iBio, Inc. Q2 FY2022 Earnings Call

Thank you. Good afternoon, everyone. Before we begin, I would like to remind you that during this call, the company will be making forward-looking statements regarding our current expectations and projections about future events that are subject to risks and uncertainties. Reference to these risks and uncertainties are made in today’s press release as disclosed in detail in the company’s periodic and current filings with the U.S. Securities and Exchange Commission. No forward-looking statements can be guaranteed and actual results may differ from the results discussed in the forward-looking statements. The information on this conference call is provided only as of today and we undertake no obligation to update any forward-looking statements made on this call on account of new information, future events or otherwise, except as required by law. On the call today representing the company are Mr. Tom Isett, iBio’s Chairman and Chief Executive Officer; Martin Brenner, iBio’s Chief Scientific Officer; and Rob Lutz, the company’s Chief Financial and Business Officer. With that, I will now turn the call over to Tom.

Thank you, Steve, and good afternoon, everyone. I am pleased to report another highly productive quarter for our biopharmaceutical development activities, wherein we continue to grow and advance our recently established immuno-oncology pipeline, while also advancing our second-generation COVID-19 vaccine candidate. Last month, we received the FDA’s response to our pre-IND package for IBIO-202, which is our nucleocapsid protein subunit vaccine candidate against the SARS-CoV-2 virus. Given the agency’s feedback, we are moving forward with IND-enabling studies and we plan to file an investigational new drug application before the end of this calendar year. We were guided in the development of IBIO-202 by what we call our DAVi strategy, with the acronym reflective of the need for vaccines with greater durability, access, and variant inclusion. These critical needs are currently unmet by commercially available vaccines, all of which rely in some way on the virus’ spike protein as their basis for generating immunity. Spike protein is a major modulator of CoV-2’s infectivity and leads to frequent mutations. Indeed, since our last call, we saw the emergence and rapid spread of Omicron, a variant with over 35 mutations at its spike. It’s important to note that iBio is one of the very few companies, if not the only company, developing a vaccine exclusively based on the far less mutable nucleocapsid protein. iBio has the opportunity to lead in development through its true second-generation solution. Our preclinical data suggests that IBIO-202 provides a durable memory T-cell response, and at least today, none of the variants displayed mutations in the region of the virus that we used for our antigen. Thus, with our work on IBIO-202, we are aiming to deliver people’s last COVID vaccine dose, not just their next dose. While we think that the switch to a nucleocapsid-based subunit vaccine can address issues with durability and variants, we believe it can also favorably affect access as well. This is because subunit vaccines typically don’t have the additional costs and logistical challenges associated with frozen transport and storage, like mRNA vaccines do. However, we see technology solutions for other complementary ways to improve access even further. In particular, there are new delivery technologies that can avoid the labor-intensive process of delivering intramuscular injections, while making it easier for people with a fear of needles to seek getting vaccinated. To that end, in November, we executed an agreement with a leading innovator of microarray patch delivery systems to explore the feasibility of administering IBIO-202 intradermally. Microarray patches are minimally invasive and contain microneedles that painlessly penetrate the upper layers of the skin and dissolve to release their payload. This intradermal delivery method may even allow for vaccine self-administration, creating a more accessible alternative to intramuscular injections. Interestingly, this route of administration may also enhance durability by targeting a large pool of immune cells in the skin, eliciting an enhanced immune response. In turn, a stronger immune response could mean a lower dose of antigen is required, which would further improve access via a lower cost of goods. Turning now to our therapeutics, we are very pleased to see the investments that we began making in drug discovery R&D a few quarters ago already bearing fruit with multiple new pipeline additions and advancements. I would like to start our discussion in this area by pointing out that going forward, we will classify our discovery and preclinical programs into four distinct stages for greater clarity, ease of tracking, and consistency with our peers. The stages are: one, early discovery; two, late discovery; three, lead optimization; and four, IND-enabling. Since we announced plans to create our in-house drug discovery capabilities at the end of last fiscal year, we went on to add six new immuno-oncology assets to our pipeline in just six months. Our newest candidate, a monoclonal antibody designed with machine learning tools, has progressed the fastest. Emanating from our partnership with RubrYc Therapeutics, the concept for this molecule was only just identified in October, but due in part to its high-quality design, this candidate has already moved through to the late discovery stage. This example helps demonstrate the power of artificial intelligence in developing higher quality therapeutic candidates, and Martin will speak to this further. Meanwhile, another element of our partnership with RubrYc is our worldwide exclusive license agreement for a novel IL-2 sparing anti-CD25 antibody for the depletion of immunosuppressive regulatory T-cells. This is a promising anticancer therapeutic candidate with the potential to turn cold tumors hot. We have transitioned the development of the molecule from the mammalian cell culture production methods that RubrYc’s CDMO was using to our plant-based FastPharming manufacturing system. So in addition to the scalability, sustainability, and quality advantages, we are now realizing by switching to FastPharming, we also avoid the costly and complicated process of licensing the intellectual property needed to produce an afucosylated version of the molecule in mammalian systems. We can achieve the same end by simply deploying our proprietary Glycaneering technology to afucosylate the antibody in plants. Data generated to date demonstrates that the quality of the FastPharming-produced antibody is comparable to traditional mammalian bio-production methods. We continue to advance this candidate as IBIO-101, and we estimate that we may enter the IND-enabling stage before the middle of calendar 2022. We added another candidate to our oncology pipeline in November when we announced a research collaboration with the University of Texas Southwestern Medical Center to explore the anti-cancer potential of the endostatin E4 molecule in solid tumors. A version of this E4 protein has antifibrotic properties and makes up the core of the IBIO-100 program. While we continue to develop IBIO-100 for two major fibrotic diseases, systemic scleroderma, and idiopathic pulmonary fibrosis, this new collaboration with UTSW is based on E4’s potential to address tumors with a strong fibrotic component like those associated with pancreatic cancer that make them so hard to treat. On a related note, last week, iBio and a licensor for the fibrotic indications, the University of Pittsburgh, signed an amended license agreement that extends several development milestone-related deadlines for IBIO-100.

