BoneChat #52 - Nanochon, new cartilage repair startup with a unique solution.

Welcome to Bone Chat Discussion 52. I can't believe we're at 52. Uh, today we have Ben Holmes with us. Ben is the CEO and co-founder of a new cartilage repair startup called NanoChon, and their first product's called ChondroGraft, which is a 3D-printed implant that mimics the natural cartilage and promotes stem cell regeneration. So this is— I can't wait for somebody to crack the code on cartilage. So handing the mic over to Ben, welcome.

Excellent. Well, thank you very much. It's a pleasure to be here and a pleasure to present to everyone today. So I am Ben Holmes. I'm the co-founder and CEO of NanoCon. As Tiger said, we're an early-stage company developing the ChondroGraft implant to treat one of the biggest problems in orthopedics today, and that is cartilage repair and cartilage regeneration. So I think everyone in this group is probably very familiar with the problem. You know, cartilage over time loses its ability to stay durable and wears away, and you eventually get the formation of lesions or potholes in the surface. And we know that there is not a good robust treatment for these defects today. So eventually patients kind of go through, you know, maybe 1 or 2 or 3 surgeries before they end up needing a knee replacement. Replacement anyway. So that's exactly where we see ourselves fitting into the continuum. Again, probably not a surprise. We want to focus on these, these younger and more active patients who do have cartilage damage and need a surgery but are not yet a candidate for a knee replacement. So our implant is a button-sized device like you see here in the rendering. The technology is really based on two critical pieces. The first is the material itself. So we've actually developed a nylon-based nanocomposite, and this nylon composite has a highly aligned porous structure which actually simulates the structure of collagen fibers. So, that collagen-like structure gives the material mechanical properties matched to cartilage. So, in the short term, it does actually act as a replacement for lost tissue and a stabilizer of the region where it's implanted. But then, the other component of our device is 3D printing. So, I want to be— super clear up front, we're not using 3D printing to do patient-specific devices. In fact, we envision this being an off-the-shelf device. They'll come in standard set sizes, but 3D printing is a way for us to create a highly controlled tissue scaffolding structure out of our material. So what we're able to achieve is we don't lose the biological or the mechanical properties of the material, but we create this nice, open, well-organized lattice structure, which allows for very rapid ingrowth of tissue into the device. And so what we've observed now in 3 different animal models is that immediately upon implantation, the device is able to survive immediate loading. It does provide stability and stops the injury from spreading to the healthy cartilage and bone around the defect site. And then you also get the immediate wicking of blood and progenitor cells up from the subchondral bone. So the device also provides a very fast-forming coherent clot throughout the DeepX site. Then what we've observed is over a relatively short period of time, you actually see substantial growth of new tissue and you also see substantial restructuring of the joint. And at just 2 months, we actually see the joint surface has been returned to an anatomical state in terms of its morphology. And then you also continue to see this preservation of the cartilage and the bone around the defect. And then the real long-term benefit, of course, is that over time, the matrix continues to support the differentiation of cartilage. And then we've also seen the regeneration of healthy subchondral bone as well. So we believe that this is not just a treatment for frontline chondral defects, but it has the capacity to preserve and regenerate bone in more advanced DPX as well. And as we know, this is a critical piece of the key to unlocking real longevity and certainly a way that the current treatments fail. So again, I assume this is a very knowledgeable group, so I won't spend too much time on this. But, you know, we definitely think that this is a no-brainer in terms of disrupting microfracture as a frontline treatment, you know, mainly pushing out that need for revision in that typical 2-year period. We also believe patients will be able to start rehab much sooner. So instead of the customary 8 to 12 weeks of non-weight-bearing. We do believe patients will be able to bear weight immediately and start rehab immediately. And then, of course, when you talk about the tissue grafting and cell therapy approaches, you know, this is a synthetic manufactured off-the-shelf device. So even today at a research scale, our cogs are very good. And so we think that we could comfortably price this, you know, at a much lower than Allograft or the cell therapy products, make it more reimbursement-friendly, make it much friendlier for hospital and ASC purchasers as well. And then also you have all these upfront benefits to the patient, you know, much faster access to care, faster rehab, and faster recovery. And then also ensuring that you have a high-quality cartilage as well as a high-quality subchondral bone to actually achieve true longevity in the treatment. This is a healthy and growing market. We're estimating it's a $2 billion target market annually in the US. That's based on a patient population of close to 500,000 that we think would be a candidate for our ChondroGraph product based both on age and the severity of their injury. We also think that there would be, you know, low-hanging fruit in extending this to other joints, certainly the ankle and the hip and potentially the shoulder. We think that's close to a $4 billion opportunity annually. And then the material and the 3D printing process we're using are very adaptable and very scalable. So we think that this could be used as a platform to treat a variety of soft tissue defects all throughout the body. And so we think that the technology as a platform could lead to probably a $10 billion total annual opportunity in the US. We, as I mentioned, have gone through a number of animal models. Our most recent animal model was a horse. So not very many people invest in doing the horse model. I certainly will say that there are some difficulties and challenges in doing horses, but the payoff is that unlike other animals that are typically used in this space, like goats or sheep or pigs, horses actually develop the osteoarthritic disease, and it looks very similar to how osteoarthritis progresses in humans. And so you can see on the left-hand side, there is the control group, which was using a, a debridement procedure similar to microfracture. And you can certainly see, as we expect, the sort of disorganized scar-like tissue that grows. But at the same time, you also see pretty substantial degenerative changes in the bone. And in this particular horse, we saw bone thickening. So again, this thickening and lifting of the subchondral plate over time is what eventually leads to bone on bone, which is one of the most common conditions for people that end up needing knee replacement. And then conversely, on the right-hand side, the NanoCon device is seated in place. It's intact. It's well integrated with cartilage at the surface. And then also when you look at the tissue cross-section, there's a totally normal cartilage growing throughout it. And then also the subchondral bone underneath is completely normal. And I think, again, you