Bone Biologics Corporation (NASDAQ:BBLG) is a medical device company that is currently focused on bone regeneration in spinal fusion using the recombinant human protein known as NELL-1. The company's NELL-1 technology platform has been licensed exclusively for worldwide applications through a technology transfer from the UCLA Technology Development Group on behalf of UC Regents.

Business Overview

Bone Biologics was founded in 2004 as a privately-held company with proprietary, patented technology that has been validated in sheep and non-human primate models to facilitate bone growth. The company believes its platform technology has application in delivering improved outcomes in the surgical specialties of spinal, orthopedic, general orthopedic, plastic reconstruction, neurosurgery, interventional radiology, and sports medicine. Lead product development and clinical studies are targeted on spinal fusion surgery, one of the larger segments in the orthopedic market.

The company is currently a development stage entity, with no revenue generated from operations to date. The production and marketing of Bone Biologics' products and ongoing research and development activities are subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any combination product developed by the company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the FDA under the Federal Food, Drug, and Cosmetic Act.

Financials

For the fiscal year ended December 31, 2023, Bone Biologics reported an annual net loss of $8,948,731, with no revenue generated. The company's annual operating cash flow and free cash flow were both -$9,555,904 for the same period.

In the first quarter of 2024, the company continued to incur significant losses, reporting a net loss of $865,970. Research and development expenses declined significantly from $2,590,645 in Q1 2023 to $245,625 in Q1 2024, as the company completed the production of NELL-1 protein necessary for its initial clinical study. However, general and administrative costs increased from $556,892 in Q1 2023 to $657,911 in Q1 2024, primarily due to legal expenses related to settling ongoing litigation.

Liquidity

As of March 31, 2024, Bone Biologics had $3,227,634 in cash, which the company expects to fund its operations through the third quarter of 2024. The company will continue to attempt to raise additional debt and/or equity financing to fund future operations and provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet the company's needs.

The company's consolidated financial statements for the three months ended March 31, 2024 have been prepared assuming Bone Biologics will continue as a going concern. However, the company's net losses, negative cash flows, and the need for additional financing raise substantial doubt about its ability to continue as a going concern within one year after the date the financial statements are issued. The company's independent registered public accounting firm has also expressed substantial doubt about its ability to continue as a going concern in its audit report on the financial statements included in the company's Annual Report on Form 10-K for the year ended December 31, 2023.

Regulatory Milestones and Licensing Agreement

Bone Biologics has received guidance from the FDA that its NELL-1/DBM product will be classified as a device/drug combination product that will require an FDA-approved pre-market approval application before it can be commercialized in the United States. The company is obligated to make various milestone payments to UCLA TDG, the licensor of the NELL-1 technology, upon the achievement of certain regulatory and commercial milestones.

Under the terms of the Amended License Agreement with UCLA TDG, Bone Biologics is required to pay an annual maintenance fee of $10,000, as well as royalties of 3.0% of net sales of licensed products or licensed methods. The company is also obligated to pay UCLA TDG a Diligence Fee of $8,000,000 upon the sale of any Licensed Product, to be paid in installments based on cumulative net sales thresholds. As of March 31, 2024, none of the milestones have been met.

Risks and Challenges

Bone Biologics faces several risks and challenges in its pursuit of commercializing the NELL-1 technology. The company's success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by the company will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the company.

Additionally, the company's development efforts and the production and marketing of its products are subject to extensive regulation by the FDA and other governmental authorities. There can be no assurance that the company will not encounter problems in clinical trials that will cause it or the FDA to delay or suspend the clinical trials. The company's ability to continue as a going concern is also a significant risk, as it will need to secure additional financing to fund its operations and development activities.

Outlook

Bone Biologics' NELL-1 technology platform holds significant promise in the orthopedic and spinal fusion markets, which are large and growing segments. The company's exclusive licensing agreement with UCLA TDG provides it with a strong intellectual property position, and the FDA's guidance on the regulatory pathway for NELL-1/DBM offers a clear path forward.

Conclusion

However, the company's financial position and going concern status remain significant concerns. Bone Biologics will need to successfully raise additional capital and execute on its clinical development and regulatory strategy to unlock the full potential of its technology. Investors should closely monitor the company's progress in these areas, as the outcome will be crucial in determining the long-term viability and success of Bone Biologics.