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[Tommy]

$ONVO - Organovo Is A 3-D Printing Game Changer

Nov 20 2013, 08:26 | http://seekingalpha.com/article/1851411-organovo-is-a-3-d-printing-game-changer?source=email_rt_article_readmore

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ONVO over the next 72 hours. (More...)

Organovo is a 3D Printing Game Changer

3D printing is hot right now. Stories are cropping up everywhere about companies printing some amazing things. In June 2012, a 3D-printed lower jaw was fitted to an 83-year-old woman in Netherlands. The implant was built by LayerWise, a Belgium manufacturer. A new energy efficient car was built with 3D printing by a Winnipeg-based engineering group called KOR EcoLogic, created with the 3D printing capabilities of Stratasys (SSYS). The European Space Agency is testing the idea of printing an entire lunar base. There's even a new clothing line being printed by Continuum, a New York City based fashion label/experimental design lab. The future of 3D printing is wide open and the applications are endless.

So what do you get when you cross 3D printing with biotech? You get a game changer by the name of Organovo Holdings, Inc. (ONVO). Some big names currently dominate the 3D printing industry, like 3D Systems Corp. (DDD) and Stratasys, Inc. Both have appeared in Investors Business Daily repeatedly and have garnered lots of attention. Organovo is a lesser known company that is raising the bar on 3D printing with its planned pipeline. Organovo develops three-dimensional (3D) bioprinting technology for creating functional human tissues on demand for research and medical applications.

What is bioprinting? The bioprinting process revolves around the identification of key architectural and compositional elements of a target tissue, and the creation of a design that can be utilized by a bioprinter to generate that tissue in the laboratory environment. So what does that mean? It means that Organovo wants create functional human tissues starting with cells from any source. To do what? To develop an advanced routine surgical therapy and transplantation therapy for patients with damaged or diseased tissue using engineered (3D printed) tissue. The end product is a 3D printed liver, due for launch in December 2014, with plans for a 3D-printed heart and kidney.

Fundamentals

Fundamentally speaking Organovo is not a stellar investment, but that's what you expect from a development stage company, that doesn't expect a product launch until the end of 2014. Organovo is still in development. Don't waste your time trying to figure how much this company is worth, the traditional methods of valuation, such as PE ratios are not appropriate. One must approach Organovo as a long term speculative holding. There have been bullish articles responsible for driving the stock price much higher recently but all those articles are merely speculation not based on any facts. No corporate news is responsible for this run up. I repeat, treat this is a long term speculative holding.

Partnerships

Organovo is not flying solo in its mission. It has established several key collaborative partnerships to further the research and development in drug development and tissue therapy. In December of 2012, Organovo announced a new partnership with Autodesk, Inc. (ADSK), the leader in cloud-based design and engineering software, to create the first 3D design software for bioprinting. Early in 2013, Organovo partnered with ZenBio Inc., a leading provider of advanced cell-based solutions and services, to produce three-dimensional human tissues for drug discovery and advanced tissue therapies.

"Autodesk is an excellent partner for Organovo in developing new software for 3D bioprinters," said Keith Murphy, Chairman and Chief Executive Officer at Organovo. "This relationship will lead to advances in bioprinting, including both greater flexibility and throughput internally, and the potential long-term ability for customers to design their own 3D tissues for production by Organovo."

"ZenBio is a highly respected provider of human cells, which are key inputs to our 3D tissue models," said Keith Murphy, Chairman and Chief Executive Officer at Organovo. "Together, we can create new tissues and disease models that offer greater preclinical predictive value for drug discovery, and will fill unmet needs for medical research and surgical therapies."

Needless to say, these are intelligent partnerships that will no doubt enhance Organovo in both the 3D software needed to model tissue architectures and the human tissue cells needed to develop the prototypes.

Opportunity Matrix

The following slide was taken from the Organovo Investor Overview Presentation August 2013, which is available upon request from the company. Organovo has outlined three main areas of opportunity for their planned pipeline. The Organovo 3D printed human liver is anticipated to launch in December 2014 and has already shown tremendous success during initial testing in the laboratory. In the next few weeks we should be hearing the results of the liver's functioning test and tests against known drugs. Preliminary results suggest superior functional performance in 3D liver constructs vs. matched 2D cultures including demonstrated sustained production of a number of critical functional endpoints that include Albumin, fibrinogen, transferrin, cholesterol, CYP activity, inducible CYP1A2 and CYP3A4 activities.

Organovo plans on similar product launches of a 3D kidney and heart down the road. Organovo also plans on working collaboratively with partners to develop disease models, such as cancer, in order to develop pharmaceuticals from which it will collect royalties. Finally, the company has identified several key areas where advanced surgical tissue therapy can treat patients with damaged tissues of the lung, bone, blood vessels and heart.

(click to enlarge)

The implications upon successful testing and production are game changers, in my opinion. Imagine the possibility, for a moment, babies born with heart defects can have new heart tissue or perhaps even a new heart printed on demand for immediate transplant. Think about transplant patients no longer being placed on a waiting list for donors for their needed organs. Ex-smokers can go in and have their lungs repaired from years of tobacco abuse.

Summary

Reasons to Buy

Right now, there's a lot of hype around 3D printing. An Austin-based production company Solid Concepts developed the first metal handgun using 3D printer technology. Good luck to the TSA and other law enforcement agencies with that one. Food and pieces of art are also being printed. That's all good for demonstration purposes, but certainly not game changers. Well, maybe the 3D gun qualifies. Organovo, however, will be the definitive game changer. They're taking 3D printing to the extreme by printing actual human tissue to be used in 3D-printed human hearts, livers and kidneys. Patients may soon have therapy options for damaged tissue they having been living with for years. Advancements in pharmaceuticals may be just around the corner through Organovo's partnerships. Keep an eye on Organovo, it will earn some serious bragging rights.

Risky Business

Organovo may be the next leader in the 3D printing arena, but is still is a development stage company and does not expect product-based revenue until the commercial release of their liver toxicity assay product in 2014. Most articles that have been written are nothing more than attempts to create a catalyst for short term traders. Beware.

ONVO has been in a strong uptrend fueled by lots of bullish speculation and no corporate news. The stock was getting too parabolic soon after the latest earnings release and needed to correct. I am bullish on ONVO. For that reason, I am keeping ONVO on my watchlist. However, in light of its recent move, I will not initiate any new positions until I see a pullback/dip.

On 11/19/2013, ONVO dropped over 24%, on over 700% above average volume. The sudden drop was not specific to any corporate news, because other players in the sector, like DDD and SSYS, also dropped around 6% and 9%, respectively. I would buy now to take advantage of the dip, but because the3D printing leaders also dropped has me wondering if we might be experiencing a sector shift out of 3D printing. Time will tell.