Washington Editor

Tengion Inc., which is developing a pipeline of regenerative medicine products, raised $33 million in a Series C round to fund Phase II trials of its lead product Neo-Bladder Augment and the development of other autologous organs and tissues in the genitourinary and cardiovascular systems.

To date, the East Norriton, Pa.-based firm has raised $122 million in venture financing.

In two Phase II trials, Tengion is studying its autologous neo-bladder construct in 10 pediatric patients with bladder impairment or failure due to spina bifida and 10 adult patients with bladder ailments caused by spinal cord injuries, said Gary Sender, chief financial officer for the firm.

The company anticipates completion of the Phase II pediatric study in the second half of 2008, he told BioWorld Today. The firm still is enrolling participants in its adult trial, Sender noted, adding that both studies are being conducted in the U.S.

Tengion holds the licensing rights to develop and market neo-organs and neo-tissues based on technology developed by Anthony Atala, director of Wake Forest University's Institute for Regenerative Medicine in North Carolina, Sender said. Atala developed and patented the technology while he was at Children's Hospital Boston, the pediatric teaching hospital for Harvard University.

Based on positive five-year follow-up results of seven pediatric patients who received the neo-bladder construct at Children's Hospital Boston, Sender said, Tengion "has reason to be optimistic" about its Phase II study results. The long-term results, which were reported in April 2006 in The Lancet, showed there were no rejections of the neo-bladder in the seven children and no serious adverse events.

The neo-bladder constructs for Tengion's Phase II studies are being developed at the firm's pilot manufacturing facility in North Carolina using healthy cells taken from a small biopsy of each patient's failing bladder, Sender explained. The company's scientists isolate urothelial and smooth muscle cells that are capable of regeneration, also called committed progenitor cells.

Cells are grown for about eight weeks until there is a sufficient quantity and then placed onto a biodegradable scaffold shaped like a bladder, he noted. The patient's surgeon then implants the scaffold into the patient. The body uses the neo-bladder construct to regenerate and integrate new tissue, restoring the bladder's functionality.

Tengion is working closely and collaboratively with the FDA to bring its neo-bladder construct "to a population in great need of this technology" as soon as possible, Sender said.

He noted that the bladder reconstruction technique currently used, augmentation cystoplasty, involves risky surgery where a piece of the patient's intestine is removed to build a new bladder.

But, Sender said, that surgical technique, which has changed very little since the 19th century, frequently leads to serious and long-term adverse effects, including chronic diarrhea and short bowel syndrome.

In addition, he said, the epithelial lining of the intestine has absorptive and secretive properties far different from those of the epithelial lining of the bladder.

For instance, Sender said, the bladder lining acts as a nonabsorptive and nonsecreting urinary barrier, whereas intestinal tissue absorbs urine, which can lead to chronic metabolic acidosis.

Mucus secreted from the intestinal segment grafted into the bladder also can create blockage of the urethra and lead to frequent urinary tract infections, he added.

Tengion's Neo-Bladder Augment, Sender said, "holds the promise of providing a new bladder" without the serious adverse effects related to standard augmentation cystoplasty surgery.

Tengion, he said, also is pursuing development of additional autologous neo-organs and neo-tissues, including its Neo-Vessels and Neo-Kidneys.

That latest round of financing included new investor Deerfield Partners, of New York, along with the firm's current investors Bain Capital LLC, of Greenwich, Conn.; HealthCap, of Stockholm, Sweden; Quaker BioVentures, of Philadelphia; Oak Investment Partners, of Westport, Conn.; L Capital Partners, of New York; and Johnson & Johnson Development Corp., the venture capital subsidiary of New Brunswick, N.J.-based Johnson & Johnson.

The round also included equity investments from the company's current lenders Horizon Technology Finance LLC, of Farmington, Conn., and Oxford Finance Corp., of Alexandria, Va.

Other financings news:

• Akela Pharma Inc., of Montreal, said it plans a U.S. public offering of 5.3 million shares of common stock. The Canadian company expects the IPO to price between $6 and $8. The firm said it plans to list its shares on the Nasdaq Stock Market under the symbol "AKLA." The company said it expects to raise about $29.2 million after underwriting discounts and expenses from the IPO. The company's lead product is a rapid-acting inhaled drug for the treatment of breakthrough cancer pain. The firm's pipeline also includes therapeutics for asthma, chronic obstructive pulmonary disease, growth hormone deficiencies and controlled substance-abuse deterrent formulations.

• Mendel Biotechnology Inc., of Hayward, Calif., said it completed a financing round in which ZBI Ventures, the private equity investment arm of New York-based Ziff Brothers Investments, Capricorn Investment Group, of Greenwich, Conn., and CFM became new investors in the firm. Mendel did not disclose the amount of the financing. In connection with those investments, a ZBI representative will be joining the company's board. Mendel also said Monsanto has made an additional investment in the company. The firm said it will be using the proceeds to support the growth of its new BioEnergy seeds and feedstock business and the further development of its core technology platforms. The company also may use a portion of the proceeds to repurchase shares from existing share and option-holders, thereby restructuring the shareholder base of the company.

• Rules-Based Medicine Inc., of Austin, Texas, said it has raised $25 million in Series A financing. Equity Group Investments LLC, of Chicago, led the investment round, joined by Cross Creek Capital, of Salt Lake City, and Stephens Capital Partners, of Little Rock, Ark. The company said the financing will provide growth capital, debt repayment and funding for acquisitions and investments to discover and validate biomarkers for medical diagnostics. In conjunction with the funding, the firm also announced that Matt Zell, managing director of EGI, has joined its board of directors.