Organovo Holdings' (ONVO) CEO Keith Murphy on Q4 2016 Results - Earnings Call Transcript

| About: Organovo Holdings, (ONVO)

Organovo Holdings, Inc. (NYSEMKT:ONVO)

Q4 2016 Earnings Conference Call

June 09, 2016, 05:00 PM ET

Executives

Steve Kunszabo - Investor Relations

Keith Murphy - Chairman and Chief Executive Officer

Paul Gallant - General Manager, Commercial Operations

Analysts

Edward Tenthoff - Piper Jaffray & Co.

Brandon Couillard - Jefferies LLC

Michael Kay - Kay Associates

Operator

Good afternoon, and welcome to the Organovo Holdings’ Earnings Conference Call for the Fiscal Fourth Quarter of 2016. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Steve Kunszabo, Vice President of Investor Relations of Organovo Holdings. Please go ahead.

Steve Kunszabo

Good afternoon and thanks for joining us. I’d like to welcome you to our fiscal fourth quarter 2016 earnings call. Joining me on the call this afternoon are CEO, Keith Murphy; and our General Manager, Commercial Operations, Paul Gallant.

Today’s call will begin with a discussion of the 2016 fiscal fourth quarter results, followed by Q&A. I trust you’ve had an opportunity to review this afternoon’s earnings release, which is available on the Investor Relations section of Organovo’s website.

Before I turn things over to Keith, I’d like to caution all participants that our call this afternoon may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical fact, and include statements about our future expectations, plans and prospects.

Such forward-looking statements are based upon our current beliefs and expectations and are subject to risks which could cause actual results to differ from the forward-looking statements. Such risks are more fully discussed in our filings with the Securities and Exchange Commission. Our remarks today should be considered in light of such risks.

Any forward-looking statements represent our views only as of today and while we may elect to update our forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our expectations or views change.

During the call, we’ll also be referring to certain supplemental financial measures. These supplemental financial measures are not prepared in accordance with Generally Accepted Accounting Principles. Please refer to today’s earnings release for a definition of these supplemental financial measures.

With that, let me turn things over to Keith.

Keith Murphy

Thanks, Steve, and good afternoon everyone. As Steve mentioned during his introduction, Paul Gallant is joining me on the call today to provide his perspective as our senior customer-facing sales and operations executive.

You may remember that we welcomed Paul to the Organovo team last August as our General Manager of Commercial Operations. He’s done a great job building our sales, marketing, and operations infrastructure during the last several months, while also moving forward key business development initiatives. His day-to-day interaction with our customers and partners can provide an important perspective for all of our stakeholders, and we plan to have him periodically join us for our earnings announcements and other investor events.

Before I dive in on recent developments in our primary business lines, our financial highlights for the fiscal fourth quarter and our outlook for fiscal 2017 and beyond, I’d like to update you on our CFO search. Barry Michaels, our former CFO, spent his last day with the company in early April. Because of his departure, we’ve been engaged in a robust search process to identify Barry’s successor. Of course, our aim is to attract a high quality finance executive with strong industry acumen and leadership skills. No news yet, but as soon as someone is in the seat, we’ll make an announcement.

I’ll now turn to our financial and operating progress starting with our top level results, after which I’ll discuss the significant developments and revenue drivers in each of our market segments. I’ll wrap up my comments by briefly reviewing the full year fiscal 2017 financial targets we issued today and walking you through our balance sheet and liquidity profile.

Organovo recorded fiscal fourth quarter total revenue of $0.5 million, which was a gain of 105% from the year ago period and 67% on a sequential basis. Total revenue benefited from the recognition of milestone achievements through our collaborative work with L’Oreal and Merck.

It’s important to remember that the pace of customer decision making and their R&D calendars are important drivers of revenue. For example, a customer involved in a multi-stage contract can be very pleased with the results of one phase of toxicology work we’ve done for them, but may need to reorient their work plan to incorporate learnings from that phase as they move forward with additional testing.

This kind of delay along with other drivers of decision making unrelated to Organovo’s technology or scientific results can lead to choppy quarterly results as revenue recognition moves around a few months forward or back, but it does not typically change our longer term revenue outlook.

In the preclinical safety segment, we’re establishing a solid foundation around our exVive3D Human Liver Tissue. In short, we’ve continued to build out our sales footprint both geographically and to address new potential vertical markets; we’ve grown customer adoption among global top 25 pharmaceutical customers reaching five with an additional customer from this segment address recently; and we’ve maintained a solid cadence of repeat agreements.

