iBio, Inc. Form 10-Q Summary
Reporting period: Three months ended September 30, 2018, the first quarter of fiscal 2019. The filing was dated November 13, 2018. iBio is a biotechnology company providing biologics development and manufacturing services through iBio CDMO while advancing proprietary product candidates.
Key Financial Metrics
| Metric | Q1 FY2019 | Q1 FY2018 |
|---|---|---|
| Revenue | $45,000 | $122,000 |
| Operating expenses | $3.995 million | $3.483 million |
| Operating loss | $3.950 million | $3.361 million |
| Net loss | $4.399 million | $3.827 million |
| Net loss available to iBio stockholders | $4.464 million | $3.892 million |
| Loss per common share | $0.25 | $0.42 |
| Net cash used in operating activities | $778,000 | $3.017 million |
| Cash at period end | $16.010 million | $5.916 million |
Revenue declined approximately 63% year over year. Operating expenses increased approximately 15%, driven by higher research and development and general and administrative costs. Based on reported revenue, the operating and net loss margins were substantially negative; the filing does not present gross profit or gross margin because no cost-of-revenue measure is reported.
- Balance sheet: Total assets were $42.896 million and total equity was $13.028 million at September 30, 2018. Accumulated deficit was $92.626 million.
- Debt and lease obligations: Capital lease obligations totaled $25.033 million, including $201,000 current and $24.832 million long term. The 34-year Bryan, Texas facility sublease has minimum remaining payments of approximately $66.150 million, including $41.116 million of interest.
- Liquidity: Current assets were $16.335 million versus current liabilities of $5.036 million. Deferred revenue was $3.018 million, primarily reflecting customer prepayments, including approximately $2.9 million from CC-Pharming.
- Investing and financing cash flow: Investing activities used $289,000. Financing activities provided $1.143 million, including $1.350 million of gross proceeds from the July 2018 sale of 1.5 million common shares, partly offset by $159,000 of offering costs and $48,000 of lease payments.
Material Changes Versus the Prior Comparable Period
- Revenue decreased by $77,000, primarily because fewer third-party proof-of-concept, feasibility-study and small-scale production contracts were delivered.
- Research and development expense increased by $139,000 to $1.124 million, principally due to higher iBio CDMO personnel costs.
- General and administrative expense increased by $373,000 to $2.871 million, mainly due to facility maintenance and repairs, percentage rent, consulting and personnel costs.
- Net loss increased by $572,000, although loss per share improved because weighted-average shares increased to 17.894 million from 9.185 million following equity issuances and the reverse split.
- Operating cash use improved to $778,000 from $3.017 million, primarily because of the $3.018 million increase in deferred revenue.
- Cash increased modestly from $15.934 million at June 30, 2018 to $16.010 million at September 30, 2018.
- The company completed a one-for-ten reverse stock split effective June 8, 2018. It also issued common stock and convertible preferred stock in a June 2018 offering and partially exercised the related over-allotment option in July.
Outlook, Risks, Contingencies and Unusual Items
- Management stated that cash on hand was expected to support activities through at least November 15, 2019, based on the June 2018 financing, anticipated commercialization and collaboration proceeds, and iBio CDMO operations. The company remains dependent on future revenue, collaborations and additional financing.
- Management cautioned that failure to obtain financing could require delaying or reducing development programs, accepting less favorable collaborations, disposing of technology or product rights, or potentially ceasing operations.
- The company received $2.9 million of CC-Pharming prepayments during the quarter. These amounts were recorded as deferred revenue and are not yet recognized as revenue because related services had not been provided.
- iBio is advancing IBIO-CFB03, its lead candidate for fibrotic diseases, toward an investigational new drug filing. The filing provides no specific timing or commercial revenue guidance.
- iBio continues litigation against Fraunhofer entities concerning contractual breaches, technology ownership and technology transfer. The company states that the outcome cannot currently be predicted.
- NYSE American accepted the company’s compliance plan through December 6, 2019 regarding stockholders’ equity and sustained losses. The company reported $13.0 million of equity at September 30, 2018 and stated that the notices did not affect operations or create an event of default.
- Related-party exposure is significant: the facility lease and approximately $476,000 of quarterly interest expense involve an Eastern affiliate, and certain research and administrative costs involve related parties.
- The company adopted the new revenue recognition standard effective July 1, 2018, with no significant reported impact. Management concluded that disclosure controls were effective as of September 30, 2018.
Investor Verification Checklist
- Verify the timing and conditions for recognizing the $3.018 million of deferred revenue, including the CC-Pharming collaboration.
- Assess whether iBio CDMO can generate sufficient recurring revenue to offset operating costs and the substantial facility lease burden.
- Review cash burn, financing availability and the potential dilution from Series A and Series B preferred shares convertible into approximately 12.5 million common shares.
- Monitor compliance with the NYSE American plan through December 6, 2019 and subsequent equity levels.
- Review the status, potential financial impact and ownership implications of the Fraunhofer litigation and related technology rights.
- Confirm the company’s runway assumptions against actual operating cash flow, capital expenditures and future financing requirements.