Item 1. Business.
Overview
We are a biotechnology company and biologics
contract development and manufacturing organization (“CDMO”). We apply our licensed and owned technologies to develop
novel products to fight fibrotic diseases, cancers, and infectious diseases. We use our FastPharming® Development
and Manufacturing System to increase “speed-to-clinic” for new candidates. We are also using the FastPharming System
to create proteins and bioinks for research and further manufacturing uses in a variety of research and development (“R&D”)
applications, including 3D-bioprinting. In addition, we make the FastPharming System available to clients on a fee-for-service
basis for the production of proteins.
During the year ended June 30, 2020, we operated in two segments:
(i) our CDMO segment, operated via our subsidiary iBio CDMO LLC (“iBio CDMO”), and (ii) our proprietary biologics development
and licensing activities, conducted within iBio, Inc. 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. However, during the second half of 2020 and subsequent to our fiscal year end, we shifted our primary focus to our proprietary
biologics development programs, including novel vaccines and therapeutics.
Our current platforms and programs include:
(i) CDMO services using our licensed and owned FastPharming Technologies and GlycaneeringTM Services;
(ii) the development of therapeutics, for which we intend to conduct preclinical and clinical trials; (iii) the development of
vaccines, for which we intend to conduct preclinical and clinical trials, and (iv) the production of proteins for research and
further manufacturing use in 3D-bioprinting and other applications. We are developing a portfolio of technologies, products, and
services driven by the following platforms and programs, which we intend to use individually, and in combination:
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Process development and manufacturing of protein products in hydroponically-grown, transiently-transfected
plants, (typically Nicotiana benthamiana, a relative of the tobacco plant) using our proprietary expression technologies,
Glycaneering Services, and production know-how (the FastPharming System), deployed in our 130,000 square-foot manufacturing
facility in Bryan, Texas.
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“Factory Solutions” for the clients who seek to insource biologics manufacturing using
the FastPharming System instead of outsourcing production to iBio CDMO.
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Treatments for fibrotic diseases, including a fusion of the endostatin-derived E4 antifibrotic
peptide to the hinge and heavy chain of human IgG1 (“IBIO-100”, formerly described as “CFB-03”) for systemic
scleroderma (for which we have received orphan drug designation), idiopathic pulmonary fibrosis, and related conditions.
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An ACE2-Fc fusion protein to be developed as a treatment for Coronavirus disease 2019 (“COVID-19”)
and, prospectively, other diseases emanating from the Coronaviridae family, in-licensed from Planet Biotechnology, Inc.
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A novel virus-like particle antigen being designed for use in a vaccine candidate targeting the
SARS-CoV-2 virus (“IBIO-200”).
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The lichenase (“LicKMTM”)-subunit vaccine for COVID-19 (“IBIO-201”).
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An E2 antigen, in combination with a selected adjuvant, for vaccination of pigs against classical
swine fever (“IBIO-400”).
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Research & Bioprocess Products
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Protein scaffolds for use as bioinks in the development of 3D-bioprinted tissues and organs.
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Cytokines and growth factors for cell culture applications.
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Biomaterials for a range of life science research, development, and bioprocessing applications.
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Our Platforms and Programs
CDMO Services
Our contract development and
manufacturing services include:
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Process Development
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Feasibility assessment and development of manufacturing processes using the FastPharming Technology for optimized gene expression and purification parameters to meet client specifications for their active pharmaceutical ingredients (“APIs”). Product optimization via our Glycaneering Services that may be used to enhance the quality and performance of therapeutic proteins via plant-based glycosylation controls.
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Manufacturing
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Biologics production using the FastPharming System to deliver custom biologics for clinical trials.
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Fill / Finish
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Aseptic vial and bottle filling and finishing services with in-line labelling that provides serialization capability for greater quality assurance.
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BioAnalytics
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Method development and validation with expertise in protein characterization using mass spectrometry.
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FastPharming®
System
The FastPharming System
is iBio’s proprietary approach to plant-made pharmaceutical production. It uses iBio’s Nicotiana benthamiana
plants, novel expression vectors, a large-scale transient transfection method, and other technologies that can be used to produce
complex therapeutic proteins emerging from our own, our clients’ and our potential clients’ pipelines. The FastPharming System
offers several advantages versus traditional mammalian cell expression systems, including:
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Speed: Shorter time-to-clinic with research and clinical-scale quantities of product
in weeks versus months
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Cost-Effectiveness: No expensive, labor-intensive or costly mammalian cell line development
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Quality: Consistently high-quality recombinant protein production with the ability
to enhance potency for some products with powerful glycosylation controls
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Scalability: Each N. benthamiana plant is its own bioreactor, so scale-up
issues are avoided by simply growing more plants
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Safety: Since mammalian viruses cannot replicate in plants, FastPharming-produced
products avoid many of the risks associated with viral contamination events
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Eco-Friendliness: Use of plants for the protein expression process avoids the single-use
plastic disposables frequently used in large volumes with mammalian expression systems
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The FastPharming Process
Technologies have been established in iBio CDMO’s operations in Bryan, Texas. The process begins with robotic seeding of
iBio’s plants into an inert matrix for hydroponic cultivation under optimized LED lighting conditions. While the plants grow,
FastPharming Vectors carrying the genes encoding the desired protein product are developed and then loaded into a bacterial
host (Agrobacterium tumefaciens). Then, the bacteria carrying the vectors and DNA for producing the desired protein are
introduced into the leaves of the plants via an automated vacuum infiltration process. The vectors introduce the DNA into the plant
nucleus, where it is coded into instructions that direct the plant’s own cellular machinery to make the desired protein.
A specific arrangement of genes for plant viral enzymes causes these protein production instructions to be copied hundreds of thousands
of times in each plant cell. Thus, as the plants continue growing for about another week, the gene transfer vectors combine the
desirable features of the DNA mobilization plasmid, with gene control elements taken from single-stranded RNA plant viruses, to
produce the encoded protein in abundance. With the target protein accumulated in the leaves, the plants are harvested, and the
bulk drug substance is purified via traditional methods.
In the FastPharming System,
no animal- or human-derived materials are used, decreasing the risk of product contamination with mammalian viruses or prions.
In place of animal-origin raw materials, green plants, grown under clean and controlled conditions, provide for the expression
of proteins. This portion of the bioprocess uses raw materials readily available to us, decreasing certain supply chain risks.
By incorporating transient gene
expression technology, the FastPharming System can rapidly deliver high quality proteins for clinical use without several
of the time-consuming steps that competitive mammalian-cell based expression systems require, such as the need to i) isolate a
high-producing cell clone from millions of non-productive cells, ii) establish a master cell bank, and iii) grow the clonal cells
in a sterile fermenter to start the manufacturing process. In addition to saving months of development time associated with traditional
methods, the use of plants instead of bioreactors – and sterile liquid-handling systems to prevent bacterial, fungal, or
viral contamination of the protein drug substance – saves money and reduces plastic waste.
FastPharming Facility
Joint Venture with Eastern Capital Limited
iBio CDMO’s operations
take place in Bryan, Texas in a 130,000 square-foot cGMP manufacturing facility controlled by an affiliate (the “Second Eastern
Affiliate”) of Eastern Capital Limited (“Eastern”), a stockholder of the Company as sublandlord (the “Sublandlord”).
The facility is a Class A life sciences building located on land owned by the Texas Agricultural and Mechanical College of Texas
(“Texas A&M”) system designed and equipped for the manufacture of plant-made biopharmaceuticals. The Sublandlord
granted iBio CDMO a 34-year lease for the facility that expires in 2050.
On December 16, 2015, we formed
iBio CDMO as a Delaware limited liability company to develop and manufacture plant-made pharmaceuticals. On January 13, 2016, we
entered into a contract manufacturing joint venture with an affiliate of Eastern (the “Eastern Affiliate”). The Eastern
Affiliate contributed $15 million in cash for a 30% interest in iBio CDMO. We retained a 70% interest in iBio CDMO and granted
iBio CDMO a non-exclusive license to use our proprietary technologies for research purposes and an exclusive U.S. license for manufacturing
purposes. We retained the exclusive right to grant product licenses to those who wish to sell or distribute products made using
our technology. On February 23, 2017, we entered into an exchange agreement with the Eastern Affiliate, pursuant to which we acquired
substantially all of the interest held by the Eastern Affiliate in iBio CDMO and issued one share of our iBio CMO Preferred Tracking
Stock, par value $0.001 per share. After giving effect to the transaction, we own 99.99% of iBio CDMO. At any time, at our election
or the election of the Eastern Affiliate, the outstanding share of iBio CMO Preferred Tracking Stock may be exchanged for 29,990,000
units of limited liability company interests of iBio CDMO. Following such exchange, we would own a 70% interest in iBio CDMO and
the Eastern Affiliate would own a 30% interest.
See Notes 1, 13 and 14 in the
consolidated financial statements for a further discussion.
Commercial activities commenced
in January 2016 with most of our initial efforts directed towards recommissioning the facility to help meet cGMP manufacturing
standards and provisions for iBio’s service offerings. The facility houses laboratory and pilot-scale operations, as well
as large-scale automated hydroponic systems capable of growing more than four million plants and delivering dozens of kilograms
of protein per year.
In
the first half of 2020, we renewed development of our E2 classic swine fever vaccine program (IBIO-400). During the second half
of fiscal 2020, we entered the human vaccine space with the filing on March 11, 2020 of four provisional patent applications
with the U.S. Patent and Trademark Office in support of our COVID-19 vaccine platforms, followed by the announcement
in March 2020 of our Virus-Like Particle (VLP)-Based Platform (“VLP”) vaccine program (IBIO-200) and our announcement
in June 2020 of our second candidate, the LicKM-subunit vaccine (IBIO-201).
SARS-CoV-2
Severe
acute respiratory syndrome coronavirus 2 (SARS-CoV-2) is a strain of coronavirus that
causes coronavirus disease 2019 (COVID-19). The virus was introduced to human populations from an animal source in the Chinese
province of Hubei in late 2019. The spread of infection has since been driven by human-to-human transmission and has resulted
in an ongoing pandemic. According to the World Health Organization, as of September 15, 2020, more than 28 million cases have
been reported globally with more than 900,000 deaths.
IBIO-200
IBIO-200 is a vaccine candidate
currently in preclinical development for the prevention of COVID-19 and leverages iBio’s own VLP platform. The first
VLP vaccine was approved in 1998, and the safety and effectiveness of additional VLP-based vaccines have been well documented since
that time. VLP-based vaccines interact with immune cells differently than soluble antigens and trigger both humoral and cellular
responses. IBIO-200 incorporates the receptor binding motif (RBM) of SARS-CoV-2 within the VLP structure to direct antigen presentation
to activate both polyfunctional CD4+ and CD8+ T cells and increase the overall immune response.
This design allows for a multivalent particle to display high density antigens to the immune system in a highly structured format.
Combined with iBio’s FastPharming Manufacturing System, iBio’s technology delivers a tightly controlled
particle size, leading to better dose definition and higher product consistency.
IBIO-201
IBIO-201
is a vaccine candidate currently in preclinical development for the prevention of COVID-19. IBIO-201 is based on a subunit platform
that combines antigens derived from the SARS-CoV-2 spike protein fused with iBio’s patented LicKM™ booster
molecule to enhance immune response. iBio’s proprietary LicKM technology offers the potential to strengthen the initial
immune response to the antigen and extend the duration of the immune response.
Preclinical
Development of IBIO-200 and IBIO-201
We have engaged in preclinical
studies of both IBIO-200 and IBIO-201 and are developing IBIO-200 and IBIO-201 in tandem, and in combination with multiple adjuvants.
In August 2020, we announced that preclinical immunization studies with IBIO-200 and IBIO-201, combined with select adjuvants from
the Infectious Disease Research Institute (“IDRI”), induced anti-SARS-CoV-2 antibodies with notable antibody responses
with two particular antigen-adjuvant combinations. Additional data from cell-based pseudovirus neutralization assay testing demonstrated
that IBIO-201 induced the production of more anti-spike neutralizing antibodies than IBIO-200 in immunized mice. Based on these
results, in September 2020, we announced the selection of IBIO-201 as our lead candidate for the prevention of SARS-CoV-2 infection.
We intend to conduct more focused studies on each of IBIO-200 and IBIO-201 with the goal of advancing IBIO-201 to toxicology studies
ahead of planned clinical development while we continue preclinical development of IBIO-200 and our VLP platform as a potential
‘plug-and-play’ vaccine development system.
Classical
Swine Fever
Classical
swine fever (“CSF”) is a contagious, often fatal disease affecting both feral and domesticated pigs. Outbreaks in Europe,
Asia, Africa, and South America have not only adversely impacted animal health and food security but have also had severe socioeconomic
impacts on both the pig industry worldwide and small-scale pig farming.
IBIO-400
In collaboration with the Institute of Infectious Animal Diseases
at Texas A&M University and Kansas State University, iBio used the FastPharming System to develop a potentially
safe and protective [DIVA]-capable subunit vaccine. Characterized as a candidate that can “differentiate
infected from vaccinated animals” [DIVA]-capable, the antigen is formulated in cost-effective oil-in-water emulsion adjuvants.
IBIO-400 studies have shown that after single-dose vaccination, the adjuvanted, plant-made CSF E2 subunit vaccine provides complete
protection in challenged pigs and is accompanied by strong virus neutralization antibody responses.
Therapeutics
We are developing novel therapeutic
candidates that we believe can quickly move into clinical trials by using our FastPharming® System. Our
current focus is on biological medicines for the treatment of fibrotic and infectious diseases, and we intend to continue to
explore the application of our FastPharming Technologies in oncology and other therapeutic areas.
Fibrosis
Fibrosis
is a pathological disorder in which connective tissue replaces normal parenchymal tissue to the extent
that it goes unchecked, leading to considerable tissue remodeling and the formation of permanent scar tissue. Fibrosis
can occur in many tissues within the body, including the lungs (e.g., idiopathic pulmonary fibrosis (“IPF”) and skin
(e.g. systemic scleroderma).
Systemic
scleroderma is a rare chronic disease of uncertain etiology characterized by diffuse fibrosis and vascular abnormalities in the
skin, joints, and internal organs. IPF is a type of chronic scarring lung disease characterized
by a progressive and irreversible decline in lung function. In both cases, while there are medications that can
slow the progression of specific existing symptoms or temporarily reduce the development of new symptoms, there remains an unmet
need for more effective treatments.
