iBio(IBIO) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited financial statements, management's analysis of financial condition and operations, market risk disclosures, and internal controls Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, reflecting a strategic pivot, significant losses, and substantial doubt about the company's going concern status Condensed Consolidated Balance Sheets The balance sheet shows a significant decrease in total assets and stockholders' equity, primarily driven by reduced cash and asset reclassifications Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2022 (Unaudited) | June 30, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $3,696 | $22,676 | | Current assets held for sale | $20,457 | $3,900 | | Total Current Assets | $38,235 | $45,070 | | Total Assets | $51,800 | $99,406 | | Liabilities & Equity | | | | Total Current Liabilities | $27,775 | $30,436 | | Total Liabilities | $32,977 | $35,921 | | Total Stockholders' Equity | $18,823 | $63,485 | | Total Liabilities and Equity | $51,800 | $99,406 | Condensed Consolidated Statements of Operations and Comprehensive Loss The statements of operations show no revenue from continuing operations, increased operating losses, and a substantial net loss due to discontinued operations Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues (Continuing) | $0 | $0 | $0 | $84 | | Operating loss (Continuing) | $(10,573) | $(7,231) | $(18,209) | $(12,456) | | Loss from discontinued operations | $(22,990) | $(4,729) | $(33,583) | $(8,480) | | Net loss available to iBio, Inc. stockholders | $(33,553) | $(11,942) | $(51,683) | $(20,947) | | Loss per common share - total | $(3.42) | $(1.37) | $(5.54) | $(2.40) | Condensed Consolidated Statements of Cash Flows Cash flow statements indicate increased cash usage in operations, a net decrease in cash, and a low ending cash balance Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(21,594) | $(20,033) | | Net cash used in investing activities | $(1,226) | $(6,121) | | Net cash used in financing activities | $(1,903) | $(6,105) | | Net decrease in cash, cash equivalents and restricted cash | $(24,723) | $(32,259) | | Cash, cash equivalents and restricted cash - beginning | $28,672 | $77,404 | | Cash, cash equivalents and restricted cash - end | $3,949 | $45,145 | Notes to Condensed Consolidated Financial Statements The notes detail the company's strategic pivot to AI-driven immunotherapy, the divestment of CDMO operations, and significant going concern doubts due to losses and limited cash - The company has shifted its focus to become an AI-driven innovator of precision antibody immunotherapies, with a pipeline focused on immuno-oncology antibodies against hard-to-drug targets[26] - The IND filing for IBIO-101 is delayed from the first half of 2024 to the first half of 2025 to await competitor clinical data and optimize financial resources[28] - The company has terminated its IBIO-100 anti-fibrotic program and the related license agreement with the University of Pittsburgh due to manufacturing challenges[34] - In September 2022, the company acquired substantially all assets of RubrYc Therapeutics, including its AI Drug Discovery platform, to enhance its antibody discovery capabilities[36][118] - There is substantial doubt about the Company's ability to continue as a going concern due to significant losses and limited cash. Cash and investments of $9.9 million as of Dec 31, 2022, are not expected to be sufficient to support operations through Q3 Fiscal 2023 without additional financing or other measures[42][43] - On November 3, 2022, the company announced the divestment of its CDMO business, leading to a 60% workforce reduction and classifying the segment as a discontinued operation. This resulted in a charge of $33.6 million for the six months ended Dec 31, 2022, including a $17.6 million fixed asset impairment[46] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic transformation, severe liquidity challenges, increased operating expenses, and significant asset impairment charges Overview and Recent Developments The company is transforming into an AI-driven immunotherapy innovator, marked by CDMO divestment, workforce reduction, an equity offering, and significant management changes - The company is transforming into an AI-driven precision antibody discovery and development company, planning to divest its CDMO business[229] - In conjunction with the divestment, the company reduced its workforce by approximately 60% (69 positions), which is expected to reduce the monthly burn rate by about half to a range of $2.5-$3.0 million[229] - In December 2022, the company closed an underwritten public offering, receiving net proceeds of approximately $2.86 million[231][233] - The company experienced significant management turnover, with the CEO resigning in December 2022, followed by the appointment of an Interim CEO and Interim CFO in January 2023[230][234] Liquidity and Capital Resources The company faces severe liquidity challenges, with insufficient cash to fund operations, raising substantial doubt about its ability to continue as a going concern - Management has concluded there is substantial doubt about the company's ability to continue as a going concern for the next 