10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

OR

 [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 001-34688

Tengion, Inc.
(Exact name of registrant as specified in its charter)
Delaware	20-0214813
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3929 Westpoint Boulevard, Suite G Winston-Salem, NC 27103	(336) 722-5855
(Address of principal executive offices)	(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes x    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer, as defined in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o Accelerated filer  o Non-accelerated filer  o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.

Yes o    No  x

As of May 7, 2012, there were 24,665,818 shares of the registrant’s common stock outstanding.

TENGION, INC.

FORM 10-Q

INDEX

Part I.  Financial Information

Item 1.	Financial Statements (unaudited)
	Balance Sheets	1
	Statements of Operations	2
	Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)	3
	Statements of Cash Flows	5
	Notes to  Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	23
Part II.  Other Information
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	25
Signature Page		26

NOTE REGARDING COMPANY REFERENCES

Throughout this report, "Tengion", the "Company," "we," "us" and "our" refer to Tengion, Inc.

NOTE REGARDING TRADEMARKS

Tengion® and the Tengion logo® are our registered trademarks and Tengion Neo-Urinary Conduit™, Tengion Neo-Kidney™, Tengion Neo-Kidney Augment™, Tengion Neo-Vessel™, Tengion Neo-Vessel Replacement™, Tengion Neo-Bladder Replacement™, Neo-Bladder Augment™, Tengion Organ Regeneration Platform™ and Organ Regeneration Platform™ are our trademarks. Other names are for informational purposes only and may be trademarks of their respective owners.

- i -

PART I.                      FINANCIAL INFORMATION

Item 1.                                Financial Statements.

TENGION, INC.

(A Development-Stage Company)

 Balance Sheets

(in thousands, except per share data)

(unaudited)

	December 31, 2011			March 31,  2012
ASSETS
Current assets:
Cash and cash equivalents, including $1,194 of cash at December 31, 2011 and March 31, 2012, collateralizing letters of credit (Note 14)	$	9,244		$	7,349
Short-term investments		6,066			1,517
Prepaid expenses and other		408			450
Total current assets		15,718			9,316
Property and equipment, net of accumulated depreciation of $12,622 and $12,752 as of December 31, 2011 and March 31, 2012, respectively		1,021			888
Other assets		1,078			1,069
Total assets	$	17,817		$	11,273
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	2,205		$	2,363
Current portion of lease liability		739			721
Accounts payable		829			546
Accrued compensation and benefits		2,354			837
Accrued expenses		437			578
Warrant liability		2,511			3,034
Total current liabilities		9,075			8,079
Long-term debt		2,782			2,172
Lease liability		943			813
Other liabilities		2			4
Total liabilities		12,802			11,068
Commitments and contingencies (Note 14)		—			—
Stockholders’ equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; zero shares issued or outstanding at December 31, 2011 and March 31, 2012, respectively		—			—
Common stock, $0.001 par value; 90,000 shares authorized; 23,814 and 24,495 shares issued and outstanding at December 31, 2011 and  March 31, 2012, respectively		24			25
Additional paid-in capital		235,235			235,373
Deficit accumulated during the development stage		(230,244	)		(235,193	)
Total stockholders’ equity		5,015			205
Total liabilities and stockholders’ equity	$	17,817		$	11,273

The accompanying notes are an integral part of these financial statements.

- 1 -

TENGION, INC.

(A Development-Stage Company)

 Statements of Operations

(in thousands, except per share data)

(unaudited)

	Three Months Ended March 31,						Period from July 10, 2003 (inception) through March 31,
	2011			2012			2012
Revenues	$	—		$	—		$	—
Operating expenses:
Research and development		3,345			2,694			120,551
General and administrative		1,776			1,381			43,274
Depreciation		1,127			136			23,288
Impairment of property and equipment		—			—			7,371
Other expense		942			48			1,753
Total operating expenses		7,190			4,259			196,237
Loss from operations		(7,190	)		(4,259	)		(196,237	)
Interest income		14			7			8,519
Interest expense		(272	)		(174	)		(15,063	)
Change in fair value of warrant liability		419			(523	)		15,975
Net loss	$	(7,029	)	$	(4,949	)	$	(186,806	)
Basic and diluted net loss attributable to common stockholders per share	$	(0.45	)	$	(0.21	)
Weighted-average common stock outstanding :
Basic and diluted		15,711			23,699

The accompanying notes are an integral part of these financial statements.

- 2 -

TENGION, INC.

(A Development-Stage Company)

 Statements of Redeemable Convertible Preferred Stock

and Stockholders’ Equity (Deficit)

(in thousands, except per share data)

(unaudited)

					Stockholders’ equity (deficit)
	Redeemable convertible preferred stock				Common stock						Additional paid-in			Deferred			Deficit  accumulated during the  development
	Shares		Amount		Shares			Amount			capital			compensation			stage			Total
Balance, July 10, 2003		—	$	—		—		$	—		$	—		$	—		$	—		$	—
Issuance of common stock to initial stockholder		—		—		2,000			2			(2	)		—			—			—
Effect of reverse stock split (see Note 3)		—		—		(1,862	)		(2	)		2			—			—			—
Net loss		—		—		—			—			—			—			(1,032	)		(1,032	)
Balance, December 31, 2003		—		—		138			—			—			—			(1,032	)		(1,032	)
Issuance of Series A Redeemable Convertible Preferred stock at $1.62 per share, net of expenses		18,741		30,126		—			—			—			—			—			—
Conversion of notes payable, including interest		2,203		3,562		—			—			—			—			—			—
Issuance of restricted common stock to employees and nonemployees		—		—		240			1			336			(336	)		—			1
Issuance of common stock to consultants		—		—		140			—			21			—			—			21
Issuance of common stock to convertible noteholders		—		—		93			—			67			—			—			67
Issuance of options to purchase common stock to consultants for services rendered		—		—		—			—			14			(14	)		—			—
Amortization of deferred compensation		—		—		—			—			—			23			—			23
Change in value of restricted common stock subject to vesting		—		—		—			—			11			(11	)		—			—
Accretion of redeemable convertible preferred stock to redemption value		—		1,035		—			—			—			—			(1,035	)		(1,035	)
Net loss		—		—		—			—			—			—			(2,438	)		(2,438	)
Balance, December 31, 2004		20,944		34,723		611			1			449			(338	)		(4,505	)		(4,393	)
Issuance of Series A Redeemable Convertible Preferred stock at $1.62 per share, net of expenses		3,247		5,223		—			—			—			—			—			—
Issuance of restricted common stock to employees and nonemployees at $2.32 per share		—		—		60			—			140			(139	)		—			1
Issuance of warrants to purchase preferred stock to noteholders		—		—		—			—			681			—			—			681
Issuance of options to purchase common stock to consultants for services rendered		—		—		—			—			7			(7	)		—			—
Amortization of deferred compensation		—		—		—			—			—			111			—			111
Accretion of redeemable convertible preferred stock to redemption value		—		3,164		—			—			—			—			(3,164	)		(3,164	)
Net loss		—		—		—			—			—			—			(9,627	)		(9,627	)
Balance, December 31, 2005		24,191		43,110		671			1			1,277			(373	)		(17,296	)		(16,391	)
Issuance of Series B Redeemable Convertible Preferred stock at $1.82 per share, net of expenses		27,637		50,040		—			—			—			—			—			—
Issuance of restricted common stock to employees		—		—		3			—			—			—			—			—
Issuance of common stock upon exercise of options		—		—		4			—			9			—			—			9
Repurchased nonvested restricted stock		—		—		(14	)		—			—			—			—			—
Reclassification of deferred compensation		—		—		—			—			(373	)		373			—			—
Reclassification of warrants to purchase preferred stock		—		—		—			—			(681	)		—			—			(681	)
Stock-based compensation expense		—		—		—			—			400			—			—			400
Accretion of redeemable convertible preferred stock to redemption value		—		5,640		—			—			—			—			(5,640	)		(5,640	)
Net loss		—		—		—			—			—			—			(20,873	)		(20,873	)
Balance, December 31, 2006		51,828		98,790		664			1			632			—			(43,809	)		(43,176	)
Issuance of Series C Redeemable Convertible Preferred stock at $1.82 per share, net of expenses		18,333		33,219		—			—			—			—			—			—
Issuance of common stock upon exercise of options		—		—		16			—			60			—			—			60
Repurchased vested restricted stock		—		—		(5	)		—			(94	)		—			—			(94	)
Stock-based compensation expense		—		—		—			—			664			—			—			664
Accretion of redeemable convertible preferred stock to redemption value		—		8,742		—			—			—			—			(8,742	)		(8,742	)
Net loss		—		—		—			—			—			—			(30,988	)		(30,988	)
Balance, December 31, 2007		70,161	$	140,751		675		$	1		$	1,262		$	—		$	(83,539	)	$	(82,276	)

The accompanying notes are an integral part of the financial statements.

- 3 -

TENGION, INC.

(A Development-Stage Company)

 Statements of Redeemable Convertible Preferred Stock

 and Stockholders’ Equity (Deficit) – (continued)

(in thousands, except per share data)

 (unaudited)

							Stockholders’ equity (deficit)
	Redeemable convertible preferred stock						Common stock					Additional paid-in			Deferred		Deficit accumulated during the development
	Shares			Amount			Shares			Amount		capital			compensation		stage			Total
Balance, December 31, 2007		70,161		$	140,751			675		$	1	$	1,262		$	—	$	(83,539	)	$	(82,276	)
Issuance of Series C Redeemable Convertible Preferred stock at $1.82 per share, net of expenses		11,793			21,352			—			—		—			—		—			—
Issuance of common stock upon exercise of options		—			—			8			—		28			—		—			28
Repurchased vested restricted stock		—			—			(1	)		—		—			—		—			—
Stock-based compensation expense		—			—			—			—		1,317			—		—			1,317
Accretion of redeemable convertible preferred stock to redemption value		—			11,754			—			—		—			—		(11,754	)		(11,754	)
Net loss		—			—			—			—		—			—		(42,393	)		(42,393	)
Balance, December 31, 2008		81,954			173,857			682			1		2,607			—		(137,686	)		(135,078	)
Issuance of common stock upon exercise of options		—			—			20			—		54			—		—			54
Stock-based compensation expense		—			—			—			—		855			—		—			855
Accretion of redeemable convertible preferred stock to redemption value		—			14,059			—			—		—			—		(14,059	)		(14,059	)
Net loss		—			—			—			—		—			—		(29,845	)		(29,845	)
Balance, December 31, 2009		81,954			187,916			702			1		3,516			—		(181,590	)		(178,073	)
Issuance of common stock upon exercise of options		—			—			32			—		14			—		—			14
Accretion of redeemable convertible preferred stock to redemption value		—			3,993			—			—		—			—		(3,993	)		(3,993	)
Conversion of preferred stock to common stock		(81,954	)		(191,909	)		5,652			5		191,904			—		—			191,909
Conversion of preferred stock warrants to common stock warrants		—			—			—			—		123			—		—			123
Proceeds from initial public offering, net of expenses		—			—			6,000			6		25,721			—		—			25,727
Stock-based compensation expense		—			—			—			—		953			—		—			953
Net loss		—			—			—			—		—			—		(25,600	)		(25,600	)
Balance, December 31, 2010		—			—			12,386			12		222,231			—		(211,183	)		11,060
Proceeds from equity financing, net of expenses		—			—			11,079			11		28,930			—		—			28,941
Issuance of warrants to purchase common stock issued in connection with equity financing		—			—			—			—		(16,947	)		—		—			(16,947	)
Issuance of common stock upon exercise of options		—			—			187			1		82			—		—			83
Issuance of restricted stock to employees		—			—			311			—		—			—		—			—
Cancellation of restricted stock to employees		—			—			(149	)		—		—			—		—			—
Issuance of warrants to purchase common stock in connection with debt financing		—			—			—			—		105			—		—			105
Stock-based compensation expense		—			—			—			—		834			—		—			834
Net loss		—			—			—			—		—			—		(19,061	)		(19,061	)
Balance, December 31, 2011		—			—			23,814			24		235,235			—		(230,244	)		5,015
Issuance of common stock upon exercise of options		—			—			19			—		8			—		—			8
Issuance of restricted stock to employees		—			—			679			1		(1	)		—		—			—
Cancellation of restricted stock to employees		—			—			(17	)		—		(4	)		—		—			(4	)
Stock-based compensation expense		—			—			—			—		135			—		—			135
Net loss		—			—			—			—		—			—		(4,949	)		(4,949	)
Balance, March 31, 2012		—		$	—			24,495		$	25	$	235,373		$	—	$	(235,193	)	$	205

The accompanying notes are an integral part of these financial statements.

- 4 -

TENGION, INC.

