A lot of people believe Organovo (NASDAQ:ONVO) could one day print human organs for use in transplants. But that day is incredibly far away, and investors are better off focusing on the company's current line of business before getting carried away with such thoughts.
In that vein, there are three important details I've come across recently that investors in the company should be aware of.
True market opportuntity?
Organovo's current business focus is on developing 3-D tissues that can be used for drug testing. Because many drug toxicities only show up during human testing, drug companies spend billions of dollars on treatments that will never make it to market. But, if companies could test these drugs in tissues that mimic native human cells, drugs could be killed off faster -- and billions would be saved.
Last month, I attempted to figure out what Organovo's true market opportunity could be. I threw around a lot of big numbers, but wasn't able to come up with anything solid to provide readers. But, during a conference earlier this month, CEO Keith Murphy provided a tidbit that might add a little clarity.
He said, "10% of all drug costs go to drugs that fail due to liver [toxicity]." In 2010, drug companies spent $50 billion dollars; so judging by Murphy's estimation, $5 billion will be spent on drugs that will eventually fail as a result of liver safety concerns.
For a company with virtually no product revenue, the opportunity to help pharmaceutical partners reduce this wasted spending represents a sizable -- if ambiguous -- opportunity.
Why focus on the liver?
The reason that the liver market is so important is because it represents the first fully functioning tissue that Organovo has been able to develop. Though results have been promising, it wasn't until recently that investors got an idea for when the company's liver tissues would be readily available to pharmaceutical companies.
Murphy said that the company's liver tissues would begin functional validation in December of 2013, then would be alpha and beta tested by key opinion leaders in April of 2014, before an eventual product launch in 2014.
Beyond that, Murphy said the next two years would also be devoted to building up the company's cancer model readouts, as well as functional kidney tissues.
A new partnership
Organovo already has partnerships in place to study and develop functional tissues for testing. The company has already completed work with Pfizer (NYSE:PFE), and is waiting to hear back from Pfizer to hear if it would like to continue working together in the future. Organovo's partnership with United Therapeutics (NASDAQ:UTHR) is ongoing, and has already been extended due to the successful nature of the early part of the collaboration.
And just yesterday, the company announced that it had entered into an agreement with Roche Holdings (NASDAQOTH:RHHBY), whereby Roche would be using Organovo's technology in "exploring the use of 3D liver tissue in toxicology."
Don't bet the farm on this
Without a doubt, Organovo is one of the most exciting plays at the intersection of medicine and 3-D printing. The company, however, is still young, and investors should tread with caution when putting their money behind a highly speculative technology.
Fool contributor Brian Stoffel owns shares of Organovo. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.