Exhibit 99

Report
by the Chairman of the Board of Directors
(Article 117 of the French Law on financial security, Article 225-37, Paragraph 6 of theCode de Commerce)

Preparation and organization of the activities of the Board of Directors



Transgene is directed by a Board of Directors currently consisting of nine members. The Directors are appointed for four- year terms. Each Director
must hold at least one share of the Company.

As
it currently stands, the Board of Directors has five independent directors.

The
NASDAQ Stock Market (on which Transgene is listed) has adopted new rules, pursuant to the regulations laid down by the Securities and Exchange Commission (SEC) in accordance with the
Sarbanes-Oxley Law, and which define, in particular, criteria for non-independence of a director. Although those criteria are close to the ones listed by the Viennot and Bouton Reports,
application of which is recommended to French companies, certain differences exist. The Board has therefore decided to instigate reasoned application of both families of criteria, and has entrusted
the compensation and nomination committee with the task of examining the situation of each Director accordingly. That work is in progress.

There
are no directors elected by the employees to the Board of Directors. Two employees, one of whom represents employees at the staff level
(cadres), represent theComité d'entreprise(a mandatory committee under French Labor Law
comprised of representatives of employees and management) and attend the meetings of the Board of Directors.

In
addition to the auditors, who take part in most of the meetings of the Board, the following also attend all of the meetings: the Chief Executive Officer (CEO), the Chief Financial
Officer, and the Director of Legal Affairs who acts as secretary for the Board. In addition, the Board regularly hears the Vice-Presidents of Medical and Regulatory Affairs, of Research,
of Pharmaceutical Development and of Business Development, on the progress and major events of their activities, as well as certain project managers on the progress of their work.



The Board of Directors met four times in 2003, with an average attendance of 85% of the Directors. Attendance fees are paid, after each meeting, only to the
independent directors who have attended the meeting.

The
Board of Directors has decided to adopt an internal code of rules for its functioning which are in the process of being drawn up. A memorandum to the directors and senior executives
of the Company recalls their obligations as regards any action they take on the Company's securities, with respect both to the French regulations and the American rules, due to the fact that the
Company's securities are listed both on theNouveau Marché(Paris New Market) and on the Nasdaq. By way of example, they may make
transactions on the securities of the Company only if at least 48 hours have elapsed since the release of information on the financial statements of the Company or of any other important
information. NASD has adopted new rules including corporate governance standards applicable to issuers listed on the NASDAQ. They must, in particular, establish a code of ethics for all directors,
executive officers and employees. The Board has decided to establish such a code, which will be made publicly available pursuant to the NASD rules.

The Board of Directors is assisted by two committees:

Theaudit committeeconsists of three independent directors and of one
non-voting member representing the majority shareholder who does. The Chief Financial Officer is requested at each

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meeting
to present the financial information of the Company and to answer questions from the committee.

The
committee is responsible for advising the Board of Directors on financial and accounting issues, in particular as regards the financial statements, their auditing and compliance with
the bookkeeping standards, the choice of the auditors and internal auditing and control. In addition, the audit committee supervises the cash investment policy. The audit committee met six times
during the last financial year (four physical meetings and two telephone meetings), with at least two members being present at each of those sessions. The audit committee operates under a charter that
is regularly revised and adapted to accommodate changes in corporate governance practices.

The
committee has regularly reported to the Board of Directors and made recommendations.

Thecompensation and nomination committeeconsists of two independent directors.

It
is responsible for proposing to the Board of Directors the compensation and bonuses, as well as stock options, of the senior executives and key people in the Company. It meets and
optionally deliberates through telephone conferences as and when necessary; it met twice in 2003. The Board has also assigned to the committee the task of selecting and proposing applicants for the
offices of Director, and of examining the situation of each director with respect to independence criteria.

Restrictions on the powers of the Managing Director

The Chairman of the Board (President) of Transgene also assumes the duties of Managing Director (Directeur
Général) pursuant to theCode de Commerce, and no restriction has been put on the powers
attributed to him by law.

Internal control procedures

As of the early years of its existence, the Company put in place a set of operating procedures, in particular as regards committing financial and human resources,
thereby contributing to creating a control-oriented environment. As it has developed, the Company has changed its objectives and methods of control, in particular with a view to keeping its main
financial resource (its cash available) under control, and to ensuring that it complies with the regulatory requirements as a biopharmaceutical company.

After
recalling the objectives of internal control in any organization, this chapter of the present report lists the specific responses provided by the Company.

Objective and definition of internal control

Internal control is a process implemented by the General Management and the staff of an organization, to provide reasonable assurance that the following
objectives are reached:



The players in and contributors to internal control 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 optimizing the Company's operations. The audit committee is party to the process
of internal control, in particular as regards the Company's financial disclosures. To this end, it is informed, before each quarterly, half-yearly, and yearly publication, of the Group's
financial statements and of the discussion accompanying them.

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The
Scientific Advisory Committee

Transgene
convenes two meetings per year of a Scientific Advisory Committee made up in 2003 of seven high-caliber scientific personalities, assigned the task of examining the
research programs and strategy in order to take a critical look at them as well as outsider perspective. Two Directors are also members of the Scientific Advisory Committee, ensuring communication
between the two bodies.

Clinical
Advisory Committee

Transgene
convenes two Clinical advisory committee meetings per year, each of which brings together seven members of the medical community. The committee meetings are assigned the task
of examining the clinical development programs and strategy for candidate products in order to take a critical look at them and to contribute to alternatives to developing those products.

