogene
is one of the most clinically advanced companies in this field
(after Novartis). Within around 10 years since its creation,
the company has developed and acquired specific know-how
in gene therapy.
Lysogene develops two main compounds. The first one is LYS-
SAF302 for the treatment of Sanfilippo syndrome (or MPS III
A), a rare genetic neurological disease due to the
accumulation of heperan sulfate in neurons which damages
and destroys them. This is due to the absence of a gene
producing an enzyme in charge of their elimination. The
disease affects young children but also some adolescents and
adults. LYS-SAF302 is developed to bring this gene to the
neurons and restore production of the enzyme. Phase I/II
results showed good safety of the drug and some efficacy
signals. As such, the drug candidate is now in a phase III trial
and should be on the market in 2022 assuming positive
results. It is estimated that about 2,000 children are affected
by MPS III A in Europe and in the US. Peak sales for LYS-
SAF302 can therefore be estimated at about EUR300m. An
agreement has been signed with Sarepta Therapeutics, which
is to handle commercialisation outside Europe while Lysogene
is to keep the European rights. In addition, if Lysogene
continues to lead the development, Saretpa is to fully finance
R&D costs. The next significant clinical results are expected
in H2 2020.
The second development programme is LYS-GM101, which is
fully owned by Lysogene. It is in phase I/II and aims to treat
another rare CNS disease, GM1 gangliosidosis. The target
population is smaller than MPS III A with approximately 1,000
children affected (Europe & the US). We estimate peak sales
potential at about EUR260m.
We estimate the value of LYS-SAF302 for Lysogene at
EUR5.6/share and of LYS-GM101 at EUR2.7/share after
applying PoS rates of 30% and 15% respectively. In addition,
the company could benefit from 50% of the value of a
voucher attached to LYS-SAF302 that we estimate at about
EUR0.6/share. The overall valuation we retain for Lysogene is
EUR11/share.
Lysogene est une société de biotechnologie française spécialisée dans
la thérapie génique. Elle s'est concentrée sur le développement de
médicaments contre des maladies génétiques neurologique rares. Le
domaine de la thérapie génique est un secteur en pleine ébullition
avec pas moins de 300 nouveaux médicaments en développement. En
outre, les montants payés par Novartis pour racheter Avexis,
8.7MdUSD, ou par Roche pour s'offrir Spark Therapeutics (près de
4.8MdUSD) montrent l'intérêt porté par les grands laboratoires
pharmaceutiques dans ce domaine. L'intérêt de la thérapie génique,
malgré un coût initial du traitement qui peut paraître élevé, est que
l'on peut penser à une guérison de la maladie si l'on vise des cellules
non réplicatives comme les neurones ou à tout le moins à une
efficacité de plusieurs années dans d'autres cas (hémophilies). En
Europe, Lysogene est la société la plus avancée du point de vue du
développement Clinique (après Novartis).
Lysogene développe deux principaux médicaments. Le premier est
LYS-SAF302 pour le traitement de la maladie de Sanfilippo (ou MPS III
A). C'est une maladie génétique neurologique lié à l'accumulation
d'héparane sulfate dans les neurones conduisant à leur mort. Cette
accumulation provient de l'absence du gène responsable de la
production de l'enzyme en charge de l'élimination de ces composés.
Cette maladie affecte les très jeunes enfants et les adolescents. Le
médicament développé par Lysogene permet d'apporter le gène
manquant au sein des neurones. Les résultats cliniques de phase I/II
ont montré une bonne tolérance des résultats encourageants
d'efficacité. Sur la base de ceux-ci une phase II/III vient de débuter
et le LYS-SAF302 pourrait être sur le marché en 2022 en cas de
résultats positifs. On estime à près de 2 000 le nombre d'enfants
atteints par la MPS III A en Europe et aux Etats-Unis. Nous estimons le
potentiel de CA de LYS-SAF302 à près de 300mEUR. A la suite d'un
accord avec Sarepta Therapeutics, ce dernier sera en charge de la
commercialisation hors d'Europe (Lysogene ayant gardé les droits
européens). En outre, celui-ci finance en totalité des frais de
développement de ce candidat médicament. La prochaine étape
majeure sera la publication des résultats à 1 an de la phase II/III en
cours au S2 2020
Le deuxième programme en développement est le LYS-GM101 pour
lequel Lysogene a gardé tous les droits. Il est en phase I/II et vise à
traiter une autre maladie neurologique, la gangliosidose à GM1. Cette
maladie affecte environ 1 000 patients (Europe et Etats-Unis) et nous
attendons un potentiel de CA de près de 260mEUR.
Nous avons valorisé la société en additionnant la valorisation des
deux projets cités obtenue par DCF. Pour LYS-SAF302 nous obtenons
une valorisation de 5.6EUR/action (en appliquant une PoS de 30%) et
de 2.7EUR/action pour LYS-GM101 (avec une PoS de 15%). A ceci
s'ajoute la valeur potentielle du "voucher" attaché à LYS-SAF302 pour
0.6EUR/action ainsi que la trésorerie pour 1.76Eur/action. Au total
notre FV de Lysogene ressort à 11EUR/action.
Page - 3
Contents
EXECUTIVE SUMMARY 3
PART 1: A LEADING GENE THERAPY COMPANY IN EUROPE 5
Gene therapy: a buoyant area 5
Lysogene is particularly well positioned 6

PART 2: WHAT IS SANFILIPPO SYNDROME (OR MPS III)? 8

What is the cause of MPS III A? 9
Signs and symptoms of MPS III A 10
Sanfilippo syndrome is a rare disease with no existing treatment 10

PART 3: LYS-SAF302: A TRANSFORMATIVE APPROACH TO MPS IIIA 12

AAV viruses, the preferred vectors in gene therapy 12
A specific mode of administration for superior efficacy 15
Encouraging phase I/II clinical results 16
Manufacturing and distribution 20
Agreements with Sarepta and Regenxbio 20
LYS-SAF302: sales potential close to EUR300m 21

PART 4: COMPETITIVE ENVIRONMENT FOR LYS-SAF302 24

Abeona Therapeutics is engaged in a strategic review process 24
Esteve: data from phase I/II not published yet 25
Orchard Therapeutics: too early to be a threat. 25
Enzyme replacement therapy 26

PART 5: LYS-GM101 IS ANOTHER HIGH-POTENTIAL ASSET 27

GM1 gangliosidosis: another lysosomal storage disease 27
Axovant and PassageBio are the only serious competitors identified 29
Sales potential close to EUR260m and 100% for Lysogene 29

