iBio, Inc. Form 10-Q Summary
Business Context and Reporting Period
iBio, Inc. is a biotechnology company that uses plant-based technologies and production facilities to provide product development, manufacturing, and technology-transfer services, while advancing proprietary product candidates. The filing covers the fiscal quarter and six-month period ended December 31, 2017, representing fiscal 2018 second-quarter results. The financial statements are unaudited.
The company operates through iBio, Inc. and iBio CDMO. iBio CDMO operates a 139,000-square-foot plant-based biopharmaceutical manufacturing facility in Bryan, Texas under a 34-year capital lease. The company’s lead proprietary candidate is IBIO-CFB03, being advanced toward an investigational new drug application for fibrotic diseases.
Key Financial Metrics
| Metric | Three Months Ended Dec. 31, 2017 | Three Months Ended Dec. 31, 2016 | Six Months Ended Dec. 31, 2017 | Six Months Ended Dec. 31, 2016 |
|---|---|---|---|---|
| Revenue | $153,000 | $75,000 | $275,000 | $210,000 |
| Research and development expense | $993,000 | $1.049 million | $1.978 million | $1.869 million |
| General and administrative expense | $2.587 million | $2.351 million | $5.085 million | $4.820 million |
| Operating loss | $(3.427) million | $(3.325) million | $(6.788) million | $(6.479) million |
| Net loss attributable to iBio | $(3.899) million | $(3.229) million | $(7.725) million | $(6.290) million |
| Net loss available to common stockholders | $(3.964) million | $(3.229) million | $(7.856) million | $(6.290) million |
| Loss per share | $(0.04) | $(0.04) | $(0.08) | $(0.07) |
Revenue increased 104% for the quarter and 31% for the six-month period, primarily due to increased third-party proof-of-concept, feasibility, and small-scale production contracts. No revenue was recognized from the Fiocruz yellow fever vaccine program during either 2017 period.
Operating margins remained substantially negative. Based on reported revenue and operating loss, the operating margin was approximately (2,240)% for the quarter and (2,468)% for the six-month period. These percentages reflect the company’s very small revenue base and should be interpreted accordingly.
- Cash was $7.310 million at December 31, 2017, compared with $8.088 million at June 30, 2017.
- Net cash used in operating activities was $6.605 million for the six months, compared with $5.837 million in the prior-year period.
- Net cash used in investing activities was $312,000, including $277,000 of fixed-asset additions and $35,000 of intangible-asset additions.
- Net cash provided by financing activities was $6.139 million, including common-stock proceeds and a $1.050 million contribution from the Eastern Affiliate.
- The company reported total assets of $34.840 million and total liabilities of $27.029 million at December 31, 2017.
- Capital lease obligations totaled approximately $25.175 million, including $190,000 classified as current. Total minimum lease payments were approximately $67.725 million, including interest, over the remaining lease term.
- Accumulated deficit was $79.848 million at December 31, 2017.
Material Changes Versus the Prior Comparable Period
- Quarterly revenue increased by $78,000, while six-month revenue increased by $65,000.
- Quarterly research and development expense declined by $56,000, but six-month research and development expense increased by $109,000 because of higher personnel costs at iBio CDMO.
- Quarterly general and administrative expense increased by approximately $235,000, and six-month expense increased by approximately $264,000, primarily due to higher iBio CDMO operating costs.
- Quarterly net loss attributable to iBio increased by $670,000, and six-month net loss increased by $1.435 million.
- Cash used in operations increased by approximately $768,000 for the six-month period.
- The company raised capital through a July 2017 Lincoln Park transaction and a November 2017 public offering. It issued 22.5 million shares in the public offering at $0.20 per share for gross proceeds of $4.5 million and had 115.3 million common shares outstanding at December 31, 2017.
- Following an exchange transaction completed in February 2017, iBio owned 99.99% of iBio CDMO at December 31, 2017, compared with a 70% interest before the transaction. The Eastern Affiliate retained a 0.01% interest and received one share of preferred tracking stock.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
The company does not provide quantitative revenue or earnings guidance. Management expects continuing significant expenses and operating losses for at least the next year and has not completed development or commercialization of any vaccine or therapeutic product candidate.
Management stated that cash on hand was expected to support activities at least through May 31, 2018. The filing concludes that the company’s recurring losses, negative operating cash flow, limited cash resources, and dependence on additional financing raise substantial doubt about its ability to continue as a going concern.
- Future funding is expected from cash on hand, additional equity or other securities, potential Lincoln Park stock sales, licensing and collaboration arrangements, and iBio CDMO operations. Availability and terms of such funding are uncertain, and additional equity financing could materially dilute shareholders.
- The Lincoln Park agreement permits purchases of up to an aggregate of $16 million of common stock over 36 months, subject to market, share-price, volume, ownership, and other limitations. The company stated that even full access to the facility might not satisfy all funding needs.
- The 34-year facility sublease requires base rent of $2.1 million annually, subject to increases, plus percentage rent and potential minimum-sales-related payments beginning in 2018 and 2020.
- The company is involved in ongoing Delaware litigation against Fraunhofer entities concerning technology ownership, contractual breaches, technology transfer, and related claims. The outcome cannot currently be predicted.
- On January 4, 2018, NYSE American notified the company that continued listing depends on a reverse stock split or sustained share-price improvement by July 5, 2018. The stock continued trading with a “.BC” designation for noncompliance.
- Eastern beneficially owned approximately 40% of the company’s outstanding common stock as of the filing date, creating significant ownership concentration and related-party considerations.
- The company disclosed related-party expenses, obligations, and transactions involving Novici Biotech, Eastern affiliates, and the facility sublandlord.
- Revenue-recognition, lease, cash-flow, income-tax, and other accounting standards were pending adoption or evaluation; management generally did not expect a material effect based on the information available at filing.
Most Important Facts for Investors to Verify
- Whether the company secured additional financing after December 31, 2017 and whether cash runway extended beyond May 31, 2018.
- Actual customer demand, backlog, and conversion of iBio CDMO proof-of-concept and feasibility contracts into recurring manufacturing revenue.
- Progress toward an IND for IBIO-CFB03 and the revised milestone schedule under the University of Pittsburgh license.
- Compliance with NYSE American minimum-price requirements and whether a reverse stock split or other corporate action occurred.
- Potential dilution from the Lincoln Park purchase agreement, stock options, and other equity issuances.
- The financial and operational impact of the $25.2 million capital lease obligation and long-term minimum payments.
- Developments and potential financial consequences of the Fraunhofer litigation.
- Terms and accrued dividends associated with the preferred tracking stock and the company’s continuing related-party transactions.