Please ensure Javascript is enabled for purposes of website accessibility

Why Organovo Holdings Inc. Is Up 27% This Year

By Brian Feroldi - Jun 30, 2016 at 9:05AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares are off to a great start to the year. Here's a recap of the key developments that have caused the stock to jump this much.

Image source: Organovo Holdings.

What: Shareholders of Organovo Holdings (ONVO 5.46%), a 3-D bioprinting technology company, are having a great 2016. The company's stock is up more than 27% since the start of the year, according to data from S&P Global Market Intelligence.

ONVO Chart

ONVO data by YCharts.

So what: Organovo Holdings has been busy over the past six months. Here's a recap of the key developments that have occurred so far this year: 

  • The company's subsidiary Samsara Sciences officially commenced commercial operations earlier this year. Samsara Sciences' focus will be on creating human liver cells, and the company is expected to be a key supplier to Organovo Holdings.
  • Organovo presented data at the Society of Toxicology's annual meeting in March. Two of its big customers -- Bristol-Myers Squibb and Astellas Pharma -- were on hand to assist with the presentation of the data, lending a great deal of credibility to the company's exVive3DTM Human Liver Model.
  • Organovo reported fiscal fourth-quarter and full-year results in June. Total revenue grew to $1.5 million, up 160% year over year and slightly ahead of the company's guidance. Net loss for the year was $38.6 million, and the company ended March with a cash balance of $62.1 million.

Overall, Organovo has had a productive start to the year, so it's understandable why the markets have bid up shares. As shareholders surely remember, shares plunged 66% in 2015, so any positive news was bound to help the company's stock start to rebound. 

Now what: Organovo now counts five of the top 25 largest drugmakers in the world as customers, showing that it's making solid progress in gaining the attention of industry giants. This list includes Merck, Astellas Pharma, Bristol-Myers Squibb, and more, so it's possible that the company's entry into the space has reached a tipping point.

Looking ahead, management believes revenue will land between $4 million and $6 million in fiscal 2017, which represents strong growth from the $1.5 million in revenue that Organovo generated in fiscal 2016. However, that's still nowhere near enough sales to offset the company's growing expenses, so cash burn is expected to be at least $32.5 million for the year. That will certainly take a big bite out of the company's cash balance of just over $62 million.

The company is on track to launch its kidney tissue product in the third quarter of this year, which could be a great catalyst for investors to look forward to. Management believes the kidney tissue market could exceed $1 billion in time, so investors will want to watch this launch closely.

Still, Organovo is likely to remain in the red for at least a few more years, so while its business model is intriguing, I personally have no interest in becoming a shareholder. If the company proves that it can generate a profit, then I'd happily change my tune, but until that happens, I'm content to remain on the sidelines. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Organovo Holdings, Inc. Stock Quote
Organovo Holdings, Inc.
ONVO
$1.93 (5.46%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
332%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.