iBio, Inc. Q2 FY2021 Earnings Call

Thank you for being here, and welcome to the iBio Fiscal 2021 Second Quarter Financial Results Conference Call. Currently, all participants are in a listen-only mode. We will have a question-and-answer session later, and instructions will be provided at that time. I will now hand the conference over to your host, Stephen Kilmer from Investor Relations. Please proceed.

Thank you. Good afternoon, everyone. Let me start by pointing out that this conference call will include forward-looking statements regarding our iBio and its business. Often but not always, forward-looking statements can be identified by the use of words such as may, might, will, should, believe, expect, anticipate, estimate, continue, predict, forecast, project, plan, intend or similar expressions, or statements regarding intent, belief, or current expectations are forward-looking statements. Such statements are based on the current expectations of management. The forward-looking events and circumstances discussed in this conference call may not occur by certain specified dates or at all and could differ materially due to known and unknown risk factors and uncertainties affecting the company. Including risks regarding the company’s ability to obtain regulatory approvals for commercialization of its product candidates or to comply with ongoing regulatory requirements, regulatory limitations relating to its ability to promote or commercialize its product candidates for specific indications, acceptance of its product candidates in the marketplace, and the successful development, marketing or sale of the products, its ability to maintain its license agreements, the continued maintenance and growth of its patent estate, its ability to establish and maintain collaborations, its ability to obtain or maintain the capital or grants necessary to fund its research and development activities, competition, or its ability to retain its key employees. Although iBio has attempted to identify important factors that could cause actual actions or uncertain results to differ materially from those described in these forward-looking statements, there may be other factors that can cause actions, events or results to differ from those anticipated, estimated or intended. No forward-looking statement can be guaranteed except if required by applicable securities laws, forward-looking statements are only as of the date on which they are made and iBio undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise, other than as required by law. On the call today representing the company are Mr. Tom Isett, iBio’s Chairman and Chief Executive Officer; and John Delta, iBio’s Principal Accounting Officer. With that said, I’ll now turn the call over to Tom.

Great. Thank you, Steve, and good afternoon, everyone. So I would like to start off by thanking the small team of people who helped start the transformation of iBio in late 2019, and the investors who believed in us. That grew our passion, energy, and belief that we could use the power of plants not only to help other companies speed the development of their products into the clinic, but also to use our own technologies and scalable manufacturing platform to create our own portfolio of biological medicines to address unmet needs in human and animal health. In 2020, we combined our new Glycaneering technologies with our FastPharming System to significantly enhance our protein engineering capabilities. That led to growing interest in our CDMO services while jumpstarting work on our proprietary vaccines and therapeutics. There were plenty of skeptics who didn't think that plants could work as well as traditional mammalian cell production systems. But we added a few members to our team and even introduced a new business model that led to a novel partnership, enabling us to accelerate the formation of our research and bioprocess business. With three new businesses added to our existing services portfolio, we invested in recruiting experienced and talented leaders to help us build and grow these four segments. Now, in 2021, we have a growing pipeline of biopharmaceuticals for human and animal health indications. Our lead COVID-19 vaccine candidate attempts to anticipate the potential for new coronavirus mutations, with a design that includes the spike antigen as well as other more conserved viral proteins. As COVID-19 evolves into a seasonal illness, as many experts are beginning to predict, the subunit vaccine carrying multiple SARS-CoV-2 antigens that can be rapidly modified and scaled like IBIO-201 could address some of the still significant unmet needs associated with recently introduced mRNA and viral vaccine platforms. Meanwhile, we're advancing our lead anti-fibrotic molecule by optimizing its efficacy, safety profile, and manufacturability. It was the creation of our new Animal Health Organization that is accelerating our work to bring our classical swine fever vaccine forward, which includes our effort to secure important regulatory approvals for our FastPharming facility in Texas. As significant as this progress may be, the advances we've made to establish a pipeline of human and animal health candidates is only part of the work our dedicated team has been focused on. We've overcome the challenges of the pandemic to serve our CDMO clients and continue to deliver on the projects that we have underway with organizations such as United Therapeutics, Safi Biosolutions, and ATB Therapeutics, among others. More generally, we're seeing our innovative FastPharming system gaining traction in the Contract Manufacturing Services segment. Therefore, we expect that with our new commercial initiatives, reflected in part by our recently launched website, we will be able to spread the word about all the advantages of our truly green platform, including speed, scalability, and quality. Notably to that last point, we've enhanced our monoclonal antibody engineering and characterization capabilities, which would make FastPharming even more attractive to certain market segments. Bottom line, we believe the FastPharming platform provides a sustainable competitive advantage by reducing time and cost for the early stage biologics development cycle. We're confident that we can build a strong multifaceted biotech and CDMO around it to capitalize on the optionality it provides and to return value to our shareholders. We couldn't be more grateful to our employees, vendors, strategic partners, and investors for their efforts and support regarding our transformation. Before I go into our quarterly developments and positioning for the remainder of FY 2021, I'll turn the call over to John to review our fiscal second quarter 2021 financial results. John?

