What happened
Shares of tissue engineering specialist Organovo Holdings (ONVO +7.33%) dropped more than 28% after the company reported its fiscal fourth-quarter and full-year 2018 results. Investors are growing impatient with the company's slow pace of growth for its technology platform and products, which has continued to eat up limited cash reserves and deliver losses.
While revenue grew nearly 9% from fiscal 2017, the business reported a net loss of $34.8 million and negative operating cash flow of $29 million -- essentially identical to the prior year. Organovo Holdings may have just a little over one year of cash reserves at its current burn rate, which could prove problematic given it has no reliable way of funding itself from operations anytime soon.
As of 2:33 p.m. EDT, the stock had settled to a 23.9% loss.
Image source: Getty Images.
So what
Here's how the tissue engineering company's fiscal 2018 compares to the prior year:
|
Metric |
Fiscal 2018 |
Fiscal 2017 |
Change (YOY) |
|---|---|---|---|
|
Products and services revenue |
$3.63 million |
$3.17 million |
14.5% |
|
Total revenue |
$4.60 million |
$4.23 million |
8.8% |
|
Operating income |
($35.3 million) |
($38.6 million) |
N/A |
|
Net income |
($34.8 million) |
($38.5 million) |
N/A |
|
Operating cash flow |
($28.9 million) |
($29.2 million) |
N/A |
Data source: Press release. YOY = year over year.
As the table above indicates, there wasn't much operational progress made during fiscal 2018 in terms of financial improvements. Losses continued to pile up and operating cash flow was far from breakeven. However, the silver lining is that the business increased sales of products and services compared to the year-ago period. That's the most important and sustainable source of revenue for the company, especially compared to grants and collaboration revenue, which can be volatile from year to year. That said, it's not growing fast enough to make a big difference for investors.
Looking ahead, Organovo said it expects to begin studies that could enable an Investigational New Drug (IND) application to be filed for one of its liver tissue programs. The goal is to submit an application in the calendar year of 2020. That expected slow pace of progress -- and just for an IND, which may or may not enable clinical trials -- has investors taking their money elsewhere today.
Now what
Organovo has long captured the imagination of investors, but the reality is that tissue engineering technologies face quite a few obstacles on their path to successful commercialization. Additionally, there are dozens of companies in the space, so there's no guarantee that Organovo is the best-positioned to capitalize on the next-generation biopharma products. Long story short: This is just not a good place for individual investors to put their hard-earned money.
