iBio, Inc. Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2021, compared with fiscal 2020. The provided metadata refers to “2020 Q4,” but the filing is an annual Form 10-K for fiscal 2021, not a quarterly filing.
Business Context
iBio develops biopharmaceuticals and operates the plant-based FastPharming Manufacturing System and Glycaneering technology. Its two segments are Biopharmaceuticals, consisting of therapeutics and vaccines, and Bioprocessing, consisting of contract development and manufacturing services and research and bioprocess products.
- Lead programs included IBIO-100 for fibrosis, IBIO-101 for oncology, IBIO-202 for a SARS-CoV-2 nucleocapsid vaccine, and IBIO-400 for classical swine fever.
- All internally developed therapeutic and vaccine candidates remained in preclinical development during fiscal 2021.
- The company operated a 130,000-square-foot facility in Bryan, Texas and had 75 employees, including 57 at iBio CDMO, as of June 30, 2021.
Financial Results and Key Metrics
| Metric | Fiscal 2021 | Fiscal 2020 | Change |
|---|---|---|---|
| Revenue | $2.371 million | $1.638 million | Up 45% approximately |
| Gross profit | $0.909 million | $0.935 million | Down approximately 3% |
| Gross margin | 38.3% | 57.1% | Down approximately 18.8 percentage points |
| Research and development expense | $9.989 million | $3.573 million | Up $6.416 million |
| General and administrative expense | $22.031 million | $11.365 million | Up $10.666 million |
| Operating loss | $(31.111) million | $(14.003) million | Loss increased |
| Settlement income | $10.200 million | — | Unusual item |
| Net loss attributable to iBio | $(23.207) million | $(16.439) million | Loss increased |
| Net loss attributable to common stockholders | $(23.467) million | $(38.260) million | Improved due to prior-period deemed dividend |
| Basic and diluted loss per share | $(0.12) | $(0.61) | Improved primarily from share-count growth and prior-period items |
| Operating cash flow | $(30.064) million | $(13.345) million | Cash use increased |
| Investing cash flow | $(26.478) million | $(1.154) million | Cash use increased |
| Financing cash flow | $78.835 million | $65.192 million | Primarily equity issuance |
Revenue consisted primarily of contract development and manufacturing services. Fiscal 2021 revenue included approximately $0.9 million from Lung Bio and $1.5 million from four other customers. Revenue was highly variable because the company generally did not have recurring contracts. Approximately 99% of fiscal 2021 revenue came from four customers.
Liquidity, Debt and Capital Resources
- Cash and cash equivalents were $77.404 million at June 30, 2021, compared with $55.112 million a year earlier.
- Cash plus investments in debt securities totaled approximately $97.0 million. Management stated that available funds were expected to support current operations through March 31, 2023, subject to the company’s assumptions.
- Investments in debt securities totaled $19.570 million at June 30, 2021.
- Total liabilities were $38.400 million, including $32.122 million of finance lease obligations and $0.600 million of current PPP loan debt. The PPP loan was subsequently forgiven in July 2021.
- The company had no conventional long-term funded debt reported; the principal financing obligation was the long-term finance lease for the Bryan facility.
- Stockholders’ equity was $108.568 million, while accumulated deficit was $173.627 million.
- The company raised approximately $78.276 million from preferred and common stock issuances before capital-raising costs during fiscal 2021. Shares outstanding increased to 217.873 million from 140.071 million.
Material Changes Versus Fiscal 2020
- Revenue increased, but gross profit declined because cost of goods sold grew faster than revenue, reducing gross margin.
- Research and development spending increased substantially as internal pipeline programs expanded, including higher personnel, consulting and laboratory consumable costs.
- General and administrative expense nearly doubled due primarily to increased personnel, facility repairs and maintenance, consulting, legal and recruiting costs.
- Operating cash burn more than doubled, reflecting increased investment in the business and pipeline.
- Cash increased principally through substantial equity financing, resulting in significant dilution.
- The company recognized $10.2 million of settlement income from the Fraunhofer litigation settlement. The settlement provided for $28.0 million of gross cash payments, but the company estimated aggregate net cash recovery of approximately $10.2 million after legal and related costs.
- Revenue mix shifted toward CDMO activity. External Bioprocessing revenue increased from $0.092 million to $1.274 million, while external Biopharmaceutical revenue declined from $1.546 million to $1.098 million.
- The company launched four research-use-only products and a new e-commerce site.
Guidance, Outlook and Unusual Items
- Management expected a sequential revenue decline in the first half of fiscal 2022 compared with the second half of fiscal 2021, followed by stronger growth in the second half; it nevertheless anticipated year-over-year revenue growth.
- Research and development, general and administrative expenses were expected to continue increasing in fiscal 2022, but at slower growth rates than in fiscal 2021.
- IBIO-100 and IBIO-101 were expected to enter IND-enabling work during fiscal 2022, while IBIO-202 was expected to advance toward clinical development.
- In August 2021, iBio entered into agreements with RubrYc Therapeutics for the RTX-003 oncology antibody and a broader antibody-discovery collaboration. The arrangements included up to $15 million of milestone payments per applicable program, royalties, development obligations and a $5.0 million investment in RubrYc preferred stock, with a potential additional $2.5 million investment.
- The company disclosed that it was unlikely to meet the December 31, 2021 IND deadline under its University of Pittsburgh license for IBIO-100 and was negotiating an extension. Failure to extend or meet the deadline could result in termination of the license.
- The company terminated its Planet Biotechnology partnership for ACE2-Fc and recorded a related impairment of approximately $0.143 million.
- A San Diego laboratory and office lease was signed in September 2021 to support expanded drug discovery and research activities.
- Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2021. Because iBio is a smaller reporting company, the auditor did not provide an internal-control attestation.
Principal Risks and Contingencies
- The company has a history of significant losses, negative operating cash flow and no commercialized proprietary therapeutic or vaccine products.
- Additional capital may be required; future equity financing could materially dilute shareholders, while financing may not be available on acceptable terms.
- Product candidates face substantial preclinical, clinical, manufacturing and regulatory risks, and none had reached the clinical stage in the filing.
- CDMO revenue is concentrated among a small number of customers and is subject to substantial timing variability.
- The Bryan facility is the company’s primary manufacturing site, creating concentration risk from regulatory findings, operational interruptions, supply shortages, pandemics or natural disasters.
- The company competes with substantially larger pharmaceutical, biotechnology and contract manufacturing companies.
- Patent protection, license compliance and the ability to maintain rights under the University of Pittsburgh and RubrYc arrangements are material to the pipeline.
- The company had previously received NYSE American noncompliance notices, although it reported regaining compliance and had stockholders’ equity above the cited threshold at June 30, 2021.
- The company reported a 34-year facility lease with substantial future principal and interest payments, plus rent escalators and minimum percentage-rent provisions.
Investor Verification Checklist
- Verify current cash, investment balances, operating burn and the date through which liquidity is expected to last.
- Assess whether CDMO revenue growth is recurring or dependent on a small number of one-time contracts.
- Review the full terms, funding requirements, milestones, royalties and potential dilution associated with the RubrYc transactions.
- Confirm whether the University of Pittsburgh license deadlines for IBIO-100 were extended and whether the license remains in good standing.
- Track IND-enabling progress and regulatory filings for IBIO-100, IBIO-101, IBIO-202 and IBIO-400.
- Evaluate the effect of the substantial equity issuances, outstanding options and subsequent grants on future dilution.
- Review the Fraunhofer settlement receivables, collection status and the accounting treatment of the remaining license-related payments.
- Monitor NYSE American continued-listing compliance and the company’s limited remaining authorized common shares.