IBIO-100
IBIO-100, is our lead therapeutic
candidate being advanced for Investigational New Drug (“IND”) development based on in-licensed patents from the University
of Pittsburgh. The molecule is a fusion of the endostatin derived E4 antifibrotic peptide to the hinge and heavy chain of human
IgG1. In preclinical studies, IBIO-100 has been shown to reduce: (i) bleomycin-induced lung
fibrosis in mice, as measured by hydroxyproline content and modified
Ashcroft histopathology scoring; (ii) collagen content in mice in
which fibrosis was produced by osmotic pump delivery of bleomycin followed by pump delivery of IBIO-100, and (iii) hydroxyproline
content of human lung tissue obtained after transplant of diseased, terminal-stage organs. Tissue fragments exhibited a significant
reduction of hydroxyproline when cultured in the presence of IBIO-100 after only 72 hours. We expect to conduct our remaining
IND-enabling studies in 2021. IBIO-100 has been granted orphan drug designation by the FDA for treatment of systemic scleroderma.
COVID-19
Coronavirus
disease 2019 is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). It
was first identified in December 2019 in Wuhan, Hubei, China, and has resulted in an ongoing pandemic. According
to the World Health Organization, as of September 15, 2020, more than 28 million
cases have been reported globally with more than 900,000 deaths. Common symptoms include fever, cough, fatigue, shortness
of breath or breathing difficulties, and loss of smell and taste. While most people have mild symptoms, some
people develop acute respiratory distress syndrome (ARDS), possibly precipitated by cytokine dysregulation, multi-organ
failure, septic shock, and blood clots.
ACE2-Fc Immunoadhesin
As part of our strategy to develop
new therapeutics for infectious diseases, we entered into an exclusive license agreement with Planet Biotechnology, Inc., (“Planet”)
in August 2020 to develop a recombinant ACE2-Fc protein as a treatment for COVID-19 and related coronavirus diseases. We received
worldwide, sublicensable rights to the technology and assumed responsibility for preclinical development expenses. In the event
we, at our sole discretion, choose to continue to develop the technology, Planet will be eligible for certain clinical development
milestone payments, and royalties on net sales if products are commercialized. The molecule is in the lead optimization stage of
development.
Research & Bioprocess Products
We are also developing recombinant proteins
for third parties on a catalog and custom basis. We plan to initially focus on creating products that will help life science researchers
working in the field of cell and tissue biofabrication, including those using 3D-bioprinting techniques. Biofabrication involves
the use of cells, proteins, and biological materials to construct functional tissues and organs in the laboratory as a means to
ultimately replace human donors as a source of organs for transplantation. The speed, economy, and safety profile of plant-produced
recombinant proteins should allow us to leverage our FastPharming System to enter the market for cytokines, growth factors,
scaffolds (sometimes referred to as “bioinks”) and other proteins for use in the cell and tissue biofabrication category.
Strategic Alliances, Collaborations,
and Service Agreements
We have formed collaborations and strategic
alliances to gain access to funding, capabilities, technical resources and intellectual property to further our development efforts,
commercialize our technology and to generate revenues, including through the development and manufacture of products at iBio’s
FastPharming Facility.
License Agreement with Planet Biotechnology,
Inc.
As part of our strategy to develop new
therapeutics for infectious diseases, we entered into an exclusive license agreement with Planet in August 2020, as described above.
Service Agreement with IBM, Corp.
In June 2020, we entered into a Cloud Services
Agreement with IBM Watson Health under which iBio will receive free-of-charge access to IBM’s
clinical development solution for 18 months. Thereafter, we will be required to pay standard service fees.
Collaboration with AzarGen Biotechnologies
(Pty) Ltd.
In March 2020, we entered into a
second Statement of Work (SOW) with AzarGen Biotechnologies (Pty) Ltd (“AzarGen”) under the 2018 Master Joint
Development Agreement (“MJDA”) between the companies. iBio continues to provide contract development and manufacturing services
for AzarGen’s development of a rituximab biosimilar/biobetter for the South African market.
Collaboration with The Texas A&M
University System
We entered into two new SOWs with The Texas
A&M University System ("TAMUS") during 2020. In March, we entered into an SOW related to iBio’s preclinical
development of COVID-19 vaccine candidates as part of the MJDA executed in June 2016. The other SOW, executed in January, involved
TAMUS support of certain CDMO services.
License Agreement with University of
Natural Resources and Life Sciences, Vienna
Effective February 1, 2020, we expanded
our non-exclusive license agreement with the University of Natural Resources and Life Sciences, Vienna, to include commercial applications
as well as research use of technology for the expression of recombinant proteins with modified N-glycosylation patterns in Nicotiana
benthamiana plants.
Collaboration with EdgePoint AI, a division
of Mateon Therapeutics, Inc.
On December 20, 2019, we entered into a
collaboration agreement with EdgePoint AI, a division of Mateon Therapeutics, Inc., to deploy EdgePoint’s proprietary artificial
intelligence (“AI”)/blockchain-driven vision system for pharmaceutical manufacturing, known as TrustPoint Fabric. Initial
implementation is occurring at iBio’s FastPharming Facility for the optimization of raw material documentation and
verification activities from receipt through final manufacturing.
Collaboration with CC-Pharming Ltd.
In August 2019, we licensed our rituximab biosimilar/biobetter
candidates to CC-Pharming Ltd. of Beijing (“CC-Pharming”) for the China territory, along with a research license to
the FastPharming Technologies for use in the evaluation of reagents for research, diagnostic, bioprocess, and cosmetic applications.
The license to our rituximab candidate follows as part of the strategic, royalty-bearing, commercial relationship with we established
with CC-Pharming in June 2018 under a MJDA between the parties. In April 2020, we amended and restated the Master Joint Development
Agreement and iBio recognized more than $1.2 million in revenues in fiscal year 2020, primarily attributable to Process Development
and Tech Transfer.
Service Agreement with Lung Biotechnology
PBC, a subsidiary of United Therapeutics Corporation
In July 2019,
we entered into an MSA with Lung Biotechnology PBC ("Lung Bio"), to produce recombinant human collagen (“rhCollagen”)
licensed from CollPlant Biotechnologies, Inc., to be used as a bioink for 3D bioprinting. The initial work involves the development
of a scalable purification process for rhCollagen tailored to the biofabrication of lung scaffolds.
License with University of Pittsburgh
(“UP”)
On January 14, 2014 (the “Effective
Date”), we entered into an exclusive worldwide License Agreement with UP covering all of the U.S. and foreign patents and
patent applications and related intellectual property owned by UP pertinent to the use of endostatin peptides for the treatment
of fibrosis. We paid an initial license fee of $20,000 and we are required to pay all of UP’s patent prosecution costs that
were incurred prior to, totaling $30,627, and subsequent to the Effective Date. On each anniversary date we are to pay license
fees ranging from $25,000 to $150,000 for the first five years and $150,000 on each subsequent anniversary date until the first
commercial sale of the licensed technology. Beginning with commercial sales of the technology or approval by the FDA or foreign
equivalent, the Company will be required to pay milestone payments, royalties and a percentage of any non-royalty sublicense income
to UP. We are also required to meet certain diligence milestones and we and UP have agreed to set a new milestone schedule and
are currently undergoing an analysis based on new data and revised forecasted timelines.
Intellectual Property
We currently own or license 106 patents,
of which 100 are owned and 6 are licensed. Of the 100 patents we own, 32 are U.S. and 68 are international. We have an exclusive
license to five U.S. patents and one application. Additionally, we have one international patent application allowed, as well as
seven U.S. and 12 international applications pending. International patents and applications include numerous foreign countries
including Australia, Brazil, Canada, China, Hong Kong, India, Korea, Russia and several countries in Europe.
We exclusively own the right to use certain
intellectual property acquired by or developed at Fraunhofer for human health and certain veterinary and diagnostic applications.
We also own intellectual property developed or acquired independently of Fraunhofer.
In addition, we have an exclusive worldwide
license agreement with the University of Pittsburgh covering U.S. and foreign patents and patent applications and related intellectual
property co-owned with the University of Pittsburgh and the Medical University of South Carolina pertinent to the use of endostatin
peptides for the treatment of fibrosis.
Our success will depend in part on our
ability to obtain and maintain patent protection for our technologies and products and to preserve our trade secrets. Our policy
is to seek to protect our proprietary rights, by among other methods, filing patent applications in the U.S. and foreign jurisdictions
to cover certain aspects of our technology. We continue to prepare patent applications relating to our expanding technology in
the U.S. and abroad.
The technology and products covered by
our issued and pending patent applications are summarized below:
Technology and Product Patents (U.S.)
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Virus-induced gene silencing in plants
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Transient expression of foreign genes in plants
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Production of foreign nucleic acids and polypeptides in sprout systems
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Production of pharmaceutically active proteins in sprouted seedlings
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Systems and method for clonal expression in plants
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Recombinant carrier molecule for expression, delivery and purification of target polypeptides
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Influenza antigens, vaccine compositions, and related methods
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Plague antigens, vaccine compositions, and related methods
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Influenza therapeutic antibodies
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Trypanosomiasis vaccine
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Anthrax antigens, vaccine compositions, and related methods
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Use of endostatin peptides for the treatment of fibrosis
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Pending Technology Patent Applications
(U.S. and International)
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Activation of transgenes in plants by viral vectors
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Transient expression of proteins in plants
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Thermostable carrier molecule
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In vivo deglycosylation of recombinant proteins in plants
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Pending Product Patent Applications
(U.S. and International)
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Antibodies
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Influenza vaccines
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Influenza therapeutic antibodies
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Anthrax vaccines
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Plague vaccines
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HPV vaccines
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Trypanosomiasis vaccine
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Malaria vaccines
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Endostatin fragments and variants for use in treating
fibrosis
COVID-19 vaccines
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Competition
The biotechnology and pharmaceutical industries
are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.
We face competition from many different
sources, including commercial pharmaceutical and biotechnology enterprises, academic institutions, government agencies, and private
and public research institutions. Our commercial opportunities will be reduced or eliminated if our competitors develop and commercialize
products that are safer, more effective, have fewer side effects or are less expensive than any products that we or our collaborators
may develop based on the use of our technologies.
Our competition in the CDMO market includes
a number of full-service contract manufacturers and large pharmaceutical companies offering third-party development and manufacturing
services to fill their excess capacity. Large pharmaceutical companies have been seeking to divest portions of their manufacturing
capacity, and any such divested businesses may compete with us in the future. In addition, most of our competitors may have substantially
greater financial, marketing, technical or other resources than we do. Moreover, additional competition may emerge and may, among
other things, result in a decrease in the fees paid for our services, which would affect our results of operations and financial
condition.
While we believe that the potential
advantages of our new technologies will enable us to compete effectively against other providers of technology for biologic
product development and manufacturing, many of our competitors have significantly greater financial resources and expertise
in research and development, manufacturing, preclinical testing, clinical trials, regulatory approvals and marketing approved
products than we do. Smaller or early stage companies may also prove to be significant competitors, particularly through
arrangements with large and established companies, and this may reduce the value of our technologies for the purposes of
establishing license agreements. In addition, these third parties compete with us in recruiting and retaining qualified
scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well
as in acquiring technologies and technology licenses complementary to our programs or advantageous to our business.
We expect to rely upon licensees, collaborators
or customers for support in advancing certain of our drug candidates and intend to rely on additional work with our collaborators
during our efforts to commercialize our product candidates. Our licensees, collaborators or customers may be conducting multiple
product development efforts within the same disease areas that are the subjects of their agreements with us. Agreements with collaborators
may not preclude them from pursuing development efforts using a different approach from that which is the subject of our agreement
with them. Any of our drug candidates, therefore, may be subject to competition with a drug candidate under development by a customer.
There are currently approved vaccines and
therapies for many of the diseases and conditions addressed by the product candidates our clients and collaborators may be developing
or manufacturing or in our own pipeline. Specifically, with respect to the development of COVD-19 biopharmaceuticals, there are
over 180 vaccines in various stages of development, and 549 therapeutics, according to the Biotechnology Industry Organization.
Several of those candidates are in late stage clinical trials and are sponsored by large, multinational biopharmaceutical companies,
some of whom have also received government funding. There are also a number of companies working to develop new drugs and other
therapies for diseases of commercial interest to us that are undergoing various stages of testing including clinical trials. The
key competitive factors affecting the success of our technologies for commercial product candidates are likely to be efficacy,
safety profile, price, and convenience.
Research and Development
Our research and development functions
are focused on the creation of new products and services, as well as enhancements to our existing offerings, both of which are
necessary to maintain our competitive position. Our research and development activities take place primarily at our facilities
in Bryan, Texas.
Suppliers
We outsource certain functions to third
parties. While we rely on our outsourcing partners to perform their contracted functions, we are continuing to build internal capabilities.
Refer to Item 1A, “Risk Factors,” for a description of risks associated with our reliance on suppliers and outsourcing
partners.
Backlog
Our backlog consists primarily of orders
for which we have entered into a Master Services Agreement with an accompanying Statement of Work (“SOW”). Our backlog
was approximately $2.6 million as of June 30, 2020.
Government Regulation and Product Approval
Regulation by governmental authorities
in the U.S. and other countries is a significant factor in the development, manufacturing and marketing of pharmaceutical drugs
and vaccines.
CDMO Regulatory
Requirements
iBio CDMO’s operations are subject
to a variety of environmental, health and safety laws and regulations, including those of the Environmental Protection Agency and
equivalent local and state agencies. These laws and regulations govern, among other things, air emissions, wastewater discharges,
the use, handling and disposal of hazardous substances and wastes, soil and groundwater contamination and employee health and safety.
Any failure to comply with environmental, health and safety requirements could result in the limitation or suspension of production
or monetary fines or civil or criminal sanctions, or other future liabilities. iBio CDMO is also subject to laws and regulations
governing the destruction and disposal of raw materials and the handling and disposal of regulated material. In particular, we
are subject to laws and regulations concerning research and development, testing, manufacturing processes, equipment and facilities,
including compliance with current Good Manufacturing Practices (“cGMPs”), labeling and distribution, import and export,
and product registration and listing. As a result, our facility is subject to regulation by the FDA, as well as regulatory bodies
of other jurisdictions where our customers have marketing approval for their products.