PART 6: SIGNIFICANT UPSIDE POTENTIAL 31

LYS-SAF302: valuation of EUR5.6/share 31
LYS-GM101 deserves a valuation of EUR2.7/share 32
A global valuation of EUR144m or EUR11/share 33

BRYAN GARNIER STOCK RATING SYSTEM 35

Page 4
 Part 1: A leading gene therapy company in Europe
Lysogene is a biotech company co-founded in 2009 by its existing CEO, Karen Aiach.
The company is present in the buoyant area of gene therapy and is developing compounds to
treat certain rare paediatric diseases affecting the central nervous system (CNS).
A biotech So far, two main drugs are in development targeting lysosomal storage diseases. The first one is
company focused LYS-SAF302 for the treatment of Sanfilippo syndrome or MPS III A while the second one is
on lysosomal designed to treat GM1 gangliosidosis.
storage diseases
Lysosomal storage diseases are inherited metabolic diseases that are characterised by an
abnormal build-up of various toxic materials in the body's cells as a result of enzyme
deficiencies. There are about 50 of these disorders altogether, and they may affect different
parts of the body. Symptoms occur because of an enzyme deficiency that inhibits the ability of
the lysosomes present in each of the body’s cells to perform their normal function. The
lysosomes role is to break down complex components into simpler ones. Each cell has hundreds
of lysosomes that degrade complex cellular components such as proteoglycans (substrates) into
simpler components. This specific overload in one or more toxic substrates occurs in different
body cells, causing cell impairment or death and resulting in a number of debilitating symptoms
in the affected organs. In all, LSDs affect 1 in 5,000 births worldwide. Over two-thirds of LSDs
have neurological complications.

Gene therapy: a buoyant area

According to PhRMA, nearly 300 cell and gene therapies were in development in 2018. While
cancer is the leading disease area in terms of the number of molecules in development,
neurologic disorders are a key area of interest.
Fig. 1: Number of cell & gene therapies in development in 2018 by therapeutic class

Source: PhRma report

Page - 5
Gene therapy is Note that gene and cell therapies are different since gene therapy consists of bringing genetic
a buoyant area material into cells that are not working correctly whereas the objective of cell therapy is to
transplant whole cells into a patient.

Regarding gene therapies, generally two technologies can be used: 1/in vivo gene therapy (in
which Lysogene is involved), and 2/ex vivo gene therapy mostly represented today by CAR-T.
Fig. 2: In vivo and ex vivo gene therapy

Source: R. Brau et al, L.E.K. consulting

With first The recent development success illustrated by the launches of Zolgensma (Novartis) to treat
commercial (cure?) SMA, Luxturna (Spark Therapeutics) to treat an eye disease, and the potential launch by
successes and BioMarin of a gene therapy to treat haemophilia A also demonstrate the viability of the
high value M&A "concept".
deals
Finally, recent acquisitions in this field, Avexix by Novartis for USD8.7bn or Spark Therapeutics
by Roche for a potential amount of USD4.8b,n illustrate the interest end excitement of large
pharmaceuticals players for this approach.

Lysogene is particularly well positioned

In this report, we have detailed the two main programmes in development at Lysogene. The
most important one, LYS-SAF302 for Sanfilippo syndrome is the most advanced in the world and
is certainly a first and potentially a best in class drug. Some competitors are working in this field
but are less advanced than Lysogene. Abeona is the second most advanced but the group has
started a strategic review, which could result in some delays to the drug's development.
Lysogene is one The technology used by Lysogene, AAVrh10 vector and intracranial delivery, has been in
of the clinically development for many years and Lysogene currently boasts some of the best know-how in this
most advanced domain.
in Europe
The next significant clinical results with LYS-SAF302 are expected in H2 2020.

Page - 6
The second programme, for GM1 gangliosidosis, will benefit from Lysogene's know-how and
expertise in the field. In addition, the drug will not be shared with a partner as is the case for
LYS-SAF302 (shared with Sarepta).

In short, after Novartis, Lysogene is the most clinically advanced gene therapy company in
Europe.

Well financed until 2021

The agreement signed with Sarepta in September 2018 has provided Lysogene financial visibility
until 2021. With this agreement, Sarepta is financing the full development of Lysogene's main
asset LYS-SAF302.
At the end of June 2019, Lysogene's net cash position was EUR33m compared with EUR25m at the
end of 2018.

Page - 7
 Part 2: What is Sanfilippo syndrome (or MPS III)?
MPS III belongs to the mucopolysaccharidoses (MPS) disorders, which are a group of seven rare
genetic disorders caused by the deficiency of one of the enzymes needed to break down complex
Sanfilippo
sugar molecules called mucopolysaccharides. Mucopolysaccharides are also called GAGs
syndrome is a
(glycoaminoglycans) and are naturally produced by the body and used in the building of bones,
rare…
cartilage, skin, and tissues.
Fig. 3: Sanfilippo syndrome is part of a wider group of pathologies

Source: Sanfilippo Children's Foudation

…genetic disease MPS III is also known as Sanfilippo syndrome, named after Dr. Sylvester Sanfilippo who described
the disease in 1963. MPS III is characterised by developmental delay and cognitive regression,
usually with mild physical problems. It is subdivided into four types:
• MPS IIIA (Sanfilippo syndrome type A)

• MPS IIIB (Sanfilippo syndrome type B)

• MPS IIIC (Sanfilippo syndrome type C)

• MPS IIID (Sanfilippo syndrome type D)

All four types of MPS III are caused by changes (mutations) in different genes that contain the
instructions for making enzymes that break down heparan sulfate.

Page - 8
 Fig. 4: Genes and enzymes impacted in the different types of Sanfilippo syndromes

Gene involved Enzyme lacking

Sanfilippo syndrome type
MPS III A SGSH Heparan N-sulfatase

MPS III B NAGLU Alpha-N-acetylglucosaminidase

MPS III C HGSNAT Heparan-alpha-glucosaminide N-acetyltransferase

MPS III D GNS N-acetylglucosamine 6-sulfatase

Source: Bryan, Garnier & Co

MPS III is inherited in an autosomal recessive manner. This means that both parents have one
copy of the altered gene and one normal copy – they are known as carriers and do not show signs
of disease. A child with MPS III inherits two copies of the altered gene, one from each parent. In
autosomal recessive inheritance, in each pregnancy of a couple who are both carriers, there is:
• a 25% chance of having an affected child.

• a 50% chance of a child receiving only one copy of the altered gene and therefore
being a carrier.

