Organovo Holdings, Inc. (NASDAQ:ONVO) (“Organovo”) today reported
financial results for the fiscal second quarter of 2018 and updated
its full-year fiscal 2018 outlook. The Company is shifting
the focus of its commercial and platform development efforts toward
higher-demand and higher-value disease modeling services, and is
deprioritizing routine toxicology research services. While
Organovo has had meaningful early uptake for its disease modeling
studies, these revenues are not anticipated to offset a smaller
than expected contribution from toxicology research services in the
remaining months of its 2018 fiscal year. As a result, the
Company has lowered its fiscal 2018 total revenue outlook.
The Company believes its focus on disease modeling platforms
coupled with its IND-track therapeutics program will best unlock
the value of its 3D tissue printing capabilities. As a result
of its change in strategic focus and the recently announced
restructuring and organizational realignment, the Company also has
favorably revised its negative Adjusted EBITDA(1) guidance.
Organovo reported fiscal second-quarter total
revenue of $1.4 million. Total revenue decreased 2 percent
from the prior-year period, and increased 37 percent versus the
fiscal first quarter of 2018. Net loss was $9.5 million, or
$0.09 per share, for the fiscal second quarter of 2018, as compared
to $9.4 million, or $0.10 per share, for the fiscal second quarter
of 2017. Negative Adjusted EBITDA for the second quarter
was $6.6 million, as compared to $7.1 million for the prior-year
period.
“We have the ability to monetize our platform in many ways,
including the provision of primary human cells for research
applications, compound screening in disease models, licensing
agreements that capitalize on our technology, and the ongoing
development of novel therapeutics,” said Taylor J. Crouch, CEO,
Organovo. “Clients are working with us across this value
chain, allowing us to target the entire drug discovery and
development ecosystem. Given the increased adoption by a
number of sophisticated customers of our disease modeling
capabilities, and the important role that non-alcoholic fatty liver
disease (“NAFLD”) and non-alcoholic steatohepatitis (“NASH”) play
in pharmaceutical R&D, we believe our move to this space
represents the highest value opportunity for our commercial
business.”
Crouch continued, “As we work with multiple industry leaders, we
see deeper engagement from them relating to annual budget
allocations and framework agreements for our services. These
are all important steps as they move from individual platform
validation studies with us to dedicated research plans and
meaningful annual revenue commitments tied to their specific drug
development needs. For example, a number of our customers
have already indicated they’re building us into their upcoming
budgets in a more meaningful way, with programs related to NASH and
liver fibrosis leading the way for broader adoption. We’ve
also recently begun to utilize our platform with clients who
already have drugs in clinical development, illustrating that
collaboration opportunities exist in all stages of drug discovery
and development.”
Crouch concluded, “Recent progress in developing our liver
therapeutic tissue serves both as a way to de-risk the adoption of
our services and as a chief source of validation for our
customers. Its greatest promise is as a revolutionary
therapeutic application for multiple liver diseases, including
alpha-1 antitrypsin deficiency. With robust functionality and
retention through 125 days post-implantation, and an approximately
75% reduction in the pathologic hallmarks of this disease in the
region of implant, our advanced 3D liver model is at the leading
edge of mirroring human liver function in our preclinical
studies.”
Second-Quarter Organovo Business Highlights
Revenue
- Total revenue was $1.4 million, down 2 percent from the
year-ago period. The decrease was primarily driven by less
revenue from previously completed collaborative research
agreements, partially offset by grant payments related to the
Company’s recently awarded National Institutes of Health (“NIH”)
grant.
- Product and service revenue was $0.9 million, down 8 percent
from the prior-year period, largely driven by fewer customer
validation projects for liver tissue toxicology research
services. This decrease was partially offset by strong gains
in customer contracts for liver tissue disease modeling research
services, primarily in the areas of liver fibrosis, NASH and kidney
fibrosis.
Operating Expenses
- Cost of revenues was $0.3 million, a decrease of 35 percent
from the prior-year period, reflecting a greater contribution from
higher-margin primary human cell and tissue products.
- Research and development costs increased 9 percent
year-over-year to $4.9 million, primarily due to increased
facilities costs and employee related expenses.
- Selling, general and administrative expenses decreased 3
percent from the prior-year period to $5.7 million, reflecting
lower external professional services and facilities costs.
