Staff Writer

Tengion Inc. plans to fund clinical trials of its lead product Neo-Bladder using $21 million raised in a Series C financing round that was reopened to new and existing investors.

The round, which initially closed in 2007, completed a second closing that included new investor Safeguard Scientifics Inc.

Gary Sender, chief financial officer at Tengion, told BioWorld Today that the company now is positioned financially to advance Neo-Bladder "well into Phase III."

The product uses a bladder-shaped scaffold to grow new bladders using a patient's own (autologous) cells.

Once a large number of cells have replicated, the neo-bladder is sent to a surgeon to be inserted into the patient's body.

The body recognizes the neo-bladder as an early stage organ, which is able to function and mature over six to 12 months.

As it grows, the "scaffold" consisting of biomaterial eventually dissolves, similar to the way that sutures are absorbed in the body.

According to Tengion, the current therapy for urinary bladder reconstruction, known as augmentation cystoplasty, dates back to the 1890s and is associated with acute and chronic risks and complications.

East Norriton, Pa.-based Tengion is not aware of any other company with a late-stage product that uses an autologous approach to regenerate new organs.

The company hopes that its regeneration platform will be used to cure - rather than treat - organ and tissue failure, without the need for donor transplants and related therapies that can have side effects.

The company also has preclinical programs designed to grow new blood vessels and new kidneys.

The Neo-Bladder, currently in Phase II testing, has completed a trial in children who have spina bifida and neurogenic bladder, a condition in which the nerves of the urinary system do not function properly. Data from that trial are expected in the first part of 2009.

A second Phase II trial of the Neo-Bladder is ongoing in adults who have spinal cord injuries and neurogenic bladder. That trial is expected to wrap up in the next couple of months, and it could take another two months to compile the data, Sender said.

The company is working with the FDA's office of cellular and gene therapy in the center for biologics in the hope of filing a biologics license application for Neo-Bladder.

In addition, a second-generation Neo-Bladder product for patients who have had their bladder removed is expected to enter the clinic next year.

Tengion also named Gary J. Kurtzman, vice president and managing director of Safeguard Scientifics' Life Sciences Group, to its board of directors.

Tengion's full roster of current institutional investors - Bain Capital LLC, Johnson & Johnson Development Corp., Deerfield Partners, Quaker BioVentures, Oak Investment Partners, HealthCap and L Capital Partners - also participated in the financing round, along with Safeguard Scientifics.

In connection with that receipt of additional equity capital, Tengion restructured a portion of its venture debt, which the company said will improve its cash position next year.

Tengion's financing comes amid tough economic times that have caused capital to dry up for many firms, including biotechs. Sender said that investors generally seem to be focusing on products with a comfortable risk profile and those that address an unmet need. In Tengion's case, it helped that the Neo-Bladder, the subject an April 2006 article in The Lancet, already had been used in people, adding a level of safety and predictability with the product, he said.

He also said that investors seem less interested in products that show a modest improvement and are more keen on those that may provide a real breakthrough.

The company has raised nearly $145 million since its Series A round.

In other financing news,

• Arete Therapeutics Inc., of Hayward, Calif., has closed the final tranche of its Series A financing. Frazier Healthcare Ventures and Alta Partners co-led the $16.7 million tranche, which also included existing investors Burrill & Co., Three Arch Partners and Altitude Life Science Ventures. The financing completes the Series A round, bringing the total amount raised to date to more than $51 million. The company expects to initiate a Phase II trial in the first quarter of 2009 using AR9281 for the treatment of metabolic syndrome. The company is focused on soluble epoxide hydrolase, an enzyme for the metabolism of arachidonic acid that plays an essential role in metabolic, inflammatory and cardiovascular physiology.

• Knopp Neurosciences Inc., of Pittsburgh, completed a $6.6 million financing as a result of its current investors exercising Series B2 warrants. The funding raises the company's total capitalization to $27 million. Investors participating in the recent round include Saturn Partners II and Kramer Capital Partners. Proceeds from the offering will be used to advance Knopp's discovery research targeting mitochondrial mechanisms of neurodegeneration and to complete an ongoing Phase II study of KNS-760704 in amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig's disease or Charcot's sclerosis. "In a challenging financial time, we're pleased that our investors recognized our progress to date and our prospects for continued rapid milestone attainment," said Michael Bozik, president and CEO of Knopp. The company also said it completed enrollment in its Phase II safety and tolerability study of KNS-760704 in ALS patients, with 102 patients randomized across 20 U.S. study centers.

• SciClone Pharmaceuticals Inc., of Foster City, Calif., said that Silicon Valley Bank will provide the company's operating subsidiaries a $6 million debt financing. The revolving line-of-credit facility will be used to provide additional working capital to support SciClone's growth. The bank line permits borrowing up to $6 million for a term of 36 months. The company is considering a partner for Phase III development of its thymalfasin (Zadaxin) as a potential treatment for stage IV melanoma. As of Sept. 30, prior to that financing, SciClone's cash, cash equivalents and short-term investments totaled $24.4 million. (See BioWorld Today, Nov. 18, 2008.)