• a 25% chance that a child will be neither be affected nor be a carrier.

The risk is the same for males and females.

Lysogene is focused on the development of a treatment for Sanfilippo type A.

What is the cause of MPS III A?

To understand how GAGs accumulate and cause MPS III, it is important to understand that in the
course of the normal life process, there is a continuous process of building new GAGs and
breaking down old ones, the recycling process. The breaking down of GAGs occurs in a part of
the cell called the lysosome. Individuals with MPS III are missing one of the four specific enzymes
that are essential in the breakdown of heparan sulfate. The incompletely broken down heparan
It is caused by sulfate remains stored inside cells in the body and begins to build up, causing progressive
the damage. The GAGs themselves are not toxic, but building up and storing abnormally large
accumulation of amounts of GAGs in the body causes disease.
GAGs in neurons
The accumulation of GAGs in neurons leads to most of the symptoms observed in MPS IIIA. While
occurring in all body cells, GAG accumulation is particularly harmful for CNS cells (neurons),
hence MPS IIIA could be qualified as a neurodegenerative disease.
There are usually no signs of the disease at birth, but as more and more GAGs accumulate,
symptoms start to appear, usually between two and six years of age.

As described in Fig.4, the lacking gene and enzyme in MPS III A are called SGSH and Heparan N-
sulfatase respectively.

Page - 9
 Signs and symptoms of MPS III A
Patients with Sanfilippo syndrome usually seem normal at birth, but developmental delay is
evident by age two/five years. Mental and motor development reach a peak by three/six years of
age after which behavioural disturbances and intellectual decline usually occur. However,
behavioural problems such as hyperactivity and irritability may appear earlier. Severe
behavioural disturbance is a very common feature of Sanfilippo syndrome with sleeping problems
as a main symptom, and one of the most difficult aspects of the disorder to manage. Other
symptoms can be coarse hair, excess hair growth (hirsutism), slightly coarse facial features,
mildly enlarged liver and/or spleen, respiratory and ear infections, diarrhoea, hernias, seizures,
and a wobbly and erratic walk.
Children Children with Sanfilippo syndrome usually start to lose their intellectual functions, especially
affected speech before their motor function declines. There is great variability in the rate of regression
experienced a with some showing rapid loss of function and others who exhibit a much slower progression in the
development disease. Death can occur from before the age of 10 until the third or fourth decades of life, the
delay
average being around 15 to 20 years of age.
Diagnosis of the disease may start with parents observing a delay in language before their
children go to school. If the child has learned language, it will be lost progressively as will
comprehension.
The "formal" diagnosis of Sanfilippo disease is made by measuring the level of heparan sulfate in
urine followed by measurement of enzyme activity in blood, which also helps determine the type
of MPS III (A, B, C or D).

Sanfilippo syndrome is a rare disease with no existing treatment

Among MPS, it is estimated that MPS III has the highest incidence with about 1.2/100,000 births.
The A subtype is the most frequent with an incidence estimated at about 1/100,000 births.
Finally, the number of existing cases in the world is estimated to be between 2,500 and 3,000
(mainly in Western Europe and the US).
About 2,000 Regarding treatment, some options have been developed but with no real success.
cases estimated
• Enzyme Replacement Therapy (ERT). The goal is to administer the lacking enzyme
in EU and US
generally by IV route. ERT products have been commercially successful in some
lysosomal diseases like Gaucher type 1 (Cerezyme from Sanofi with sales of
EUR711m or VPRIV from Shire) or Fabry (Fabrazyme from Sanofi with sales of
EUR755m in 2018) diseases. However, this therapeutic strategy is difficult (if not
impossible) to apply to neurologic diseases because these replacement enzymes
do not cross the blood brain barrier. In addition, it is virtually impossible to deliver
a drug every week or two directly into the brain.

• Molecular chaperones. Chaperone therapy consists of administering low

concentrations of small inhibiting molecules capable of stabilising the three-
dimensional structure of the deficient enzyme, thus preventing its elimination

Page - 10
No existing
and allowing for hydrolysis of the accumulated substrate. Oral administration is
treatments
preferred for this treatment. However, this strategy has not been identified as a
viable option for MPS III A.

The most recent option, gene therapy, is developed by several companies. The first clinical
results have shown encouraging efficacy, as demonstrated by the positive treatment results
obtained in SMA, another genetic disease affecting the central nervous system.

Lysogene is the most clinically advanced company in the field of MPS III A.

Page - 11
 Part 3: LYS-SAF302: a transformative approach to MPS IIIA
Gene therapy consists of replacing the missing (or defective) gene by a functional one, which is
transported to the targeted cells using a vector that is generally a virus. Genetically modified
cells are then able to produce the functional enzyme.
Fig. 5: Gene therapy schematic principle

LYS-SAF302 is
the most
advanced
project

Source: uniQure

Gene therapy The recent success of Zolgensma to treat SMA is a good example of the potential of this
consists of approach. However, since long term clinical data are missing, a question mark remains about the
replacing the maintenance of long term efficacy and therefore, it is difficult to state that gene therapy may
missing (or definitively cure a genetic disease. Indeed, the renewal of cells and cell division lead to the loss
defective) gene
of a part of the introduced genes and potentially to loss of efficacy with time. This is the case in
haemophilia where phase III data with gene therapy conducted by Biomarin led the company to
expect efficacy to exceed eight years but probably no more than 10 years. It should be pointed
out however that neurons do not divide and there is therefore a diminished potential for loss of
genes introduced into these cells.

AAV viruses, the preferred vectors in gene therapy

Generally-speaking, viruses are now recognised as the most suitable vectors to transport a gene
into the targeted cells or tissues. This is mainly because they can efficiently deliver their genes
to human cells and why scientists are using this ability to be able to manipulate the viral genome
to remove the disease-causing genes and to insert a therapeutic one.
Viruses like AAV Today the three main families of viruses used are adenovirus, lentivirus and adeno-associated
are used as virus (AAV). The specificity of AAV is that it is non-pathogenic and unable to replicate when
vectors standalone in the cell and needs another virus, for example adenovirus (hence the name adeno-
associated virus), to replicate. AAV is particularly attractive because of its ability to infect a
broad range of cells, and its overall safety, including mild immune responses. In addition,
because AAV does not integrate the host cell genome, the risk of insertional mutagenesis is low.
Finally, AAV can exist long term as concatemers (a long continuous DNA molecule that contains
multiple copies of the same DNA sequence linked in series) in non-dividing cells like neurons,
however it will be lost in replicating cells.