Thank you, Tom. We continue to be very pleased with the progress we are making building out our drug discovery and development infrastructure, which we initiated in May last year. We have since ensured access to multiple diverse antibody libraries and a broad range of screening capabilities through external partners and at the same time have built a team of highly skilled drug hunters at our San Diego site. This team has not only entered six new oncology programs into the pipeline in less than seven months, but has also successfully advanced two of those programs from the early discovery to the late discovery stage. I want to put this effort into the context of the one to two years, it typically takes to establish a new R&D center and to three to five years, an antibody drug discovery program in oncology usually takes from target identification to clinical development. As Tom mentioned earlier, there are four distinct stages of the discovery program. The early discovery phase includes the identification of the novel target, which is followed by an antibody screening campaign and can take somewhere between six and eight months, delivering early active molecules. In the late discovery stage, these molecules then undergo a thorough characterization, where they have to show among other things, potent and specific binding to their target protein, the desired biological effect in tumor cells, and their efficacy in a cancer animal model. This phase usually takes six to twelve months and is followed by the lead optimization phase. During lead optimization, molecules undergo improvements of their overall characteristics, which might include increasing potency and manufacturability by altering physical and chemical properties. Lead molecules are subjected to a whole battery of tests, including animal models, which more closely represent the cancer indication in patients. At the end of this phase, the molecule with the best overall profile is selected as the clinical candidate and enters into the IND-enabling stage. The lead optimization phase, depending on the complexity of the molecule, can take anywhere from eight months to one and a half years. The following IND-enabling phase is focused to a large degree on developing the manufacturing process for the molecule and establishing that it is safe to be administered to patients. This is the most expensive phase apart from clinical development and, depending on the molecule and the indication, can take eighteen months to sometimes even two years. So, we are obviously moving extraordinarily fast, enabled by our unique platform. Today, I will share some additional details about our RubrYc partner discovery program, which we refer to as Target 6 on our website. I hope you understand that we can’t disclose the molecular target at this early stage due to the highly competitive nature of the biotech industry. Target 6 is a protein on the surface of cells and is widely distributed throughout the body. Mutations in several solid tumor indications change the structure and function of this protein in a specific way. RubrYc’s machine-learning technology allowed us to exactly reproduce the three-dimensional shape of the mutated region through the generation of artificial proteins, so-called Meso-scale Engineered Molecules or MEMs. Using these MEMs as fishhooks, we were able to identify or fish antibodies from a library that specifically bind to the MEMs and therefore to the mutated region of our target protein. This ensures that our antibodies only bind to the mutated protein on tumor cells and not to the normal protein on healthy cells, which is believed to improve the safety of the molecule. In collaborating with RubrYc, we were able to reduce the time in the early discovery phase from the usual six to eight months down to three months. Since the molecule identified from RubrYc’s antibody library has already built in a certain degree of optimization, we can also potentially reduce the length of the lead optimization phase. Lastly, if the program reaches the IND-enabling stage, our FastPharming technology has the potential to further cut down that time by nine months, leading to development time savings of more than a year.

