Earnings Call Transcript - IBIO Q4 2022

Operator, Operator

Thank you for standing. And welcome to the iBio Fiscal Year 2022 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. As a reminder, today’s conference call is being recorded. I would now like to hand the conference over to the host, Mr. Stephen Kilmer with Investor Relations. Please go ahead.

Stephen Kilmer, Investor Relations

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. References 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 said, I will now turn the call over to Tom.

Tom Isett, CEO

Thanks, Steve. Hello everyone and thanks for joining us. Today, I’d like to focus on our recent acquisition of RubrYc and the potential resulting opportunities ahead for iBio. I’ll then turn the call over to Martin to provide a pipeline update and additional color on the RubrYc acquisition followed by Rob’s financial update. We believe the RubrYc transaction we announced last week is transformative for iBio. Broadly speaking, this acquisition will enable us to accelerate our mission to bring more immunotherapies to the clinic faster. Specifically, we've added a proprietary computational biology platform that has a demonstrated ability to more precisely identify molecules that have the potential to address hard-to-treat cancers and other diseases. The RubrYc acquisition includes several components. The first is RubrYc’s drug discovery platform, which incorporates machine learning tools or artificial intelligence at its core. This is a patented system that uses AI to identify, design and create 3D models of unique binding sites, or epitopes, that may exist on cancer or immune cells. We can then use these unique models to facilitate the discovery of antibody drug candidates for epitopes that have proven challenging for standard screening and development techniques. The second element of the acquisition are all rights to the two candidates we previously licensed from RubrYc. That includes IBIO-101 and IL-2 sparing anti-CD25 antibody for depletion of regulatory T cells. It is one of the few companies with such a molecule in development. And the data we've published today, we remain excited for the potential of IBIO-101 as both a monotherapy as well as in combination with checkpoint inhibitors. The other previously licensed candidate from RubrYc is what we refer to as Target 6. Target 6 was discovered and modeled as part of our joint development agreement with RubrYc. It was identified late last year using the discovery engine and has advanced quickly through the early development stages relative to traditional approaches. The final element of the transaction is the acquisition of four new pipeline assets. These include three promising immuno-oncology candidates, plus a partnership-ready PD-1 agonist designed for autoimmune diseases. In exchange for these assets, we made an upfront payment to RubrYc of approximately a million dollars in iBio common stock. Over the next five years, RubrYc will be eligible to receive from iBio up to 5 million in development milestones to be paid in common stock or cash at iBio’s sole discretion. I'd like to note that the RubrYc purchase agreement terminates and supersedes the previous agreements between the two companies. That change eliminates all of iBio’s obligations for development milestones, fees, and royalties associated with both current and future placement candidate. Pairing RubrYc’s AI drug discovery engine with our existing platforms creates a biotech company with its own end-to-end discovery capabilities and an expanded pipeline of immunotherapy candidates. We see this as an attractive opportunity to accelerate iBio’s transformation into an immuno-oncology-focused discovery and development company with potential synergies with our existing FastPharming and Glycaneering platforms. Given the significant and attractive opportunities in the immunotherapy space, we have started evaluating multiple options to extend our cash runway past our previous guidance of September 30, 2023. The options we are considering include asset sales, partnerships, cost reductions, and portfolio decisions. Those may include actions such as our decision recently to discontinue IBIO-202 clinical trials planning while evaluating partnership options for the nucleocapsid antigen. We're reviewing multiple non-dilutive ways to raise additional capital in addition to dilutive financing if necessary. I think it's prudent to point out that while we are confident we will be successful in extending the runway, there's no guarantee of that. Now, I'd like to turn the call over to our Chief Scientific Officer Martin Brenner, who will provide us with more detailed information on the RubrYc transaction, as well as an update on our pipeline, drug candidates on IBIO-202.

