What: Shares of Organovo Holdings (NASDAQ:ONVO), a tissue-engineering company designed to help pharmaceutical companies more effectively develop drugs, and to explore the potential of printed organs for transplant, surged by 28% in April, according to data from S&P Capital IQ, after reporting its preliminary fourth-quarter earnings results.
So what: For the quarter, Organovo announced that it generated total net revenue of approximately $268,000, a 73% sequential quarterly increase from the $155,000 it announced in revenue during the third quarter. Additionally, Organovo noted that its quarterly cash burn rate was $6.3 million, and that it ended the year with $50.1 million in cash, or roughly a two-plus-year cash runway based on its quarterly cash burn in Q4.
Although Organovo isn't even slated to report its full-year results until June, the preliminary release of these results was probably made to help abate investor jitters that clobbered the stock in March. While $268,000 in revenue isn't exactly something to write home about, it does imply the ongoing adoption of the exVive3D Liver Tissue test.
Now what: The big question that investors need to ask is whether a 28% move higher was warranted when the company still burned through $6.3 million in cash.
In one corner we have Organovo's first-in-class tissue bioprinting technology that could lead to the first large-scale printed organ transplants. But before this happens, we could also see Organovo's kidney tissue assay hit the market, which pharmaceutical companies can use in combination with, or separately from, the exVive3D Liver Tissue assay to test the toxicity of experimental drugs before they enter the clinical setting. The technology and potential of exVive3D are certainly real.
But in the other corner we have to ask if this is a product that'll sell, or if it's merely a cool concept. A quarter and a partial quarter don't exactly give us a lot of sales data to work with. Plus, we're dealing with incomplete preliminary data, so we can't even know for sure how much of the $268,000 came from exVive3D and how much was from collaboration and/or contract revenue. What I can say with some degree of certainty is the losses Organovo is experiencing are expected to continue for years to come, as will its probably need for fresh capital.
I find the technology here to be intriguing and suspect there is an outside chance Organovo could be wildly successful. However, I don't believe there's any sense of urgency in chasing Organovo's volatile share price until exVive3D sales pick up considerably, and Organovo's cash burn rate is cut substantially.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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