iBio, Inc. — Form 10-Q Summary
Business Context and Reporting Period
iBio is a biotechnology company that uses plant-based technologies and production facilities to provide product development, manufacturing and technology-transfer services, while advancing proprietary therapeutic candidates. The filing covers the three months ended September 30, 2017, the first quarter of fiscal 2018, with comparison to September 30, 2016.
The company operates through iBio, Inc. and its nearly wholly owned iBio CDMO subsidiary, which operates a large plant-made biopharmaceutical manufacturing facility in Bryan, Texas. The lead proprietary candidate is IBIO-CFB03 for fibrotic diseases.
Financial Highlights
| Metric | Q1 FY2018 | Q1 FY2017 | Change |
|---|---|---|---|
| Revenue | $122,000 | $135,000 | Down $13,000 |
| Research and development expense | $985,000 | $820,000 | Up $165,000 |
| General and administrative expense | $2.498 million | $2.469 million | Slightly higher |
| Operating loss | $(3.361) million | $(3.154) million | Loss widened $207,000 |
| Interest expense | $480,000 | $483,000 | Slightly lower |
| Consolidated net loss | $(3.827) million | $(3.612) million | Loss widened $215,000 |
| Net loss available to iBio | $(3.892) million | $(3.061) million | Loss widened $831,000 |
| Basic and diluted loss per share | $(0.04) | $(0.03) | More negative |
| Cash used in operating activities | $(3.017) million | $(2.273) million | Use increased $744,000 |
Approximate operating margin was negative 2,755% and consolidated net margin was negative 3,137% for Q1 FY2018, based on reported revenue. The filing does not provide a gross profit or gross margin.
- Cash and cash equivalents were $5.916 million at September 30, 2017, compared with $8.088 million at June 30, 2017.
- Total assets were $33.433 million; total liabilities were $27.140 million; and total equity was $6.293 million.
- The capital lease obligation was $25.221 million, including $187,000 current and $25.034 million long-term. Total future minimum lease payments were $68.250 million, including $43.030 million of interest.
- Net cash used in investing activities was $111,000, including $96,000 of fixed-asset purchases and $15,000 of intangible-asset additions.
- Financing activities provided $956,000, consisting primarily of $1.0 million in common-stock proceeds, offset by $44,000 of capital-lease principal payments.
- Accumulated deficit was $75.949 million at September 30, 2017.
Material Changes Versus the Prior Comparable Period
- Revenue declined 10% to $122,000. The decrease primarily reflected the absence of revenue from technology services previously performed for Fiocruz, partly offset by higher third-party client services.
- Research and development expense increased approximately 20%, primarily because of higher iBio CDMO personnel costs, partly offset by lower contracted Fiocruz research expense.
- General and administrative expense was broadly stable as higher CDMO-related costs were largely offset by lower legal and consulting expenses at iBio, Inc.
- Net loss attributable to iBio increased substantially, including a $66,000 preferred-stock dividend in Q1 FY2018 and a $551,000 noncontrolling-interest allocation in the prior-year quarter.
- Operating cash burn increased from $2.273 million to $3.017 million.
- Cash decreased $2.172 million during the quarter, versus a $2.916 million decrease in the prior-year period.
- Shares outstanding increased to 92.819 million at September 30, 2017 from 89.119 million at June 30, 2017, primarily due to Lincoln Park transactions.
Guidance, Outlook, Risks and Unusual Items
- No formal revenue or earnings guidance was provided. Management expects continued significant expenses and operating losses for at least the next year and states that expenses could increase substantially if clinical trials and additional product development proceed.
- Management disclosed substantial doubt 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 stated that September 30 cash of approximately $5.9 million was expected to support activities through December 31, 2017. The filing also states that additional capital may be required even if the company accesses the full Lincoln Park facility.
- Under the July 2017 Lincoln Park agreement, the company may sell up to $16.0 million of common stock over 36 months, subject to market, ownership and other limitations. It sold 2.5 million shares for $1.0 million initially and issued commitment shares. The filing contains an inconsistency regarding the commitment issuance: the equity note states 1.2 million shares, while the legal-proceedings disclosure states 1.25 million shares.
- Additional equity financing could materially dilute existing stockholders. If financing is unavailable, the company may delay or discontinue programs, seek less favorable collaborations, relinquish rights or potentially cease operations.
- The 34-year capital sublease requires annual base rent of $2.1 million, subject to CPI and other adjustments, plus percentage rent. Beginning in 2018, minimum-sales provisions may require payments based on specified revenue thresholds even if actual sales are lower.
- The company is litigating against Fraunhofer concerning contractual breaches, technology ownership and technology-transfer obligations. iBio filed an additional complaint against Fraunhofer-Gesellschaft in November 2017. The outcome cannot currently be predicted.
- The filing states that an FDA or foreign equivalent filing related to licensed fibrosis technology was extended to December 31, 2017 through successive amendments. No product candidate had been commercialized as of September 30, 2017.
- Related-party activity remained significant, including approximately $480,000 of quarterly interest expense and $778,000 of accrued expenses owed to an Eastern affiliate or related entities.
- Management concluded that disclosure controls and procedures were effective as of September 30, 2017, with no material changes in internal control over financial reporting during the quarter.
Most Important Facts for Investors to Verify
- Whether the company obtained sufficient financing after the filing date to address the disclosed going-concern uncertainty and its stated cash runway.
- The actual number of Lincoln Park commitment shares issued and the remaining availability under the $16.0 million equity facility.
- Current operating performance and customer backlog at iBio CDMO relative to the facility’s substantial fixed lease obligations and minimum-sales provisions.
- Progress toward the IBIO-CFB03 regulatory filing and any required milestones under the University of Pittsburgh license.
- Developments, potential damages and technology-rights implications in the Fraunhofer litigation.
- The extent of future equity issuance and resulting dilution, including outstanding options of approximately 13.6 million shares.