Page - 12
 There are eleven serotypes of AVV targeting different cells.
Fig. 6: Different AAV serotypes and preferred targeted tissues

Source: addgene

One of the major limitations of AAV is that most people have already been infected with this
virus and therefore some may carry pre-existing neutralising antibodies (Nabs) directed against
the AAV capsid. It is estimated that up to 60% of people have Nabs.
Major limitation This was presented as a limiting factor with Zolgensma (Novartis) but documentation with this
of AAV is pre- drug suggests that only 5-10% of patients have NAbs. It could be assumed that the older the
existing patient, the higher the likelihood of this occuring.
neutralizing
antibodies The AAV "constructed" for gene therapy is made up of the virus capsid, which helps to direct it to
specific tissues, and the "gene cassette" containing the therapeutic gene, a promoter that directs
its expression and at each end of the "gene cassette" a viral inverted terminal repeat, which
marks the boundaries of the therapeutic gene.

Page - 13
 Fig. 7: Construction of an AAV vector for gene therapy

Source: uniQure

Lysogene has developed two different gene therapy vectors coding for SGSH protein (LYS-SAF301
and LYS-SAF302). LYS-SAF302 has been demonstrated to have greater potency than LYS-SAF301
(see below).
Lysogene The main difference between the two vectors is that the CAG promoter was used in LYS-SAF302
selected a less instead of the PGK promoter in LYS-SAF301, and that the SUMF1 (a cofactor for SGSH) gene was
common and removed in the second-generation vector.
more potent AAV
vector: AAVrh10 Fig. 8: Two different genes used by Lysogene for clinical trial

Source: Lysogene annual report

SUPERIOR EFFICACY FOR AAVRH10 VIRUS

While AAV 2,5,9 are the most commonly used in gene therapy in development, Lysogene has
carefully selected another AAV virus, AAVrh10. This vector has some clear advantages over other
AAVs, and is often used in gene therapy for CNS disease:

• It allows a high transduction in CNS cells and particularly neurons.

Page - 14
 • Since AAVrh10 stems from rhesus monkeys, there is a reduced risk of developing
anti-AAV antibodies in humans and therefore less risk (if not no risk) of AAVrh10
inhibition.

For this reason, we are convinced Lysogene has an edge over other competitors with this
vector for the treatment of MPS III A.
Fig. 9: Vectors used by three main Lysogene competitors

Company Product Vector

Abeona Therapeutics ABO-102 AAV9

Esteve EGT-101 AAV9

Orchard Therapeutics OTL-201 Ex-Vivo autologus lentiviral

Source: Bryan, Garnier & Co

A specific mode of administration for superior efficacy

LYS-SAF302 is A major difference between Lysogene and its competitors lies in the mode of administration of
delivered LYS-SAF302. The company has developed an intra-cranial approach to deliver the AAVrh10 vector
directly into the directly into the brain.
brain
Indeed, one of the major difficulties in bringing drugs and treatments into the brain is to cross
the Brain Blood Barrier (BBB) which is a highly efficacious filter around the brain to protect it
against any foreign agent (pathogenic agents, toxins, hormones etc.) circulating in the blood.

Most players in gene therapy deliver their gene therapy products through IV infusion and
therefore need to administer very high doses of AAV to get some of it into the brain. Another
route used is intrathecal administration into the cerebrospinal fluid, which also requires
relatively high doses.
To avoid The intracranial administration selected by Lysogene has several advantages:
administration of
• No issue for crossing the BBB.
high doses
• This approach targets mainly non-replicative cells therefore reducing the loss of
gene expression and increasing the probability of long and sustainable efficacy.

• In situ production of the SGSH enzyme which can spread to the entire brain.

Page - 15
 Fig. 10: Method of administration of LYS-SAF302

This method of
administration
has been already
used for other
CNS diseases

Source: Lysogene

Intracranial administration lasts less than three hours and has been used in several gene therapy
clinical trials for other CNS diseases, including Parkinson's disease. The hospitalisation time after
administration is just a few days.

Encouraging phase I/II clinical results

Between 2011 and 2013, Lysogene conducted a phase I/II clinical trial enrolling four children who
were between two and six years old. The drug used in the trial was the first-generation gene
therapy product LYS-SAF301 (see Fig.8), which is why we have not provided a detailed analysis of
the results, which nevertheless showed a good safety profile and some encouraging efficacy
signals.

The main goal of the study was to assess the safety of the drug and the safety of the surgical
procedure. LYS-SAF301 was administered intracranially bilaterally into the white matter (12
deposits via six injection tracks at two different depths).

The patients were monitored over five years. All four patients reached the milestone of five
years of follow-up without any side effects attributable to LYS-SAF301.
Page - 16
 First encouraging Regarding efficacy, which was a secondary endpoint, there were encouraging signs of efficacy.
phase I/II clinical The parents of three of the patients who presented behavioural disorders and hyperactivity at
results inclusion noted improvement in day-to-day quality of life. This outcome was supported by the
fact that children were able to stop taking medication for hyperactivity, behaviour and sleep
disorders. Further improvements were reported in certain patients experiencing chronic
intestinal disorders, infections or upper respiratory tract infections. In the most favourable
cases, these improvements resulted in the interruption of symptomatic treatments.

However, Lysogene decided to improve the profile of its drug and has changed the composition
of the gene incorporated in the virus (see Fig.8 above) to construct LYS-SAF302.

In animal models, it has been shown that LYS-SAF302 is three times more potent than LYS-
SAF301.
Fig. 11: Difference of efficacy between LYS-SAF301 and LYS-SAF302 in mice model

Source: Lysogene

Pivotal clinical The phase II/III AAVance is conducted using this second-generation vector LYS-SAF302 and a 10-
trial now in fold higher dose.
progress
Fig. 12: Main design characteristics of the phase II/III trial AAVance
Study AAVance (NCT03612869)
Design Single arm, two years efficacy with additional three years follow-up
Patients 20 with developmental quotient >50%
Dose 7.2 1012 vg. Direct brain administration.
Change from baseline in development quotient (DQ), compared to regression reported in natural
Primary endpoint
history studies
Secondary endpoints Sleep and behaviour assessment, patient and parent quality of life.
Locations EU and USA
Source: Company, ClinicalTrial.gov

The trial started in February 2019 and the first interim data (six-month) could be delivered in H2
2020.

