The following information should be read together with the financial statements
and the notes thereto and other information included elsewhere in this Quarterly
Report on Form 10-Q (this "Report") and in our Annual Report on Form 10-K for
the year ended June 30, 2021 as filed with the SEC on September 28, 2021 (the
"Annual Report"). Unless the context requires otherwise, references in this
Report to "iBio," the "Company," "we," "us," or "our" and similar terms mean
iBio, Inc.
Forward-Looking Statements
This Report contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). For this purpose, any statements contained herein regarding our
strategy, future operations, financial position, future revenues, projected
costs and expenses, prospects, plans and objectives of management, other than
statements of historical facts, are forward-looking statements. The words
"anticipate," "believe," "estimate," "may," "plan," "will," "would" and similar
expressions are intended to identify forward-looking statements, although not
all forward-looking statements contain these identifying words. Such statements
reflect our current views with respect to future events. Because these
forward-looking statements involve known and unknown risks and uncertainties,
actual results, performance or achievements could differ materially from those
expressed or implied by these forward-looking statements for a number of
important reasons, including those discussed in this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and elsewhere in
this Report, as well as in the section titled "Risk Factors" in the Company's
Annual Report. We cannot guarantee any future results, levels of activity,
performance or achievements. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described in this Report as anticipated,
believed, estimated or expected. The forward-looking statements contained in
this Report represent our estimates as of the date of this Report (unless
another date is indicated) and should not be relied upon as representing our
expectations as of any other date. While we may elect to update these
forward-looking statements, we specifically disclaim any obligation to do so
unless otherwise required by securities laws.
Overview
We are a developer of next-generation biopharmaceuticals and pioneer of the
sustainable FastPharming Manufacturing System. The Company applies its licensed
and owned technologies to develop novel products to treat or prevent fibrotic
diseases, cancers, and infectious diseases. We use our FastPharming
Manufacturing System ("FastPharming" or the "FastPharming System") and
Glycaneering Services TM to more rapidly build a portfolio of high quality
biologic drug candidates in human clinical trials. We are also using the
FastPharming System to create proteins for others by contract or via the
Company's catalog.
We operate in two segments: (i) Biopharmaceuticals: which includes development
and licensing in two business units; Therapeutics (focused on oncology, as well
as fibrotic and infectious diseases) and Vaccines (human and animal health
vaccines), and (ii) Bioprocessing which includes Services (FastPharming Process
Development and Manufacturing, as well as Bioanalytical and other services) and
Products (growth factors, lectins, and monoclonal antibodies) for research and
further manufacturing uses, collectively known as our Research & Bioprocess
products ("RBP").
Recent Developments
On August 23, 2021, we entered into a series of agreements with RubrYc
Theraputics, Inc. ("RubrYc") described in more detail below whereby in exchange
for a $5 million investment in RubrYc, a probable further investment of $2.5
million, potential future milestones and royalties, we acquired:
A worldwide exclusive license to certain antibodies that RubrYc develops under
what it calls its RTX-003 campaign, which are promising immuno-oncology
? antibodies that bind to the CD25 protein without interfering with the IL-2
signaling pathway thereby potentially depleting T regulatory (T reg) cells
while enhancing T effector (T eff) cells and encouraging the immune system to
attack cancer cells
? Options for us to license additional antibodies developed using RubrYc's
artificial intelligence-based antibody discovery platform
? Preferred stock in RubrYc
Pursuant to its new partnership with RubrYc Therapeutics, wherein artificial
intelligence ("AI")-based antibody discovery technologies are deployed, iBio
announced on November 15, 2021 that the first new target is now being optimized
through the program. This result follows just two months after the joint
discovery collaboration was initiated
On November 1, 2021, we purchased the manufacturing facility (the "Facility") we
had previously operated under a lease from two affiliates of Eastern Capital
Limited (the "Eastern Affiliates"). We also acquired the approximate 30% equity
interest in iBio CDMO
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held by the Eastern Affiliates, became the lessee under the ground lease for the
property upon which the Facility is located and terminated the Sublease we had
entered into with the Eastern Affiliates. As a result, the subsidiary and its
intellectual property are now wholly-owned by us. The total purchase price for
the Facility, the termination of the Sublease and other agreements among the
parties, and the equity described below is $28,750,000, which was paid
$28,000,000 in cash and by the issuance to Bryan Capital Investors LLC, an
affiliate of the Eastern Affiliates a two-year warrant to purchase 1,289,581
shares of our common stock at an exercise price of $1.33 per share. In
connection with the purchase of the Facility, we entered into a Credit
Agreement, dated November 1, 2021 (the "Credit Agreement"), with Woodforest
National Bank ("Woodforest") pursuant to which Woodforest provided iBio CDMO a
$22,375,000 secured term loan (the "Term Loan") to purchase the Facility, which
Term Loan is evidenced by a Term Note (the "Term Note"). The Term Loan was
advanced in full on the closing date. The Term Loan bears interest at a rate of
3.25%, with higher interest rates upon an event of default, which interest is
payable monthly beginning November 5, 2021. Principal on the Term Loan is
payable on November 1, 2023 subject to early termination upon events of default.