Thanks, Tom. Good afternoon, everyone. I'd like to provide a brief update on our financial results for the quarter ended December 31, 2020. To streamline things, all the numbers I will mention have been rounded and are therefore approximate. For the three-month period ended December 31, 2020, iBio reported revenue of $700,000, an increase of $400,000 from the same quarter last year. Total operating expenses, consisting primarily of research and development or R&D, and general and administrative or G&A expenses for the quarter ended December 31, 2020, were $8.3 million, compared with $3.5 million for the same period last year. R&D expenses for the quarter ended December 31, 2020, were $2.4 million compared with $900,000 in the same period a year ago. The increase is primarily related to rising laboratory consumables, supplies, and higher R&D personnel costs. G&A expenses for the quarter ended December 31, 2020, were $5.8 million, compared with $2.6 million in the same quarter last year. The increase results primarily from higher professional and consulting fees, including recruiting, as well as facility repairs and maintenance, public company costs, insurance, and board of director fees. Other expense for the quarter ended December 31, 2020, was $600,000, which was consistent with the same quarter a year ago. As we move forward in our current quarter, and with the establishment in January of our dedicated R&D group, led by our new Chief Scientific Officer, we will be able to provide more visibility in regard to R&D, G&A, and cost of goods sold expenses. In Q3, we will begin reporting on revenues and expenses associated with the three new profit centers within iBio, Inc., which include therapeutics, vaccines, and research and bioprocess products. We've been making significant investments in people, processes, and infrastructure to match our progress and position in our lifecycle. We believe that creating this solid foundation provides the expertise and capabilities needed for a high-quality biotech company, and will serve iBio well as it moves forward with its value creating objectives. That said, as we continue to advance our clinical pipeline, we expect growth in R&D expense to begin significantly outpacing G&A expense moving forward, especially with the aforementioned expense visibility we will be providing. Net loss attributable to iBio stockholders for the quarter ended December 31, 2020, was $8.2 million, or $0.04 per share, compared with a net loss of $25.4 million, or $0.69 per share in the comparative period last year. As of December 31, 2020, iBio had cash and cash equivalents, plus investments in debt securities of $107.6 million. With that, I'll now turn the call back over to Tom. Tom?