know, the critical benefit of our device is, you know, we do get that high-quality cartilage long-term, but because the device provides immediate mechanical support, you don't have the issue that's been observed in historical attempts to develop biomaterials or matrices where you don't have that appropriate mechanical environment early on and you still see bone degeneration. And certainly the cell therapy products that are on the market today, when they fail in humans, that's primarily why they fail. It's because that degeneration continues to happen in the bone even if you get a nicer cartilage over top than you get with microfracture or DeBryant procedures. And you can also really track the development of how this healing took place over time. So, you know, we got the— on the far left-hand side, the 2-month time point from our first horses. We have that 8-month time point, and then we also have the 12-month time point. And again, the progression across this is that the soft tissue has differentiated into cartilage, and then also the subchondral bone has repaired itself. So again, very clearly observable in these groups. And then also at the 12-month time point, there was a significant differentiation not only in the degeneration of the repair cartilage, but also in the subchondral bone. So just want to be very, very clear in driving that point home. We also looked at the adjacent tissue surface. Again, I think an important endpoint, but one that's often overlooked in regenerative technologies, mostly one that's just looked at in sort of the synthetic replacement technologies. We also demonstrate that you have totally normal, healthy cartilage on the adjacent surface. And again, you start to see this degeneration and breakdown of the cartilage in the control groups, which again, in a human patient, this is what would eventually lead you to those kissing lesions or even at an advanced state, that bone-on-bone contact. We've also spent a lot of time, you know, taking the technology, taking our early versions of the device and really thinking through surgical workflow, surgical delivery, and how to best maximize the benefits of the patient, but also really maximize the value proposition for the surgeon. So we've developed an introducer system It's very reminiscent of what's used for an osteochondral allograft where you have a, you know, a guidewire and a reamer. But what's different is we've actually developed an implant design and a reamer to match which achieve very, very robust self-fixation. So the device has essentially what we're referring to as a bottle cap design. So there is a cartilage thick layer throughout, but then there's a a ring that extends off of that that would go into the subchondral bone. And then the reamer, instead of just drilling a straight hole, it drills this well shape that you see there in the cadaver lab photo. And the device and that well just fit together like a puzzle piece. And so what we found is that you have a procedure where the surgeon has to remove a lot less bone than they do with like an allograft. They're only going about a centimeter— sorry, they're only going about a millimeter into the subchondral bone to place our implant. But we found that you actually get on average 2 times the pullout force with our implant in this design than you do with osteochondral grafts. So, you know, we have something that doesn't require glues or darts or, you know, a complex reaming procedure. And at the same time, we not only meet the clinical gold standard of allograft fixation, but we actually exceed it. We've also put this new design of the device through pretty rigorous stress tests. We designed a cadaver tissue test that could replicate the joint environment and we could take that through loading and cycling. And again, what we found is that, you know, the cartilage health is maintained, the device health is maintained, and the device is totally fixed in place after going through cycle testing. So to talk a little bit quickly about myself and the team, I've been leading the company since 2016. We spun this technology out of the tissue engineering lab at George Washington University. I've raised all the funding for company to date, which totals a little over $9 million, and about $1 million of that is non-dilutive funding. I've also taken the company through a number of high-impact accelerators and incubators, such as UCSF Rosemann Program, as well as Johnson Johnson JLABS. My co-founder, Dr. Castro, who is the CTO, is also a very experienced researcher in the space. He's done a number of postdocs beyond our initial time together in the lab. All focusing on cartilage regeneration and biomaterials for cartilage. I do also want to just note that he is full-time at the company now, so he's not, he's not still in academia or sitting in a professorship. He is full-time CTO of the company. But we also have a really great team helping us commercialize this technology. So probably close to 200 years of medical device experience up here on this slide, several major exits to industry. We also have expanded the team. So everybody you see on that bottom row is new as of the last calendar year. And I think most important is our senior clinical director Heather Neal and her colleague Colleen Smith. Heather had a long career in industry designing and running clinical trials for the likes of Zimmer and Smith Nephew and has also helped some other sports medicine device companies execute very good clinical programs and achieve exits. We also have a great board of directors. I think probably some familiar faces up here. You know, of note is Dr. Sean Churchill, who represents CultivateMD. Our largest single investor to date. We also did all of that design work with the Genesis Innovation Group, which is closely tied to CultivateMD. Also Bob Creeden from the UVA Seed Fund, he was the lead investor in our first round of financing. He had a long career in life science and medtech investing in the Boston area before coming down to Charlottesville to run this UVA fund. And then Nick Pasciutta, industry veteran from ARK Rex and J&J, also represents our next largest investor and is on our board of directors. And then we also have Kurt Jacobus in the independent seat. If you don't know who Kurt is, current CEO of Restore3D and has also had a successful career as a serial entrepreneur in biomaterials, advanced manufacturing, and orthopedics. And just to brag a little bit, the company's been getting a lot of really, really great attention, press, and just other great opportunities for engagement over the last several years. So I think most notable and most recent was we went through the MedTech Innovator program this past year, which just wrapped a couple of weeks ago. We also went through Zimmer Biomet's new accelerator program that they're running with Plug and Play out of Warsaw, Indiana. We also were the recipient of a Virginia Catalyst grant at the beginning of this year. That's a $500,000 grant to do ongoing research activities. And then we've also had, you know, other awards and other great articles about us in the press and in the trade publications. So to talk about where we're at today and where we're going, we're gearing up to start our first human clinical trial. We're anticipating potentially doing the first surgery at the very end of the year. So we're trying to fit it in between Christmas and New Year's, which our surgeon thinks won't be a problem, but it is a little bit of a stretch goal. But all that's to say— Where is this surgery, Ben? So we're doing 2 clinical sites, Virginia Tech Carilion and LSU in New Orleans.

Okay, just like customs.

Okay. Yep, yep. So we're hoping to get that study going very soon. 10-patient, 1-year follow-up safety study. And then we'll be looking to raise capital again to do the pretty typical pivotal trial. This is a PMA device, so we're estimating a $20 million Series A that will open in the second half of next year to finance that trial. And if everything stays on track, we could be looking at FDA approval late '28 and be ready for market entry in 2029. I'll also point out that there are some good exit comps in the space. You know, PMA companies in this indication have typically exited, you know, close to or right at the point of FDA approval. It was sort of a $500 million-ish, you know, Cartahill, then Cartiva before it. And then finally, you know, I wouldn't, wouldn't be remiss if I didn't have an ask here. So we do actually have an open bridge round right now. It's a $1.5 million convertible note. I do want to say that we are capitalized to date to run that human trial, but this bridge note will allow us to do some additional work and accomplish some additional technical milestones, mainly around manufacturing, additional product development, and then also allow us to really accelerate the prosecution of some of our patents. And some new patent filings. So if you're interested in that convertible note, uh, very happy to discuss it further. And that is me. This is Nanocon, and thank you very much for your attention.

Yeah, thanks for going fast.

My pleasure.

Very interesting. So as you know, there's a graveyard of failed, uh, cartilage implants over the last 40 years. Indeed. And I, yeah, and I always thought just as an engineer, people underestimate the shear forces in the knee. And so, you know, a lot of the cell transfer stuff just gets wiped away. It's gone. And so, your implant looks really robust and that has a good chance. Alyssa's up. Then Kyle.

So, this isn't a question that I've ever heard asked, but With consideration to Infuse coming on the market, right, and feeling like there were limitations in how much it could grow, particularly with respect to my tenure in total joints and knowing 1 millimeter, 2 millimeters can change the whole kinematic situation, right? How do you know that it's not going to stop growing? How do you know that it's not going to bulk up the joint? Is there— do you rely on the weight of the patient and the movement of the patient to keep that from bulking up?

Yeah, so I do think that rehab is critical. And I think that, again, one of the nice things about the horse model is it is a load-bearing model. So I think it is a way to predict how we can be aggressive with rehab. The other element that we've addressed that is the 3D-printed structure itself. There actually is a slightly different porosity at the top layer that does inhibit the growth as well. So that's something we've shown across our animal models and our various iterations from step to step. So that's also something we've designed into the matrix.

What's the thickest cartilage regeneration that you've been able to achieve with it?

Well, the horse model is between 1.5 and 2 millimeters.

Okay, but nothing extends— you've never seen anything extend outside of that? No. Which is good, right? As long as you know what you're going to get. That's the predictability and the reliability is what's hard to capture with different bodies. Thank you.

Kyle.

Hey, Ben.

So wondering if you have lower limits and upper limits for the size of the defect, right? Something's too small, you gotta wait for it to get worse before you bother, or something's too big to where it goes beyond the limits of what the size of your implants you can fit in or that will carry the, carry the load.

