Organovo (NASDAQ:ONVO) is a little company with a big dream: to use 3-D printing technology to create functional human organs. But that dream is far, far off into the future.
In order to reach that dream, the company has focused on more practical -- and realistic -- applications for its technology. The revenue created by these applications, the thinking goes, will help Organovo bridge the gap between now and the day when it might be able to realize the potential of printing organs.
While there's one industry that should soon account for most of Organovo's revenue, an interesting development earlier this month reveals that there might be more applications for the company's technology than originally thought.
Pharmaceuticals: The industry in the crosshairs
There's no industry that Organovo is more interested in focusing on right now than pharmaceuticals. As it stands, industry experts predict that almost 40% of the $50 billion spend annually by the pharmaceutical industry is on drugs that will eventually be ditched because of the toxicity that arises during human trials.
That's where Organovo's ability to print 3-D cells that mimic native human behavior comes in. Because these cells more closely resemble the behavior that occurs within the organs of the human body than standard 2-D cells, they are far more predictive of toxicities.
That's important because if pharmaceutical companies can catch toxicities earlier on, they can choose to either tweak their treatments or abandon them altogether. No matter the direction, the pharmaceutical companies end up saving a lot of money by catching these problems early in the process.
Already, Organovo has had working agreements in place with Pfizer (NYSE:PFE) and United Therapeutics (NASDAQ:UTHR). The deal with Pfizer expired in 2012, and Organovo is waiting to hear back on whether Pfizer will pursue further collaborations. United Therapeutics, on the other hand, expanded the scope of its collaboration with Organovo last year, and research is still ongoing.
Organovo also disclosed in September that it had entered into an agreement with Roche (NASDAQOTH:RHHBY), "exploring the use of 3D liver tissue in toxicology."
Just as importantly, Organovo plans to be able to deliver functional liver tissues for use by pharmaceutical companies in 2014 -- representing the first regular, recurring revenue stream the company plans to realize.
A surprising development
But while investors would be wise to keep most of their attention on developments within the pharmaceutical industry, Organovo also disclosed recently that at least one company outside of big pharma is also interested in 3-D bioprinting: L'Oreal (NASDAQOTH:LRLCY).
Specific details of the agreement were not released, and L'Oreal does have some business interests within the pharmaceutical industry, but the release stated that L'Oreal would be "exploring the use of 3D skin for testing skin care products."
L'Oreal represents the world's largest cosmetic and beauty company, with more than $30 billion in sales in 2012. Any agreement with such a large player could open yet another revenue stream for Organovo -- which is a huge deal considering that Organovo has only generated $3.2 million in revenue since inception in 2007.
How I'm moving forward
I've already purchased Organovo shares myself, but they represent less than 1% of my overall holdings. If the company succeeds, I have no problem adding shares at later dates.
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.