The Term Loan provides that it may be prepaid by iBio CDMO at any time and
provides for mandatory prepayment upon certain circumstances. The Term Loan is
secured by a lien on all of the assets of iBio CDMO and we guaranteed payments
of the obligations owed under the Term Loan.
The Transaction is expected to immediately reduce our Facility related cash
requirements by approximately 67% after taking into account interest payments
owed under the Credit Agreement and provide us with the flexibility to explore
potential longer-term financing options for our FastPharming Facility,
including, but not limited to, a potential sale-leaseback transaction.
Taking into account these potential financing options, combined with the savings
in the Facility related cash requirements expected to be achieved through this
transaction, the Company continues to believe that its current cash position is
sufficient to fund its operations through the third quarter of Fiscal 2023. If
we cannot take advantage of the additional financial flexibility and based on
the Company's working capital at September 30, 2021, management has concluded
that there is sufficient liquidity to fund normal operations through at least
the second quarter of Fiscal 2023.
On November 15, 2021, we announced that we entered into a collaboration with the
University of Texas Southwestern ("UTSW") to jointly research the potential of
iBio's IBIO-100 to treat solid tumors. Among all the stromal cells that present
in the tumor microenvironment, cancer-associated fibroblasts ("CAFs") are one of
the most abundant and critical components of tumor tissue, which provide
physical support for tumor cells and can promote or retard tumorigenesis in a
context-dependent manner. CAFs are also involved in the modulation of many
components of the immune system, and recent studies have revealed their roles in
immune evasion and poor responses to cancer immunotherapy. 1 In addition, CAF
response to chemotherapy is highly variable. 2 Through a series of planned in
vitro and in vivo studies, the collaboration will evaluate the potential of the
anti-fibrotic effects of our endostatin E4 molecule to improve the efficacy of
concomitant treatments, such as chemotherapy and immunotherapy, in cancer models
with a fibrotic component. We are currently developing endostatin E4 as IBIO-100
for fibrotic diseases.
On November 15, 2021, iBio announced it has entered a collaboration with a
leading innovator of microarray patch systems, which are a painless alternative
to intramuscular ("IM") injections. The first objective of the collaboration is
to evaluate feasibility of intradermal delivery of IBIO-202. If successful, the
partnership has the potential to drive improved patient access, and possibly
enable patient self-administration. This initiative is not expected to impact
the clinical development timeline for IBIO-202.
Results of Operations - Comparison of the three months ended September 30, 2021
and 2020
Revenue
Revenues for the three months ended September 30, 2021 and 2020 were
approximately $0.21 million and $0.41 million respectively, a decrease of
approximately $0.2 million. We expect revenue to be variable, quarter to quarter
since we are currently dependent on a small number of customers and revenue
recognition often occurs when a task or job is entirely complete. We recognized
100% of revenues from three customers in Q1 of 2021 compared to two in Q1 of
2020, however the size of the contracts in 2021 were smaller leading to a
decrease in revenue compared to Q1 of 2020.
1 Liu, T., Han, C., Wang, S. et al. Cancer-associated fibroblasts: an emerging
target of anti-cancer immunotherapy. J Hematol Oncol 12, 86 (2019).
https://doi.org/10.1186/s13045-019-0770-1
2 Sonnenberg, M., van der Kuip, H., Haubeiß, S. et al. Highly variable response
to cytotoxic chemotherapy in carcinoma-associated fibroblasts (CAFs) from lung
and breast. BMC Cancer 8, 364 (2008). https://doi.org/10.1186/1471-2407-8-364
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Gross Profit
Gross profit for the three months ended September 30, 2021 and 2020 was $0.17
million and $0.30 million, respectively, a decrease of approximately $0.13
million. Gross profit percentage was 81.0% for the three months ended
September 30, 2021 and 73.9% for the three months ended September 30, 2020. The
increase in gross profit percentage was largely due to the completion in 2021 of
a small number of higher gross profit projects.
