My View On … How Much Organovo (ONVO) Is Really Worth?

Dec. 17, 2013 1:27 PM ETONVO, DDD
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- A tentative valuation attempt … using Inpsheros' technology! -

-76% downside risk

/hey … don't trust me … I'm probably wrong … as always/

Organovo Holdings, Inc., a public company valued approximately of USD 700m, develops three-dimensional (3D) bio printing technology for creating functional human tissues on demand for research and medical applications. The company's 3D NovoGen bio printing technology works across various tissue and cell types, and allows for the placement of cells in desired pattern.

InSphero AG, a privately held Swiss based Company, is a leading supplier of organotypic, biological in vitro 3D micro tissues for highly predictive drug testing. The company currently counts all of the top ten global pharmaceutical and cosmetics companies as customers and is helping them to implement its patented micro tissue technology in their development work-flow.

InSphero 3D Insight™ Micro tissues enable more biologically relevant in vitro applications in efficacy (e.g. in oncology) and toxicology, including long-term and inflammation-mediated toxicity testing. A broad portfolio of tumor and liver micro tissues is available, with additional toxicology models in the pipeline. InSphero's 3D micro tissues are more predictive, last longer and are more affordable than conventional cell-based models. (

As the CEO pointed out during the recent (Dec. 5, 2013) presentation, Investors should not expect ONVO to start Printing Organs. He described ONVO's potential market as follows:

The slide above, gives more details about the "revenue potential" disclosed by the Company in the 11/20/2013 PR.

Under such a definition of the Market ONVO intends to enter in, Cyprotex (Listed on the LSE) should also be included as a potential competitor.

"Cyprotex in collaboration with InSphero is co-marketing and providing services related to InSphero's proprietary 3D InsightTM rat and human liver micro tissue technologies. Other micro tissue services are expected to follow as the uptake of 3D cells for Toxicology testing gathers pace."

How much did Recently Private Equity Investors Value Insphero AG? My best Guess.

1. Inshpero AG secured its first (Series A) Financing in August 2010

Zurich, Switzerland, August 6, 2010 - InSphero AG, a supplier of novel 3D cell-based assays for efficacy testing and toxicology, announced it has secured CHF1,800,000 financing (approx. USD 2,000,000) led by Redalpine Venture Partners. (06/Aug/2010 - Link)

02/Aug/2010, the Company's Capital (nominal) was increased by CHF 22'058 (from CHF 100,000).

22'0582 (note 1) new shares were issued at a nominal value of CHF 1.00 / share. (02/Aug/2010 - Link)

The Company issued 22,058 shares in exchange of approx. USD 2,000,000 in capital. (Price per share: approx. USD 90.00 per share)

August 2010 Financing Round Implied Company Valuation: USD 10,985,220

2. Inshpero AG secured its second (Series B) Financing in June 2013

"…Successfully closed a financing round of CHF 2'000'000 last month (approx. 2'200'000 USD). This series B financing was …"(13/June/2013 - Link)

05/July/2013, the Company's Capital (nominal) was increased by CHF 24,470 (from CHF 208'694).

24,470 new shares were issued at a nominal value of CHF 1.00 / share. (05/July/2013- Link)

The company issued 24,470 shares in exchange of approx. USD 2,200,000 in capital. (Price per share = approx. USD 90.00 per share)

August 2010 Financing Round Implied Company Valuation: USD 20,984,760 (note 2)

To introduce a certain degree of flexibility (thus correcting for possible Errors) we use an Implied Company Value of USD 32.50m (instead of the calculated USD 21m)

Assuming Insphero AG has zero debts and zero Cash, the resulting Enterprise Value (EV) would be USD 32.50m.

ONVO's EV is USD 645m! More than 19.84 times higher than Insphero EV (USD 32.50m)

Furthermore, if you were to consider that

  1. Insphero is already generating revenue / selling the tissues,
  2. Insphero counts all of the top ten global pharmaceutical and cosmetics companies as customers,
  3. Insphero's tissues and technology is already used/studied by Pfizer and Roche
  4. Insphero has almost same number of workers of ONVO (25)

…. you will have a hard time … to justify ONVO's current Market Capitalization!

ONVO and Insphero are two very similar companies (IMO, Insphero is a little bit ahead of ONVO from a technological and executional point of view / see September 2013 Insphero Presentation).

The two Companies do however have two complete different valuations!

Private Equity (PE) Redalpine valued Insphero AG at USD 32.50m in June 2013 during the last financing round, while Irrational Retail investors are currently valuing ONVO at a whopping USD 645m EV! (A 1'884 % premium / assuming ONVO and Insphero are similar companies)

Well, sorry guys … but I do trust more to Private Equity Experts rather than to Irrational Markets Participants! Don't you?

Does the Fact that ONVO is a public traded Company, and does therefore offer its shareholders a degree of liquidity on their investments, justify a 1'884% Premium!? Not so sure about that!

Assuming that:

  1. Private Equity (PE) investors entered into Insphero at a bargain-price (estimating the FV of Insphero at USD 65m - approx. 100% higher)
  2. A 34% Market Liquidity DISCOUNT (note 4)

It follows that the Market Value (=EV) of A listed Insphero would be approximately USD 98m

EV of ONVI is currently USD 645m (6.58 times higher)

Based on Insphero AG valuation, ONVO should have a Market Cap of USD 151M (EV+ net cash)

Corresponding to a Price per Share (PPS) of USD 2.09

ONVO, at current Prices (USD 9.02), is 331% Overvalued!

-76.83% downside risk form here!

- Comparing Organovo to Cyprotex (Listed on the LSE)

The Market Cap of Cyprotex is GBP 17.65m (= USD 28.77m)

Do your math!


Complete Insphero's presentation: Here

(note 1) Key assumption: all the shares issued were used in the Financing Transaction. If this assumption is falsified, then the entire results could be jeopardized! However, it is highly unlikely to conduct a round of financing for less than 5% of the value of the Company (in the Start-Up world).

(note 2) It is highly unlikely to conduct a round of financing for less than 5% of the value of the Company (in the Start-Up world). It follows that we believe with a high degree of certainty that the total Value of Insphero (as of June 2013) was not higher than USD. For our analysis we used the resulting average of USD 32.50m

(note 3) The Silber regression does provide us with a sense of how different the discount will be for a firm with small revenues versus one with large revenues. For More Details see Slides 32-33 of this Presentation

Disclosure: I am short ONVO.

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