Management
committee (Codir)

The
Codir, led by the CEO, meets monthly, brings together the ten members of the management team, and minutes of it are systematically drawn up. It assesses the progress of the Company,
checks, in all aspects of management, that the progress plan and the assigned objectives are complied with, and debates on all of the organization and operational strategy issues put on the agenda by
its members. In addition, a report is issued monthly to the President, highlighting all of the salient points and warnings relating to the activity.

The
"projects" organization

Transgene
is organized in function departments who operate together under a strong "project" organization. The focuses of Applied research, product research and development, and
subcontracting programs are managed as projects, each project having a project manager and reporting schedules. The project manager is in charge of coordinating, leading, and optimizing the various
cross-department tasks necessary for the success of the project. The project manager establishes a development plan and a schedule, and issues a monthly report with milestones reached and warnings.
Each project is allocated resources (manpower) and the time spent on it is monitored through time statements filled in by all of the researchers and technicians of the company. A project steering
committee (Copil) meets regularly in order to collect all elements relevant to take major decisions concerning each project. The progress of each project and the warnings in the event of difficulties
are stated in a monthly report sent to the members of the management committee and of the Copil.

The
control-oriented environment in the pharmaceuticals industry

Research
and development, pre-clinical trials, clinical trials, premises and equipment, manufacturing and marketing for therapeutic products are subject to very comprehensive
regulations developed by numerous governmental authorities in France, in Europe, in the United States, or in other countries. The European Medicines Agency (EMEA), theAgence
Française de Sécurité Sanitaire des Produits de Santé(AFSSAPS), the Food and Drug Administration (FDA) in the
United States, and others require compliance with strict regulations for manufacturing, developing, and marketing products such as the ones that Transgene develops. Pharmaceutical facilities are
regularly inspected by such bodies, to identify defaults and determine the appropriate corrective actions.

In
this environment of strict control, the internal control organization must be capable of ensuring that standards are complied with. To this end, the Company has set up a quality
assurance department whose aim is to satisfy the regulatory requirements of quality and safety of human-use pharmaceutical products. It has developed an extensive documentary system of
procedures, instructions, and dockets, which it maintains strictly (in terms of issuance, modifications and deletions). In June 2003, 1,305 applicable documents were listed. The assurance
quality department regularly audits the system in order to verify that it complies with Good Manufacturing Practices, and regularly monitors changes in the applicable regulations.

In
the field of clinical trials, Transgene complies with the Good Clinical Practices of the International Conference on Harmonization or with the national regulations, if they are
stricter. An

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employee
of the medical department is specifically in charge of the quality of clinical operations and conducts audits on the documentation and on the application of procedures, and also gives advice
to the members of the management team. The quality assurance department also commissions audits of clinical trials.

Insurance
and coverage for risks

In
order to outsource a portion of the financial burden of operational risks, the Company has put in place a policy of coverage for the main insurable risks with guarantee amounts that
it considers to be compatible with its cash consumption requirements.

Determining priority risks and processes

Transgene considers certain operational and financial risks as being significant, either by their probability of occurrence, or by their impact on the Company.
They are the subject of the following procedures:



The
strategic data of the Company is backed up essentially by procedures for separate archiving, duplication and storage, using the existence of two distinct and distant sites making it
possible to limit the risk of total loss. A data preservation commission, which operates under the authority of the Chief Financial Officer is in charge of studying whether the procedures are matched
to the needs of the Company. By way of example, the work of this commission has led to prioritization being established for backing up documents containing strategic medical data.



The
batches of finished, and semi-finished products, and the cell or viral seed banks are stored in deep freezers that are secured with alarms connected to the security post.
Surveillance of the site is performed by a security guard 24 hours a day.

As
regards the critical initial biological materials (viral constructions made on the Strasbourg site), an instruction exists that aims to collect samples of those constructions every
three months and to store them in two deep freezers located on different premises. A database for the samples is kept by the quality assurance department. In 2003, the Company purchased a mobile
electricity generator serving, pursuant to detailed emergency instructions, to mitigate a prolonged power shut down which might put the backup deep freezer at risk. Transgene intends to reinforce
these procedures by a campaign to heighten the awareness of researchers in 2004.



Cash
flow constitutes the main financial asset of the Company. The controls put in place aim to ensure that the invested funds are used well and are secure, and they are, in particular,
as follows:



Other accounting and financial procedures

The Group establishes consolidated annual accounts to French and American generally accepted accounting principles (GAAP), and individual accounts for Transgene
S.A. The Group prepares consolidated half-yearly accounts to French GAAP that are subjected to limited review by the auditors. In addition, non-audited consolidated accounts to
American GAAP are published quarterly. The

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consolidation
process does not present any particular complexity insofar as the consolidation perimeter includes Transgene S.A. and its sole fully-owned subsidiary Transgene, Inc. A quarterly
management report makes it possible to analyze the corporate and consolidated data.

The
reference documents filed annually with the French and American market regulatory authorities, and the publications of the financial statements in the B.A.L.O.
(Bulletin des Annonces Légales Obligatoires[Bulletin of Obligatory Legal Announcements]) are drawn up jointly by
the Chief Financial Officer and by the Director of legal affairs. They are reviewed by the legal advisers and the auditors of the Group.

Conclusion:it is important to note that, while it is a small company (166 employees), Transgene has put in place an extensive internal
control organization and procedures, in particular with regard to its pharmaceutical activity. This report addresses the main aspects of that internal control in summary manner. It is part of a
continuous approach to assessing the effectiveness of the main procedures that will aim to supplement information to shareholders in future reports.

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