Organovo Stock Falls after Media Critique, But Future Roadmap Is Bright
Bioprinting Pioneer Battles in the Stock Market as it Looks Ahead to a Major Milestone
Organovo (NYSE: ONVO) is an exciting 3D printing company that has had a volatile ride in the stock market lately. We dig into some of the factors contributing to changes in its stock price.
As we have covered in the past, Organovo specializes in Bioprinting. The company designs and creates functional, three-dimensional human tissues for medical research and therapeutic applications. The Company collaborates with pharmaceutical and academic partners to develop human biological disease models in three dimensions. These 3D human tissues have the potential to accelerate the drug discovery process, enabling treatments to be developed faster and at lower cost.
This savings amounts to a multi-billion dollar opportunity for changing the way Big Pharma discovers drug therapies. Drug companies will be able to test on 3D printed human tissue in a lab before they even embark on the FDA approval process with animal trials, saving hundreds of millions of dollars.
Read: Bioprinting is a Multi-Billion Dollar Pharma Opportunity for 3D Printing
With all of this promise, why does Organovo only have a $700 million market capitalization? 3D Systems and Stratasys are two other public 3D printing companies that boast multi-billion dollar market caps.
Moreover, why did Organovo climb to an all-time high of $13.65 last week, only to crash nearly 40%?
Pictured above: ONVO year-to-date stock chart. Click to enlarge.
The answer is two-fold.
First, Organovo is early in its product roadmap, and has yet to realize much revenue.
Second, the price of the stock is being heavily influenced by the media.
Organovo Product Roadmap
In September, Organovo CEO Keith Murphy shared his company’s future roadmap:
- Development and launch of 3D Liver
- Scientific proof of concept – April 2013
- Functional validation: testing against known drugs – December 2013
- Delivery to KOLs: alpha and beta testing – April 2014
- Product launch – December 2014
- Follow on cell assay product launches
- Multiple additional pharma partnerships
- Developed disease models
- Cancer model readouts over 12-24 months: kidney, others
- Therapeutic tissue proof of concept and path to clinical
Note that there is a key milestone coming in December to demonstrate functional validation. Organovo has scheduled a retail investor conference for December 5 to discuss product pipeline and revenue potential, partnership model, cash burn and R&D spend, and more.
Read the full agenda in Organovo’s press release.
Be Careful About the Media
Because ONVO has a relatively small market cap and 3D printing is a concentrated industry, one highly negative or positive story can make a difference in the markets.
Case in point: Seeking Alpha contributor Richard Pearson wrote an article called A Very Detailed Look at Organovo on November 19, saying “Investors should therefore expect the share price to quickly return to below $7.00, where it was prior to over a dozen promotional articles on Organovo released in the past few weeks.”
On that day, the stock fell 40%. Luckily for Mr. Pearson, he was shorting the stock as it read in his disclosure.
If you look across Seeking Alpha as one example of a site sharing investment advice, there has been a lot of attention paid to ONVO by contributors. There is even an article entitled Organovo At the Mercy Of The Media.
The takeaway is that investors need to be aware of this media-drive volatility and be prepared to have short-term pops and crashes until Organovo demonstrates, or fails to live up to, the achievements set out on its roadmap.
2014 will be an important year for the Bioprinting pioneer!
Disclosure: At the time of this writing, the author is long ONVO. Please consult your financial advisor on all investment decisions.
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