Yeah, so I guess there's a couple answers to that question. I guess the simple one from a product perspective is we are gonna offer 3 sizes initially. A 1 centimeter, a 1.5 centimeter, and a 2 centimeter. And that was really based on a survey of surgeons. We sort of took a distribution of what they thought were the common sizes of these defects. So we sort of picked the middle part of the distribution. But, you know, what we showed from going from our goat model to the, to the horses is that increasing the area of the defect doesn't seem to matter, whereas that has been a limitation of of, you know, other products, and it is a limitation of the CartiHeal product as well. I think the horse model allowed us to stress test that. And again, I think it's, I think it's 'cause our matrix was primarily designed with promoting, you know, progenitors up from the bone rather than relying too much on cartilage infiltration from the margin. So I think there are biological and regenerative elements about our matrix that would allow it to scale pretty dramatically. In terms of the clinical reasons for why we chose that size range, once you get below 1 centimeter, it's fairly easy and successful to do an autograft, at least according to the surgeons that we talked to. And so I think we didn't really see a lot of value in competing with autograft procedures. And then in terms of going larger, I think once you get larger than 20 centimeters, then you're talking about lesions that take on different irregular shapes. You know, I do think that there'll be opportunities to use multiple devices for a large lesion, but we are gonna restrict that in our first human study, kind of a crawl, walk, run approach.

That may be something you have to do as a staged thing at some point, even instead of getting into some of the— like, there's other companies that are in this space or adjacent spaces where they're going after some wild geometries, and then they're trying to figure out how they're gonna machine the bone to look like that, and that's an adventure.

Yeah.

Yes. So, we want to kind of keep it simpler and, and kind of focus on where we can have the, the best, most straightforward impact.

I got a couple questions. So, since you're recruiting stem cells into the implant, does— do you think it's— do— will do better in younger patients that have more stem cells in their body than older patients?

Yeah, I think we'll probably see faster healing in humans. But, um, you know, another argument for using the horse study, um, and another kind of, I think, benefit of, of doing that particular animal is that, you know, I've, I've heard people that are very knowledgeable about these animal tests say that, you know, goats and sheep, that's, that sort of is like biologically modeling the effect you're going to see in those young patients. But the horse really is not good at healing, um, and the horse is really sort of a model of more like what you'd see in an older patient. So, you know, again, I think my answer would be, you know, correlating these animal models as best you can, still seeing really significant high-quality cartilage in the horse makes us think that it will definitely still work in older patients. It just might take a little bit longer to recover. Got it.

And then what's the— after you do your first in humans next year, what's the endpoint where you say, hey, eureka, this thing works? Or we got, we have some more development to do?

Yeah, I mean, we're going to start looking at clinical metrics at 3 months, but we're also going to do really frequent MRIs. So we're going to start doing MRIs at 2 weeks, and then we have a 6-week, 3 months, 6 months, and 12 months planned. So I think once we get to 6 months, having that aggregate imaging data along with the pain scores will, will really give us a strong idea that this has worked in humans.

Got it.

Yeah.

Mark?

Yeah, I got a little bit distracted at the beginning of your talk. What's the material? What's it made of?

Yeah, so it's a composite material, but the primary polymer is nylon. Nylon? Mm-hmm. Okay, thanks.

Interesting.

Interesting. And how are you doing? How are you assessing the patient, you know, selection? Is it through MRI?

Yeah, it's going to be MRI, MRI as well as scope. Okay.

Oh, so you can, you can, they can bail out at the time of surgery. They can put a scope in and say defect's too deep or whatever.

Okay.

Correct. Interesting.

Alyssa.

Have you ever thought or studied about applying these on top of porous implants? For example, they have unicompartmental knees, right? If you can— if there's too much bone loss in that area, have you thought about applying the two technologies together?

Yes, I'm actually really glad you asked that question because that was actually an important part of our foundational research. You know, when we were just researchers who didn't know the industry well, we thought this was going to be something for like a KL4 person that needed a knee replacement. So actually, a lot of our foundational work was showing that we can kind of fabricate this along with bone-appropriate materials and also create bone structures. So I can't say exactly when we'll pick that back up, but we have already started to talk about, you know, one, a device that could be used as you know, for an even more advanced patient with even more distressed bone. But then also thinking about having our own revision system. So if, if at some point a NanoCon treatment fails, instead of people just having to get a knee replacement or an allograft, we might also have an opportunity to have a revision product.

That might be something, considering there's so many, there's quite a few companies out there down this path, it would be something that would completely set you apart. Just conceptually speaking.

Yeah, no, I appreciate that and I agree.

Oh, go ahead, Patrick.

When you guys get around to the pivotal trial, not the pilot trial, but the pivotal trial, you plan to recruit entirely within the US? You have to know, I'm sure, that these trials tend to take long, you know, they always take longer and are more expensive than, than everybody always envisions.

Yeah, so we definitely do want to include some US sites. Heather has worked a lot in Canada, and then we also, we have connections to some, you know, other investigators in, in Europe as well as Australia. So those are some of the places we thought of, and I'm very open to, you know, learnings from the group and suggestions on other places to potentially do sites as well.

