Business Overview
Organovo Holdings, Inc. (NASDAQ: ONVO) is a clinical stage biotechnology company that is focusing on the clinical drug development of the farnesoid X receptor (FXR) agonist FXR314 and building high-fidelity, 3D tissues that recapitulate key aspects of human disease for drug discovery and development.Organovo's primary focus is on advancing the clinical development of FXR314, its lead compound in the established FXR program. FXR is a mediator of gastrointestinal and liver diseases, and FXR agonism has been tested in preclinical models of inflammatory bowel disease (IBD). FXR314 has demonstrated safety and tolerability after daily oral dosing in Phase 1 and Phase 2 trials and has FDA clinical trial authorization for a Phase 2 trial in ulcerative colitis (UC). The company plans to start a Phase 2a clinical trial for FXR314 in UC in the calendar year 2024.
Organovo's secondary focus is on building high-fidelity, 3D tissues that mimic key aspects of native human tissue composition, architecture, function, and disease. The company believes these 3D tissue models can enable critical, complex, multicellular disease models that can be used to develop clinically effective drugs across multiple therapeutic areas. Organovo is initially focusing on the intestine and has ongoing 3D tissue development efforts in human tissue models of UC and Crohn's disease (CD). The company uses these models to identify new molecular targets responsible for driving these diseases and to explore the mechanism of action of known drugs, including FXR314 and related molecules. Organovo intends to initiate drug discovery programs around these new validated targets to identify drug candidates for partnering and/or internal clinical development.
Financials
For the fiscal year ended March 31, 2023, Organovo reported annual revenue of $109,000, annual net loss of $14,671,000, annual operating cash flow of -$14,653,000, and annual free cash flow of -$14,695,000.In the third quarter of fiscal 2024, which ended on December 31, 2023, the company reported total revenue of $5,000, a net loss of $3,604,000, and negative operating cash flow of $11,982,000. The decrease in revenue year-over-year was due to a decline in sales of royalty-bearing products by the company's licensee.
Research and development expenses for the third quarter of fiscal 2024 were $1,434,000, an increase of 21% from the prior year period. This increase was directly related to the company's shift in strategic focus to advance the clinical drug development of FXR314 and prepare for a Phase 2a clinical trial in UC. Selling, general, and administrative expenses for the quarter were $2,251,000, a decrease of 2% compared to the prior year period.
For the first nine months of fiscal 2024, Organovo reported total revenue of $80,000, a net loss of $11,626,000, and negative operating cash flow of $11,982,000. The decrease in revenue year-over-year was again due to lower sales of royalty-bearing products by the licensee.
Research and development expenses for the first nine months of fiscal 2024 were $4,435,000, an increase of 29% from the prior year period. This increase was driven by higher personnel costs, lab expenses, consulting expenses, depreciation and amortization, and facility costs as the company focused on advancing the FXR314 clinical program. Selling, general, and administrative expenses for the first nine months were $7,635,000, an increase of 14% compared to the prior year period, primarily due to increases in legal and other corporate expenses.
Liquidity
As of December 31, 2023, Organovo had cash and cash equivalents of $5,295,000 and restricted cash of $143,000. The company had negative cash flow from operations of $11,982,000 during the nine months ended December 31, 2023.Organovo has historically financed its operations primarily through the sale of common stock, including public and at-the-market (ATM) offerings, as well as revenue from licensing intellectual property, products, and research-based services. The company currently does not have any committed external sources of funds and does not expect to generate meaningful revenue in the foreseeable future.
Based on the company's current operating plan and available cash resources, it will need substantial additional funding to support future operating activities. Organovo has concluded that the prevailing conditions and ongoing liquidity risks it faces raise substantial doubt about its ability to continue as a going concern for at least one year following the date the financial statements were issued.
To address its liquidity needs, Organovo has the ability to sell up to $27.1 million of additional shares of its common stock through an ATM offering program. The company also has an effective shelf registration statement on Form S-3 that allows it to offer and sell up to $150 million of various securities, including common stock, preferred stock, debt securities, warrants, and units. However, the company's ability to raise additional capital through these means may be limited by market conditions and other factors.
Risks and Challenges
Organovo faces several key risks and challenges in executing its business strategy:1. Using its 3D bioprinting platform to develop human tissues and disease models for drug discovery and development is a new and unproven approach. The company may experience unforeseen technical complications, unrecognized defects, and limitations in its technology or ability to develop viable disease models and drug candidates.
2. As the company pursues drug development through 3D tissues and disease models, it will require a constant, steady, and reliable supply of human cells to support its development activities. Any failure to obtain a sufficient and cost-effective supply of human cells could harm the company's business and results of operations.
3. Organovo will require substantial additional funding to continue its research and development activities and advance the clinical development of FXR314. Raising additional capital could result in dilution to existing shareholders or impose restrictive covenants that limit the company's operations.
4. Clinical drug development involves a lengthy and expensive process with uncertain timelines and outcomes. The company's ability to successfully develop and obtain regulatory approval for any drug candidates it identifies is subject to significant risks and uncertainties.
5. The company's reliance on third-party contractors and service providers for critical aspects of its development programs introduces risks related to the quality and timeliness of the services provided, which could delay or derail the company's efforts.