Ibio, Inc. quarterly report, Q2 FY2016

iBio, Inc. Form 10-Q Summary

Reporting period: Quarter and six months ended December 31, 2015. The filing was dated February 19, 2016. Amounts are in thousands unless otherwise stated. iBio is a biotechnology company commercializing its plant-based iBioLaunch and iBioModulator platforms and developing biopharmaceutical candidates, including products for fibrotic diseases.

Financial Results and Position

Metric	Three months ended Dec. 31, 2015	Three months ended Dec. 31, 2014	Six months ended Dec. 31, 2015	Six months ended Dec. 31, 2014
Revenue	$134	$367	$294	$1,186
Operating loss	$(2,254)	$(1,666)	$(4,067)	$(3,082)
Net loss	$(2,246)	$(1,653)	$(4,051)	$(3,063)
Loss per share	$(0.03)	$(0.02)	$(0.05)	$(0.04)
Operating cash flow	Not provided quarterly	Not provided quarterly	$(2,814)	$(2,193)

• Revenue was generated primarily from technology services supporting FioCruz’s yellow fever vaccine program, with substantially offsetting research and development costs paid to Fraunhofer; the arrangement generated no profit.
• Operating expenses were $2,388 for the quarter and $4,361 for the six-month period. Research and development expense was $704 for the quarter and $1,255 for six months; general and administrative expense was $1,684 and $3,106, respectively.
• Reported operating margins were approximately negative 1,682% for the quarter and negative 1,383% for six months; net margins were approximately negative 1,676% and negative 1,378%, respectively. These percentages are distorted by very low revenue.
• Cash declined to $6,732 at December 31, 2015 from $9,494 at June 30, 2015. Total current assets were $7,201 and total liabilities were $1,538.
• The filing presents no debt balance; liabilities consisted primarily of accounts payable, accrued expenses and deferred revenue.
• Accumulated deficit was $51,878 at December 31, 2015. Total stockholders’ equity was $7,878, down from $11,231 at June 30, 2015.
• Cash used in investing activities was $5, while financing activities provided $63 from warrant exercises. The company had 77.3 million common shares outstanding at December 31, 2015 and 82,609,410 shares outstanding as of February 19, 2016.

Material Changes Versus Prior Comparable Period

• Quarterly revenue decreased $233, or approximately 64%, and six-month revenue decreased $892, or approximately 75%, primarily because FioCruz-related laboratory work was nearing completion.
• Quarterly operating loss increased by $588, or approximately 35%; the six-month operating loss increased by $985, or approximately 32%.
• General and administrative expense increased $382 for the quarter and $754 for six months, driven primarily by higher legal expenses and approximately $102 of expenses related to the newly formed iBio CMO operations.
• Research and development expense decreased $27 for the quarter and $661 for six months, reflecting changes in laboratory work and lower Fraunhofer-related activity.
• Share-based compensation increased to $643 for six months from $466 in the prior period. The company granted options for 2.55 million shares at an exercise price of $1.72 per share.
• iBio formed iBio CMO in December 2015. In January 2016, an Eastern affiliate invested $15 million for a 30% interest, while iBio retained 70% and contributed a technology license.

Guidance, Outlook, Risks and Unusual Items

• Management stated that cash on hand and proceeds from the Eastern transactions were expected to support activities at least through December 31, 2016, but additional capital may be required thereafter.
• The company expects iBio CMO to pursue third-party development and manufacturing, production of iBio’s proprietary products, and technology-transfer services. Commercial operations commenced in January 2016.
• iBio CMO entered into a 35-year sublease requiring annual base rent of $2.1 million, subject to annual CPI increases, plus percentage-of-sales payments and specified minimum sales-based payments beginning in later periods.
• Future funding is expected from cash, additional equity or other securities, license and collaboration arrangements, and iBio CMO operations. The filing warns that financing may not be available on favorable terms and that equity financing may significantly dilute shareholders.
• The company has incurred recurring losses and negative operating cash flow since its 2008 spin-off. Management states that failure to obtain funding could require delaying or discontinuing programs, entering less favorable collaborations, relinquishing rights, or ceasing operations.
• The $15 million Aspire Capital equity facility remained unused as of the filing date. It permits purchases of up to $15 million of common stock, subject to contractual and share-issuance limits.
• In January 2016, Eastern purchased 3.5 million shares for approximately $2.2 million and exercised warrants for 1.784 million shares for approximately $946. The proposed purchase of an additional 6.5 million shares requires shareholder approval.
• A securities class-action settlement totaling $1.875 million received preliminary court approval in December 2015 and was scheduled for a final hearing in April 2016. The company expected insurance coverage to fund the settlement, subject to final approval.
• The company continues to litigate against Fraunhofer over alleged contractual breaches and has a separate derivative action pending. The filing states that the outcomes cannot currently be predicted.
• The company extended the deadline for filing an FDA New Drug Application for its fibrosis-related licensed technology to June 1, 2016. No clear filing or approval date is provided.

Important Facts for Investors to Verify

• Whether the Eastern affiliate’s $15 million iBio CMO investment and approximately $3.1 million of stock and warrant proceeds were fully received and how they affected subsequent liquidity.
• Whether shareholder approval was obtained for the remaining 6.5 million Eastern shares and the resulting ownership and dilution implications.
• The pace of revenue generation from FioCruz, iBio CMO manufacturing contracts, licensing and technology-transfer arrangements.
• Whether the company can sustain operations after the stated liquidity runway and on what terms additional financing may be obtained.
• Final approval, insurance funding and any residual exposure related to the $1.875 million securities litigation settlement.
• The status and potential financial or intellectual-property effects of the Fraunhofer litigation, derivative action and fibrosis-product regulatory milestones.
• The economic obligations and execution risks associated with the 35-year iBio CMO facility sublease, including minimum sales-based payments.