Argyll had a lot of success in Eastern Europe. Mm-hmm. I think some of the reasoning behind that makes, at least to me, makes sort of logical sense, especially with a microfracture control group. A lot of US surgeons don't consider that the standard of care and what those patients would get in a US surgeon's hands would be typically Allograft, MACI, something like that. And Eastern Europe, socioeconomically, I know I'm painting with a broad brush here, as uncomfortable as it may be. Eastern Europe's a bit of a sweet spot where the patients are and the economies are wealthy enough that they're going to get surgery, but not wealthy enough that they're going to get Allograft or MACI. And therefore the doctors can say to the patients behind the closed door of an exam room, listen, if you You can participate in the trial or you cannot participate in the trial. But if you don't participate in the trial, you're going to just get the control group surgery anyways. So participating in the trial is all upside. Whereas a US surgeon, when the door is closed, um, you know, and the patient starts asking some uncomfortable questions of, well, what if I get the control group? Because it's not selling the fancy technology that's the hard part for the doctor, it's selling the control group oftentimes.

Yeah, I, I really appreciate that. I think that's, that's really good food for spot. Do you know, do you know like specifically what country in Eastern Europe?

Well, that success in Hungary, but I don't know if the reasons why, or you know what, anything specific about the healthcare system or the economy or anything like that, or if it's— if that was random or calculated or anything like that.

But got it. Okay. Yeah, I can echo what Patrick says for some, uh, South American countries as well.

Yeah, the same thing would apply. You can just take a look at anywhere around the world, you know, no, not, not knowing the regulatory environment in any specific country. There is a— I think there is a sort of like GDP sweet spot where you can probably hit— it's a unique thing of these trials in the US where the control group that FDA imposes upon everyone is considered not the standard of care.

So it creates this—

it creates a tough enrollment environment.

Yeah, I'll speak for Mauricio, who's not on the call, but he's a startup founder and he has a lot of shareholders in Colombia, and he has ties to Colombia, and he says it's— you can get— you can do surgery in Colombia, and you can in 3 months. I mean, uh, it's not going to be a clinical trial, but if you just want experience, if you want to see surgeries, refine your instruments, figure out your sizing, you know, you— there's places like that where you can go. Um, it's not hard to do. I would implore you, this is my advice, forget, forget the random control trial outside the US. I would just go do as many surgeries as you could. Just, I would do humans. I would do 10, 20, 30 humans somewhere. And you will, I always, always say this, that the implant you designed is probably not right. It's just all startups And so you're, you're going to go to Gen 2 and Gen 3, and you don't want to go to your IDE/PMA trial with Gen 1. You want to, you want to refine the design. And the way you learn and the way you get to Gen 2 or Gen 3 is you got to go get human data somewhere as fast as possible. I worked for Lips Technologies and we did we, we had a, we had a, uh, a mantra that we always did our first surgeries in faraway lands. So we, we did our first Magic Rods in Hong Kong, we did our first Precise Nails in Australia, and we did our first HTO, adjustable HTO, in India. And those surgeries were invaluable. We, we came back and immediately redesigned the product.

I agree with that, Tiger, specifically for biologic implants because there— I think it's— there's only a 3%, uh, similarity between even the closest, uh, animal, um, from a genetic standpoint, from a— there's a DNA standpoint, but there's also biological and physiological processes that go into play. And when you're talking about pH balances and so on and so forth, They're just different in animals.

Totally agree. We, we're on the same page. I mean, horses and goats, they were, they're designed to get injured in the wild and survive. And so they have a better survival DNA than, than humans do.

Horses are, horses are tough to heal. Horses are really tough to heal. So I commend them on doing the study on choosing horses.

Yeah, that was not easy to do.

Patrick?

Ben, without like, you know, there's clearly a limit on what you can and can't say, but you clearly, you know, have been fundraising, are fundraising, will continue to be fundraising. With PMA products, it's not necessarily always just like a, can you do it? Like, can you sort of enroll and will the outcomes be what you need them to be? But oftentimes, how long will it take? In today's interest rate environment, is that pushback that you get— without naming firms or anything, of course— is that something that you hear more so now than you did a couple of years ago, for example? Can you make any sort of general comments on how the macro financial picture of today is impacting what you're trying to do?

Yeah, I mean, I definitely will say that it made things challenging in 2023. We originally were planning on raising a larger round. We were looking for a venture lead and that didn't happen. We were close to a term sheet in March and then SVB happened. So that kind of just washed all those efforts away. But I think by going back and being really critical about what were our most essential activities, we were able to kind of reduce the cash need in our, in our plans and go out and raise a smaller amount. And, and, you know, we had luck with getting additional support from our insiders, you know, obviously pulling in the Cultivate Group and, and some others, some, some new investors as well. So I think that, you know, we were still able to kind of navigate those waters. And then everything I'm hearing now is that, you know, and I'm not a financial expert, but this is what people are telling me, now that we're past the election, the capital is going to free up. And I think that our next major round of financing is going to be a true venture round. And all of the funds that would be interested in leading that round seem to be healthy. I'll also say too that we're getting a lot of attention from several strategics that probably want to participate in that Series A. So I think that'll also help push things along.

Yeah, it's good to hear. Yeah, funding is going to loosen up, but I think it's going to take some time. Nobody wants to be first to gamble. I'd love to hear about your experience with J&J and Zimmer Biomet and what it did for you and what the limitations were.

