Medtronic Inc. (NYSE:MDT) is hot on technology that could coax the body into producing its own replacement kidney.
The Fridley, Minn.-based medical device maker revealed its 17 percent stake and a right of first refusal to purchase technology made by (NSDQ:Tengion Inc.) in regulatory filings April 13.
The East Norriton, Pa.-based company is developing a pipeline of cell- and tissue-based regenerative medicine treatments. Tengion first went public almost exactly a year ago, but its stock failed to gain traction until early this year, forcing it to seek more backing ’ hence the Medtronic deal.
Tengion says its products are “designed to allow patients to have functioning organs and tissues regenerated from their own cells.” Early clinical trials showed some success in rebuilding bladder tissue in children with spina bifida; Tengion hoped to use those results as a spring board toward a suite of regenerative products.
But an underwhelming initial public offering, $10 million shy of its $40 million estimate, forced Tengion to alter its strategy. Company officials even considered an outright sale until its share price began to show traction in February, leading them to spike the sale plan and audible into a private placement with Medtronic and HealthCap, a Swedish venture capital firm. Tengion said it intends to use the net proceeds to develop its Neo-Urinary Conduit and Neo-Kidney Augment programs.
Medtronic put $7 million in the company, good for about 4.3 million shares, according to regulatory filings. The deal also includes a right of first refusal to “license, sale, assignment, transfer or other disposition by us of any material portion of intellectual property (including patents and trade secrets) or other assets related to our Neo-Kidney Augment program,” according to the filings. And Dr. Richard Kuntz, MDT’s chief scientific, clinical and regulatory officer, sits on Tengion’s board.
Medtronic will hold the rights to buy Tengion’s kidney assets until the end of October 2013. It’s a short bet (for short money) that Tengion will come up aces with a potentially disruptive technology in the robust kidney failure market. More than 500,000 U.S. patients a year are treated for some kind of renal failure, stemming from chronic illnesses such as diabetes and hypertension. That number is expected to grow considerably as the population in the U.S. continues to get older and heavier.
Outgoing Medtronic CEO William Hawkins told MassDevice last October that the company is involved in a number of partnerships with smaller companies like Tengion that have the potential to create breakthrough technologies, mentioning regenerative medicine as a particular focus.
That’s because regenerative medicine fits into Medtronic’s ultimate goal of moving from “palliative care to restorative care,” Hawkins told us, noting a number of partnerships aimed at furthering those technologies.
“With regenerative medicine, at some point we’re going to find ways of being able to implant cells, use our technology to deliver those cells to a target and be able to regenerate viable tissue, versus just treating the systems,” he said. “There are a number of areas like that we’re exploring.”
Medtronic has about $300 million in minority investments, Hawkins said, spread over areas of strategic interest.