Martin Brenner, CSO

Thank you, Tom. Today, I'm excited to share specific details about the RubrYc AI-driven discovery engine iBio acquired last week. I will also provide an update on our lead pipeline program, IBIO-101, and our COVID-19 vaccine candidate IBIO-202. We believe the acquisition of RubrYc’s AI powered discovery platform significantly expands iBio’s ability to identify and develop monoclonal antibody drugs against drug targets that are either undrugable or pose a daunting challenge for traditional monoclonal antibody platforms. Therefore, this marks a significant step toward iBio achieving its strategic intent to become a drug discovery and development-focused biotechnology company. The AI-discovery platform is built on a foundation of three modules that seamlessly integrate to solve the challenges of finding medicines against hard-to-drug targets. First, the technology combines computational biology and 3D modeling to identify and optimize stable artificial epitopes. Epitopes are small but important regions of targeted proteins. These artificial epitopes mimic the exact shape and form of natural human epitopes by selectively targeting those human epitopes. The most specific antibodies can be identified, which is usually lost or easily overlooked when the entire target protein is being used. Then the epitopes can be used in two ways to identify antibodies. One is by immunizing animals, which then produce antibodies against them. The other way is much faster and more efficient, and uses RubrYc’s proprietary antibody library called RubrYc Shield. RubrYc Shield is a broadly diverse, fully human antibody library that has employed machine learning algorithms to eliminate sequence liabilities. This means that molecules from this library inherently have a high grade of developability, which should save a significant amount of time in the costly lead optimization stage. Finally, lead molecules are rapidly optimized using Stable Xu, an AI-enabled antibody optimization tool. The typical brute force approach to improve a lead molecule is to individually exchange many of the antibody's building blocks to generate a multitude of molecules for characterization, which is expensive and time-consuming. Because Stable Xu is designed to be able to predict which specific building blocks of a molecule should be exchanged to improve a lead candidate's potency, efficacy, and manufacturability, the lead optimization process is streamlined, which should save both time and cost. All three modules of the AI platform have already clearly demonstrated their value with iBio’s pipeline Target 6, a mutated form of a protein expressed in a number of tumors. The discovery engine enabled the rapid identification of antibodies that selectively bind the mutated protein without binding the wild-type version, which is more commonly expressed in healthy tissue. Due to the unique characteristics of the AI discovery engine, the program could expeditiously be advanced from the early discovery to the late discovery stage and could soon be advancing into in vivo proof-of-concept. We also have acquired three promising immuno-oncology programs, plus a PD-1 agonist program potentially for serious autoimmune diseases. All programs have been developed with the AI platform technology. While two of the immuno-oncology programs are in early discovery, the PD-1 asset and one immuno-oncology program have already progressed into the late discovery stage and iBio is preparing to conduct in vivo proof-of-concept studies for each program. I'll now turn to an update on our development pipeline. Starting with IBIO-101 our lead immune oncology candidate. Our pre-IND studies have been progressing and we have recently submitted a pre-IND package for IBIO-101 to the FDA. As we continue to create the best strategies for IBIO-101's development, we have updated our expected timing of an IND Application Filing with the FDA to occur in the first half of calendar 2024. Moving now to our COVID-19 vaccine development program. We previously reported the preclinical studies of IBIO-202, our nucleocapsid protein-directed SARS-CoV-2 vaccine candidate, demonstrated a robust antigen-specific memory T cell response. Unfortunately, data from recent IND enabling challenge studies in immunologically naive hamsters showed IBIO-202 did not provide a protective effect. Given these results, we feel it's not prudent to move forward with the IND submission we had planned for this calendar year. Despite this disappointing year, we continue to believe there remains a need for a last dose and not a next dose of a COVID-19 vaccine. Interestingly, a recent preclinical study published in the Peer-Reviewed Journal of Science Translational Medicine similarly demonstrated that an N-only vaccination provided modest protection from SARS-CoV-2. However, the study also showed that combining N with S or M plus S induces more robust protection against both delta and Omicron variants than S-only vaccination. In light of the clinical study data and iBio’s prospects to secure non-dilutive funding and or partnership opportunities for the program, we are evaluating next steps for all proprietary antigen drug substances. With the addition of the four new programs to our rapidly growing therapeutics pipeline through the RubrYc transaction and as part of the overall evaluation Tom mentioned earlier, we will also be conducting a comprehensive portfolio review to ensure that we manage our resources appropriately and stay focused on our goal to become a clinical stage company.