Yeah, absolutely. You know, I think with the JLABS program, you know, really is kind of a long and slow relationship. So, you know, we been in that program for 3 years. But it does allow you, if you get connected to the right people, to build deep relationships. And so I got a lot of guidance and mentorship from specifically folks from Depew. You know, when there was a MyTech, you know, those were the people I mostly talked to. And, you know, now we've kind of been rerouted to Depew Biologics. But, you know, it's been fruitful in terms of looking at and interpreting some of this animal data. And then also sort of talking about clinical needs, you know, where they see the biggest need. I think the limitation of the JLABS program is they really can't provide any commercialization assistance. They can only really talk to you about, you know, the technology, your clinical application, and just in broad strokes, do we want something like this? Do we not want something like this?

Right?

But I think that that's where the Zimmer program, you know, really helped us. And if anybody is looking to go through an accelerator incubator, you know, they're— I think they're trying to turn over like 2 cohorts a year in that Zimmer program. So it's a much faster-paced program, really more of a traditional accelerator, but they had a lot of freedom to sort of comment and talk about things. And so, you know, we're at a point now where we're starting to think really critically about you know, what's our market access plan, you know, what's our reimbursement landscape, and, you know, even to get some assistance on kind of like discussing clinical trial goals. So, you know, the Zimmer program really was able to provide a lot of help with those things.

That's excellent. Do they— so do they get equity or right of first, you know, offer, or what do they get out of it? Or they just get early look?

They just get an early look. Yeah, like they don't get any— there's no equity component. You know, we did get some funding from J&J, but it through one of their non-dilutive programs, and they don't get any other rights or anything. So yeah, it really is just an opportunity for them to look early and potentially steer it in a direction that's more to their liking.

That's great.

Mark Maloney.

Yeah, I was actually going to ask that same question, but I had another question too. And I was going to ask you if you could sort of enlarge a little bit on the 3D printing and the actual structure and why you think it works. I had some experience with that with Tim Ganey, who was Chief Science Officer for a couple of, couple biologic companies in a nanospinning project for cartilage out of the Czech Republic. And it didn't end well, but I learned a lot.

Sure, sure. Well, yeah, you know, I think that, you know, the first most important piece is just the material itself, right? So I mentioned that this nylon composite we've developed has this structure that looks like collagen fibers. So progenitor cells attach to it and then they align along it, you know, much like chondrocytes existing within a collagen structure. So that's kind of the basic level what the material does. But then there are quite a few elements that have been designed into the 3D-printed structure. I think the first and most important one is that we have horizontal and vertical channels, but the vertical channels are larger and they're distinct, so you get like this distinct vertical channel alignment. And, you know, that's part of why the Cartahill device works. It's, it's not something we discovered, but it was something that we sought to design into the implant, and you're able to really control that well with a 3D-printed approach. And then the other thing I'll say is that, you know, going to that new version of the device, being able to design in some additional features to make it more usable and more durable. So the structure that comes into the bone does actually have some change in the 3D-printed structure and some features. It's still porous, but it looks different than the cartilage layer. So being able to also kind of tune those mechanical properties to get slightly different properties in different regions of the device. And then ultimately, I think from a, from a macro mechanical standpoint, and this is something that a lot of my PhD work looked at, is that the way we've designed that microstructure to have distinct vertical channels and then also smaller horizontal channels, the device maintains the bulk properties of the material in compression, but then it's actually a little bit more flexible in shear. And so in, you know, sort of like the early recovery process, the device kind of can wiggle under shear loading. So you don't have the same risk of either a solid piece coming off or coming out or causing, you know, stress buildup in the surrounding cartilage. So that was also, I think, a critical design element that we found 3D printing provided a way to, you know, design those properties into the device.

Great. Is that where, is that where a lot of your intellectual property is probably encapsulated?

Yeah, that's correct. Yeah.

Cool.

Alyssa. I, I don't know if you've studied this yet. I'm assuming you have, but how does the newly formed cartilage compare and contrast in comparison to the the cartilage that was there prior, that was, that's still existing and still healthy cartilage?

Yeah, I mean, ultimately we see, you know, really good comparable collagen II, which I think is probably the most important marker. You know, we also see good, you know, equivalent levels of GAG, which is the next most important marker. And then it's also, you know, organized and structured, you know, it has the right alignment in the collagen fibers compared to native cartilage. The only difference really is that our—

So like the fatigue resistance of it compared to traditional cartilage, compared to the prior cartilage, will it withhold, hold up to, for longevity purposes, or does it just buy you a few years?

Yeah, I mean, again, if you're growing something that's a Highland cartilage, it should have the longevity of Highland cartilage. You know, we didn't, we didn't take horses out to 5 years, so I don't know if I can scientifically claim that. But, you know, again, we know repair cartilage is very disorganized and doesn't have the right constituents in it. So our tissue does. So theoretically, it will be as durable as hyaline cartilage because it is hyaline cartilage.

Hmm.

Could it— could the material be used in soft tissue repair, tendons and ligaments?

