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… Conduit did not enjoy the same kind of popularity amongst physicians as a procedure of choice like Augment did. According to the market survey report, there was low acceptance amongst physicians to use Conduit product (approximately 37%) instead of the current Conduit procedure in market. This was due to the fact that there wasn’t enough data on the new Conduit procedure to entice payers to reimburse and it would require atleast 3 to 5 years of data showing no unforeseen complication. Also, the modal patient for Conduit was 68 years which was very high as compared to Augment. Hence there was skepticism amongst payers regarding the additional healthcare care costs that might incur in the future. Moreover, the current conduit available in the market incurred virtually no cost to payers whereas the new procedure would prove to be expensive. In addition to the above, with the introduction of the Conduit procedure by Tengion, the physicians would have to be trained by Tengion which could meet some resistance.
If Conduit were to be pursued ahead of Augment by Tengion, then the first phase studies would not require any additional investment. But once they made it to phase II and phase III trials, they would require more than 100 patients. This would necessitate expansion of manufacturing facility at Pennsylvania by raising capital of about $ 2 million in addition to the cost of managing the clinical trials. On the other hand, pursuing Augment
