iBio, Inc. — Form 10-Q Summary
Business context and reporting period
iBio develops biopharmaceuticals and operates the FastPharming plant-based manufacturing platform. Its two segments are Biopharmaceuticals, focused on therapeutics and vaccines, and Bioprocessing, including contract development and manufacturing services and research products. This unaudited Form 10-Q covers the three months ended September 30, 2021, the first quarter of fiscal 2022, and was filed November 15, 2021.
Financial performance and liquidity
| Metric | Q1 FY2022 | Q1 FY2021 | Change |
|---|---|---|---|
| Revenue | $0.211 million | $0.410 million | Down approximately 49% |
| Gross profit | $0.171 million | $0.303 million | Down approximately 44% |
| Gross margin | 81.0% | 73.9% | Up 7.1 percentage points |
| Research and development | $2.511 million | $1.862 million | Up approximately 35% |
| General and administrative | $6.634 million | $5.365 million | Up approximately 24% |
| Operating loss | $8.974 million | $6.924 million | Loss increased |
| Net loss attributable to iBio stockholders | $9.005 million | $7.599 million | Loss increased |
| Basic and diluted loss per share | $0.04 loss | $0.05 loss | Shares increased materially |
Revenue was generated at a point in time and depended on three customers; two customers represented 81% of quarterly revenue. Net cash used in operating activities was $9.347 million, compared with $7.070 million in the prior-year quarter. Net cash used in investing activities was $5.149 million, including $2.867 million of intangible-asset additions, $1.173 million for an equity-security investment, and $1.123 million for fixed assets. Net cash used in financing activities was $0.088 million.
Cash and cash equivalents were $62.820 million at September 30, 2021, compared with $77.404 million at June 30, 2021. Including debt securities of $19.453 million, cash and investments totaled approximately $82.3 million. Total assets were $143.739 million, total liabilities were $43.214 million, and accumulated deficit was $182.566 million.
Reported liabilities included finance lease obligations of $32.034 million and operating lease obligations of $3.603 million. The PPP loan and accrued interest, totaling approximately $0.607 million, were forgiven during the quarter and recognized as other income. Subsequent to quarter-end, iBio entered into a $22.375 million secured term loan at 3.25% interest, maturing November 1, 2023, in connection with its facility acquisition.
Material changes versus the prior comparable period
- Revenue declined by approximately $0.199 million because the 2021 customer contracts were smaller, although gross margin improved due to completion of higher-margin projects.
- R&D increased by approximately $0.649 million and G&A increased by approximately $1.269 million, primarily reflecting higher personnel, consulting, production-capability, and portfolio-development costs.
- Operating loss increased by approximately $2.050 million and net loss attributable to iBio stockholders increased by approximately $1.406 million.
- Share-based compensation increased to $0.821 million from $0.351 million. Weighted-average common shares increased to 217.876 million from 162.442 million.
- On August 23, 2021, iBio entered into RubrYc agreements, investing $5.0 million and recording $7.5 million of total consideration, including a $2.5 million payable for a potential second tranche. The transaction added preferred stock, intangible assets, and prepaid expenses, and provided an exclusive RTX-003 license and collaboration options.
- On September 10, 2021, iBio entered into an 88-month lease for approximately 11,383 square feet in San Diego, recording a $3.487 million right-of-use asset.
Outlook, commentary, risks, and unusual items
Management stated that available cash and debt securities, together with financial flexibility following the facility transaction, are expected to fund operations through the third quarter of fiscal 2023. Without those additional financing options, management stated that existing working capital should fund normal operations through at least the second quarter of fiscal 2023. The company expects expenses to rise as it expands drug-discovery capabilities and advances IBIO-100, IBIO-101, IBIO-202, IBIO-400, and additional oncology programs.
On November 1, 2021, iBio acquired its Bryan, Texas manufacturing facility, acquired the remaining interest in iBio CDMO, terminated the related-party sublease, and became the ground-lease tenant. The $28.75 million transaction was funded with $28.0 million of cash, a warrant for 1,289,581 shares at $1.33 per share, and a $22.375 million secured term loan. Management expects facility-related cash requirements to decline by approximately 67%, or about $2 million annually, and is exploring longer-term financing alternatives, including a potential sale-leaseback.
Key risks include continuing losses and negative operating cash flow, dependence on additional financing, customer concentration, potential equity dilution, limited authorized and unissued common shares, uncertain commercialization and clinical-development outcomes, COVID-19-related operational effects, and compliance with the secured term loan. The term loan requires at least $10 million of unrestricted cash and an approximately $5.5 million letter of credit, and is secured by iBio CDMO assets and the facility; iBio, Inc. guaranteed the obligations. Failure to comply could result in foreclosure or loss of the manufacturing facility.
The company has not commercialized a vaccine or therapeutic product and expects to remain unprofitable. No material legal proceedings were reported. Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting.
Facts investors should verify
- Reconcile the company’s stated fiscal-2023 liquidity runway with its continuing operating cash burn and planned R&D expansion.
- Review the November 1, 2021 facility acquisition, secured term loan, cash minimum, letter-of-credit requirement, covenants, guarantee, and November 2023 maturity.
- Assess whether the expected 67% reduction in facility-related cash requirements is achieved and whether a sale-leaseback or refinancing is completed.
- Evaluate the RubrYc transaction’s milestone obligations of up to $15 million for RTX-003, up to $15 million per collaboration product, and future royalty obligations.
- Monitor revenue concentration and the sustainability of quarterly CDMO and product revenue.
- Consider dilution from approximately 14.4 million outstanding stock options, 0.8 million restricted stock units, the 1.29 million-share warrant, and potential future equity financing.
- Confirm the status of the University of Pittsburgh IND diligence milestone, which was extended to December 31, 2021, and any further extension.