iBio, Inc. Form 10-Q Summary
Business Context and Reporting Period
iBio, Inc. is a biotechnology company commercializing plant-based protein expression technologies and developing biopharmaceutical candidates. Its operations include technology licensing, product development, contract manufacturing, and technology-transfer services. The quarter ended September 30, 2016 represents the first quarter of fiscal 2017. iBio CMO, a 70%-owned contract manufacturing joint venture formed with an Eastern Capital affiliate, commenced commercial operations in January 2016.
Financial Performance and Position
| Metric | Three Months Ended September 30, 2016 | Prior Comparable Period |
|---|---|---|
| Revenue | $135,000 | $160,000 |
| Operating loss | $3.154 million | $1.813 million |
| Consolidated net loss | $3.612 million | $1.805 million |
| Net loss attributable to iBio | $3.061 million | $1.805 million |
| Loss per share | $0.03 | $0.02 |
| Cash used in operating activities | $2.273 million | $1.147 million |
- Revenue was primarily generated from technology services for the Fiocruz yellow fever vaccine program. The revenue stream carries little or no profit because related subcontractor costs are reimbursed.
- Operating expenses were $3.289 million, including $820,000 of research and development and $2.469 million of general and administrative expenses.
- Operating margin was approximately negative 2,336%; net loss attributable to iBio represented approximately negative 2,267% of revenue.
- Other expense was $458,000, principally consisting of $483,000 of interest expense on the iBio CMO capital lease, partly offset by interest and royalty income.
- Cash decreased from $23.014 million at June 30, 2016 to $20.098 million at September 30, 2016.
- Total assets were $48.091 million, including $25.580 million of net fixed assets and $2.023 million of net intangible assets.
- Total liabilities were $27.394 million. Capital lease obligations totaled $25.393 million, including $25.220 million long term. Total minimum lease payments were $70.350 million, including $44.957 million of interest.
- Accumulated deficit was $60.652 million. iBio reported total equity of $20.697 million, including $13.556 million of noncontrolling interest.
Material Changes Versus the Prior Comparable Period
- Revenue declined by approximately $25,000, or 16%, primarily because of changes in technology services performed under the Fiocruz agreement.
- Research and development expense increased by approximately $269,000, primarily because of iBio CMO operations, partially offset by lower contracted Fiocruz research costs.
- General and administrative expense increased by approximately $1.1 million, including approximately $830,000 associated with iBio CMO operations.
- Operating loss increased by approximately $1.341 million, and net loss attributable to iBio increased by approximately $1.256 million.
- Cash used in operating activities nearly doubled year over year, increasing by approximately $1.126 million.
- Investing cash outflows increased to $602,000, including $202,000 of intangible-asset additions and $400,000 of fixed-asset purchases.
- The company adopted separate segment reporting for iBio, Inc. and iBio CMO. iBio CMO generated $49,000 of external revenue and incurred a $1.837 million net loss, including the noncontrolling interest share.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management stated that the $20.1 million of cash on hand was expected to support operations through September 30, 2017; this is not a revenue or earnings forecast.
- The company expects to fund operations with cash on hand, potential equity or other securities offerings, licensing and collaboration proceeds, and iBio CMO operating proceeds. No shares had been sold under the $15 million Aspire Capital facility as of the filing date.
- Management warned that additional funding may be required beyond June 30, 2017 and may not be available on favorable terms or at all. Additional equity financing could materially dilute shareholders.
- If financing is unavailable, the company may delay or reduce development and commercialization, seek less favorable collaborations, relinquish rights, or potentially cease operations.
- iBio CMO is subject to a 34-year sublease with annual base rent of $2.1 million, subject to increases, percentage rent, operating costs, and minimum-sales provisions beginning in specified future periods.
- The company amended its University of Pittsburgh license milestone schedule, extending the deadline for filing an IND related to its fibrosis technology to June 30, 2017.
- In litigation against Fraunhofer, a Delaware court ruled in July 2016 that iBio owns the relevant plant-based technology rights and is entitled to receive a technology transfer. The remaining outcome, including damages and additional claims, remains uncertain.
- A shareholder derivative action reached a settlement in principle. Court approval remained pending, and the company expected its insurance carrier to fund the settlement.
- The company has incurred recurring losses and negative operating cash flows since its 2008 spinoff. The financial statements were prepared on a going-concern basis.
- Related-party exposure includes Eastern affiliates, which hold a 30% interest in iBio CMO and provide the facility sublease, and Novici Biotech, in which iBio’s president is a minority stockholder.
Most Important Facts for Investors to Verify
- Whether iBio CMO can generate sufficient third-party manufacturing and technology-transfer revenue to offset its operating losses and substantial lease commitments.
- The company’s cash burn, remaining liquidity, and timing and terms of any future equity or other financing.
- Progress toward the June 30, 2017 IND milestone for the fibrosis program and the commercial status of IBIO-CFB03.
- Development and funding status of the Fiocruz yellow fever vaccine program and the extent to which associated revenue is economically profitable.
- The final outcome and potential financial impact of the Fraunhofer litigation and the shareholder derivative settlement.
- The terms, related-party implications, and long-term obligations associated with the iBio CMO capital lease and Eastern-affiliated arrangements.