Bone Biologics Corporation — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Bone Biologics is a development-stage medical device company developing NELL-1 combined with demineralized bone matrix (DBM) for bone regeneration, initially targeting spinal fusion. The product is expected to be regulated as a device/drug combination requiring FDA premarket approval.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $1.575 million | $0.769 million | $6.461 million | $0.823 million |
| General and administrative | $0.506 million | $0.450 million | $1.808 million | $1.555 million |
| Total operating expenses | $2.081 million | $1.219 million | $8.268 million | $2.378 million |
| Net loss | $1.920 million | $1.219 million | $7.399 million | $2.378 million |
| Loss per share, basic and diluted | $0.61 | $3.53 | $4.68 | $6.89 |
There was no revenue or gross profit, so a meaningful gross margin is not reported. The company reported no debt on its balance sheet. At September 30, 2023, cash was $4.453 million, prepaid expenses were $0.524 million, total assets were $4.976 million, current liabilities were $1.183 million, and stockholders’ equity was $3.793 million. Accounts payable and accrued expenses were $1.103 million; warrant liability was $81,000.
Operating cash used in the first nine months was $7.538 million, compared with $1.616 million in 2022. A June 2023 public offering provided $4.452 million net proceeds. Cash decreased from $7.538 million at December 31, 2022 to $4.453 million at September 30, 2023. The company reported a noncash gain of $868,000 for the nine-month decrease in warrant-liability fair value.
Material changes and unusual items
- Year-to-date R&D expense rose by $5.637 million, primarily due to NELL-1 development ahead of a pilot clinical study. Q3 R&D increased 105% year over year; nine-month R&D increased 685%.
- Year-to-date G&A rose 16%, with higher legal expenditures partly offset by lower option-related expense. Q3 G&A increased 12%, primarily reflecting proxy and Nasdaq-related consultants.
- A 1-for-30 reverse stock split became effective June 5, 2023; share and per-share figures were retroactively adjusted. The June offering issued 2,538,071 shares at $1.97 per share. Shares outstanding were 3,134,391 at quarter-end, versus 510,065 at December 31, 2022.
- The warrant liability is measured using Level 3 inputs and a Black-Scholes model; remeasurement affects reported earnings and is noncash.
Outlook, liquidity, and risks
- Management estimates operating expenditures of $5.1 million over the next 12 months and expects current cash to fund operations through the second quarter of 2024, when it expects to announce pilot-study data. The filing states that substantial doubt exists about the company’s ability to continue as a going concern.
- Management estimates $5.9 million is needed to complete first-in-human studies and a further $27 million to achieve FDA approval for a spine interbody-fusion indication. The company plans to seek additional debt or equity financing, but availability and terms are uncertain; insufficient funding could force it to scale back or discontinue development or operations.
- Nasdaq notified the company on September 27, 2023 that its shares again failed the $1.00 minimum bid-price requirement and determined to delist its securities. The company appealed, staying delisting pending a hearing scheduled for November 30, 2023. Delisting could reduce liquidity, increase volatility, and impair access to financing.
- The NELL-1 program depends on FDA authorization, successful clinical studies, continued access to licensed technology, and third-party development and manufacturing. UCLA license terms include development spending requirements; failure to meet them could allow UCLA to terminate or make the license nonexclusive.
- A vendor accounted for approximately 98% of accounts payable; amounts payable to that vendor were $955,076, with $487,640 remaining under development contracts. The company also disclosed ongoing litigation arising from terminated professional service agreements; it stated that potential loss could not be estimated at this stage.
Important facts for investors to verify
- Cash runway assumptions, expected pilot-study data timing, and the timing and amount of additional financing required.
- Clinical-study progress, costs, results, and the regulatory path and funding needed to reach FDA approval.
- Outcome of the Nasdaq appeal and whether the company can maintain an exchange listing and regain bid-price compliance.
- Development-spending obligations and other material terms of the UCLA license, and the status of vendor payables and litigation.
- Potential dilution from future financing, outstanding warrants and options, and the effect of warrant-liability remeasurement on reported results.