Page - 17
 WHAT ARE THE ENDPOINTS?
No well Since MPS III A treatments in development are new, guidelines to follow for a clinical trial are
established not well established (and there is no reference drug to use as a comparator). As such, several
guidelines to Natural history studies were launched to describe and quantify the main clinical signs of this
conduct clinical pathology. The study by Shapiro et al. has provided the most important results due to its high
trials
number of patients (25). The objective was to collect data on the natural disease progression
and to identify clinical endpoints for future clinical trials. In line with previous reports, the study
confirmed the general progression of the disease for 19 patients diagnosed before the age of six,
defined as rapidly progressing (RP), in contrast with the other patients with a more slowly
progressing (SP) form of the disease.

In this study, a comparison of the chronological age and the "equivalent cognitive age" has been
made. It was observed that beyond two/three years of age, no cognitive development should be
expected in children suffering from MPS IIIA.
Fig. 13: Comparison between chronological age and cognitive equivalent age for normal
children and children suffering from MPS III A.

Source: Elsa G. Shapiro et al., The Jounal of Pediatrics, 170, 278-284 - Legend: black line is for "normal" children, red line is the average
of rapid progressors (black and blue line with markers are for individual scores).

In the same study, the authors measured the correlation between the decline in brain grey
matter and the development quotient (DQ) and chronological age.

Page - 18
 Fig. 14: Correlation between grey matter and DQ and chronological age

Fig. 15: Source: Elsa G. Shapiro et al., The Jounal of Pediatrics, 170, 278-284

Based on this data and after discussions with the EMA, in 2016, Lysogene launched its own
natural history study using standardised scales:
• For cognitive development, the Bayley Scales of Infant and Toddler Development,
Third Edition (BSID-III), the Vineland scale (VABS-II) and the Sanfilippo Behavior
Rating Scale (“SBRS”).
• The quality of life (parents and children) is measured with the Infant Toddler
Quality of Life Questionnaire (ITQOL), HUI3, MAPI and GHQ13

By combining data from Shapiro et al. and Lysogene study results, Lysogene has a robust control
group to use in its pivotal clinical trial underway.
Natural history Therefore, the endpoints for the AAVance study are:
trial as a control
• Primary endpoint: Change from baseline in development quotient (DQ), compared
group
to regression reported in natural history studies measure with BSID-III or KABC-II
scales

• Secondary endpoints:
 Change from baseline in the total adaptive behaviour composite standard
score as measured by the VABS-II scale

 Change in sleep pattern as measured by the Children's Sleep Habits

Questionnaire (CSHQ).

 Change from baseline in patient quality of life using the Infant and Toddler
Quality of Life (ITQOL) questionnaire.
 Change from baseline in parent quality of life, using the Parenting Stress
Index, 4th Edition (PSI-4).

 Change from baseline in total cortical grey matter volume and white matter
volume on MRI.

Page - 19
 Manufacturing and distribution
The manufacturing difficulties seen with CAR-T therapies have placed a brake on their rapid
commercial success. This is why we consider it important to have a manufacturing process that is
robust and as simple as possible. Lysogene has no manufacturing capabilities and has
Manufacturing is
subcontracted manufacturing to Novasep Henogen.
well under However, Lysogene has developed very strict interim and final quality control procedures, which
control are part of its in-house "know-how".

Fig. 16: LYS-SAF302 manufacturing and distribution cycle

Source: Lysogene

Agreements with Sarepta and Regenxbio

In October 2018, Lysogene signed an agreement with Sarepta covering development,
manufacturing and commercialisation of LYS-SAF302 in specified territories.
Two main Regarding development, Lysogene will be in charge of phase II/III in all territories, and of the
agreements with filing and approval of LYS-SAF302 in Europe while Sarepta will take charge in the US.
Sarepta and
Regenxbio
For commercialisation, Sarepta has received full commercial rights to LYS-SAF302 in the US and
other markets outside Europe, while Lysogene retains full commercial rights in Europe.

Finally, Lysogene has given a non-exclusive license to Sarepta regarding patents outside Europe
and co-exclusive licenses in Europe.

The financial terms of this agreement are:

• An upfront payment of USD10m paid in 2018.

• Up to USD28.25m for R&D investment, USD15.5m of which was paid in 2018.

Page - 20
 • Up to USD50m in milestones for the development of LYS-SAF302.

• Up to USD25m in sales milestones.

• Royalties based on sales realised by Sarepta (high-single digit on our estimates

since the drug had not started pivotal studies when the agreement was signed).
With this agreement, Lysogene is financed until the end of 2021 and will be able to complete
phase III with LYS-SAF302 and the phase I/II for GM101.
With Sarepta Lysogene intends to commercialise LYS-SAF302 in Europe by itself since it does not require a
agreement, significant commercial network, unless a pharmaceutical company is prepared to pay the right
Lysogene is price for the EU rights before going commercial.
financed until
the end of 2021 In addition, Lysogene has signed a worldwide exclusive license agreement with REGENXBIO to
obtain access to the AAVrh10 vector. According to this agreement, Lysogene will pay some
milestones mainly when LYS-SAF302 is filed and approved, for a total consideration of EUR7m.
Since the patent covering AAVrh10 expires in 2022, we do not expect Lysogene to pay any
royalties on LYS-SAF302 future sales.

LYS-SAF302: sales potential close to EUR300m

To estimate sales potential for LYS-SAF302, we have assumed the following:

• Number of existing patients in Western Europe and in the US of 1,000 in each

region.
Significant sales • An incidence of 1/100,000 births with 4 million births/year in the US and 6 million
potential for births/year in Europe.
LYS-SAF302
• A price per treatment of USD1.5 million in the US and EUR1 million in Europe.
• Some recurring R&D costs for register maintenance and some post marketing
clinical activities.
• A low level of SG&A since we estimate that no more than 10-15 sales staff (MSL
and Reps) will be needed.

