iBio, Inc. — Form 10-Q Summary
Business Context and Reporting Period
iBio develops biopharmaceutical candidates and operates the FastPharming plant-based protein production platform. Its two segments are Biopharmaceuticals and Bioprocessing, including contract development and manufacturing services and research and bioprocess products. This unaudited report covers the three and six months ended December 31, 2021, the second quarter and first half of fiscal 2022.
Key Financial Metrics
| Metric | Three Months Ended Dec. 31, 2021 | Six Months Ended Dec. 31, 2021 |
|---|---|---|
| Revenue | $0.2 million | $0.4 million |
| Gross profit | $0.1 million | $0.2 million |
| Gross margin | 32.7% | 59.6% |
| Research and development expense | $3.3 million | $5.8 million |
| General and administrative expense | $8.4 million | $15.0 million |
| Operating loss | $11.6 million | $20.6 million |
| Net loss attributable to iBio stockholders | $11.9 million | $20.9 million |
| Loss per share | $0.05 | $0.10 |
| Net cash used in operating activities | Not separately provided | $20.0 million |
At December 31, 2021, cash and cash equivalents were $39.2 million, investments in debt securities were $18.2 million, and restricted cash was $5.9 million. Management reported approximately $57.4 million of unrestricted cash and investments in debt securities and believes this is sufficient to fund activities through at least September 30, 2023. Total assets were $126.4 million and total liabilities were $35.9 million.
Debt included a $22.4 million secured term loan, recorded net of approximately $0.3 million of financing costs. The loan bears interest at 3.25% and is due November 1, 2023. The credit agreement requires at least $10.0 million of unrestricted cash and is secured by iBio CDMO assets, including the manufacturing facility; iBio, Inc. has guaranteed the obligations.
Material Changes Versus the Prior Comparable Period
- Quarterly revenue declined to $0.2 million from $0.7 million, while six-month revenue declined to $0.4 million from $1.1 million. Management attributed the decline to smaller customer contracts and variable timing of project completion.
- Quarterly gross margin fell to 32.7% from 70.1%; six-month gross margin fell to 59.6% from 71.5%, primarily because larger, higher-margin projects were completed in the prior-year periods.
- Quarterly R&D expense increased 40% to $3.3 million, and G&A expense increased approximately 48% to $8.4 million. Six-month R&D and G&A increased to $5.8 million and $15.0 million, respectively, reflecting higher staffing, San Diego facility investment, production capability, and pipeline development costs.
- Quarterly net loss attributable to stockholders increased to $11.9 million from $8.2 million; six-month net loss increased to $20.9 million from $15.8 million.
- Operating cash use increased to $20.0 million for the first six months from $15.5 million in the prior-year period. Cash, cash equivalents and restricted cash decreased to $45.1 million from $91.3 million at December 31, 2020.
- On November 1, 2021, the Company acquired its Bryan, Texas manufacturing facility, terminated the related-party sublease, acquired the remaining interest in iBio CDMO, and made the subsidiary wholly owned. The transaction totaled $28.75 million, including $28.0 million of cash and a warrant for 1.29 million shares.
- The Company entered into the $22.4 million secured term loan to fund part of the facility acquisition and paid $5.8 million to settle finance lease obligations during the six months.
- The $0.6 million PPP loan and accrued interest were forgiven in the first quarter of fiscal 2022.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- iBio expects revenue to remain volatile because it depends on a small number of customers and recognizes much of its revenue when projects are completed.
- Management expects continued significant losses and increased spending as it advances IBIO-100, IBIO-101, IBIO-202, IBIO-400, and additional oncology programs. The Company has not commercialized a therapeutic or vaccine product candidate.
- The Company planned to conduct IND-enabling studies for IBIO-202 and file an IND before the end of calendar 2022, subject to study results. It expected to move IBIO-101 into IND-enabling work before mid-2022 and planned to pace IBIO-100 development to extend its cash runway.
- The University of Pittsburgh license deadlines for IBIO-100 were extended in February 2022, including an IND filing deadline of December 31, 2023. Failure to meet license obligations could result in loss of important intellectual property rights.
- The RubrYc arrangements require potential milestone payments of up to $15 million for RTX-003 and up to $15 million for each collaboration product, plus royalties. A $2.5 million second tranche of RubrYc preferred stock remained unpaid at December 31, 2021, and management believed the remaining conditions were more likely than not to be met.
- The Fraunhofer settlement provides additional payments of $5.1 million and $0.9 million in 2022 and again in 2023. The Company received the first $0.9 million license payment on February 9, 2022 and expected to recognize related license revenue.
- The term loan matures in November 2023 and failure to comply with its covenants or refinance the obligation could result in foreclosure on the manufacturing facility and other pledged assets. The Company is exploring longer-term financing alternatives, including a potential sale-leaseback.
- The Company has incurred substantial cumulative losses and states that additional funding will be needed to execute its long-term plans. Additional equity financing could dilute existing stockholders, while debt or collaboration financing may impose restrictive terms.
- The Company has 275 million authorized common shares and approximately 218.1 million outstanding at December 31, 2021. A proposed one-for-ten reverse stock split and related reduction in authorized shares were not approved at the January 31, 2022 reconvened annual meeting.
- Revenue concentration remained significant: 100% of quarterly revenue came from four customers, with two customers representing approximately 74% and 17% of revenue.
- COVID-19 remains a potential operational and liquidity risk, although management did not anticipate a significant immediate threat to operations.
- Management concluded that disclosure controls and procedures were effective as of December 31, 2021, and reported no material changes in internal control over financial reporting.
Important Facts for Investors to Verify
- Whether unrestricted cash and investments remain sufficient to support operations through September 30, 2023 given the $20.0 million six-month operating cash burn and expected spending increases.
- Progress toward repayment or refinancing of the $22.4 million term loan due November 1, 2023, including compliance with the $10.0 million unrestricted-cash covenant.
- Customer bookings, backlog, revenue concentration, and whether the Bioprocessing segment can generate materially higher and more consistent revenue.
- Regulatory and development progress for IBIO-202, IBIO-101, IBIO-100, IBIO-400, and the oncology pipeline, including the amended University of Pittsburgh milestones.
- Potential dilution from the 14.9 million outstanding stock options, 0.8 million restricted stock units, 1.3 million acquisition warrant shares, and any future equity financing.
- Completion and accounting treatment of the remaining Fraunhofer settlement payments and the unpaid RubrYc preferred-stock tranche.