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Why iBio Presents a Dilemma to Shareholders

Will Ashworth
·4 min read

iBio (NYSEAMERICAN:IBIO) reported its first-quarter results on Nov. 16. As expected, it lost a big chunk of money while failing to deliver much else for investors. With both Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) seemingly in the vaccine winner’s circle, IBIO stock holders need some meaningful IBIO news before it’s too late.

A scientist in medical gear peers through a microscope.
A scientist in medical gear peers through a microscope.

Source: Shutterstock

That’s especially true for investors who bought IBIO stock in July when it was trading close to $7.50. If you’re still holding – at a significant unrealized loss – tax-loss harvesting questions will soon come into play.

Should you stay, or should you go? It depends on why you invested in the first place.

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Here’s why.

Contract Development Pays the Bills

iBio’s Q1 2021 loss was $7.6 million, 68% higher than a year earlier. Most of the increase was due to costs related to staffing up to deal with the novel coronavirus.

In Q1 2021, its general and administrative expenses were $5.6 million, 87% higher than in Q1 2020. G&A expenses accounted for 76% of the company’s operating expenses. This was up slightly from 75% in Q1 2020.

Unfortunately, revenue in the first quarter was only $410,000. And even though that was 280% higher than last year, it did little to stem the losses.

There was, however, a silver lining.

Remember the 280% increase in sales in the quarter? That was entirely from the company’s FastPharming contract development and manufacturing services. It’s name is iBio CDMO.

“In the past, our primary focus was the CDMO business, pursuant to which iBio CDMO provided manufacturing services to collaborators and third-party customers as well as to us, for our own product development purposes,” iBio’s Q1 2021 10-Q states.

“However, during the second half of 2020 and subsequent to year end, we shifted our primary focus to our biologics development programs, including new vaccines and therapeutics.”

And so, IBIO-200 and IBIO-201 were born, with the company ultimately selecting the latter as its candidate vaccine for Covid-19.

Price of the New Focus

The only problem was this ratcheted up the expenses and losses while reducing the amount of legwork and time available to grow a contract manufacturing business.

Now, I’m not an expert on contract manufacturing, but I think a third-party could ask the following question. Do I really want to hand the production of my biologic drug to a company that’s more committed to producing a home-run vaccine?

If iBio hadn’t spent the first six months of calendar 2020 (the second half of iBio’s fiscal year) getting up to its armpits in Covid-19, who knows how much more contract business it could have attracted in Q1 2021 and beyond?

It might not be a glamorous business, but it’s got a much better chance of paying the bills than the development of vaccines.

However, investors may never know, now that it’s gone full-in on Covid.

So, if you bought in 2019 or early in 2020 at prices well below $1 because you liked the idea of its FastPharming business and now are holding on because of a bigger potential payday, my advice would be to take your profits and move on.

The business it was last year is not what it will be six months or a year from now.

If You Bought IBIO Stock Because of the News

Investors who bought IBIO stock in early February after the company announced that it would work with Beijing CC-Pharming on the development of a coronavirus vaccine – it was trading at 28 cents before the announcement in early February and as high as $2.45 by the end of the month – in hindsight, had every reason to be excited about the possibilities.

So, assuming you bought into IBIO somewhere between 33 cents and $2.45, the fact that Pfizer and Moderna are celebrating doesn’t mean you should throw in the towel.

On the contrary.

If you bought IBIO solely because it was a Covid-19 vaccine candidate and are still holding, I think you need to wait until it is confirmed out of the hunt before selling.

And if you bought for the same reason at the 52-week high in July, I also think you continue to hold.

However, you’ve got to be brutally honest about why you bought in the first place. My suspicion, if you bought in July, is that you were chasing a golden ticket.

And those are very rare, indeed.

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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.

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