Certain products manufactured by us
involve the use, storage and transportation of toxic and hazardous materials. Our operations are subject to extensive laws
and regulations relating to the storage, handling, emission, transportation and discharge of materials into the environment
and the maintenance of safe working conditions. We maintain environmental and industrial safety and health compliance
programs and training at our facilities. Prevailing legislation tends to hold companies primarily responsible for the proper
disposal of their waste even after transfer to third party waste disposal facilities. Other future developments, such as
increasingly strict environmental, health and safety laws and regulations, and enforcement policies, could result in
substantial costs and liabilities to us and could subject the handling, manufacture, use, reuse or disposal of substances or
pollutants at our facilities to more rigorous scrutiny than at present.
These regulatory requirements impact many
aspects of our operations, including manufacturing, developing, labeling, packaging, storage, distribution, import and export and
record keeping related to customers’ products. Noncompliance with any applicable regulatory requirements can result in government
refusal to approve facilities for manufacturing products or products for commercialization.
U.S. Drug Approval
Process
All of the vaccine and therapeutic products
developed from our technologies will require regulatory approval by governmental agencies prior to commercialization. In particular,
pharmaceutical drugs and vaccines are subject to rigorous preclinical testing and clinical trials and other pre-marketing approval
requirements by the U.S. Food and Drug Administration (“FDA”) and regulatory authorities in other countries. In the
U.S., various federal, and, in some cases, state statutes and regulations, also govern or impact the manufacturing, safety, labeling,
storage, record-keeping and marketing of vaccines and pharmaceutical products. The lengthy process of seeking required approvals
and the continuing need for compliance with applicable statutes and regulations requires the expenditure of substantial resources.
Regulatory approval, if and when obtained for any of our product candidates, may be limited in scope, which may significantly limit
the indicated uses for which our product candidates may be marketed. Further, FDA approved vaccines and drugs are subject to ongoing
oversight and discovery of previously unknown problems may result in restrictions on their manufacture, sale or use, or in their
withdrawal from the market.
The process required by the FDA before
a drug or biological product may be marketed in the United States generally involves the following:
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completion of pre-clinical laboratory tests and animal studies according
to good laboratory practices (“GLP”) and applicable requirements for the humane use of laboratory animals or other
applicable regulations;
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submission to the FDA of an Investigational New Drug (“IND”)
application which must become effective before human clinical trials may begin;
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performance of adequate and well-controlled human clinical trials
according to the FDA’s regulations commonly referred to as good clinical practices (“GCPs”) and any additional
requirements for the protection of human research subjects and their health information, to establish the safety and efficacy of
the proposed biological product for its intended use;
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submission to the FDA of a New Drug Application or NDA or Biologics
License Application (“BLA”) for marketing approval that meets applicable requirements to ensure the continued safety,
purity, and potency of the product that is the subject of the NDA or BLA based on results of pre-clinical testing and clinical
trials;
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satisfactory completion of an FDA pre-approval inspection of the manufacturing
facility or facilities where the product candidates are produced, to assess compliance with cGMP, to assure that the facilities,
methods and controls are adequate to preserve the product’s identity, strength, quality and purity;
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potential FDA audit of the pre-clinical trial and clinical trial sites
that generated the data in support of the NDA or BLA; and
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FDA review and approval of the NDA or licensure of the BLA.
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Before any product candidates with potential
immunization or therapeutic value may be tested in human subjects, we must satisfy stringent government requirements for preclinical
studies. Preclinical testing includes both in vitro and in vivo laboratory evaluation and characterization of the
safety and efficacy of the product candidate. “In vitro” refers to tests conducted with cells in culture and
“in vivo” refers to tests conducted in animals. The conduct of the preclinical tests must comply with federal
regulations and requirements including good laboratory procedures (“GLP”). Preclinical testing results obtained from
studies in several animal species, as well as data from in vitro studies, are submitted to the FDA as part of an IND application
and are reviewed by the FDA prior to the commencement of human clinical trials. These preclinical data must provide an adequate
basis for evaluating both the safety and the scientific rationale for the initial clinical trials. In the case of vaccine candidates,
animal immunogenicity and immune protection tests must establish a sound scientific basis to believe that the product candidate
may be beneficial when administered to humans.
An IND becomes effective
automatically 30 days after receipt by the FDA unless the FDA raises concern or questions about the conduct of the clinical
trials as outlined in the IND prior to that time. In such an event, the IND sponsor and the FDA must resolve any outstanding
concerns before clinical trials may proceed. For additional information on the most recent FDA regulations and guidance on
vaccine and therapeutic product testing and approval, visit its website at http://www.fda.gov. The FDA may also impose
clinical holds on a product candidate at any time before or during clinical trials due to potential safety concerns or
non-compliance. If the FDA imposes a clinical hold, trials may not recommence without FDA authorization and then only under
terms authorized by the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing
clinical trials to begin, or that, once begun, issues will not arise that suspend or terminate such trials.
Clinical trials involve the administration
of the product candidate to healthy volunteers or patients under the supervision of qualified investigators, generally physicians
not employed by or under the trial sponsor’s control. Clinical trials are conducted under protocols detailing, among other
things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to
be used to monitor subject safety, including stopping rules that assure a clinical trial will be stopped if certain adverse events
should occur. Each protocol and any amendments to the protocol must be submitted to the FDA as part of the IND. Clinical trials
must be conducted and monitored in accordance with the FDA’s regulations composing the good clinical practice requirements,
including the requirement that all research subjects provide informed consent. Further, each clinical trial must be reviewed and
approved by an independent institutional review board, or IRB at or servicing each institution at which the clinical trial will
be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether
the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits.
The IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or
her legal representative and must monitor the clinical trial until completed. Human clinical trials involving biological products
are typically conducted in three sequential phases that may overlap or be combined:
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Phase 1. The biological product
is initially introduced into a small number of closely monitored healthy human volunteers and tested for safety. In the case of
some products for severe or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer
to healthy volunteers, the initial human testing is often conducted in patients with the targeted disease.
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Phase 2. The biological product
is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the
efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.
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Phase 3. Clinical trials generally
enroll a large number of volunteers and are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an
expanded patient population at geographically dispersed clinical trial sites. These clinical trials are intended to establish the
overall risk to benefit ratio of the product and provide an adequate basis for product labeling.
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Post-approval clinical trials, sometimes referred to as Phase
4 clinical trials, may be conducted after initial FDA marketing approval. These clinical trials are used to gain additional experience
from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up.
During all phases of clinical development,
regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators.
Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must
be promptly submitted to the FDA and the investigators for serious and unexpected adverse events, any findings from other studies,
tests in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important
increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The sponsor
must submit an IND safety report within 15 calendar days after the sponsor determines that the information qualifies for reporting.
The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within seven calendar
days after the sponsor’s initial receipt of the information. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed
successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend or
terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to
an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the
clinical trial is not being conducted in accordance with the IRB’s requirements or if the biological product has been associated
with unexpected serious harm to subjects.
Concurrently with clinical trials, companies
usually complete additional studies and must also develop additional information about the physical characteristics of the biological
product as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.
The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other criteria,
the sponsor must develop methods for testing the identity, strength, quality, potency and purity of the final biological product.
Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted.
U.S. Review and Approval Processes
After the completion of clinical trials
of a product candidate, FDA approval of an NDA or BLA must be obtained before commercial marketing of the product. The NDA or
BLA must include results of product development, laboratory and animal studies, human trials, information on the manufacture and
composition of the product, proposed labeling and other relevant information. The FDA may grant deferrals for submission of data,
or full or partial waivers. The testing and approval processes require substantial time and effort and there can be no assurance
that the FDA will accept the NDA or BLA for filing and, even if filed, that any approval will be granted on a timely basis, if
at all.
Under the Prescription Drug User Fee Act,
or PDUFA, as amended, each NDA or BLA must be accompanied by a significant user fee. The FDA adjusts the PDUFA user fees on an
annual basis. PDUFA also imposes an annual program fee on approved biological products. Fee waivers or reductions are available
in certain circumstances, including a waiver of the application fee for the first application filed by a small business. No user
fees are assessed on NDAs or BLAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.
Within 60 days following submission of
the application, the FDA reviews an NDA or BLA submitted to determine if it is substantially complete before the agency accepts
it for filing. The FDA may refuse to file any NDA or BLA that it deems incomplete or not properly reviewable at the time of submission
and may request additional information. In this event, the NDA or BLA must be resubmitted with the additional information. The
resubmitted application also is subject to review before the FDA accepts it for filing. Once the submission is accepted for filing,
the FDA begins an in-depth substantive review of the NDA or BLA. The FDA reviews the NDA or BLA to determine, among other things,
whether the proposed product is safe, potent, and effective for its intended use, and has an acceptable purity profile, and whether
the product is being manufactured in accordance with cGMP to assure and preserve the product’s identity, safety, strength,
quality, potency and purity. The FDA may refer applications for novel products or products that present difficult questions of
safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation
and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations
of an advisory committee, but it considers such recommendations carefully when making decisions. During the product approval process,
the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure the safe use of
the biological product. If the FDA concludes a REMS is needed, the sponsor of the NDA or BLA must submit a proposed REMS. The FDA
will not approve an NDA or BLA without a REMS, if required.
Before approving an NDA or BLA, the FDA
will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that
the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production
of the product within required specifications. Additionally, before approving an NDA or BLA, the FDA will typically inspect one
or more clinical sites to assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements.
To assure cGMP and GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training,
record keeping, production, and quality control.
Notwithstanding the submission of relevant
data and information, the FDA may ultimately decide that the NDA or BLA does not satisfy its regulatory criteria for approval and
deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we
interpret the same data. If the agency decides not to approve the NDA or BLA in its present form, the FDA will issue a complete
response letter that describes all of the specific deficiencies in the NDA or BLA identified by the FDA. The deficiencies identified
may be minor, for example, requiring labeling changes, or major, for example, requiring additional clinical trials. Additionally,
the complete response letter may include recommended actions that the applicant might take to place the application in a condition
for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies
identified in the letter, or withdraw the application.
If a product receives regulatory approval,
the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited,
which could restrict the commercial value of the product.
Further, the FDA may require that certain
contraindications, warnings or precautions be included in the product labeling. The FDA may impose restrictions and conditions
on product distribution, prescribing, or dispensing in the form of a risk management plan, or otherwise limit the scope of any
approval. In addition, the FDA may require post marketing clinical trials, sometimes referred to as Phase 4 clinical trials, designed
to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to monitor the safety
of approved products that have been commercialized.
In addition, under the Pediatric Research
Equity Act, an NDA or BLA or supplement to an NDA or BLA must contain data to assess the safety and effectiveness of the product
for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric
subpopulation for which the product is safe and effective. The FDA may grant deferrals for submission of data or full or partial
waivers.
Orphan Drug Act
Under the Orphan Drug Act, the FDA may
grant orphan designation to a drug or biologic intended to treat a rare disease or condition, which is generally a disease or
condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States
and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug
for this type of disease or condition will be recovered from sales in the United States for that drug. Orphan drug designation
must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the name of the sponsor, identity
of the drug or biologic and its potential orphan use are disclosed publicly by the FDA. The orphan drug designation does not shorten
the duration of the regulatory review or approval process, but does provide certain advantages, such as a waiver of Prescription
Drug User Fee Act, or PDUFA, fees, enhanced access to FDA staff and potential waiver of pediatric research requirements.
If a product that has orphan drug designation
subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan
product exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same
drug or biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority
to the product with orphan drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different drug or biologic
for the same disease or condition, or the same drug or biologic for a different disease or condition. Among the other benefits
of orphan drug designation are tax credits for certain research and a waiver of the application user fee. A designated orphan drug
may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan
designation. In addition, exclusive marketing rights in the United States may be lost if the FDA later determines that the request
for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet
the needs of patients with the rare disease or condition.
Fast Track Program
The FDA has a Fast Track program that is
intended to expedite or facilitate the process for reviewing new drugs and biological products that meet certain criteria. Specifically,
new biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition
and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination
of the product and the specific indication for which it is being studied. For a Fast Track product, the FDA may consider review
of completed sections of an NDA or BLA on a rolling basis provided the sponsor provides, and the FDA accepts, a schedule for the
submission of the completed sections of the NDA or BLA. Under these circumstances, the sponsor pays any required user fees upon
submission of the first section of the NDA or BLA. A Fast Track designated drug candidate may also qualify for Priority Review
designation, under which the FDA reviews the NDA or BLA in a total of six months rather than ten months after it is accepted for
filing.
Post-Approval Requirements
Any products for which we receive FDA approvals
will be subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse
experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution
requirements, and complying with FDA promotion and advertising requirements, which include, among others, standards for direct-to-consumer
advertising, restrictions on promoting products for uses or in patient populations that are not described in the product’s
approved uses, known as ‘off-label’ use, limitations on industry-sponsored scientific and educational activities, and
requirements for promotional activities involving the internet. Although physicians may prescribe legally available products for
off-label uses, if the physicians deem to be appropriate in their professional medical judgment, manufacturers may not market or
promote such off-label uses.
In addition, quality control and manufacturing
procedures must continue to conform to applicable manufacturing requirements after approval to ensure the long-term stability of
the product. cGMP regulations require among other things, quality control and quality assurance as well as the corresponding maintenance
of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and other entities
involved in the manufacture and distribution of approved products are required to register their establishments with the FDA and
certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance
with cGMP and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production
and quality control to maintain cGMP compliance. Discovery of problems with a product after approval may result in restrictions
on a product, manufacturer, or holder of an approved BLA or NDA, including, among other things, recall or withdrawal of the product
from the market. In addition, changes to the manufacturing process are strictly regulated, and depending on the significance of
the change, may require prior FDA approval before being implemented. Other types of changes to the approved product, such as adding
new indications and claims, are also subject to further FDA review and approval.
The FDA also may require post-marketing
testing, known as Phase 4 testing, and surveillance to monitor the effects of an approved product. Discovery of previously unknown
problems with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse
publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications
with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require
changes to a product’s FDA approved labeling, including the addition of new warnings and contraindications, and also may
require the implementation of other risk management measures. Also, new government requirements, including those resulting from
new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of
our product candidates under development.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, our activities
are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including but
not limited to, the Centers for Medicare & Medicaid Services, or CMS, other divisions of the U.S. Department of Health
and Human Services, for instance the Office of Inspector General, the U.S. Department of Justice, or DOJ, and individual U.S.
