An Organovo Article With a Negative Spin
We’ve written about Organovo before. For retail investors who want to invest in 3D bioprinting, Organovo (NYSEMKT:ONVO) is the only pure play in town. However, this doesn’t mean they have a monopoly by any means. German startup EnvisionTEC has been selling their 3D Bio-Printer commercially since 2001 at a price point under $200,000 USD. At least 5 other private 3D bioprinting startups are working on printing tissues as well. Competition also exists from non-bioprinted cell-based assays offered by such companies as InSphero, or “organ-on-a-chip” technologies from companies like Emulate.
Investors should be extremely critical of ONVO given that they were originally conceived as an over the counter (OTC) stock and then moved up to the NYSE. Probably the biggest validation for Organovo would be the recognition of product revenues. Just yesterday, the Company received some vindication with the first product revenues from their exVive3D Human Liver Tissue product being announced along with their yearly financial statements. The financials stated:
From April 1, 2014 through the date of this release, the Company has recorded total contract bookings for its commercial liver tissue product of approximately $1.94 million, which includes $0.29 million in revenue recognized as of March 31, 2015.
This is great to hear and now investors will expect to see that number grow significantly to achieve profitability given that ONVO lost over $30 million last year. The Company goes on to say:
The Company has had multiple customers sign a second contract, representing repeat business for its liver tissue product. The Company has signed liver service contracts with customers in the United States, Europe and Asia.
It’s good to hear that multiple customers are placing second orders. The alternative of not having any repeat customers would truly be a disaster given the following quote from Organovo:
We continue to expect this tissue to grow into the tens of millions in annual revenue, and that it has $100M+ revenue potential.
These are some big numbers to hit and the competition is not standing still. However, Organovo is being very transparent with their numbers so investors can easily see the growth in sales for each product and the progress being made to hit these targets. But don’t be too critical about the progress they are making. It could be a hangover from being born on the OTC market but Organovo seems exceptionally critical of any critics. The first question on the FAQ under the “Investor” section of their website is the following:
- Can you comment on why certain websites have articles with a negative spin and without any quotes from Organovo?
Then, later on, another interesting question:
- I read comments critical of Organovo on an article recently. Should I be concerned?
We haven’t seen any publicly traded company that went to that length to address such questions. At least they used investor relations resources to address these “concerns”. There’s nothing worse than seeing C-level executives from an OTC company commenting on message boards while trying to silence their critics. They should be focused on growing their companies instead. But as an investor, don’t you want to be reading critical information about the companies you are invested in? If all you read are sugar-coated fluff pieces, then how can you possibly make informed investment decisions without understanding all the risks? If I want all the optimistic viewpoints, I’ll read the company’s website.
It’s understandable why Organovo is sensitive to the price of their shares. If the share price is at a premium, then they can raise more funds without having to dilute shareholders excessively. On the first day of 2012, Organovo had 22.4 million shares outstanding and since then that number has risen to 81.5 million. With the shares outstanding having nearly quadrupled, investors can take some solace in the fact that Organovo has $50 million in cash as of March 31, 2015. Given last year’s cash burn was $19.6 million, we can expect another 2.5 years of funded operations provided that costs don’t increase. If Organovo shows consistent revenue over the next few quarters then investors will have observed a very rare event; an OTC company that moved to a major exchange and then successfully commercialized a product.