Page - 21
 Fig. 17: Sales model for LYS-SAF302
USA 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Number of existing
1 000
patients
Number of treatable
500 350 210 105 42 17 7 3 1 0 0 0 0 0
patients
Penetration rate 20% 30% 40% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%
Number of existing
100 120 112 101 40 16 6 3 1 0 0 0 0 0
patients treated
Remaining patients 400 280 168 67 27 11 4 2 1 0 0 0 0 0

Number of births/year
4
(millions)
MS III A incidence 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001%
Number of new
38 38 38 38 38 38 38 38 38 38 38 38 38 38
cases/year
Penetration rate 20% 40% 55% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% 60%
Number of new patients 8 15 21 23 23 23 23 23 23 23 23 23 23 23
treated
Total number of
105 135 133 124 63 39 29 25 24 23 23 23 23 23
patients treated

Price/injection (M$) 1.5

Total US sales (M$) 161 203 199 185 95 58 44 38 36 35 34 34 34 34
Total US sales in Euros

EUROPE 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035
Number of existing
1 000
patients
Number of treatable
500 400 300 195 117 64 29 12 5 2 1 0 0 0
patients
Penetration rate 15% 20% 35% 40% 45% 55% 60% 60% 60% 60% 60% 60% 60% 60%
Number of existing
75 85 119 88 60 40 20 8 3 1 1 0 0 0
patients treated
Remaining patients 425 340 221 133 73 33 13 5 2 1 0 0 0 0

Number of births/year
6
(millions)
MS III A incidence 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001%
Number of new
60 60 60 60 60 60 60 60 60 60 60 60 60 60
cases/year
Penetration rate 10% 15% 25% 45% 55% 65% 65% 60% 60% 60% 60% 60% 60% 60%
Number of new patients
6 9 15 27 33 39 39 36 36 36 36 36 36 36
treated

Price/Injection (M€) 1
Total number of
81 94 134 115 93 79 59 44 39 37 37 36 36 36
patients treated

Total EU sales (M€) 81 94 134 115 93 79 59 44 39 37 37 36 36 36

Total US+EU sales (M€) 228 278 315 284 179 132 99 78 72 69 68 67 67 67
Source: Bryan Garnier & Co estimates

Page - 22
Lysogene kept Based on these assumptions, we derive a full market potential including the EU and the US of
rights for EU and EUR315m which would divide into EUR181m for the US with Lysogene receiving high single-digit
Sarepta has the royalties and EUR134m of sales booked by the company in Europe.
rights outside EU
With sales of USD160m for its first quarter on the US market (Q3 2019), Zolgensma (SMA)
demonstrated that gene therapy could be a significant commercial success. In addition, Novartis
stated that it expects at least the same level of sales in Q4 2019. Interestingly, in states with
new-born screening, about 70% of incident patients were treated (vs 25% in states without
screening).

Page - 23
 Part 4: Competitive environment for LYS-SAF302
No real
While no drug is currently on the market for MPS III A, some companies have drugs under
competitors for
development. Two companies, SOBI and Armagen, are developing enzyme replacement therapy
Sanfilippo
treatment
(ERT) while three others are involved in gene therapy, Abeona Therapeutics, Esteve and Orchard
Therapeutics. Regarding gene therapy, it is fair to say that Lysogene is the most advanced
company.

Abeona Therapeutics is engaged in a strategic review process

Abeona has two gene therapy programmes in development for Sanfilippo syndrome: ABO-102 for
MPS III A and ABO-101 for MPS III B. ABO-102 is a potential direct competitor to LYS-SAF302.

ABO-102 is in phase I/II and Abeona uses an AAV9 vector administered through IV infusion. This
route of administration is drug's first weakness due to what we said above regarding the
relatively small amount of AAV9 that crosses the BBB. As such, a high amount of vector needs to
be administered, with potential side effects particularly for the liver since this organ will be
preferentially transduced following IV administration. In addition, this could prompt an issue
regarding manufacturing capacity.
Abeona is the The phase I/II clinical trial Transpher A is in progress and interim results were published in July
most advanced this year. The trial is set to enrol 20 patients six months of age and older and is due to be
company but completed in 2022. Three dosages have been studied in this trial, 5x1012 vg/kg, 1x1013 vg/kg and
using an IV 3x1013 vg/kg. While the concentration of Cerebrospinal Fluid (CSF) heparan sulfate was
formulation
decreased for all three dosages, the highest dose led to the highest decrease, reaching levels
close to the lower limit of quantitation. Fourteen children have received ABO-102 to date.
Eleven of these continue to track according to the natural history of the disease. Three patients
treated early in the disease before any symptoms, are currently tracking within the normal range
but below average. Given their younger age, a longer follow-up is needed.

For this reason, we are not totally convinced by these clinical results.

Page - 24
 Fig. 18: Change in development age in interim results of Transpher A study

Source: Abeona Therapeutics

Abeona entered Moreover, Abeona Therapeutics announced a company strategic review on 3rd September this
in a strategic year "including, but not limited to the partnering of its various clinical and pre-clinical
review process programs, or a sale or merger of the Company, in an effort to unlock the potential of those
assets". The announcement came just before the FDA announced it would not give its green light
to conduct a phase III with another drug in development (EB-101). Therefore, the future of ABO-
102 remains hanging.

We think the programme may no longer be a priority for the company.

Esteve: data from phase I/II not published yet

Esteve is a private Spanish company developing, among other drugs, an AAV9 gene therapy for
MPS III A. The drug is in phase I/II but no data has been released. The group's drug is
administered by an intracerebroventricular injection into the cerebrospinal fluid.

Given the lack of information regarding this drug it is hard to assess whether it is a true
competitor to LYS-SAF302 but if it is, it is also lagging somewhat.

Orchard Therapeutics: too early to be a threat.

Orchard is developing OTL-201 for which the first clinical trial (phase I/II?) is expected to start
by the end of this year after being postponed in 2018.

The technology is an ex vivo autologous lentiviral gene therapy in which the patient's own stem
cells (autologous) are taken from the patient and genetically corrected outside of the body (ex-
vivo) with a lentiviral vector carrying a functioning copy of the missing or faulty gene. The
genetically corrected cells are then transplanted back into the body so that they can produce
the missing SGSH enzyme.

Page - 25
 The early stage of this programme and the lack of human data prevent it from being a serious
competitor to Lysogene yet.

Enzyme replacement therapy

The other alternative for treating MPS III A is to administer the lacking enzyme (SGSH). One issue
is that patients would have to be treated chronically over their entire life.

Two companies remain involved in this field after Shire discontinued its programme.
Enzyme The first one is Armagen developing AGT-184. This drug has not started clinical trials yet and it is
replacement difficult to assess its efficacy/safety and therefore its commercial potential.
therapy is a
chronic
The second company is SOBI with SOBI003, which is a chemically modified variant of recombinant
treatment human sulfamidase. It is administered as a weekly IV infusion.

A phase I/II started in August 2018. It is an open label study to assess dose-related safety,
tolerability, PK and PD.

However, in June 2019, SOBI decided to divest this programme due to the strategic realignment
of its R&D.

In all, the ERT approach has no real serious candidate today to compete with LYS-SAF302.

