Biotech small cap Organovo soars 244% as giant Eli Lilly buys its IBD drug program

Quotes on the micro-cap drugmaker Organovo Holdings skyrocketed 244% yesterday, February 25, before gaining another 22% in premarket trading today. This came after the company announced the sale of its drug development program for inflammatory bowel disease to pharma giant Eli Lilly. Industry news outlet FirstWorld Pharma believes that for Organovo, which has almost $350 million in debt, the deal serves as a “lifeline,” while it presents Eli Lilly with an opportunity to strengthen its position in metabolic disorder therapies.

Yesterday, Organovo Holdings stock surged 244% on the Nasdaq to $1.27 per share, the largest single-day gain in the company's history and its highest closing price since November 2023. In premarket trading today, it climbed another 22% to $1.55 per share.

Earlier in the day yesterday, Organovo announced that Eli Lilly would acquire its inflammatory bowel disease drug development program for $10 million in cash upfront, with an additional $50 million to be paid upon reaching certain development, regulatory, and commercial milestones, according to SEC filings. For context, even after yesterday’s rally, Organovo’s market capitalization hovers just above $22 million.

Organovo develops treatments for inflammatory bowel diseases, such as Crohn’s disease and ulcerative colitis, using proprietary 3D human tissue model technology. Its lead drug candidate, FXR314, is a synthetic compound designed to activate the FXR receptor, a key factor in regulating glucose and lipid metabolism and immune responses, which is found mainly in the liver and intestines.

Organovo is studying FXR314 for two indications: ulcerative colitis and two chronic liver diseases. The company believes the drug might have other applications, as well, such as metabolic diseases and oncology. FXR agonists have shown promising results, according to an article published in the scholarly journal Gastro Hep Advances.

The agreement with Eli Lilly represents something of a lifeline for Organovo, notes FirstWorld Pharma. As of late 2024, the company had $1.2 million in cash and an accumulated deficit of almost $350 million.

For Eli Lilly, the deal presents an opportunity to expand its pipeline of experimental treatments for inflammatory bowel disease, FirstWorld Pharma adds. The outlet notes that Organovo had previously suggested that FXR314 could be used to treat another chronic liver disease — metabolic-associated steatohepatitis — but in combination therapy. This could be of particular interest to Eli Lilly, as the company may want to test FXR314 in combination with tirzepatide, the active ingredient in its diabetes drug Mounjaro and weight-loss medication Zepbound.

According to MarketWatch, the lone Wall Street analyst covering Organovo rates it a “hold,” with a target price of $5.40 per share, 4.3 times the last closing price.