(A Development-Stage Company)

 Statements of Cash Flows

(in thousands)

 (unaudited)

	Three Months Ended March 31,						Period from July 10, 2003 (inception) through March 31, 2012
	2011			2012
Cash flows from operating activities:
Net loss	$	(7,029	)	$	(4,949	)	$	(186,806	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,127			136			23,288
Change in fair value of warrant liability		(419	)		523			(15,975	)
Charge related to lease liability		942			48			1,753
Loss on disposition of property and equipment		—			—			119
Impairment of property and equipment		—			—			7,371
Amortization of net discount on short-term investments		—			—			(149	)
Noncash interest expense		69			30			2,578
Noncash rent (income) expense		(3	)		2			219
Stock-based compensation expense		257			135			5,314
Changes in operating assets and liabilities:
Prepaid expenses and other assets		(748	)		(45	)		(1,673	)
Accounts payable		39			(283	)		587
Accrued expenses and other		(1,070	)		(1,571	)		1,192
Net cash used in operating activities		(6,835	)		(5,974	)		(162,182	)
Cash flows from investing activities:
Purchases of short-term investments		—			—			(324,508	)
Sales and redemption of short-term investments		—			4,548			323,139
Cash paid for property and equipment		(48	)		(3	)		(31,677	)
Proceeds from the sale of property and equipment		—			—			11
Net cash (used by) provided by investing activities		(48	)		4,545			(33,035	)
Cash flows from financing activities:
Proceeds from sales of redeemable convertible preferred stock and warrants, net		—			—			139,960
Proceeds from sales of common stock and warrants, net		29,092			4			54,921
Repurchase of restricted stock		—			—			(94	)
Proceeds from long-term debt, net of issuance costs		4,907			—			39,517
Payments on long-term debt		(7,610	)		(470	)		(31,738	)
Net cash provided by (used in) financing activities		26,389			(466	)		202,566
Net increase (decrease) in cash and cash equivalents		19,506			(1,895	)		7,349
Cash and cash equivalents, beginning of period		11,972			9,244			—
Cash and cash equivalents, end of period	$	31,478		$	7,349		$	7,349

The accompanying notes are an integral part of these financial statements.

- 5 -

Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

(1) Organization and Nature of Operations

Tengion, Inc. (the Company) was incorporated in Delaware on July 10, 2003. The Company is a regenerative medicine company focused on discovering, developing, manufacturing and commercializing a range of neo-organs, or products composed of living cells, with or without synthetic or natural materials, implanted or injected into the body to engraft into, regenerate, or replace a damaged tissue or organ.  Using its Organ Regeneration Platform, the Company creates these neo-organs using a patient’s own cells, or autologous cells.  The Company believes its proprietary product candidates harness the intrinsic regenerative pathways of the body to regenerate a range of native-like organs and tissues. The Company’s product candidates are intended to delay or eliminate the need for chronic disease therapies, organ transplantation, and the administration of anti-rejection medications.  In addition, the Company’s neo-organs are designed to avoid the need to substitute other tissues of the body for a purpose to which they are poorly suited.

Building on its clinical and preclinical experience, the Company is initially leveraging its Organ Regeneration Platform to develop its Neo-Urinary Conduit for bladder cancer patients who are in need of a urinary diversion and its Neo-Kidney Augment for patients with advanced chronic kidney disease. The Company operates as a single business segment. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of product candidate development; technological uncertainty; dependence on collaborative partners; uncertainty regarding patents and proprietary rights; comprehensive government regulations; having no commercial manufacturing experience, marketing or sales capability or experience; and dependence on key personnel.

(2) Management’s Plans to Continue as a Going Concern

The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and has a deficit accumulated during the development stage of $235.2 million as of March 31, 2012. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its therapeutic product candidates currently in development or enters into cash flow positive business development transactions.

Based upon its current expected level of operating expenditures and debt repayment, and assuming it is not required to settle any outstanding warrants in cash, the Company expects to be able to fund its operations to September 2012. The Company intends to pursue additional sources of capital to continue its business operations as currently conducted and fund deficits in operating cash flows. There is no assurance that such financing will be available when needed or, if available, on terms acceptable to the Company. In the event financing is not obtained, the Company could pursue additional headcount reductions and other cost cutting measures to preserve cash as well as explore the sale of selected assets to generate additional funds.If the Company is required to significantly reduce operating expenses and delay, reduce the scope of, or eliminate one or more of its development programs, these events could have a material adverse effect on the Company's business, results of operations and financial condition.

These factors could significantly limit the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

- 6 -

Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

(3) Basis of Presentation and Reverse Stock Split

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, as amended, filed with the Securities and Exchange Commission (SEC). The results of the Company’s operations for any interim period are not necessarily indicative of the results of operations for any other interim period or full year.

A reverse stock split of the Company’s common stock was effective March 24, 2010 at a ratio of one share for every 14.5 shares previously held. All common share and per-share data included in these financial statements reflect such reverse stock split.

(4) Use of Estimates

The preparation of financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

(5) Net Loss Attributable to Common Stockholders Per Share

Basic and diluted net loss attributable to common stockholders per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding. For all periods presented, the outstanding shares of common stock options and restricted stock, and preferred and common warrants have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted-average shares used to calculate both basic and dilutive loss per share are the same.

The following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive:

	Three Months Ended March 31,
	2011		2012
Shares underlying warrants outstanding		10,645,888		10,645,888
Shares underlying options outstanding		1,370,263		2,407,563
Unvested restricted stock		—		759,618

- 7 -

Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

(6) Supplemental Cash Flow Information

The following table contains additional cash flow information for the periods reported (in thousands).

	Three Months Ended March 31,				Period from July 10, 2003 (inception) through March 31,
	2011		2012		2012
Supplemental cash flow disclosures:
Noncash investing and financing activities:
Conversion of note principal to redeemable convertible preferred stock	$	—	$	—	$	3,562
Convertible note issued to initial stockholder for consulting expense		—		—		210
Fair value of warrants issued with issuance of long-term debt		105		—		2,290
Fair value of warrants issued with sale of common stock		16,947		—		16,947
Conversion of redeemable convertible preferred stock into 5,652 shares of common stock		—		—		191,909
Conversion of warrant liability		—		—		123

(7) Short-term Investments and Fair Value of Financial Instruments

As of December 31, 2011 and March 31, 2012, the carrying amounts of financial instruments held by the Company, which include cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued expenses, approximate fair value due to the short-term nature of those instruments. In addition, the carrying value of the Company’s debt instruments, which do not have readily ascertainable market values, approximate fair value, given that the interest rates on outstanding borrowings approximate market rates. See Note 12 for a discussion of fair value of the warrants.

As of December 31, 2011 and March 31, 2012, short-term investments consisted of investments in commercial paper and U.S. government agency and corporate securities of $6.1 million and $1.5 million, respectively. The Company has the ability and intent to hold these investments until maturity and, therefore, has classified the investments as held-to-maturity, which we carry at amortized cost. Due to the short-term nature of these investments, unrealized gains and losses have been deemed temporary and, therefore, not recognized in the accompanying financial statements. Income generated from short-term investments is recorded to interest income.

Fair value guidance requires fair value measurements be classified and disclosed in one of the following three categories:

· Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

· Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

· Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

- 8 -

Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2011 and March 31, 2012 (in thousands).

	Fair value measurement at reporting date using
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
At December 31, 2011:
Assets:
Cash and cash equivalents	$	9,244	$	—	$	—	$	9,244
Short-term investments		6,066		—		—		6,066
	$	15,310	$	—	$	—	$	15,310
Liabilities:
Warrant liability	$	—	$	—	$	2,511	$	2,511
At March 31, 2012:
Assets:
Cash and cash equivalents	$	7,349	$	—	$	—	$	7,349
Short-term investments		1,517		—		—		1,517
	$	8,866	$	—	$	—	$	8,866
Liabilities:
Warrant liability	$	—	$	—	$	3,034	$	3,034

The reconciliation of warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

	Warrant liability
Balance at December 31, 2011	$	2,511
Change in fair value of warrant liability		523
Balance at March 31, 2012	$	3,034

The fair value of the warrant liability is based on Level 3 inputs. For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value. See Note 12 for further discussion of the warrant liability.

(8) Restructuring Expenses

In November 2011, the Company’s Board of Directors approved a restructuring plan designed to fund the Company’s lead development programs through key milestones in 2012, eliminate plans to use its facility in East Norriton, Pennsylvania as a manufacturing center, and centralize its research and development operations in its leased facility in Winston-Salem, North Carolina. The Company has retained a few administrative employees in its facility in East Norriton, Pennsylvania, and is exploring options to significantly reduce the amount of space it currently rents.

The Company offered severance benefits to the terminated employees, and recorded a $1.7 million charge for personnel-related termination costs in the fourth quarter of 2011, of which $0.8 million was included in research and development expense and $0.9 million was included in general and administrative expense in the accompanying statements of operations. The Company expects to complete payment of these severance benefits by September 2012.

- 9 -

Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

The following table summarizes the activity related to accrued severance benefits for the quarter ended March 31, 2012 (in thousands).

	Accrued Severance Benefits
Balance at December 31, 2011	$	1,544
Net Charges paid		(1,056	)
Balance at March 31, 2012	$	488

(9) Lease Liability

The Company entered into an agreement in February 2006 to lease warehouse space effective March 1, 2011, at which time the Company determined it was not likely to utilize the space during the five-year lease term. Therefore, the Company recorded a liability as of March 1, 2011, the cease-use date, for the fair value of its obligations under the lease. The most significant assumptions used in determining the amount of the estimated lease liability are the potential sublease revenues and the credit-adjusted risk-free rate utilized to discount the estimated future cash flows.

In connection with the restructuring described in Note 8, the Company determined it was not likely to utilize substantially all of the leased office and manufacturing space in its East Norriton, Pennsylvania facility during the remainder of the lease term. Therefore, the Company recorded a liability as November 30, 2011, the cease-use date, for the fair value of its obligations under the lease.

The following table summarizes the activity related to the lease liability for the quarter ended March 31, 2012 (in thousands).

	Warehouse space			Office and manufacturing space			Total
Balance at December 31, 2011	$	828		$	854		$	1,682
Charges utilized		(59	)		(137	)		(196	)
Additional charges to operations		23			25			48
Balance at March 31, 2012		792			742			1,534
Less current portion		(227	)		(494	)		(721	)
	$	565		$	248		$	813

(10) Debt

Total debt outstanding consists of the following (in thousands):

	December 31, 2011			March 31,  2012
Working Capital Note	$	5,000		$	4,627
Equipment and Supplemental Working Capital Notes		126			30
Unamortized debt discount		(139	)		(122	)
		4,987			4,535
Less current portion		(2,205	)		(2,363	)
	$	2,782		$	2,172

Working Capital Note

The Company has an outstanding working capital loan (the Working Capital Note) that was utilized to fund working capital needs of the Company. In March 2011, the Company refinanced the outstanding debt owed to its lender of the Working Capital Note. Pursuant to the terms of the refinancing, the Company simultaneously borrowed $5 million and repaid the then outstanding principal amount of $4.5 million. Borrowings under the Working Capital Note are secured by all assets of the Company, except for Intellectual Property and permitted liens that have priority, including liens on equipment subsequently acquired to secure the purchase price or lease obligation, as defined in the loan agreement. The Company was obligated to make interest-only payments through January 2012, followed by 24 monthly payments of principal and interest at an interest rate of 11.75% per annum. In connection with the refinancing, the Company granted a warrant to the lender to purchase 70,671 shares of common stock. The fair value of the warrant issued in connection with the refinancing was $0.1 million, using the Black-Scholes model. See Note 12 for further discussion on warrants.

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Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

The Company recorded interest expense related to the Working Capital Note of $0.2 million and $0.1 million for the three months ended March 31, 2011 and 2012, respectively. The relative fair value of the warrants issued to the lender of the Working Capital Note has been recorded against the carrying value as an original issue discount (OID), which is being amortized as interest expense over the term of the Working Capital Note. The Company recognized a noncash charge to interest expense of $55,000 and $17,000 for the three months ended March 31, 2011 and 2012, respectively, for the amortization of OID.

Equipment and Supplemental Working Capital Notes

In 2005, the Company executed a loan facility with another lender to fund equipment (the Equipment Note) and other asset purchases (the Supplemental Working Capital Note) from July 2005 through December 2010. Borrowings under the Equipment and Supplemental Working Capital Note are secured by equipment, as defined in the loan agreements. As of March 31, 2012, the Equipment Note and the Supplemental Working Capital Note bear interest at an average rate of 11.99% and 13.52%, respectively. The Company will make its final monthly principal and interest payment in April 2012 for each of the Equipment Note and the Supplemental Working Capital Note. The Company recorded interest expense related to the Equipment and Supplemental Working Capital Notes of $26,000 and $2,000 for the three months ended March 31, 2011 and 2012, respectively.

The relative fair value of the warrants issued to the lender of the Equipment and Supplemental Working Capital Notes has been recorded against the carrying value as OID, which is being amortized as interest expense over the term of the Equipment and Supplemental Working Capital Notes. The Company recognized a noncash charge to interest expense of $3,000 and $1,000 for the three months ended March 31, 2011 and 2012, respectively, for the amortization of OID.

