Case memo question: Should Tengion prioritize Augment or Conduit as its lead product?
Tengion is a relatively new biotech company which focuses its efforts in building regenerative medicine. This is a niche field that seeks to promote the creation of new cells and tissue to repair or replace tissue or organ function lost due to age, disease, damage, or congenital defects. In late 2008 Tengion management faces a difficult dilemma. In light of the financial crises, the company needs to manage cash burn by prioritizing its R&D efforts. CEO Nichtberger needs to recommend to the board which of two promising new medical treatments to keep developing while placing the other on hold. In comparing the two options, a host of factors need to be…show more content… This was a less complicated than the procedure of removing bowel tissue, but required a tissue biopsy and required an invasive procedure under general anesthesia. Production cost for Augment was around $15000 to $20000. FDA would give priority in approval to Augment an “orphan” status since the study population was small and involved mainly children.
In contrast, production of Conduit required only a single needle extraction of healthy fat tissue. There were reduced chances of contamination and errors since it was a single stage manufacturing process as opposed to Augment’s two cell process. Manufacturing cost for Conduit was $10,000 which was cheaper than Augment. There were more patients available for clinical trial and easier endpoints to show to the FDA as compared to Augment. Also, partnership with Uro-oncologists would make FDA approval easy because of their experience in FDA clinical trials. Tengion was also highly optimistic about the clinical trial success of Conduit after its successful implantation in dog. Tissue implantation procedures showed greater equivalence across animals and humans as compared to drugs.
According to the market survey report, there was high acceptance amongst physicians to use Augment (approximately 69%) instead of the current procedure in market. The modal patient for Augment procedure was only 12 years and hence would easily be reimbursed by payers. The median cost was $ 22,000 and there would be a functioning