Monday, July 22, 2013

Spotlight on Organovo: The Future of Regenerative Medicine?




Imagine going to the hospital and being able to print out a functional human organ. That's precisely the future that Organovo (ONVO: NYSEMKT) envisions.   

Organovo, a 3D tissue bioprinting company based in San Diego founded in 2007, recently made headlines as it made its debut on July 11th on the NYSE. Previously listed on the OCT market, the company’s stock price rose from $3.90 (July 8th to a high of $7.86 (July 17th) and a market cap of more than $400M. As of July 22nd, ONVO dropped back down to $6.33.


What’s the big deal about Organovo and why are investors so excited?


Organovo has developed the world’s first commercial 3D Bioprinter (the NovoGen MMX Bioprinter). This 3D Bioprinter allows Organovo to create and grow “functional human tissues" similar to those of actual human organs.1 With this technology, Organovo hopes to one day manufacture human organs for patients waiting for organ transplants. Currently, there is great demand and a huge "organ shortage crisis" in the US; "more than 114,000 people are on transplant lists and waiting for an act of tragedy or charity.”2,3 

 In addition, Organovo hopes to transform how pharmaceutical companies discover new drugs and conduct clinical research. Organovo believes its 3D tissues are superior to existing animal and cell culture models and has applications in drug screening procedures and drug development. For instance, if Organovo's 3D tissue model showed negative results, then pharmaceutical companies, such as Pfizer, would not have to commit to costly clinical trials (up to $1 billion) even if animal studies showed positive results. If successful, Organovo would revolutionize healthcare research and regenerative medicine. 


How does Bioprinting work? How successful is Organovo? 


Organovo’s platform technology relies on “combinations of cellular ‘bio-ink’ (building blocks comprised solely of cells) and hydrogel (building blocks of biocompatible gels).” The NovoGen Bioprinter deposits the bio-ink and hydrogel according to pre-specified computer-aided designs (CAD) to generate 3D constructs. For a video of the process, check out:

This novel 3D bioprinting approach not only ensures high precision and reproducibility, but also provides in-vivo function and form not normally found in 2D cell cultures.4,5  Organovo’s approach to regenerative medicine relies on “autologous tissue engineering”, in which the patient’s own cells are used as bio-ink to minimize rejection and immunological responses.6 For initial proof of concept, Organovo focused on developing substitute blood vessels and nerve grafts. According to CEO Keith Murphy, “these blood vessels are made from a patient’s own cells, expand and contract as expected and have reached a strength that’s implantable, though they are not yet implanted.”7 More importantly, Organovo has recently successfully produced 3D liver tissue (see Image 1) with a thickness of 500 microns using primary human hepatocytes and hepatocyte-like cells derived from stem/progenitor sources.8,9  
Image 1: 3D Liver Cells9 

 Although Organovo’s 3D liver tissue is not completely functional yet, it does exhibit characteristics, such as cell density and spatial positioning, found typically only in in vivo liver tissues and not in in vitro cell cultures. Furthermore, Organovo showed that “these novel 3D liver tissues possessed critical liver functions, including albumin production, fibrinogen and transferrin production, and inducible cytochrome P450 enzymatic activities, including CYP 1A2 and CYP 3A4. Cholesterol biosynthesis was also demonstrated for the first time in a 3D human liver system in vitro and albumin production was 5-9 times greater than matched 2D controls, suggesting superior functionality.”10,11 Lastly, in comparison to 2D liver cell cultures, which survive typically for 48 hours, the 3D liver cell cultures survive for up to five and a half days.9


What are Organovo's markets and strategies? 


Organovo's products have value in the following markets: 1. specialized models for drug discovery and development; 2. biological research tools; and 3. regenerative medicine. In particular, Organovo's technology can be used to develop highly specialized human tissues that can serve as effective disease models in cardiovascular disease, oncology, and fibrosis. In addition, 3D tissues can be used to complement ADME (absorption, distribution, metabolism, and excretion), TOX (toxicology), DMPK (drug metabolism and pharmacokinetics) studies in traditional 2D cell based assays because it may more accurately predict human outcomes. Lastly, 3D tissues can be used as next-generation therapeutic products (i.e blood vessels) that restore function to damaged tissues and organs.   

