Organovo Holdings (NASDAQ:ONVO) needed some good news. 

The company, which develops 3D-bioprinted human tissues for medical research and therapeutic applications, has mainly reported not-so-good surprises lately. In February, Organovo slashed its fiscal 2017 guidance. A couple of months later, the company announced a change in CEO.

Organovo reported its fiscal 2017 fourth-quarter and full-year results after the market closed on Wednesday. Was there finally some good news for investors? 

The words "Financial report" appear under a magnifying glass.

Image source: Getty Images.

By the numbers


Fiscal Q4 2017

Fiscal Q4 2016

Year-Over-Year Change





Net loss from continuing operations

($10.7 million)

($8.4 million)


Net loss per share




Data source: Organovo. 

Beyond the numbers

Organovo's fourth-quarter performance enabled the company to post full-year revenue of $4.2 million. That's well below the company's initial guidance of $4.5 million to $6.2 million for the year. However, it was above the midpoint of Organovo's revised guidance range of $3.7 million to $4.5 million. 

Year-over-year revenue growth of more than 48% might not sound bad at all, but it is for Organovo. The company had consistently grown revenue by a lot more than that in previous quarters. In late November, former CEO Keith Murphy predicted Organovo would continue to grow sales by triple-digit percentages for years to come. It didn't take long for that prediction to fall flat.

The reason behind Organovo's slower revenue growth is that customers requested additional validation studies. As a result, they delayed placing orders that the company was counting on.

While its once sizzling revenue growth tapered off significantly, it's interesting to note the change in composition of revenue. Where nearly 78% of total revenue in the prior-year period stemmed from collaborations (including a major one with Merck (NYSE:MRK)), less than 3% of total revenue came from collaborations in the last quarter. Instead, roughly 95% of revenue came from products and services, thanks mainly to an increase in customer contracts for Organovo's tissue research services.

The company's bottom line in the fourth quarter worsened compared with the prior-year period despite higher revenue. This was caused by higher operational spending. Research and development costs rose nearly 22% year over year to $5.5 million. Selling, general, and administrative expenses increased 30% year over year to $5.8 million.

A man looks through binoculars, with a blue sky and mountains behind him.

Image source: Getty Images.

Looking ahead

Despite the comparatively lackluster performance in the fourth quarter, the real story for Organovo is where the company is headed. Organovo provided an outlook for fiscal 2018 which appears to indicate that it still won't quite be back on track to its heady growth of the past.

The company projects fiscal 2018 revenue between $6 million and $8.5 million. That would mean a year-over-year increase of 73% at the mid-point. While that would be an impressive performance for most companies, it's well below the expectations that Keith Murphy set last year.

New CEO Taylor Crouch could be the right person to move the company forward, though. His background is in conducting the exact kind of clinical trials that Organovo needs to do to convince skeptical prospects about its 3D human tissues. Crouch said that the company has now studied 46 compounds to evaluate their safety profiles. 

He also gave a hint about what could be Organovo's best path forward. Crouch stated that the company is "seeing strong customer demand for compound screening in disease models, including key areas such as liver fibrosis and non-alcoholic steatohepatitis (NASH)." Quite a few big drugmakers are racing to develop NASH drugs, including Organovo's partner, Merck. In April, Merck-backed privately held biotech NGM Bio announced promising results from a mid-stage study of an experimental NASH drug.

At least for now, investors don't have to worry about Organovo running out of cash. The company reported cash and cash equivalents totaling $62.8 million at the end of the quarter. The key thing to watch now with Organovo is how quickly the company can complete the validation studies requested by customers. Any prospects for returning to that triple-digit growth Keith Murphy once promised hinge on these studies.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.