Thanks, John. While we're excited with our progress today, of course, we remain focused on delivering results in the near-term while also creating long-term success. We believe that our investments in innovation, processes, and people today will be foundational for achieving our long-term goals. To that end, we've added eight new leaders to the organization since the beginning of fiscal Q2, bringing with them a wealth of industry experience to our team. As you may have seen in our separate press release earlier today, our most recent addition comes with the appointment of Mr. Robert Lutz as Chief Financial and Business Officer. He will manage our financial operations, including reporting, budgeting and strategic planning, and considering Rob's impressive background working with commercial stage companies to secure complimentary assets via licensing deals and partnerships. We believe he will be in a position to readily contribute to the growth of our product portfolio. Joining Rob in our recently enhanced C-suite is Randy Maddux, Chief Operating Officer; Lisa Middlebrook, Chief Human Resources Officer; and Dr. Martin Brenner, Chief Scientific Officer. In many respects, Dr. Brenner's appointment embodies our iBio transformation from an acquired CDMO into a dynamic biotech innovator and leading biologics contract manufacturing organization. He has a strong history of success heading drug discovery and development teams at several of the world's leading pharmaceutical companies, including AstraZeneca, Lilly, Pfizer, and Merck. Most recently, Martin served as the CSO in Pfenex, an NYSE-listed company, which, using his novel protein expression technology platform, created an advanced pipeline of therapeutics, vaccines, biologics, and biosimilars. We believe Martin will be able to leverage his prior experience to drive the growth of iBio’s proprietary product platform. As a self-described drug developer, we believe his skill sets round out our team quite well. Ms. Middlebrook is a proven team builder with a strong bottom line focus. Coming to us from Lupin Incorporated, a global pharmaceutical company offering branded and generic formulations, biosimilars, and active pharmaceutical ingredients, Lisa has extensive experience delivering human resources strategies and recruiting talent. Notably, at Biologics, a multinational CDMO, she led a global leadership development program. Rob, Martin, and Lisa joined us alongside Randy Maddux, who was appointed COO in November, coming to us from GSK, and Dr. Melissa Berquist, who was named head of animal health programs in October. Along with these recent additions, we've greatly enhanced our biopharmaceutical industry experience on our board with the appointment of Dr. Linda Armstrong, Dr. Alexandra Kropotova, and Gary Sender earlier. So please join us in welcoming all of them to iBio as they help us execute on our strategy. Turning now to developments with our biopharmaceutical pipeline, I'd like to provide a few details on the advancement of our COVID-19 vaccine candidate. We've recently completed the end-of-life phase of IND enabling toxicology studies for our subunit vaccine IBIO-201. The data is currently being analyzed by our contract research organization, and we expect to report pathology results in early Q4 of fiscal year 2021. Although there are approved vaccines now on the market, we still see a need for continued development of alternatives considering evolving mutations as well as global distribution and access constraints for the current products. As most of you know, we selected IBIO-201 as our leading COVID-19 vaccine based upon its production of higher spike neutralizing antibodies, compared to our DLP vaccine platform, IBIO-200. IBIO-201 is based on a subunit platform that combines antigens derived from the SARS-CoV-2 spike protein, fused with our patented ligand booster molecule to enhance immune response. The addition of the ligand booster to a subunit antigen may improve the likelihood of achieving single-dose prolonged immunity. Additionally, considering the emergence of circulating mutations of COVID-19, we recently began designing a next-gen subunit vaccine with IBIO-201 that includes the spike, or S-protein, plus the nucleocapsid, or N-protein. We're using fast farming to build the N plus S for us, with the idea that if the toxicology results are favorable, we would take those two and test them with other adjectives and evaluate results. The same concerns around possible variants that drove our decision to develop the N plus S vaccines provided