Filing summary
Important identity check: The supplied filing is for Organovo Holdings, Inc., not Vivosim Labs, Inc. It is a Form 10-Q for the quarter ended September 30, 2018 (Organovo’s fiscal second quarter), filed November 8, 2018. Confirm that this is the intended filing before relying on the figures below.
Business context and reporting period
Organovo is a biotechnology company developing 3D-bioprinted human tissues for therapeutic research and drug profiling. Its therapeutic program targets Alpha-1-antitrypsin deficiency (A1AT); the company also develops in vitro disease models, including NAFLD and NASH platforms, and sells cell-based products and research services. The filing reports the three and six months ended September 30, 2018, compared with the corresponding 2017 periods.
Financial performance and position
| Metric | Three months ended Sep. 30, 2018 | Six months ended Sep. 30, 2018 | Comparable 2017 period |
|---|---|---|---|
| Revenue | $0.943 million | $1.632 million | $1.355 million and $2.345 million, respectively |
| Operating loss | $6.009 million | $13.586 million | $9.579 million and $19.779 million, respectively |
| Net loss | $5.837 million | $13.253 million | $9.461 million and $19.563 million, respectively |
| Basic and diluted loss per share | $0.05 | $0.12 | $0.09 and $0.19, respectively |
For the six months, products and services contributed $1.039 million, collaborations and licenses $0.085 million, and grants $0.508 million. Gross margin, calculated as revenue less cost of revenue divided by revenue, was approximately 87% for the quarter and 85% for the six months; these figures include grant revenue.
- Cash and cash equivalents were $37.355 million at September 30, 2018, down from $43.726 million at March 31, 2018; restricted cash was $0.127 million.
- Six-month operating cash use was $11.346 million, versus $16.802 million in the prior-year period. Investing used $0.009 million; financing provided $4.984 million, primarily from ATM stock sales. Cash, cash equivalents, and restricted cash decreased $6.371 million.
- Current assets were $40.117 million and current liabilities $3.291 million, for working capital of $36.826 million. Total liabilities were $3.755 million; the balance sheet reports no debt.
- Accumulated deficit was $247.373 million. The company sold 3,762,130 shares through its ATM program during the six months for net proceeds of approximately $5.1 million. It reported 115,200,421 shares outstanding at September 30; 115,890,335 were outstanding November 1.
Material changes versus the prior comparable periods
- Revenue declined 30% in both the quarter and six-month comparison. Management attributed the decrease mainly to fewer liver-tissue research service contracts and the end of a collaboration and a one-time license fee; increased NIH grant activity partly offset the declines.
- Operating expenses fell: quarterly R&D decreased 36% and SG&A 37%; six-month R&D decreased 34% and SG&A 27%. Management primarily attributed reductions to restructuring, lower staffing, lower stock-based compensation, and reduced lab and consulting costs.
- Net loss narrowed to $13.253 million for the six months from $19.563 million. Operating cash use also declined year over year.
- Organovo adopted ASC 606 revenue recognition on April 1, 2018 using the modified retrospective method; the company said adoption had no material financial statement impact.
Outlook, risks, contingencies, and unusual items
- Management said available resources were sufficient to fund operations as currently planned for at least 12 months from the financial-statement issuance date. It also said additional capital would be needed for therapeutic development and execution of its business plan. Future financing may be unavailable or unfavorable; equity financing would dilute shareholders, while debt could impose payment obligations and restrictive covenants.
- The A1AT program had FDA orphan-drug designation and targeted an initial IND filing in calendar 2020. Near-term priorities included a pre-IND meeting and IND-enabling studies, pursuing a second orphan designation (expected in the first half of calendar 2019), and growing service and cell-product revenues. These are plans and targets, not assurances.
- After September 30 and through the filing date, the company issued 741,298 ATM shares for approximately $0.8 million in net proceeds.
- Operating lease obligations totaled approximately $3.210 million, primarily for facilities. The main lease included a potential termination option on or after September 1, 2019, subject to nine months’ notice.
- The company reported no off-balance-sheet arrangements. It recorded no legal-loss accrual and said it had not determined any unfavorable outcome to be probable or reasonably possible with a reasonably estimable loss; it cautioned that legal outcomes remain uncertain.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter. The filing said there were no material changes to previously disclosed risk factors.
Most important facts for investors to verify
- Whether Organovo Holdings, Inc. is the intended issuer, given the request metadata names Vivosim Labs, Inc.
- Whether September 30, 2018 is the intended reporting period; the filing describes Organovo’s fiscal second quarter, not a calendar-quarter June 30 period.
- The assumptions underlying management’s stated 12-month cash runway and the timing and terms of any future financing.
- Whether commercial revenue can recover, given the 30% year-over-year decline, and whether cost reductions are sustainable without impairing development plans.
- Execution and regulatory progress toward the targeted A1AT IND filing, alongside potential dilution from equity compensation and further ATM sales.