IBIO

Business Context and Reporting Period

Company: iBio, Inc. (formerly iBioPharma, Inc.)
Filing Type: Form 10-Q (Unaudited)
Period Ended: September 30, 2009
Business Overview: iBio is a biotechnology company focused on developing vaccines and therapeutic proteins using proprietary plant-based technology. The company's near-term focus is advancing influenza vaccine candidates (H1N1 and H5N1) to clinical trials. Effective April 1, 2009, the company discontinued its nutritional supplement business, licensing the technology and customer relationships to a subsidiary of its former parent in exchange for a 5% royalty.

Key Financial Metrics

Cash Flow Summary (Three Months Ended Sep 30, 2009):
- Net cash used in operating activities: $(259,437)
- Net cash used in investing activities: $(209,863)
- Net cash provided by financing activities: $2,807,051 (primarily from stock issuance)

Material Changes vs. Prior Period

• Revenue Elimination: Sales dropped to zero from $333,428 in the prior year due to the discontinuation of the nutritional supplement business on April 1, 2009.
• Operating Expenses: Total operating expenses decreased to $572,419 from $747,398.
  • Research & Development: Decreased by $220,000 (68%) primarily due to the absence of a $250,000 milestone payment to FhCMB in 2009 that occurred in 2008.
  • General & Administrative: Increased by $45,000 (11%) due to higher financial advisory and accounting fees associated with operating as a standalone public entity.
• Liquidity: Cash balances increased by approximately $2.34 million (225%) compared to the prior year-end, driven by a financing transaction in September 2009.
• Financing Activity: The company issued 4,615,385 shares of common stock and warrants at $0.65 per share, raising net proceeds of $2,807,051.

Guidance, Outlook, Risks, and Contingencies

• Outlook: Management expects current cash and working capital resources to support operations through the fall of 2010. The company anticipates beginning Phase 1 clinical trials for at least one vaccine candidate in calendar year 2010.
• Funding Strategy: Future funding beyond fall 2010 is expected to come from licensing arrangements or the sale of equity securities. Management warns that raising additional equity may result in significant dilution.
• Contingency: A dispute exists with the Center for Molecular Biology of Fraunhofer USA, Inc. (FhCMB) regarding a technical milestone. If the company is required to pay the disputed $250,000, R&D expenses and the net loss for the quarter would increase by that amount.
• Commitments: The company has a commitment to pay FhCMB an aggregate of $10 million through May 2014, with a $1 million payment due in November 2009.
• Risks: Risks include the inability to secure future funding on acceptable terms, potential delays in clinical trials, and general economic conditions affecting the availability of credit.

Key Facts for Investor Verification

• Cash Runway: Verify if the $3.38 million cash balance is sufficient to cover the $1 million FhCMB payment due in November 2009 and sustain operations until fall 2010.
• Disputed Liability: Monitor the resolution of the $250,000 milestone dispute with FhCMB, as this could materially impact the next quarter's financials.
• Dilution Risk: Assess the impact of the recent equity issuance (4.6 million shares) and potential future fundraising needs on shareholder value.
• Clinical Progress: Track the timeline for the anticipated Phase 1 clinical trials for H1N1/H5N1 vaccine candidates scheduled for 2010.
• Revenue Model: Confirm the status of royalty income from the former parent company, which contributed $9,000 to other income in this quarter.