Ibio, Inc. quarterly report, Q1 FY2021

iBio, Inc. — Form 10-Q Summary

Reporting period: Three months ended September 30, 2020, compared with the three months ended September 30, 2019. The filing was signed November 16, 2020. iBio is a biotechnology company and biologics contract development and manufacturing organization using its FastPharming platform. Management reported a strategic shift toward proprietary biologics development, including vaccines and therapeutics, while continuing CDMO services.

Financial Performance and Position

Metric	Q1 FY2021	Q1 FY2020	Change
Revenue	$0.410 million	$0.108 million	+$0.302 million
Operating expenses	$7.334 million	$3.963 million	+$3.371 million
Operating loss	$6.924 million	$3.855 million	Loss increased $3.069 million
Net loss attributable to iBio	$7.533 million	$4.463 million	Loss increased $3.070 million
Net loss available to common stockholders	$7.599 million	$4.529 million	Loss increased $3.070 million
Loss per share	$0.05	$0.21	Improved on substantially higher share count
Net cash used in operating activities	$7.070 million	$2.287 million	Use increased $4.783 million

Margins: Revenue was insufficient to cover the cost structure. Approximate operating margin was negative 1,689% and net margin was negative 1,837% in Q1 FY2021, based on reported revenue and losses.

Revenue was generated from two customers: Corteva Agriscience contributed 50.5% and AzarGen Biotechnologies 49.5%.
R&D expense increased to $1.762 million from $0.977 million, primarily because of higher laboratory supplies and personnel costs.
General and administrative expense increased to $5.572 million from $2.986 million, principally due to higher professional, consulting, recruiting, facility, board and personnel costs.
Other expense was $0.610 million, substantially consisting of $0.614 million of related-party finance lease interest.

Cash Flow, Liquidity and Capital Structure

Cash and cash equivalents were $77.543 million at September 30, 2020, compared with $55.112 million at June 30, 2020.
Investments in debt securities were $6.010 million, resulting in cash and debt securities of approximately $83.6 million.
Investing cash outflows were $6.600 million, including $6.017 million for debt securities, $0.419 million for fixed assets and $0.164 million for intangible assets.
Financing cash inflows were $36.101 million, primarily from common-stock issuances, partially offset by capital-raising costs and finance-lease payments.
Management believes available cash and debt securities, together with approximately $3.0 million of subsequent stock-sale proceeds, are sufficient to fund operations through fiscal year 2022. This is management’s estimate, not a guarantee.
Total liabilities were $37.212 million. The principal obligation was the related-party finance lease, with $32.234 million of principal payments and $48.890 million of interest scheduled over the remaining term; the lease expires in 2050 and requires annual base rent of approximately $2.1 million, subject to increases.
The $0.600 million PPP loan remained outstanding, with $0.362 million classified as current and $0.238 million as non-current. Forgiveness remained subject to SBA approval and documentation.
Common shares outstanding increased to 180.3 million at September 30, 2020 from 140.1 million at June 30, 2020. Approximately 182.1 million shares were outstanding as of November 16, 2020.

Material Changes Versus the Prior Comparable Period

Revenue increased approximately 280%, reflecting completion of deliverables for Corteva and AzarGen, but remained small relative to operating expenses.
Operating expenses rose approximately 85%, and net loss increased approximately 69%.
Operating cash use increased approximately 209%, partly reflecting the larger net loss and changes in working capital.
Financing activity materially strengthened liquidity: the Company generated $36.1 million of financing cash flow in the quarter versus none in the prior-year quarter.
Weighted-average shares increased to 162.4 million from 21.9 million, reducing reported loss per share despite the larger absolute loss.
All Series B preferred stock was converted into 28.925 million common shares in August 2020. The Company also terminated the Lincoln Park March 2020 purchase agreement effective July 27, 2020.
The UBS at-the-market facility was increased to $72 million. As of the filing date, the Company reported approximately $68.97 million of net proceeds from approximately 30.18 million shares sold under the facility.

Guidance, Outlook, Risks and Unusual Items

Management expects continued losses and negative operating cash flow and has not provided revenue, earnings or clinical-development guidance.
Key programs include IBIO-201, selected as the lead COVID-19 vaccine candidate; IBIO-200; IBIO-100 for fibrotic diseases; and an ACE2-Fc COVID-19 therapeutic licensed from Planet Biotechnology.
The Planet license required a $150,000 upfront payment and includes potential milestone payments totaling up to approximately $6.15 million, payable in cash or stock at iBio’s discretion under the agreement terms.
COVID-19 caused reduced CDMO capacity and a three-day facility shutdown in April 2020. Management did not anticipate a significant current operational threat but stated that future effects on operations and liquidity could not be reasonably estimated.
The Company faces substantial customer concentration, development and regulatory risk, dependence on future financing, potential equity dilution, and the risk that proprietary products may never reach commercialization or profitability.
The Company’s long-running litigation against Fraunhofer will proceed to trial scheduled for March 1–5, 2021. Several claims survived summary judgment, while fraud, conversion, constructive trust, partial rescission and unjust enrichment claims were dismissed. The filing states that the outcome cannot be predicted.
The Company reported that a material weakness related to recording common-stock sales on the settlement date rather than the trade date was remediated, and that disclosure controls were effective as of September 30, 2020.
On October 1, 2020, iBio entered into a services agreement with Safi Biosolutions and invested $1.5 million in a 5% convertible promissory note maturing October 1, 2023.
On October 1, 2020, the NYSE American notified iBio that it had regained compliance with applicable continued-listing standards through the $50 million market-capitalization exemption.

Important Facts for Investors to Verify

Whether cash and debt securities remain sufficient through fiscal year 2022 given continuing quarterly cash burn and planned vaccine and therapeutic development costs.
The timing, amount and potential dilution from additional equity sales, including the remaining availability under the UBS facility.
Progress of IBIO-201 toward toxicology studies, clinical development and regulatory milestones, and the Company’s ability to finance those activities.
Customer renewals, backlog and diversification, given that two customers generated 100% of quarterly revenue.
The status and potential financial impact of the Fraunhofer litigation and any related intellectual-property rights.
Whether the PPP loan is forgiven and whether any additional liabilities arise under the long-term related-party finance lease.
Whether the reported remediation of the stock-transaction control weakness remains effective in subsequent filings.