We’ve also made robust scientific progress as evidenced by our customers’ peer reviewed posters at recent events such as the Society of Toxicology’s annual meeting and by our own internal validation studies. Paul will have more detail on all these fronts as well as our kidney tissue development during his remarks.

I’d like to update you now on our partnerships and then on our tissue therapeutics research. As we noted last quarter, we completed phase one of our agreement with L’Oreal ahead of schedule, with a gain in collaborations revenue during the fiscal fourth quarter primarily coming from our achievement of this milestone. We’re pleased with our progress and look forward to working with this partner in developing 3D skin tissue.

As for our Merck relationship, we continue to work on both the toxicology and custom tissue disease modeling parts of that agreement. We’ve now recorded revenue from the early phases of this long-term multi-part agreement. And with a majority of the total contract value still in front of us, we expect this deal to be an important contributor to total revenue in the quarters and years ahead.

We also continue to see great promise for our tissue replacement products. In late April, the Vatican hosted a regenerative medicine conference, at which I was invited to present. And as I noted to the audience there, the potential exists for Organovo’s technology to revolutionize therapeutic applications and materially improve patient outcomes.

We’re achieving solid results in animal models for the multiple tissue types that we’re evaluating and now believe that we’re inside of 12 months for being able to share some high level data and our next steps. Our goal is to reach an investigational new drug or IND submission with the FDA in the next three to five years depending on the tissue type, which would allow us to enter clinical trials. Stay tuned for news as we move through calendar 2016.

And now a quick summary of our expense trends before I wrap up with our fiscal 2017 and long range guidance. We reported $4.4 million in selling, general, and administrative expenses during the fiscal fourth quarter, a 3% year over year decrease, primarily resulting from lower employee related costs, including non-cash share-based compensation expense.

I’d also add that while the bulk of our costs here come from employee related expenses such as salaries and benefits, we expect a growth rate for SG&A expense in fiscal 2017 to be materially lower than the 23% expansion we posted in fiscal 2016.

We expect the pace of our hiring to decrease now that we’ve reached approximately 115 total employees. We’ll add targeted headcount in fiscal 2017 to support key functional areas, but additional hiring will be driven primarily by the need to grow the in vitro tissues business to support demand.

Research and development expenses were $4.5 million, a 25% increase from the prior year period, largely due to higher employee related costs such as salaries and benefits and lab supplies. Our research staff supports product development and sales activities that align with the ongoing commercialization of our products and services as well as in meeting our obligations under existing collaborative research agreements.

Finally, a brief review of the full year fiscal 2017 outlook we issued today and a few quick notes on our balance sheet and liquidity position. We forecast total revenue to be between $4 million and $6 million for fiscal year 2017, with the principal contributions coming from our liver tissue services and research collaboration agreements. This compares to fiscal 2016 total revenue of $1.5 million and represents approximately 230% growth at the midpoint of the range.

It’s also worth highlighting that we expect minimal revenue impact from our kidney tissue, given that initiation of commercial contracting will occur about halfway through our 2017 fiscal year and keeping in mind the long revenue recognition cycle. On the same basis, for the full fiscal year 2017, we expect net cash utilization to be between $32.5 million and $36.5 million. This rate of annual net cash spend is consistent with the level we reported in fiscal 2016, and as with our consolidated operating expenses, it reflects that the business is reaching the right size to execute against our business and growth plans.

With a 2016 fiscal year end cash balance of $62.1 million and using this range for net cash utilization, we have nearly two years of cash on hand to carry out our current business plan. We’ll continue to be thoughtful in deploying our resources to balance growth and operating efficiency.

Lastly, we continue to anticipate that we will initiate commercial contracting for our kidney tissue product in the calendar third quarter of 2016.

In closing, we continue to lay the groundwork to support our excellent long term growth prospects. We’re reaching attractive markets with critical unmet needs, extending our first-mover advantage in a rapidly evolving space and fortifying our position for the world class IP portfolio that is constantly expanding.

The power of our technology platform is that it allows us to expand our product and services portfolio in many ways, leading to a great breadth and diversity in our revenue profile. We expect our liver business to more than triple this year, our kidney product is on schedule and our skin model is hitting its important milestones. There’s much to be excited by as we look ahead at fiscal 2017 and we look forward to updating you on our progress again in about two months.

With that, I’ll turn it over to Paul for a deeper dive into our sales and operations progress.

Paul Gallant

Thanks, Keith, and good afternoon everyone. I’m excited to be on today’s call to share my perspective on our commercial progress and all the critical work we’ve done in the 10 months since I’ve joined Organovo, including building our sales footprint, aligning ourselves with our customers, generating our scientific dataset and expanding our manufacturing capacity to support future growth.

I’ll spend my time with you today in four key areas: our sales organization footprint and how we maximize our reach with customers; the evolution of our liver toxicology business, including customer use cases and our expanded scientific dataset; the development of our kidney product as we look ahead to commercialization in a few months; and the steps we’re taking to target revenue opportunities in disease modeling.

But before I jump in, if there’s only one thing I leave with you today, it should be providing an understanding of the power and the versatility of our technology platform. We’re working across multiple disciplines to bring our innovations to market in a host of areas. It’s multiple tissue types in multiple markets that really drives home the breadth of our long term revenue profile. In short, we can do many things with this platform to address a number of revenue opportunities.

Let’s start with our sales footprint. When I joined Organovo last August, we essentially had one dedicated sales executive supporting the commercial launch of our first product, the liver tissue. Today, we have a VP of Sales and four dedicated sales directors across the US, Europe and Asia, working on deals with pharmaceutical customers. We now effectively cover the globe to cultivate pharma customer relationships and can begin to explore non-pharma markets, including cosmetics, chemical, consumer health and CROs.

Supporting in sales force is a staff of four commercial, technical and marketing professionals, bringing the total size of our commercial organization to 10 employees. We believe that the size, structure and expertise of this group allows us to effectively target our near term revenue opportunities.

In our liver business, sales momentum has been ramping since our participation in the Society of Toxicology’s annual meeting in mid March. As a reminder, we had a joint presentation with Bristol-Myers Squibb [indiscernible] and five peer reviewed posters, including two of which were presented by our global 25 top pharmaceutical customers, namely Astellas and Bristol-Myers Squibb.

We’ve had one additional global top 25 pharmaceutical customer win in recent weeks, bringing our total to five with this important group and there are additional near term opportunities in our pipeline. Repeat orders have also continued that good pace as evidenced by the fact that we’re now in on a third contract with one of our earliest global top 25 pharma customers.

As the adoption of our solutions grow and we take a hard look at customer needs, three primary use cases are emerging. First, traditional toxicity testing of compounds in the late preclinical stages of drug discovery. We believe we’ve built a strongly differentiated model that enables better drug candidate selection.

Second, drugs in development that are on clinical hold due to toxicity issues. The value proposition for a customer in this instance is huge as they’ve already invested many millions of dollars in development and our incentivized to turn that compound into a revenue-producing asset.

And third, in-depth mechanistic analysis of toxicology issues. What this means in practical sense is that drug-induced liver injury can involve complex series of interactions with multiple cell types which can be missed by standard 2D cell in animal models given their limitations. Our 3D printed tissue really stands out here with 100% multi-cellular composition that effectively models native tissue architecture.

A great example of this type of use case was presented at the Society of Toxicology’s annual meeting by Bristol-Myers Squibb. In short, they are able to identify multiple mechanisms of a known toxic compound using our 3D liver model, which were not captured with 2D models. We continue to build a scientific proof set that validates our liver tissue model as this is vital in building credibility and increasing customer adoption in all of our business lines.

Turning now to our kidney program, kidney tissue development remains on track for the initiation of commercial contracting in the third calendar quarter of 2016. As many of you know, we hit the functional validation milestone for our kidney tissue last October. Since then, our focus has been on taking the necessary steps in the development, manufacturing and quality areas to ready this product for commercial use.

More recently, we’ve commenced an early access program with preferred partners allowing us to prime the market, while also providing an evaluation period for potential customers. We’re seeing strong interest from about a dozen companies and we anticipate that these actions will drive early success.

Finally, a quick outline of our progress in the disease modeling space. In addition to addressing toxicology challenges, the power of our platform can be harnessed to model disease state and evaluate efficacy during the drug discovery and development workflow. Robust data validating our liver fibrosis model has resulted in a significant uptick in customer interest. This data along with our internal validation work is leading to a higher pace of customer wins. As we’ve emphasized before, we expect to have increased market penetration with the liver tissue as the dataset grows.

In wrapping up my thoughts, I’m encouraged by our commercial and scientific momentum. The power and the versatility of our technology is clear and we’ll leverage it to address critical unmet needs for our customers. The right building blocks are in place to support our success and I share Keith’s view that 2017 will be a year of solid revenue growth for Organovo.

I look forward to participating in future calls and investor events. With that, I’ll turn things back to the operator for the Q&A portion of this afternoon’s call.

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Ted Tenthoff with Piper Jaffray.

Edward Tenthoff

Thanks so much for the update and the very constructive guidance rolling forward here. I’m looking at – couple of questions. Firstly, just with respect to the skin collaboration with L’Oreal, can you lay out what next steps are there?

Keith Murphy

There’s many phases in that contract, and the initial phases were development of a model, the next phases beyond that are validation and then commercialization in some sense of those. And so, we need to work on next phase agreements to move that forward, and then continue to execute scientifically, but we’re very encouraged by the early results; we’re very happy with the scientific results on that side. And I believe it’s safe to say our partner is as well, so we’re encouraged by everything that’s happened. It’s just about moving that forward through the next steps.

Edward Tenthoff

When it comes to revenue breakdown between collaboration and products and services, it looks like in the fiscal fourth quarter, in the March quarter, we saw a shift more to the collaborative side away from the products and services. And I know that you highlighted that some of the products and services will come from a large partner early in fiscal 2017, so in the June, September, let’s call the summer or whatever. Is this a trend that we should continue to expect or how should we be thinking about those revenues going forward?

Keith Murphy

It’s not really a trend. One of the things I noted is that the product and service revenue can be choppy just because of when the timing hits for different contract execution and then completion. The same thing is true probably even more so for collaborations, because there can be major phases of work the last multiple quarters that happen to be completed in a specific quarter.

And so I would not say that’s a trend. I would say that those are going to be growing as we get into the next year here and that the, of course, that the predominant thing we’re expecting is significant growth on the order of 200% growth plus in the liver tissues business. So that’s going to be the biggest driver as you see us grow our revenues in 2017.

Operator

The next question comes from Brandon Couillard with Jefferies.

Brandon Couillard

Keith, as far as the revenue guidance for the year, what does that contemplate in terms of number of new liver contracts?

Keith Murphy

We’re not breaking it down. We’re still seeing contracts in the same rough range, averaging about $150,000 per contract. So you can do some of that math yourself. We haven’t given specific guidance around numbers of contracts. And also, I would just note that that number is comprised not only of Paul’s business, the in vitro tissues business, but the collaboration revenues as well. And so we have to be cognizant of that. So it’s hard to break it down exactly by number of contracts, I think we’ve focused on the total revenue side as the key thing to be guiding on.

Brandon Couillard

Now that we’re at the end of the year, any chance you’d be willing to share an update on the backlog or total order value for liver to date?

Keith Murphy

So we just – we’ve tended, as you see, to focus on the – going forward focus on the total revenue for the year. I think that one of – some of the reasons that revenue guidance is the best indicator is just that not all contract bookings are going to be ultimately recognized and as we’ve talked about before they vary quarter to quarter in terms of when exactly they’re going to get recognized.

We’re just preferring to use the GAAP metric. What we’re going to try to do for you, Brandon, is to shrink the total turnaround time from initiation of engagement with a customer to execution of an order. If we can do that successfully, we really think this is going to be the most useful metric on a going-forward basis, and we’re trying to get that number down at least within the things that we control on our side.

As you can expect, as we’ve got – as we guided or as we just – as Paul just mentioned, some of our customers are on their third order from us now, their third contract with us. So as we build the relationships across the industry, we’re going to have the ability to turn the next contract faster with people and those delays that you have when you start up a customer relationship aren’t going to be as important. So I think you’re not going to be as worried about that on a going forward basis if we’re executing the right way.

Brandon Couillard

Qualitatively, Keith, what would be the factors that would push you towards the low end or the high end of the revenue range for the year?

Keith Murphy

That’s a great question. So it’s a very fair question, it’s a broad guidance. So we take note of that. It’s a 50% difference from the low end to the high end, and I think that reflects just the status of where we are in the growth phase of this product and service right now. It’s early days. We wanted to make sure we were guiding because we didn’t want to leave it just completely silent, but I think we’re confident in that range, but there’s play within that range for the reason that it’s hard to be predictive when you’re still starting in the early days.

So it’s really about total uptake, right, and what’s going to drive that are new data that we generate. Paul mentioned the importance of the data from customers that came out at the Society of Toxicology. I think another big driver is going to be publications that come out, and we’re obviously working on publications in the liver space and then peer referencing, word of mouth customer to customer is also very important.

So Paul, you want to comment maybe too about – we’ve obviously built now a way to manage key accounts and then getting key accounts to [indiscernible] their next contract is a part of driving that to the upside too, you want to speak to that?

Paul Gallant

Yes, sure, Keith. So we recently hired in a new Sales Director whose main focus will be, one, on developing sales in Asia, most specifically in Japan, but also another key responsibility for this individual will be – is to start to manage some of our key accounts and develop those key accounts going forward, because we know some of our top 25 pharma customers, we have multiple activities going on in each of those accounts and we need someone to manage the relationship, development, help the sales reps develop the relationships with individuals across the organization, both on a transactional basis but also on a strategic basis.

Keith Murphy

So broadly speaking, Brandon, we got to push existing customers to grow what they’re using and then new customers, we got to get them through the doors faster as well. And so all of that contributes to being at the higher end.

Brandon Couillard

And then one for Paul since you’re here, how many of the five top 25 pharma accounts have placed repeat orders? And then when we look at the kidney product, you talked about a dozen have indicated interest, let’s say, in the early access program. First, how many of those are existing liver customers? And then secondly, how does that compare to the pre-launch period or experience that you went through with liver in terms of just number of customers interested?

Paul Gallant

So I can’t comment specifically on the rate of repeat of those top five, but I can tell you the high percentage of repeat business from those pharma, except for the one that we just recently signed up, it’s a little soon for that. So those key accounts are – we’re building great relationships with, they’re happy with the data and ordering repeat business and follow up studies based on the initial findings, which is great.

Then with regards to kidney, I would say about half of the customers, the companies, the accounts are the same as the liver accounts, but the end customer is different. It’s not always the same group that is ordering liver that has interest in kidney tox issues as well. And I can’t speak, Keith, directly to early access. If we did that with the liver that was before me...

Keith Murphy

We did do it to some degree. And I would say it’s going to be about the same number of folks that we would have doing this. Paul obviously has folks, he’s already engaged with to potentially become the first early access on the kidney side. And so I would expect that to be the same with a limited impact on revenue in the fiscal year, of course.

One added color comment is just that Paul spoke to the repeat business, I would say that customer feedback across the board, top 25 global pharma all the way through the – down to the smallest customers we have, universally very good feedback on the data that they’re getting, the correlation they see with their expectations and the in vivo expectations they have. So we know that people are appreciating the work that we’re doing and that’s been very strong.

It’s more of a commercial challenge. Of course, you always have to introduce any new product and product adoption takes time, but the results that people are getting are very highly valued and then I would say the level of wow factor with the kidney might even be higher in the sense that they have nothing to work with today and they’re definitely seeing the value of what we’re bringing to the table on the kidney side. So it’s very exciting.

Operator

[Operator Instructions] The next question comes from Michael Kay with Kay Associates.

Michael Kay

Would you say that the majority, if not all, of the majors and some of the minor pharmaceutical companies are aware of what [Novo] has? And number two, what kind of feedback you’re getting in terms of their concerns or why they need maybe heads into sign up for what you have? And number three, the last one, is could you talk about the competition? In other words, [indiscernible] Merck or one of the big pharmaceutical companies, why would I choose your company, are there competitors that have price advantage or is Novo’s technology is such that it’s very superior to other technologies I would assume to do the same thing?

Keith Murphy

Yeah, I get the nature of the question and I’ll kind of cover it in two phases. First, talking about how widespread understanding there is of what we offer in the market, I think that’s the first question. And then speaking to competition a little bit and what alternatives might be in front of the customer right now.

So on the first side, I would say it’s not – this effort is not just selling into a market. It’s a market development and that means you start from scratch in terms of customer awareness of what we’re doing, which is of course why it takes time. You have to educate the market, a growing number, and probably at this point a majority of the potential customers out there have at least heard about what we’re doing.

