iBio, Inc. Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2023; fiscal 2023 third quarter. The filing was signed May 15, 2023. iBio is transitioning from contract development and manufacturing to an AI-driven precision antibody discovery and development company.
Business Context and Key Developments
- The Company discontinued iBio CDMO operations and is seeking to sell the 130,000-square-foot Bryan, Texas facility and related assets. CDMO results are presented as discontinued operations.
- Management reduced the workforce by approximately 60%, or approximately 69 positions, and expects the restructuring and facility exit to reduce annual spending by approximately 50%.
- The September 2022 acquisition of substantially all RubrYc assets added an AI drug-discovery platform and antibody programs including IBIO-101, CCR8, EGFRvIII, MUC16, CD3 and a PD-1 agonist.
- IBIO-101 IND-enabling studies were paused pending additional clinical data on Roche’s RG6292 program. The Company terminated its IBIO-100 anti-fibrotic license in February 2023, with related obligations ending August 14, 2023.
Financial Results and Metrics
| Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 |
|---|---|---|---|---|
| Continuing-operations revenue | $0 | $1.8 million | $0 | $1.9 million |
| R&D expense | $2.6 million | $3.3 million | $8.0 million | $6.3 million |
| G&A expense | $3.5 million | $5.3 million | $16.4 million | $14.9 million |
| Operating loss | $6.2 million | $6.8 million | $24.4 million | $19.2 million |
| Loss from discontinued operations | $1.0 million | $5.6 million | $34.6 million | $14.1 million |
| Net loss attributable to iBio stockholders | $7.3 million | $12.4 million | $59.0 million | $33.3 million |
| Total loss per share | $0.55 | $1.42 | $5.57 | $3.82 |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $25.5 million | $26.0 million |
Margins: Continuing operations generated no revenue, so operating and net margins were not meaningful. The Company remains pre-revenue from its primary antibody discovery business.
- At March 31, 2023, cash and cash equivalents were $6.6 million, restricted cash was $3.3 million, and total cash, cash equivalents and restricted cash were $9.8 million, compared with $28.7 million at June 30, 2022.
- Total assets were $44.4 million and stockholders’ equity was $17.4 million at March 31, 2023, compared with $99.4 million and $63.5 million, respectively, at June 30, 2022.
- The Woodforest term loan balance was $13.7 million, net of deferred financing costs, at March 31, 2023, compared with $22.2 million at June 30, 2022. Equipment financing totaled approximately $438,000.
- Investing activities provided $7.0 million for the nine months, primarily from debt security redemptions and sales and fixed-asset sale proceeds. Financing activities used $0.4 million after equity proceeds and debt repayments.
Material Changes Versus the Prior Comparable Period
- Continuing-operations revenue fell to zero from $1.8 million in the quarter and from $1.9 million to zero for the nine-month period, as prior-period revenue primarily related to licensing and settlement activity.
- Quarterly R&D expense declined approximately $0.7 million due to more work being performed in-house and lower outside-services spending. Nine-month R&D increased $1.7 million due to investment in IBIO-101, CCR8, EGFRvIII, personnel, laboratory expenses and the San Diego facility.
- Quarterly G&A declined approximately $1.8 million following workforce and spending reductions. Nine-month G&A increased $1.5 million, primarily because of severance and retention costs.
- Nine-month discontinued-operations losses increased by approximately $20.5 million, including a $17.6 million fixed-asset impairment, a $4.9 million inventory reserve and approximately $7.5 million of personnel-related costs.
- The Company received $5.1 million from the Fraunhofer settlement in March 2023 and applied $3.0 million to a restricted Woodforest account. It also received approximately $2.9 million from the CDMO equipment auction, including an estimated $0.5 million of excess proceeds.
- Common shares outstanding increased to 15.8 million at March 31, 2023 from 8.7 million at June 30, 2022, reflecting equity offerings, warrant exercises and other issuances. A one-for-25 reverse stock split became effective October 7, 2022.
Outlook, Liquidity, Risks and Unusual Items
- Management states that the $9.8 million of cash, cash equivalents and restricted cash at March 31, 2023 was not expected to fund operations through the first quarter of fiscal 2024 without further cost reductions, asset sales or additional financing. The filing states that substantial doubt exists regarding the Company’s ability to continue as a going concern.
- The Company expects to require additional capital to execute its near- and long-term plans. Potential sources include equity financing, further asset sales, sale or out-licensing of product candidates, grants and collaborations. No committed source of additional funding was identified.
- The Woodforest credit arrangements require maintenance of $1.0 million of unrestricted cash after the March 2023 amendment and include restrictions on debt, asset sales and other payments. The Company had previously breached the higher liquidity covenant in January 2023 and obtained amendments and waivers.
- A May 10, 2023 amendment increased term-loan interest to 5.25% and added payment-in-kind interest of 1% to 3%, depending on the timing of a facility sale or maturity. It also provides for lender fees of $75,000 to $125,000 and conditional releases of restricted cash.
- As of the filing date, the Company was not negotiating a purchase agreement for the facility, although it had retained a new commercial real estate firm to remarket it. Failure to sell the facility, raise capital or extend the runway could lead to covenant violations, acceleration of debt and loss of collateral.
- The Company recorded a $565,000 impairment of intangible assets and identified the IBIO-101 intangible asset as at risk of future impairment. Management expects to perform annual impairment testing in the fourth quarter of fiscal 2023.
- Disclosure controls and procedures were deemed ineffective due to a material weakness involving stock-based compensation accounting for awards of severed employees. The filing states that stock-based compensation was overstated by approximately $1.2 million in the March 2023 quarter and understated by the same amount in the December 2022 quarter.
- The Company had approximately $422,000 of costs incurred under its IBIO-101 CRO agreement and approximately $958,000 of additional committed costs as of the filing date.
- Interim CEO Martin Brenner and interim CFO Felipe Duran were serving during the filing period. The search for a permanent CEO was ongoing.
Most Important Facts to Verify
- Available unrestricted liquidity, monthly cash burn and whether financing or asset-sale proceeds extend the runway beyond the first quarter of fiscal 2024.
- Status, valuation and sale prospects for the Bryan facility and remaining CDMO assets relative to the $13.7 million term-loan balance and related covenants.
- Terms and compliance status of the Woodforest amendments, including the 5.25% interest rate, payment-in-kind interest, restricted cash releases and potential acceleration rights.
- Progress and expected spending for IBIO-101 and the other AI-driven antibody programs, particularly after the IBIO-101 development pause.
- Remediation of the material weakness in stock-based compensation controls and the effect of any correction on comparative financial statements.
- Potential additional impairment of the IBIO-101 intangible asset and any further impairment or sale-price shortfall involving the facility.
- Future dilution from the ATM program, outstanding warrants, stock options and restricted stock units.