(11) Capital Structure

Initial Public Offering

In April 2010, the Company completed its initial public offering, selling 6,000,000 shares of common stock at an initial public offering price of $5.00 per share resulting in gross proceeds of $30.0 million. Net proceeds received after underwriting fees and offering expenses were $25.7 million. In connection with the closing of the initial public offering, all outstanding shares of the Company’s redeemable convertible preferred stock were converted into an aggregate of 5,651,955 shares of common stock, and all outstanding warrants to purchase preferred stock were converted into warrants to purchase 110,452 shares of common stock.

March 2011 Equity Financing

In March 2011, the Company closed a private placement transaction pursuant to which the Company sold securities consisting of 11,079,250 shares of common stock and warrants to purchase 10,460,875 shares of common stock. The purchase price per security was $2.83. The Company received net proceeds of $28.9 million. See Note 12 for discussion of the warrant liability.

In connection with the March 2011 equity financing, the Company filed a registration statement with the SEC for the registration of the total number of shares sold to the investors and shares issuable upon exercise of the warrants and the registration statement was declared effective by the SEC on May 16, 2011. The Company is required to use commercially reasonable efforts to cause the registration statement to remain continuously effective until such time when all of the registered shares are sold or such shares may be sold by non-affiliates without volume or manner-of-sale restrictions pursuant to Rule 144 of the Securities Act and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144. In the event the Company fails to meet certain legal requirements in regards to the registration statement, it will be obligated to pay the investors, as partial liquidated damages and not as a penalty, an amount in cash equal to 1.5% of the aggregate purchase price paid by investors for each monthly period that the registration statement is not effective, up to a maximum aggregate payment of 6% of the purchase price paid by investors, except that if the Company fails to satisfy the current public information requirement pursuant to Rule 144(c)(1), the maximum aggregate payment would be 12% of the purchase price paid by investors. If the Company determines a registration payment arrangement in connection with the securities issued in March 2011 is probable and can be reasonably estimated, a liability will be recorded. As of March 31, 2012, we concluded the likelihood of having to make any payments under the arrangements was remote, and therefore did not record any related liability.

- 11 -

Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

(12) Warrants

We account for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants are accounted for as derivative liabilities under FASB Accounting Standard Codification (ASC) 815, Derivatives and Hedging (ASC 815) if the stock warrants allow for cash settlement or provide for modification of the warrant exercise price in the event subsequent sales of common stock are at a lower price per share than the then-current warrant exercise price. We classify derivative warrant liabilities on the balance sheet as a current liability, which is revalued at each balance sheet date subsequent to the initial issuance of the stock warrant.

The following table summarizes outstanding warrants to purchase common stock as of December 31, 2011 and March 31, 2012:

	Number of shares	Exercise price		Expiration
Equity–classified warrants
Issued to vendors	3,890	$	2.32	September 2015 through December 2016
Issued pursuant to March 2011 refinancing of Working Capital Note	70,671	$	2.88	March 2016
Issued to lenders	64,409	$	23.44	August 2013 through December 2016
Issued to lenders	46,043	$	26.39	October 2015 through September 2019
	185,013
Liability–classified warrants
Issued pursuant to March 2011 equity financing	10,460,875	$	2.88	March 2016
	10,645,888

Equity-classified Warrants

In March 2011, the Company granted a warrant to a lender to purchase 70,671 shares of common stock in connection with the refinancing of the Company’s Working Capital Note. See Note 10 for a discussion of the refinancing. The Company determined the fair value of the warrant as of the date of grant was $1.49 per share by utilizing the Black-Scholes model. In estimating the fair value of the warrant, the Company utilized the following inputs: closing price per share of common stock of $2.74, volatility of 64.96%, expected term of 5 years, risk-free interest rate of 2.0% and dividend yield of zero.

- 12 -

Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

In conjunction with the Working Capital Note, Equipment Note, and the Supplemental Working Capital Note, the Company issued warrants to purchase shares of Series A, B, and C Preferred Stock. Upon the close of the Company’s initial public offering, the preferred stock warrants automatically converted into warrants to purchase 110,452 shares of common stock. Warrants related to the Working Capital Note expire ten years from the date of issuance. Warrants related to the Equipment and Supplemental Working Capital Notes expire the earlier of eight years from the date of issuance or upon acquisition of the Company as defined in the warrant agreement.

Liability-classified Warrants

In March 2011, the Company issued warrants to purchase 10,460,875 shares of common stock in connection with a private placement transaction (see Note 11). Each warrant is exercisable in whole or in part at any time until March 4, 2016 at a per share exercise price of $2.88, subject to certain adjustments as specified in the warrant agreement. The Company valued the warrants as derivative financial instruments as of the date of issuance (March 4, 2011) and will continue to do so at each reporting date, with any changes in fair value being recorded on the Statement of Operations. During the three months ended March 31, 2011 and 2012, the Company recorded non-operating income of $0.4 million and non-operating expense of $0.5 million, respectively, due to changes in the estimated fair value of these warrants. 

The warrants contain provisions that require the modification of the exercise price and shares to be issued under certain circumstances, including in the event the Company completes subsequent equity financings at a price per share lower than the then-current warrant exercise price. In addition, the warrants contain a net cash settlement provision under which the warrant holders may require the Company to purchase the warrants in exchange for a cash payment following the announcement of specified events defined as Fundamental Transactions involving the Company (e.g., merger, sale of all or substantially all assets, tender offer, or share exchange) or a Delisting, which is deemed to occur when the common stock is no longer listed on a national securities exchange. The net cash settlement provision requires use of the Black-Scholes model in calculating the cash payment value in the event of a Fundamental Transaction or a Delisting.

The net cash settlement value at the time of any future Fundamental Transaction or Delisting will depend upon the value of the following inputs at that time: the price per share of the Company’s common stock, the volatility of the Company’s common stock, the expected term of the warrant, the risk-free interest rate based on U.S. Treasury security yields, and the Company’s dividend yield. The warrant requires use of a volatility assumption equal to the greater of (i) 100%, (ii) the 30-day volatility determined as of the trading day immediately following announcement of a Fundamental Transaction or Delisting, or (iii) the arithmetic average of the 10, 30, and 50-day volatility determined as of the trading day immediately following announcement of a Fundamental Transaction or Delisting.

The fair value of the warrants is determined using a risk-neutral lattice methodology within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction or Delisting into the calculation of fair value. The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of the Company’s common stock, assumptions regarding the expected amounts and dates of future equity financing activities, assumptions regarding the likelihood and timing of Fundamental Transactions or a Delisting, the historical volatility of the stock prices of the Company’s peer group, risk-free rates based on U.S. Treasury security yields, and the Company’s dividend yield. Changes in these assumptions can materially affect the fair value estimate. We could, at any point in time, ultimately incur amounts significantly different than the carrying value. For example, as of March 31, 2012, the fair value of $3.0 million exceeded the calculated cash settlement value of $2.3 million. The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability.

- 13 -

Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

The following table summarizes the calculated aggregate fair values and net cash settlement value as of the dates indicated along with the assumptions utilized in each calculation.

	Fair value as of:						Net cash settlement value as of March 31, 2012
	December 31, 2011			March 31, 2012
Calculated aggregate value	$	2,511		$	3,034		$	2,301	(1)
Exercise price per share of warrant	$	2.88		$	2.88		$	2.88
Closing price per share of common stock	$	0.47		$	0.56		$	0.56
Volatility		93.8	%		94.5	%		100.0	%(2)
Probability of Fundamental Transaction or Delisting		28.9	%		28.8	%	Not applicable
Expected term (years)	Not applicable			Not applicable				3.9
Risk-free interest rate		0.7	%		0.8	%		0.8	%
Dividend yield	None			None			None

(1) Represents the net cash settlement value of the warrant as of March 31, 2012, which value was calculated utilizing the Black-Scholes model specified in the warrant.

(2) Represents the volatility assumption used to calculate the net cash settlement value as of March 31, 2012.

(13) Stock-Based Compensation

The Company currently maintains two stock-based compensation plans. Under the 2004 Stock Option Plan (the 2004 Plan), stock awards were granted to employees, directors, and consultants of the Company, in the form of restricted stock and stock options. The amounts and terms of options granted were determined by the Company’s compensation committee. The equity awards granted under the Plan generally vest over four years and have terms of up to ten years after the date of grant, and options are exercisable in cash or as otherwise determined by the board of directors. There are no shares available for future grants under the 2004 Plan, as grants from the 2004 Plan ceased upon the Company’s initial public offering in April 2010.

The 2010 Stock Incentive and Option Plan (2010 Plan) became effective upon the closing of the Company’s initial public offering. Under the 2010 Plan, stock awards may be granted to employees, directors, and consultants of the Company, in the form of restricted or unrestricted stock, stock appreciation rights, cash-based or performance share awards and stock options. The amounts and terms of awards granted are determined by the Company’s compensation committee. The equity awards granted under the Plan generally vest over four years and have terms of up to ten years after the date of grant, and options are exercisable in cash or as otherwise determined by the board of directors. The 2010 Plan allows for the transfer of forfeited shares from the 2004 Plan. As of March 31, 2012, 344,792 shares of common stock were available for future grants under the Plan.

- 14 -

Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

Stock Options

The following table summarizes stock option activity under the Plans:

	Number of shares			Weighted-average exercise price		Weighted-average remaining contractual term (in years)		Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2011		1,746,970		$	1.68		8.9	$	63
Granted		734,751		$	0.60
Exercised		(19,187	)	$	0.44
Forfeited		(54,971	)	$	2.67
Outstanding at March 31, 2012		2,407,563		$	1.34		9.0	$	151
Vested and expected to vest at March 31, 2012		2,209,632		$	1.37		9.0	$	138
Exercisable at March 31, 2012		474,135		$	2.81		7.3	$	23

Total stock-based compensation expense recognized for stock options to employees and non-employee directors for the three months ended March 31, 2011 and 2012 was $0.3 million and $86,000, respectively. As of March 31, 2012, there was $1.0 million of unrecognized compensation expense, net of forfeitures, related to unvested employee stock options and $2,000 of unrecognized compensation expense related to unvested non-employee director stock options. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately 3.5 years.

Total stock-based compensation expense recognized for stock options to non-employees for the three months ended March 31, 2011 and 2012 was immaterial.

The following table summarizes restricted stock activity under the Plans:

	Number of shares		Weighted-average grant date fair value
Nonvested at December 31, 2011	139,779		$	2.42
Granted	678,584		$	0.51
Vested	(51,087	)	$	2.42
Forfeited	(7,658	)	$	2.34
Nonvested at March 31, 2012	759,618		$	0.71

Total stock-based compensation expense recognized for restricted stock to employees for the three months ended March 31, 2012 was $49,000. As of March 31, 2012, there was $0.5 million of unrecognized compensation expense, net of forfeitures, related to unvested employee restricted stock. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately 3.7 years.

- 15 -

Tengion, Inc.

(A Development-Stage Company)

Notes to Financial Statements

(unaudited)

(14) Commitments and Contingencies

Operating Leases

The Company leases office space and office equipment under operating leases, which expire at various times through February 2016. Excluding the lease liability activity described in Note 9, rent expense under these operating leases was $190,000 and $50,000 for the three months ended March 31, 2011 and 2012, respectively. The following table summarizes future minimum lease payments as of March 31, 2012 (in thousands):

2012	$	747
2013		1,016
2014		1,040
2015		1,063
2016		276
Total minimum lease payments	$	4,142

The lease agreement for the Company’s facility in East Norriton, Pennsylvania requires the Company to provide security and restoration deposits totaling $2.2 million to the landlord. The Company has deposited $1.0 million with the landlord as a security deposit, which amount was recorded as a non-current other asset on the Company’s balance sheet as of December 31, 2011 and March 31, 2012. As of March 31, 2012, an outstanding letter of credit is satisfying the remaining restoration deposit obligation of $1.2 million. At the end of the lease term, the landlord has the right to require the Company to utilize the funds collateralizing this letter of credit to restore the facility to its original condition. The letter of credit is collateralized by an account held at the bank. If the bank determines the collateral to be insufficient, the bank has the right to demand additional collateral. If the Company fails to provide additional collateral, the bank has the right to withdraw the letter of credit. In that event, the landlord would have the right to require the Company to deposit cash of up to $1.2 million in an account to satisfy its deposit obligation.

- 16 -

Item 2.                      Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Any statements herein or otherwise made in writing or orally by us with regard to our expectations as to financial results and other aspects of our business may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our future plans, objectives, expectations and intentions and may be identified by words like “believe,” “expect,” “designed,” “may,” “will,” “should,” “seek,” or “anticipate,” and similar expressions. These forward looking statements may include, but are not limited to, statements concerning: (i) our plans to develop and commercialize our product candidates; (ii) our ongoing and planned preclinical studies and clinical trials; (iii) the timing of and our ability to obtain and maintain marketing approvals for our product candidates; (iv) the rate and degree of market acceptance and clinical utility of our products; (v) our plans to leverage our Organ Regeneration Platform to discover and develop product candidates; (vi) our ability to identify and develop product candidates; (vii) our commercialization, marketing and manufacturing capabilities and strategy; (viii) our intellectual property position; (ix) our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; and (x) other risks and uncertainties, including those under the heading “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q , in the section entitled “Risk Factors” in Item IA of Part I of our Annual Report on Form 10-K for the year ended December 31, 2011, as amended, as well as in other documents filed by us with the SEC.

Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, the forward-looking statements contained in this document are neither promises nor guarantees. Our business is subject to significant risks and uncertainties and there can be no assurance that our actual results will not differ materially from our expectations. Factors which could cause actual results to differ materially from our expectations set forth in our forward-looking statements are set forth in the section entitled “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q, in the section entitled “Risk Factors” in Item IA of Part I of our Annual Report on Form 10-K for the year ended December 31, 2011, as amended, as well as in other documents filed by us with the SEC and include, among others: (i) the FDA could place our Neo-Urinary Conduit clinical trial on clinical hold; (ii) patients enrolled in our Neo-Urinary Conduit clinical trial may experience adverse events, which could delay our clinical trial or cause us to terminate the development of the Neo-Urinary Conduit; (iii) we may have difficulty enrolling patients in our clinical trials, including our Phase 1 clinical trial for our Neo-Urinary Conduit; (iv) data from our ongoing preclinical studies, including our proposed GLP program for the Neo-Kidney Augment, may not continue to be supportive of advancing such preclinical product candidates; (v) we may be unable to progress our product candidates that are undergoing preclinical testing, including our Neo-Kidney Augment, into clinical trials and we may not be successful in designing such clinical trials in a manner that supports development of such product candidates; and (vi) we will need to raise additional funds through collaborative arrangements or the issuance of additional equity to execute our business plan beyond September 2012 and such financing may not be available to us or, if available, on terms acceptable to us.

The forward-looking statements made in this document are made only as of the date hereof and we do not intend to update any of these factors or to publicly announce the results of any revisions to any of our forward-looking statements other than as required under the federal securities laws.

Overview

Tengion is a regenerative medicine company focused on discovering, developing, manufacturing and commercializing a range of neo-organs, or products composed of living cells, with or without synthetic or natural materials, implanted or injected into the body to engraft into, regenerate, or replace a damaged tissue or organ.  Using our Organ Regeneration Platform, we create these neo-organs using a patient’s own cells, or autologous cells.  We believe our proprietary product candidates harness the intrinsic regenerative pathways of the body to regenerate a range of native-like organs and tissues.  Our product candidates are intended to delay or eliminate the need for chronic disease therapies, organ transplantation, and the administration of anti-rejection medications.  In addition, our neo-organs are designed to avoid the need to substitute other tissues of the body for a purpose to which they are poorly suited.

Building on our clinical and preclinical experience, we are initially leveraging our Organ Regeneration Platform to develop our Neo-Urinary Conduit for bladder cancer patients who are in need of a urinary diversion and our Neo-Kidney Augment for patients with advanced chronic kidney disease.

- 17 -

Our Neo-Urinary Conduit is intended to replace the use of bowel tissue in bladder cancer patients requiring a non-continent urinary diversion after bladder removal surgery, or cystectomy.  We are able to manufacture our Neo-Urinary Conduit using a proprietary process that takes four weeks or less and uses smooth muscle cells derived from a routine biopsy.  We are currently conducting a Phase 1 clinical trial for our Neo-Urinary Conduit in bladder cancer patients to assess its safety and preliminary efficacy, as well as to translate the surgical implantation procedure utilized in preclinical studies.  This trial is an open-label, single-arm study, which is expected to enroll up to ten patients.  We enrolled our fourth patient in this trial in the first quarter of 2012 and, with this implantation, we and our clinical investigators believe that the surgical technique used successfully in animal models has been translated to this patient.  We intend to discuss with our Data Safety Monitoring Board, or DSMB, a reduction in the timelines between future patient implants, which is currently 12 weeks.  Assuming appropriate safety data, we anticipate that we will complete implantation of up to ten patients by the end of 2012.

Our Neo-Kidney Augment is being developed to prevent or delay dialysis by increasing renal function in patients with advanced chronic kidney disease.  Our Neo-Kidney Augment is based on our proprietary technology, which is expected to use the patient’s cells, procured by a needle biopsy of the patient’s kidney, to create an injectable product candidate that can catalyze the regeneration of functional kidney tissue.  We recently completed a successful Pre-IND meeting with the U.S. Food and Drug Administration (FDA) for the Neo-Kidney Augment. We and the FDA have agreed on a good laboratory practice (GLP) animal study program required to support an Investigational New Drug (IND) filing and initiation of a Phase 1 clinical trial in chronic kidney disease (CKD) patients. We anticipate we will submit an IND filing for the product candidate during the first half of 2013 and that our Phase 1 trial will provide initial human proof-of-concept data in 2014. We also continue to explore moving our Neo-Kidney Augment forward in Europe using the Advanced Therapy Medicinal Products, or ATMP, pathway, an established European regulatory route for advanced cell based therapies.  We intend to aggressively pursue our Neo-Kidney Augment development program.

To date, we have devoted substantially all of our resources to the development of our Organ Regeneration Platform and product candidates, as well as to our facilities that we employ to manufacture our neo-organs. Since our inception in July 2003, we have had no revenue from product sales, and have funded our operations principally through the private and public sales of equity securities and debt financings. We have never been profitable and, as of March 31, 2012, we had an accumulated deficit of $235.2 million. We expect to continue to incur significant operating losses for the foreseeable future as we advance our product candidates from discovery through preclinical studies and clinical trials and seek marketing approval and eventual commercialization.

Cash, cash equivalents and short-term investments at March 31, 2012, were $8.9 million, representing 78.6% of total assets. Based upon our current expected level of operating expenditures and debt repayment, we expect to be able to fund our operations to September 2012. This period will be shortened if there are any significant increases in planned spending on development programs or if we are required to settle any outstanding warrants in cash. We will need to raise additional funds to complete the Phase 1 clinical trial for our Neo-Urinary Conduit and our preclinical research and development activities for our Neo-Kidney Augment. We will need to raise additional funds through collaborative arrangements, public or private sales of debt or equity securities, commercial loan facilities, or some combination thereof. There is no assurance that such financing will be available or, if available, on terms acceptable to us.

In March 2011, we issued warrants to purchase 10,460,875 shares of common stock in connection with a private placement transaction. We valued the warrants as derivative financial instruments as of the date of issuance (March 4, 2011) and will continue to do so at each reporting date, with any changes in fair value being recorded on the Statements of Operations. The warrants contain a net cash settlement provision under which the warrant holders may require us to purchase the warrants in exchange for a cash payment following the announcement of specified events defined as Fundamental Transactions involving the Company (e.g., merger, sale of all or substantially all assets, tender offer, or share exchange) or a Delisting, which is deemed to occur when the common stock is no longer listed on a national securities exchange. As of March 31, 2012, the fair value recorded on our balance sheets of $3.0 million exceeded the calculated net cash settlement value was $2.3 million. We will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability.

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Recent Developments

In April 2012, we announced completion of a Pre-IND meeting with the FDA for the Neo-Kidney Augment. We and the FDA have agreed on a GLP animal study program required to support an IND filing and initiation of a Phase 1 clinical trial in CKD patients. We anticipate we will submit an IND filing for the product candidate during the first half of 2013 and that our Phase 1 trial will provide initial human proof-of-concept data in 2014.

Financial Operations Overview

Research and Development Expense

Our research and development expense consists of expenses incurred in developing and testing our product candidates and are expensed as incurred. Research and development expense include:

· personnel related expenses, including salaries, benefits, travel and other related expenses including stock-based compensation;

· payments made to third-party contract research organizations for preclinical studies, investigative sites for clinical trials and consultants;

· costs associated with regulatory filings and the advancement of our product candidates through preclinical studies and clinical trials;

· laboratory and other supplies;

· manufacturing development costs; and

· facility maintenance.

Preclinical study and clinical trial costs for our product candidates are a significant component of our current research and development expenses. We track and record information regarding external research and development expenses on a per-study basis. Preclinical studies are currently coordinated with third-party contract research organizations and expense is recognized based on the percentage completed by study at the end of each reporting period. Clinical trials are currently coordinated through a number of contracted sites and expense is recognized based on a number of factors, including actual and estimated patient enrollment and visits, direct pass-through costs and other clinical site fees. We utilize internal employees, resources and facilities across multiple product candidates.  We do not allocate internal research and development expenses among product candidates.

The following table summarizes our research and development expense for the three months ended March 31, 2011 and 2012 (in thousands):

	Three months ended March 31,
	2011		2012		Change
Third-party direct program expenses:
Urologic	$	278	$	171	$	(107	)
Renal		464		406		(58	)
Total third-party direct program expenses		742		577		(165	)
Other research and development expense		2,603		2,117		(486	)
Total research and development expense	$	3,345	$	2,694	$	(651	)

From our inception in July 2003 through March 31, 2012, we have incurred research and development expense of $120.6 million. We expect that a large percentage of our research and development expense in the future will be incurred in support of our current and future preclinical and clinical development programs. These expenditures are subject to numerous uncertainties in timing and cost to completion. We expect to continue to test our product candidates in preclinical studies for toxicology, safety and efficacy, and to conduct additional clinical trials for each product candidate. If we are not able to engage a partner prior to the commencement of later stage clinical trials, we may fund these trials ourselves. As we obtain results from clinical trials, we may elect to discontinue or delay clinical trials for certain product candidates or programs in order to focus our resources on more promising product candidates or programs. Completion of clinical trials by us or our future collaborators may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate. The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:

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· the number of sites included in the trials;

· the length of time required to enroll suitable patients;

· the number of patients that participate in the trials;

· the duration of patient follow-up;

· the development stage of the product candidate; and

· the efficacy and safety profile of the product candidate.

None of our product candidates have received FDA or foreign regulatory marketing approval. In order to grant marketing approval, the FDA or foreign regulatory agencies must conclude that clinical data establishes the safety and efficacy of our product candidates. Furthermore, our strategy includes entering into collaborations with third parties to participate in the development and commercialization of our product candidates. In the event that third parties have control over the clinical trial process for a product candidate, the estimated completion date would largely be under control of that third party rather than under our control. We cannot forecast with any degree of certainty which of our product candidates will be subject to future collaborations or how such arrangements would affect our development plan or capital requirements.

As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our development projects or when and to what extent we will receive cash inflows from the commercialization and sale of an approved product candidate.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Management bases these significant judgments and estimates on historical experience and other assumptions it believes to be reasonable based upon information presently available. Actual results could differ from those estimates under different assumptions, judgments or conditions. There were no material changes to our critical accounting policies and use of estimates previously disclosed in our 2011 Annual Report on Form 10-K.

Results of Operations

Comparison of Three Months Ended March 31, 2011 and 2012

Research and Development Expense.  Research and development expense for the three months ended March 31, 2011 and 2012 were comprised of the following (in thousands):

	Three months ended March 31,
	2011		2012		Change
Compensation and related expense	$	1,808	$	1,191	$	(617	)
External services – direct third parties		742		577		(165	)
External services – other		68		216		148
Research materials and related expense		279		315		36
Facilities and related expense		448		395		(53	)
Total research and development expense	$	3,345	$	2,694	$	(651	)

Research and development expense were $3.3 million and $2.7 million for the three months ended March 31, 2011 and 2012, respectively. The decrease in research and development expense for the three months ended March 31, 2012 was primarily due to a reduction in compensation and related expenses resulting from fewer employees as compared to the three months ended March 31, 2011, as well as a reduction in external services related to direct third parties resulting from the termination of the sponsored research agreement with Wake Forest University at the end of 2011.

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General and Administrative Expense. General and administrative expense for the three months ended March 31, 2011 and 2012 were comprised of the following (in thousands):

	Three months ended March 31,
	2011		2012		Change
Compensation and related expense	$	983	$	629	$	(354	)
Professional fees		630		551		(79	)
Facilities and related expense		93		134		41
Insurance, travel and other expenses		70		67		(3	)
Total general and administrative expense	$	1,776	$	1,381	$	(395	)

General and administrative expense was $1.8 million and $1.4 million for the three months ended March 31, 2011 and 2012, respectively. The decrease in general and administrative expense for the three months ended March 31, 2012 was primarily due to a reduction in compensation and related expenses resulting from fewer employees as compared to the three months ended March 31, 2011.

Depreciation Expense. Depreciation expense was $1.1 million and $0.1 million for the three months ended March 31, 2011 and 2012, respectively. The decrease for the three months ended March 31, 2012 was primarily due to the recording during the fourth quarter of 2011 of an impairment charge, which reduced the carrying value of assets at our East Norriton, Pennsylvania facility. The decrease was also due to a change during the second quarter of 2011 in the estimated useful life of leasehold improvements associated with leased laboratory space in Winston-Salem, North Carolina upon the extension of that lease.

Other Expense. Other expense was $942,000 and $48,000 for the three months ended March 31, 2011 and 2012, respectively. During the three months ended March 31, 2011, we recorded a non-cash charge of $0.9 million due to the initial recognition of a lease liability. The liability resulted from a lease agreement entered into in February 2006 that became effective in March 2011 for additional warehouse space that will not be utilized over the lease term.

