1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Holmes Osborne, CFA
Holmes Osborne, CFA
Articles (232)  | Author's Website |

Why 3D Printing and Biotech Will Be Good Bets in 2017

Organovo and BioVie are 2 microcap biotechs doing well

Some analysts cite Hillary Clinton’s continued criticism of drug prices as a cause for a slump in biotech during the U.S. presidential campaign, but with the election behind us, many biotech enterprises saw at least a 9% increase due to Donald Trump’s victory.

Two companies in the biotech space entering the first quarter of 2017 may be in a position for their products, as well as stock prices, to move to greater heights, BioVie Inc. (BIVI) and Organovo Holdings Inc. (NASDAQ:ONVO).

Organovo is a microcap biotech that produces a 3D-printed model using human liver cells that can be used in early phase pharmaceutical trials. Currently, the industry is using a 2D model in which liver enzymes only last two days. Organovo’s model is more robust and enzymes last 42 days. The company has 104.4 million shares and trades at $2.91, and the market cap is $303.84 million.

The company noted in an Investor Presentation that Pfizer (NYSE:PFE) spent $750 million in legal costs and another $150 million to remove a drug that did not show toxicity in 2D models but was in humans. If Organovo’s product catches on, the stock will take off.

In a recent press release, the company’s chief scientist pointed out that 3D bioprinted proximal tubule tissue model exhibits key characteristics of renal physiology that can be used in vitro, meaning in animal research. This research was quoted in a recent academic article released by the Institute for Laboratory Animal Research (ILAR) Journal. The issue is that in pharmaceutical testing, the liver often rejects the drug. This is called drug-induced liver injury (DILI). Much of this research is conducted on animals in the early phases.

According to a study, DILI was the second-most poorly predicted toxicity. This creates a big problem because of all the billions of dollars spent in drug research. Much of this money could be saved by uncovering liver problems early in the process. What works in animal research may not translate to the humans. This problem has existed for many decades.

The 3D printer produces a model using human liver cells. According to the paper from ILAR Journal, “3D spheroid culture system represents a promising and phenotypically relevant hepatic system for routine toxicity testing.” Furthermore, “bioprinting allows for the fabrication of 3D liver tissue that recapitulates native hepatic tissue architecture, cellular compartmentalization and intercellular interactions. Most importantly, the 3D tissue constructs generated using these approaches exhibit a broad range of highly differentiated in vivo-like liver features and functions while being maintained in vitro.”

The paper seems optimistic on 3D printed liver cells “as it addresses many of the shortcomings associated with traditional in vitro culture models and animal models.”

“Overall, the 3D bioprinting culture technology has attracted the attention of the pharmaceutical industry, especially for drug discovery and safety assessment.” The paper was written by experts from the Food and Drug Administration, Merck (NYSE:MRK), and other health care companies.

Organovo recently had an article published by Frontiers in Physiology. According to the article, “Current preclinical methods using 2D cell cultures and animal models are unable to fully recapitulate clinical drug responses due to limited in vitro functional lifespan, or species-specific differences. Using Organovo’s proprietary 3D bioprinting platform, we have developed a fully cellular human in vitro model of the proximal tubule interstitial interface comprising renal fibroblasts, endothelial cells and primary human renal proximal tubule epithelial cells to enable more accurate prediction of tissue-level clinical outcomes.”

The company’s stock took a hit the other day. Fiscal 2017 revenue guidance was adjusted from $4.5 million to $6.2 million to $3.7 million to $4.5 million. The stock was at $3.83 early this month and is now at $2.91. It happens. It’s a microcap biotech. As of the last quarter, the balance sheet showed $70 million in cash and no debt. Management gives a burn rate of $31 million to $34 million. It looks like Organovo has plenty of breathing room to conduct R&D. Sales jumped 160% in 2016 to $1.5 million. L’Oreal (XPAR:OR) is a major customer.

The management team and board of directors have ties with Amgen (NASDAQ:AMGN) and biotech venture capital. It seems they have no issues raising money. The company has been around for 10 years and is headquartered in San Diego.

BioVie is on a mission to provide the technology to ward off liver disease. The company’s BIV-201 is designed to tackle ascites formation by blocking neurohormonal signals to the body, meaning it targets ascites formation at its mechanistic source. The company’s first clinical trial will address refractory ascites with the ultimate goal of getting the first approved drug for ascites on the market. Currently, the two-year survival in patients with diuretic-resistant ascites is approximately 25%.

The company is also looking to use its patented technology to help patients with other forms of liver disease such as esophageal variceal bleeding (EVB) and hepatorenal syndrome type 1 and type 2. An extremely serious health issue, liver cirrhosis is advanced liver diseases often brought on by cirrhosis, hepatitis, alcoholism or nonalcoholic steatohepatitis (NASH). Estimates range from 20 million to 30 million Americans who have NASH and approximately 1.5 million will go on to develop liver cirrhosis.

Ascites is a direct complication of advanced cirrhosis and affects approximately 100,000 individuals in the U.S. each year. The word on the street is that Trump’s revamping of health care should positively impact trend-setters like BioVie allowing shorter to market times and greater support toward research efforts. The company is trading at 30 cents offering mega opportunities for ground-floor investors. BioVie is led by an impressive team with former experience at Merck, Amgen and Boston Heart Diagnostics.

What I like about Organovo is that it has been around for 10 years and has real sales. It’s transitioning from theoretical to tangible dollars. Pharmaceutical companies are cautious as they should be. No one wants to go way out on a limb for new technology until it is 100%. If the company surprises on the upside in revenues this year, the stock will skyrocket. If not, it will lag. Another positive is that there is somewhat of a following on the internet. Several sites follow Organovo.

Disclosure:We do not own any of the stocks mentioned.

Start a free seven-day trial of Premium Membership to GuruFocus.

About the author:

Holmes Osborne, CFA
Holmes Osborne is principal of Osborne Global Investors.

Visit Holmes Osborne, CFA's Website

Rating: 0.0/5 (0 votes)


Please leave your comment:

Performances of the stocks mentioned by Holmes Osborne, CFA

User Generated Screeners

pascal.van.garsseHigh FCF-M2
kosalmmuseBest one1
DBrizanall 2019Feb26
kosalmmuseBest one
DBrizanall 2019Feb25
MsDale*52-Week Low
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat