Why Organovo Holdings Inc. Stock Roared Higher

Organovo announces the findings of a key opinion leader with regard to its 3-D liver assay test, and shareholders cheer. See what investors should really be watching going forward.

Jun 26, 2014 at 3:13PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Organovo Holdings (NYSEMKT:ONVO), a company focused on tissue engineering for clinical testing applications, soared as much as 12% after announcing the first public opinion of a key opinion leader regarding the use of its 3-D liver assay test.

So what: According to an 8-K filing with the Securities and Exchange Commission, Dr. Adrian Roth, Head of Mechanistic Safety for Roche Pharmaceutical Research and Early Development at the Roche Innovation Center Basel, presented results from his work with the 3-D liver assay test in collaboration with Organovo scientists. Per the release, Organovo's 3-D liver system "was able to distinguish a toxic drug known to cause drug induced liver injury (DILI) from a close chemical analogue that is known to be non-toxic. Further, the toxicity of the toxic compound was detected at physiologically relevant doses, an important observation not previously reported with the same compounds in other model liver systems."

In addition to these findings, Organovo also reaffirmed its product development forecast, with plans to launch its 3-D liver assay before the end of 2014. It did note, however, that it's granted access to its liver assay system to select clients with specific testing needs in the preclinical setting. These contracts would be expected to expand to a broader audience once the product is officially launched.

Now what: Obviously getting a positive review of its 3-D liver assay from a well-respected doctor is good news for Organovo, but the bigger deal in my view is the company again sticking to its launch timeline. Shareholders have a lot of high hopes for this Star Trek-like tissue engineering company, but they'll need to see some real world revenue generation before it can move to the next level. While I would have a hard time arguing that the data thus far isn't right on par with expectations, following a huge run higher over the past couple of years I'm inclined to stick to the sidelines and see how successful the initial launch of Organovo's first product turns out to be. Make no mistake, though, this is a stock I strongly encourage investors that are looking for the next cutting-edge health-care technology to keep their eyes on.

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Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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