Organovo (ONVO), a 3-D bio printing company, was established in 2007 and is headquartered in San Diego California. Organovo designs and creates functional, three dimensional human tissue for medical research and therapeutic application. The company utilizes its NovoGen MMX Bioprinter™ for 3-D bio printing.
The bio printing platform of the company has the ability to generate three dimensional constructs that have all, or some of, their components composed entirely of tissue cells.
The company intends to distribute several products in the market including:
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· 3-D models of human tissue to be used in drug discovery and development;
· 3-D tissues to be used in regenerative medicine, such as regenerative patches for the treatment of heart disease;
· 3-D bio printers and a portfolio of consumables for use with the printers.
The company’s revenues are generated through collaborative research agreements, National Institute of Health and Treasury Department grants, the sale of bio printer related products and services, and license agreements. For reporting purposes, revenue is divided into three segments; products, collaborations and grants. During the year ended 2012, Organovo generated around 86% of its revenue from collaborations and the remaining via grants. There was no product revenue in 2012.
Market Performance
Shares of Organovo are listed on the NYSE. The stock posted an increasing trend in 2013 and grew by around 278%. The valuation was around the $3 mark at the start of the year and rose to just around $10.
Revenue in billions ($)
The revenue and EPS is expected to show a mixed trend in the future. This is because the company is more research oriented at present, as it is in the early stages of its technology development. Says CEO Keith Murphy:
    “Our revenues are always going to be lumpy because they are substantially contributed to by partner revenues.”
The negative EPS is also evidence of the fact that the company is in the research and development stage – not many customers but heavy spending on research. The revenues are not supported by product sales, which also indicates that the technology offered by the company is in its early adoption stage. As for the growth in valuations, they were mainly due to the general optimism attached to the 3-D printing industry and the expected improvement in the EPS trends of the company.
Thesis And Catalysts
Industry Prospects
Research carried out by personnel of Harvard and MIT concludes that bio printing is an emerging field that has significant future potential. They believe that this method can be integrated with conventional laboratory techniques and used to create high throughput and scalable alternatives. These techniques have applications in tissue engineering, regenerative medicine and cancer studies.
The function of 3-D printing in regenerative medicine and tissue engineering could bring a disruptive change to the current drug testing mechanisms by saving billions of dollars wasted in dead end medicine researches. The differences in animal and human tissues have contributed to roughly a dozen failures of late stage drugs in 2012. Luxe Research forecasts 3-D printing in medicine to grow into a $1.9 billion industry by 2025 and a report by Transparency Market Research predicts that the medical 3-D printing market will grow to $965m in 2019. Hence, 3-D bio printing is a technology with promising growth potential; specifically in regenerative medicine and drug testing mechanisms.
Organovo: Catalysts
Liver tissue generation: Organovo has recently developed liver tissue that can last for around 40 days after printing. The printed liver is able to filter toxins and drugs like a normal liver, but the integration of blood vessels is a barrier and it cannot last beyond 40 days. Nonetheless, this is a drastic improvement on the company’s last effort which resulted in a liver tissue lasting only 5 days. The life extension of the 3-D printed liver has several positive implications. Firstly it is a step towards organ printing and their eventual implantation; but this application is not expected in the near future due to certain technical hurdles. However, the live liver tissue can be used to test drugs and medicines and this can assist pharmaceuticals in saving a lot of money.
(click to enlarge) According to Forbes, the cost of creating a new drug is around $5 billion (the approval of the drug is another story altogether). 3-D printed tissues can help in bringing these costs down and may even result in the development of more successful drugs. We believe that the drug testing market is one that holds significant growth prospects for Organovo in the near future. The primary reason being, as the 3-D printed tissue behaves almost like human tissue it will be a better medium to test drugs than animal tissue. This will also prevent the complications caused by initial clinical trials of certain drugs on human subjects.
Organovo’s first product launch, featuring a 3-D printed liver for toxicology (to be used by pharma customers), is slated for 2014. The company is also creating cancerous versions of living tissue models for testing cancer drugs. This launch, if successful, will bring substantial revenues towards the company, reflected in the revenue projection shown earlier in this article.
Development of simple tissue: In an interview with, Keith Murphy (CEO of the company) explained that Organovo is currently focusing on two development avenues. One, as discussed earlier, is liver tissue generation and the other is the development of simple tissue that can be used in direct surgical therapy. According to Mr. Murphy, these smaller tissues are technically achievable with the current technology. If this claim is valid, we will see Organovo developing heart muscle patches, nerve grafts and blood vessels for bypass. This is also a promising segment as far as Organovo’s future growth is concerned.
Specific growth opportunities: The company has several opportunities in drug research and development, including the sale and distribution of bio printed materials. According to a research carried out by Scientia Advisors (sponsored by Organovo), the cell biology market is set to grow to around $17 billion by 2016; the specific market opportunity is around $500 million by 2018. Organovo can also seek partnerships with different organizations in drug discovery and benefit from the royalties once the drug goes through successfully. The company claims that it expects around 3% to 7% in royalties from successful medicines and $10-30 million milestone payouts per opportunity. These estimates indicate that the company has healthy growth opportunities in drug discovery, collaborations and the sale of bio printed material.
3-D bio printing is in its early growth stages and has applications in several fields including tissue engineering and regenerative medicine. There is indication of strong growth prospects for bio printing in both these areas. The fact that pharmaceutical companies waste a lot of money on the development of new drugs with a very limited success rate opens the door for a change in drug development methodologies and presents a promising growth opportunity for bio printing. Organovo’s recent developments, including the liver tissue generation, will fuel the future growth of the company. It will provide its printed tissue to clients that are involved in research, while also collaborating with different organizations to discover new drugs and earn royalties. However, all these developments in 3-D printing and bio technology are expected to bring more competition in the form of new research companies, pharmaceuticals running their own research on bio printing technology and, most importantly, different governments deciding to finance their own departments for bio printing research. Hence, it is too early to say whether Organovo will be able to emerge as a market leader. However, it is safe to assume that it will have a significant position in the industry, no matter which cards the competition plays, because it is the pioneer and currently ahead of all competition in bio printing technology. Therefore, the stock is a buy for long term investors.

Organovo (ONVO), a 3-D bio printing company