iBio, Inc. Form 10-Q Summary
Reporting period: Fiscal quarter and nine months ended March 31, 2019. The supplied metadata identifies “2018 Q3,” but the filing itself is the March 31, 2019 Form 10-Q, representing fiscal 2019 third quarter. Financial statements are unaudited and amounts are generally in thousands unless otherwise stated.
Business Context
iBio is a biotechnology company that uses proprietary plant-based technologies and production facilities to provide product development, contract development and manufacturing, technology transfer and related services. The company also develops proprietary therapeutic candidates, including IBIO-CFB03 for fibrotic diseases. Its principal operating subsidiary, iBio CDMO, operates a 139,000-square-foot plant-based biopharmaceutical facility in Bryan, Texas under a 34-year capital lease.
Key Financial Metrics
| Metric | Three months ended March 31, 2019 | Three months ended March 31, 2018 | Nine months ended March 31, 2019 | Nine months ended March 31, 2018 |
|---|---|---|---|---|
| Revenue | $527 | $78 | $1,223 | $353 |
| Research and development expense | $1,453 | $966 | $3,850 | $2,944 |
| General and administrative expense | $2,844 | $2,605 | $9,108 | $7,690 |
| Operating loss | $(3,770) | $(3,493) | $(11,735) | $(10,281) |
| Net loss | $(4,224) | $(3,963) | $(13,093) | $(11,690) |
| Net loss available to iBio stockholders | $(4,287) | $(4,026) | $(13,285) | $(11,882) |
| Loss per common share | $(0.22) | $(0.35) | $(0.71) | $(1.16) |
Calculated operating margins were approximately negative 715% for the quarter and negative 960% for the nine-month period. Net margins were approximately negative 801% and negative 1,071%, respectively; these percentages reflect the company’s very limited revenue base.
- Cash and liquidity: Cash was $9.0 million at March 31, 2019, down from $15.9 million at June 30, 2018. Management stated that existing cash was expected to support operations through at least October 31, 2019.
- Cash flow: Net cash used in operating activities was $9.6 million for the nine months, compared with $10.1 million in the prior-year period. Investing cash use was $0.8 million, primarily for fixed assets. Financing activities provided $3.5 million.
- Debt and lease obligations: Capital lease obligations totaled $24.9 million, including $0.2 million current and $24.7 million long-term. Total minimum lease payments were $65.1 million, including $40.2 million of interest.
- Balance sheet: Total assets were $35.7 million, total liabilities were $28.8 million and total equity was $6.9 million at March 31, 2019. Accumulated deficit was $101.3 million.
- Revenue composition: Quarterly revenue included approximately $467,000 recognized from amounts previously prepaid by CC-Pharming. Nine-month revenue included approximately $1.092 million recognized from that relationship.
Material Changes Versus Prior Comparable Period
- Quarterly revenue increased $449,000, or approximately 576%, to $527,000; nine-month revenue increased $870,000, or approximately 246%, to $1.223 million. The increase was primarily attributable to the CC-Pharming strategic relationship.
- Quarterly R&D expense increased $487,000, or approximately 50%, and nine-month R&D expense increased $906,000, or approximately 31%, primarily due to personnel and third-party development costs.
- Quarterly G&A expense increased $239,000, or approximately 9%, while nine-month G&A expense increased $1.418 million, or approximately 18%, driven principally by facility maintenance and repairs, professional fees, percentage rent, consulting and recruiting costs.
- The nine-month net loss increased by $1.4 million to $13.1 million, despite higher revenue, because operating expenses remained substantially above revenue.
- Common shares outstanding increased to 19.6 million at March 31, 2019 from 16.0 million at June 30, 2018. Weighted-average shares for the quarter increased to 19.2 million from 11.5 million, partly reflecting the June 2018 equity offering and preferred-stock conversions.
- The company received $2.459 million of working-capital funding from an Eastern affiliate in November 2018 and recognized $1.350 million of gross proceeds from a July 2018 over-allotment share sale.
Outlook, Risks and Unusual Items
- Management expects continued significant expenses and operating losses and has not completed development or commercialization of any vaccine or therapeutic product candidate.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern because of recurring losses, negative operating cash flow, limited cash resources and dependence on additional financing.
- Management plans to fund operations through cash on hand, additional equity or other securities, CDMO operations, licensing and collaboration arrangements and potential commercialization of technologies or products. Additional financing may be unavailable or may cause substantial shareholder dilution.
- If financing is not obtained, the company may need to delay, reduce or discontinue development activities, seek less favorable collaborations, dispose of technology or product rights, or potentially cease operations.
- The company’s largest ongoing fixed obligation is the Bryan facility capital lease, which requires base rent of approximately $2.1 million annually, subject to CPI and other adjustments, plus percentage rent and operating costs.
- iBio continues litigation against Fraunhofer regarding alleged contractual breaches, technology ownership and technology transfer. A separate complaint against Fraunhofer-Gesellschaft was dismissed as untimely on December 14, 2018; the action against Fraunhofer USA remains pending, and the outcome cannot be predicted.
- The company recognized a $179,000 fixed-asset write-off during the nine months ended March 31, 2019. No intangible-asset impairment charges were recorded.
- The company regained compliance with NYSE American continued-listing standards in December 2018 after previously receiving deficiency notices related to share price and stockholders’ equity.
- Subsequent events included director stock-option grants effective April 1, 2019 and a consulting agreement effective May 1, 2019 with a company owned by director Thomas Isett, including a $40,000 monthly retainer for the initial statement of work.
Most Important Facts to Verify
- Whether the company obtained additional financing after March 31, 2019 and whether cash runway extended beyond the stated October 31, 2019 expectation.
- The sustainability and timing of revenue from CC-Pharming and other CDMO customers, given the low historical revenue base and reliance on customer prepayments.
- Progress toward IND development and clinical advancement of IBIO-CFB03 and other proprietary candidates.
- Actual utilization, customer commitments and future profitability prospects of the Bryan CDMO facility relative to its substantial lease obligations.
- Potential dilution from the remaining convertible preferred stock, equity facilities, stock options and future capital raises.
- Developments and potential financial consequences of the pending Fraunhofer litigation and related technology rights.