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Here's Why Organovo Holdings Inc Fell 10.5% in June

By Brian Feroldi – Jul 10, 2017 at 10:17AM

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Shares dropped after the company reported uninspiring fourth-quarter results.

What happened

In response to reporting fiscal fourth-quarter earnings results, shares of Organovo Holdings (ONVO 3.20%), a 3D printing company focused on tissue engineering, declined by 10.5% in June according to data from S&P Global Market Intelligence

So what

Here's a review of the headline numbers from the fiscal fourth-quarter:

  • Revenue grew 48% to $812,000.
  • Net loss was $10.7 million, or $0.10 per share.
  • The company's cash balance at quarter end was $62.8 million

And here's a look at how the company performed during fiscal-year 2017.

  • Revenue grew 185% to $4.2 million
  • Net loss was $38.4 million, or $0.39 per share.
  • Total cash consumption for the year was $30.6 million.

While total revenue of $4.2 million was within the company's updated guidance range of $3.7 million to $4.5 million, it is worth pointing out that this figure fell far short of the company's original guidance range of $4.5 million to $6.2 million for the fiscal year. 

Coins falling through hands.

Image source: Getty Images.

Now what

Looking out to full-year fiscal 2018, the company is forecasting the following results:

  • Revenue between $6.0 million and $8.5 million. The mid-point of this range represents growth of 73%. 
  • Adjusted EBITDA is expected to land between ($29.0 million) and ($31.0 million). For context, this figure was ($29.8 million) in fiscal 2017.

Top-line growth of 73% sounds exciting, but it is worth noting out that this falls short of former CEO Tom Murphy's call for triple-digit revenue growth for years on end. What's more, another year of big losses is going to eat into the company's cash balance yet again. That could mean that a capital raise could be coming down the road. 

Another concern for investors is that some of the company's customers are delaying orders for Organovo's system. Management said that the delay was being caused by some customers calling for extra validation studies of its technology before they are willing to move forward. While new CEO Taylor Crouch has the company focused on fulfilling these requests, revenue delays are never a good sign.

Can the company hit its forward guidance and fix the issues that are causing the orders delays? Only time will tell. However, given the risks, I for one have a hard time considering this dip to be a buying opportunity.

Brian Feroldi has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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