Organovo Is Reinvigorating Biotechnology Through 3D Printing Of Human Tissue

Benzinga had the opportunity to sit down with the company's chairman and CEO Keith Murphy to delve into the innovative realm of ever-changing biotechnology and what it means for the market.

Customer Contracts

Keith Murphy: Sure. I know there's a lot of interest in which companies we're working with in four of the top 25 global pharma companies. And, of course, we have not undertaken to talk about specific names, we're not trying to highlight individual customers. But, I think folks who have paid attention have known that we did a large contract with Merck & Co., Inc. MRK that has both a toxic safety aspect to it, as well as an aspect where they are working with us to build multiple tissues over multiple years for disease modeling, for use in screening for the efficacy of drugs. So, that's one to cover.

BZ: The next thing I wanted to talk about [is] you've got the Society of Toxicology conference coming up. What do you think will be presented that will be the biggest takeaway for investors? What should investors maybe be excited about for, in terms of the catalyst, in terms of this and the rest of 2016 going forward?

And what's being shown there is, when you take our liver tissue and expose it to methotrexate, you see patterns of liver injury that match what you see in patients who have long-term methotrexate exposure and develop fibrosis. Fibrosis is a very difficult area of disease for people to study. There are not good animal models. There are not good models to use in vitro that have previously existed. So, it really is a breakthrough that we're able to get that kind of result with our liver tissue. And what we're finding is that that is tremendously— that dataset is tremendously influential with customers, because they see this as highly validating that we're [reaching] aspects of native biology that couldn't be achieved before. They have drugs that have the potential to be fibrotic that they're trying to develop, and they want to understand those. So, this becomes a really compelling trigger for them to use Organovo's system.

And that's a general observation across different types of drugs and different types of injury for the liver. We're seeing, on a regular basis, that areas of biology that couldn't be well-understood before are being shown to be demonstrated in our tissue.

Another example would be endothelial mediated toxicity. The liver is made up primarily of hepatocytes, but it has endothelial cells in it. Our system has endothelial cells like the ones in the native liver, and we can show patterns of injury that happen only in those cells, which aren't even in existence in other models. So, you really have these aspects of biology and the big picture. And why investors should be excited about that is that pharma wants to understand and move drugs forward.

We offer a system that can give them insights into how to move their drugs forward. So, if they run into a liver injury signal in rats or in other animal species that they can't figure out, they have a really compelling interest in using our human system to understand it, to allow them to move drugs forward. So, if they can find an understanding of the pathway and understand the dose issue in a more human-relevant fashion, they can move drugs forward that they would have had to stop before, for example. So, it becomes really compelling that they can understand areas that they had no option to take on in the past, because there's no other system that could show these areas to them.

Looking Forward

KM: For the liver tissue specifically, what you're going to see is, this is still early days in terms of the amount of data that will be produced over time in this system. What you're seeing from this coming week is that it's being produced by Organovo, but it's also being produced by customers and outside research entities.

So, that data set is going to grow. That's one of the key things that drives uptake in the system. So, for the first time, having customers on stage at a conference talking about the fact that they're getting value out of our system, we expect that to be highly impactful in terms of other customers coming forward in greater numbers to work with us. I think that's really impactful. Then, as we grow the data set together with the customers and the research groups out there, that becomes more and more compelling for folks. So, I think you'll see a continued uptake.

Then, the other big thing of course in 2016 is the kidney model. Data, internally, has shown very strong results from the kidney tissue that we're building for release later this year. And we hit our functional validation of that in the end of 2015. So, we do expect, though, this kind of data that you're starting to see for liver to be coming out for kidney over time as well. We'll build that data set and show really compelling results there.

BZ: An extension of that— with the kidneys efforts, from what I understand, you also are making skin efforts and have partnered with L'Oreal SA (ADR) LRLCY. Could you go into that a little bit for people who aren't familiar with the company?