I know there is a distinct difference between Society of Toxicology in 2015, in March or February of 2015 and Society of Toxicology this past March, clear difference in the number of people who had heard about us, clear difference as Paul reported at the time in the number of people coming to find us because they knew about what was going on and appearing at our presentation and the presentation he mentioned was standing-room-only and really we had a lot of follow up from people who couldn’t get in. And so there’s a growing awareness.

But like with anything that takes time to grow and we do, that’s why Paul has built a team as he described to make sure we’re pitching as well, so one thing to think about is at the toxicologist level, there is certain level of awareness, but we’ve got to continue to increase awareness at the Executive Vice President of R&D level, at the early development team leader level, make sure that everyone who could ask someone further down the chain to be looking at and using this technology is aware and that’s one thing we’re focused on for sure to grow the penetration.

And then to your question about competition, the predominant thing that is used, I’m going to speak to the liver space and then broadly kidney as well, the predominant thing that is used today is animal models and 2D cell cultures. And animal models and 2D cell cultures we know don’t fully meet the bill and aren’t fully predictive. But that’s the main thing that people are thinking of as an alternative when they’re looking at the options in the space.

There is some use of other technologies that have been around – since around 2007, 2008 that people do turn to sometimes, but those are low single digit percentages of the market and not a major driver for us in terms of competing with them. It’s more about competing with what people do historically and the gold standards in 2D cell culture and in animal models.

And I think we presented a very compelling picture in terms of how we compare to that because of the level of prediction and matching of the performance of our tissue with native liver. So remember, the unmet need out there is that they know there are gaps in prediction for animal models; they know there are gaps in prediction for 2D cell cultures.

And we’ve got to grow the dataset that demonstrates that our tissue really does match the most – one of the best examples to point to is the liver fibrosis data that Paul highlighted, which you get from no animal model and you can’t get from any cell culture. You can’t show that and that is seen in humans. And so our ability to match that really speaks volumes to these customers about why we are one of the best options out there and we think we’re a very powerful option for them. So hopefully that gives you a good picture, a lay of the land in a short time frame there.

Operator

The next question is a follow-up from Ted Tenthoff with Piper Jaffray.

Edward Tenthoff

I had a quick question about R&D. Obviously, we saw some R&D growth from fiscal 2016 over 2015, but for the most part quarterly 2016 results were pretty stable. Is this sort of the quarterly spend we should be looking for for R&D? Will that be growing? How should we be thinking about that?

Keith Murphy

Very good question and one thing I’ll point out that while it was stable, what we were spending on has changed over time. If you think about it, leading up to the liver launch, we were obviously spending more on liver. We continue to spend on liver. You’ve heard me refer to additional data and we drive that with R&D spending. But the predominant R&D spend today inside the company is kidney development as you would expect. And so those two sort of switched positions a little bit and evened out to be the same which is what you’re noting had in the consistency year to year.

On a forward looking basis, I think it remains to be seen a little bit what exactly will dominate. Those R&D numbers could potentially go down after the bolus of our kidney spend, if we’re successful especially in having outside partners like L’Oreal fund the next tissues like kidney. But we have the option to continue to invest in new tissues as well and keep that R&D spend up. And these are the kind of things that we’ll think about a little bit as we move forward.

But we have options, we have options to think about trying to drive profitability with the existing in vitro platform exclusively or we could invest in new things in an R&D spend setting and think about how fast we can grow the overall value proposition. And we’ll be communicating about the options and our decisions around that over time.

Edward Tenthoff

Just maybe one question, you’re talking about the tissues, what about sort of human therapeutic as an investment potential?

Keith Murphy

Yeah and that’s obviously huge opportunity and you heard me say that in the next 12 months or so we’re going to be talking exactly about what tissues we’re choosing to move forward. And so a portion of that R&D spend is on early studies, animal studies for these therapeutic tissues and that would grow as we’re looking out the next several years into larger animal studies and GLP toxicology studies that would grow the R&D on that side as well. And so those become huge opportunities. We do see billion dollar plus market opportunities available in that space, but you do have to spend to get there and that would include longer term clinical spend.

So if you think about our options from a financing perspective, we could be financing either finding strategic finance for those kind of opportunities or financing around driving one or more of those programs which should add to overall enterprise value or we may have options to think about if we’re developing the revenue the way we expect to, we could continue to grow that a couple of hundred percent a year, then you open up debt option for financing as well.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

Keith Murphy

Thank you all for your time today. We appreciate the good questions. We hope you enjoyed the call. Thank you for joining us and we’ll see you next time.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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