Interest Income (Expense).  Interest income was $14,000 and $7,000 for the three months ended March 31, 2011 and 2012, respectively. The decrease was primarily due to decreased average cash balances. Interest expense was $0.3 million and $0.2 million for the three months ended March 31, 2011 and 2012, respectively. The decrease was primarily due to lower average debt facility balances outstanding in 2012.

Change in Fair Value of Warrant Liability.  During the three months ended March 31, 2012, we recorded a non-cash charge of $0.5 million on our statements of operations due to an increase in the fair value of the warrant liability for warrants to purchase common stock that were issued in March 2011. The increase in fair value was primarily due to an increase in the price per share of our common stock during the three months ended March 31, 2012. During the three months ended March 31, 2011, we recorded a non-cash credit of $0.4 million on our statements of operations due to a decrease in the fair value of the warrant liability for warrants to purchase common stock that were issued in March 2011. The decrease in fair value was primarily due to a decrease in the price per share of our common stock between the date of issuance of the warrants (March 4, 2011) and March 31, 2011.

Liquidity and Capital Resources

Source of Liquidity

Cash, cash equivalents and short-term investments at March 31, 2012, were $8.9 million, representing 78.6% of total assets. Based upon our current expected level of operating expenditures and debt repayment, we expect to be able to fund our operations to September 2012. This period will be shortened if there are any significant increases in planned spending on development programs or if we are required to settle any outstanding warrants in cash. We will need to raise additional funds to complete the Phase 1 clinical trial for our Neo-Urinary Conduit and our preclinical research and development activities for our Neo-Kidney Augment. We will need to raise additional funds through collaborative arrangements, public or private sales of debt or equity securities, commercial loan facilities, or some combination thereof. There is no assurance that such financing will be available or, if available, on terms acceptable to us.

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We have incurred losses since our incorporation in 2003 as a result of our significant research and development expenditures and the lack of any approved products to generate product sales. We have a deficit accumulated during the development stage of $235.2 million as of March 31, 2012.  We anticipate that we will continue to incur additional losses until such time that we can generate significant sales of our product candidates currently in development or we enter into cash flow positive business transactions. We have funded our operations principally with proceeds from equity offerings and long-term debt. The following table summarizes our equity funding sources as of March 31, 2012:

Issue	Year		Number of Shares		Net Proceeds (in thousands) (1)
Series A Redeemable Convertible Preferred Stock		2004, 2005	1,668,311	(2)	$	38,910
Series B Redeemable Convertible Preferred Stock		2006	1,906,009	(2)		50,040
Series C Redeemable Convertible Preferred Stock		2007, 2008	2,077,635	(2)		54,571
Initial Public Offering		2010	6,000,000			25,721
Private Placement		2011	11,079,250			28,941
			22,731,205		$	198,183

(1) Net proceeds represent gross proceeds received net of transaction costs associated with each equity offering.

(2) Number of shares represents the number of shares of common stock into which each series of preferred stock converted at the time of our initial public offering.

We have also funded our operations through the use of proceeds received from our long-term debt totaling $39.5 million through March 31, 2012, net of issuance costs. We currently have a working capital note with an outstanding principal of $4.6 million as of March 31, 2012, which borrowings were used for our general working capital needs. In addition, we have loans to fund equipment and other asset purchases with outstanding principal of $30,000 as of March 31, 2012.

The lease agreement for the Company’s facility in East Norriton, Pennsylvania requires the Company to provide security and restoration deposits totaling $2.2 million to the landlord. The Company has deposited $1.0 million with the landlord as a security deposit, which amount was recorded as a non-current other asset on the Company’s balance sheet as of March 31, 2012. As of December 31, 2011 and March 31, 2012, an outstanding letter of credit is satisfying the remaining restoration deposit obligation of $1.2 million. At the end of the lease term, the landlord has the right to require the Company to utilize the funds collateralizing this letter of credit to restore the facility to its original condition. The letter of credit is collateralized by an account held at the bank. If the bank determines the collateral to be insufficient, the bank has the right to demand additional collateral. If the Company fails to provide additional collateral, the bank has the right to withdraw the letter of credit. In that event, the landlord would have the right to require the Company to deposit cash of up to $1.2 million in an account to satisfy its deposit obligation.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities for the three months ended March 31, 2011 and 2012 (in thousands):

	Three months ended March 31,
	2011			2012			Change
Statement of Cash Flows Data:
Total cash provided by (used in):
Operating activities	$	(6,835	)	$	(5,974	)	$	861
Investing activities		(48	)		4,545			4,593
Financing activities		26,389			(466	)		(26,855	)
Increase (decrease) in cash and cash equivalents	$	19,506		$	(1,895	)	$	(21,401	)

Operating Activities

Cash used in operating activities decreased $0.9 million for the three months ended March 31, 2012, compared to the three months ended March 31, 2011, primarily due to the payment of $1.0 million security deposit in the first quarter of 2011 in connection with the lease for our East Norriton, Pennsylvania facility.

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Investing Activities

Cash provided by investing activities increased $4.6 million for the three months ended March 31, 2012, compared to the three months ended March 31, 2011, primarily due to an increase in net sales and redemptions (net of purchases) of short-term investments of $4.5 million.

Financing Activities

Cash provided by financing activities decreased $26.9 million for the three months ended March 31, 2012, compared to the three months ended March 31, 2011. The 2011 period included net proceeds of $29.0 million received from our March 2011 equity financing.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

The primary objective of our investment activities is to preserve our capital to fund operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of cash equivalents and investments in a variety of securities of high credit quality. Due to the nature of these investments, we believe that we are not subject to any material market risk exposure. As of March 31, 2012, we held cash, cash equivalents and short-term investments of $8.9 million.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II.                      OTHER INFORMATION

Item 1.  Legal Proceedings.

None

Item 1A.  Risk Factors.

There were no material changes from the risk factors previously disclosed in the Amendment No. 1 to our Annual Report on Form 10-K/A filed on April 24, 2012.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

The Company does not have a securities repurchase program. Under the Company’s 2010 Stock Incentive and Option Plan (the Plan), employees may elect for the Company to withhold shares to satisfy minimum statutory federal, state and local tax withholding and exercise price obligations arising from the vesting or exercise of stock options, restricted stock and other equity awards. Restricted stock awards granted under the Plan are made pursuant to individual restricted stock agreements, a form of which is filed as an exhibit to the Company’s Annual Report on Form 10-K.

The following table provides information with respect to the shares withheld by the Company during the three months ended March 31, 2012, to satisfy these obligations to the extent employees elected for the Company to withhold such shares.

Period	Total Number of Shares Purchased		Average Price Paid per Share
January 1, 2012 – January 31, 2012		—	$	—
February 1, 2012 – February 29, 2012		8,706		0.61
March 1, 2012 – March 31, 2012		—		—
Total		8,706	$	0.61

Item 3.  Defaults Upon Senior Securities.

None

Item 4.  Mine and Safety Disclosures.

Not applicable

Item 5.  Other Information.

None

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Item 6.  Exhibits.

(a) Exhibits required by Item 601 of Regulation S-K.

Exhibit Number	Description
10.1	Amended and Restated Management Severance Plan (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 20, 2012).#
10.2	Tengion, Inc. Amended and Restated Non-Employee Director Compensation Policy.*#
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Principal and Financial Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101	The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the  Balance Sheets, (ii)  Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit), (iii) the  Statements of Operations, (iv) the  Statements of Cash Flows, and (v) Notes to  Financial Statements.**

*      Filed herewith

#      Indicates a management contract or any compensatory plan, contract or arrangement.

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed as part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TENGION, INC.
Date:  May 10, 2012	By:	/s/ John L. Miclot
		John L. Miclot President and Chief Executive Officer (Principal Executive Officer)
Date:  May 10, 2012	By:	/s/ A. Brian Davis
		A. Brian Davis Chief Financial Officer and Vice President, Finance (Principal Financial and Accounting Officer)

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EX-10.2

Exhibit 10.2

AMENDED AND RESTATED

TENGION, INC.

NON-EMPLOYEE DIRECTOR COMPENSATION POLICY

Approved by Board of Directors on April 2, 2012

Non-employee directors of Tengion, Inc., a Delaware corporation (the “Company”) shall be entitled to the compensation set forth below for their service as a member of the Board of Directors (the “Board”) of the Company. This policy supersedes all prior agreements and policies concerning compensation of the Company’s non-employee directors.

Cash Compensation

Annual Retainer for Board Service

Each non-employee director, other than such director who has been designated as the “chair” of the Board, shall be entitled to an annual cash retainer in the amount of $35,000 (the “Annual Retainer”). The Company shall pay the Annual Retainer in quarterly installments based on the Company’s fiscal year.  Each non-employee director’s Annual Retainer shall start on the date of the Annual Meeting of Stockholders (“Annual Meeting”) at which the non-employee director is elected to the Board. In each case the Annual Retainer shall be paid on a pro rata basis to account for the actual date of the Annual Meeting or to account for any non-employee director who is elected to the Board on a date other than that of the Annual Meeting.  Upon any non-employee director’s termination of membership on the Board, no further Annual Retainer payments shall be due.

Annual Retainer for Chair of the Board Service

A non-employee director who serves as the Chair of the Board shall be entitled to an annual cash retainer in the amount of $55,000 (the “Chair of the Board Retainer”) in lieu of the Annual Retainer. The Company shall pay the Chair of the Board Retainer in quarterly installments based on the Company’s fiscal year.  The “chair’s” Chair of the Board Retainer shall start on the date of the Annual Meeting at which such non-employee director becomes Chair of the Board. In each case the Chair of the Board Retainer shall be paid on a pro rata basis to account for the actual date of the Annual Meeting at which such director became Chair of the Board or to account for any non-employee director who is elected to Chair the Board on a date other than that of the Annual Meeting.  Upon a non-employee director’s termination of service as Chair of the Board, such non-employee director shall be entitled to receive an Annual Retainer (or pro rata portion thereof) as a member of the Board.

Board Committee Chair and Member Retainers

Compensation for service by a non-employee director on a committee of the Board shall be as set forth in the table below and shall be paid at the same time in the same fashion as the Annual Retainer. In the event that a non-employee director’s committee assignment changes, his or her compensation shall be adjusted accordingly on a pro rata basis.

Position	Annual Cash Retainer
Audit Committee Chair	$	15,000
Compensation Committee Chair	$	10,000
Governance and Nominating Committee Chair	$	6,000
Technology Committee Chair	$	10,000
Audit Committee Member	$	7,500
Compensation Committee Member	$	5,000
Governance and Nominating Committee Member	$	3,000
Technology Committee Member	$	5,000

Equity Compensation

Initial Equity Award for Directors

Each non-employee director shall automatically receive on the date such director becomes a member of the Board an option to purchase 30,000 shares of the Company’s common stock (an “Initial Award”).  The Initial Award shall have an exercise price equal to the fair market value of the Company’s common stock on the date of grant.  The Initial Award shall vest on each quarter anniversary of the option grant date over a two-year period such that 100% of the shares of common stock covered by the Initial Award shall be fully vested on the two-year anniversary, subject to the non-employee director’s continued service to the Company through the vesting dates. An employee director who ceases to be an employee, but who remains a director, will not receive an Initial Award.

Annual Equity Award for Continuing Board Members

Each continuing non-employee director shall automatically receive a grant of an option to purchase 20,000 shares of the Company’s common stock (an “Annual Award”), with such option to have an exercise price equal to the fair market value of the Company’s common stock on the date of grant. The Annual Award for continuing Board members shall vest on each quarter anniversary of the option grant date over a one-year period, subject to the non-employee director’s continued service to the Company through the vesting date.

“Fair market value” of the Company’s common stock shall be determined in accordance with the Company’s stockholder approved equity compensation plan in effect at the time of grant.

Provisions Applicable to All Non-Employee Director Equity Compensation Grants

All grants shall be subject to the terms and conditions of the Company’s stockholder approved equity compensation plan in effect at the time of grant and the terms of the option agreement issued thereunder.

Upon a non-employee director’s termination of membership on the Board, all vested options shall remain exercisable for three months (or such longer period as the Board may determine in its discretion on or after the date of grant of such option, to the extent consistent with Section 409A of the Internal Revenue Code). In the event that a non-employee director leaves the Board before the end of a quarter, any unvested options shall be vested through the quarter anniversary of the date of grant of such option following the date of termination of service. All unvested options shall be cancelled as of the last date of service on the Board.

Expense Reimbursement

All directors shall be entitled to reimbursement from the Company for their reasonable travel, lodging and meal expenses incident to meetings of the Board or committees thereof or in connection with other Board related business, provided such expenses are consistent with the Company’s travel and entertainment policy. The Company shall make reimbursement to director within a reasonable amount of time following submission by the director of reasonable written substantiation for the expenses.