Page - 26
 Part 5: LYS-GM101 is another high-potential asset
LYS-GM101 to
While LYS-SAF302 is the main drug in development, Lysogene also has two other main gene
treat another
therapy programmes underway. The first (and most advanced) one is LYS-GM101 for GM1
CNS lysosomal
storage disease
gangliosidosis treatment while the second is for Fragile X syndrome. Since the latter is in the
early discovery stage we have not included it in this report or in our model.

GM1 gangliosidosis: another lysosomal storage disease

This disease is another lysosomal storage disease and is characterised by a deficiency of the
enzyme ß-galactosidase. This deficiency in enzyme activity entails an accumulation of toxic
substrates, in particular GM1 ganglioside, in the tissues, particularly in the CNS.
Fully owned by The disease can be classified into three major types based on the age at which signs and
Lysogene symptoms first appear.
• Type I or infantile form: signs and symptoms usually become apparent by the age
of six months. Infants with this form of the disorder typically appear normal until
their development slows and muscles used for movement weaken. Affected
infants eventually lose the skills they had previously acquired and may develop
an exaggerated startled reaction to loud noises. As the disease progresses,
children with GM1 gangliosidosis type I develop an enlarged liver and spleen
(hepatosplenomegaly), skeletal abnormalities, seizures, profound intellectual
disability, and clouding of the cornea with a gradual loss of vision as the retina
gradually deteriorates. An eye abnormality called a cherry-red spot, which can be
identified with an eye examination, is characteristic of this disorder. In some
Three types of cases, affected individuals have distinctive facial features that are described as
GM1 "coarse," enlarged gums (gingival hypertrophy), and an enlarged and weakened
gangliosidosis heart muscle (cardiomyopathy). Individuals with GM1 gangliosidosis type I usually
do not survive past early childhood.

• Type II late infantile and juvenile form: this consists of intermediate forms of the
condition. Children have normal early development, but they begin to develop
signs and symptoms of the condition between the age of 18 months (late infantile
form) and 5 years (juvenile form). They experience developmental regression but
usually do not have cherry-red spots, distinctive facial features, or enlarged
organs. Type II usually progresses more slowly than type I, but still causes a
shortened life expectancy. People with the late infantile form typically survive
into mid-childhood, while those with the juvenile form may live into early
adulthood.

• Type III or adult form: this is the mildest end of the disease spectrum. The age at
which symptoms first appear varies, although most affected individuals develop
signs and symptoms in their teens. The characteristic features of this type include
involuntary tensing of various muscles (dystonia) and abnormalities of the spinal
bones (vertebrae). Life expectancy varies.

Page - 27
 The prevalence of GM1 gangliosidosis is estimated to be about 500 patients in Europe and 600 in
the US.
Fig. 19: Incidence and prevalence of GM1 gangliosidosis

Early infantile Late infantile Juvenile Adult Total GM1

(50%) (20%) (20%) (10%) population

Life expectancy (years) 4 10 30 40

US birth prevalence
19.7 9.8 7.9 2.0 39
(1/100 000 live births)

EU28 birth prevalence

25.4 12.7 10.2 2.5 51
(1/100 000 live births)

US point prevalence 79 98 236 78.6 491

EU point prevalence 104 127 305 102 638

Source: Company data

LYS-GM101 targets the three forms

Lysogene is developing a gene therapy using the same AAV serotype as for LYS-SAF302 to treat
the three forms of the disease. The AAVrh10 vector contains the GLB1 gene coding for the β-
galactosidase (ß-gal) enzyme, driven by a CAG promoter.
Fig. 20: Construction of LYS-GM101

Source: Lysogene

GM1 The drug is administered by the intracisternal route i.e. directly into the cerebrospinal fluid.
gangliosidosis
Lysogene intends to start phase I/III by mid-2020. This clinical trial will be an adaptive trial with
may three forms
two stages. There will be no interruption between Stage 1 (phase 1-2) and Stage 2 (pivotal
phase) and the patients who have enrolled in Stage 1 will continue for two years while Stage 2 is
initiated. For Stage 2, some patients will be added. It is expected that Stage 1 will enrol six
patients with a primary objective to look at safety but also efficacy. Stage 2 will enrol
approximately 12 patients.

Page - 28
 Axovant and PassageBio are the only serious competitors identified
Regarding competition, Biostrategies LC is developing an enzyme replacement therapy, which is
in a preclinical stage and the Swiss company Dorphan has a chaperones approach also in the
preclinical stage.
GM1 The most serious competitor is Axovant (part of the Roivant group), which is developing a gene
gangliosidosis therapy based on the AAV9 vector, AXO-AAV-GM1, which is administered by IV infusion. Axovant
may three forms will use the same design of an adaptive trial as Lysogene and the trial should start in Q4 2019.
Results for the phase I/II part of the trial are expected mid-2020. It remains to be seen whether
the disadvantage of using IV AAV9 vector may finally prevent Axovant from being a real threat to
Lysogene in this indication.

PassageBio is another potential competitor (USD225m raised since its launch) developing AAV
vector for GM1 gangliosidosis. It expects to start clinical trials in 2020.

Sales potential close to EUR260m and 100% for Lysogene

Leaving For modelling purposes, we have assumed that Lysogene will commercialise LYS-GM101 alone
significant sales both in Europe and the US. Our main assumptions are the following:
for LYS-GM101
• A total number of existing patients estimated at 1,000 equally distributed
between Europe and the US.

• An incidence of 1/150,000 births

• A list price of USD1.5m in the US and EUR1m in Europe.

• A maximum penetration rate of 50% due to potential competition from Axovant

drugs and before understanding what could be the real penetration rate of gene
therapies in general.
• A launch in 2025.

Page - 29
 Fig. 21: Sales model for LYS-GM101
USA 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
Number of existing
500 400 280 168 84 42 21 11 5 3 1 1
patients
Penetration rate 15% 20% 30% 40% 50% 50% 50% 50% 50% 50% 50% 50%
Number of existing
75 85 102 95 71 36 18 9 4 2 1 1
patients treated
Remaining patients 425 340 238 143 71 36 18 9 4 2 1 1

Number of births/year
4
(millions)
GM1 incidence 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001%

Number of new cases/year 25 25 25 25 25 25 25 25 25 25 25 25

Penetration rate 15% 20% 30% 40% 50% 50% 50% 50% 50% 50% 50% 50%
Number of new patients
4 5 8 10 13 13 13 13 13 13 13 13
treated

