Can Organovo Keep It Up?

Organovo (NYSEMKT: ONVO  ) is kicking off 2014 the same way that it closed out 2013: on fire.

The company hoping to create a proxy for human tissue that could be used to expedite drug testing -- with loftier organ-related aspirations down the line -- saw its stock soar 17% last week. The shares more than quadrupled last year as investors warmed up to Organovo's compelling story.

Organovo's 3-D bioprinting niche initially hopped on the 3-D printing bandwagon that's been en vogue since 2012. If we can now print physical objects on demand, why not genetic material, including tissue and organs? It's a fantastic scenario, yet the viability of Organovo's dream seemed years away. It helped make itself a rock star late last year when it pointed to the end of this year as its goal to roll out its first product. If this year's bioprinted liver tissue test is successful, heart and kidney tissue won't be too far away.

Soaring 326% over the past year, Organovo is packing a market cap of $842 million as it enters its first full week of trading in 2014. That may seem preposterous for a development-stage company with negligible revenue, but biotech and 3-D investors have shown that they're not afraid of taking a gamble.

An investment in Organovo is certainly not for the weak of heart. If it's successful in being the first company to market lab-created human tissue, drug companies will beat a path to its door. Organovo could be worth billions if not tens of billions. However, if it falls short -- or someone else beats it to the punch -- the stock's going to take a beating.

We won't have answers right away, but that will only make 2014 as volatile as the past year has been. We're months away from important tests that will hint at the feasibility of Organovo's faux liver tissue, but this is still a story that will take years -- not months -- to fully play out.

Organovo had a huge 2013, and it's likely to be more familiar to investors as 2014 plays out. That's saying something. Outside of the market's shortened trading day on Christmas Eve, you have to go back to mid-October to find the last time that less than a million shares traded hands.

It's going to be a lively year of trading for Organovo. Will its product follow suit? That's the multibillion-dollar question.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 06, 2014, at 11:21 AM, mukticat wrote:

    I love the depth of financial analysis in presenting ONVO which can be summed up in its entirety as 'this is a cool story and let's just say it could be worth billions!'

    How do you know it could be worth 'billions'? Not based on some 96-cell liver assays that might make it to market by 2015. There's already other companies making and selling 3D liver assays and the entire market is measured in the low millions, not 'billions'. Beyond that there isn't much in ONVO's pipeline for the forseeable future.

    Besides isn't it curious why if this company is so poised to reap in the big bucks why biotech funds, hedge funds, and Big Pharma are all ignoring them? The institutional ownership is a measly 8% and consists almost entirely of index funds that bought a nominal amount due to the company's uplisting to AMEX . . . excuse me, 'new NYSE'.

    The company and Motley Fool continually pitch this to retail investors not known for their savvy due diligence because institutions 'dey isn't interested.

    And don't forget that while the company is pitching itself to new investors (they have a $100M shelf offering they're selling) the insiders too are raking it in with $1.5M a month in personal stock sales.

    Looks to me like they're harvesting suckers, not 3D liver cells.

  • Report this Comment On January 06, 2014, at 12:48 PM, sciencedave wrote:

    Organovo's methodology is novel and ground-breaking enough to set it apart from other Biotechs. Big Pharma is too slow to develop anything useful and hedge funds look for immediate returns. Yes, it is high risk for investors but that's what makes it interesting and worth a serious look.

    By the way The Fool discusses lots of biotech stocks. I would not call any single article a "pitch."

  • Report this Comment On January 06, 2014, at 1:37 PM, boogo2 wrote:

    Great argument for shorting, Pearson. Who else makes 3d liver assays?

  • Report this Comment On January 06, 2014, at 3:28 PM, mukticat wrote:

    One company already making and selling 3D liver assays is a privately held Swiss firm called Insphero. They also list Pfizer and Roche as customers which is significant considering that Pfizer considered ONVO first, even put up $1M to fund some research and get an early look at their liver assays, then decided to go with Insphero instead.

  • Report this Comment On January 06, 2014, at 4:52 PM, jaswade wrote:

    Munarriz quote:

    "If it's successful in being the first company to market lab-created human tissue, . . . "

    It is NOT. That race has already been run, and ONVO was not even in it.

    Munarriz quote:

    " . . . if it falls short -- or someone else beats it to the punch -- the stock's going to take a beating . . "

    They have already been beaten to the punch by InSphero.

    http://www.insphero.com/index.php/products-services/liver-mi...

    With all due respect to Mr. Munarriz, his article has zero research to support his statements, or perhaps better described as, musings.

    The only article that I have read that actually researched issues surrounding the valuation of ONVO stock was a Seeking Alpha piece written by Richard Pearson. It can be viewed here:

    http://seekingalpha.com/article/1848361-A-Very-Detailed-Look....

    This stock has ridden a retail-investor wave to unjustifiable valuations. There are no insider purchases, and almost no institutional investors. While I was long this stock (pre-Pearson article), I told may friends and family about it. Since then, I have told them all to get out now, or don't blame me for the consequences.

    Disclosure: I am a former ONVO long that rode the stock to $12.81 and sold (more than tripling my money), and immediately bought Dec 21, 2013 $12.50 puts, selling few days later and doubling my money again. In this last run-up, I bought May 17, 2014 $11.00 puts at $2.35. I am already up 17%, and expect to at least double this latest investment before selling to close out.

    I will own ONVO again, but only when it returns to a justifiable valuation.

  • Report this Comment On January 07, 2014, at 5:11 AM, shaneatlas wrote:

    @jaswade - I just wanted to say that I could not agree more and it sounds like we are speaking from very similar positions. I was a huge believer in ONVO when I picked up (too many) shares between $3 and $4 in early 2013. I held them for a loss for most of the year until the recent price changes, and i would have held, had I not been lucky enough to read Pearson's analysis. Sometimes fervent belief in a company can be blinding. It is an amazing idea, but fundamentally speaking it is not worth close to what it's selling for so I too sold around $10-$13 and told my family and friends to do the same. I'm recommending SGLB now :)

  • Report this Comment On January 07, 2014, at 5:13 AM, shaneatlas wrote:

    I still have a small position of course, and plan to buy in around $6, of course.

  • Report this Comment On January 07, 2014, at 5:35 AM, shaneatlas wrote:

    I just don't agree with arguments that compare Organovo to inSphero. There are doing totally different physiological processes. Organovo is live tissue "in vivo" whereas inSphero is an 3-dimensional organized version of the old 2D version of "in vitro" tissue in a tube.

    The reason ONVO has the IP is because the best way to test liver toxicity is organovo 3D assays because they perform the closest thing to the human body -- "in vivo". In order words, at Organovo, these livers are grown from the embryonic state all the way until they are mature tissue. And, right now, only ONVO can do that. 3D Bioprinting is something that is going to change the world.

  • Report this Comment On January 07, 2014, at 10:07 AM, mukticat wrote:

    You're welcome to think that ONVO's not-on-market-yet 3D liver assays might turn out to be better than what Insphero's offering but that's not what Pfizer and Roche think.

    Personally - no offense - I'm gonna take Pfizer' opinion over yours.

  • Report this Comment On January 14, 2014, at 7:09 PM, MelissainVA wrote:
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