Have you ever— Yeah. So, so yes. We actually have some work that shows that it supports fat tissue. And also, in the right environment, it actually— and I want to be very careful about how I say this because we certainly didn't observe this in these cartilage studies. But we did some in vitro work earlier on where we also showed that in the right environment, we could induce microvascularization. So, you know, I definitely think there's opportunities for other types of soft tissue and tissue filling. And then we also have other formulations of this material. So this nylon was really designed to behave like articular cartilage and really kind of focused on compressive properties. But we also have different versions of the material that perform well in tension. And then you also can maximize that effect by changing the 3D printed microstructure. So, you know, I do, I do believe that, you know, there could be applications in that direction. Well, I've forgotten what was the Artilon material that I think it was a polyurethane and some other stuff. Yeah, I think it is.

Yeah, yeah, the nanofiber wick. The, you know, nobody is doing that. Everybody's doing cartilage, but nobody is doing ligament tendon reinforcement structures, and these surgeons are having to rely on very old and antiquated things. So that might be something also that to to consider. And then you can probably learn a lot, a lot more for the cartilage defect side as well based off of what you're learning from tendon. I know you need to focus, so sorry to get you off of that consideration, but that— there is a big, huge, massive void in that space.

No, I mean, I appreciate it because we're, you know, we continue to pursue non-dilutive funding and we're always looking for topics, good, interesting topics for you know, other grant applications. So I think there, there could be opportunities to get R&D funding probably to do it what you're suggesting.

Yeah, it could be a faster regulatory pathway and you could start commercialization earlier. I mean, it's an idea. That's a great idea.

I mean, honestly, they're still using Hunter tendon rods that are like, what, 40 years old or 100, maybe even more than that in the OR.

Wow.

I mean, the brilliance of Arthelon and what Aaron Smith did was the material had been around for 20, 30 years, and they were, they were putting it in the base of the thumb, CMC, you know, that for the anchovy procedure. And it was just the wrong application, just totally the wrong. And Aaron and his team said, wait a minute, this is perfect for tendon repair, ligament repair. And they, and then they not only did it work, but they created procedural kits, disposable procedural kits for each little tendon and, and they just took off.

Interesting.

So what's the next big milestone, uh, as you sit here late 2024? Is it the surgeries? Next year, or there's something before that?

No, I mean, I really think at this point it's, it's the surgeries. So getting the first clinical cases done, that's what we're pretty laser-focused on today.

And when we, when we talked, uh, I think last month, you said you're building a manufacturing center in Baltimore, I think.

Uh, yes. So we, we just signed a lease, uh, this facility called the Launchport. Uh, the Launchport is run by a gentleman named Bob Story who I assume that there's probably some people here who know who Bob Storey is, but, you know, he was a veteran of the orthopedics industry and then he was a serial entrepreneur, mostly in the spine. And then he opened this Launchport Group, which, which, you know, he really saw as kind of bridging that gap between where a company like Nanocon is today, where, you know, we have space, but it's primarily like R&D technical space and bridging the gap between that and needing full-blown commercial support from like a big CMO. So they have the typical kind of white box incubator space, but then they also have an ISO-certified, FDA-registered manufacturing facility where they really focus on clinically viable production and then also early commercialization. So after talking to some of the big CDMOs and not being super enthused about the types of contracts that they wanted to put in front of us, it seemed like a really, really good option. And then I'll also say Bob is like the master of Maryland state funding. So, you know, even the fact that it's in Baltimore, he's gotten tons of, you know, state, state-level funding, city-level funding, foundation funding for the companies in there. So that's also something that we've started to talk to him about. And they just got a huge investment from the state and some private foundations to support 3D-printed Class 3 devices specifically. So I think there's also going to be the ability for them to probably finance some of this work that we want to do as well. Wow, excellent.

It's a great partner.

Yeah, we're very excited.

Interesting.

Yeah, any—

go ahead.

Doesn't Maryland have like a 40% tax credit for any investor as well?

Yes, they do. And actually, we will qualify for an even higher tax credit because we are in an economically disadvantaged zone being in Baltimore City.

Wow, you're in an old warehouse or something downtown.

Well, well, you know, I— well, we have a little time. I'm happy to tell the story about Launchboard. So used to be the municipal garage for the city. So it's where they did all the work on like the cop cars and and, you know, like the park ranger vehicles and stuff. So when the city shut it down and built a new garage north, north of town, um, Kevin Plank, the Under Armour guy, bought it. So he— a lot of people don't know this— he was Baltimore-based. He started Under Armour in Baltimore, and he's never taken it out of Baltimore. So he's become like this, this huge kind of like economic engine for the city of Baltimore. So he bought this city garage he kind of turned it into like a typical kind of like incubator makerspace. You know, there was like a, I think literally when Bob tells the story, there was like a skateboard company, there was like a basket weaver, you know, it was not anything like medtech and it wasn't really working out. So he kind of shut it down. He's trying to figure out what to do with the building. And that's kind of when he met Bob and Bob wanted to do this Launchboard thing. So he kind of talked Kevin into, you know, helping him, you know, rehab the facility, retrofit it to do, medical manufacturing. Um, and then that's basically how the Launchport was born. And so Under Armour still is in the space, I guess, but they're about to vacate because they're building a huge new campus like right across the street. Uh, and so that's kind of like Bob's vision for the future too, is that today they can do what I said they can do, where they can take you through clinical trials, maybe take you through the first 3 years of commercialization. But they also are now going to start expanding into this open space that's now available because their, their goal is they want you to be able to, you know, scale throughout the lifecycle product there. So could also provide opportunities to, you know, continue to build a commercial ramp, continue to go to greater and greater volume. So just another interesting kind of attractive thing they're doing there.