Attorney offices within the DOJ, and state and local governments. For example, research, sales, marketing and
scientific/educational grant programs must comply with the anti-fraud and abuse provisions of the Social Security Act, the
false claims laws, the physician payment transparency laws, the privacy and security provisions of HIPAA, as amended by
HITECH, and similar state laws, each as amended.
The federal Anti-Kickback Statute prohibits,
among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration,
directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging
for the purchase, lease or order of any item or service reimbursable under Medicare, Medicaid or other federal healthcare programs.
The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted
to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on
the other. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution.
The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to
induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor.
Our practices may not in all cases meet all of the criteria for protection under a statutory exception or regulatory safe harbor.
Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor, however, does
not make the conduct per se illegal under the Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated
on a case-by-case basis based on a cumulative review of all of its facts and circumstances.
Additionally, the intent standard
under the Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act, as amended by the Health Care
and Education Reconciliation Act of 2010, collectively the ACA, to a stricter standard such that a person or entity no longer
needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In
addition, the ACA provides that the government may assert that a claim including items or services resulting
from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal
civil False Claims Act., as discussed below.
The civil monetary penalties statute imposes
penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim
to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or
is false or fraudulent.
Drug manufacturers can be held liable
under the federal civil False Claims Act, which imposes civil penalties, including through civil whistleblower or qui tam
actions, against individuals or entities (including manufacturers) for, among other things, knowingly presenting, or causing
to be presented to federal programs (including Medicare and Medicaid) claims for items or services, including drugs, that are
false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or
services; making a false statement or record material to payment of a false claim; or avoiding, decreasing or concealing an
obligation to pay money to the federal government. The government may deem manufacturers to have “caused” the
submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or
promoting a product off-label. Claims which include items or services resulting from a violation of the federal Anti-Kickback
Statute are false or fraudulent claims for purposes of the False Claims Act. Our future marketing and activities relating to
the reporting of wholesaler or estimated retail prices for our products, if approved, the reporting of prices used to
calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for our
products, and the sale and marketing of our product and any future product candidates, are subject to scrutiny under this
law. Pharmaceutical and other healthcare companies have been prosecuted under these laws, for among other things, allegedly
providing free product to customers with the expectation that the customers would bill federal programs for the product.
Pharmaceutical and other healthcare companies also have been prosecuted for causing false claims to be submitted because of
the companies’ marketing of the product for unapproved, and thus non-reimbursable, uses.
The federal Health Insurance
Portability and Accountability Act of 1996, or HIPAA, created new federal criminal statutes that prohibit knowingly and
willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means of false or fraudulent pretenses,
representations or promises, any money or property owned by, or under the control or custody of, any healthcare benefit
program, including private third party payors and knowingly and willfully falsifying, concealing or covering up by trick,
scheme or device, a material fact or making any materially false, fictitious or fraudulent statement in connection with the
delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or
entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a
violation.
We may be subject to data privacy and security
regulations by both the federal government and the states in which we conduct business. HIPAA, as amended by the Health Information
Technology for Economic and Clinical Health Act of 2009, or HITECH Act, and their respective implementing regulations, imposes
requirements on covered entities, including health plans, health clearinghouses, and certain healthcare providers, and their business
associates relating to the privacy, security and transmission of individually identifiable health information. Among other things,
HITECH makes HIPAA’s privacy and security standards directly applicable to business associates, defined as independent contractors
or agents of covered entities, which include certain health care providers, health plans, and healthcare clearinghouse, that create,
receive, or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also
increased the civil and criminal penalties that may be imposed against covered entities and business associates, and gave state
attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA
laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, certain state laws govern
the privacy and security of health information in specified circumstances, some of which are more stringent and many of which differ
from each other in significant ways, thus complicating compliance efforts.
Additionally, the Federal Physician Payments Sunshine Act under
the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies
for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, (with certain exceptions),
to annually report to the CMS, information related to certain payments or other transfers of value made or distributed to physicians
and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians, as defined
by such law, and teaching hospitals and to report annually certain ownership and investment interests held by physicians and their
immediate family members. Beginning in 2022, applicable manufacturers also will be required to report such information regarding
its relationships with physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists
and certified nurse midwives during the previous year. Failure to submit timely, accurately, and completely the required information
may result in civil monetary penalties. Certain states also mandate implementation of compliance programs, impose restrictions
on pharmaceutical manufacturer marketing practices and/or require the tracking and reporting of gifts, compensation and other remuneration
to healthcare providers and entities.
Many states have similar statutes or regulations
to the above federal laws that may be broader in scope and may apply regardless of payor. In addition, in order to distribute products
commercially, we must also comply with state laws that require the registration of manufacturers and wholesale distributors of
drug and biological products in a state, including, in certain states, manufacturers and distributors who ship products into the
state even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements
on manufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that
require manufacturers and others to adopt new technology capable of tracking and tracing product as it moves through the distribution
chain. Several states have enacted legislation requiring pharmaceutical and biotechnology companies to establish marketing compliance
programs, file periodic reports with the state, make periodic public disclosures on sales, marketing, pricing, clinical trials
and other activities, and/or register their sales representatives, as well as to prohibit pharmacies and other healthcare entities
from providing certain physician prescribing data to pharmaceutical and biotechnology companies for use in sales and marketing,
and to prohibit certain other sales and marketing practices. All of our activities are potentially subject to federal and state
consumer protection and unfair competition laws.
If our operations are found to be in violation
of any of the federal and state healthcare laws described above or any other governmental regulations that apply to it, we may
be subject to penalties, including without limitation, significant civil, criminal and/or administrative penalties, damages, fines,
disgorgement, imprisonment, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private
“qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to enter into government
contracts, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment
or restructuring of operations, any of which could adversely affect our ability to operate our business and our results of operations.
If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance
with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government
funded healthcare programs. Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible
investigations by government authorities, can be time- and resource-consuming and can divert a company’s attention from the
business.
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the
coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the United States and markets
in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part, on
the extent to that third-party payors provide coverage, and establish adequate reimbursement levels for such products. In the United
States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other
organizations. The process for determining whether a third-party payor will provide coverage for a product may be separate from
the process for setting the price of a product or for establishing the reimbursement rate that such a payor will pay for the product.
Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include
all of the FDA-approved products for a particular indication. Third-party payors are increasingly challenging the price, examining
the medical necessity and reviewing the cost- effectiveness of medical products, therapies and services, in addition to questioning
their safety and efficacy. We may need to conduct expensive pharmaco-economic studies in order to demonstrate the medical necessity
and cost-effectiveness of our product candidates, in addition to the costs required to obtain the FDA approvals. Our product candidates
may not be considered medically necessary or cost-effective. A payor’s decision to provide coverage for a product does not
imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a
product does not assure that other payors will also provide coverage for the product. Adequate third-party reimbursement may not
be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.
Different pricing and reimbursement schemes
exist in other countries. Some jurisdictions operate positive and negative list systems under which products may only be marketed
once a reimbursement price has been agreed. To obtain reimbursement or pricing approval, some of these countries may require the
completion of clinical trials that compare the cost-effectiveness of a particular product candidate to currently available therapies.
Other countries allow companies to fix their own prices for medicines but monitor and control company profits. The downward pressure
on health care costs has become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
In addition, in some countries, cross-border imports from low-priced markets exert a commercial pressure on pricing within a country.
The marketability of any product candidate
for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail to provide
adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and we expect the
pressure on healthcare pricing will continue to increase. Coverage policies and third-party reimbursement rates may change at any
time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory
approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
U.S. Healthcare Reform
In the United States and some foreign jurisdictions, there have
been, and likely will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare
system directed at broadening the availability of healthcare, improving the quality of healthcare, and containing or lowering the
cost of healthcare. We expect that there will continue to be a number of federal and state proposals to implement government pricing
controls and limit the grown of healthcare costs. For example, the ACA was passed in March 2010, and substantially changed the
way healthcare is financed by both governmental and private insurers, and continues to significantly impact the U.S. pharmaceutical
industry. There remain judicial and Congressional challenges to the ACA, as well as efforts by the Trump administration to repeal
or replace certain aspects of the ACA. Since January 2017, President Trump has signed several Executive Orders and other directives
designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health
insurance mandated by the ACA. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or
part of the ACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of
certain taxes under the ACA were signed into law. For example, the Tax Cuts and Jobs Act of 2017, or Tax Act, included a provision
which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals
who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual
mandate.” On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is unconstitutional in its entirety
because the “individual mandate” was repealed by Congress as part of the Tax Act. Additionally, on December 18, 2019,
the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional
and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well.
On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case. It is unclear
how such litigation and other efforts to repeal and replace the ACA will impact our business in the future.
Other legislative changes have been proposed
and adopted in the United States since the ACA was enacted. Additionally, there have been several recent U.S. Congressional inquiries
and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing
and manufacturer patient programs and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2021 includes a
$135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket
drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump administration
sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare
Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket
expenses, and place limits on pharmaceutical price increases. Further, the Trump administration previously released a “Blueprint”
to lower drug prices and reduce out of pocket costs of drugs that contained proposals to increase drug manufacturer competition,
increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their
products, and reduce the out of pocket costs of drug products paid by consumers. While some of these and other measures may require
additional authorization to become effective, Congress and the Trump administration have each indicated that it will continue to
seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly passed
legislation and implemented regulations designed to control pharmaceutical and biological product pricing.
We cannot predict what healthcare reform
initiatives may be adopted in the future. Further federal, state and foreign legislative and regulatory developments are likely,
and we expect ongoing initiatives to increase pressure on drug pricing. Such reforms could have an adverse effect on anticipated
revenues from product candidates and may affect our overall financial condition and ability to develop product candidates.
We anticipate that current and future U.S.
legislative healthcare reforms may result in additional downward pressure on the price that we receive for any approved product,
if covered, and could seriously harm our business. For example, it is possible that additional government action is taken in response
to the COVID-19 pandemic. Any reduction in reimbursement from Medicare and other government programs may result in a similar reduction
in payments from private payors.
Foreign Regulation
In order to market any product outside
of the United States, we would need to comply with numerous and varying regulatory requirements of other countries and jurisdictions
regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial
sales and distribution of our products. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary
approvals by the comparable foreign regulatory authorities before we can commence clinical trials or marketing of the product in
foreign countries and jurisdictions. Although many of the issues discussed above with respect to the United States apply similarly
in the context of the European Union, the approval process varies between countries and jurisdictions and can involve additional
product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions
might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does
not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction
may negatively impact the regulatory process in others.
European Data Collection
The collection and use of personal
health data in the European Economic Area (EEA) is governed by the General Data Protection Regulation 2016/679
(“GDPR”), which became effective May 25, 2018. The GDPR applies to any company established in the EEA and to
companies established outside the EEA that process personal data in connection with the offering of goods or services to data
subjects in the EU or the monitoring of the behavior of data subjects in the EU. The GDPR enhances data protection
obligations for data controllers of personal data (including stringent requirements relating to the consent of data subjects,
expanded disclosures about how personal data is used, requirements to conduct privacy impact assessments for “high
risk” processing, limitations on retention of personal data, mandatory data breach notification and “privacy by
design” requirements) and creates direct obligations on service providers acting as data processors. The GDPR also
imposes strict rules on the transfer of personal data outside of the EEA to countries that do not ensure an adequate level of
protection, like the U.S. Failure to comply with the requirements of the GDPR and the related national data protection laws
of the EEA Member States may result in fines up to 20 million Euros or 4% of a company’s global annual revenues for the
preceding financial year, whichever is higher. Moreover, the GDPR grants data subjects the right to claim material and
non-material damages resulting from infringement of the GDPR. Given the breadth and depth of changes in data protection
obligations, maintaining compliance with the GDPR, will require significant time, resources and expense, and we may be
required to put in place additional mechanisms ensuring compliance with the new data protection rules. This may be onerous
and adversely affect our business, financial condition, results of operations and prospects.
Employees
As of October 8, 2020,
we had four employees in iBio and forty-seven employees in iBio CDMO, forty-three of which are full time employees. Our employees
are not represented by any union and are not the subject of a collective bargaining agreement. We consider our relations with our
employees to be good. We believe that we will need to continue to add staff during FY21 in order to meet our new growth objectives
for Therapeutic, Vaccine, and Research & Bioprocess proprietary product development.
Corporate Information
We were incorporated under the laws of the State of Delaware
on April 17, 2008 under the name iBioPharma, Inc. We engaged in a merger with InB:Biotechnologies, Inc., a New Jersey corporation
on July 25, 2008 and changed our name to iBio, Inc. on August 10, 2009.
Available Information
Our website address is www.ibioinc.com.
We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and other materials
with the Securities and Exchange Commission, or SEC. We are subject to the informational requirements of the Exchange Act and
file or furnish reports, proxy statements and other information with the SEC. Such reports and other information filed by the
Company with the SEC are available free of charge on our website at www.ibioinc.com. Information contained on, or that
can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not
consider information on our website to be part of this Annual Report on Form 10-K.
The SEC also maintains a website that contains reports, proxy
and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.
Item 1A. Risk Factors.
Our business faces many risks. Past experience
may not be indicative of future performance, and as noted elsewhere in this Annual Report on Form 10-K, we have included forward-looking
statements about our business, plans and prospects that are subject to change. Forward-looking statements are particularly located
in, but not limited to, the sections “Business” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” In addition to the other risks or uncertainties contained in this Annual Report, the
risks described below may affect our operating results, financial condition and cash flows. If any of these risks occur, either
alone or in combination with other factors, our business, financial condition or operating results could be adversely affected
and the trading price of our common stock may decline. Moreover, readers should note this is not an exhaustive list of the risks
we face; some risks are unknown or not quantifiable, and other risks that we currently perceive as immaterial may ultimately prove
more significant than expected. Statements about plans, predictions or expectations should not be construed to be assurances of
performance or promises to take a given course of action.
COVID-19
We have in the past been impacted
by the COVID-19 pandemic and may in the future been impacted by the COVID-19 pandemic.
