Organovo Holdings, Inc. (ONVO)

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"ONVO Worth A Second Look From Investors"

http://seekingalpha.com/article/3550306-organovos-3-d-organ-printing-platform-worth-a-second-look-from-investors?auth_param=2jtbj:1b14i3c:f3f6c3cd84306e6fa47f2bfcf1bc39dc&uprof=51

"Organovo's 3-D Organ Printing Platform: Worth A Second Look From Investors
Oct. 5, 2015 5:52 AM ET | About: Organovo Holdings, Inc. (ONVO)
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Summary

Organovo is a leading developer of structural regenerative technology.

3-D printing may help solve important problems in organ transplants.

Organovo recently finished a secondary offering to fund its development.

In biochemistry, we had an adage when discussing complex proteins: form is function. This refers to the fact that the overall shape and structure of a molecule is what largely determines its role in the cell. This is oversimplified, of course, but it helps to inform discussions.

One of the most important goals of regenerative medicine is the manufacture of organs meant for transplant. But this requires addressing a diverse range of problems. In my mind, they boil down to three major challenges:

Deriving the tissue itself - By this, I mean that we need to make the cells that comprise the organ of interest. As our in vitro systems and understanding of cell biology have improved, this has grown less challenging. As I've discussed in previous articles, we can make a diverse range of tissues ranging from retinal cells to blood cells, just to scratch the surface.
Making the tissue biocompatible - Rejection is a major issue in organ transplants. The hope is that we will discover the tissue source (i.e., skin fibroblasts for autologous transplant) or genetic modifications (e.g., knockdown of beta-2 macroglobulin in platelets) necessary to make transplant possible without the need for immunosuppressants.
Making it function properly through structure - In order for a heart to work, it is not sufficient to shoot cardiomyocytes and fibroblasts and other cells into the chest cavity. You don't need heart cells. You need a heart! The same can be said for lungs, kidneys, and many of the other organs that are needed in transplant. For some applications, such as replacement of retinal pigmented epithelium in macular degeneration, there is some ongoing debate as to whether you can preserve vision with either a bolus of cells or whether you need to first culture the cells on a sheet. However, with other organs, structure is obviously critical.

Challenges 1 and 2 are largely in the purview of basic research, with many, many labs tackling these cell and molecular biological questions. Challenge 3, however, presents itself almost as an engineering problem. We have an idea of what the structure of organs looks like. How can we make it work?

The answer, as far as Organovo Holdings (NYSEMKT:ONVO) is concerned, lies in 3-D printing. We all know generally how 3-D printers work: feed a drafted image into a computer, and it builds the image using whichever material is loaded. In this case, it's cells and other tissue components.

What investors may not know about Organovo's platform is its importance outside of clinical regenerative medicine. Obviously, this would be an important money maker for the company if it had an approved device, but the importance of 3-D printing goes further than that, with applications both in basic research and clinical development.
What's Obvious to Investors: The Functional Organ Holy Grail

The question on anyone's mind when bringing up 3-D printing of organs might be "When will we see it in the market?" The answer is a bit tricky to provide. Many of Organovo's applications are still in the pre-clinical development stage, and the company has presented proofs of concept in a variety of tissue types, including bone, liver, and kidney. To date, however, none of these applications has moved into clinical trials.

In a normal paradigm, this might be putting off investors. Preclinical-stage drug-based pharma companies must put their whole effort behind getting the drug to the market. This requires massive resources and, oftentimes, major dilution of the company shares.

But with Organovo, the picture might be a little different.
Platform to Aid Other Drug Development Efforts

The use of 3-D printing to make organ cultures for in vitro testing is an application that may not be obvious for many would-be investors of Organovo. But this technology has the potential to address some major problems in cell biology research and drug development.

Consider for a moment the practical challenges of growing cells. In many cases, researchers use a plastic dish to allow the cells to proliferate. But, in almost every case, this does not properly recapitulate the native environment of those cells. So, when you're trying to answer key questions in cancer research and other biological fields, you're already operating under highly artificial conditions.

One way around this issue is the use of softer substrates like Matrigel. In the extreme, some labs will use so-called "organotypic" cultures, whereby they grow the cells on tissue taken from actual patients. Both methods are rather expensive, and, more importantly, very difficult to control. Matrigel is derived from a specific kind of mouse tumor and is subject to batch-to-batch variation, leading to inconsistent results.

The problem is that human tissue and Matrigel are not well-defined. This is where Organovo can solve a major problem. Because its methods for tissue printing are standardized, the company has the ability to generate, on demand, specialized culture environments that are highly reproducible, which will yield more consistent results.
Printing for Drug Testing

As many of us know, the pipeline for a drug typically follows a set path. First, it is designed and tested in cells for some kind of efficacy. Then, it moves to animal research, including mice and, perhaps, dogs and monkeys (both species being much closer to humans in terms of drug metabolism). Finally, it enters the clinic and goes through phase 1, 2, and 3 studies before making it to market.

And, of course, this pathway fails 84% of the time, even if it makes it into humans. The attrition rate is much higher for drugs in the preclinical setting. What we need is a cheaper way to identify the losers early on and save millions of dollars in development costs.

Organovo's tissue printing platform is able to make different drug processing tissues in order to better recapitulate the human environments that we're attempting to modify with drugs. The company has published an overview of its various technologies and how they apply to drug development.
Conclusions

From a scientific perspective, Organovo looks to be a promising player in the regenerative medicine space. It has recently demonstrated promising data in a variety of applications, which it feels constitutes a tipping point in terms of the viability of these technologies. In addition to the 50 million in cash it held at the end of 2014, the company recently completed a 40 million dollar stock sale, bringing its balance sheet up to $86 million.

The dilution has certainly had an impact, as the stock price has fallen over 50% since January 2015. However, the strengthened balance sheet and current annual burn rate of only around 5 million suggest that it will be a long while before Organovo needs to pursue other funding opportunities. In the meantime, it has platforms that can be sold for research and drug development, on top of the possibility to move printed organs into the clinic.

As such, it appears to me that Organovo is worth a second look for non-investors looking to put money into regenerative medicine."

Disclosure: I do not currently hold a position in Organovo, nor do I intend to initiate one in the short term. I am interested in helping other investors derive their due diligence from the scientific perspective of these companies, and I am not making a specific recommendation. Investors should perform their own comprehensive research to ascertain the risk of any investment."