Liquidity & Capital Resources
- The Company ended the fiscal second quarter with a cash and
cash equivalents balance of $50.7 million.
- Working capital was $49.2 million to end the fiscal second
quarter compared to $49.5 million in the prior-year quarter.
Fiscal-Year 2018 Outlook
The Company updated its full-year fiscal 2018 outlook for total
revenue and negative Adjusted EBITDA. The Company now
expects:
- Total revenue of between $4.5 million and $6.5 million for
fiscal-year 2018. Fiscal 2017 total revenue was $4.2
million.
- Negative Adjusted EBITDA of between $26.0 million and $28.0
million for fiscal-year 2018. Fiscal 2017 negative Adjusted
EBITDA was $29.8 million. The improvement in negative
Adjusted EBITDA will be largely driven by reduced operating costs
the Company will benefit from as the result of its recently
announced organizational restructuring and a more rigorous focus on
its existing commercial opportunities and therapeutics research
program.
|
|
|
|
Fiscal-Year 2018 Outlook (August
2017) |
Fiscal-Year 2018 Outlook(November
2017) |
Fiscal-Year 2018
Total Revenue |
$6.0 million - $8.5 million |
$4.5 million - $6.5 million |
Fiscal-Year 2018 Negative Adjusted
EBITDA |
$29.0 million - $31.0 million |
$26.0 million - $28.0 million |
|
|
|
A reconciliation of non-GAAP negative Adjusted EBITDA, as
forecasted for fiscal 2018, to the closest corresponding GAAP
measure, net loss, is not available without unreasonable efforts on
a forward-looking basis due to the high variability and low
visibility of certain charges that may impact our GAAP results on a
forward-looking basis, such as the measures and effects of
share-based compensation.
Definitions & Supplemental Financial
Measures
- In addition to disclosing financial results that are determined
in accordance with U.S. GAAP, the Company provides Adjusted EBITDA
which is a non-GAAP financial measure, as a supplemental measure to
help investors evaluate the Company's fundamental operational
performance. Adjusted EBITDA represents earnings before
interest, income taxes, depreciation and amortization, share-based
compensation expenses and restructuring/CEO transition costs.
Adjusted EBITDA does not represent, and should not be considered in
isolation from, as a substitute for, or as superior to, U.S. GAAP
measurements such as net income or loss. By eliminating
interest, income taxes, depreciation and amortization, share-based
compensation expenses and restructuring/CEO transition costs, the
Company believes the result is a useful measure across time in
evaluating its fundamental core operating performance.
Management also uses Adjusted EBITDA to manage the business,
including in preparing its annual operating budget, financial
projections and compensation plans. The Company believes that
Adjusted EBITDA is also useful to investors because similar
measures are frequently used by securities analysts, investors and
other interested parties in their evaluation of companies in
similar industries. However, there is no standardized
measurement of Adjusted EBITDA, and Adjusted EBITDA as the Company
presents it may not be comparable with similarly titled non-GAAP
financial measures used by other companies. Since Adjusted
EBITDA does not account for certain expenses, its utility as a
measure of the Company's operating performance has material
limitations. Due to these limitations, investors should not
view Adjusted EBITDA in isolation, but should also consider other
measurements, such as net income or loss and revenues, to measure
the Company’s operating performance. Please refer to the
schedule below for a reconciliation of consolidated GAAP net income
to Adjusted EBITDA for the fiscal quarters ended September 30, 2017
and 2016.
|
Organovo Holdings, Inc. |
Supplemental Reconciliation of GAAP Net Income
to Adjusted EBITDA |
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
|
|
|
|
September 30, 2017 |
|
September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net
loss |
$ |
(9,461 |
) |
$ |
(9,442 |
) |
|
|
|
|
Interest
expense |
|
- |
|
|
- |
|
|
|
|
|
Interest
income |
|
(118 |
) |
|
(37 |
) |
|
|
|
|
Income taxes |
|
- |
|
|
- |
|
|
|
|
|
Depreciation and
amortization |
|
321 |
|
|
251 |
|
|
|
|
|
Share-based
compensation |
|
2,298 |
|
|
2,093 |
|
|
|
|
|
Restructuring/CEO
transition |
|
409 |
|
|
- |
|
|
|
|
|
Adjusted
EBITDA |
$ |
(6,551 |
) |
$ |
(7,135 |
) |
|
|
|
|
|
|
|
|
|
|
|
Conference Call InformationAs previously
announced, the Company will host a conference call to discuss its
results at 5:00 p.m. ET on Thursday, November 9, 2017.