Research and Development Expenses ("R&D")
Research and development expenses for the three months ended September 30, 2021
and 2020 were $2.5 million and $1.9 million, respectively, an increase of
approximately $0.6 million. The increase was primarily related to increases in
personnel and other expenses to support the Company's development of a portfolio
of proprietary therapeutics and vaccines.
General and Administrative Expenses ("G&A")
General and administrative expenses for the three months ended
September 30, 2021 and 2020 were approximately $6.6 million and $5.4 million
respectively, an increase of $1.2 million. The increase resulted primarily from
an increase in headcount and consulting costs to increase production capability
and support the portfolio of proprietary therapeutics and vaccines.
Total Operating Expenses
Total operating expenses, consisting primarily of R&D and G&A expenses, for the
three months ended September 30, 2021 were approximately $9.1 million, compared
with approximately $7.2 million in the same period of 2021.
Total Other Income (Expense)
iBio CDMO's operations take place in a facility in Bryan, Texas. Until November
1, 2021, the Facility was operated under a 34-year lease (the "Sublease") with
the second affiliate of another affiliate of Eastern Capital Limited
("Eastern"), a stockholder of the Company (the "Second Eastern Affiliate"). Such
Sublease is accounted for as a finance lease and included in Other Income.
Total Other Income (expense) for the three months ended September 30, 2021 and
2020 was approximately $0.03 million and ($0.61) million, respectively. For the
three months ended September 30, 2021, Total Other Income primarily included
interest expense of approximately $.7 million incurred under the finance lease
offset by $.6 million of Forgiveness of note payable and accrued interest and
$.13 million of interest income. For the three months ended September 30, 2020,
Total Other Expense primarily included interest expense of approximately $.6
million incurred under the finance lease.
Net Loss Attributable to Noncontrolling Interest
This represents the share of the loss in iBio CDMO for an affiliate of Eastern
(the "Eastern Affiliate") for the three months ended September 30, 2021 and
2020.
Net Loss Attributable to iBio, Inc. Stockholders
Net loss attributable to iBio, Inc. stockholders for the three months ended
September 30, 2021 was approximately ($9) million, or ($0.04) per share and
includes preferred stock dividends for iBio CMO Tracking Stock of approximately
$66,000. Net loss available to iBio, Inc. stockholders for the three months
ended September 30, 2020 was approximately ($7.6) million, or ($0.05) per share,
and included preferred stock dividends for iBio CMO Tracking Stock of
approximately $66,000.
Liquidity and Capital Resources
As of September 30, 2021, we had cash and cash equivalents plus debt securities
of approximately $82.3 million as compared to $97.0 million as of June 30, 2021.
As discussed above, on November 1, 2021, we purchased the manufacturing facility
we had previously operated under a lease from the Eastern Affiliates. We also
acquired the approximate 30% equity interest in iBio CDMO, LLC. ("CDMO") held by
the Eastern Affiliates. In order to finance these purchases, we borrowed
$22.375M under the terms of the Credit Agreement and used approximately $6M of
cash to pay the $28,750,000 purchase price. Despite incurring additional
interest payments under the Credit Agreement, the termination of the Sublease is
expected to lower the cash requirements of the Facility by 67% (or approximately
$2M per year). In addition, the purchases provide us with the flexibility to
explore potential longer-term financing options for our Facility, including, but
not limited
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to, a potential sale-leaseback transaction. Taking into account these potential
financing options, combined with the savings in the Facility related cash
requirements expected to be achieved through this transaction, the Company
continues to believe that its current cash position is sufficient to fund its
operations through the third quarter of Fiscal 2023. If we cannot take advantage
of the additional financial flexibility and based on the Company's working
capital at September 30, 2021, management has concluded that there is sufficient
liquidity to fund normal operations through at least the second quarter of
Fiscal 2023.
