What happened
Shares of Organovo Holdings, Inc. (ONVO 11.61%), an early-stage biotech company that specializes in 3D bioprinting to aid drug development, jumped 49.7% this week, according to data provided by S&P Global Market Intelligence. The stock closed at $3.12 last Friday, then opened at $3.10 on Monday before rising to a high of $4.67 on Thursday. The stock has been down more than 61% over the past 12 months but is up more than 21% so far in 2022. It has a 52-week high of $12.14 and a low of $2.56.
So what
The reason for the jump was the company's settlement of its lawsuit with CELLINK, a wholly owned subsidiary of Swedish company BICO, regarding alleged patent infringements by CELLINK. A trial date had been scheduled for April in 2023. But on Monday, Organovo announced that it had reached a licensing agreement for BICO and its affiliate companies, allowing them to access Organovo's patent portfolio in 3D bioprinting.
Image source: Getty Images.
The agreement ends the lawsuit and resulting legal fees and means BICO will pay Organovo for the licensing agreement. The upfront payment is $1.5 million, followed by royalties in the range of low- to high-single-digit percentages of net sales of the licensed products.
The agreement is a big deal because Organovo didn't have revenue in the third quarter, its most recent reporting period, and it reported a net loss of $9.5 million through the first nine months of the fiscal year, $1.10 per share. While that was an improvement from the $14.2 million and EPS $2.14 it lost in the same period in 2020, the company's funds were low enough that the company said it only had enough cash to fund operating expenses for the next year.
Now what
It's hard not to be impressed by what Organovo is doing: creating three-dimensional human tissues for therapeutic and medical research applications. The biotech company works with pharmaceutical and academic entities to create human biological disease models for study purposes. It's futuristic stuff, and Cathie Wood's ARK Innovation ETF was a big investor in the company beginning in 2016. However, Wood has cut back on her Organovo holdings considerably, selling it six times since Q3 2020. Now she is down to 330,000 shares of the stock, worth roughly $1.25 million.
Investors must realize that what Organovo does may be amazing science, but that doesn't mean it will translate into a good investment anytime soon. Any company that has inconsistent revenue and consistent losses, such as Organovo, represents a risk. However, as this past week showed, the stock may have long-term potential.
