Organovo (ONVO) Developing 3D Bioprinting Technology amid Market Volatility

July 8, 2014 • Analysis • Tags:

Organovo is up 50% since I last wrote on the company, refuting the misleading short thesis that was taking a shot at the company’s legitimacy (more here). This rally has also been fueled by the resurgence of the 3D printing sector as main players (DDD,SSYS,VJET) are up over 15%. Whenever the market experiences a slight correction though, these names generally see an amplified sell off, given the volatile nature of the 3D printing sector. Today is an example of this as all mentioned names are down at least 5%. In the midst of this market volatility, Organovo has delivered on its scheduled targets and continues to develop its bioprinting technology.

First Key Opinion Leader (KOL) Validation

During the 3D Cell Culture 2014 conference in Germany, Dr. Adrian Roth, Head of Mechanistic Safety for Roche Pharmaceutical Research and Early Development, presented positive results from a collaborative study with Organovo’s 3D human liver tissues.

Conducted at Organovo’s San Diego facility, results showed Organovo’s 3D liver system was able to distinguish a toxic drug that causes drug induced liver injury (DILI) from a chemical analogue that is known to be non-toxic. Additionally, Organovo’s model detected physiologically relevant doses of this toxic compound, which other liver systems have not been able to detect.

DILI is the most frequent cited reason for withdrawal of medications from development and the marketplace. At times, DILI may not be detected prior to drug approval, because most new drugs are tested in small patient populations. Having a more indicative liver system that could potentially lower DILI would be revolutionary in drug discovery. Companies which sink around $1B in drug development could overcome the most common reason for drug failure. This is what Organovo is aiming to accomplish with their 3D human liver tissues.

Receiving independent validation from a reputable third party such as Roche bodes well for Organovo’s future 3D human liver tissue launch by the end of 2014. The backing of a Roche doctor publication will influence future customers as Organovo’s product will have the scientific support showing its efficacy. Essentially, this can be seen as free product marketing.

What the Future Holds

As we approach the launch and adoption of Organovo’s 3D liver tissue, I expect to see additional KOL reports validating the upcoming product even further. Roche was the first, but definitely not the last. Additionally, the company is expected to sign research service contracts for toxicity testing using its 3D human liver tissue.

Naysayers have take shots at this service approach rather than shipping product, implying the liver product is not as developed as planned. From Organovo’s perspective, delivering live 3D tissue would prove to be difficult as it may affect product quality and thus results. This would not be an issue with servicing at Organovo’s facility. I see the servicing approach being similar to what Roche recently did. Clients will have a team committed to the testing as they collaborate with Organovo. Both parties will have input on the testing.

Organovo has historically been a volatile stock that tends to be overexposed to swings. For investors, this market noise should be minimized as the real focus should be on creating value. So far, Organovo has been on schedule with targets and developing its bioprinting technology. The second half of 2014 should be catalyst filled as more KOL reports, research collaborations and additional tissue (breast) advancements are announced.

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