Tengion IPO Unspectacular – What Do Investors Want?

Aaron Saenz

Apr 14, 2010

Biotech firm Tengion (NASDAQ: TNGN) went public on April 9th, and while the IPO didn't hit any major snags, it was smaller than most had originally envisioned. While the original plan for an IPO was expected to raise around $40 million (4.4 million shares at $8-10), Tengion ended up raising just $30 (6 million shares at $5). Tengion is focused on regenerative medicine and is the major private developer of the organ technologies created by Dr. Anthony Atala at Wake Forest. In other words, Tengion is in the business of growing you new organs. It's the sort of technology investors should be chomping at the bit to get a piece of, but initial trading has shown little interest in Tengion. Is this IPO a sign that the organ production business isn't generating the interest we expect or is it just a reflection of the economy or Tengion's business prospects?

Tengion's IPO was handled by Leerink Swann and Piper Jaffray, firms with experience in the field, but with smaller names than Goldman Sachs, Bank of America, etc. The somewhat steady price of the stock may indicate that the boutique firms actually picked the right offer for Tengion, though it's still early to say if the IPO was over or under priced.

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Perhaps the more important question is if the $30 million raised will be able to satisfy Tengion's need for capital and launch it into real production. The biotech firm has several promising technologies in clinical trials including a neo-urinary conduit (phase I), and replacement bladder (phase II). Both are grown from a patient's cells. If Tengion can actually get these products to market they will be light-years ahead of everyone else. Growing you a new bladder? C'mon that's just freakin' amazing.

It may take a while for Tengion to move out of clinical trials and into real sales. (Judging from Atala's research, I'd say this looks like a question of when, not if.) Whether or not that will translate to a huge upswing in stock prices is probably dependent on what other technologies emerge in the same time frame. We've seen procedures for stem cell organ replacement that may be available soon. Hopefully the influx of capital will propel Tengion forward, letting it reach the potential we've seen in it for years. Growing new organs in a lab may not have generated the investment excitement at IPO, but there's still strong signs that Tengion is going to make big waves in the years to come.

[image credits: Tengion, Google Finance]
[source: Tengion, Google Finance, NYTimes]

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