As a result of the pandemic, we have at times experienced reduced
capacity to provide CDMO services as a result of instituting social distancing at work requirements in our Texas facility, restricting
access to essential workers, as well as taking other precautions. We also experienced a full three-day operational shutdown in
April 2020 for extensive facility cleaning following the discovery that an employee had contracted COVID-19, and successfully resumed
operations on a reduced capacity basis.
We have ascertained that certain risks associated with further
COVID-19 developments may adversely impact our operations and liquidity, and our business and share price may also be affected
by the COVID-19 pandemic. However, we do not anticipate any significant threat to our operations at this point in time. Due to
the general unknown nature surrounding the crisis, we cannot reasonably estimate the potential for any future impacts on our operations
or liquidity.
The outbreak and spread of COVID-19
and continued progress in various countries around the world, including the United States, has led authorities around the
globe to take various extraordinary measures to stem the spread of the disease, such as emergency travel and transportation
restrictions, school closures, quarantines and social distancing measures. The outbreak of COVID-19 has had an adverse effect
on global markets and may lead to a major slowdown in the economy in the United States and globally.
In recognition of the significant threat
to the liquidity of financial markets posed by COVID-19, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security
Act (the “CARES Act”), a stimulus bill intended to bolster the U.S. economy, among other things, was signed into law
to provide emergency assistance to qualifying businesses and individuals. There can be no assurance that these interventions by
the government will be successful, and the financial markets may experience significant contractions in available liquidity. On
April 16, 2020, the Company received $600,000 related to its filing under the Paycheck Protection Program and the CARES Act. Forgiveness
of this loan is only available for principal that is used for the limited purposes that qualify for forgiveness under the Small
Business Administration’s ("SBA") requirements, and that to obtain forgiveness, we must request it and must provide
documentation in accordance with the SBA's requirements, and certify that the amounts we are requesting to be forgiven qualify
under those requirements. Forgiveness of the loan is dependent upon approval of the SBA and there can be no assurance or certainty
that forgiveness will in fact occur. It is not possible at this time to estimate the further need, availability, extent or impact
of any additional such relief. There can be no assurance that these interventions by the government will be successful, and the
financial markets may experience significant contractions in available liquidity. Although the Company does not anticipate current
operational difficulties, the risk exists that further COVID-19 developments may negatively impact the Company’s financial
condition and restrict the availability of liquidity for its operational needs.
On March 11, 2020, iBio filed four provisional
patent applications (the “Patent Applications”) that apply its Virus Like Particle ("VLP") platform technology,
or its lichenase carrier immunostimulatory (“LicKM”) adjuvant technology, in conjunction with its FastPharming
Manufacturing System for treating or preventing infections with the SARS-CoV-2 virus, which is the agent that causes COVID-19.
We announced our first proprietary COVID-19 development program on March 26, 2020, and its second program on June 4, 2020.
In addition, as previously announced, on
February 6, 2020, iBio and CC-Pharming Ltd., of Beijing, China (“CC-Pharming”) executed a Statement of Work 2 (“SOW2”),
pursuant to an existing Master Joint Development Agreement to develop and test a new CC-Pharming SARS-CoV-2 antigen to be manufactured
using iBio’s FastPharming Manufacturing System. The contemplated collaborative effort has not yet progressed in any
material respect.
There is no assurance that our activities relating to the development
of intellectual property in the field of vaccine candidate development for the SARS-CoV-2 virus, which are reflected in the filing
of the Patent Applications described above, will result in the development of any successful product candidates or generate any
proceeds or that we will be able to develop a vaccine in time for its use. These efforts are subject to the risks relating to the
development and commercialization of our technologies and product candidates, risks relating to our intellectual property and other
risks relating to our operations described in this Annual Report.
In addition, we may face additional risks
relating to the COVID-19 pandemic and its potential negative effects on our operations, share price and its toll on the world economy
and health risks generally. COVID-19 may affect our operations and those of third parties on which we rely, including our customers
and suppliers. Our business, financial condition, and results of operations may be affected by: disruptions in our customers’
abilities to fund, develop, or bring to market products as anticipated; delays in or disruptions to the conduct of clinical trials
by our customers; cancellations of contracts or confirmed orders from our customers; and the inability, difficulty, or additional
cost or delays in obtaining key raw materials, components, and other supplies from our existing supply chain; among other factors
caused by the COVID-19 pandemic. Our operations could again be disrupted if some of our employees become ill or are otherwise absent
from work as a result of the COVID-19 pandemic. Additionally, governmental restrictions, including travel restrictions, quarantines,
shelter-in-place orders, business closures, new safety requirements or regulations, or restrictions on the import or export of
certain materials, or other operational issues related to the COVID-19 pandemic may have an adverse effect on our business and
results of operations. We continue to monitor our operations and governmental recommendations and have made modifications for an
indefinite period to our normal operations because of the COVID-19 pandemic, including requiring most non-production related employees
to work remotely, which may increase cyber security risks or create data accessibility concerns.
The evolving nature of the circumstances
is such that it is impossible, at this stage, to determine the full and overall impact the COVID-19 pandemic may have, but it could
further disrupt production and cause delays in the supply and delivery of products used in our operations, adversely affect our
employees and disrupt our operations and manufacturing activities, all of which may have a material adverse effect on our business.
Risks Related
to Our Financial Position and Need for Additional Capital
We have incurred significant losses
since our inception. We expect to incur losses during our next fiscal year and may never achieve or maintain profitability.
Since our 2008
spinoff from Integrated BioPharma, we have incurred operating losses and negative cash flows from operations. Our net loss was
approximately $16.4 million and $17.6 million for 2020 and 2019, respectively. As of June 30, 2020, we had an accumulated deficit
of approximately $150.4 million.
To date, we have
financed our operations primarily through the sale of common stock, preferred stock and warrants. We have devoted substantially
all of our efforts to research and development, including the development and validation of our technologies, our CDMO facilities,
and the development of a proprietary therapeutic product against fibrosis and COVID-19 vaccines based upon our technologies. We
have not completed development of or commercialized any vaccine or therapeutic product candidates. We expect to continue to incur
significant expenses and may incur operating losses for at least the next year. We anticipate that our expenses and losses will
increase substantially if we:
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initiate clinical trials of our product
candidates;
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continue the research and development
of our product candidates;
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seek to discover additional product candidates;
and
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add operational, financial and management
information systems and personnel, including personnel to support our product development and manufacturing efforts.
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To become and
remain profitable, we must succeed in attracting and maintaining customers for the development, manufacturing and technology transfer
services offered by iBio CDMO, or acquire customers for our new Research & Bioprocess Products presently in development. Our
profitability in large part depends on the spending on iBio CDMO’s services by its customers and potential customers and
our ability to successfully develop and commercialize our product candidates. In addition, our profitability will also depend on
continuing to commercialize our technologies or we, alone or with our licensees, must succeed in developing and eventually commercializing
products that generate significant revenue. This will require us, alone or with our licensees and collaborators, to be successful
in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, obtaining
regulatory approval for these product candidates and manufacturing, marketing and selling those products for which regulatory approval
is obtained or establishing collaborations with parties willing and able to provide necessary capital or other value. We may never
succeed in these activities. We may never generate revenues that are significant or large enough to achieve profitability.
Even if we do
achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become
and remain profitable would diminish the value of our company and could impair our ability to raise capital, expand our business,
diversify our product offerings or continue our operations. A decline in the value of our company could also cause you to lose
all or part of your investment.
We anticipate
that our expenses will increase in the future.
We
expect our research and development expenses to increase significantly as our product candidates advance in clinical development.
Because of numerous risks and uncertainties involved in our business, the timing or amount of increased development expenses cannot
be accurately predicted, and our expenses could increase beyond expectations if we are required by the FDA, or comparable non-U.S.
regulatory authorities, to perform studies or clinical trials in addition to those we currently anticipate. Even if our product
candidate is approved for commercial sale, we anticipate incurring significant costs associated with the commercial launch of and
the related commercial-scale manufacturing requirements for our product candidate. As a result, we expect to continue to incur
significant and increasing operating losses and negative cash flows for the foreseeable future. Because of the numerous risks and
uncertainties associated with biopharmaceutical product development and commercialization, we are unable to accurately predict
the timing or amount of future expenses or when, or if, we will be able to achieve or maintain profitability. These losses have
had and will continue to have an adverse effect on our financial position and working capital.
We anticipate that our expenses will increase to the extent
we:
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continue the research and development of product candidates, and any
future product candidates;
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conduct additional clinical studies of our product candidates in the
future;
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seek to discover additional product candidates;
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seek regulatory approvals for our product
candidates and any future product candidates that successfully complete clinical studies;
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establish a sales, marketing and distribution
infrastructure and scale-up manufacturing capabilities to commercialize our product candidates or other future product candidates
if they obtain regulatory approval, including process improvements in order to manufacture our product candidates at commercial
scale; and
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enhance operational, financial and information
management systems and hire more personnel, including personnel to support development of our product candidate and any future
product candidates and, if a product candidate is approved, our commercialization efforts.
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We need
additional funding to fully execute our business plan, which funding may not be available on commercially acceptable terms or at
all. If we are unable to raise capital when needed, we may be forced to delay, reduce or eliminate the commercialization of our
development and manufacturing services and efforts or our product development programs.
Even though we issued and sold an
aggregate of (i) 19,473,013 shares of our common stock through July 16, 2020 for gross proceeds of $25,228,437 pursuant to the
Lincoln Park March 2020 Purchase Agreement and (ii) 28,394,064 shares of our common stock September 9, 2020 for gross proceeds
of $68,888,074 pursuant to the equity distribution agreement with UBS Securities, LLC ("UBS Securities") as our sales
agent, as well as a significant percentage of the additional $27,000,000 of shares of our common stock pursuant to the equity
distribution agreement, as amended by amendment no. 1, we still need additional capital to fully implement our current business,
operating and development plans. To the extent that we initiate or continue clinical development without securing collaborator
or licensee funding, our research and development expenses could increase substantially. Additionally, if we are unsuccessful in
our efforts to attract and retain customers for CDMO services, develop and launch Research & Bioprocess Products, out-license
our technologies and product candidates, or we find that it is necessary to advance the development of product candidates further
than contemplated by our current business plans to secure favorable licensing terms, we would require substantial additional capital.
When we elect to raise additional funds
or additional funds are required, we may raise such funds from time to time through public or private equity offerings, debt financings,
corporate collaboration and licensing arrangements or other financing alternatives. Additional equity or debt financing or corporate
collaboration and licensing arrangements may not be available on acceptable terms, if at all. In addition, no further sales of
shares of our common stock will be made pursuant to the Purchase Agreement that we entered into with Lincoln Park in March 2020
since we could no longer issue additional shares due to NYSE American limitations and therefore we terminated such agreement, effective
July 27, 2020. If we are unable to raise capital in sufficient amounts when needed or on attractive terms, we would be forced to
delay, reduce or eliminate our research and development programs or commercialization efforts and our ability to generate revenues
and achieve or sustain profitability will be substantially harmed.
Given that our total cash and marketable securities as of October
8, 2020, exceeded $83 million we believe we have adequate cash to support our current operations. We plan to fund our future business
operations using cash on hand, through proceeds realized in connection with the commercialization of our technologies and proprietary
products, license and collaboration arrangements and the operation of iBio CDMO, and through proceeds from the sale of additional
equity or other securities. We cannot be certain that such funding will be available on favorable terms or available at all. To
the extent that the Company raises additional funds by issuing equity securities, its stockholders may experience significant dilution.
We have based this projection on assumptions
that may prove to be wrong, in which case we may deplete our cash resources sooner than we currently anticipate. Our future capital
requirements will depend on many factors, including:
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further obtaining and retention of developmental, manufacturing and
facility build-out and technology transfer opportunities at iBio CDMO;
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the ability to generate and increase third-party
client sales and realized revenue at iBio CDMO;
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our ability to attract additional licensees
or other third parties willing to fund development and, if successful, commercialization of product candidates;
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the costs, timing and regulatory review
of our own product candidates;
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the costs of preparing, filing and prosecuting
patent applications and maintaining, enforcing and defending intellectual property-related claims; and
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the extent to which we acquire or invest
in businesses, products and technologies.
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If we are unable to raise funds when required
or on favorable terms, this assumption may no longer be operative, and we may have to: a) significantly delay, scale back, or discontinue
the product application and/or commercialization of our proprietary technologies; b) seek collaborators for our technology and
product candidates on terms that are less favorable than might otherwise be available; c) relinquish or otherwise dispose of rights
to technologies, product candidates, or products that we would otherwise seek to develop or commercialize; or d) possibly cease
operations.
Raising
additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights
to our technologies or product candidates.
Until such time
as we can generate substantial development, manufacturing, license or product revenues, we expect to finance our cash needs through
a combination of equity offerings, collaborations, strategic alliances, service contracts, manufacturing contracts, facility build-out
and technology transfer contracts, licensing and other arrangements. Sources of funds may not be available or, if available, may
not be available on terms satisfactory to us.
If we raise additional
funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased
fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific
actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional
equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our stockholders.
If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish
valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms
that may not be favorable to us. Should the financing we require to sustain our working capital needs be unavailable or prohibitively
expensive when we require it, our business, operating results, financial condition and prospects could be materially and adversely
affected and we may be unable to continue our operations.
To the extent
that we raise additional capital through a public or private offering and sale of equity securities, your ownership interest will
be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as
a stockholder. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties,
we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates
or to grant licenses on terms that may not be favorable to us. Should the financing we require to sustain our working capital needs
be unavailable or prohibitively expensive when we require it, our business, operating results, financial condition and prospects
could be materially and adversely affected and we may be unable to continue our operations.
We have a limited operating history
conducting commercial activities as a CDMO and developing vaccines and therapeutics, which may limit the ability of investors to
make an informed investment decision.
We commenced independent operations in
2008, and our operations to date have included organizing and staffing our company, business planning, raising capital, acquiring
and developing our proprietary technologies, recommissioning and operating our CDMO facility, identifying potential product candidates
and undertaking, through third parties, preclinical trials and clinical trials of product candidates derived from our technologies.
Commercial activities at our CDMO facility commenced in January 2016 with the large majority of our early efforts directed towards
recommissioning the facility to help meet cGMP manufacturing standards and provisions for iBio’s core service offerings.
