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Record Revenue Growth & Imminent Nasdaq Listing Could Spell Big Upside for Unknown Orgenesis (ORGS)

- NASDAQ up-listing may bring new institutional investors to the cell therapy manufacturer Orgenesis (ORGS), which has seen increased interest already as the company executes on their business model in the highly sought-after cell therapy sector.
- Revenue grew 57% from 2016 to 2017, and fourth quarter '17 numbers suggest growth is still underway. Their main focus, cell therapy manufacturing, is one of the biggest potential healthcare markets of the coming ten years, and more companies are expected to go to the market with FDA approved drugs - all will need manufacturing expertise.
- One commercial product alone from an ORGS partner could be worth hundreds of millions in revenue to Orgenesis, and high gross margins of 43% make this business highly attractive.

NEW YORK, NY / ACCESSWIRE / March 13, 2018 / Big news continues to trickle out of the little cell therapy manufacturing company Orgenesis, Inc. (ORGS), which will uplist to the Nasdaq this week after announcing record financial results for 2017, with 57% revenue growth over 2016.

This Contract Development Manufacturing Organization (CDMO) does cell therapy manufacturing work for larger biopharmaceutical companies, a potentially lucrative market as cell therapies emerge as one of the biggest healthcare innovations in years. Gilead Sciences (GILD) and Novartis (NVS) are two of the first to market CAR T-cell therapies, both approved last year, and many more of these drugs are headed to market in the coming decade. Collectively, they're expected to generate tens of billions in revenue by 2020, made even more amazing by their current sticker price of about $300-400K per patient treated!

Shares of ORGS have been moving higher as investors began to recognize the value in this company's business, and the company's announcement Monday that they're moving to the big board NASDAQ this week which opens up a much bigger potential investor base. Many large institutions are restricted from owning OTC equities, and we expect that many are lined up to own this emerging-growth sector. Some basic math suggests that ORGS could be worth significantly more in the coming years if their business continues to grow at this pace and as they sign on new partners – just one or two commercial deals could make this a multi-bagger investment in the healthcare sector.

Record Year for Orgenesis Demonstrates Growing Market Potential

One of the hottest investments of the last few years has been cell therapies, namely companies that develop CAR T-cell therapies and, more recently, gene editing companies like Editas Medicine (EDIT). Orgenesis provides outsourced product manufacturing for these companies through their MasTherCell subsidiary. Living cells are complex and costly to manufacture, and the few companies that do it well are poised to benefit from the market expansion of cell therapies like Car T-cells. Orgenesis is already partnered with some of the biggest players, like Servier, CRISPR (CRSP), and Adaptimmune (ADAP). CSRP has been on a tear recently as their new gene editing techniques come into focus with investors, and data from the first such technologies could be out in the coming yer.

Orgenesis' partnerships offer major validation of their technology and manufacturing capabilities, and their financials demonstrate that things are on the right track. The company reported revenue in 2017 increased an impressive 57.7% to $10.1 million, compared to $6.4 million for 2016.

Revenue in the most recent quarter, of $3.4 million, was 78% higher than the same period in 2016! Importantly, this Q4 number means the company is on a $12 million or more annual run rate, and with continued growth they could see $20 million in annual sales quickly.

This kind of growth, in one of the hottest healthcare modalities of the last few decades, won't go overlooked for long, and a NASDAQ up-listing this week could bring new buyers to the name.

Up-listing Allows Top-Notch Funds to Participate and Upcoming Re-Balances Could Add Fuel

Orgenesis moved to the NASDAQ Capital Markets this week, opening up a huge potential investor base and potential new buying tailwinds for the public equity. This is a major milestone for a small company, and high quality institutional funds, with the experience to recognize the potential value of Orgenesis' manufacturing business, can now own the stock.

Many large funds write into their bylaws that the simply cannot own OTC equities...ORGS just graduated to the big leagues. The same smart money that owned stocks like Kite Pharmaceuticals (KITE) before its $12 billion acquisition by Gilead Sciences may now also able to own this smaller, emerging growth company. Further, the NASDAQ listing may also open up a cohort of mechanical buyers when/if ORGS is included in upcoming index re-balances.

Index funds like the Russell 3000 add new public companies yearly based on predetermined requirements, and these could lead to additional buyers of ORGS in the coming months as the next re-balance approaches for many of these indexes and associated ETFs. The Russell 3000 is one of the most common benchmarks for mutual funds that participate in small-cap stocks, and Orgenesis should meet the inclusion criteria for this and other similar funds. The Russell indexes will all re-balance—when they add or subtract new and old constituent equities - this June. Funds that track these indexes buy or sell the constituents as a result, which can bring in new buyers based solely on a stock's inclusion in the index. This is yet another source of possible institutional involvement for Orgenesis.

One or Two Commercial Deals Could Justify Huge Upside for ORGS

What's poorly understood by the markets is how the business scales and how rapidly ORGS could see a ramp of its top-line. Orgenesis' current revenues come from development-stage drug products; signing a deal with a commercial ready company, or having any one of their partners make it to market in the coming years could mean huge upside for ORGS.

You see, cell therapies cost tens of thousands of dollars to manufacture per patient treated, in many cases, or 20-40% of their sale price. Orgenesis hopes to perform this service for emerging cell therapy clients, meaning that they could reap this portion of the sale price, possibly$50K per patient treated.

Orgenesis most recently posted gross margins of 43.5%, meaning that 10-20% of a cell therapy's selling price (or almost half of the 20-40% manufacturing cost) would be Gross Profit for Orgenesis. This is where the numbers get really interesting, as CAR T-cell therapeutics just approved are expected to do $2-4 billion EACH. Applying this 10-20% figure to this new class, if just one of Orgenesis' partnered drugs makes it to market in the coming few years, it could mean hundreds of millions in gross profit for the small company. That kind of revenue would justify a substantially higher valuation for ORGS shares.

Investing in ORGS has its risks. They may still be limited by the balance sheet in terms of expansion, and as a result could need to raise more capital through stock issuance. They're going up against big competitors, and some cell therapy developers will opt to keep their manufacturing in-house. In the end, whether ORGS can justify an increase in valuation comes down to execution.

CAR T-cell companies have lamented their manufacturing issues for the last few years, and it's been a major focus for analysts covering these stocks. This kind of technical know-how isn't easy to find, and Orgenesis has been signing up high-profile public and private clients consistently. With the potential to put away a significant portion of the multi-billion dollar market opportunity for cell therapies in the next few years, ORGS could be a compelling addition to any portfolio.

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SOURCE: One Equity Stocks