The Nasdaq stock exchange is littered with former novel coronavirus stocks that soared for a month or two but are now in rapid decline. Unfortunately, for shareholders of iBio (NYSEAMERICAN:IBIO), it appears that their company is heading down a similar path. IBIO stock ran up from a 52-week low of just 5 cents per share, and at one point hit $7. It was an amazing run for anyone that got in early.
But the magic is long gone. IBIO stock has already lost more than two-thirds of its peak value back in July. iBio has a long history as a publicly-traded company, and not a great one at that. It appears that while it has potential Covid-19 vaccines and therapeutics in the pipeline, this stuff simply won’t make a meaningful impact in the commercial market. There are a ton of companies working on Covid-19 therapies, and it seems that iBio’s efforts may simply be too little, too late.
iBio Has Been Pretty Quiet Lately
Earlier this summer, there was a great deal of excitement around iBio. The company was preparing huge vaccine manufacturing capacity. It got added to key stock indices. It raised money, and the share price soared.
Now, however, momentum has lagged. The company only put out two press releases over the past month, and neither was particularly momentous. The first gave an update on the company’s vaccine candidate for Covid-19. While there was some progress to report, it all came from pre-clinical study arms. That’s the first step in the long process to eventually seeking Federal Drug Administration approval.
By contrast, you have the well-funded competitor vaccines already nearing completion. Several rival vaccines are into or about to start Phase 3 clinical trials, and could reach the market within months. By the time iBio’s vaccine potentially makes it through trials, there’s a good chance that the commercial opportunity will be long gone.
Additionally, recently iBio announced an agreement with Planet Biotechnology for the license to a potential Covid-19 therapeutic. If successful, this could use iBio’s proprietary FastPharming system. Problem is that so far, the work on this has only been in vitro. In other words, it too is far from any commercial sales. The press release didn’t mention anything about near-term revenue to iBio as a result of this partnership, either.
Excessive Valuation
It’d be easy to look at IBIO stock and its $2 share price and think it’s a cheap play on something happening with Covid-19. Maybe the company catches a break and the stock soars. However, that’s not really the right mental framework here.
Due to iBio’s unsuccessful run as a public company over the past decade, it has had to issue a ton of stock merely to remain in business. As a result, even with a $2 share price, the market capitalization is $350 million. That’s a whole lot of money for a company that has never generated consistent revenue or profit.
In fact, over the past decade, iBio has never brought in more than $2 million of revenue in a single year. $2 million – yet people are paying $350 million for the business today. Such a bloated valuation makes even the frothiest software stocks look cheap by comparison.
Needless to say, when revenues are a pittance, profits are abysmal as well. The company has regularly lost $1 or more per share each and every year recently, though its loss will be smaller this year, simply because it diluted the shareholder base so dramatically. Speaking of which, iBio’s shares outstanding went from less than 10 million in 2017 to 174 million now. That sort of flagrant printing would put most central banks to shame.
IBIO Stock Verdict
Let’s be clear here, IBIO stock is at best a trade, not an investment. This company has been an awful performer over the years. In fact, historically, iBio hasn’t ever managed to turn its ideas into meaningful commercial revenues or profits. And there’s little sign that this is about to change with Covid-19.
With the coronavirus, the company was in the right place at the right time, as far as investor enthusiasm goes. But with the race for a Covid-19 vaccine winding down and the likely winners emerging, iBio will soon fade into the background.
And given the company’s lack of recurring revenues or profits, the stock is likely to head lower in due time.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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.
