Investing your money in shares of Organovo Holdings (NASDAQ:ONVO) can be a trying experience.
The stock ran up 250% during 2013 alone on hype of the company's ability to manufacture in-vivo liver cells that could mimic native cell behavior with the use of a 3D bioprinter. When the 3D printing bubble burst -- an occurrence that Organovo should never have been lumped with in the first place -- the stock fell precipitously, and is now down 75% from those all-time highs.
That being said, it's still so early in Organovo's life as a public company that it's impossible to pin a valuation on the company. So while long-term investors might be encouraged by the stock's 6% pop after quarterly results were released, there are much bigger things worth watching than the stock's price. Below are the three biggest takeaways to keep an eye on.
Kidney assays are ahead of schedule
Currently, Organovo only has one marketable product to generate revenue: the exVive3D Liver Tissue. Drug companies can send their compounds to Organovo, and the company will test them for liver toxicity. This is key, as any toxicity found before starting clinical trials can save Big Pharma billions of dollars.
Organovo had previously announced that its second product would accomplish functional validation by December of this year. As was the case with the liver assay two years ago, it turns out that management was being very conservative, and had good news to share.
Said CEO Keith Murphy: "We hit the functional validation of stone for our kidney tissue ahead of schedule in October and remain on track to initiate contracting for the service in the third calendar quarter of 2016."
This is definitely good news, as Organovo has been bleeding cash for its entire history as a public company. For it to not only survive but thrive, it needs to get traction from its kidney assay when it becomes available.
Full-year guidance and long-term potential is reaffirmed
It takes a while to understand Organovo's flow of revenue. The company announced that it had $2 million in bookings for its exVive3D Liver Tissue this summer. But that money isn't all paid at once. Instead, it is paid over time as Organovo hits certain milestones for its customers.
For the most recent quarter, Organovo only recognized $200,000 in revenue from the liver product. But Murphy said that the company remains on track to reach its full-year revenue objective.
Perhaps more importantly, Murphy has also not backed down from his more ambitious long-term goals for the liver assays. The company's earnings release stated that "as it penetrates the toxicology market, Organovo's exVive3D Liver Tissue and service will grow into tens of millions in annual revenue, and has $100 million+ revenue potential in the future."
The company also reaffirmed that it expects to use up roughly $34 million in cash during the fiscal year, and that it has about $77 million in cash on hand to fund itself.
Hints at more signings?
By far one of the most disappointing moves that Murphy has made as CEO was announcing that Organovo would only be giving yearly updates as to additional bookings of its liver assays. As this is the only major revenue stream of the company, any additional bookings are big news for the company's long-term outlook.
Though Murphy and CFO Barry Michaels didn't offer updated numbers, they did provide some nuggets that might indicate further bookings have been achieved. Asked about guidance for bookings, Michaels said: "Any contracts that were signed subsequent to that $2 million that can be recognized by March 31, 2016 can be added on top of that."
He expanded on that by saying, "I think something that you can read into the fact that we are expanding this team is that we are seeing our ability to grow this market and we wouldn't be investing in new sales team members if we weren't starting to max out the capacity of the current ones."
In other words, Michaels is claiming that an increase in spending -- to facilitate further hires -- is a sign that the liver assay is gaining traction. Unfortunately, investors will have to wait until next summer before getting any solid numbers on these bookings.
In the end, Organovo makes less than 1% of my overall holdings, as it is a very speculative play. But one thing's for sure: It'll be an interesting stock to watch over the coming years.
Brian Stoffel owns shares of Organovo Holdings. 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.