With these markets in mind, Organovo strategically picked the liver as their first organ to develop. Based on their findings, the 3D liver tissue has been shown to be a more accurate model than 2D cell cultures of in vivo liver tissue. Instead of jumping from animal to human studies and risking huge R&D costs and failure, researchers can opt to test in the 3D liver tissue first before committing additional resources. In addition, liver tissue is already used to study drug toxicity by companies, such as BD Biosciences and Life Technologies.9 Lastly, the liver is one of few human organs that can regenerate by themselves; implanting a small amount of 3D liver tissue (grown from a patient's healthy liver cells) may one day promote growth of a normal liver.

In the short term, licensing fees for access to technology and partnerships serve as sources of revenue.12 Partnerships with big Pharma and other organizations will not only provide a source of revenue, but also demonstrate further proof of concept. As their 3D tissues become more advanced and functional, Organovo will be able to sell them to life science companies for drug screening and development. In the long term, Organovo may be able to sell therapeutic products, such as tissues and organs, for use in regenerative medicine. 


What are Organovo's financials? 


In addition to $7.66 M in seed funding, Organovo has raised $15.2 M from private placement.13,14,15 As of March 31, 2013, Organovo has incurred cumulative operating losses of $17.7 million and cumulative net losses totaling $66.4 M.1 In the 12 month time period leading to March 31, 2013, Organovo had $1.29 M in reported revenue.16 As of July 22nd, Organovo's Price to Sales ratio is 244. Over the next few years, Organovo expects to continue incurring substantial operating losses as R&D and commercialization activities increase. According to its latest S-3 filing, Organovo plans to raise another $100 M from selling stock.17


What are the risks? What's the competition? 


Organovo faces considerable risk in all of its markets. In particular, Organovo's drug discovery, biological research and regenerative medicine tools and products are still new and unproven. Organovo's business models for these markets are also unproven and rely on buy-in from customers. Organovo's technologies and products must not only be cost-effective and of interest to collaborators, but must also ultimately achieve FDA approval. At any point, a more innovative technology could render Organovo's technology obsolete.

Organovo has fierce competition in its markets from current and future companies. In the case of drug discovery and development, Organovo faces the challenge of convincing companies to commit to their technologies instead of relying on traditional techniques. In the short term, biotech/pharma companies will probably complement their traditional techniques with those of Organovo. It is highly unlikely that Organovo's technology will replace any traditional methods until several drugs successfully complete clinical trials. In regards to drug discovery and biological research tools, other innovative approaches are also being pursued. For example, the Wyss Institute at Harvard is developing Organs-on-Chips as an alternative to animal testing. These Organs-on-Chips (i.e heart, lung, etc) can be used as models of complex human diseases, such as chemotherapy-induced pulmonary edema.18 In the field of regenerative medicine, Organovo faces competitors, such as Aastrom Biosciences (ASTM: NASDAQ) and Cytori Therapeutics (CYTX:NASDAQ), which also utilize autologous cell therapy approaches, as well as other approaches, such as Athersys (ATHX:NASDAQ) and Osiris Therapeutics (OSIR:NYSEMKT).


What are Orgonovo's advantages? 


  • First mover advantage and potential first to market
  • Promising preliminary results from 3D tissue and demonstrated superiority to traditional 2D cell culture approaches
  • Successful IPO with strong investor interest
  • Partnerships with established companies, such as Pfizer, ZenBio and AutoDesk
  • Partnerships with academia, such as the Knight Cancer Institute at Oregon Health & Science University (OHSU)
  • No reliance on venture capital funding; less rush for a return of investment from investors


What are the possible exits?


  • Continue developing and commercializing the technology alone
    • Is highly risky and requires significant financial commitment
    • Requires buy-in from customers in each market
    • Depends on cost-efficient manufacturing processes and effective scale-up of distribution
    • Need to obtain FDA approval
    • Relies on continued drive and motivation from founders and executive board
  • Form a partnership to distribute and license the technology and products
    • Need to identify partners that can advance the value of the technology and have the capability of mass production
    • Depends on specification and needs of each potential customer (may have to develop custom tissue for various disease models)
    • Requires negotiation of terms of agreement with each licensee regarding access fees and possible royalties
  • Become acquired by a pharma/ biotech company
    • Is the least risky and shortest path to return on investment
    • Requires further demonstration of proof of concept and development of fully functional human product (i.e 3D liver tissue)
    • Need to obtain additional capital to fund additional R&D and reach critical milestones in the short-term 

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions; any investment choices you pursue are done so solely at your own risk. I am not receiving compensation for this post and I have no business relationship with any company whose stock is mentioned. Feel free to post comments and critiques below. 

Sources:

14. http://www.biocentury.com/companies/organovo_holdings_inc

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