Osteopore boosts revenue, plans to break into Chinese and US markets

Bone healing biotech company Osteopore (ASX: OSX) has posted strong revenue growth since its ASX debut, eyeing China and the US as the next markets for its regenerative technology.

The Australian and Singapore-based business listed on the ASX last September after raising $5.25 million through its initial public offering and aims to become a world-leading producer of 3D-printed bioresorbable implants to assist with natural tissue regeneration.

Speaking with Small Caps, Osteopore executive director Geoff Pocock said the company’s technology has already been used in more than 30,000 surgeries across the globe, yet the potential to expand into different therapeutic areas and international markets is “massive”.

Bridging the gap

Osteopore is commercialising a range of unique, patented 3D-printed scaffolds designed to naturally dissolve over time, leaving only healthy bone tissue.

As Mr Pocock explains, bone “wants to regenerate” but if a piece of bone is removed, the remaining bone can’t heal across the void.

“The Osteopore scaffold provides that microstructure so the bone can grow through the scaffold and then, gradually, the scaffold dissolves and is naturally absorbed into the body,” he said.

Osteopore claims the implants, made from a polymer called polycaprolactone (PCL) which is usually used for dissolvable surgical sutures, significantly reduce post-surgery complication rates associated with permanent bone implants.

According to Mr Pocock, bone grafts, which involve harvesting a bone off another part of the body, bring risks of complications including co-morbidity and a secondary risk of infection from a second surgery site.

Meanwhile, permanent implants made from titanium or another polymer, for example, could have complications such as the implant becoming loose, damaged or cracked.

“The final risk is … you can get infections around that [permanent] implant, and even in particular between that implant and the natural healthy bone, and that can be very dangerous and very difficult for the body to clear,” Mr Pocock said.

According to Osteopore, its products have been used extensively and repeatedly without complications, including instances where the polymer could be rejected by the body.

All three of its current products on the market – Osteoplug, Osteomesh and Osteostrip – have received FDA (US) and CE Mark (EU) certification and are being sold to hospitals around the globe, either through direct sales or a distributor network.

“People are increasingly looking for products that boost and augment and work with the body’s natural regenerative capabilities, rather than trying to replace or override that and produce artificial scenarios,” Mr Pocock said.

Financial performance

Osteopore released its December quarter results at the end of January, posting a 21% increase in quarter-on-quarter revenue to $363,000.

This growth was attributed to record December revenues of $165,000 as a result of increased business development activity after the successful IPO.

The results bring the total 2019 calendar year revenue to more than $1.1 million – up 14% from 2018, and the highest in the company’s history.

Mr Pocock said the company is pleased to see its revenue grow in the months following its IPO.

“We [are] really starting to see the monthly sales revenues and the quarterly sales revenues growing, and that’s what we want to deliver over the coming quarters,” he said.

Revenue expansion strategy

Osteopore has announced an aggressive global growth strategy to increase revenue and penetrate new markets with additional breakthrough products.

In a recent investor presentation, the company outlined an initial phase of growing revenue from existing Asian markets and establishing new geographic markets in the US, Europe, Australia and China.

The second phase of its strategy involves expanding the company’s therapeutic scope with applications of Osteopore’s bone regeneration scaffold in new therapeutic areas such as dental and orthopaedics.

The third phase of the strategy is to investigate new commercial opportunities for the technology, such as new polymers to improve patient outcomes and the application of 3D-printed scaffolds for regeneration of other tissues.

Mr Pocock said the majority of the products are currently used for craniofacial procedures or for aesthetic work involving the regeneration of cartilage for rhinoplasty.

However, he said the company is “increasingly looking at other markets”, noting the dental space is a “major opportunity” with the regeneration of the alveolar (jaw) ridge being an area of “unmet therapeutic need”.

Mr Pocock said Osteopore also has undertaken several trials and cases in Australia, Oman, Singapore and Germany in the orthopaedic markets, covering everything from legs, arms and shoulders.

