By Brad Sorensen, CFA
NASDAQ:BBLG
READ THE FULL BBLG RESEARCH REPORT
Bone Biologics (NASDAQ:BBLG) is a company advancing a technology, known as NELL-1, that could positively impact millions of Americans suffering with back pain, and stands to be in the middle of the increasing demand for treatment of such conditions as osteoporosis, which is estimated to be valued at $14 billion by Coherent Market Insights and growing at close to 4% a year. Additionally, the company also has the potential to be heavily involved in the orthobiologics market, with a recently updated estimate by MR Accuracy Report of close to $7 billion by 2028.
It is these issues, and other back-related problems, that continue to make us optimistic about the prospects for Bone Biologics. BBLG stock has had a bit of a rough run but it appears to us to have found support and we see the potential for decent sized gains ahead. Investors may have to be patient but stocks such as BBLG can have sudden, sharp movements on such events such as testing announcements or regulatory decisions, leading to the belief that getting an established position in a stock like BBLG for investors with a higher risk tolerance may be better to be done sooner rather than later.
Bone recently announced their 2Q earnings and there were no real surprises. The company continues to make progress toward getting NELL-1 into the testing process by completing preparations for a first-in-man clinical study scheduled to commence in Australia in 2023. The study has been accepted by both the FDA and Australia’s Human Research Ethics Committee. The company’s balance sheet, which is important to pay attention to for a medical company at this stage of development, continues to look good in our view. Cash remains solid at almost $5.5 million, while expenses in 2Q2022 were just under $470,000. Additionally, the company holds no long-term debt at the present time—all leaving the company in a good position in our view to shepherd NELL-1 through the testing process. The company estimates it will take approximately $10 million to complete first-in-man studies—money we believe the company’s pristine balance sheet will help the company’s management raise.
The company’s combination product, NELL-1/DBM is expected to be purified NELL-1 mixed with 510(k) cleared Demineralized Bone Putty recommended for use in conjunction with the applicable hardware consistent with the indication. The NELL-1/DBM Device will be comprised of a single dose vial of NELL-1 recombinant protein mixed with DBM putty in the operating room. A vial of NELL-1 plus DBM will be sold in a convenience kit with a diluent and a syringe of 510(k) cleared demineralized bone (DBM putty) produced by MTF. A delivery device will allow the surgeon to mix the reconstituted NELL-1 with the appropriate quantity of DBM Putty just prior to implantation. Since committing to this process and bring in new leadership Bone Biologics has already surpassed four milestones:
• Demonstrating a successful small laboratory scale pilot run for the manufacturing of the recombinant NELL-1 protein in Chinese hamster ovary cells
• Validation of protein dosing and efficacy in established large animal sheep models pilot study
• Completed pivotal animal study
• Filed for a Pilot clinical trial outside the US
Additionally, Bone Biologics has received Human Research Ethics Committee (HREC) approval for a multicenter pilot clinical trial that will commence in 2023 to evaluate NELL-1/DBM in 30 patients in Australia with degenerative disc disease. Additionally, UCLA TDG and Bone Biologics received guidance from the FDA that NELL-1/DBM will be classified as a combination product with a device lead—meaning the PMA approval process will likely be less onerous than if it was a pure drug or classified as a drug lead.
In short, 2Q2022 earnings from BBLG produced no surprises and confirmed that the process for getting NELL-1 into the commercial market remains on progress. There are obviously risks with a company such as Bone, such as speed bumps on the way to approval that the company is unable to overcome or being unable to fund further needed testing, but the initial studies we’ve seen give us confidence that BBLG will be able to navigate those potential challenges successfully and has the potential to of being a good investment for investors with a higher risk tolerance.
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