the rationale for us signing the H2FC deal with Planet Biotechnology back in August. This COVID-19 therapeutic candidate is a recombinant protein comprised of human angiotensin converting enzyme 2 or ACE2, fused to a human immunoglobulin G Fc fragment. This ACE2 is the target receptor for the coronavirus's entry into the cells, and we believe the candidate will bring the benefit of traditional neutralizing antibody prospectively limiting the potential for viral escape. We continue to see a strategic advantage of that approach in light of what we're seeing with competing therapeutics. We continue to watch the regulatory and competitive landscape closely to make ACE2-Fc part of the solution. Turning to our lead animal health product, with the help of Dr. Berquist, we're planning to submit an outline of production for a U.S. veterinary biologics establishment license as part of the development of IBIO-400, our classical swine fever vaccine. If we secure such a license, it will enable us to expand our development capabilities across our organization and open up a constructive pathway for this and other veterinary vaccines and therapeutics. Keep in mind, this is an initial albeit important step in what is often a multi-year approval process. Meanwhile, we're planning to start an efficacy study in June on IBIO-400, with a large safety study to follow later in 2021. In addition to the progress with IBIO-400, we're excited to announce the patent issuance covering Endostatin peptides for treating fibrosis. The claims cover a novel expression cassette that enhances the yield of Endostatin fragments and variants using our FastPharming system. These patent claims are foundational to our work on antifibrotic therapies to support the development of our product candidate IBIO-100 for the treatment of systemic scleroderma and idiopathic pulmonary fibrosis as potential lead indications. We continue to make preparations to launch the last of our IND-enabling studies, which will be followed by GMP manufacturing. We are excited about the future of our therapeutic human and animal health pipeline, and the emerging success of our CDMO business has also given us confidence in our ability to execute and deliver differentiated solutions to biologics manufacturers. Our FastPharming system and Glycaneering technologies provide multiple runways of opportunity for our internal product catalogs and service capabilities, which can be seen in our CDMO agreements this year. During the quarter, we continued to diversify our customer base with the ATB Therapeutics agreement. ATB Therapeutics will use iBio's FastPharming System to produce its bioengineered antibody-toxin fusion proteins. We are looking forward to helping the organization rapidly build a scalable manufacturing process as it prepares for its first safety trial. Our Safi agreement continues to progress as we work towards generating cGMP growth factors and cytokines using our FastPharming system. This agreement has become a significant revenue contributor, driving quarter-over-quarter and year-over-year growth. We believe that Safi agreements represent a great opportunity for us in two ways. First, we are able to grow our CDMO business and showcase our capabilities. Secondly, we are starting to build our own catalogue of high-quality proteins for research and further manufacturing uses. The proteins we are building with Safi that are not designated as custom by them can be commercialized by us. The opportunity for IBIO is that, if a manufacturer buys a product from our research and bioprocess catalogue for a specific delivery system or product candidate, it will get specified for use in their manufacturing process as they move through their own clinical trials. Furthermore, a number of these products could be translated to our own proprietary product candidates. We plan to begin offering a new catalogue of these high-quality research and bioprocess proteins by mid-calendar 2021, initially focusing on growth factors and cytokines. Overall, we remain very encouraged by our growing success in CDMO services, driven by the combined technologies of FastPharming and Glycaneering. I'm excited about the opportunities across our therapeutics and vaccine product candidate pipeline, as well as for our emerging RBP business. Importantly, I believe we now have the requisite leadership and expertise within our organization to maximize both our current and future opportunities. Thank you. With that, I've concluded our highlights and we're happy to take any questions you might have. Operator?

