Editor’s note: This article was updated on Nov. 23, 2020, to correct the cash burn amount for iBio.
I’ve been waiting to write about iBio (NYSEAMERICAN:IBIO) in order to see their earnings report and give readers a better handle on the latest IBIO news. As usual, there is nothing worth investing in with this company. Most investors should stay far away from IBIO stock.
In fact, the only thing of note that happened this quarter is that the company was somehow able to issue even more shares for about $27 million. This was reported in an obscure footnote in the company’s recent 10-Q filing (Page 25).
The company’s cash pile is now up to $77.5 million. That’s great. But here is the issue: IBIO stock has a market capitalization over 3 times this amount at $295 million.
IBIO News: Burning Cash
The biggest headline for iBio right now is this: the company is burning cash for the foreseeable future. So far this year, the company’s cash burn has been over $13.6 million (Page 6). This figure was taken from its cash flow statement, which was not on the earnings release but in its 10-Q filing.
So, in order to finance this tremendous outflow of capital, the company has had to issue shares. On a net basis, it has sold $36 million in IBIO stock so far this fiscal year ending in June 2021. I would suspect that as its losses continue, you will continue to see further dilution.
For example, last year ending June 30, 2020, iBio burnt through $14.5 million. Therefore — so far during its first fiscal quarter ending Sept. 30 — the company has already burnt through the equivalent of over 93% of its entire last fiscal year.
At this pace, it will burn through $54.4 million for the rest of its fiscal year ending in June 2021. That would eat up a huge portion of the $77.5 million it has in the bank.
Given this record, don’t expect to see the stock move up as its cash drains faster.
In fact, you can already see what has happened. On Page 8 of its 10-Q filing, the company said that it has issued $68.97 million for 30.2 million shares under its Lincoln Park equity facility. I wrote about this earlier. This is essentially an equity line of credit.
The bottom line is that the average price for the equity sales is $2.28 per share — $68.97 million divided by 30.2 million shares. But the problem is IBIO stock is now trading at around $1.60 as of Nov. 20. That is a miserable track record, for both the new and existing shareholders.
What to Do with Shares in IBIO
I have been consistently negative on IBIO stock in my past three articles on the company. Other than a short-lived spike in July to over $7 per share, the stock has generally traded between the high side of $1 to the low side of $2. This is likely to continue.
One reason for this is that iBio’s proposed Covid-19 vaccine candidate has not really taken off. The company is still stuck in early pre-trial actions. And now it seems that other companies have already beaten iBio to the punch in this space.
Moderna (NASDAQ:MRNA) announced on Nov. 16 that its novel coronavirus vaccine candidate is 94.5% effective. Along with Pfizer’s (NYSE:PFE) recent report of 95% effectiveness in its vaccine, this essentially puts iBio’s chances to bed. Both companies will likely receive approval from the FDA soon in order to begin nationwide distribution.
Moreover, iBio has yet to produce any kind of significant revenue from any of its vaccine or plant-based products. I don’t see that turning around anytime in the near future.
By the way, my view on the company seems to be away from the consensus. For example, the analyst report surveyed by Marketbeat.com has the stock at an average price target of $2. However, there is only one analyst with this price and they recently lowered their price down from $3.
Of course, though, one report is also not enough to make a real consensus. Therefore, I stand by my recommendation. Stay away from IBIO stock for the time being. It’s better for investors to wait until there are more reasonable prospects for the company before investing in this money pit.
On the date of publication, Mark Hake did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.