Callers should dial (888) 317-6003 (U.S. only) or (412) 317-6061
(from outside the U.S.) to access the call. The conference
call ID is 4644999. The conference call will also be
simultaneously webcast on Organovo’s Investor Relations webpage at
www.organovo.com. A replay of the conference call will be
available beginning Thursday, November 9, 2017 through Thursday,
November 16, 2017 at Organovo’s Investor Relations webpage.
Callers can also dial (877) 344-7529 (U.S. only) or (412) 317-0088,
Access Code 10111988, for an audio replay of the conference
call.
About Organovo Holdings, Inc.Organovo designs
and creates functional, three-dimensional human tissues for use in
drug discovery, clinical development, and therapeutic
applications. The Company develops 3D human tissue systems
through internal research programs and in collaboration with
pharmaceutical, academic and other partners. Organovo's 3D
human tissues have the potential to transform the drug discovery
process, enabling treatments to be developed more effectively and
with greater relevance to performance in human trials and
commercialization. The Company’s ExViveTM Human Liver and
Kidney Tissues are used in high-value drug profiling, including
compound screening in disease models, toxicology, target and marker
discovery/validation, and other drug testing. The Company is
also advancing a preclinical program to develop liver therapeutic
tissues for critical unmet medical needs, including certain
life-threatening pediatric diseases. In addition to numerous
scientific publications, the Company’s technology has been featured
in The Wall Street Journal, Time Magazine, The Economist, Forbes,
and numerous other media outlets. Organovo is changing the
shape of life science research and transforming medical care.
Learn more at www.organovo.com.
Forward-Looking Statements Any statements
contained in this press release that do not describe historical
facts constitute forward-looking statements as that term is defined
in the Private Securities Litigation Reform Act of 1995. Any
forward-looking statements contained herein are based on current
expectations, but are subject to a number of risks and
uncertainties. Forward-looking statements include, but are
not limited to, statements regarding the potential for one or more
customer’s electing to move toward framework agreements involving
annual budgets, revenue commitments, and/or dedicated research
plans, the expected costs, timing and operational benefits of the
Company’s restructuring plan, the financial impact of the Company’s
restructuring plan on its future operating costs and financial
results, and statements regarding the potential benefits and
therapeutic uses of the Company’s therapeutic liver tissue.
The factors that could cause the Company's actual future results to
differ materially from current expectations include, but are not
limited to, risks and uncertainties relating to the Company's
ability to develop, market and sell products and services based on
its technology; the expected benefits and efficacy of the Company's
products, services and technology; the Company’s ability to
successfully complete studies and provide the technical information
required to support market acceptance of its products, services and
technology, on a timely basis or at all; the Company's business,
research, product development, regulatory approval, marketing and
distribution plans and strategies, including its use of third party
distributors; the Company’s ability to recognize deferred revenue;
the final results of the Company's preclinical studies may be
different from the Company's studies or interim preclinical data
results and may not support further clinical development of its
therapeutic tissues; the Company may not successfully complete the
required preclinical and clinical trials required to obtain
regulatory approval for its therapeutic tissues on a timely basis
or at all; the Company’s ability to control the costs and to
achieve the expected operational benefits and long- term cost
savings of its restructuring plan; and the Company’s ability to
meet its fiscal year 2018 outlook. These and other factors are
identified and described in more detail in the Company's filings
with the SEC, including its Annual Report on Form 10-K filed with
the SEC on June 7, 2017. You should not place undue reliance on
these forward-looking statements, which speak only as of the date
that they were made. These cautionary statements should be
considered with any written or oral forward-looking statements that
the Company may issue in the future. Except as required by
applicable law, including the securities laws of the United States,
the Company does not intend to update any of the forward-looking
statements to conform these statements to reflect actual results,
later events or circumstances or to reflect the occurrence of
unanticipated events.