Rob Lutz, CFO

Thanks, Martin. I will start by simply speaking to a few preliminary unaudited financial highlights that we announced earlier. Revenues for the fiscal year ended June 30, 2022, were approximately $2.4 million and essentially flat versus the prior year. R&D and G&A expenses for fiscal 2022 increased by approximately $7.7 million and $12.1 million, respectively, over the comparable period in fiscal 2021. This reflects the company's growing investment in its pipeline platform technologies, employees and related infrastructure. iBio’s consolidated net loss for the fiscal year ended June 30, 2022, was approximately $50.3 million. This increased loss of $27.1 million compared to 2021 is largely due to an increase in expenses incurred to support the company's business strategy, plus $10.2 million in Fraunhofer USA settlement income in fiscal 2021 that did not recur in fiscal 2022. This was partially offset by $1.8 million in Fraunhofer USA licensed revenue recognized in fiscal 2022. We held cash, cash equivalents and investments in debt securities of approximately $39.5 million as of June 30, 2022. The company and its auditors have concluded there is substantial doubt about the company's ability to continue as a going concern. We are currently evaluating a number of potential options to expand our cash runway, which were also mentioned in last week's press release. Regardless of whether we are able to reduce our burn rate or sell our outlets and certain assets or parts of the business, we will need to raise additional capital in order to fully execute our longer-term business plans. We believe that it is likely we will be able to implement one or more options that will extend our cash runway for 12 months or more from today. However, there can be no assurance that we will be successful in implementing any of the options that we are evaluating. Before I turn back to Tom for closing remarks, I'd like to mention our board's approval of our previously announced one-for-25 reverse stock split of our common shares becoming effective on October 7, 2022. On Monday, October 10, 2022, our common stock will begin trading on a post-reverse split basis on the NYSE American under the same symbol iBio.

Tom Isett, CEO

Thanks, Rob. We're excited about what the future holds for iBio, particularly as we've created a differentiated technology-enabled drug discovery capability for our business. With a clear focus on achieving our mission to bring more and better immunotherapies to the clinic faster, our evaluation of the business and extension of our cash runway remains critical to our future success. Please note that while it is premature for us to provide any additional color on today's call about our review of cash runway extension options, we look forward to updating our stakeholders as we move forward with our continued transformation into an immuno-oncology-focused company. With that, operator, please open up the call for questions.

Operator, Operator

Thank you. Our first question comes from Kristen Kluska of Cantor. Your line is open.

Kristen Kluska, Analyst

Hi, everyone. Thanks for taking my questions and hope you're all doing well. First question I had is just from a timing perspective, what led you to this decision now to close on substantially all assets from RubrYc versus the original agreement that you had in place with them? So specifically, I guess what I'm trying to ask here is, was there any new information that came over this past year since that initial partnership or further diligence on the platform that led to this expansion?

Tom Isett, CEO

Yes, Kristen, thanks for the question. And indeed, the relationship as we've been running it for a year, we did get hands-on experience with the platform as part of the joint discovery agreement. So as part of what we originally established was not only the license to IBIO-101, but five DT licenses, if you will. So five additional RubrYc discovery engine opportunities to license over the coming five years. So as we referenced, Target 6 that we've been talking about was the first one that we jointly worked on together and got those very favorable results. So we got to see the strength of the platform in our own hands. I’ll let Martin comment on this a little bit further, so that certainly informed our diligence, it was just real-world experience with the platform. And then certainly, we saw some of the progress that they were making with their own other molecules, as well as with other partners in the space. But Martin has any additional color there?

Martin Brenner, CSO

Yes, Kristen. Hi. I think what Tom mentioned is spot-on. We have been working, obviously, with RubrYc for the last year. And our Target 6 has been progressing really nicely. So we have a proof-of-concept of the technology platform, validating it to at least the preclinical stage. That gave us more confidence as well to move on.

Tom Isett, CEO

And then, Kristen, needless to say, what we've seen in some of the work that we've published on IBIO-101 here especially over the summer gave us great confidence with the platform, the developing capabilities. The teams had been working well together here over the course of the past year as part of the collaboration. So the opportunity to have four of RubrYc’s computational biologists join us and advance the work was an attractive opportunity. So that was able to come together pretty nicely over the course of the past several months. So that's why the timing sorted out the way it did.

Kristen Kluska, Analyst

Okay, thanks for that. And then once the first asset IBIO-101 enters the clinic, how are you thinking about the cadence of the other programs? So I understand, of course, that you haven't disclosed to us some of these other IO targets. But I guess how much work around this first candidate is going to be able to synergize with the other programs?