We have our first question from Kristen Kluska with Cantor Fitzgerald. Your line is open.

Hi, everyone. Thanks for taking my questions. And congrats on the progress, new hires, as well as your new website. My first question is, last week one of the companies in phase three development for IPF announced the discontinuation of their autotaxin inhibitors citing the benefit-risk profile. So perhaps I could ask you, based on the mechanism of action of iBio-100, and what you've seen in preclinical studies, why you think your therapy could be differentiated and overcome some of the hurdles we've seen in the space?

Yes. Thanks, Kristen, and great question. We saw that development with interest, of course. The ATX inhibitor class, I think the whole class actually may get called into jeopardy here. And that combination is a safety and efficacy question that is associated with it. When we take a look at our MOA, of course, it's quite different than those layers. As we've taken a look at our particular product, one thing that we have some relatively high confidence about is its safety profile. I mean, this is ultimately just a derivative of collagen, here that we're talking about, so relative to the opportunities that we see ahead with what we've done with some of our preclinical work. By the way, that’s sort of in two areas. We have sort of a traditional mouse model, used for testing idiopathic pulmonary fibrosis, where we saw really good results versus the standard of care right now, which are pirfenidone and nintedanib. Moreover, we have human lung explants, where our data showed great results. We saw not only stabilization but also reversal in both of those particular models. So we're optimistic that, with an important dropout in the competitive landscape of developing here to treat some of these diseases, for which, I mean, there's part of the embrace solutions and the material that I just mentioned, then pirfenidone and nintedanib, and of course a lot of patients can't even stay on those medications due to such poor tolerability. So we're hopeful that what we'll be seeing for iBio-100, as we get around to designing the trials, is that from a safety and tolerability standpoint, we're certainly going to have our fingers crossed that we'll be able to deliver something there with the preclinical data that we have regarding the efficacy of the molecule. We feel pretty good about that, too, which is why we're moving forward as quickly as possible to try to get into the clinic.

Great. Thank you. On the COVID-19 vaccine landscape front, could you further elaborate on how FastPharming may allow for greater production and cost savings? And kind of what you've seen and observed from some of the other key vaccine players so far? I also wanted to elaborate on some of your prepared remarks regarding the second-generation vaccine that you have in development here. Do you think you're going to have to conduct any further toxicology work similar to what you've done for the first generation, or would you plan to move forward with them together assuming that this data next quarter for you will be positive?

Yes. Let's do, I guess, the second question first. The hope is here that, with the tox work that we're doing and taking a look at the booster molecule, Lichtenstein booster or LicKM booster, that we can have the spike protein and nucleocapsid ride along with that, and hopefully get clearance to move forward from the agency. So that's the expectation that we pair those two and then move ahead. So turning to some of the unmet needs, and I think the question is a good one around cost, especially when we take a look at what's going on and access in certain places, not the least of which would be Africa and South America. The cost is one component. The other thing I think worth noting is we see from the Pfizer and Moderna vaccines that they have pretty substantial cold chain requirements. The question is going to become, as we see if in fact, this becomes a seasonal illness and we have new mutations for which the current vaccines may have a different coverage level or efficacy. We've seen early on that you're getting 90%, and then that started to drop off, prospectively due to some of these new mutants. Then the question becomes, do you end up with entirely new strains. As we consider what's going on, if we're going to see season-after-season of this, then the speed with which mRNA vaccines can be produced to address new strains and mutants is good. I mean, it rivals what we can do with FastPharming. But ultimately, if one were to go with a subunit vaccine, then overcoming some of the cold chain requirements, among other factors, could lead to possibilities for better cost and access.

Great. Thanks so much, Tom.

Thank you. Great questions.

Our next question comes from the line of Ben Haynor with Alliance Global Partners. Your line is open.

Hey, guys. Thanks for taking the questions. Just thinking about the veterinary side of things and the IBIO-400. You mentioned that it might take a couple of years to get the clearance on the USDA side of things. What does the timeline look like for IBIO-400? When do you anticipate investing that kind of take up to completion?

Hey, Ben. So great question. It's interesting when you take a look at the regulatory pathway on the USDA side of things. Yes, it's a little bit like how the FDA used to be where you actually have to have your manufacturing facility inspected by the FDA. Nowadays, it's more incumbent upon the developer to produce the necessary information to get a Biologics License Application. Whereas in the case of USDA, you have to pass a facility inspection. They’ll send somebody out to check out the manufacturing facility itself. What one has to do if you're interested in moving down the regulatory pathway is that you have your site license for your facility travel along with your first product. To that end, we had good data in progress on our IBIO-400. What we need to do is catch up on getting the facility moving down the same path to get an establishment license. This times well for us because we're going to be able to submit an outline of production for the Classical Swine Fever Vaccine. We're doing a couple of studies here so that we're in a position to get the facility site license while also having our efficacy and safety studies.

That makes sense.

And by the way, COVID has absolutely impacted what we’ve seen and heard in terms of the USDA's ability to process these new submissions. We're mindful of that, and there are a few steps we're taking to try to alleviate some of the time however. So we could see it, it could be as long as two years depending on factors associated with the global pandemic.

