Inkjet & Digital Printing

Organovo Reports Fiscal 2013 Financial Results

Tuesday 28. May 2013 - OrganovoHoldings, Inc. (OTCQX: ONVO) ("Organovo"), a three-dimensional biology company focused on delivering breakthrough 3D bioprinting technology, has reported on its financial results for the three month transition period ended March 31, 2013, completing the Company's fiscal 2013 reporting. The Company also reported on its corporate highlights during fiscal 2013.

FY2013 Corporate Highlights
— Organovo achieved first fully cellular, functional 3D bioprinted liver
tissue, demonstrating the power of our bioprinting technology to create
functional human tissue that replicates human biology better than what
has come before;
— Reduced derivative-liability-laden warrant overhang by approximately 88
percent, resulting in shareholder equity at the end of FY 2013 exceeding
the respective initial listing requirement for either NYSE or NASDAQ;
— Formed a collaboration with OHSU Knight Cancer Institute to develop more
clinically predictive in vitro three dimensional cancer models;
— Partnered with ZenBio to create 3D tissue models;
— Formed a partnership with Autodesk Research to develop 3D bioprinting
software;
— Received multiple issued patents, including the Company’s first assigned
patent, and acquired an additional issued patent;
— Joined QX tier of the OTC Markets;
— Moved to a new, larger research and headquarters facility;
— Expanded executive management team with the addition of Dr. Eric David
as Chief Strategic Officer and Michael Renard as Executive Vice
President of Commercial Operations;
— Appointed additional independent director James Glover to the Board of
Directors and to serve as Audit Committee Chairman;
— Featured in Wall Street Journal.
“Organovo reached important milestones in demonstrating our ability to create functional human tissues in fiscal year 2013,” stated Keith Murphy, chief executive officer of Organovo. “We continue to grow quickly, attract great partners, and see tremendous scientific results from our bioprinting efforts. Building upon our financial and operational achievements during the last year, we look forward to continued success in fiscal 2014 as we seek to continue to provide long-term shareholder value.”
Change in Fiscal Year End
On March 31, 2013, the Board of Directors of the Company (the “Board”) approved a change in the Company’s fiscal year end from December 31st to March 31st. As a result of this change, the Company has filed a Transition Report on Form 10-K for the three-month transition period ended March 31, 2013.
Financial Results
Comparison of the three months ended March 31, 2013 and 2012
Revenues
Revenues of $0.2 million for the three months ended March 31, 2013 increased approximately $0.1 million, or nearly 100%, over revenues of $0.1 million for the same period in 2012. That increase can be attributed to $0.1 million of grant revenue during the three months ended March 31, 2013. The Company had no active grants or grant revenue during the three months ended March 31, 2012.
Operating Expenses
Operating expenses increased approximately $2.8 million, or 200%, from $1.4 million for the three months ended March 31, 2012 to $4.2 million for the three months ended March 31, 2013. Of this increase, $1.9 million is related to increased selling, general and administrative expense while the other $0.9 million relates to increased investment in research and development expense. These increases are attributed to the continued strategic growth of the Company, including additional staffing to support research and development initiatives, incremental investment associated with strategic growth and commercialization project initiatives, expenses related to operating a publicly traded corporation, relocation to a larger facility, and increased stock compensation expense relative to employees and certain consulting services.
Research and Development Expenses
Research and development expense increased $0.9 million, or 180%, from $0.5 million for the three months ended March 31, 2012 to $1.4 million for the three months ended March 31, 2013 as the Company more than doubled its research staff to support its obligations under certain collaborative research agreements and government grants, and to expand product development efforts in preparation for research-derived revenues. Full-time research and development staffing increased from ten full-time employees as of March 31, 2012 to twenty-one full-time employees as of March 31, 2013. In addition to the incremental payroll, benefits and stock-based compensation resulting from increased staffing levels, the Company relocated its facilities to accommodate its growing research staff, and increased its spending on lab equipment and supplies in proportion to its increased research activities.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1.9 million, or 211%, from $0.9 million for the three months ended March 31, 2012 to $2.8 million for the three months ended March 31, 2013. Increased staffing expenses of approximately $0.6 million included full-time administrative headcount which was increased from five full-time employees to nine full-time employees, including the addition of two executives, to provide strategic infrastructure in developing collaborative relationships and preparation for commercialization of research based product introductions and to address the additional compliance requirements of becoming a publicly traded corporation. In addition, stock-based compensation costs increased due to approximately $0.4 million in additional grants to employees, and approximately $0.3 million for the revaluation of restricted common stock issued to consultants during the three months ended March 31, 2013. Finally, the Company incurred approximately $0.3 million more in external expenses related to becoming a publicly traded corporation, including SEC financial reporting, investor relations, corporate governance, and audit fees.
Other Income (Expense)
The $23.7 million decrease in other expenses as compared to the three months ended March 31, 2012 was primarily due to the inclusion of one-time non-cash transaction costs associated with the Merger and 2012 Private Placements in other expense during the first quarter of 2012, including approximately $19.0 million of expense for the excess of the fair value of warrant liabilities over proceeds received, $2.1 million of financing costs in excess of proceeds received and $1.0 million in interest expense from the accretion of debt discount and amortization of deferred financing costs related to the 2011 Private Placement, the Merger and the 2012 Private Placement. The non-cash expense related to the change in fair value of warrant liabilities decreased by approximately $1.5 million, due in part to fewer warrants outstanding as of March 31, 2013. Interest expense of less than $0.1 million for the three months ended March 31, 2013 is primarily related to the modification of certain warrant agreements during the period.
Various factors are considered in the pricing models we use to value the warrants, including the Company’s current stock price, the remaining life of the warrants, the volatility of the Company’s stock price, and the risk free interest rate. Future changes in these factors will have a significant impact on the computed fair value of the warrant liability. As such, we expect future changes in the fair value of the warrants to continue to vary significantly from quarter to quarter.
Financial Condition, Liquidity and Capital Resources
Since its inception, the Company has primarily devoted its efforts to research and development, business planning, raising capital, recruiting management and technical staff, and acquiring operating assets. Accordingly, the Company is considered to be in the development stage.
Since inception, the Company has incurred negative cash flows from operations. As of March 31, 2013, the Company had cash and cash equivalents of $15.6 million and an accumulated deficit of $66.4 million. The Company also had negative cash flows from operations of $2.8 million for the three months ended March 31, 2013. At March 31, 2013, we had total current assets of $16.1 million and current liabilities of $8.4 million, resulting in working capital of $7.7 million. Net cash used in investing activities was $0.2 million for the three months ended March 31, 2013. The increased use of net cash in investing activities was primarily due to purchases of equipment for the research lab.
Net cash provided by financing activities was $3.7 million for the three months ended March 31, 2013.
On February 5, 2013, the Company provided a Notice of Redemption to affected warrant holders, of approximately 2.4 million warrant shares, that they would have until March 14, 2013 to exercise their outstanding warrants at $1.00 per share. Thereafter, any warrants that remained unexercised would have been automatically redeemed by the Company at a redemption price of $0.0001 per share of common stock then issuable upon exercise of the redeemed warrant. As of March 14, 2013, all redeemable warrants had been exercised for net proceeds of approximately $2.3 million. During the three months ended March 31, 2013, the Company also received approximately $1.4 million of additional proceeds from the exercise of other warrants unrelated to the Notice of Redemption.
Through March 31, 2013, the Company has financed its operations primarily through the sale of convertible notes, the private placement of equity securities, and through revenue derived from grants or collaborative research agreements. Based on its current operating plan and available cash resources, the Company has sufficient resources to fund its business for at least the next twelve months.