What to Expect in Organovo Holdings Inc. Q3 Results

Can Organovo keep its impressive sales growth going in the third quarter?

Keith Speights
Keith Speights
Jan 26, 2017 at 7:23AM
Health Care

Organovo Holdings (NASDAQ:ONVO) announces its fiscal third-quarter results on Feb. 9 after the market closes. The 3-D bioprinting company posted record numbers in the second quarter, so shareholders have high expectations. Can Organovo continue its remarkable growth story? Here's what to look for when the company gives its quarterly update in a couple of weeks.

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The company's revenue in the third quarter of fiscal year 2016 totaled $328,000. In the second quarter this year, Organovo reported revenue of $1 million. Organovo should blow both of those figures away in its upcoming results. Analysts project revenue of $1.4 million for the quarter. 

Will that kind of revenue growth also lead to a significantly improved bottom line? A year ago, Organovo posted a loss of $10.4 million, or $0.11 per share. The company's second-quarter number reported three months ago was better, with a loss of $9.4 million, or $0.10 per share. The average estimate among the analysts covering Organovo is for the company to again report a net loss of $0.10 per share.

In October, Organovo sold more than 10 million shares. If the company reports the same net loss per share as it did in the second quarter but with higher revenue and more shares on the market, it will mean that Organovo's net loss was higher than last quarter. That requires spending to have increased at a faster rate than revenue growth. 

Investors will definitely want to keep an eye on the company's cash position. At the end of the second quarter, Organovo had $51.7 million in cash and cash equivalents. The sale of those 10 million shares netted an additional $25.6 million for the company. Unless Organovo's spending really soared last quarter, expect an improved cash position this time around. 

Business developments

The big news for Organovo in the third quarter will be how fast the company has grown sales for its 3-D bioprinted liver and kidney tissues. The launch of the kidney tissue got off to a great start. Shareholders will be eager to learn if the momentum has increased.

In the past, CEO Keith Murphy has touted the growing number of big pharmaceutical companies that use his company's tissue services. At last count, the company's customer base included 10 of the top 25 global biopharmaceutical companies. Although Murphy doesn't usually mention customers by name, the number of big customers could be higher as a result of having two tissues commercially available.

Murphy also mentioned in the company's last earnings conference call and at the Piper Jaffray Healthcare Conference in December that Organovo plans to offer metabolism studies. He said the addition of these studies could enable the company to double its addressable market. 

Look for an update from Murphy about progress on this front. Organovo has to build an infrastructure to support this effort, including buying a mass spectrometer and hiring new staff. So far, the company hasn't announced a schedule for when it expects to launch the metabolism studies. Hopefully, Murphy will have good news to share in February.

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Looking ahead

The main thing investors will want to see with Organovo in the second quarter is significant progress. No one expects the company to have reached profitability yet. And a bigger net loss won't be troublesome if it's due to increased investments that should pay off over time (such as those needed for the metabolism studies).

Organovo remains a stock that you either believe in for the long run or you don't. Murphy continues to express confidence that the company will generate annual revenue in the hundreds of millions of dollars. Organovo's third-quarter results will show just how far the company has come -- and just how far it has to go.