That's a cool story.

Frozen, Ben.

That's awesome. Yeah, when you have a super— when you end up with a billionaire in a town, it's— they, uh, usually create spin-offs. I mean, look at Seattle. Seattle was nothing, and then you got Microsoft and, um, Starbucks And Amazon just completely changed Seattle forever.

Interesting.

Well, cool. Any questions you have, Ben, as we're kind of wrapping up here?

This is really cool. Yeah, no, I really appreciate it. I really appreciate the opportunity to present to the group. You know, I think, you know, some people already shared their insights, but, you know, looking to do anything we can to de-risk and maximize that future pivotal trial, right? So, you know, anybody who has experience and wants to chat about it, you know, I'm all ears. You know, the other thing I'll say too is that, you know, we are looking to sort of refine our market access plan. So anybody that really knows about not just reimbursement, but also sort of like pricing, different strategies to achieve early coverage and maximize coverage, like You know, we're always looking for support there. And then finally, once we close out this note and, um, you know, we're up in Baltimore, we are going to be looking to expand. So we'll probably be looking to hire, you know, one or two key technical people to sort of be, uh, you know, manufacturing engineers and program managers, um, you know, up there at the Launchport facility. So, you know, also, um, not quite ready to hire somebody, but starting to turn an ear to the ground to look for folks. So if anybody has any ideas there, happy to chat about it.

Yeah, I think the biggest thing— well, just reiterate, the biggest thing you can do to de-risk is just get implantations done outside the US. And the other thing, you don't have to tell anybody. I mean, sure, your investors are going to want to know, but it's not for press releases, right? You're just trying to get experience.

Yeah. Yeah.

Well, this is awesome. We, we all, uh, everybody probably need, will need a cartilage repair at some point. The, the market's enormous. Kyle's got 2. You got, what do you have, Kyle?

I'll need, I'll need 2, maybe 10 for sure.

I was a Cartahill candidate, uh, but I declined the surgery because of the, um, postoperative, uh, care and, and lack of ability to put weight-bearing— be where— be the time—

oh, I think we lost you.

Got it. I assume, I assume the NanoCon implant you could weight-bear, you know, pretty early, within a few weeks, I would think, right?

Yeah, yeah. So, so what we're planning on doing in the, in the first couple cases is recommending an osteochondral allograft recovery, which is immediate weight-bearing but progressive weight-bearing over a 2-week period. But based on what we've seen in the animals, based on what we've seen in our mechanical bench tests, we do expect that we'll be able to prescribe, prescribe something more aggressive. So the hope is that once we get data from the first clinical patients, we can think about how to, you know, make that rehab regime even more aggressive.

Did, did you protect the horses a little bit from weight bearing, or you just let them run around?

So the only, the only, um, restriction that we put on them is they were penned for the first month. So I mean, they were standing and able to walk around, but they're, they're sort of in this like 10x10 pen. And then after the first month, they were allowed to then go, go run around in the paddock.

Yeah.

That's, that's a good one.

Yeah, I don't, I don't think there's any way to make them non-weight-bearing. Is my understanding.

No, you can't do it. No, you can't do it.

I think you have to kill them if they're non-weight-bearing. Isn't that why they get shot?

That's part of it. My understanding is that, you know, they're, they're health-wise, they can't handle being mobilized.

Yeah.

Right.

I, I saw a horse surgery at, uh, Auburn University that was fascinating. I mean, they had this giant rubber room and they, they put— they anesthetize the horse and they lift them up with this giant hoist, and then they move him over to the operating room and they do their thing, and then they move them back in the hoist into the rubber room, and it wakes up, he's kicking everything. It is fascinating. It's a large animal.

Oh yeah, it was, it was wild. Um, yeah, it was pretty wild. I mean, they when they first put them under too, the, the whole hospital suite has this like almost looks like a, like a, like a little train track running across the ceiling. And I was like, oh, what is that for? And the surgeon was like, oh, you'll, you'll see. So then the first horse is ready and they, they bring it in and they've got it like trussed up on a winch that they just roll it, roll it into the OR on this track and then they lower it down onto the, the OR bed. Yeah, it's pretty crazy stuff.

It's like, it's like a 10-ton hoist.

Yeah, yeah, yeah, like you're lifting out of the engine block.

Yeah, exactly.

Yeah.

Well, thanks, Ben. This has been great. This is, uh, I love— this is real early and we're all pulling for you. And, uh, yeah, anytime, and, uh, anytime you need help, you know, come to Bone Chat. We, uh, we got a lot of collective wisdom here, so we'll be watching.

Yeah, I really appreciate it. Thanks for the time, everybody.

Yeah, thank you.

Good job.

Good day.

Thank you.

Nice work.