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What happened

Shares of tissue engineering pioneer Organovo Holdings (NASDAQ:ONVO) dropped over 16% this morning after revenue during the company's fiscal third-quarter 2017, which ended in December, came in a little light. That forced management to announce a significant reduction for full-year 2017 guidance. 

So what

If investors only look at percentage increases from the prior-year period, then it would be easy to craft a story about how Organovo absolutely crushed it during the most recent quarter. Product and service revenue jumped 139% and total revenue leapt 251% compared to the same quarter in fiscal 2016. But it's important to note that triple-digit increases are occurring from (1) low revenue totals and (2) a period before the technology platform was considered commercialized.

Here are several important metrics for investors to digest:


Fiscal Third-Quarter 2017

Fiscal Third-Quarter 2016

% Change

Products and services




Collaborations and grants




Total revenue

$1.15 million

$0.328 million


Operating expenses

$10.8 million

$10.8 million






Data source: Organovo. 

There's good news in the table above. Revenue growth is encouraging, even if investors want larger totals. Operating expenses are holding steady, which is leading to small improvements in the bottom line. Organovo is also hanging onto $70 million in cash. Importantly, it only burned $7.7 million during the quarter, which means it has about nine quarters of runway left at the current burn rate -- although investors should expect capital expenditures to climb as the technology platform scales.

The bad news is in the table below. Management reduced full-year fiscal 2017 guidance after "timing of customer orders" will push back when the company can recognize revenue. What's the reason? Customers want additional validation studies to be completed and for a new cell line -- the "seed" that grows a tissue sample -- to be qualified for specific applications. Here's the updated guidance:


New Guidance

Previous Guidance

% Difference

Total revenue

$3.7 million to $4.5 million

$4.5 million to $6.2 million

(17.8% to 27.4%)

Net cash utilization


$31 million to $34 million


Data source: Organovo. 

Now what

There was a tiny nugget of information in the press release that brings the recent financial results and updated guidance together. Consider that Organovo saw repeat business from seven customers and added six new customers during the quarter. The latter includes one "Top 25" pharmaceutical company, which means the company has generated revenue from 11 such companies in its history. Then again, having only six repeat customers during the quarter demonstrates that some Top 25 customers didn't repurchase products from Organovo in the most recent period.

That doesn't mean those customers are gone for good, but it hints that adoption rates for tissue engineering technology remain low in the industry. That's especially true given that more customers want additional validation testing -- the cause for reduced guidance in the first place. The takeaway for Organovo investors continues to hinge on an uncomfortable truth: Successfully commercializing next-generation biology-based products remains a difficult task, no matter how innovative the technology.