Thanks, Martin. Rather than reiterate the details of the company’s financial results that are available in the press release and the 10-Q, I will simply speak to a few financial highlights. Revenues for the second fiscal quarter of 2022 ended December 31 were approximately $200,000, a decrease of 76% versus the second quarter of fiscal 2021. As is commonplace for early stage pharma services companies, iBio has experienced significant quarter-to-quarter revenue variability driven by factors such as the number and size of customer contracts and the timing of revenue recognition. As previously communicated, the company expects revenue growth to return in the second half of fiscal 2022. R&D and G&A expenses for the second quarter of fiscal 2022 increased 40% and 48% respectively over the comparable period in fiscal 2021. This reflects the company’s growing investment in our pipeline, platform technologies, employees, and related infrastructure. iBio anticipates this trend continuing. However, the rate of growth is expected to moderate over time. In November, iBio used approximately $6 million in cash and took on debt to purchase our manufacturing facility in Bryan, Texas, as well as to acquire the remaining equity interest in our CDMO subsidiary, which is now wholly owned. This strategic transaction provided iBio with full control of our 130,000 square foot manufacturing facility as well as a CDMO entity, which holds the exclusive rights to produce biologics using the FastPharming System in the United States. Following the purchase, iBio began exploring the potential for a sale-leaseback, whereby a buyer would purchase the facility and lease it back to us, enabling us to repay the debt, recover the cash we put in and perhaps to receive financial help from the buyer with funds to expand the facility. With the transaction to be completed, it would help iBio raise non-dilutive capital to grow the business. In terms of liquidity, iBio had $57.4 million in cash, marketable securities, and investments in debt securities as of December 31, 2021, excluding $5.9 million in restricted cash. Based on recent initiatives undertaken to extend our cash runway, iBio now believes that it has adequate cash to support our activities through September 30, 2023. That’s two quarters more than we were expecting previously.

Great. Thanks, Rob. We are, of course, very pleased with the performance of our recently established biopharmaceutical discovery and development capabilities here this past quarter. We have exceeded standard industry benchmarks for the speed with which we have added our six new oncology assets and we are also encouraged by the forward momentum of each of our therapeutic and vaccine programs that demonstrated this quarter. Looking ahead, we will focus on continuing to advance our oncology assets, particularly moving IBIO-101 for its IND-enabling studies. We are looking forward to efficacy study results for IBIO-400 and progressing IBIO-100 to the lead optimization stage. Finally, we will work to bring a last vaccine dose rather than the next vaccine dose as a response to the COVID-19 pandemic, with the goal of filing an IND before the calendar year ends. Thank you. And with that, we are happy to take any questions you might have.

Hi, good afternoon. Thanks so much for taking my questions here. The first one is related to oncology, so I understand that Target 3 and the AI-driven IO Target 6 are undisclosed at this time, but wanted to see what information you could provide for us on a big picture basis. So for example, I know with your RubrYc’s collaboration, you have highlighted the potential amongst challenging targets, but then also recognizing that some of these targets have been well understood in the cancer setting. So, can you maybe speak at a high level about the validation of the targets you are going after or perhaps if these are a little bit more novel to the company?

Yes, you bet. Thanks, Kristen for the question. I will hit it at the high level and then let Martin talk a little bit to the validation, second portion of the question. So at the high level, I think there are a lot of interesting targets out there, of course, but a lot of times, it’s easier said than done to get to the endpoint. I will take what we are now calling IBIO-101, which RubrYc previously called their RTX-003 molecule as a really good example of this. For years and years, people have been trying to find a way to knock down the immunosuppressive regulatory T-cells in the tumor microenvironment. CD25 was a great target to research; people were able to create molecules that could bind really nicely, but it interfered with IL-2 signaling to the T effector cells. So you were getting rid of your immunosuppressive T-cells, but you weren’t allowing the cancer-killing capabilities of your T effector cells to function. Areas like that, we’re really seeking these hard-to-solve problems with antibody engineering that we think, with the combination of our methods, libraries, and Meso-scale Engineered Molecules, we can solve. Without getting into too much detail, there’s a really attractive target for targeting solid tumors, but the particular molecule is also present on healthy cells. The challenge there is engineering something that’s specific enough for tumors without creating a toxicity issue on healthy cells. I hope that helps provide a big picture view. Martin, could you elaborate on how we get to the validation challenges?

