iBio, Inc. Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2017. The request metadata references “2016 Q3,” but the filing is for fiscal 2017 third quarter. Financial statements are unaudited and presented in thousands, except per-share data.
Business Context
iBio is a biotechnology company commercializing plant-based protein expression technologies, developing biopharmaceutical candidates, and providing development, manufacturing, and technology-transfer services. Its principal activities include the iBioLaunch and iBioModulator platforms, the IBIO-CFB03 fibrosis candidate, and operations of iBio CMO in Bryan, Texas.
Effective February 23, 2017, iBio exchanged the minority owner’s interest in iBio CMO for one share of iBio CMO Preferred Tracking Stock issued at an original value of approximately $12.5 million. iBio’s ownership of iBio CMO increased from 70% to approximately 99.99%.
Financial Highlights
| Metric | Three Months Ended March 31, 2017 | Three Months Ended March 31, 2016 | Nine Months Ended March 31, 2017 | Nine Months Ended March 31, 2016 |
|---|---|---|---|---|
| Revenue | $37,000 | $379,000 | $247,000 | $673,000 |
| Operating loss | $(3.936) million | $(3.072) million | $(10.415) million | $(7.139) million |
| Consolidated net loss | $(4.405) million | $(3.385) million | $(11.809) million | $(7.436) million |
| Net loss attributable to iBio | $(3.913) million | $(3.036) million | $(10.203) million | $(7.087) million |
| Net loss available to common stockholders | $(3.939) million | $(3.036) million | $(10.229) million | $(7.087) million |
| Basic and diluted loss per share | $(0.04) | $(0.04) | $(0.11) | $(0.09) |
- Operating expenses were $3.973 million in the quarter and $10.662 million for the nine-month period, consisting primarily of research and development and general and administrative expenses.
- Research and development expense increased to $1.136 million for the quarter and $3.005 million for nine months, primarily because of iBio CMO operations.
- General and administrative expense increased to approximately $2.837 million for the quarter and $7.657 million for nine months, largely because of iBio CMO-related costs.
- Interest expense was $481,000 for the quarter and $1.447 million for nine months, primarily from the iBio CMO capital lease.
- Cash was $12.422 million at March 31, 2017, compared with $23.014 million at June 30, 2016. Total current assets were $12.984 million and current liabilities were $2.621 million.
- Total assets were $40.698 million and total liabilities were $27.750 million at March 31, 2017.
- The capital lease obligation totaled approximately $25.309 million, including $180,000 current and $25.129 million long-term. Total minimum future lease payments were $69.3 million, including $43.992 million of interest.
- Accumulated deficit was $67.794 million at March 31, 2017.
Cash Flow and Liquidity
- Cash used in operating activities was $9.398 million for the nine months ended March 31, 2017, compared with $5.250 million in the prior-year period.
- Cash used in investing activities was $1.068 million, including $259,000 for intangible assets and $809,000 for fixed assets.
- Cash used in financing activities was $126,000, reflecting payments on the capital lease. The prior-year period benefited from $17.662 million of financing cash inflows, including the $15 million iBio CMO contribution and equity and warrant proceeds.
- Management stated that the recurring losses, negative operating cash flow, limited cash resources, and dependence on additional financing raise substantial doubt about the Company’s ability to continue as a going concern.
- Potential funding sources include cash on hand, additional equity or other securities, the up-to-$15 million Aspire Capital facility, and license, collaboration, or iBio CMO proceeds. No shares had been sold under the Aspire facility as of filing.
Material Changes Versus Prior Comparable Period
- Quarterly revenue declined 90% to $37,000 from $379,000; nine-month revenue declined 63% to $247,000 from $673,000. Revenue primarily reflected Fiocruz yellow-fever vaccine technology services.
- Quarterly consolidated net loss increased 30% to $4.405 million; nine-month consolidated net loss increased 59% to $11.809 million.
- Nine-month operating expenses increased 36% to $10.662 million, driven by higher research and development and general and administrative spending associated with iBio CMO.
- Nine-month interest expense increased from $323,000 to $1.447 million because the iBio CMO capital lease was in operation for a larger portion of the period.
- Cash declined by $10.592 million from June 30, 2016, primarily reflecting operating cash use and investing expenditures after the prior year’s financing inflows.
- Noncontrolling interest declined from $14.107 million at June 30, 2016 to $2,000 at March 31, 2017 following the exchange transaction that increased iBio’s ownership of iBio CMO.
Outlook, Risks, and Unusual Items
- No quantitative revenue, earnings, or cash-flow guidance was provided. Management’s near-term objectives are to secure additional commercial, government, and nonprofit technology arrangements and advance selected product candidates.
- The Company plans to advance IBIO-CFB03 through preclinical, IND-enabling activities and use iBio CMO for production supporting clinical development.
- The iBio CMO sublease requires annual base rent of $2.1 million, subject to increases, plus percentage rent and potential minimum-sales payments beginning in 2018 and 2020 under specified conditions.
- The Preferred Tracking Stock carries a 2% cumulative dividend. Approximately $26,000 had accrued at March 31, 2017, and common-stock dividends or repurchases are restricted until accrued preferred dividends are paid.
- The Preferred Tracking Stock may be exchanged for 29.99 million iBio CMO units after March 31, 2018, or upon specified liquidation or change-of-control events.
- A Delaware action against Fraunhofer concerning ownership and contractual claims remained unresolved; the Company stated that it could not predict the outcome.
- A shareholder derivative action was settled and was subsequently dismissed by court order on May 3, 2017; the Company expected insurance to fund the settlement.
- The Company’s ability to continue operations depends on obtaining additional financing or generating sufficient collaboration, licensing, and operating proceeds. Failure to obtain funding could require delaying or discontinuing programs, disposing of rights, or ceasing operations.
Important Facts for Investors to Verify
- Whether the Company can reduce its substantial operating cash burn and obtain financing before cash resources are exhausted.
- The timing, commercial scale, and profitability of iBio CMO customer contracts and technology-transfer arrangements.
- Progress toward the IBIO-CFB03 IND milestone and the commercial development of the Fiocruz yellow-fever vaccine program.
- The economic obligations and related-party risks associated with the 34-year iBio CMO sublease and Eastern-affiliated counterparties.
- The potential dilution and ownership effects of future equity issuance, including use of the Aspire Capital facility.
- The status and financial consequences of the Fraunhofer litigation and other contractual or intellectual-property contingencies.
- The terms and potential future impact of the iBio CMO Preferred Tracking Stock, including its cumulative dividend and exchange rights.