Filing summary
Entity and period: The supplied metadata names Vivosim Labs, Inc., but this filing is for Organovo Holdings, Inc. It is a Form 10-Q for the quarter ended December 31, 2018 (the third quarter of Organovo’s fiscal year) and includes results for the nine months ended that date. Amounts below are in U.S. dollars; financial statement figures are generally in millions unless noted.
Financial performance and position
| Metric | Three months ended Dec. 31, 2018 | Prior-year quarter | Nine months ended Dec. 31, 2018 | Prior-year period |
|---|---|---|---|---|
| Revenue | $0.779 million | $1.153 million | $2.411 million | $3.498 million |
| Operating loss | $6.526 million | $7.909 million | $20.112 million | $27.688 million |
| Net loss | $6.399 million | $7.791 million | $19.652 million | $27.354 million |
| Basic and diluted loss per share | $0.06 | $0.07 | $0.17 | $0.26 |
| Gross margin, calculated from reported revenue and cost of revenue | 82.5% | 83.3% | 84.2% | 78.6% |
- Revenue mix: For the quarter, products and services contributed $0.670 million, collaborations and licenses $0.043 million, and grants $0.066 million. For the nine months, the respective figures were $1.709 million, $0.128 million, and $0.574 million.
- Expenses: Nine-month R&D expense was $10.348 million and SG&A was $11.794 million. Cost of revenue was $0.381 million.
- Cash flow: Nine-month operating cash outflow was $15.298 million, investing cash outflow $0.034 million, and financing cash inflow $6.830 million. Cash, cash equivalents and restricted cash declined $8.502 million.
- Liquidity: At December 31, 2018, cash and cash equivalents were $35.224 million; restricted cash was $0.127 million. Working capital was $34.1 million, versus $42.1 million at March 31, 2018. Accumulated deficit was $253.8 million.
- Liabilities and debt: Total liabilities were $4.010 million, including $3.410 million of current liabilities. The filing does not provide a clear separate debt balance.
Changes versus prior comparable periods
- Revenue fell 32% in the quarter and 31% for the nine months. Management attributed the decline mainly to fewer liver-tissue research-service contracts; higher sales of primary human liver cells partly offset the decrease. Collaboration and license revenue also declined, while grant revenue increased for the nine-month period.
- Quarterly operating expenses declined 19% overall; nine-month expenses declined 28%. Management cited restructuring and reduced staffing, lower laboratory and consulting costs, and reduced stock-based compensation among the drivers. Average R&D staffing for the nine months fell to 47 from 74, and SG&A staffing to 23 from 35.
- Net loss narrowed year over year, while operating cash use decreased by $7.9 million, primarily reflecting lower adjusted operating losses and changes in working capital.
- The company issued 5.56 million shares through its ATM program during the nine months, raising approximately $6.9 million net. It reported 117.77 million shares outstanding at December 31, 2018; subsequent ATM sales through the filing date added 1.72 million shares for approximately $1.8 million net.
Outlook, risks and notable items
- Management stated that current cash resources and its operating plan were expected to fund planned operations for at least 12 months from the financial statement issuance date. It also said additional capital would be needed to advance therapeutic tissues and implement its business plan. Future financing may be unavailable or unfavorable; equity financing could substantially dilute shareholders, while debt could impose payment obligations and restrictive covenants.
- Product and development priorities include a pre-IND meeting and IND-enabling studies in calendar 2019, with the first IND filing targeted for calendar 2020. These are targets, not guaranteed milestones. The company is developing liver-tissue therapeutics, including an Alpha-1-antitrypsin deficiency program with FDA orphan drug designation, and in vitro disease models including NAFLD/NASH.
- On November 30, 2018, Organovo extended its principal facility lease to September 2024 in exchange for up to $0.5 million in landlord-funded tenant improvements and gave up its lease termination option. Future minimum operating lease payments totaled approximately $6.5 million.
- The board amended CEO performance-based award criteria in December 2018, shifting remaining vesting tranches to regulatory milestones; no tranche was then expected to vest in fiscal 2019.
- The company reported no legal contingency accrual and had not determined an unfavorable outcome to be probable or reasonably possible or a loss estimate to be reasonably estimable. It cautioned that litigation outcomes remain uncertain. Management reported disclosure controls operating effectively and no material change in internal control during the quarter.
- No formal financial revenue or earnings guidance is provided. The company said it had no off-balance-sheet arrangements and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Confirm the issuer identity: this filing is Organovo Holdings, Inc., not Vivosim Labs, Inc.
- Assess whether revenue from services, products, collaborations and grants can stabilize or grow, given the year-over-year revenue declines and reliance on a relatively small number of customers and collaborators.
- Review cash burn against management’s stated 12-month runway, and monitor subsequent ATM issuance, remaining shelf capacity and resulting dilution.
- Track progress toward pre-IND work, IND-enabling studies and the targeted 2020 IND filing, including the regulatory and development risks.
- Consider lease commitments, outstanding equity awards and reserved shares when evaluating future cash requirements and potential dilution.