Happy to, Tom. Hi, Kristen. Yes, I think it’s important to mention here that we’re utilizing the RubrYc technology to go after a relatively well-validated target where we see there are improvements and upsides on the safety side. As I mentioned earlier, this target is expressed in healthy cells and in tumor cells. It’s slightly different, and our technology hopefully helps to only target this protein on the tumor cell, which then would avoid the toxicities one would expect to see when you target the endogenous protein on the healthy human cells. This is mainly a play of going after a target that’s relatively well validated but increasing the safety margin.

Got it. Thank you. And then for your oncology pipeline, how do you think about precision medicine approaches and different types of sequencing to identify who might most likely be a responder versus looking at targets that might potentially have a broad effect either as a monotherapy and/or in combination?

So, I’ll make a comment here, but generally speaking with regards to the markets and then let Martin chime in. It’s to say that we’re hoping to develop solutions for unmet medical needs for broader groups of people. We think, like the case we just described, that between IBIO-101 and some of the new targets we’ve entered into our pipeline, some of these will be broadly applicable to a variety of cancers and favorably help many patients in the end. That said, to your point on precision medicine and taking a look at smaller patient populations and maybe getting after some of these rare cancers, our FastPharming Manufacturing platform lends itself to helping in some of those cases because, if you think about some of these rare cancers where you may only have a few dozen patients worldwide in any given year, producing small quantities of molecules and therapies isn’t easy with traditional methods. In our case, we can plant many plants to make larger quantities of product, but if small quantities are required, our production system is modular, and each of our plants is its own protein factory. So, if we only need a little less, we can just plant accordingly. That’s how I think about your question regarding precision medicine. Martin, anything to add from a design and development strategy perspective?

Happy to weigh in here, Tom and Kristen. If you consider your typical solid tumor immunooncology indication, what you often do is run an all-comer trial, right? These trials can be lengthy and massive. Over the past few years, some efforts have been made to characterize tumors of individual patients better, utilizing machine learning to that effect as well. This is an evolving field, and we keep a close eye on what’s happening outside, specifically now that we’re employing machine learning at an earlier stage. We want to look for further gains we can achieve with that technology, say, on the clinical side or the biomarker side.

Okay, thank you. Last question is two-part. You talked about these four different stages, including the time frames that we typically see. I wanted to ask whether with all of your platform capabilities, AI, and partnerships, you think the lead optimization process will be more seamless, given that you are studying this in greater detail? In light of the updates related to your COVID-19 vaccine efforts, could you talk about the timeline you saw there versus what might have been expected without your platform?

Great, thanks, Kristen. Yes, in terms of the platforms and the relative seamlessness, we are expecting that with the capabilities we’ve built, we will see a much more efficient process here with fundamentally more shots on goal for less money than in the traditional way. You might find studies suggesting that out of 10,000 discovery initiatives, usually five make it to IND and the time and money invested are significant, with many spending $20 million to $25 million to reach that point. Our initiatives aim to reduce costs and time while providing opportunities for more projects. For the COVID vaccine, we believe we will file an IND before the end of the calendar year. The environment is changing, and we are moving from a pandemic to an endemic state. This doesn't mean less of a problem; it raises serious issues. However, we strongly believe that a second-generation solution, independent of the constantly changing spike protein, will offer a viable path forward. While there are numerous companies working on this, we understand the necessity for alternatives.

Yes. Thank you again.

Hi, thanks for taking the question. I guess the first one to follow up on Kristen’s first question around targets in neuro-oncology. For Target 6 and the others, is there anything you can say about the level of validation? With IBIO-101, you have substantial preclinical data; what about Target 6 in terms of validation and general philosophy on whether you go after totally novel targets or those that have some degree of validation?