The current vaccines and therapeutics being developed are all in preclinical development. Certain vaccine candidates using iBio’s
technologies have previously been evaluated by other organizations in Phase 1 clinical trials; however, all of our vaccine and
therapeutic protein product candidates are still in preclinical development. Neither we nor our collaborators have completed any
other clinical trials for any vaccine or therapeutic protein product candidate produced using iBio technology. As a result, we
have not yet demonstrated our ability to successfully complete any Phase 2 or pivotal clinical trials, obtain regulatory approvals,
manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities
necessary for successful product commercialization. Consequently, any conclusion you reach about our future success or viability
may not be as predictive as it might be if we had a longer operating history.
Even if we receive regulatory approval
for the sale of any of our product candidates, we do not know when we will begin to generate significant revenue from such product
candidates, if at all. Our ability to generate revenue depends on a number of factors, including our ability to:
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set an acceptable price for our products and obtain coverage and adequate reimbursement from third-party
payors;
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establish sales, marketing, manufacturing and distribution systems; add operational, financial
and management information systems and personnel, including personnel to support our clinical, manufacturing and planned future
clinical development and commercialization efforts and operations as a public company;
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manufacture commercial quantities of product candidates at acceptable cost levels;
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achieve broad market acceptance of our product candidates in the medical community and with third-party
payors and consumers;
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attract and retain an experienced management and advisory team;
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launch commercial sales of our products, whether alone or in collaboration with others; and
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maintain, expand and protect our intellectual property portfolio.
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Because of the
numerous risks and uncertainties associated with development and manufacturing, we are unable to predict if we will generate significant
revenue. If we cannot successfully execute on any of the factors listed above, our business may not succeed, and we may never generate
significant revenue.
Reliance
on government funding for our R&D programs may impose requirements that limit our ability to take certain actions, and subject
us to potential financial penalties, which could materially and adversely affect our business, financial condition and results
of operations.
We have applied
for government grants to support some of our research and development activities for our product candidates. Often government grants
include provisions that reflect the government’s substantial rights and remedies, many of which are not typically found in
commercial contracts, including powers of the government to potentially require repayment of all or a portion of the grant award
proceeds, in certain cases with interest, in the event we violate certain covenants pertaining to various matters.
Risks Related to the Development and
Commercialization of Our Technologies and Product Candidates
We rely
on licenses to use various technologies that are material to our business and if the agreements underlying the licenses were to
be terminated or if other rights that may be necessary for commercializing our intended products cannot be obtained, it would halt
our ability to market our products and technology, as well as have an immediate material adverse effect on our business, operating
results and financial condition.
Our prospects
for our fibrosis product candidate are significantly dependent upon our U-Pitt License Agreements. The license grants us exclusive,
worldwide rights to certain existing patents and related intellectual property that cover fibrosis. If we breach the terms of the
license, including any failure to make minimum royalty payments required thereunder or failure to reach certain developmental milestones
and by certain deadlines or other factors, U-Pitt has the right to terminate the license. If we were to lose or otherwise be unable
to maintain the license on acceptable terms, or find that it is necessary or appropriate to secure new licenses from other third
parties, we would not be able to market IBIO-100.
We currently
have only four product candidates in early stages of pre-clinical development and are dependent on the success of these product
candidates, which requires significant clinical testing before seeking regulatory approval. If our product candidates do not receive
regulatory approval or are not successfully commercialized, our business may be harmed.
We are currently in preclinical development of four product
candidates, IBIO-100, -200, -201 and -400, as a potential treatment for of fibrosis, COVID-19 and a veterinary vaccine for swine
fever. It is possible that we may never be able to develop a marketable product candidate.
We expect that
a substantial portion of our efforts and expenditures over the next few years will be devoted to these product candidates. Accordingly,
our business currently depends heavily on the successful development, regulatory approval and commercialization of these product
candidates, which may not receive regulatory approval or be successfully commercialized even if regulatory approval is received.
The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of product candidates are and will remain
subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries that each
have differing regulations. We are not permitted to market any product in the United States unless and until we receive approval
from the FDA, or in any foreign countries unless and until we receive the requisite approval from regulatory authorities in such
countries. We have never submitted an NDA or BLA to the FDA or comparable applications to other regulatory authorities and do not
expect to be in a position to do so for the foreseeable future. Obtaining approval of an NDA or BLA is an extensive, lengthy, expensive
and inherently uncertain process, and the FDA may delay, limit or deny approval of its product for many reasons.
We depend on spending and demand
from our customers for our contract manufacturing and development services.
Any reduction in customer spending on outsourcing
contract manufacturing and development services could have a material adverse effect on our business, financial condition, and
results of operations. The amount that our customers choose to spend on our contract manufacturing and development services offerings
is based upon, among other things, the clinical outcomes and market success of their research, development and marketing, available
resources, access to capital and their need to develop new products which, in turn, depend upon a number of other factors, including
their competitors’ research, development and product initiatives and the anticipated market for any new products, as well
as clinical and reimbursement scenarios for specific products and therapeutic areas. In addition, increasing consolidation in the
pharmaceutical industry may adversely impact such spending, particularly in the event that any of our customers choose to develop
or acquire integrated manufacturing operations.
Our business, financial condition,
and results of operations could be significantly impacted if the products we manufacture for our customers do not gain market acceptance.
If the products we manufacture for our
customers do not gain market acceptance or production volumes of key products that we manufacture for our customers decline, our
financial condition and results of operations may be adversely affected. We depend on, and have no control over, market acceptance
for the products we manufacture for our customers. Consumer demand for our customers’ products could be adversely affected
by, among other things, delays in securing regulatory approvals, the emergence of competing or alternative products, including
generic drugs, the loss of patent and other intellectual property rights protection, reductions in private and government payment
product subsidies or changing product marketing strategies.
We expect that continued changes to the
healthcare industry, including ongoing healthcare reform, changes in government or private funding of healthcare products and services,
legislation or regulations governing the delivery, pricing or reimbursement of pharmaceuticals and healthcare services or mandated
benefits, could cause healthcare industry participants to purchase fewer services from us or influence the price that others are
willing to pay for our services. Changes in the healthcare industry’s pricing, selling, inventory, distribution or supply
policies or practices could also significantly reduce our revenue and profitability.
We may expend
our limited resources to pursue a particular technology or product candidate and fail to capitalize on technologies or product
candidates that may be more profitable or for which there is a greater likelihood of success.
Because we have
limited financial and managerial resources, we focus on specific product candidates derived from or enhanced by our technologies
or that have been identified and partially developed by our clients or collaborators. As a result, we may forego or delay pursuit
of opportunities with other technologies or product candidates that later prove to have greater commercial potential. Our resource
allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending
and the spending of our clients and collaborators may not yield any commercially viable products.
We have based
our research and development efforts largely on our technologies and product candidates derived from such technologies. Notwithstanding
our large investment to date and anticipated future expenditures in these technologies, we have not yet developed, and may never
successfully develop, any marketed products using these technologies. As a result, we may fail to address or develop product candidates
based on other scientific approaches that may offer greater commercial potential or for which there is a greater likelihood of
success.
We also may not
be successful in our efforts to identify or discover additional product candidates using our technologies. Research programs to
identify new product candidates require substantial technical, financial and human resources. These research programs may initially
show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development.
If we do not accurately
evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that
product candidate through collaboration, licensing or other royalty arrangements on terms less favorable to us than possible.
We, our
clients and collaborators, are very early in our development efforts. If we or our clients and collaborators are unable to successfully
develop and commercialize product candidates or experience significant delays in doing so, our business will be materially harmed.
Excepting a limited
number of vaccine candidates that have been evaluated in completed Phase 1 clinical trials, all of our other vaccine and therapeutic
protein product candidates are still in preclinical development. Our ability to generate product sales revenues for our own products,
which we do not expect will occur for many years, will depend heavily on the successful development and eventual commercialization
of our product candidates. The success of our product candidates will depend on several factors, including the following:
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completion of preclinical
studies and clinical trials with positive results;
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receipt of marketing
approvals from applicable regulatory authorities;
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obtaining and maintaining patent and trade secret protection
and regulatory exclusivity, which may exceed patent exclusivity, for our product candidates;
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making arrangements
with third-party manufacturers for commercial manufacturing capabilities;
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launching commercial
sales of our products, if and when approved, whether alone or in collaboration with others;
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successfully maintaining
existing collaborations and entering into new ones throughout the development process as appropriate, from preclinical studies
through to commercialization;
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acceptance of the
products, if and when approved, by patients, the medical community and third-party payors;
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effectively competing
with other products;
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obtaining and maintaining
coverage and adequate reimbursement by third-party payors, including government payors, for any products we successfully develop;
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protecting our rights
in our intellectual property portfolio; and
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maintaining a continued
acceptable safety profile of the products following approval.
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If we or our collaborators
do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability
to successfully develop and commercialize our product candidates, which would materially harm our business.
We may not
be successful in our efforts to use iBio technologies to build a pipeline of product candidates and develop marketable products.
While we believe
that data we and our collaborators have obtained from preclinical studies and Phase I clinical trials of iBio technology-derived
and iBio technology-enhanced product candidates has validated these technologies, our technologies have not yet, and may never
lead to, approvable or marketable products. Even if we are successful in further validating our technologies and continuing to
build our pipeline, the potential product candidates that we identify may not be suitable for clinical development for many
possible reasons, including harmful side effects, limited efficacy or other characteristics that indicate that such product candidates
are unlikely to be products that will receive marketing approval and achieve market acceptance. If we and our collaborators
do not successfully develop and commercialize product candidates based upon our technologies, we will not obtain product or collaboration
revenues in future periods, which likely would result in significant harm to our financial position and adversely affect our stock
price.
Neither we nor our clients, collaborators
or licensees will be able to commercialize product candidates based on our technologies and services if preclinical studies do
not produce successful results or clinical trials do not demonstrate safety and efficacy in humans.
Preclinical and clinical testing is expensive,
difficult to design and implement, can take many years to complete and has an uncertain outcome. Success in preclinical testing
and early clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial
do not necessarily predict final results. We and our licensees may experience numerous unforeseen events during, or as a result
of, preclinical testing and the clinical trial process that could delay or prevent the commercialization of product candidates
based on our iBio technologies, including the following:
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Preclinical or clinical
trials may produce negative or inconclusive results, which may require additional preclinical testing, additional clinical trials
or the abandonment of projects that we expect to be promising. For example, promising animal data may be obtained about the anticipated
efficacy of a therapeutic protein product candidate and then human tests may not result in such an effect. In addition, unexpected
safety concerns may be encountered that would require further testing even if the therapeutic protein product candidate produced
an otherwise favorable response in human subjects.
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Initial clinical
results may not be supported by further or more extensive clinical trials. For example, a licensee may obtain data that suggest
a desirable immune response from a vaccine candidate in a small human study, but when tests are conducted on larger numbers of
people, the same extent of immune response may not occur. If the immune response generated by a vaccine is too low or occurs in
too few treated individuals, then the vaccine will have no commercial value.
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Enrollment in our
or our licensee’s clinical trials may be slower than projected, resulting in significant delays. The cost of conducting a
clinical trial increases as the time required to enroll adequate numbers of human subjects to obtain meaningful results increases.
Enrollment in a clinical trial can be a slower-than-anticipated process because of competition from other clinical trials, because
the study is not of interest to qualified subjects, or because the stringency of requirements for enrollment limits the number
of people who are eligible to participate in the clinical trial.
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We or our licensees
might have to suspend or terminate clinical trials if the participating subjects are being exposed to unacceptable health risks.
Animal tests do not always adequately predict potential safety risks to human subjects. The risk of any candidate product is unknown
until it is tested in human subjects, and if subjects experience adverse events during the clinical trial, the trial may have to
be suspended and modified or terminated entirely.
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Regulators or institutional
review boards may suspend or terminate clinical research for various reasons, including safety concerns or noncompliance with regulatory
requirements.
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Any regulatory approval
ultimately obtained may be limited or subject to restrictions or post-approval commitments that render the product not commercially
viable.
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The effects of iBio
technology-derived or iBio technology-enhanced product candidates may not be the desired effects or may include undesirable side
effects.
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Significant clinical trial delays could
allow our competitors to bring products to market before we or our licensees do and impair our ability to commercialize our technologies
and product candidates based on our technologies. Poor clinical trial results or delays may make it impossible to license a product
candidate, or reduce its attractiveness to prospective licensees, so that we will be unable to successfully develop and commercialize
such a product candidate.
Clinical trials
are risky, lengthy and expensive. We incur substantial expense for, and devote significant time and resources to, preclinical testing
and clinical trials, yet cannot be certain that these tests and trials will demonstrate that a product candidate is effective and
well-tolerated, or will ever support its approval and commercial sale. For example, clinical trials require adequate supplies of
clinical trial material and sufficient patient enrollment to power the trial. Delays in patient enrollment can result in increased
costs and longer development times. Even if we, or a licensee or collaborator, if applicable, successfully complete clinical trials
for our clinical product candidate, we or they might not file the required regulatory submissions in a timely manner and may not
receive marketing approval for the clinical product candidate. We cannot assure you that our clinical product candidate will successfully
progress further through the drug development process, or will ultimately result in an approved and commercially viable product.
Enrollment
and retention of subjects in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered
impossible by multiple factors outside our control.
We may encounter
delays in enrolling, or be unable to enroll, a sufficient number of participants to complete any of our clinical trials. Once enrolled,
we may be unable to retain a sufficient number of participants to complete any of our trials. Late-stage clinical trials of our
clinical product candidate may require the enrollment and retention of large numbers of subjects. Subject enrollment and retention
in clinical trials depends on many factors, including the size of the subject population, the nature of the trial protocol, the
existing body of safety and efficacy data with respect to the trial drug, the number and nature of competing treatments and ongoing
clinical trials of competing drugs for the same indication, the proximity of subjects to clinical sites and the eligibility criteria
for the trial.
Furthermore, any
negative results we may report in clinical trials of our clinical product candidate or negative results of similar product candidates
may make it difficult or impossible to recruit and retain participants in other clinical trials of that same clinical product candidate.
Delays or failures in planned subject enrollment or retention may result in increased costs, program delays or both, which could
have a harmful effect on its ability to develop its clinical product candidate, or could render further development impossible.