Tom Isett, CEO

Right, well, that's part of the portfolio review that Martin alluded to. So because of IBIO-101 and the significant opportunities that we see for that, there are a number of options that we're evaluating there to prospectively increase the funding for that program as our lead asset. But we're doing a review of the others because there are attractive candidates that are in there. So we haven't yet made the decision fully stack ranking of each one of the candidates and how much what we want to allocate in terms of resources. But the attractiveness of IBIO-101 remains foremost in the thinking here, and we're completing the assessment and the prioritization, but part of this obviously goes to cash management that we talked about a couple times here on the call, and want to make sure that we're moving aggressively to get 101 in the clinic at the same time that we're creating the opportunities that we see out there for the other assets that we just added to the portfolio.

Roy Buchanan, Analyst

Since I guess the first one kind of follow up on the last one, just what can you detail what remains to be done ahead of submitting the IND for IBIO-101? And are you going as fast as you can with that? Or are you capital constrained ahead of making these decisions? And then I guess for Target 6, the PD-1 agonist and the other oncology asset that Martin mentioned, could be in vivo proof-of-concept soon. I guess, can you put maybe a range on how soon is soon? I kind of want to benchmark that against these financing options. Thanks.

Tom Isett, CEO

Right, thanks for the question, Roy. I think that all goes to the resource allocation for the portfolio altogether. So we're evaluating a couple of options. Of course, we only just completed the RubrYc transaction a couple of weeks ago. So resource allocations to the discovery platform itself, necessarily, then, as far as the assets are concerned, there's a couple of opportunities with IBIO-101. So we are evaluating the clinical strategy. So to your good question, are we going as fast as we can? Yes. But then at the same time, we're seeing opportunities here. And as you know, there's a leading major global biopharmaceutical company driving forward and is sort of first into the clinic with their own version of an IL-2 sparing anti-CD 25 molecule and we're learning a lot from what they're seeing in the clinic as well as what we're intending to do. So it's important for us to be looking at the opportunities that we have here for IBIO-101 as a monotherapy, but then also taking a look at other options that we have, and do we or do we not double down in looking at perhaps opportunities in combination with checkpoint inhibitors. So we're taking the moment here to evaluate that, as we recently picked up the asset and now wholly own it. And then for PD-1, we do think that there's opportunities for that now that that one you see us make reference to is partner ready. And we do see the immunotherapy in the autoimmune space as being an attractive prospectively; there may be partners for that. It's well enough in advance, although, albeit these are all fairly early stage. With what we have at this particular moment, we do think that there could be some interest and so we will be looking to see about prospective partners in the autoimmune space for PD-1, as well as doing the portfolio review and seeing if it would make more sense for us to invest ourselves in trying to drive that one forward. Does that make sense?

Roy Buchanan, Analyst

Yes, that makes sense. So I think maybe reading between the lines, maybe can I assume everything's on the table, but maybe ex-U.S. partnerships for 101 or something you're exploring?

Tom Isett, CEO

Yes, I think for us, I mean, 101 we're at the moment focused on moving it forward to the clinic ourselves. But to your good point and what we said during the call, we're looking for both non-dilutive, well, primarily non-dilutive partnerships for certain of the assets to move them forward and accelerate past the clinic. But at the moment, IBIO-101, we're planning on moving that forward as a monotherapy ourselves. And with certain other molecules, we're exploring the opportunity for partnerships, like you say, they could be regional or global, or, disease-state-specific as we go. But indeed, all those options are being considered.

Philip Barnett, Analyst

Thank you for taking my call. Well, I speak for myself, I think I also speak for a lot of shareholders who are very excited for you to come in and bring new life to iBio, but it would have since been really discouraged. With the lack of transparency provided under your leadership, you came in with messages of transparency. And instead, we seem to have only received obfuscation or mission and perpetual dragging of goal lines. I really appreciate Mr. Brenner’s brief detail on our pipeline really feels like the first we've heard in years. Also very interesting to know that we're acquiring RubrYc’s portfolio rather than focusing on our own incredible pipeline, which had fibrosis and swine fever that were touched and have believed better that you said wasn't worth pursuing. We've had so many collaborations and partnerships announced over the years, and none of them have gone anywhere. We haven't even received updates that they've failed or that they're continuing. And then there's this wildly suspicious backdoor deal with Jim Pisano that I think you owe the shareholders an explanation or, I mean, that was incredible news. Incredible. I've never seen anything like it. But what I really want to ask here is iBio does not appear to be in financially good times. And I want I want to be respectful. But I also want to hold you to the fire here. You've got a very nice salary and you recently received an option to gift the 2 million shares with a public company that's been just reported a consolidated net loss of $50.3 million. Like, I believe that leadership should benefit when times are good, but times aren't good right now. So if you could speak to that, I'd really appreciate that. Thank you.