Yes. I’ll allow Martin to elaborate, but it's important to underline that while we may target well-validated targets, not every engineered antibody achieves maximal efficacy or safety. For instance, IBIO-101 has solid preclinical data. Target 6 is also progressing quickly, potentially moving to animal studies soon. Martin, could you elaborate further?

Yes. Roy, we are currently focusing on targets with some clinical validation. We want to position ourselves advantageously compared to competitors. Our goal is to target clinically recognized areas, especially those posing lower risks, particularly while as we implement new technologies. Going after novel targets would significantly increase risk, so at present, we're prioritizing targets where we can confirm some degree of validation.

Okay, perfect. That’s very helpful. So for IBIO-202, do you still need to do the challenge study that FDA had requested, or has that changed?

Yes. Per the guidance from our review, we are planning for the challenge studies. Martin, would you like to take it from here?

Yes. As you know, both Pfizer and Moderna ran challenge studies. Given the fluid nature of the COVID-19 pandemic, this is crucial for drug manufacturers and developers. Currently, we are in the planning stages of this study. We will provide more details once we have them.

Great. So, it’s still on plan. Anything in the guidance regarding whether you’ll need more emphasis on T-cell response given the antigen's nature?

There is a growing body of evidence suggesting the protective role of N-mediated T-cell responses. While our studies are still in early stages, we see the potential of the N protein being more significant than initially anticipated. This supports our long-term strategy to stay ahead of the pandemic.

Okay, great. And then, last one for Rob. Can you remind us if the cash guidance includes some component for the sale of the manufacturing facility? You also bought back your portion of the CDMO business, yes?

Yes, thanks, Roy. In general, we take a conservative approach in our assumptions when providing guidance, aiming to set realistic expectations.

Got it. And for the CDMO part of the business, you’re maintaining full ownership, correct?

That’s correct. Yes, absolutely.

Hi, Tom. Congratulations on the progress and thanks for taking my question. I was wondering if you could offer any further insight regarding the Board’s recently adopted resolutions regarding the change in the percent of shareholder ownership to constitute a proxy. Is that related to any future plans for an increase in authorized shares, or perhaps a stock split?

Yes, Matthew, thanks for the question. We want to ensure that we can conduct our business effectively in light of various structural impediments. Voting turnout is becoming a challenge, making it difficult to hold Annual Shareholders Meetings. Some changes are made to consider the complexity of allowing our valued retail shareholders to exercise their voting rights, enabling us to move forward while complying with exchange and Delaware law.

Hi Mr. Isett and team. Thank you for your time today. I have a couple of quick questions. There was a request for information posted by HHS and BARDA regarding next-generation COVID-19 vaccines. Reading through that, it appeared the RFI was targeted at iBio. Are you aware of that, and did you submit a proposal?

Yes, Phil, we are aware of that. We are actively evaluating RFIs and opportunities for proposals and contracts with the U.S. government, focusing our resources and bringing in key advisors to help us respond effectively. We aim to ensure that we leverage every opportunity we come across.

Alright. I appreciate that. On the topic of IBIO-202, I am interested to hear that we are addressing both IND-enabling studies and alternative delivery systems simultaneously. Can you elaborate on how we are able to investigate both at the same time?

Certainly. We are committed to pushing forward with intramuscularly delivered IBIO-202. While focusing on it, we are also exploring alternative routes of administration. This is feasible, and we are evaluating the same antigen and adjuvant combination. Microarray patch technologies have made significant progress, and while the feasibility studies will inform our offerings, we do not foresee this impacting our timelines.

Yes, absolutely. Exciting times ahead! I know I’m a little adverse to needles, so I was thrilled to hear about that. Last question, back in May 2021, we heard that we won the case against Fraunhofer. Part of the settlement was confidential. Will we ever hear about the details of that, or is it strictly financials?

I’d refer you to the 8-K filings. While the press release didn’t include much financial detail, our filings do provide further context. The total cash payment is $28 million, with the first installment due this quarter. They have also licensed the FastPharming technology and other IP created during the relationship, which is set to generate revenue in the latter half of the fiscal year.

Thank you. Ladies and gentlemen, this concludes the Q&A portion. I would now like to turn the call back over to Stephen for closing remarks.

Thank you, operator, and thanks, everyone, for taking the time to join us today. This concludes iBio’s Fiscal Second Quarter 2022 Investor Call. We look forward to updating you again on our next call.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.