Tengion's recently completed, $30 million initial public stock offering will help support an ongoing Phase I trial of its Neo-Urinary Conduit biologic-device product.

The company bills itself as "the only regenerative medicine company focused on discovering, developing, manufacturing, and commercializing a range of replacement organs and tissues, or neo-organs and neo-tissues."

By going public April 9 with an offering of 6 million shares at $5 each, the firm netted $26 million, after expenses. But the offering priced lower than Tengion originally anticipated. In March, the firm forecast an offering price of $8-$10 each. To help compensate, the firm increased the size of the offering from an originally planned 4.4 million shares. Even so, the net was reduced from an original estimate of around $35 million.

About $6 million of the IPO funds are tabbed for the Phase I trial of the Neo-Urinary Conduit; another $6 million will go toward preclinical R&D for the firm's kidney-focused Neo-Kidney Augment ; $3 million is tabbed for R&D facilities; the balance will be used for working capital.

Neo-Organ Opportunity Still Latent

Tengion's business model rests on a made-to-order manufacturing process in which a patient's own cells are combined with a biodegradable scaffold. The result is an implantable product intended to stimulate the body to augment or replace the function of a diseased or removed organ.

In a 2007 interview with "The Gray Sheet," CEO Steven Nichtberger stressed that while many applications of regenerative medicine remain a distant goal, Tengion's focus on using a patient's own cells make relatively near-term revenues a more realistic possibility (¹ [A#01330420011]). Nonetheless, the challenges to entering this new space remain considerable.

The company conducted two Phase II clinical trials for its Neo-Bladder Augment , intended to supplement bladder function in patients with neurogenic bladder dysfunction. But in early 2009, FDA placed a hold on that trial program in response to two serious adverse events.

The agency released the hold later in the year, but Tengion decided to refocus on the Neo-Urinary Conduit instead. The firm initiated its Phase I FDA trial last month.

To make the conduit neo-organ, Tengion isolates progenitor cells from a patient's fat biopsy sample and grows the cells on a tubular scaffold. The product is designed to divert urine to an ostomy bag in bladder cancer patients whose bladder has been removed. The current standard of care, which uses a segment of a patient's bowel tissue as a conduit, is associated with significant adverse events.

The urinary conduit targets a market about 10-times larger than that of the Neo-Bladder Augment, Tengion says.

Kidney, Blood Vessel Products Also In The Works

The firm also has an active earlier-stage product pipeline. At the top of the list is the Neo-Kidney Augment, designed to prevent or delay dialysis or kidney transplants by improving renal function in patients with advanced chronic kidney disease. The IPO proceeds will support a large animal study expected to start in the first half of this year.

Tengion's earlier stage targets also include a system designed to regenerate native esophagus and intestinal tissue ( Neo-GI Augment ) and one to regenerate blood vessels for use as vascular grafts ( Neo-Vessel Replacement ).

But moving forward on these and other projects will require more funding. Following the downsized IPO, Tengion says it has enough capital to last through March 2011, but not to complete the ongoing urinary conduit trial. Since its 2003 inception, the firm has spent more than $90 million on R&D, and as of Dec. 31 it had $22.3 million in debt. Tengion generated a net loss of $29.8 million last year.

- David Filmore ( ² d.filmore@elsevier.com )

Tengion Goes Public: IPO For Neo-Organ Firm Is Smaller Than Projected

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