Medtronic Backs Struggling Bio Company

Tengion, Inc., a clinical-stage biotechnology company based in Pennsylvania, is raising $31.4 million through definitive agreements with its investors-including Fridley-based Medtronic.

Fridley-based Medtronic, Inc., is among several investors that have entered into definitive agreements with Tengion, Inc., to help the struggling startup raise $31.4 million.

Under the agreements, Norristown, Pennsylvania-based Tengion will sell 11.1 million shares of its common stock to the investors and will issue warrants to purchase 10.5 million additional shares-which will be exercisable for a period of five years from the date of their issuance at a price of $2.88 per share.

Tengion will net $31.4 million from the transaction and plans to use the money to fund research and development activities, to repay debt, and for working capital and other general corporate purposes.

As part of its investment, Medtronic has secured a right of first refusal on Tengion's Neo-Kidney Augment, which extends through October 31, 2013.

The Neo-Kidney Augment is being developed to delay or prevent the need for dialysis or transplantation in patients at risk for kidney failure. It uses a patient's own cells to augment or replace renal function for patients with chronic renal failure.

Tengion has also applied the technology behind its Neo-Bladder Augment for the treatment of neurogenic bladder, and its Neo-Urinary Conduit-an implant that is intended to catalyze regeneration of native-like bladder tissue for bladder cancer patients who require a urinary diversion following bladder removal.

Tengion, which went public in April 2010, has struggled in recent months and previously stated that it only had enough cash to fund its operations into April 2011. Last month, the company announced that negotiations about a possible sale were terminated and it would need to either secure a sale transaction or alternative financing through a partnership or an equity investment, or wind down its operations.

The company posted a net loss of $6.7 million, or 54 cents per share, for the quarter that ended in September-the most recent period for which data is available. Since its inception in 2003, the company's net loss has totaled $156.9 million.