Net Cash Used in Operating Activities
Net cash used in operating activities was approximately $ (9.3) million for the
three months ended September 30, 2021. The use of cash was attributable to
funding our net loss for the period.
Net Cash Used in Investing Activities
Net cash used in investing activities was approximately ($5.1) million for the
three months ended September 30, 2021. Net cash used in investing activities for
the three months ended September 30, 2021 was mainly attributable to a series of
agreements entered into with RubrYc Therapeutics, Inc. which resulted in the
purchase of equity securities of $ (1.2) million, additions of intangible assets
of $ (2.9) million and fixed assets attributable to iBio CDMO of $(1.1) million.
Refer to Note 5 - Significant Transaction for details.
Net Cash Used in Financing Activities
Net cash used in financing activities was approximately ($0.1) million and
represented the payment of finance lease obligations.
Funding Requirements
We have incurred significant losses and negative cash flows from operations
since our spin-off from Integrated BioPharma in August 2008. As of
September 30, 2021, our accumulated deficit was approximately $ (182.6) million
and we used approximately ($8.1) million of cash for operating activities during
the three months ended September 30, 2021.
Taking into account the potential financing options following purchase of our
Facility, combined with the savings in the Facility related cash requirements
expected to be achieved, the Company continues to believe that its current cash
position is sufficient to fund its operations through the third quarter of
Fiscal 2023. If we cannot take advantage of the additional financial flexibility
and based on the Company's working capital at September 30, 2021, management has
concluded that there is sufficient liquidity to fund normal operations through
at least the second quarter of Fiscal 2023.
We plan to fund our future business operations using existing cash and liquid
resources, through proceeds realized in connection with the commercialization of
our technologies and proprietary products, government grants, license and
collaboration arrangements relating to the operation of iBio CDMO, and through
proceeds from the sale of additional equity or other securities. Although we
have been successful in raising capital during the past year, we cannot be
certain that such funding will be available in the future on favorable terms or
at all. We also plan to explore potential longer-term financing options for our
Facility, including, but not limited to, a potential sale-leaseback transaction.
We anticipate that expenses will increase as we further expand our operations,
including our planned establishment of drug discovery capabilities in San Diego,
California. In addition, further product development is also expected to
increase expenses, including but not limited to the advancing IBIO-100,
IBIO-101, IBIO-202, IBIO-400 and additional immune-oncology pipeline products in
fiscal 2022. To the extent that we raise additional funds by issuing equity
securities, our stockholders may experience significant dilution. If we are
unable to raise funds when required or on favorable terms, this assumption may
no longer be operative, and we may have to: a) significantly delay, scale back,
or discontinue the product application and/or commercialization of our
proprietary technologies; b) seek collaborators for our technology and product
candidates on terms that are less favorable than might otherwise be available;
c) relinquish or otherwise dispose of rights to technologies, product
candidates, or products that we would otherwise seek to develop or
commercialize; or d) possibly cease operations.
Off-Balance Sheet Arrangements
As part of our ongoing business, we do not participate in transactions that
generate relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose
entities (SPEs), which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually limited
purposes. As of September 30, 2021, we were not involved in any SPE
transactions.
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Critical Accounting Policies and Estimates
A critical accounting policy is one that is both important to the portrayal of a
company's financial condition and results of operations and requires
management's most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain.
Our condensed consolidated financial statements are presented in accordance with
U.S. GAAP, and all applicable U.S. GAAP accounting standards effective as of
September 30, 2021 have been taken into consideration in preparing the condensed
consolidated financial statements. The preparation of condensed consolidated
financial statements requires estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues, expenses and related disclosures. Some
of those estimates are subjective and complex, and, consequently, actual results
could differ from those estimates. The following accounting policies and
estimates have been highlighted as significant because changes to certain
judgments and assumptions inherent in these policies could affect our condensed
consolidated financial statements:
? Valuation of intellectual property;
? Revenue recognition;
? Lease accounting;
? Legal and contractual contingencies;
? Research and development expenses; and
? Share-based compensation expenses.
We base our estimates, to the extent possible, on historical experience.
Historical information is modified as appropriate based on current business
factors and various assumptions that we believe are necessary to form a basis
for making judgments about the carrying value of assets and liabilities. We
evaluate our estimates on an on-going basis and make changes when necessary.
Actual results could differ from our estimates.
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