He referred to one particular case of a Queensland man named Reuben Lichter, who developed a bone infection in 2017 that destroyed his right tibia and faced an above-the-knee amputation.

“He had his entire tibia regrown using an Osteopore scaffold, so that’s a massive opportunity and completely life-changing procedure and shows the versatility of the Osteopore scaffold to work in any of these bone regenerative areas,” Mr Pocock said.

“There is no alternative for some of these procedures and the impact can be life-changing in terms of the therapeutic and the general lifestyle benefit to the patient,” he added.

According to Mr Pocock, the bone graft substitute market is forecast to be in the order of about US$4 billion over the next few years.

Market penetration

Osteopore recently made an initial step toward penetrating the Chinese market, signing a memorandum of cooperation with Boao Yiling Life Care Centre in China’s Hainan province.

The agreement will see the companies jointly develop rhinoplasty procedures and secure regulatory approval for Osteopore’s products in China.

Mr Pocock said the Hainan province is seen as the “entry point into the Chinese market for a range of international medical device distributors” and the market size is in the “billions of dollars”.

In addition, Osteopore is focused on building distribution networks to boost revenue streams while retaining control over the key manufacturing process.

In its recent investor presentation, the company said it aimed to replicate the successful distributor deals already in place in Asian markets in the US and key European markets.

“We’ll be looking at getting further into the dental markets, further into the orthopaedic markets and building that revenue globally, broadening our revenue base and giving us more exposure to the US and European markets,” Mr Pocock said.

As well as having regulatory clearance  to sell its products in the US and Europe, plus a range of South East Asian countries including Singapore, Malaysia, Vietnam and the Philippines, Osteopore expects to receive TGA approval in Australia “sometime during 2020”.

“We have approval and a very significant sales presence in Korea,” Mr Pocock added.

Strong board

Mr Pocock said a major strength of the company is its solid board and management team.

Osteopore’s chairman is Brett Sandercock, the chief financial officer of $10.2 billion medical equipment company ResMed (ASX: RMD), who has a wealth of experience in translating company growth into value for shareholders.

Also sitting on the board is the original inventor of the technology, Professor Teoh Swee Hin, a professor at Nanyang Technological University in Singapore and one of the world’s leading experts on bioengineering and tissue regeneration.

At the management level, the Singapore-based chief executive officer is Goh Khoon Seng, who has 30 years of experience in medical devices, building distribution networks and sales profiles.

Mr Pocock added that non-executive director and chartered accountant Stuart Carmichael was the one responsible for driving the idea of Osteopore entering the ASX environment.

In December, Osteopore also welcomed the former president and chief executive officer of hearing device company Cochlear (ASX: COH), Jack O’Mahony, as a board advisor.

Market competition

Mr Pocock said another factor setting Osteopore apart from other small cap medical technology companies is its product has been proven effective.

“We’re still developing the technology and we’re still developing the range of procedures it can be used in, but it works. We know that it works – we have IP granted, we have regulatory clearances obtained and it’s being used on a regular basis,” he said.

“This has been developed through the Singaporean academic research institutions for a long time. The operating company has been around for 10-15 years and is now poised to build revenue and commercialisation activities.”

According to Mr Pocock, no other competitors in the market combine the two key features of the Osteopore scaffold.

“There is [no other product] that is both bioresorbable that doesn’t leave a permanent product behind, but also creates that biomimetic architecture that facilitates natural bone growth,” he said.

Mr Pocock said Osteopore is keen to accelerate its growth based on its unique position in the market, aspiring to become a world-leading medical technology company like its multi-billion-dollar ASX peers, Polynovo (ASX: PNV) and Avita Medical (ASX: AVH).

“It’s all about being better than the alternatives. At the moment, the key is to be demonstrating those superior patient outcomes over the existing bone graft or permanent implant markets,” he said.