[Editor’s Note: This article was updated on May 27, 2020.]
On May 13, iBio (NYSEAMERICAN:IBIO) announced it was selling one million shares of IBIO stock to Chicago-based asset manager, Lincoln Park Capital and its Lincoln Park Capital Fund LLC for $1.09 a share. The company, one of the many biotechs fighting for the right to supply a vaccine for the novel coronavirus, intends to use the proceeds for general corporate purposes.
Currently trading at $1.64 a share as I write this, it appears Lincoln Park Capital’s investment in the biotech company is off to a good start.
I have two questions: First, who is Lincoln Park Capital? And why did they buy a million shares of IBIO stock?
Let’s consider both questions.
Who Is Lincoln Park Capital?
Well, as anyone who’s spent time in Chicago knows, Lincoln Park is an excellent neighborhood in the Windy City. Alas, the asset manager’s office is located in River North, 2.5 miles south of the Lincoln Park Zoo as the crow flies.
That’s about all I can tell you about Lincoln Park Capital’s relationship to Lincoln Park, the neighborhood.
As for the firm itself, it says it “has over 160 combined years of experience as investors, professionals in diverse areas, service providers, operating executives and as trusted partners to our portfolio companies.”
According to the Lincoln Park Capital Fund’s SEC filings, it owns shares in six different publicly traded healthcare companies, along with one resource company whose shares are worth approximately $7.1 million. That doesn’t include the fund’s one million shares in iBio.
So, for rounding purposes, let’s say that it has investments in eight public companies worth almost $9 million. The seven companies, excluding iBio, have a combined market capitalization of $186 million. Ibio’s current market cap is $172 million, which makes it by far the fund’s most prominent investment.
However, take a closer look at iBio’s proxy, and you’ll see that Lincoln Park has a much closer relationship to iBio.
Why Is Lincoln Park Buying IBIO Stock?
Ibio’s proxy indicates that as of Jan. 21, 2020, Lincoln Park Capital, not the fund, owned 6.17 million shares of the biotech, and Joshua Scheinfeld, Lincoln Park’s managing partner, owned an additional 500,000 shares. Together, they owned 7.6% of the shares.
On March 19, iBio reached an agreement with the Lincoln Park Capital Fund to purchase up to $50 million of its stock over the next 36 months at regular intervals chosen by iBio management. Lincoln Park Capital Fund, if asked, will purchase no more than 1 million shares per regular purchase, valued at no more than $5 million.
Recently, iBio issued a press release that indicated that it has the manufacturing capacity to produce 500 million doses of its IBIO-200 Virus-Like Particle (VLP) vaccine candidate.
“If our own proprietary SARS-CoV-2 Virus-Like Particle (‘VLP’) program, IBIO-200, results in an approved vaccine, we estimate that we could make about 500 million doses of high-quality product annually at our Texas facility, depending upon the potency we see in the clinic,” said Tom Isett, CEO of iBio.
“That scalability links directly to the modular technology behind our FastPharming Manufacturing System, which uses a relative of the tobacco plant as the ‘bioreactor’ to produce biopharmaceuticals,” continued Mr. Isett.
A Covid-19 vaccine is estimated to be worth $10 billion annually to the company or companies that win the right to immunize the world. That’s at an estimate of $30 per vaccination. Move up from there and the numbers get really crazy. If iBio were to max out its capacity and deliver 500 million doses, that would be worth over $15 billion to the company.
Moderna (NASDAQ:MRNA) recently sold $1.3 billion of stock at $76 a share to help finance its work developing a vaccine. There are massive amounts of money involved in finding a vaccine to help the world get back to normal.
So, it’s not hard to see why Lincoln Park Capital is so heavily invested in iBio.
However, as I said in March, unless you know a lot about health care, you’re wiser to put any bet you make on something like Pfizer (NYSE:PFE) or Johnson & Johnson (NYSE:JNJ), whose entire future isn’t tied up in the vaccine’s success or failure.
That said, as InvestorPlace’s Chris Lau recently stated, IBIO stock could double or triple in value, thanks in large part to its FastPharming process, which utilizes automated hydroponics and vertical farming to accelerate production.
While I can’t say too much about the who of Lincoln Park Capital, it’s easy to see the why.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.