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, John L. Miclot, certify that:

1. I have reviewed this Quarterly Report of Tengion, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:           May 10, 2012

/s /John L. Miclot

John L. Miclot

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, A. Brian Davis, certify that:

1. I have reviewed this Quarterly Report of Tengion, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:           May 10, 2012

/s/ A. Brian Davis

A. Brian Davis

Chief Financial Officer and Vice President, Finance

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tengion, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John L. Miclot, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2012

/s/John L. Miclot

John L. Miclot

President and Chief Executive Officer

(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tengion, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I,   A. Brian Davis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 10, 2012

/s/ A. Brian Davis    

A. Brian Davis

Chief Financial Officer and Vice President, Finance

(Principal Financial and Accounting Officer)

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Management's Plans to Continue as a Going Concern

3 Months Ended

Mar. 31, 2012

Management's Plans to Continue as a Going Concern [Abstract]

Management's Plans to Continue as a Going Concern

(2) Management's Plans to Continue as a Going Concern

The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and has a deficit accumulated during the development stage of $235.2 million as of March 31, 2012. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its therapeutic product candidates currently in development or enters into cash flow positive business development transactions.

Based upon its current expected level of operating expenditures and debt repayment, and assuming it is not required to settle any outstanding warrants in cash, the Company expects to be able to fund its operations to September 2012. The Company intends to pursue additional sources of capital to continue its business operations as currently conducted and fund deficits in operating cash flows. There is no assurance that such financing will be available when needed or, if available, on terms acceptable to the Company. In the event financing is not obtained, the Company could pursue additional headcount reductions and other cost cutting measures to preserve cash as well as explore the sale of selected assets to generate additional funds.If the Company is required to significantly reduce operating expenses and delay, reduce the scope of, or eliminate one or more of its development programs, these events could have a material adverse effect on the Company's business, results of operations and financial condition.

These factors could significantly limit the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

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Organization and Nature of Operations

3 Months Ended

Mar. 31, 2012

Organization and Nature of Operations [Abstract]

Organization and Nature of Operations

(1) Organization and Nature of Operations

Tengion, Inc. (the Company) was incorporated in Delaware on July 10, 2003. The Company is a regenerative medicine company focused on discovering, developing, manufacturing and commercializing a range of neo-organs, or products composed of living cells, with or without synthetic or natural materials, implanted or injected into the body to engraft into, regenerate, or replace a damaged tissue or organ.  Using its Organ Regeneration Platform, the Company creates these neo-organs using a patient's own cells, or autologous cells.  The Company believes its proprietary product candidates harness the intrinsic regenerative pathways of the body to regenerate a range of native-like organs and tissues. The Company's product candidates are intended to delay or eliminate the need for chronic disease therapies, organ transplantation, and the administration of anti-rejection medications.  In addition, the Company's neo-organs are designed to avoid the need to substitute other tissues of the body for a purpose to which they are poorly suited.

Building on its clinical and preclinical experience, the Company is initially leveraging its Organ Regeneration Platform to develop its Neo-Urinary Conduit for bladder cancer patients who are in need of a urinary diversion and its Neo-Kidney Augment for patients with advanced chronic kidney disease. The Company operates as a single business segment. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of product candidate development; technological uncertainty; dependence on collaborative partners; uncertainty regarding patents and proprietary rights; comprehensive government regulations; having no commercial manufacturing experience, marketing or sales capability or experience; and dependence on key personnel.

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Balance Sheets (unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents, including $1,194 of cash at December 31, 2011 and March 31, 2012, collateralizing letters of credit (Note 14)	$ 7,349	$ 9,244
Short-term investments	1,517	6,066
Prepaid expenses and other	450	408
Total current assets	9,316	15,718
Property and equipment, net of accumulated depreciation of $12,622 and $12,752 as of December 31, 2011 and March 31, 2012, respectively	888	1,021
Other assets	1,069	1,078
Total assets	11,273	17,817
Current liabilities:
Current portion of long-term debt	2,363	2,205
Current portion of lease liability	721	739
Accounts payable	546	829
Accrued compensation and benefits	837	2,354
Accrued expenses	578	437
Warrant liability	3,034	2,511
Total current liabilities	8,079	9,075
Long-term debt	2,172	2,782
Lease liability	813	943
Other liabilities	4	2
Total liabilities	11,068	12,802
Commitments and contingencies (Note 14)
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000 shares authorized; zero shares issued or outstanding at December 31, 2011 and March 31, 2012, respectively	0	0
Common stock, $0.001 par value; 90,000 shares authorized; 23,814 and 24,495 shares issued and outstanding at December 31, 2011 and March 31, 2012, respectively	25	24
Additional paid-in capital	235,373	235,235
Deficit accumulated during the development stage	(235,193)	(230,244)
Total stockholders' equity	205	5,015
Total liabilities and stockholders' equity	$ 11,273	$ 17,817

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Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (unaudited) (Parenthetical) (USD $)	Dec. 31, 2007	Dec. 31, 2006	Dec. 31, 2005	Dec. 31, 2004	Dec. 31, 2003
Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (unaudited) [Abstract]
Series A Redeemable Convertible Preferred stock, value per share (in dollars per share)				$ 1.62	$ 1.62
Restricted common stock issued to employees and nonemployees, value per share (in dollars per share)				$ 2.32
Series B Redeemable Convertible Preferred stock, value per share (in dollars per share)			$ 1.82
Series C Redeemable Convertible Preferred stock, value per share (in dollars per share)	$ 1.82	$ 1.82

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Statements of Cash Flows (unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		105 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012
Cash flows from operating activities:
Net loss	$ (4,949)	$ (7,029)	$ (186,806)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	136	1,127	23,288
Change in fair value of warrant liability	523	(419)	(15,975)
Charge related to lease liability	48	942	1,753
Loss on disposition of property and equipment	0	0	119
Impairment of property and equipment	0	0	7,371
Amortization of net discount on short-term investments	0	0	(149)
Noncash interest expense	30	69	2,578
Noncash rent (income) expense	2	(3)	219
Stock-based compensation expense	135	257	5,314
Changes in operating assets and liabilities:
Prepaid expenses and other assets	(45)	(748)	(1,673)
Accounts payable	(283)	39	587
Accrued expenses and other	(1,571)	(1,070)	1,192
Net cash used in operating activities	(5,974)	(6,835)	(162,182)
Cash flows from investing activities:
Purchases of short-term investments	0	0	(324,508)
Sales and redemptions of short-term investments	4,548	0	323,139
Cash paid for property and equipment	(3)	(48)	(31,677)
Proceeds from the sale of property and equipment	0	0	11
Net cash (used by) provided by investing activities	4,545	(48)	(33,035)
Cash flows from financing activities:
Proceeds from sales of redeemable convertible preferred stock and warrants, net	0	0	139,960
Proceeds from sales of common stock and warrants, net	4	29,092	54,921
Repurchase of restricted stock	0	0	(94)
Proceeds from long-term debt, net of issuance costs	0	4,907	39,517
Payments on long-term debt	(470)	(7,610)	(31,738)
Net cash provided by (used in) financing activities	(466)	26,389	202,566
Net increase (decrease) in cash and cash equivalents	(1,895)	19,506	7,349
Cash and cash equivalents, beginning of period	9,244	11,972	0
Cash and cash equivalents, end of period	$ 7,349	$ 31,478	$ 7,349

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Balance Sheets (unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
Current assets:
Collateralizing letters of credit	$ 1,194	$ 1,194
Accumulated depreciation, Property and equipment	$ 12,752	$ 12,622
Stockholders equity:
Preferred stock, par value ( in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	10,000	10,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	90,000	90,000
Common stock, shares issued (in shares)	24,495	23,814
Common stock, shares outstanding (in shares)	24,495	23,814

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Debt

3 Months Ended

Mar. 31, 2012

Debt [Abstract]

Debt

(10) Debt

Total debt outstanding consists of the following (in thousands):

	December 31, 2011			March 31,  2012
Working Capital Note	$	5,000		$	4,627
Equipment and Supplemental Working Capital Notes		126			30
Unamortized debt discount		(139	)		(122	)
		4,987			4,535
Less current portion		(2,205	)		(2,363	)
	$	2,782		$	2,172

Working Capital Note

The Company has an outstanding working capital loan (the Working Capital Note) that was utilized to fund working capital needs of the Company. In March 2011, the Company refinanced the outstanding debt owed to its lender of the Working Capital Note. Pursuant to the terms of the refinancing, the Company simultaneously borrowed $5 million and repaid the then outstanding principal amount of $4.5 million. Borrowings under the Working Capital Note are secured by all assets of the Company, except for Intellectual Property and permitted liens that have priority, including liens on equipment subsequently acquired to secure the purchase price or lease obligation, as defined in the loan agreement. The Company was obligated to make interest-only payments through January 2012, followed by 24 monthly payments of principal and interest at an interest rate of 11.75% per annum. In connection with the refinancing, the Company granted a warrant to the lender to purchase 70,671 shares of common stock. The fair value of the warrant issued in connection with the refinancing was $0.1 million, using the Black-Scholes model. See Note 12 for further discussion on warrants.

The Company recorded interest expense related to the Working Capital Note of $0.2 million and $0.1 million for the three months ended March 31, 2011 and 2012, respectively. The relative fair value of the warrants issued to the lender of the Working Capital Note has been recorded against the carrying value as an original issue discount (OID), which is being amortized as interest expense over the term of the Working Capital Note. The Company recognized a noncash charge to interest expense of $55,000 and $17,000 for the three months ended March 31, 2011 and 2012, respectively, for the amortization of OID.

Equipment and Supplemental Working Capital Notes

In 2005, the Company executed a loan facility with another lender to fund equipment (the Equipment Note) and other asset purchases (the Supplemental Working Capital Note) from July 2005 through December 2010. Borrowings under the Equipment and Supplemental Working Capital Note are secured by equipment, as defined in the loan agreements. As of March 31, 2012, the Equipment Note and the Supplemental Working Capital Note bear interest at an average rate of 11.99% and 13.52%, respectively. The Company will make its final monthly principal and interest payment in April 2012 for each of the Equipment Note and the Supplemental Working Capital Note. The Company recorded interest expense related to the Equipment and Supplemental Working Capital Notes of $26,000 and $2,000 for the three months ended March 31, 2011 and 2012, respectively.

The relative fair value of the warrants issued to the lender of the Equipment and Supplemental Working Capital Notes has been recorded against the carrying value as OID, which is being amortized as interest expense over the term of the Equipment and Supplemental Working Capital Notes. The Company recognized a noncash charge to interest expense of $3,000 and $1,000 for the three months ended March 31, 2011 and 2012, respectively, for the amortization of OID.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2012	May 07, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	TENGION INC
Entity Central Index Key	0001296391
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		24,665,818
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2012

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Capital Structure

3 Months Ended

Mar. 31, 2012

Capital Structure [Abstract]

Capital Structure

(11) Capital Structure

Initial Public Offering

In April 2010, the Company completed its initial public offering, selling 6,000,000 shares of common stock at an initial public offering price of $5.00 per share resulting in gross proceeds of $30.0 million. Net proceeds received after underwriting fees and offering expenses were $25.7 million. In connection with the closing of the initial public offering, all outstanding shares of the Company's redeemable convertible preferred stock were converted into an aggregate of 5,651,955 shares of common stock, and all outstanding warrants to purchase preferred stock were converted into warrants to purchase 110,452 shares of common stock.

March 2011 Equity Financing

In March 2011, the Company closed a private placement transaction pursuant to which the Company sold securities consisting of 11,079,250 shares of common stock and warrants to purchase 10,460,875 shares of common stock. The purchase price per security was $2.83. The Company received net proceeds of $28.9 million. See Note 12 for discussion of the warrant liability.

In connection with the March 2011 equity financing, the Company filed a registration statement with the SEC for the registration of the total number of shares sold to the investors and shares issuable upon exercise of the warrants and the registration statement was declared effective by the SEC on May 16, 2011. The Company is required to use commercially reasonable efforts to cause the registration statement to remain continuously effective until such time when all of the registered shares are sold or such shares may be sold by non-affiliates without volume or manner-of-sale restrictions pursuant to Rule 144 of the Securities Act and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144. In the event the Company fails to meet certain legal requirements in regards to the registration statement, it will be obligated to pay the investors, as partial liquidated damages and not as a penalty, an amount in cash equal to 1.5% of the aggregate purchase price paid by investors for each monthly period that the registration statement is not effective, up to a maximum aggregate payment of 6% of the purchase price paid by investors, except that if the Company fails to satisfy the current public information requirement pursuant to Rule 144(c)(1), the maximum aggregate payment would be 12% of the purchase price paid by investors. If the Company determines a registration payment arrangement in connection with the securities issued in March 2011 is probable and can be reasonably estimated, a liability will be recorded. As of March 31, 2012, we concluded the likelihood of having to make any payments under the arrangements was remote, and therefore did not record any related liability.

