John von Benecke Presents Locate Bio at LSI Europe '23

The company is working to solve some of the most complex degenerative and infectious diseases that affect the muscular skeletal system.
John von Benecke
John von Benecke
CEO, Locate Bio



John von Benecke  0:04  
The story has its origins in World War One, where hundreds of 1000s of young men in the prime of their lives were cut down with horrific gunshot and blast injuries. And it was in Battlefield hospitals just like this one. But two practicing French surgeons, Laurice and Polycar came to understand the Absolute futility of trying to get large bone injuries to heal. Inevitably, for these young men, it meant amputations with life changing consequences. But they also made a remarkable discovery. In some few patients, they were seeing spontaneous bone formation in places that it shouldn't have been possible in skin tissue and in muscle tissue. The whole concept of bone biology, which is a brand new field of science at the time, so interested them that they after the war continued to research and publish the textbook in the 1920s. And in that textbook, they again returned to this unexplained phenomena of spontaneous bone formation. In the book, they refer to it as the juice of stone making that there was some factor the capital importance of which was so profound that no one had yet dreamed of it. Our story is then picked up by this man Marshall eras born in 1914. In Chicago, he grew up on a small farm in Michigan qualified as a doctor at Johns Hopkins. practice medicine for a short time before like so many of us generation in 1943, he joined the US Army in 1944, and 45. He saw active service in the European Theater of conflict as an orthopedic surgeon, and in preparation for that experience. He had also read that book by those two World War One French surgeons. And that passage around the juice of stone making had planted a seed and his own experiences of seeing these young men having to lose their limbs would shape and become a lifelong passion for him if he could discover what that missing growth factor was, he could save limbs and change lives. After the war, he took a teaching role at UCLA set up a small bone Research Laboratory. And after 15 years, he published his results in our landmark article. What Marshall had discovered, what if you take bone and dissolve away all of the mineral content using strong acids, all you're left with are proteins and as those proteins that were responsible for what he called ectopic bone formation. He would spend the rest of his career searching for ways for these proteins that he called Bone morphogenetic proteins to purify more of them to get enough of them that he could be used clinically. But it wasn't until gene sequencing and cloning technologies came to the fore in the 1980s that the first recombinant human BMP2 was synthesized by a small startup biotech startup called the Genetics Institute. They were acquired by Wired, so why earth at the time, we're looking to get a foothold in biotechnology probably didn't know what to do with this powerful therapeutic protein, and so licensed it to a small but fast growing spine company called Sofermodanic, Medtronic absolutely did know the potential of this product and move to acquire Sofimore paying $3.6 billion for it nine times its trailing revenue, that's a significant premium just to get hold of that asset. The steer that product through a PMA approval, and the Infuse bone graft product was born. Its commercial launch was astonishing. This is a product that was racing away to become the first ever medical device blockbuster of a billion dollars in revenues. Its performance was astonishing, just swept the competition aside, but the infused product had a drug delivery problem, only half of the protein was tightly bound. The other half came away very quickly, once physiological pH was restored. And that led to the controversy years the emergence of significant underreported side effects to FDA warning letters to the Chief Exec of Medtronic, a Department of Justice investigation, sales stalled at around 800 million. Now most of us in medtech would think that's a pretty good outcome. But when you consider all of the additional metalwork that is able to be sold around that biological performance, it's clear that the infused asset was the single reason Medtronic still holds its dominant share in spine today. But since then, we've now seen a shift in the spine procedure landscape just as we did for hips and knees 15 20 years ago, we're seeing the same happen in spine where more these procedures are moved from expensive to treat inpatient setting to much lower cost outpatient procedures. And that's really crystallized two further weaknesses with the infused product challenging its product market fit. The first is its very high price point relative to competition. And its handling characteristics. This is a product that takes 20 to 25 minutes to prepare in theater. You can't deliver it through a bone delivery device. So that limits your ability to use endoscopic and minimally invasive procedures. And the price point has really bitten as well. All bone grafts are reimbursed with the same CPT code. And that means that every time you reach for the interviews pack. We're losing about three and a half $1,000 of margin from that procedure, and hospital purchasing managers have really clamped down at us. They allow it to use for those patients who really did do need that incredible performance. But if you're not one of those patients with comorbidities or elderly, you're unlikely to receive it in an inpatient setting. And then outpatient settings where there's eight and a half 1000 ambulatory surgical centers in the US two thirds of which are owned by the doctors practicing medicine. Now you're asking them to put their hand in their own back pocket, take money out of their children's college tuition funds just to use the infused product. And for that reason, it simply has not been able to establish market share in that segment. Overall market share for the infused product has fallen. At Locate Bio, we're incredibly proud of what we've been able to do to generate a next generation bmpt. We're passionate about realizing the full clinical potential as envisaged by Marshall Eurest. There's four really important things that we've done. In the most comprehensive ever large animal study, we've demonstrated that each of our three doses were as fast or faster than the current gold standard. So we're replicating that in astonishing performance of the infused product in terms of bone grafting. But using our proprietary controlled and extended drug delivery vehicle, we've been able to overcome all of the side effects. So that means none of our animals at any of our time points and at any of our dose levels, even 40% higher than the infused dose, reported any of those side effects. The product has been designed to be quick and easy to use two minutes from opening a pack to implanting the patient can be delivered through a bone delivery device aligned very much to these augmented technologies and minimally invasive procedures that you're seeing in outpatient settings. And using state of the art recombinant protein manufacturer, we've been able to achieve a significant cost of goods advantage of the infused product, we could for example, if we want to do just half the price, and we'd still be in 80 plus percent gross margin business. In terms of news flow, and what you can look for forward to from locate bio, we've already achieved investors and people platinum accreditation, that's the highest level of accreditation for me team and the company culture are very, very important and very proud of that measure. We've also received a breakthrough device designation from the FDA for this product on the basis of the sheep dates that we're able to share with them. Two other bits of exciting news to look out for that will be announced in the coming months before the end of the year. We'll be starting our human clinical study called the Restore Study. And we're also be announcing a slightly oversubscribed funding round. So we hope to close that this year. There will be a second close the round in quarter one one of the investors isn't able to deploy the cash that they've committed until quarter one but really exciting news for us as we continue to make fantastic progress at Locate Bio. So please do follow the story. If you have any questions about the product funding round or anything else about the company, please grab me in one of the breaks. Thank you so much.

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