12 months[237] - Cash, cash equivalents, restricted cash and investments of $9.9 million as of December 31, 2022, are not anticipated to be sufficient to support operations through the third quarter of fiscal year 2023[239] - The company must raise additional capital to execute its long-term business plan, regardless of cost-cutting measures or asset sales[239] Results of Operations Operating expenses from continuing operations increased, driven by R&D and G&A costs, with significant losses from discontinued operations due to asset impairments Comparison of Operating Expenses (in millions) | Expense Category | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and Development | $2.8 | $1.9 | $5.3 | $3.0 | | General and Administrative | $7.8 | $5.4 | $12.9 | $9.5 | | Total Operating Expenses | $10.6 | $7.2 | $18.2 | $12.5 | - The increase in G&A expenses for the three months ended Dec 31, 2022 was primarily due to severance-related expenses for the company's former CEO[243] - Losses from Discontinued Operations for the six months ended Dec 31, 2022 were approximately $33.6 million, including impairments of fixed assets ($17.6 million) and inventory ($4.9 million), and personnel costs including severance ($5.8 million)[251] Critical Accounting Estimates Critical accounting estimates include impairment of fixed assets and indefinite-lived intangible assets, with significant charges recorded for CDMO assets and ongoing risk for IBIO-101 IP - The decision to divest the CDMO triggered an impairment analysis, resulting in a $17.6 million charge ($6.3 million for the building, $11.3 million for machinery) in the quarter ended Dec 31, 2022[264][265] - The IBIO-101 intangible asset (carrying amount of $5 million) was tested for impairment but none was recorded. It remains at risk for future impairment, with a hypothetical 16% discount rate or a 35% probability of clearing Phase 1 FDA approval potentially triggering a material charge[268][269][277] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, iBio, Inc. is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide the information required by this Item[273] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2022, with no material changes in internal control over financial reporting - Based on an evaluation as of December 31, 2022, the interim Principal Executive Officer and interim Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[275] - No changes in internal control over financial reporting occurred during the quarter ended December 31, 2022, that materially affected or are likely to materially affect internal controls[276] PART II. OTHER INFORMATION This section covers legal proceedings, critical risk factors, recent corporate developments, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings that are expected to have a material adverse effect on its business - The company is not subject to any material legal proceedings[278] Item 1A. Risk Factors The company faces critical risks including substantial doubt about its going concern ability, need for additional capital, potential credit agreement default, asset impairment, and loss of CDMO revenue - There is substantial doubt about the company's ability to operate as a going concern, as cash of $9.9 million as of Dec 31, 2022, is not sufficient to support operations for the next 12 months without raising additional capital or further reducing its burn rate[281][283] - The company needs additional funding to execute its business plan, and if unable to raise capital, it may be forced to delay, reduce, or eliminate development programs or cease operations[287][289] - Failure to comply with the terms of the Woodforest Credit Agreement, particularly the liquidity covenant, could result in a default, acceleration of debt, and potential action against pledged assets, including the manufacturing facility[290][291] - Acquired intangible assets may become impaired, requiring significant charges to earnings if circumstances change, such as sustained decreases in share price or negative developments in the pipeline[293] - The discontinuance of the CDMO business means the company will not generate material revenue from these operations going forward[297] - Recent turnover in the senior management team could adversely affect the business[298] Item 5. Other Information This section details the termination of the IBIO-100 license agreement and a second amendment to the Woodforest Credit Agreement, waiving a liquidity covenant default - On February 14, 2023, the company notified the University of Pittsburgh that it was terminating the license agreement for the IBIO-100 program, resulting in a full impairment of the related intangible asset of $25,000[300] - On February 9, 2023, the company and Woodforest entered into a Second Amendment to the Credit Agreement, which waived a default of the liquidity covenant, allowed certain equipment sales, and removed the obligation for iBio CDMO to continue its primary business[301] Item 6. Exhibits This section lists exhibits filed with the quarterly report, including corporate governance documents, agreements, and required certifications SIGNATURES The report is duly signed and authorized by the company's Principal Executive Officer and Interim Chief Financial Officer