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Statements of Operations (unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		105 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012
Statements of Operations (Unaudited) [Abstract]
Revenues	$ 0	$ 0	$ 0
Operating expenses:
Research and development	2,694	3,345	120,551
General and administrative	1,381	1,776	43,274
Depreciation	136	1,127	23,288
Impairment of property and equipment	0	0	7,371
Other expense	48	942	1,753
Total operating expenses	4,259	7,190	196,237
Loss from operations	(4,259)	(7,190)	(196,237)
Interest income	7	14	8,519
Interest expense	(174)	(272)	(15,063)
Change in fair value of warrant liability	(523)	419	15,975
Net loss	$ (4,949)	$ (7,029)	$ (186,806)
Basic and diluted net loss attributable to common stockholders per share (in dollars per share)	$ (0.21)	$ (0.45)
Weighted-average common stock outstanding :
Basic and diluted (in shares)	23,699	15,711

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Net Loss Income Attributable to Common Stockholders Per Share

3 Months Ended

Mar. 31, 2012

Net Loss Income Attributable to Common Stockholders Per Share [Abstract]

Net Loss Income Attributable to Common Stockholders Per Share

(5) Net Loss Attributable to Common Stockholders Per Share

Basic and diluted net loss attributable to common stockholders per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding. For all periods presented, the outstanding shares of common stock options and restricted stock, and preferred and common warrants have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted-average shares used to calculate both basic and dilutive loss per share are the same.

The following potentially dilutive shares have been excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive:

	Three Months Ended March 31,
	2011		2012
Shares underlying warrants outstanding		10,645,888		10,645,888
Shares underlying options outstanding		1,370,263		2,407,563
Unvested restricted stock		-		759,618

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Use of Estimates

3 Months Ended

Mar. 31, 2012

Use of Estimates [Abstract]

Use of Estimates

(4) Use of Estimates

The preparation of financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

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Warrants

3 Months Ended

Mar. 31, 2012

Warrants [Abstract]

Warrants

(12) Warrants

We account for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants are accounted for as derivative liabilities under FASB Accounting Standard Codification (ASC) 815, Derivatives and Hedging (ASC 815) if the stock warrants allow for cash settlement or provide for modification of the warrant exercise price in the event subsequent sales of common stock are at a lower price per share than the then-current warrant exercise price. We classify derivative warrant liabilities on the balance sheet as a current liability, which is revalued at each balance sheet date subsequent to the initial issuance of the stock warrant.

The following table summarizes outstanding warrants to purchase common stock as of December 31, 2011 and March 31, 2012:

	Number of shares	Exercise price		Expiration
Equity-classified warrants
Issued to vendors	3,890	$	2.32	September 2015 through December 2016
Issued pursuant to March 2011 refinancing of Working Capital Note	70,671	$	2.88	March 2016
Issued to lenders	64,409	$	23.44	August 2013 through December 2016
Issued to lenders	46,043	$	26.39	October 2015 through September 2019
	185,013
Liability-classified warrants
Issued pursuant to March 2011 equity financing	10,460,875	$	2.88	March 2016
	10,645,888

Equity-classified Warrants

In March 2011, the Company granted a warrant to a lender to purchase 70,671 shares of common stock in connection with the refinancing of the Company's Working Capital Note. See Note 10 for a discussion of the refinancing. The Company determined the fair value of the warrant as of the date of grant was $1.49 per share by utilizing the Black-Scholes model. In estimating the fair value of the warrant, the Company utilized the following inputs: closing price per share of common stock of $2.74, volatility of 64.96%, expected term of 5 years, risk-free interest rate of 2.0% and dividend yield of zero.

In conjunction with the Working Capital Note, Equipment Note, and the Supplemental Working Capital Note, the Company issued warrants to purchase shares of Series A, B, and C Preferred Stock. Upon the close of the Company's initial public offering, the preferred stock warrants automatically converted into warrants to purchase 110,452 shares of common stock. Warrants related to the Working Capital Note expire ten years from the date of issuance. Warrants related to the Equipment and Supplemental Working Capital Notes expire the earlier of eight years from the date of issuance or upon acquisition of the Company as defined in the warrant agreement.

Liability-classified Warrants

In March 2011, the Company issued warrants to purchase 10,460,875 shares of common stock in connection with a private placement transaction (see Note 11). Each warrant is exercisable in whole or in part at any time until March 4, 2016 at a per share exercise price of $2.88, subject to certain adjustments as specified in the warrant agreement. The Company valued the warrants as derivative financial instruments as of the date of issuance (March 4, 2011) and will continue to do so at each reporting date, with any changes in fair value being recorded on the Statement of Operations. During the three months ended March 31, 2011 and 2012, the Company recorded non-operating income of $0.4 million and non-operating expense of $0.5 million, respectively, due to changes in the estimated fair value of these warrants. 

The warrants contain provisions that require the modification of the exercise price and shares to be issued under certain circumstances, including in the event the Company completes subsequent equity financings at a price per share lower than the then-current warrant exercise price. In addition, the warrants contain a net cash settlement provision under which the warrant holders may require the Company to purchase the warrants in exchange for a cash payment following the announcement of specified events defined as Fundamental Transactions involving the Company (e.g., merger, sale of all or substantially all assets, tender offer, or share exchange) or a Delisting, which is deemed to occur when the common stock is no longer listed on a national securities exchange. The net cash settlement provision requires use of the Black-Scholes model in calculating the cash payment value in the event of a Fundamental Transaction or a Delisting.

The net cash settlement value at the time of any future Fundamental Transaction or Delisting will depend upon the value of the following inputs at that time: the price per share of the Company's common stock, the volatility of the Company's common stock, the expected term of the warrant, the risk-free interest rate based on U.S. Treasury security yields, and the Company's dividend yield. The warrant requires use of a volatility assumption equal to the greater of (i) 100%, (ii) the 30-day volatility determined as of the trading day immediately following announcement of a Fundamental Transaction or Delisting, or (iii) the arithmetic average of the 10, 30, and 50-day volatility determined as of the trading day immediately following announcement of a Fundamental Transaction or Delisting.

The fair value of the warrants is determined using a risk-neutral lattice methodology within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction or Delisting into the calculation of fair value. The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of the Company's common stock, assumptions regarding the expected amounts and dates of future equity financing activities, assumptions regarding the likelihood and timing of Fundamental Transactions or a Delisting, the historical volatility of the stock prices of the Company's peer group, risk-free rates based on U.S. Treasury security yields, and the Company's dividend yield. Changes in these assumptions can materially affect the fair value estimate. We could, at any point in time, ultimately incur amounts significantly different than the carrying value. For example, as of March 31, 2012, the fair value of $3.0 million exceeded the calculated cash settlement value of $2.3 million. The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability.

The following table summarizes the calculated aggregate fair values and net cash settlement value as of the dates indicated along with the assumptions utilized in each calculation.

	Fair value as of:						Net cash settlement value as of March 31, 2012
	December 31, 2011			March 31, 2012
Calculated aggregate value	$	2,511		$	3,034		$	2,301	(1)
Exercise price per share of warrant	$	2.88		$	2.88		$	2.88
Closing price per share of common stock	$	0.47		$	0.56		$	0.56
Volatility		93.8	%		94.5	%		100.0	%(2)
Probability of Fundamental Transaction or Delisting		28.9	%		28.8	%	Not applicable
Expected term (years)	Not applicable			Not applicable				3.9
Risk-free interest rate		0.7	%		0.8	%		0.8	%
Dividend yield	None			None			None

(1) Represents the net cash settlement value of the warrant as of March 31, 2012, which value was calculated utilizing the Black-Scholes model specified in the warrant.

(2) Represents the volatility assumption used to calculate the net cash settlement value as of March 31, 2012.

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Restructuring Expenses

3 Months Ended

Mar. 31, 2012

Restructuring Expenses [Abstract]

Restructuring Expenses

(8) Restructuring Expenses

In November 2011, the Company's Board of Directors approved a restructuring plan designed to fund the Company's lead development programs through key milestones in 2012, eliminate plans to use its facility in East Norriton, Pennsylvania as a manufacturing center, and centralize its research and development operations in its leased facility in Winston-Salem, North Carolina. The Company has retained a few administrative employees in its facility in East Norriton, Pennsylvania, and is exploring options to significantly reduce the amount of space it currently rents.

The Company offered severance benefits to the terminated employees, and recorded a $1.7 million charge for personnel-related termination costs in the fourth quarter of 2011, of which $0.8 million was included in research and development expense and $0.9 million was included in general and administrative expense in the accompanying statements of operations. The Company expects to complete payment of these severance benefits by September 2012.

The following table summarizes the activity related to accrued severance benefits for the quarter ended March 31, 2012 (in thousands).

	Accrued Severance Benefits
Balance at December 31, 2011	$	1,544
Net Charges paid		(1,056	)
Balance at March 31, 2012	$	488

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Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2012

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

(6) Supplemental Cash Flow Information

The following table contains additional cash flow information for the periods reported (in thousands).

	Three Months Ended March 31,				Period from July 10, 2003 (inception) through March 31,
	2011		2012		2012
Supplemental cash flow disclosures:
Noncash investing and financing activities:
Conversion of note principal to redeemable convertible preferred stock	$	-	$	-	$	3,562
Convertible note issued to initial stockholder for consulting expense		-		-		210
Fair value of warrants issued with issuance of long-term debt		105		-		2,290
Fair value of warrants issued with sale of common stock		16,947		-		16,947
Conversion of redeemable convertible preferred stock into 5,652 shares of common stock		-		-		191,909
Conversion of warrant liability		-		-		123

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Short-term Investments and Financial Instruments

3 Months Ended

Mar. 31, 2012

Short-term Investments and Financial Instruments [Abstract]

Short-term Investments and Financial Instruments

(7) Short-term Investments and Fair Value of Financial Instruments

As of December 31, 2011 and March 31, 2012, the carrying amounts of financial instruments held by the Company, which include cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued expenses, approximate fair value due to the short-term nature of those instruments. In addition, the carrying value of the Company's debt instruments, which do not have readily ascertainable market values, approximate fair value, given that the interest rates on outstanding borrowings approximate market rates. See Note 12 for a discussion of fair value of the warrants.

As of December 31, 2011 and March 31, 2012, short-term investments consisted of investments in commercial paper and U.S. government agency and corporate securities of $6.1 million and $1.5 million, respectively. The Company has the ability and intent to hold these investments until maturity and, therefore, has classified the investments as held-to-maturity, which we carry at amortized cost. Due to the short-term nature of these investments, unrealized gains and losses have been deemed temporary and, therefore, not recognized in the accompanying financial statements. Income generated from short-term investments is recorded to interest income.

Fair value guidance requires fair value measurements be classified and disclosed in one of the following three categories:

· Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

· Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

· Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

The following fair value hierarchy table presents information about each major category of the Company's financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2011 and March 31, 2012 (in thousands).

	Fair value measurement at reporting date using
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
At December 31, 2011:
Assets:
Cash and cash equivalents	$	9,244	$	-	$	-	$	9,244
Short-term investments		6,066		-		-		6,066
	$	15,310	$	-	$	-	$	15,310
Liabilities:
Warrant liability	$	-	$	-	$	2,511	$	2,511
At March 31, 2012:
Assets:
Cash and cash equivalents	$	7,349	$	-	$	-	$	7,349
Short-term investments		1,517		-		-		1,517
	$	8,866	$	-	$	-	$	8,866
Liabilities:
Warrant liability	$	-	$	-	$	3,034	$	3,034

The reconciliation of warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

	Warrant liability
Balance at December 31, 2011	$	2,511
Change in fair value of warrant liability		523
Balance at March 31, 2012	$	3,034

The fair value of the warrant liability is based on Level 3 inputs. For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value. See Note 12 for further discussion of the warrant liability.

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Lease Liability

3 Months Ended

Mar. 31, 2012

Lease Liability [Abstract]

Lease Liability

(9) Lease Liability

The Company entered into an agreement in February 2006 to lease warehouse space effective March 1, 2011, at which time the Company determined it was not likely to utilize the space during the five-year lease term. Therefore, the Company recorded a liability as of March 1, 2011, the cease-use date, for the fair value of its obligations under the lease. The most significant assumptions used in determining the amount of the estimated lease liability are the potential sublease revenues and the credit-adjusted risk-free rate utilized to discount the estimated future cash flows.

In connection with the restructuring described in Note 8, the Company determined it was not likely to utilize substantially all of the leased office and manufacturing space in its East Norriton, Pennsylvania facility during the remainder of the lease term. Therefore, the Company recorded a liability as November 30, 2011, the cease-use date, for the fair value of its obligations under the lease.

The following table summarizes the activity related to the lease liability for the quarter ended March 31, 2012 (in thousands).

	Warehouse space			Office and manufacturing space			Total
Balance at December 31, 2011	$	828		$	854		$	1,682
Charges utilized		(59	)		(137	)		(196	)
Additional charges to operations		23			25			48
Balance at March 31, 2012		792			742			1,534
Less current portion		(227	)		(494	)		(721	)
	$	565		$	248		$	813

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(14) Commitments and Contingencies

Operating Leases

The Company leases office space and office equipment under operating leases, which expire at various times through February 2016. Excluding the lease liability activity described in Note 9, rent expense under these operating leases was $190,000 and $50,000 for the three months ended March 31, 2011 and 2012, respectively. The following table summarizes future minimum lease payments as of March 31, 2012 (in thousands):

2012	$	747
2013		1,016
2014		1,040
2015		1,063
2016		276
Total minimum lease payments	$	4,142

The lease agreement for the Company's facility in East Norriton, Pennsylvania requires the Company to provide security and restoration deposits totaling $2.2 million to the landlord. The Company has deposited $1.0 million with the landlord as a security deposit, which amount was recorded as a non-current other asset on the Company's balance sheet as of December 31, 2011 and March 31, 2012. As of March 31, 2012, an outstanding letter of credit is satisfying the remaining restoration deposit obligation of $1.2 million. At the end of the lease term, the landlord has the right to require the Company to utilize the funds collateralizing this letter of credit to restore the facility to its original condition. The letter of credit is collateralized by an account held at the bank. If the bank determines the collateral to be insufficient, the bank has the right to demand additional collateral. If the Company fails to provide additional collateral, the bank has the right to withdraw the letter of credit. In that event, the landlord would have the right to require the Company to deposit cash of up to $1.2 million in an account to satisfy its deposit obligation.