|
Organovo Holdings,
Inc. |
Unaudited Condensed
Consolidated Statements of Operations and Other Comprehensive
Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
Six Months Ended |
|
Six Months Ended |
|
|
September 30, 2017 |
|
September 30, 2016 |
|
September 30, 2017 |
|
September 30, 2016 |
Revenues |
|
|
|
|
|
|
|
|
Products
and services |
|
$ |
946 |
|
|
$ |
1,023 |
|
|
$ |
1,890 |
|
|
$ |
1,697 |
|
Collaborations and licenses |
|
|
260 |
|
|
|
345 |
|
|
|
306 |
|
|
|
557 |
|
Grants |
|
|
149 |
|
|
|
8 |
|
|
|
149 |
|
|
|
12 |
|
Total
Revenues |
|
|
1,355 |
|
|
|
1,376 |
|
|
|
2,345 |
|
|
|
2,266 |
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
254 |
|
|
|
393 |
|
|
|
555 |
|
|
|
561 |
|
Research and
development expenses |
|
|
4,944 |
|
|
|
4,544 |
|
|
|
9,977 |
|
|
|
8,987 |
|
Selling, general, and
administrative expenses |
|
|
5,736 |
|
|
|
5,918 |
|
|
|
11,592 |
|
|
|
10,974 |
|
Total
costs and expenses |
|
|
10,934 |
|
|
|
10,855 |
|
|
|
22,124 |
|
|
|
20,522 |
|
Loss from
Operations |
|
|
(9,579 |
) |
|
|
(9,479 |
) |
|
|
(19,779 |
) |
|
|
(18,256 |
) |
Other Income
(Expense) |
|
|
|
|
|
|
|
|
Change in
fair value of warrant liabilities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
Interest
income |
|
|
118 |
|
|
|
37 |
|
|
|
216 |
|
|
|
74 |
|
Total Other
Income (Expense) |
|
|
118 |
|
|
|
37 |
|
|
|
216 |
|
|
|
69 |
|
Income Tax
Expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(22 |
) |
Net
Loss |
|
$ |
(9,461 |
) |
|
$ |
(9,442 |
) |
|
$ |
(19,563 |
) |
|
$ |
(18,209 |
) |
Currency
Translation Adjustment |
|
$ |
— |
|
|
$ |
(7 |
) |
|
$ |
(11 |
) |
|
$ |
(7 |
) |
Comprehensive
Loss |
|
$ |
(9,461 |
) |
|
$ |
(9,449 |
) |
|
$ |
(19,574 |
) |
|
$ |
(18,216 |
) |
Net loss per common
share—basic and diluted |
|
$ |
(0.09 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.19 |
) |
|
$ |
(0.20 |
) |
Weighted average shares
used in computing net loss per common share—basic and
diluted |
|
|
106,297,699 |
|
|
|
93,185,400 |
|
|
|
105,497,939 |
|
|
|
92,790,850 |
|
|
|
|
|
|
|
|
|
|
|
|
Organovo Holdings,
Inc. |
|
Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
March 31, 2017 |
|
|
|
(Unaudited) |
|
(Audited) |
|
Assets |
|
|
|
|
|
Current Assets |
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
50,732 |
|
|
$ |
62,751 |
|
|
Accounts
receivable |
|
|
1,033 |
|
|
|
647 |
|
|
Grant
receivable |
|
|
149 |
|
|
|
- |
|
|
Inventory, net |
|
|
496 |
|
|
|
550 |
|
|
Prepaid
expenses and other current assets |
|
|
934 |
|
|
|
1,144 |
|
|
Total
current assets |
|
|
53,344 |
|
|
|
65,092 |
|
|
Fixed
assets, net |
|
|
3,255 |
|
|
|
3,840 |
|
|
Restricted cash |
|
|
127 |
|
|
|
127 |
|
|
Other
assets, net |
|
|
185 |
|
|
|
121 |
|
|
Total
assets |
|
$ |
56,911 |
|
|
$ |
69,180 |
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
Accounts
payable |
|
$ |
477 |
|
|
$ |
1,171 |
|
|
Accrued
expenses |
|
|
2,821 |
|
|
|
4,101 |
|
|
Deferred
revenue |
|
|
654 |
|
|
|
582 |
|
|
Deferred
rent |
|
|
173 |
|
|
|
157 |
|
|
Total
current liabilities |
|
|
4,125 |
|
|
|
6,011 |
|
|
Deferred
revenue, net of current portion |
|
|
67 |
|
|
|
58 |
|
|
Deferred
