iBio Inc

iBio Inc (NYSEAMERICAN: IBIO) is a Pharmaceuticals & Biotechnology Company. The Company is engaged in the business of developing vaccines and therapeutics for the betterment of the health of human and animal.

Investment Highlights - iBio Inc – Avoid at USD 2.01

• Despite the higher revenue in H1 FY2021, the profitability margins remained impacted by higher expenses.
• In the last six months, the Company delivered a negative return of ~4.29% and delivered lower returns compared to the benchmark Index.
• As per valuation metrics, the EV/Sales multiple of the iBio Inc is currently higher as compared to the corresponding multiple of the Pharmaceuticals industry, reflecting overstretched valuations.
• From the technical standpoint, 90-day RSI is supporting downward movement (around 52 level), which means the stock price could decline in the short term.

Key Risks

• The market conditions in which the Company operates is full of challenges and might impact the operation performance and reduce financial performance as well.
• Liquidity and interest rate risks could affect the operations of the Company.

Financial Highlights – Q2 & H1 FY2021 (31 December 2020) (released on 16 February 2021)

(Source: Quarterly Report, Company Website) 

• In the second quarter and first half of the financial year 2021, the Company generated the entire revenue from four customers, and the total revenue increased to $705 thousand and $1,115 thousand, respectively.
• Due to higher operating expenses for the period, the profitability margins declined and remained in the negative zone.
• The cash improved to $91,252 thousand as on 31 December 2020 (30 June 2020: $55,112 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

The Company has shown a decline in financial performance in the second quarter and the first half of the financial year 2021. Despite the higher top-line performance, the bottom-line performance declined and remained in the negative zone. The Company needs to manage its operating expenses effectively unless it results in further deterioration in financial performance in the coming years. IBIO is focused on advancing its pipeline, growing revenue and diversifying its customer base. Despite the impact of covid-19 on the world economy, the Company is focused on driving growth across the platform. The Company’s revenue source is limited to 4 customers, which could further increase the operational challenges and impact future financial performance. The stock made a 52-week low and high of USD 0.281 and USD 7.45, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on iBio Inc at the closing price of USD 2.01 (as on 24 February 2021), and with support from few catalysts needs to be evaluated at a later stage such as new contract signed, the appointment of the new leadership team and strong growth in revenue from CDMO (Contract Development and Manufacturing) Services. 

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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