KM: Absolutely. So, we are partnered with L'Oreal in building skin tissue. What we said most recently is that the early stages of that have progressed faster than we expected. And we do expect to be advancing that program on a little bit of a more accelerated basis with L'Oreal, which is, obviously, great. And, we're working, basically, on finalizing the first model with them that would then have to be validated and moved into their screening systems for finding new drugs. But, they're a strong partner, we're finding a very good cultural fit for them as partner. We're working well with them, and we're excited that it's moving forward so quickly and that everyone's engaged on pushing it as fast as we can go together.

Taking The Company's Vitals

KM: Well, we run the company quite efficiently, and we really focus on cash management. What you saw on our last earnings call is that we actually reduced the expected number for how much we would burn in the fiscal year that we're ending at the end of March. And we went from a guidance that it would be $32–36 million as a range to a guidance that it would be $32–34 million. So, we're hitting the lower end of the guidance. And that's because we're being diligent and spending [INAUDIBLE] amounts on the right things and focused on cash management.

In terms of cash [...] we had about $10 million on hand at the end of the last period we reported, which puts us at about two years of cash on hand. We're in a strong position. If you look across biotech companies, that's a very comfortable or average to strong, in terms of, we're a company that's in development stage and net burning cash [...] So, we're feeling very good about that.

BZ: One of the trends at the beginning of the year was a bunch of these biotechs taking out offerings and what not. It looks like you guys, with the reduced cash burn, look pretty good on that front. I wanted to move over to management. I know that you guys are looking for a new CFO. The current CFO is staying on until transition occurs. I wanted to see if there was any update, if the search has narrowed, if you're choosing candidates anytime soon, when can we expect a decision on that?

KM: Well, what you can expect is that we're working very hard, very late at night with potential candidates to push forward to get to accepted offer from a big candidate. Obviously, progress in these areas is often slow. And we feel like we're making good progress. As you said, it's important to note that there's not a fixed date. We're expecting to be able to work with Barry (Michaels) on the transition timing based on getting an accepted offer and finding the start date for that person. So, I think, we're feeling very good about it. It's in progress, I can't comment directly on the number of candidates or specifics. But I think we're doing great.

From The CEO Himself

BZ: To finish off, quick recap of the company, in your own opinion, what do you think is the strength of Organovo? And also, maybe, highlight one weakness. I was wondering, if I'm looking at the company to invest, what am I investing in? And what does the company need to maybe work on a little bit?

KM: One of the great strengths is, of course, that we are an early leader in a really exciting technology base. So, it obviously has tremendous potential. And the fact that we started the company eight years ago and have been investing in bio-[INAUDIBLE]-technology regularly through that time, developing IP, the fact that we licensed the first two patents in this space from universities exclusively— With those, that puts us in a really strong position.

I think the models that we've developed to leverage that –you've seen it pay off in liver, you've seen it pay off and kidney, and, as you mentioned, skin. So, it's a platform, we can keep growing that into new areas. And we're working with customers that have extremely deep pocket and have problems that they truly want to solve, for example, pharma. So, I think that's a summary of some of our very real strengths.

From a weakness perspective, I think the challenge is, it's a platform technology.

And while we have opportunity in so many different areas, one has to really be focused. So, we actually have a strength in focusing in those areas. I mean, you see that we're really pushing on liver, kidney, cancer and skin to a small number of areas. But we believe you can't just apply yourself broadly to all these different areas that are very, very exciting. You have to think about when it's appropriate to raise capital, to go into new areas. You have to consider what can actually be done under a reasonable growth paradigm for the company, and what can be done with given management bandwidth and the team's bandwidth in a reasonable time. So, you can't just go after everything at once, even though that seems like a very exciting thing to do.

So, the natural limitations on financing and taking too much dilution, we have to be conscious of [that]. And, the natural limitations on how fast we can grow the company. That's a weakness. Otherwise, we could own even more and more quickly, and deliver stronger returns, I think. But we have to manage it with a reasonable outlook on how fast you can do that.