rent, net of current portion |
|
|
661 |
|
|
|
749 |
|
|
Total
liabilities |
|
|
4,853 |
|
|
|
6,818 |
|
|
Commitments and Contingencies (Note 4) |
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
Common
stock, $0.001 par value; 150,000,000 shares authorized,
106,904,525 and 104,551,466 shares issued and outstanding at
September 30, 2017 and March 31, 2017, respectively |
|
|
107 |
|
|
|
104 |
|
|
Additional paid-in capital |
|
|
270,842 |
|
|
|
261,586 |
|
|
Accumulated deficit |
|
|
(218,880 |
) |
|
|
(199,317 |
) |
|
Accumulated other comprehensive income (loss) |
|
|
(11 |
) |
|
|
(11 |
) |
|
Total
stockholders’ equity |
|
|
52,058 |
|
|
|
62,362 |
|
|
Total Liabilities and Stockholders’ Equity |
|
$ |
56,911 |
|
|
$ |
69,180 |
|
|
|
|
|
|
|
|
|
|
Organovo Holdings, Inc. |
|
Unaudited Consolidated Statements of Cash
Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
Six Months Ended |
|
|
|
September 30, 2017 |
|
September 30, 2016 |
|
Cash Flows From Operating Activities |
|
|
|
|
|
Net
loss |
|
$ |
(19,563 |
) |
|
$ |
(18,209 |
) |
|
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
|
|
Depreciation and amortization |
|
|
647 |
|
|
|
502 |
|
|
Change in
fair value of warrant liabilities |
|
|
— |
|
|
|
5 |
|
|
Stock-based compensation |
|
|
4,350 |
|
|
|
3,522 |
|
|
Increase
(decrease) in cash resulting from changes in: |
|
|
|
|
|
Accounts receivable |
|
|
(386 |
) |
|
|
(347 |
) |
|
Grants receivable |
|
|
(149 |
) |
|
|
— |
|
|
Inventory |
|
|
54 |
|
|
|
(111 |
) |
|
Prepaid expenses and other assets |
|
|
210 |
|
|
|
80 |
|
|
Accounts payable |
|
|
(694 |
) |
|
|
(33 |
) |
|
Accrued expenses |
|
|
(1,280 |
) |
|
|
381 |
|
|
Deferred rent |
|
|
(72 |
) |
|
|
(68 |
) |
|
Deferred revenue |
|
|
81 |
|
|
|
(631 |
) |
|
Net cash used
in operating activities |
|
|
(16,802 |
) |
|
|
(14,909 |
) |
|
Cash Flows From
Investing Activities |
|
|
|
|
|
Purchases
of fixed assets |
|
|
(56 |
) |
|
|
(452 |
) |
|
Purchases
of intangible assets |
|
|
(70 |
) |
|
|
— |
|
|
Net cash used
in investing activities |
|
|
(126 |
) |
|
|
(452 |
) |
|
Cash Flows From
Financing Activities |
|
|
|
|
|
Proceeds
from issuance of common stock and exercise of warrants, net |
|
|
4,084 |
|
|
|
4,500 |
|
|
Proceeds
from exercise of stock options |
|
|
825 |
|
|
|
500 |
|
|
Net cash
provided by financing activities |
|
|
4,909 |
|
|
|
5,000 |
|
|
Effect of
currency exchange rate changes on cash and cash
equivalents |
|
|
— |
|
|
|
(7 |
) |
|
Net (Decrease)
in Cash and Cash Equivalents |
|
|
(12,019 |
) |
|
|
(10,368 |
) |
|
Cash and Cash
Equivalents at Beginning of Period |
|
|
62,751 |
|
|
|
62,091 |
|
|
Cash and Cash
Equivalents at End of Period |
|
$ |
50,732 |
|
|
$ |
51,723 |
|
|
Supplemental
Disclosure of Cash Flow
Information: |
|
|
|
|
|
Interest paid |
|
$ |
— |
|
|
$ |
— |
|
|
Income taxes paid |
|
$ |
— |
|
|
$ |
22 |
|
|
|
|
|
|
|
|
Investor Contact:
Steve Kunszabo
Organovo Holdings, Inc.
+1 (858) 224-1092
skunszabo@organovo.com
Press Contact:
Jessica Yingling
Little Dog Communications
+1 (858) 480-2411
jessica@litldog.com
Organovo (NASDAQ:ONVO)
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