Emerging Drug Developer: Tengion

For most up-and-coming biotech companies, just getting a therapeutic candidate through a proof-of-concept trial and into a licensing deal is a big enough challenge to consume all of their planning skills. For Tengion, though, the bar has been raised significantly higher.

Two small mid-stage trials for Tengion’s neo-bladder--new bladders grown from the seeds of a patient’s cells to replace defective bladders in children with spina bifida and spinal injuries--are being mounted as the company is putting the finishing touches on a manufacturing facility that can do all the planting and harvesting of new organs.

There really wasn’t much choice. When you’re breaking brand new ground, there’s no one out there looking to subcontract the work. And to hear its executives talk, Tengion wouldn’t have it any other way.

“We decided early on that the ability to manufacture our own product would be a key value driver,” says Gary Sender, the company’s CFO.

In order to finish its manufacturing facility in Pennsylvania as it pushed into mid-stage trials, Tengion recently unveiled a $33 million Series C, bringing its total VC take to $122 million in less than three years. By just about any standards, that has to reflect a lot of investor enthusiasm for their science as well as the medical need involved.

Any time there’s an interruption in the spinal cord’s messaging system, bladders go on the blink. Bladders signal when it’s time to empty and brains signal the bladder when to contract. Break the body’s communications system, and the bladder keeps contracting, building up the muscles in the bladder until it loses its pliability. Urine refluxes back into the kidney, which causes renal failure.

Currently, physicians treat this condition by making a new bladder from a section of the bowel.

The biotech company is taking its cue from the research work of Anthony Atala, director of the Wake Forest Institute of Regenerative Medicine, whose frustration with the medical procedure for replacing bladders spurred his interest in finding a better way to treat patients. Tengion’s method involves taking a patient’s own cells and seeding them on a biodegradable scaffold. The neo-bladders that grow up in the manufacturing facility are implanted in the patient and continue to grow into a fully functioning replacement.

There are a number of research projects underway to grow replacement parts for the body, but Tengion’s program is further advanced in clinical trials and Sender is quick to note that bladders are a lot simpler to grow than, say, new heart muscles.

“The technology is ready for the bladder today,” says the CFO. But Tengion is also looking ahead to tomorrow.

Researchers in the company have two preclinical programs in play for cardiovascular ailments as well as for kidney disease. In the kidney program, scientists are working on using Tengion’s technology to augment the existing kidney to restore renal function. Sender notes that a patient only needs to have 10 percent of their normal kidney function to get off of dialysis, so treating patients won’t require a full organ replacement.

When it’s time to start commercializing its first product, provided it can satisfy the FDA’s demands, Tengion plans to stick with its go-it-alone strategy inside the U.S. Only a couple of hundred physicians in the U.S. handle bladder replacement surgeries, says Sender, which will make it relatively easy to coordinate marketing. Outside the U.S., Sender says the company is likely to line up licensing partners for the technology.

Sender says it’s still too early to try and put a price tag on a new bladder, but he adds that there is a simple way to view valuation in these cases.

“What will one hospital pay another hospital for an organ?” is the central question, says Sender. For a kidney, that can be $50,000. A heart-lung transplant will cost a hospital $125,000 for the organs alone. So the numbers can work out to Tengion’s advantage.

And the numbers have been good enough to keep new investors coming in, most recently as Deerfield Partners jumped in to lead the Series C round. Bain Capital co-led the last round.

Sender is quick to acknowledge that Tengion will need more money to get through Phase III trials. But he isn’t giving much away in terms of how Tengion will get the money.

“We’ll go for the best and cheapest cost of capital,” says Sender.

Spoken like a true chief financial officer.