In addition, we expect to rely on contract research organizations (“CROs”) and clinical trial sites to ensure proper
and timely conduct of our future clinical trials and, while we intend to enter into agreements governing our services, we will
be limited in our ability to compel our actual performance in compliance with applicable regulations. Enforcement actions brought
against these third parties may cause further delays and expenses related to our clinical development programs.
If we, or
our clients and collaborators, are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we,
or our clients and collaborators, will not be able to commercialize our, or third-party, product candidates or will not be able
to do so as soon as anticipated, and our ability to generate revenue will be materially impaired.
Our product candidates
and the activities associated with their development and commercialization, including their design, testing, manufacture, safety,
efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive
regulation by the FDA and by similar regulatory authorities outside the United States. Failure to obtain marketing approval for
a product candidate will prevent us from commercializing the product candidate. We have not received approval to market any of
our product candidates from regulatory authorities in any jurisdiction. We have only limited experience in filing and supporting
the applications necessary to gain marketing approvals and expect to rely on third parties to assist us in this process. Securing
marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory
authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing
approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing
facilities by, the regulatory authorities. Our product candidates may not be effective, may be only moderately effective or may
prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing
approval or prevent or limit commercial use. If any of our product candidates receives marketing approval, the accompanying
label may limit the approved use in such a restrictive manner that it is not possible to obtain commercial viability for such product.
The process
of obtaining marketing approvals, both in the United States and abroad, is expensive and may take many years. If additional
clinical trials are required for certain jurisdictions, these trials can vary substantially based upon a variety of factors,
including the type, complexity and novelty of the product candidates involved, and may ultimately be unsuccessful. Changes in
marketing approval policies during the development period, changes in or the enactment of additional statutes or regulations,
or changes in regulatory review process for each submitted product application, may cause delays in the review and approval
of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept a
marketing application as deficient or may decide that our data is insufficient for approval and require additional
preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and
clinical testing could delay, limit or prevent marketing approval of a product candidate. Any marketing approval we
ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not
commercially viable.
Although the FDA
and other regulatory authorities have approved plant-based therapeutics in the past, consistent with the oversight of all products,
the FDA is monitoring whether these plant-based therapeutics pose any health and human safety risks. While they have not issued
any regulation to date that is averse to plant-based vaccines or therapeutics, it is possible that the FDA and other regulatory
authorities could issue regulations in the future that could adversely affect our product candidates.
If we experience
delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product
candidates may be harmed and our ability to generate revenues will be materially impaired.
Alternative
technologies may supersede our technologies or make them noncompetitive, which would harm our ability to generate future revenue.
The manufacture
of biologics and the methods of such manufacture are intensely competitive fields. Each of these fields is characterized by extensive
research efforts, which result in rapid technological progress that can render existing technologies obsolete or economically noncompetitive.
If our competitors succeed in developing more effective technologies or render our technologies obsolete or noncompetitive, our
business will suffer. Many universities, public agencies and established pharmaceutical, biotechnology, and other life sciences
companies with substantially greater resources than we have are developing and using technologies and are actively engaging in
the development of products similar to or competitive with our technologies and products. To remain competitive, we must continue
to invest in new technologies and improve existing technologies. To make such renewing investment we will need to obtain additional
financing. If we are unable to secure such financing, we will not have sufficient resources to continue such investment. In addition,
they also have significantly greater experience in the discovery and development of products, as well as in obtaining regulatory
approvals of those products in the United States and in foreign countries. Our current and potential future competitors also have
significantly more experience commercializing drugs that have been approved for marketing. Mergers and acquisitions in the pharmaceutical
and biotechnology industries could result in even more resources being concentrated among a small number of our competitors.
Our competitors
may devise methods and processes for protein expression that are faster, more efficient or less costly than that which can be achieved
using iBio technologies. There has been and continues to be substantial academic and commercial research effort devoted to the
development of such methods and processes. If successful competitive methods are developed, it may undermine the commercial basis
for iBio products and our technologies and related services.
We will face competition
from other drugs currently approved or that will be approved in the future for the treatment of the diseases we are currently targeting.
Therefore, our ability to compete successfully will depend largely on our ability to:
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develop and commercialize product candidates
that are superior to other products in the market;
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demonstrate through our clinical trials
that our clinical product candidate is differentiated from existing and future therapies;
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attract qualified scientific and commercial
personnel;
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obtain patent or other proprietary protection
for its clinical product candidate;
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obtain coverage and adequate reimbursement
from, and negotiate competitive pricing with, third-party payors; and
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successfully develop and commercialize,
independently or with collaborators, new product candidates.
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The availability
of our competitors’ products could limit the demand, and the price we are able to charge, for any product candidate we develop.
The inability to compete with existing or subsequently introduced therapies would have an adverse impact on our business, financial
condition and prospects.
Established
pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel
compounds that could make our product candidate less competitive. In addition, any new products that competes with an
approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to
overcome price competition and to be commercially successful. Accordingly, our competitors may succeed in obtaining patent
protection, discovering, developing, receiving the FDA’s approval for or commercializing medicines before we do, which
would have an adverse impact on our business and results of operations.
Our clinical
product candidate may exhibit undesirable side effects when used alone or in combination with other approved pharmaceutical products,
which may delay or preclude its development or regulatory approval, or limit its use if ever approved.
Throughout the
drug development process, we must continually demonstrate the activity, safety and tolerability of our clinical product candidate
in order to obtain regulatory approval to further advance our clinical development, or to eventually market it. Even if our clinical
product candidate demonstrates adequate biologic activity and clear clinical benefit, any unacceptable side effects or adverse
events, when administered alone or in the presence of other pharmaceutical products, may outweigh these potential benefits. We
may observe adverse or serious adverse events or drug-drug interactions in preclinical studies or clinical trials of our clinical
product candidate, which could result in the delay or termination of its development, prevent regulatory approval, or limit its
market acceptance if it is ultimately approved.
Even if
we obtain FDA approval in the United States, we may never obtain approval for or commercialize our clinical product candidate in
any other jurisdiction, which would limit our ability to realize each product’s full market potential.
In order to market
our clinical product candidate in a particular jurisdiction, we must establish and comply with numerous and varying regulatory
requirements on a country-by-country basis regarding safety and efficacy. Approval by the FDA in the United States does not ensure
approval by regulatory authorities in other countries or jurisdictions. In addition, clinical trials conducted in one country may
not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory
approval in any other country. Approval processes vary among countries and can involve additional product candidate testing and
validation and additional administrative review periods. Seeking foreign regulatory approval could result in difficulties and costs
for us and require additional preclinical studies or clinical trials which could be costly and time consuming. Regulatory requirements
can vary widely from country to country and could delay or prevent the introduction of our clinical product candidate in those
countries. We do not have any product candidates approved for sale in any jurisdiction, including in international markets, and
it does not have experience in obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements
in international markets or to obtain and maintain required approvals, or if regulatory approvals in international markets are
delayed, our target market will be reduced and our ability to realize the full market potential of any product candidate we develop
will be unrealized.
Even if
we obtain regulatory approval, we will still face extensive ongoing regulatory requirements and our clinical product candidate
may face future development and regulatory difficulties.
Any product candidate
for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, packaging,
distribution, adverse event reporting, storage, recordkeeping, export, import, advertising and promotional activities for such
product candidate, among other things, will be subject to extensive and ongoing requirements of and review by the FDA and other
regulatory authorities. These requirements include submissions of safety, efficacy and other post-marketing information and reports,
establishment registration and drug listing requirements, continued compliance with current Good Manufacturing Practice, or cGMP,
requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents,
requirements regarding the distribution of samples to physicians and recordkeeping and current GCP requirements for any clinical
trials that we conduct post-approval. Even if marketing approval of a product candidate is granted, the approval may be subject
to limitations on the indicated uses for which the product candidate may be marketed or to the conditions of approval. If our clinical
product candidate receives marketing approval, the accompanying label may limit the approved use of our product, which could limit
sales.
The FDA may also
impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety and/or efficacy
of our clinical product candidate. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs
are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes
stringent restrictions on manufacturers’ communications regarding off-label use and if we do not market our clinical product
candidate for its approved indications, we may be subject to enforcement action for off-label marketing. Violations of the Federal
Food, Drug, and Cosmetic Act relating to the promotion of prescription drugs may lead to FDA enforcement actions and investigations
alleging violations of federal and state health care fraud and abuse laws, as well as state consumer protection laws.
In addition, later
discovery of previously unknown adverse events or other problems with our clinical product candidate, manufacturers or manufacturing
processes, or failure to comply with regulatory requirements, may yield various results, including:
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restrictions on manufacturing such clinical product candidate;
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restrictions on the labeling or marketing of such clinical product
candidate;
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restrictions on product distribution or use;
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requirements to conduct post-marketing studies or clinical trials;
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withdrawal of the clinical product candidate from the market;
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refusal to approve pending applications or supplements to approved
applications that we submit;
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recall of such clinical product candidate;
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fines, restitution or disgorgement of profits or revenues;
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suspension or withdrawal of marketing approvals;
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refusal to permit the import or export of such clinical product candidate;
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clinical product candidate seizure; or
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injunctions or the imposition of civil or criminal penalties.
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The FDA’s
policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval
of our clinical product candidate. If we are slow or unable to adapt to changes in existing requirements or the adoption of new
requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may
have obtained.
Even if
our clinical product candidate receives marketing approval, we may fail to achieve market acceptance by physicians, patients, third-party
payors or others in the medical community necessary for commercial success.
If our clinical
product candidate receives marketing approval, we may nonetheless fail to gain sufficient market acceptance by physicians, patients,
third-party payors and others in the medical community. If we do not achieve an adequate level of acceptance, we may not generate
significant revenues and become profitable. The degree of market acceptance, if approved for commercial sale, will depend on a
number of factors, including but not limited to:
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the efficacy and potential advantages compared to alternative treatments;
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effectiveness of sales and marketing efforts;
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the cost of treatment in relation to alternative treatments;
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our ability to offer our clinical product candidate for sale at competitive
prices;
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the convenience and ease of administration compared to alternative
treatments;
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the willingness of the target patient population to try new therapies
and of physicians to prescribe these therapies;
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the willingness of the medical community to offer customers our product
candidate option in addition to or in the place of our clinical product candidate;
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the strength of marketing and distribution support;
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the availability of third-party coverage and adequate reimbursement;
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the prevalence and severity of any side effects; and
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any restrictions on the use of our product together with other medications.
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Because we expect
sales of our clinical product candidate to be based on the same mechanism of action, the failure of our first product candidate
to achieve market acceptance would harm our business and could require us to seek additional financing sooner than we otherwise
planned.
The
insurance coverage and reimbursement status of newly approved products are uncertain. Our product candidates may become
subject to unfavorable pricing regulations, third-party coverage and reimbursement practices, or healthcare reform
initiatives, which would harm our business. Failure to obtain or maintain adequate coverage and reimbursement for new or
current products could limit our ability to market those products and decrease our ability to generate revenue.
The regulations
that govern marketing approvals, pricing, coverage, and reimbursement for new drugs vary widely from country to country. In the
United States, recently enacted legislation may significantly change the approval requirements in ways that could involve additional
costs and cause delays in obtaining approvals. Some countries require approval of the sale price of a drug before it can be marketed.
In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets,
prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.
As a result, we might obtain marketing approval for a product in a particular country, but then be subject to price regulations
that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenue we are able
to generate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment
in one or more product candidates, even if any product candidates we may develop obtain marketing approval.
Our ability to
successfully commercialize our product candidates also will depend in part on the extent to which coverage and adequate reimbursement
for these products and treatments will be available from government health administration authorities, private health insurers,
and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance
organizations, decide which medications they will pay for and establish reimbursement levels. The availability of coverage and
extent of reimbursement by governmental and private payors is essential for most patients to be able to afford treatments such
as gene therapy products. Sales of these or other product candidates that we may identify will depend substantially, both domestically
and abroad, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy
benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private
health coverage insurers and other third-party payors. If coverage and adequate reimbursement is not available, or is available
only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided,
the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient
return on our investment.
The availability
and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments.
Sales of our clinical product candidate that receive marketing approval will depend substantially, both in the United States and
internationally, on the extent to which the costs of our clinical product candidate will be paid by health maintenance, managed
care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities,
private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only on a limited
basis, we may not be able to successfully commercialize our clinical product candidate. Even if coverage is provided, the approved
reimbursement amount may not be high enough to allow us to establish or maintain adequate pricing that will allow it to realize
a sufficient return on our investment.
Outside the United
States, international operations are generally subject to extensive governmental price controls and other market regulations, and
we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries may cause us to price
our clinical product candidate on less favorable terms that we currently anticipate. In many countries, particularly the countries
of the European Union, the prices of medical products are subject to varying price control mechanisms as part of national health
systems. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of
marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct
a clinical trial that compares the cost-effectiveness of our clinical product candidate to other available therapies. In general,
the prices of products under such systems are substantially lower than in the United States. Other countries allow companies to
fix their own prices for products, but monitor and control company profits. Additional foreign price controls or other changes
in pricing regulation could restrict the amount that it is able to charge for its clinical product candidate. Accordingly, in markets
outside the United States, the reimbursement for its products may be reduced compared with the United States and may be insufficient
to generate commercially reasonable revenues and profits.
Moreover, increasing
efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs may
cause such organizations to limit both coverage and level of reimbursement for newly approved products and, as a result, they
may not cover or provide adequate payment for its clinical product candidate. We expect to experience pricing pressures in connection
with the sale of our clinical product candidate due to the trend toward managed healthcare, the increasing influence of health
maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly
prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high
barriers are being erected for new products entering the marketplace.
Failure
to comply with existing and future regulatory requirements could adversely affect our business, financial condition, and results
of operations.
Our CDMO operations
are highly regulated and we must comply with the regulatory requirements of various local, state, provincial, national and international
regulatory bodies having jurisdiction in the countries or localities in which we manufacture products or in which our customers’
products are distributed. In particular, we are subject to laws and regulations concerning development, testing, manufacturing
processes, equipment and facilities, including compliance with cGMPs, import and export, and product registration and listing,
among other things. As a result, our facility is subject to regulation by the FDA, as well as regulatory bodies of other jurisdictions
where our customers have marketing approval for their products. As we expand our operations and geographic scope, we may be exposed
to more complex and newer regulatory and administrative requirements and legal risks, any of which may require expertise in which
we have little or no experience. It is possible that compliance with new regulatory requirements could impose significant compliance
costs on us. Such costs could have a material adverse effect on our business, financial condition and results of operations.
