Organovo's 3 Biggest Opportunities in 3-D Bioprinting

The 3-D printing craze has infected many investors in the last year, but it isn't limited to resin or metal creations. Organovo (ONVO -11.11%) is in the early stages of developing a bioprinting platform that can produce more accurate, more functional human tissues for medical testing applications. There's a lot left to prove, but successfully scaling such technologies could revolutionize health care in a number of ways. What's the impact? What time frame can investors expect for commercializing such novel products? Here are the three biggest opportunities that await Organovo in 3-D bioprinting.

1. Pharmaceutical research (1-3 years)
The top 12 pharmaceutical companies spent $802.5 billion on research and development between 1997 and 2011 on their way to 139 drug approvals, according to data compiled by Matthew Herper. That's an astounding $5.77 billion per approved drug! Amgen (AMGN -0.10%) had the most efficient pipeline, spending just $3.7 billion per approval, while AstraZeneca spent the most at $11.8 billion for each approved therapy.  

Some of the inefficiency is due to internal problems, but drug development comes with a high probability of failure for all companies. In fact, up to 40% of all money thrown at drug development chases drugs that never leave the clinic. Why? One of the biggest problems during drug discovery is accurately assessing toxicity to human cells, particularly liver toxicity. Approximately 25% of all drugs that were withdrawn from the market or failed a phase 3 trial between 1990 and 2010 were yanked due to liver toxicities. Industry leaders Amgen and Pfizer (PFE 0.10%) may be worth hundreds of billions of dollars, but even they must rely on archaic testing models: animals or two-dimensional cell culture assays. Neither is optimized to predict what will happen in complex human tissues.  

A lab bench at Organovo featuring the company's NovoGen bioprinter. Source: Organovo 

Organovo's first product candidate can help increase the efficiency of the pharmaceutical industry by more accurately predicting liver toxicities. The company recently presented data collected over a 40-day period with its 3-D liver tissue that demonstrated the potential to retain certain native liver functions for long periods of time. Tissue that remains functional for one month or longer would allow pharmaceutical companies to replicate the administration of various doses of a drug on the same tissue, which could lead to more valuable toxicology information at an earlier stage in development.

The bioprinting company wants to develop three businesses: toxicology assays (product-based), disease models (partnerships-based), and simple tissue therapy technology (clinical-based). The three-year goal is to launch and deliver human liver tissue toxicology assays to industry partners beginning in December 2014, develop disease models for various organs, and define a clinical pathway for developing therapeutic tissues. That's quite an ambitious plan, but successful execution would create tremendous value for shareholders and the pharmaceutical industry.

2. Cancer tumor models (3-7 years)
A lot of people get excited for Organovo's potential to revolutionize organ transplants by printing fully functional human organs (No. 3 on our list), but a bigger and more immediate opportunity lies in the ability to create 3-D cancer tissues. Why re-create cancer tumors when the world spends billions of dollars each year trying to beat them into submission? Imagine having the power to print a series of cancerous tumors in a lab and then test various medications against them. Such technology could be used for researching new oncology compounds or personalized medicine applications utilizing drugs already on the market to get the best response and safety profile for each individual patient.

Organovo is collaborating with Oregon Health and Science University's Knight Cancer Center to develop the technology. The pair is expected to publish results from several studies after the second half of next year, after which a pathway for commercial develop can be established. While any number of pharmaceutical companies would surely be interested, it would also be worthwhile to partner with a cancer diagnostics company such as Genomic Health (GHDX) to expedite commercialization and improve the chances of building a successful platform.

Genomic Health performs genomic analysis on tumor samples to identify tumor-specific characteristics. If Organovo can print multiple tumor types with certain genetic dispositions (as occurs in the real world), pharmaceutical companies or doctors could rapidly develop individual regimens based on the cancer tissue and patient's genetics by utilizing Genomic Health's platform. It's a win-win proposition.

3. Organ transplantation (15-20 years)
Although more than 114,300 Americans are waiting for an organ transplant, less than 5,000 procedures occurred in 2012. On average, 18 people die each day due to the perpetual shortage of available organs. Bioprinting has the potential to make waiting lists a thing of the past.

The ability to print organs in a hospital and transplant them into patients in need is certainly within reach of Organovo's platform, but it will take decades to perfect. First, the company must develop a completely functional organ that is highly similar to its "natural" counterpart. The tissues produced by the company today are only hundreds of cell layers thick -- useful for research applications but a far cry from an entire organ. Then, the company must run a gauntlet of costly medical trials to prove the safety, robustness, and effectiveness of its organs. Even assuming international regulatory agencies don't hesitate to approve such technology, the trials could take over a decade to complete.

Developing the technology to make impactful contributions in organ transplants is a long-term goal of Organovo, but investors shouldn't assign much value to it just yet.

Foolish bottom line
The more I research Organovo, the more I like its long-term potential. There are dozens of possible opportunities that a successful bioprinting platform could capture. Unfortunately, any investment in the company today would be based solely on potential. There are no recurring revenue streams, no concrete examples of royalty ranges in which to value partnerships, and still relatively little being poured into internal research and development (although there is progress being made). Given all of the question marks I personally wouldn't invest in the company at its current market cap, but would consider adding a small, speculative position on a pullback. It may just be potential at this point, but it sure is difficult to ignore.