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Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (unaudited) (USD $) In Thousands, unless otherwise specified	Redeemable Convertible Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Deferred Compensation [Member]	Accumulated deficit during the development stage [Member]	Total
Balance at Jul. 10, 2003	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock to initial stockholder	0	2	(2)	0	0	0
Issuance of common stock to initial stockholder (in shares)		2,000
Effect of reverse stock split (see Note 3)	0	(2)	2	0	0	0
Effect of reverse stock split (see Note 3) (in shares)		(1,862)
Net loss	0	0	0	0	(1,032)	(1,032)
Balance at Dec. 31, 2003	0	0	0	0	(1,032)	(1,032)
Balance (in shares) at Dec. 31, 2003		138
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	0	0	0	0	(2,438)	(2,438)
Issuance of Series A Redeemable Convertible Preferred stock, net of expenses	30,126	0	0	0	0	0
Issuance of Series A Redeemable Convertible Preferred stock, net of expenses (in shares)	18,741
Conversion of notes payable, including interest	3,562	0	0	0	0	0
Conversion of notes payable, including interest (in shares)	2,203
Issuance of restricted common stock to employees and nonemployees	0	1	336	(336)	0	1
Issuance of restricted common stock to employees and nonemployees (in shares)		240
Issuance of common stock to consultants	0	0	21	0	0	21
Issuance of common stock to consultants (in shares)		140
Issuance of common stock to convertible noteholders	0	0	67	0	0	67
Issuance of common stock to convertible noteholders (in shares)		93
Issuance of options to purchase common stock to consultants for services rendered	0	0	14	(14)	0	0
Amortization of deferred compensation	0	0	0	23	0	23
Change in value of restricted common stock subject to vesting	0	0	11	(11)	0	0
Accretion of redeemable convertible preferred stock to redemption value	1,035	0	0	0	(1,035)	(1,035)
Balance at Dec. 31, 2004	34,723	1	449	(338)	(4,505)	(4,393)
Balance (in shares) at Dec. 31, 2004	20,944	611
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	0	0	0	0	(9,627)	(9,627)
Issuance of Series A Redeemable Convertible Preferred stock, net of expenses	5,223	0	0	0	0	0
Issuance of Series A Redeemable Convertible Preferred stock, net of expenses (in shares)	3,247
Issuance of restricted common stock to employees and nonemployees	0	0	140	(139)	0	1
Issuance of restricted common stock to employees and nonemployees (in shares)		60
Issuance of warrants to purchase preferred stock to noteholders	0	0	681	0	0	681
Issuance of options to purchase common stock to consultants for services rendered	0	0	7	(7)	0	0
Amortization of deferred compensation	0	0	0	111	0	111
Accretion of redeemable convertible preferred stock to redemption value	3,164	0	0	0	(3,164)	(3,164)
Balance at Dec. 31, 2005	43,110	1	1,277	(373)	(17,296)	(16,391)
Balance (in shares) at Dec. 31, 2005	24,191	671
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	0	0	0	0	(20,873)	(20,873)
Issuance of Series B Redeemable Convertible Preferred stock, net of expenses	50,040	0	0	0	0	0
Issuance of Series B Redeemable Convertible Preferred stock, net of expenses (in shares)	27,637
Issuance of restricted common stock to employees	0	0	0	0	0	0
Issuance of restricted common stock to employees (in shares)		3
Issuance of common stock upon exercise of options	0	0	9	0	0	9
Issuance of common stock upon exercise of options (in shares)		4
Repurchased nonvested restricted stock	0	0	0	0	0	0
Repurchased nonvested restricted stock (in shares)		(14)
Reclassification of deferred compensation	0	0	(373)	373	0	0
Reclassification of warrants to purchase preferred stock	0	0	(681)	0	0	(681)
Stock-based compensation expense	0	0	400	0	0	400
Accretion of redeemable convertible preferred stock to redemption value	5,640	0	0	0	(5,640)	(5,640)
Balance at Dec. 31, 2006	98,790	1	632	0	(43,809)	(43,176)
Balance (in shares) at Dec. 31, 2006	51,828	664
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	0	0	0	0	(30,988)	(30,988)
Issuance of Series C Redeemable Convertible Preferred stock, net of expenses	33,219	0	0	0	0	0
Issuance of Series C Redeemable Convertible Preferred stock, net of expenses (in shares)	18,333
Issuance of common stock upon exercise of options	0	0	60	0	0	60
Issuance of common stock upon exercise of options (in shares)		16
Repurchased vested restricted stock	0	0	(94)	0	0	(94)
Repurchased vested restricted stock (in shares)		(5)
Stock-based compensation expense	0	0	664	0	0	664
Accretion of redeemable convertible preferred stock to redemption value	8,742	0	0	0	(8,742)	(8,742)
Balance at Dec. 31, 2007	140,751	1	1,262	0	(83,539)	(82,276)
Balance (in shares) at Dec. 31, 2007	70,161	675
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	0	0	0	0	(42,393)	(42,393)
Issuance of Series C Redeemable Convertible Preferred stock, net of expenses	21,352	0	0	0	0	0
Issuance of Series C Redeemable Convertible Preferred stock, net of expenses (in shares)	11,793
Issuance of common stock upon exercise of options	0	0	28	0	0	28
Issuance of common stock upon exercise of options (in shares)		8
Repurchased vested restricted stock	0	0	0	0	0	0
Repurchased vested restricted stock (in shares)		(1)
Stock-based compensation expense	0	0	1,317	0	0	1,317
Accretion of redeemable convertible preferred stock to redemption value	11,754	0	0	0	(11,754)	(11,754)
Balance at Dec. 31, 2008	173,857	1	2,607	0	(137,686)	(135,078)
Balance (in shares) at Dec. 31, 2008	81,954	682
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	0	0	0	0	(29,845)	(29,845)
Issuance of common stock upon exercise of options	0	0	54	0	0	54
Issuance of common stock upon exercise of options (in shares)		20
Stock-based compensation expense	0	0	855	0	0	855
Accretion of redeemable convertible preferred stock to redemption value	14,059	0	0	0	(14,059)	(14,059)
Balance at Dec. 31, 2009	187,916	1	3,516	0	(181,590)	(178,073)
Balance (in shares) at Dec. 31, 2009	81,954	702
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	0	0	0	0	(25,600)	(25,600)
Issuance of common stock upon exercise of options	0	0	14	0	0	14
Issuance of common stock upon exercise of options (in shares)		32
Stock-based compensation expense	0	0	953	0	0	953
Accretion of redeemable convertible preferred stock to redemption value	3,993	0	0	0	(3,993)	(3,993)
Conversion of preferred stock to common stock	(191,909)	5	191,904	0	0	191,909
Conversion of preferred stock to common stock (in shares)	(81,954)	5,652
Conversion of preferred stock warrants to common stock warrants	0	0	123	0	0	123
Proceeds from initial public offering, net of expenses	0	6	25,721	0	0	25,727
Proceeds from initial public offering, net of expenses (in shares)		6,000
Balance at Dec. 31, 2010	0	12	222,231	0	(211,183)	11,060
Balance (in shares) at Dec. 31, 2010		12,386
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	0	0	0	0	(19,061)	(19,061)
Proceeds from equity financing, net of expenses	0	11	28,930	0	0	28,941
Proceeds from equity financing, net of expenses (in shares)		11,079
Issuance of warrants to purchase common stock issued in connection with equity financing	0	0	(16,947)	0	0	(16,947)
Issuance of common stock upon exercise of options	0	1	82	0	0	83
Issuance of common stock upon exercise of options (in shares)		187
Issuance of restricted stock to employees	0	0	0	0	0	0
Issuance of restricted stock to employees (in shares)		311
Cancellation of restricted stock to employees	0	0	0	0	0	0
Cancellation of restricted stock to employees (in shares)		(149)
Issuance of warrants to purchase common stock in connection with debt financing	0	0	105	0	0	105
Stock-based compensation expense	0	0	834	0	0	834
Balance at Dec. 31, 2011	0	24	235,235	0	(230,244)	5,015
Balance (in shares) at Dec. 31, 2011		23,814
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	0	0	0	0	(4,949)	(4,949)
Issuance of common stock upon exercise of options	0	0	8	0	0	8
Issuance of common stock upon exercise of options (in shares)		19
Issuance of restricted stock to employees	0	1	(1)	0	0	0
Issuance of restricted stock to employees (in shares)		679
Cancellation of restricted stock to employees	0	0	(4)	0	0	(4)
Cancellation of restricted stock to employees (in shares)		(17)
Stock-based compensation expense	0	0	135	0	0	135
Balance at Mar. 31, 2012	$ 0	$ 25	$ 235,373	$ 0	$ (235,193)	$ 205
Balance (in shares) at Mar. 31, 2012		24,495

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Basis of Presentation and Reverse Stock Split

3 Months Ended

Mar. 31, 2012

Basis of Presentation and Reverse Stock Split [Abstract]

Basis of Presentation and Reverse Stock Split

(3) Basis of Presentation and Reverse Stock Split

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, as amended, filed with the Securities and Exchange Commission (SEC). The results of the Company's operations for any interim period are not necessarily indicative of the results of operations for any other interim period or full year.

A reverse stock split of the Company's common stock was effective March 24, 2010 at a ratio of one share for every 14.5 shares previously held. All common share and per-share data included in these financial statements reflect such reverse stock split.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2012

Stock-based Compensation [Abstract]

Stock-based Compensation

(13) Stock-Based Compensation

The Company currently maintains two stock-based compensation plans. Under the 2004 Stock Option Plan (the 2004 Plan), stock awards were granted to employees, directors, and consultants of the Company, in the form of restricted stock and stock options. The amounts and terms of options granted were determined by the Company's compensation committee. The equity awards granted under the Plan generally vest over four years and have terms of up to ten years after the date of grant, and options are exercisable in cash or as otherwise determined by the board of directors. There are no shares available for future grants under the 2004 Plan, as grants from the 2004 Plan ceased upon the Company's initial public offering in April 2010.

The 2010 Stock Incentive and Option Plan (2010 Plan) became effective upon the closing of the Company's initial public offering. Under the 2010 Plan, stock awards may be granted to employees, directors, and consultants of the Company, in the form of restricted or unrestricted stock, stock appreciation rights, cash-based or performance share awards and stock options. The amounts and terms of awards granted are determined by the Company's compensation committee. The equity awards granted under the Plan generally vest over four years and have terms of up to ten years after the date of grant, and options are exercisable in cash or as otherwise determined by the board of directors. The 2010 Plan allows for the transfer of forfeited shares from the 2004 Plan. As of March 31, 2012, 344,792 shares of common stock were available for future grants under the Plan.

Stock Options

The following table summarizes stock option activity under the Plans:

	Number of shares			Weighted-average exercise price		Weighted-average remaining contractual term (in years)		Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2011		1,746,970		$	1.68		8.9	$	63
Granted		734,751		$	0.60
Exercised		(19,187	)	$	0.44
Forfeited		(54,971	)	$	2.67
Outstanding at March 31, 2012		2,407,563		$	1.34		9.0	$	151
Vested and expected to vest at March 31, 2012		2,209,632		$	1.37		9.0	$	138
Exercisable at March 31, 2012		474,135		$	2.81		7.3	$	23

Total stock-based compensation expense recognized for stock options to employees and non-employee directors for the three months ended March 31, 2011 and 2012 was $0.3 million and $86,000, respectively. As of March 31, 2012, there was $1.0 million of unrecognized compensation expense, net of forfeitures, related to unvested employee stock options and $2,000 of unrecognized compensation expense related to unvested non-employee director stock options. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately 3.5 years.

Total stock-based compensation expense recognized for stock options to non-employees for the three months ended March 31, 2011 and 2012 was immaterial.

The following table summarizes restricted stock activity under the Plans:

	Number of shares		Weighted-average grant date fair value
Nonvested at December 31, 2011	139,779		$	2.42
Granted	678,584		$	0.51
Vested	(51,087	)	$	2.42
Forfeited	(7,658	)	$	2.34
Nonvested at March 31, 2012	759,618		$	0.71

Total stock-based compensation expense recognized for restricted stock to employees for the three months ended March 31, 2012 was $49,000. As of March 31, 2012, there was $0.5 million of unrecognized compensation expense, net of forfeitures, related to unvested employee restricted stock. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately 3.7 years.