3D bioprinting leader Organovo has been steadily growing this year, signing deals with pharmaceutical giant Merck and cosmetics company L’Oreal, as well as releasing news related to their first 3D printed kidney tissue. Given these big partnerships, then, it strikes me as a bit odd that the company is looking for more money.
Yesterday, the company announced the sale of 9,425,000 shares of common stock at $4.25 per share, with underwriters given a 30-day option to buy an additional 1,413,750 shares. With Jefferies LLC and Piper Jaffray & Co. as joint book-running managers and Cantor Fitzgerald & Co. as a co-manager, the company hopes to raise about $40,056,250, which they will use “for general corporate purposes, including research and development, the development and commercialization of its products, general administrative expenses, license or technology acquisitions, and working capital and capital expenditures.”
This secondary offering comes after Organovo’s stock closed at $5.23 the day before, diluting the price down to $4.25. Why a company with some $50 million in cash would need $40 million more may scare some investors, particularly given the fact that Organovo began trading on the pink sheets before moving to the NYSE. Interestingly, two days ago, before the dilution, Cantor Fitzgerald, co-manager of the secondary offering, rated Organovo stock as a “Buy”.
Lately, I’ve become skeptical about the stock market altogether, especially 3D printing stocks and even more so about penny stocks, but I have high hopes for the bioprinting industry as a whole. Whether it be Organovo or any one of the other firms out there pursuing the technology, I hope that someone can produce some tangible results to reduce the need for animal testing and increase the supply of transplantable organs for those in need.
Update 6/29/15: In a response to speculation surrounding the company’s recent secondary offering, Organovo has since published new data on their FAQ page discussing the reasons for its quest for $40 million. Explaining that it hinted at such a possibility to its investors in February, but that it was constrained by certain rules related to the deal, the bioprinting startup claims that previous funding raised with their IPO, to the tune of $46M, has helped them grow their business two $100M+ annual revenue streams – liver and kidney tissue assays – but that this additional $40 million could help them develop two more tissues, bringing in a total of $400M+ per year.
Of its liver and kidney tissues, Organovo says, in the FAQ, that they are anticipating a greater demand for their products. While they will be increasing production capacity in the second half of this year, this demand will drive the need for yet another manufacturing facility. Additionally, they are hoping to use the funds to develop new drug discovery models. As opposed to the healthy tissues they have so far created, Organovo plans to create models of diseased tissue, including liver fibrosis and polycystic kidney disease models. This, the company suggests, will allow them to expand from the current deals with drug manufacturers to further pharmaceutical deals that will allow researchers to screen drug candidates.
The funds will also be used to develop even more skin tissues, in addition to the cosmetics model currently being funded by L’Oréal . The new skin products will be used for dermatology medicine testing and disease modeling. They also hope to further fund their cancer models.
Not only do they plan to develop more tissue types and expand the use of their current tissues, Organovo also believes that the secondary offering would bring on more institutional investors, to stabilize their stock, and build their reputation with investment banks, to bring in long-term investors.
Highlighting its success so far, Organovo states, “We all share the vision that bioprinting can be a dominant technology to solve biomedical problems in the future – but that doesn’t happen by Organovo being content with simply moving the ball forward commercially with liver and kidney for toxicology. We believe our shareholders are investing in a leader in the space, and we want to extend that position into new areas where we think it can yield long term value for shareholders.”
So, Organovo investors? What are your thoughts?