In the decade that iBio (NYSEAmerican:IBIO) stock has been publicly listed the biotech company has not achieved much measurable success. And while IBIO stock spiked again earlier in 2020, this time likely won’t be any different.
Early in the history of its trading, iBio shares shot up from the single digits to as much as $50 (split-adjusted) thanks to hype around a potential vaccine for avian flu. That was in 2011 and shares soon retreated to the single digits.
Fast forward to 2014, and the stock woke up again thanks to the Ebola outbreak, iBio soared from $5 to as much as $30. That too soon faded from the news, and the shares crashed again.
In fact, by 2020, the stock had fallen to as low as 10 cents per share. The company had failed to develop successful commercial products in 10 years and appeared to be headed toward bankruptcy or at minimum a reverse split. Enter the novel coronavirus, however, and it was time for a fresh new round of trading enthusiasm. With Covid-19 hopes, speculators launched IBIO stock from just 25 cents per share up to as high as $3.40 in recent weeks.
Unfortunately, we’ve seen this movie before. Once the current pandemic ends, excitement wears off and IBIO stock returns to its prior low point and beyond. This is a company that has failed to develop anything commercially relevant, and there’s no reason to think that the coronavirus will change this trend.
Not a Pure Covid-19 Play
Traders have gravitated to iBio — and many other small-cap biotech stocks — as potential beneficiaries of the current pandemic. That makes sense, as we saw above, iBio’s shares have soared during past disease outbreaks. But iBio isn’t the best way to bet on a coronavirus cure. Not even close, in fact.
Up until recently, iBio had two primary lines of business. For one, it has its IBIO-100 therapeutic which targets fibrotic diseases. However, this program is in the pre-clinical stage of development, meaning it is far away from potential commercialization. iBio historically spends just around $5 million per year or so on research & development. This is not a huge scientific outfit, so don’t expect any fast results from their clinical trials.
The therapy aspirant also has a “CMDO” division, that is, a contract development and manufacturing group. This can grow millions of plants and harvest the proteins from them. These, in turn, can be used for clinical trials. However, the company generated just $1.7 million in revenues over the past 12 months in total, so they clearly either don’t have the green thumbs or have picked the wrong plants, failing to reach significant scale as of yet with this either.
While iBio’s long-term prospects are more mundane, traders have gotten excited. That’s because iBio has joined the crowded sweepstakes to generate revenues fighting the coronavirus. iBio is working to create a vaccine for the disease.
In addition to its own vaccine efforts, it says it can use its contract manufacturing facilities to produce doses of other companies’ vaccines as well. That all sounds good — in theory. Remember, though, that iBio has a minuscule R&D budget, so it’s relatively unlikely that their vaccine program will beat out efforts by well-funded pharmaceutical rivals.
Meanwhile, iBio has had its contract division for years, but it has generated scant revenues. It’s unclear why investors should assign a high probability to them getting meaningful contracts for it in the near future either.
IBIO Stock Verdict
What’s clear is that iBio stock appeals only to the most adventurous of short-term traders. The company has been in business for many years, but has never proven to have a successful business model. Over the past decade, it has never generated more than $2 million of revenues in a single year. While the company has seen several pandemics, but it simply hasn’t transformed any of that urgency into consistently profitable lines of business.
In a few months, once the coronavirus enthusiasm is gone, what will be left? Do you want to own iBio for its IBIO-100 program that is the very earliest stages of clinical trials and is years away from potential approval? Or for the contract manufacturing business which is minuscule in size and is unprofitable?
There’s little going on here beyond the Covid-19 chatter. Once that is gone, there’s a good chance that iBio will slip back deep into penny stock territory.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek. At the time of this writing, he held no positions in any of the aforementioned securities.