Tom Isett, CEO

Sure, Mr. Barnett, and I'll say first. I mean, in terms of transparency, the premise there, I would dare say I think we've been quite transparent. A lot of our peer groups, in fact, don't even have conference calls. We've put out frequent updates and I think versus many of our, many of our peers, we certainly tend to be quite transparent. So that being said, with regards to stock options and compensation and some of the rest and also Bill also mentioned with regards to transparency, when I came in with the company, we initiated our first conference call so iBio did not have those in the past. So we've certainly made the effort to be transparent forthright and when there's bad or disappointing news to report like we have today, there's no doubt, we're extremely disappointed by how things played out with IBIO-202 and I'd like to talk about that a little bit more in a moment and invite Martin to comment too. But as you've undoubtedly heard on previous calls, Martin has given updates each and every time on the portfolio, and we published around those in all of our documents. So that said, with regards to stock options, of course, that's incentive compensation for any executive in any company. And we want to benefit from those. And if we're not adding value and driving things forward for our shareholders, well, then obviously, the stock price is affected. So everybody at iBio has been working very hard to transform the company, you're probably aware of its status back in 2019. And our efforts to move it forward and create a vibrant growing business, and bringing real value to shareholders, patients, and the rest is our focus. So we took an organization that had a CMO business that did not generate much in the way of revenues and made this attempt to go ahead and transform it and move it forward. And with that, we started a couple of programs; we didn't have anything advanced in the clinic. So we decided to use some of the organization's capacity and capability to begin producing our own pipeline of products. In the case of just come back to the 202 to round out the response to your final question. We'll note that we had put ourselves in position to get in front of the FDA filed the pre-IND. We did somewhat unexpectedly get feedback that required the challenge study back in January. And so if you'll recall, at that time, I suppose one could say, should the company have invested its time, money, and resources in a COVID vaccine when you had a couple of players out there already, in the form of a Moderna and Pfizer who were doing just fine? I think a good case could have been made to say, why did we spend that money? It was a pretty daunting challenge. And the FDA was now requiring an extra step. And we had to try to move things forward with an animal model that may not be ideal for what we wanted to do. But if you'll recall, that's a fair criticism. But if you'll recall, at that time, Omicron was raging, and it didn't look like, and we still don't believe that it's the case that a spike, a frequently mutating spike vaccine is the greatest solution here. But nevertheless, our team was able to do, I think, really excellent work in a supply-constrained environment for contract research laboratories and some of the rest. We were able to quite quickly pull together a study that would allow us to test out our nucleocapsid antigen. And we thought that on its own, it could provide some of the protective effects. Quite honestly, in a primate or a human, it's possible that an N-only vaccine could work. However, our data came back in the animal model in which we tested that we did not get the protective effect that we were looking for. So as we signaled back in August, even if it had been excellent, if one takes a look at the requirements to go into the clinic, how the market is shaping up where the pandemic is, and the rest, combined with the technical data that we got back, we needed to make a business decision on behalf of our shareholders in the company. And we're certainly very disappointed because we did see a nice opportunity, prospectively with government funding. There was a call, in fact, for plant-based vaccine manufacturers. So I don't want to go on too long in response to your question; there was a lot in there, but just wanted to make the point that we were making both business and technical decisions on behalf of our shareholders and unfortunately, sometimes the biology doesn't work out. We have to make a tough call, which is what we did with 202. So I hope that addresses some of the points in your question and thanks for it.

Martin Brenner, CSO

Well, I think in terms of the market sets, in the macroeconomic environment that we're seeing, there are many biotech stocks and others that are down that percentage. The macroeconomic situation for biotechs, generally, for the better part of the year, as I'm sure you've read and we've all seen, has been somewhat challenging. So I think, as always, investors should do their due diligence and take market conditions into effect. I think in the case of iBio, it is an individual investment decision. We remain excited about what we're doing in the field of immuno-oncology, and in particular, with the IBIO-101 being the candidate. We think that the space, pharma tech, or AI-driven drug discovery remains an attractive one, and we intend to build value for our shareholders with an end-to-end discovery capability that includes that technology and capability.

Operator, Operator

Thank you. I'm showing no further questions at this time. This concludes today's conference. Thank you all for participating. You may now disconnect. Have a great day.