Got it. You mentioned the site license travels along with the first product. Correct me if I'm wrong here, but are the products tied to the site? It seems I recall this being part of the USDA regulatory process for vaccines.

Well, I'm not a regulatory expert, Ben. But traditionally, that’s how it works. Ultimately, the establishment license is linked to your manufacturing facility, and once established for your facility with one product, you can make other products without undergoing additional inspection. But I will check that out and follow up with you.

I know that the USDA is kind of interesting in that for biologics, there really isn't a pathway for a generic or biosimilar to gain approval once you have something like that for that. It's interesting and of course, you mentioned the end of life phase for the IND enabling study on IBIO-201. This does seem to be taking longer than some people had hoped. Are there any concerns or worries you guys have with regards to toxicology that we should be thinking about?

No, it was really more than anything looking at how the market evolved. While we hoped we could skip the toxicology studies, we found that our virus-like particle platform didn’t generate the same immunogenicity as 201. We could have gone ahead with that platform, but we didn’t see the desired outcomes. The silver lining to that is, by getting the vaccination platform through toxicology, we hope to use it in the future. Regarding the VLP platform, we still believe in its promise and want to enhance it but can't do everything at once. We had to prioritize IBIO-201 in the meantime.

Okay. Thanks for all the color there. Just on the research and bioprocessing side of things, what have you seen in terms of incoming interest? Any color on that you can provide?

Not too much only because we have not yet put the products into the catalogue. What I can say is that we think we've had a good start pursuing the roughly dozen proteins as part of the program of cytokines and growth factors that we're doing with Safi. So far, we've been able to deliver those products quickly, allowing revenue recognition to happen fairly quickly, too. We believe that as we prepare the catalogue, that will give us traction.

Got it. No, that’s great. Thanks. Lastly, for me, an update on the Fraunhofer lawsuit?

Yes, it's still scheduled for trial to begin March 1, and we remain optimistic. Some would contend that the Delaware Court of Chancery's ruling back in 2016 was very much in iBio’s favor, so we believe we will prevail. We should know soon.

Our next question comes from the line of Jim Tassano, Private Investor. Your line is open.

Thank you for taking my call. I have several questions. First, I wanted to thank you, Tom, for saving this company back in late 2019. It was an ordeal, and I think very few people realize the difficulty involved in what you had to do. I also wanted to thank Steve Kilmer, as he's been a fantastically helpful resource. Now, on to a couple of quick questions. The VLP platform looks to be one of the best in the industry. Where are you at with the VLP platform?

Thank you for your support. Yes, the VLP platform certainly showed promise initially, and we believed we could use it effectively. However, the focus shifted towards optimizing IBIO-201. We've communicated that we are still investigating opportunities to enhance the VLP platform for the future, but resources are directed towards our existing projects at this time.

I noticed that you’re advertising for a Head of Oncology. Would that position be related to the VLP platform?

Yes, indeed. We see our ability to combine our Glycaneering technologies with FastPharming to manipulate sugars on monoclonal antibodies making them more potent. Our experience with our anti-cancer monoclonal antibodies provides a strong foundation for this search, and we believe it could be a great opportunity to leverage this technology going forward as well.

I wanted to ask if you have investigated targeting other proteins for IBIO-201?

I can’t disclose specific research activities, but we’re focused on ensuring our vaccine's efficacy through careful evaluation.

Can you outline rough timelines for the anticipated results from the toxicology analysis?

We hope to have the results in early Q4, which you can think of as around April. After that, assuming the data looks good, we would prepare for an IND filing shortly thereafter.

Thank you for the update.

We have now reached the allotted time for today's call. I will now turn the call back over to Tom Isett.

Once again, everyone, thanks for your time and attention today. We look forward to updating you again on our next call. Thanks, again.

Ladies and gentlemen, thank you for your participation. That concludes the presentation. You may now disconnect and have a wonderful day.