Don't pay dollar to keep 2 cents when wrong. Cut your losses quickly. Trade what you see, not what you think.
Joined Oct 26, 2011
719 Blog Posts

2nd Chance on $ONVO

I’ve been waiting for the inevitable secondary offering to happen on $ONVO and it has finally happened.  This is considered good news to me since price action no longer has this dilution overhang that has been bursting every bubble-rallies in the last two weeks.

I bought a small starter position yesterday with a hard-stop and promptly got stopped out this morning with the gap-down.  However, when price traded down to the $4.50 offering price, I bought back my starter position plus more.  Now, I’m comfortable holding this one as a way to play catch-up with the 3D-printing stocks that I’ve missed back in March.

Why would I buy $ONVO after the dilution news?  Well, I learned my lesson from my $CLDX trade back in the Feb of this year.  I bought a boat load of $CLDX around mid-$7 and then the dilution news came.  I immediately dumped my position for losses.  Guess what?  Not only did $CLDX recover most of the price the same day, it continued onward to the $21+ level which was current price right now.  My problem with this trade was that after I was out, I resolved not to chase the stock due to my belief that the dilution would eventually kill the rally. In hindsight, now I’ve learned that it is not necessary true for every stock.  $CLDX has more potential than the pitfall of dilution.

Anyway, not to repeat the same mistake I’ve made on $CLDX, I bought $ONVO to see if my lesson with $CLDX will pay off.  Of course, risk management still needs to be applied here since this is still considered a highly volatile biotech stock.

Below is the daily chart:


Did you see price action is sitting right on the 79 sma and 89 xma?  This give me the confidence to take on this trade at the secondary offer price of $4.50.

My 2 cents.

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  1. M.

    Good article and I am with you on this stock. Scaling in at several price points including $4.50. This is a long term hold for me, not a trade.

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    • Zenhunter

      I concur. Thing can only look better once $ONVO starts to generate revenues from their liver bioassay. BP no longer has to deal with 24 hours limitation of the 2D liver cells on a dish. Below is an excerpt from an interview that can explain the potential of $ONVO better than I do:

      TLSR: Anywhere you turn today, you hear about 3-D printing. What is Organovo doing with it?

      JN: Organovo is developing a bioprinter to create 3-D biological structures for use as bioassays. Other companies are collaborating to see what can be accomplished with these 3-D bioassay structures.

      TLSR: The company is developing a 3-D liver model as a hepatic toxicity screen, presumably for drug developers. Is that its lead development project? Is the idea that a 3-D liver structure will have more of a liver organ phenotype than hepatic cells floating in suspension or in a dish?

      JN: Yes. When you plate what’s known as two-dimensional [2-D] liver cells in a dish, they begin to stop functioning as liver cells within 24 hours. You start with a dome-shaped cell in the dish, and within 24 hours it begins to flatten out and lose interaction. If you’re a large pharmaceutical company and want to test a drug for liver toxicity, you only have the ability to test on viable liver cells for those 24 hours. With Organovo’s 3-D liver cell assay, you can build structures that are 20-25 cells high. Because of this more phenotypic shape, the liver cells still behave like in vivo liver cells at five days. Because they are surrounded by each other, they build connective junctions and work in concert to produce enzymes and perform other normal functions of liver cells.

      If you read the full interview from above, you will find that the implication of BP’s ability to test the toxicity of their drug for more than a few days is that it will save them tremendous amount of money on expensive trials (Phase I to III) by knowing that damaging toxicity will appear on the 3th day or so. In other words, having information on toxicity for more than 24 hours will allow them to cancel expensive trials that will fail before it even begins.

      Thanks for the comment, M!

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