BBLG Continues Progress as Testing Proceeds

By Brad Sorensen, CFA

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There are approximately 350,000 spinal fusion surgeries done in the US every year with varying degrees of success in alleviating often debilitating back pain. The existing dominant technology, known as rhBMP, has been quite successful in advancing the spinal fusion procedure but there are also challenges that can come along with using that technology. Patients can experience such impacts as rapid, uncontrolled bone growth that causes an unsound structure and unwanted bone formation where bone will grow where it is not intended. Back pain impacts 65 million Americans, with 16 million of those having what would be considered chronic back pain, leading to an estimated $12 billion per year in health care and indirect cost according to the Georgetown Policy Institute. While spinal fusion surgery isn't the appropriate treatment for every kind of back pain, it can help to relieve the pain associated with a variety of conditions.

The NELL-1 technology is the centerpiece of what Bone Biologics BBLG is developing. It was developed by UCLA TDG and Bone holds the exclusive worldwide rights to that technology. NELL-1 has been reviewed positively in over 45 peer reviewed publications demonstrating technological viability. NELL-1 has shown spine fusion effectiveness across three animal species—rodent, sheep and nonhuman primate and has competed two clinically relevant sheep studies that demonstrated NELL-1 increases the fusion rate and quantity of bone compared to the control group.

Bone Biologics recently announced that it has received approval to begin pilot clinical trials with NB1 in spinal fusion patients. The approval was given by the Human Research Ethics Committee and the trials will take place in Australia. This is an important and exciting step for Bone as the study will evaluate the safety and effectiveness of the company's bone graft product—NB1. The study will include 30 adults who undergo transforaminal lumbar interbody fusion to treat degenerative disc disease. Importantly, this study design has been reviewed by the FDA's Division of Orthopedic Devices and is intended to support progression to a clinical study in the US.

That brings us to the recent announcement of 1Q2024 financial results, which show a clinical stage company that is pursuing a potential game-changing treatment and getting it to patients as soon as possible.

Among the financial highlights:

• The company has a cash balance of just over $3 million. BBLG will need further funding as that approval process goes along, but the current cash balance will enable the company to continue operations through 3Q2024 according to company filings.

• Loss per share of $1.31 for 4Q2023, in line with estimates and expected with a clinical stage company.

• The company currently has no long-term debt, which provides the company with balance sheet flexibility and potential options for future funding needs.

• During the quarter, the company issued 119,000 shares of stock along with warrants to purchase another 119,000 shares and prefunded warrants to purchase 662,551 shares together with warrants to purchase 662,251 shares. Finally, the company also issued warrants to purchase up to 46,875 shares.

o The company will likely continue to raise needed capital by attempting to tap the equity markets.

▪ The company estimates it will require about $5 million to complete first-in-man studies and an estimated additional $24 million to get the product through the FDA approval process.

Summary

We have written before about the market opportunity that BBLG has, and it continues to grow. Investors have been slow to recognize the potential in our view but now, ahead of the human trials, is the opportunity to get in at what we view as a discounted price. If trial results are positive, as we believe they will be, the positive reaction in the investing community will likely be swift. We continue to be excited about the opportunity and the science behind NELL-1 and are looking forward to the human trials beginning this year. BBLG has what we believe is a product with great potential, addressing a market with seemingly insatiable demand and a solid funding situation, which is vital in this environment. As such, we believe investors with a longer-term investing horizon should take a look at BBLG.