Total number of patients

79 90 110 105 84 48 31 22 17 15 14 13
treated
Price/injection (M$) 1.5

Total US sales (M$) 118 135 164 158 126 73 46 32 26 22 21 20

Total US sales in Euros 107 123 149 144 115 66 42 29 23 20 19 18

EUROPE 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
Number of existing
500 425 340 255 166 99 55 27 14 7 3 2
patients
Penetration rate 10% 15% 25% 35% 40% 45% 50% 50% 50% 50% 50% 50%
Number of existing
50 68 96 100 75 50 31 15 8 4 2 1
patients treated
Remaining patients 450 383 287 189 112 62 31 15 8 4 2 1

Number of births/year
4
(millions)
GM1 incidence 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001% 0,001%

Number of new cases/year 40 40 40 40 40 40 40 40 40 40 40 40

Penetration rate 10% 15% 25% 40% 50% 50% 50% 50% 50% 50% 50% 50%
Number of new patients
4 6 10 16 20 20 20 20 20 20 20 20
treated

Total number of patients

54 74 106 116 95 70 51 35 28 24 22 21
treated
Price/injection (M€) 1

Total EU sales (M€) 54 74 106 116 95 70 51 35 28 24 22 21

TOTAL US+EU sales (M€) 161 196 255 260 209 136 92 65 51 44 41 39
Source: Source: Bryan, Garnier & Co estimates.

Page - 30
 Part 6: Significant upside potential
To value Lysogene, we have undertaken a sum of the parts valuation of the two main projects in
development described in this report, LYS-SAF302 and LYS-GM101.
A valuation of The FV derived from this method works out to EUR11/share (or EUR144m).
the company of
EUR11/share LYS-SAF302: valuation of EUR5.6/share
Based on the sales model described above, we have made additional assumptions:

• Since the project is just starting its phase III, we have assumed a 30% PoS
(conservative approach)

• Lysogene is to market the drug in Europe and will therefore will have to invest in
Valuation of
a commercial infrastructure. We estimate the annual cost of this at about EUR6m.
EUR260m for • Lysogene is to receive milestone payments: 1/USD50m (EUR44m) in R&D
LYS-SAF3202 milestones that we split equally between 2020 and 2021, 2/USD25m (EUR22m) in
commercial milestones. We have split them as follows: EUR4.5m when the first
sales are generated (2022), and arbitrarily, EUR9m in 2023 and 2026.
• Royalties on sales generated by Sarepta (outside the EU), for which we have
We apply a PoS estimated a rate of 9% (high-single digit) since the agreement was signed before
of 30% entering the pivotal stage.
• We have maintained R&D expenses of EUR2m/year relative to post-marketing
activities like financing of some small academic clinical trials, congresses etc.

• Some milestones to be paid to REGENX Bio according to the agreement signed.

Since the patent for AAVrh10 vector expires in 2022, we do not consider any
additional royalties after this date.

Page - 31
 Fig. 22: LYS-SAF302 valuation (no PoS applied)
(EURm) 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Revenues 93 109 148 129 100 83 62 47 42 40
COGS -8 -9 -13 -12 -9 -8 -6 -4 -4 -4
R&D -3 -2 -5 -5 -5 -3 -3 -3 -3 -3 -3 -3
SG&A -3 -3 -3 -4 -5 -7 -7 -7 -7 -7 -7 -7
Milestones from Sarepta 3 14 23 9 9
Royalties from Sarepta 17 17 14 9 5 4 3 3 3 3
Milestones to Regenx Bio -2 -3 -2
EBIT -3 7 97 98 123 106 89 65 32 28 26 25
Taxes -2 -29 -30 -37 -32 -27 -20 -14 -10 -8 -8
Cash Flow -3 5 68 69 89 74 63 46 32 23 19 18
Discounted CF (WACC of 15%) -3 4 51 45 49 37 27 17 11 6 5 4
Terminal value 0

Sum of Discounted CF 253

+ Discounted Terminal Value 0
= Net Present Value 253
Valuation per share (EUR) 18.6
Source: Bryan, Garnier & Co estimates.

Applying our PoS of 30%, we derive a valuation of EUR76m or EUR5.6/share for LYS-SAF302 for
Lysogene.

LYS-GM101 deserves a valuation of EUR2.7/share

EUR3/share for The main assumption for the product is that Lysogene will market this worldwide (mainly US and
LYS-GM101 with Europe). For this reason, despite Lysogene possibly using the same commercial network in
a PoS of 15% Europe, it will have to build one in the US and therefore, SG&A costs are more or less the same
as for LYS-SAF302.

Page - 32
 Fig. 23: LYS-GM101 valuation (no PoS applied)
(EURm) 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Revenues 161 196 255 260 209 136 92
COGS -16 -20 -26 -26 -21 -14 -9
R&D -3 -3 -3 -2 -2 -2 2 -2 2 -2 2 -2
SG&A -3 -3 -3 -3 -10 -10 -10 -10 -10 -10 -10 -10
EBIT -6 -6 -6 -5 -12 133 165 218 222 176 111 71
Taxes -40 -49 -65 -67 -53 -33 -21
Cash Flow -6 -6 -6 -5 -12 93 115 152 155 123 77 50
Discounted CF (WACC of 15%) -6 -5 -5 -3 -7 46 50 57 51 35 19 11
Terminal value 0

Sum of Discounted CF 243

+ Discounted Terminal Value 0
= Net Present Value 243
Valuation per share (EUR) 18
Source: Bryan, Garnier & Co estimates

Applying our PoS of 15% we obtain at a valuation of EUR2.7/share

A global valuation of EUR144m or EUR11/share

In addition to the value of the two projects described above, we should not forget the potential
Rare Paediatric Disease Priority Voucher (or PRV) the company could obtain with the approval of
LYS-SAF302 in the US. This PRV could be sold to another pharmaceutical company. While the
deals set up in 2017 showed a price range for the PRV between USD125m and USD150m, we have
chosen to stay on the safe side and have retained a value of USD80m or EUR72m (based on the
recent deal between Kyowa/Ultragenyx and an undisclosed buyer).
Since the PRV would be obtained in the US where LYS-SAF302 was out-licensed to Sarepta, we
have assumed that the PRV ownership will be split 50/50 between the two companies leading to
EUR36m for Lysogene and a present value of EUR27m.
Finally, assuming this PRV is sold in 2022 and applying our PoS of 30% for the project, we
estimate its current value at EUR8m or EUR0.6/share for Lysogene.

Page - 33
Fig. 24: Lysogene waterfall valuation chart

12

10

LYS-SAF302 LYS-GM101 Voucher for LYS-SAF302 Cash Lysogene

Source: Bryan, Garnier & Co estimates

Intentionally left blank

Page - 34
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