Not only will
our customers’ products be subject to the regulatory approvals discussed above that our proprietary products will be subject
to, but our facility is subject to governmental approval for the testing or manufacturing of products If our manufacturing facility
is not able to demonstrate compliance with cGMPs, pass other aspects of pre-approval inspections or properly scale up to produce
commercial supplies, the FDA or other regulatory agencies can delay approval of a customers’ drug candidate.
In addition, if
new legislation or regulations are enacted or existing legislation or regulations are amended or are interpreted or enforced differently,
we may be required to obtain additional approvals or operate according to different manufacturing or operating standards. This
may require a change in our development and manufacturing techniques or additional capital investments in our facility. Any related
costs may be significant. If we fail to comply with applicable regulatory requirements in the future, then we may be subject to
warning letters and/or civil or criminal penalties and fines, suspension or withdrawal of regulatory approvals, product recalls,
seizure of products, restrictions on the import and export of our products, debarment, exclusion, disgorgement of profits, operating
restrictions and criminal prosecution and the loss of contracts and resulting revenue losses. Inspections by regulatory authorities
that identify any deficiencies could result in remedial actions, production stoppages or facility closure, which would disrupt
the manufacturing process and supply of product to our customers. In addition, such failure to comply could expose us to contractual
and product liability claims, including claims by customers for reimbursement for lost or damaged active pharmaceutical ingredients
or recall or other corrective actions, the cost of which could be significant.
The FDA and comparable
government authorities having jurisdiction in the countries in which we or our customers intend to market their products have the
authority to withdraw product approval or suspend manufacture if there are significant problems with raw materials or supplies,
quality control and assurance or the product we manufacture is adulterated or misbranded. If our manufacturing facilities and services
are not in compliance with the FDA and comparable government authorities, we may be unable to obtain or maintain the necessary
approvals to continue manufacturing products for our customers, which would materially adversely affect our financial condition
and results of operations.
Our customers’
failure to receive or maintain regulatory approval for their product candidates could negatively impact our revenue and profitability.
Our contract manufacturing
business materially depends upon the regulatory approval of the products we manufacture. As such, if our customers experience a
delay in, or failure to receive, approval for any of their product candidates or fail to maintain regulatory approval of their
products, our revenue and profitability could be adversely affected. Additionally, if the FDA or a comparable foreign regulatory
authority does not approve of our facilities for the manufacture of a customer product or if it withdraws such approval in the
future, our customers may choose to identify alternative manufacturing facilities and/or relationships, which could significantly
impact our ability to expand our CDMO capacity and capabilities and achieve profitability.
Our manufacturing
services are highly complex, and if we are unable to provide quality and timely services to our customers, our business could suffer.
The manufacturing
services we offer are highly complex, due in part to strict regulatory requirements. A failure of our quality control systems
in our facilities could cause problems to arise in connection with facility operations for a variety of reasons, including equipment
malfunction, viral contamination, failure to follow specific manufacturing instructions, protocols and standard operating procedures,
problems with raw materials or environmental factors. Such problems could affect production of a single manufacturing run or a
series of runs requiring the destruction of products, or could halt manufacturing operations altogether. In addition, our failure
to meet required quality standards may result in our failure to timely deliver products to our customers which, in turn, could
damage our reputation for quality and service. Any such incident could, among other things, lead to increased costs, lost revenue,
reimbursement to customers for lost drug substance, damage to and possible termination of existing customer relationships, time
and expense spent investigating the cause and, depending on the cause, similar losses with respect to other manufacturing
runs. With respect to our commercial manufacturing, if problems are not discovered before the product is released to the market,
we may be subject to regulatory actions, including product recalls, product seizures, injunctions to halt manufacture and distribution,
restrictions on our operations, civil sanctions, including monetary sanctions, and criminal actions. In addition, such issues
could subject us to litigation, the cost of which could be significant.
If we fail
to comply with state and federal healthcare regulatory laws, we could face substantial penalties, damages, fines, disgorgement,
exclusion from participation in governmental healthcare programs, and the curtailment of its operations, any of which could harm
our business.
Although we do
not intend to provide healthcare services or submit claims for third party reimbursement, we will be subject to healthcare fraud
and abuse regulation and enforcement by federal and state governments, which could significantly impact our business. The laws
that may affect our ability to operate include, but are not limited to:
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the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it;
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the civil False Claims Act, or FCA, which
prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment
from Medicare, Medicaid or other third-party payors that are false or fraudulent; knowingly making, using, or causing to be made
or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; or knowingly making,
using, or causing to be made or used, a false record or statement to avoid, decrease or conceal an obligation to pay money to the
federal government;
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the criminal false claims act, which imposes criminal fines
or imprisonment against individuals or entities who make or present a claim to the government knowing such claim to be false, fictitious
or fraudulent;
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HIPAA, which created federal criminal
laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare
matters;
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the federal civil monetary penalties statute,
which prohibits, among other things, the offering or giving of remuneration to a Medicare or Medicaid beneficiary that the person
knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable
by a Federal or state governmental program;
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HIPAA, as amended by the HITECH Act, and their respective implementing
regulations, imposes requirements on covered entities, including health plans, health clearinghouses, and certain health care providers,
and their business associates relating to the privacy, security and transmission of individually identifiable health information;
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the federal physician sunshine requirements under the ACA, which
require certain manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S. Department of Health
and Human Services information related to payments and other transfers of value to physicians (defined to include doctors, dentists,
optometrists, podiatrists and chiropractors) and teaching hospitals, and ownership and other investment interests held by such
professionals and their immediate family members. Beginning in 2022, applicable manufacturers also will be required to report such
information regarding its relationships with physician assistants, nurse practitioners, clinical nurse specialists, certified registered
nurse anesthetists and certified nurse midwives during the previous year; and
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state and foreign law equivalents of each
of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party
payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the device industry’s
voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict
payments that may be made to healthcare providers and other potential referral sources; and state laws that require device manufacturers
to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing
expenditures.
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Further, the ACA, among other things, amended the intent requirements
of the federal anti-kickback statute and certain criminal statutes governing healthcare fraud. A person or entity can now be found
guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. In addition, the ACA
provided that the government may assert that a claim including items or services resulting from a violation of the federal Anti-
Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA. Any violations of these aforementioned laws,
or any action against us for violation of these laws, even if we successfully defend against it, could result in the imposition
of significant civil, criminal and administrative sanctions, damages, disgorgement, monetary fines, possible exclusion from participation
in Medicare, Medicaid and other federal healthcare programs, imprisonment, integrity oversight and reporting obligations, contractual
damages, any of which could cause a material adverse effect on our reputation, business, results of operations and financial condition.
We have entered into consulting and scientific advisory board
arrangements with physicians and other healthcare providers. Compensation for some of these arrangements includes the provision
of stock options. While we have worked to structure our arrangements to comply with applicable laws, because of the complex and
far-reaching nature of these laws, regulatory agencies may view these or other transactions as prohibited arrangements that must
be restructured, or discontinued, or for which we could be subject to other significant penalties. We could be adversely affected
if regulatory agencies interpret our financial relationships with providers who influence the ordering of and use our products
to be in violation of applicable laws.
The scope and enforcement of each of these laws is uncertain
and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent
and regulations. Federal and state enforcement bodies have continued their scrutiny of interactions between healthcare companies
and healthcare providers, which has continued to result in a number of investigations, prosecutions, convictions and significant
settlements in the healthcare industry.
Responding
to investigations can be time- and resource-consuming and can divert management’s attention from the business. Additionally,
as a result of these investigations, healthcare providers and entities may have to agree to additional onerous compliance and reporting
requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase
our costs or otherwise have an adverse effect on its business.
Product liability lawsuits against
us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.
We face the risk
of product liability exposure in connection with the testing of our product candidates in human clinical trials and will face an
even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves against
claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or eventual
outcome, liability claims may result in:
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decreased demand for any product candidates
or products that we may develop;
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injury to our reputation and significant
negative media attention;
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withdrawal of clinical trial participants;
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significant costs to defend the related
litigation;
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substantial monetary awards to trial participants
or patients;
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reduced resources of our management to
pursue our business strategy; and
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the inability to commercialize any products
that we may develop.
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Prior to commencing human clinical
trials, we will seek to obtain product liability insurance coverage. Such insurance coverage is expensive and may not be available
in coverage amounts we seek or at all. If we obtain such coverage, we may in the future be unable to maintain such coverage at
a reasonable cost or in an amount adequate to satisfy any liability that may arise.
If we are unable to
establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we may not
be successful in commercializing our clinical product candidate, if approved.
We do not have
any infrastructure for the sales, marketing or distribution of our clinical product candidates, and the cost of establishing and
maintaining such an organization may exceed the cost-effectiveness of doing so. In order to market any product candidate that may
be approved, we must build our sales, distribution, marketing, managerial and other non-technical capabilities or make arrangements
with third parties to perform these services. To achieve commercial success for any product candidate for which we have obtained
marketing approval, we will need a sales and marketing organization. There are significant expenses and risks involved with establishing
our own sales, marketing and distribution capabilities, including our ability to hire, retain and appropriately incentivize qualified
individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively manage
a geographically dispersed sales and marketing team. If we were to determine to develop our own sales organization, any failure
or delay in the development of our internal sales, marketing and distribution capabilities could delay any product candidate launch,
which would adversely impact commercialization.
Factors that may inhibit our efforts
to commercialize our clinical product candidate on our own include:
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our inability to recruit, train and retain adequate numbers of effective
sales and marketing personnel;
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the inability of sales personnel to obtain access to physicians or
attain adequate numbers of physicians to administer our products; and
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unforeseen costs and expenses associated with creating an independent
sales and marketing organization.
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We intend to pursue
collaborative arrangements regarding the sale and marketing of our clinical product candidate, if approved, for certain international
markets; however, we may not be able to establish or maintain such collaborative arrangements. To the extent that we depend on
third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, and there
can be no assurance that such efforts will be successful.
If we are unable
to build our own sales force in the United States or negotiate a collaborative relationship for the commercialization of our clinical
product candidate outside the United States, we may be forced to delay the potential commercialization or reduce the scope of our
sales or marketing activities. We may have to enter into arrangements with third parties or otherwise at an earlier stage than
we would otherwise choose and we may be required to relinquish rights to our intellectual property or otherwise agree to terms
unfavorable to us, any of which may have an adverse effect on our business, operating results and prospects.
We may be competing
with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the
support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more
established companies.
If we obtain
approval to commercialize our clinical product candidate outside of the United States, a variety of risks associated with international
operations could harm our business.
If our clinical
product candidate is approved for commercialization, we intend to enter into agreements with third parties to market them in certain
jurisdictions outside the United States. We expect that we will be subject to additional risks related to international operations
or entering into international business relationships, including:
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different regulatory requirements for
drug approvals and rules governing drug commercialization in foreign countries;
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reduced protection for intellectual property
rights;
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unexpected changes in tariffs, trade barriers
and regulatory requirements;
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economic weakness, including inflation,
or political instability in particular foreign economies and markets;
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compliance with tax, employment, immigration
and labor laws for employees living or traveling abroad;
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foreign reimbursement, pricing and insurance
regimes;
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foreign currency fluctuations, which could
result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country;
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workforce uncertainty in countries where
labor unrest is more common than in the United States;
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potential noncompliance with the U.S.
Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act 2010 and similar anti-bribery and anticorruption laws in
other jurisdictions;
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product shortages resulting from any events
affecting raw material supply or manufacturing capabilities abroad; and
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business interruptions resulting from
geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.
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We have no prior
experience in these areas. In addition, there are complex regulatory, tax, labor and other legal requirements imposed by both the
European Union and many of the individual countries in Europe with which we will need to comply.
Recently
enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our
clinical product candidate and affect the prices we may obtain.
In the United States and some foreign jurisdictions, there have
been a number of executive, legislative and regulatory changes and proposed changes regarding the healthcare system that could,
among other things, prevent or delay marketing approval of our clinical product candidate, restrict or regulate post-approval activities
and affect our ability to profitably sell any product candidate for which we obtain marketing approval. Changes in regulations,
statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes
to our manufacturing arrangements, (ii) additions or modifications to product labeling, (iii) the recall or discontinuation of
our products or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect
our business, financial condition and results of operations.
Among policy makers
in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals
of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has
been a particular focus of these efforts and has been significantly affected by major legislative initiatives. In March 2010, the
ACA was passed, which substantially changed the way healthcare is financed by both the government and private insurers, and significantly
impacts the U.S. pharmaceutical industry. The ACA, among other things, subjects biological products to potential competition by
lower-cost biosimilars, addresses a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program
are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increases the minimum Medicaid rebates owed
by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed
care organizations, establishes annual fees and taxes on manufacturers of certain branded prescription drugs, and creates a new
Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated
prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s
outpatient drugs to be covered under Medicare Part D.
There remain executive, judicial and Congressional challenges.
Since January2017, President Trump has signed several Executive Orders and other directives designed to delay the implementation
of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. Concurrently,
Congress has considered legislation that would repeal or repeal and replace all or part of the ACA. While Congress has not passed
comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA were signed into law.
For example, the Tax Cuts and Jobs Act of 2017, or Tax Act, included a provision which repealed, effective January 1, 2019, the
tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage
for all or part of a year that is commonly referred to as the “individual mandate.” On December 14, 2018, a Texas U.S.
District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed
by Congress as part of the Tax Act. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the
District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine
whether the remaining provisions of the ACA are invalid as well. On March 2, 2020, the United States Supreme Court granted the
petitions for writs of certiorari to review this case. It is unclear how such litigation and other efforts to repeal and replace
the ACA will impact the ACA and our business.
There have been, and likely will continue to be, legislative
and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing
or lowering the cost of healthcare. The implementation of cost containment measures or other healthcare reforms may prevent us
from being able to generate revenue, attain profitability, or commercialize our products. Such reforms could have an adverse effect
on anticipated revenue from product candidates that we may successfully develop and for which we may obtain regulatory approval
and may affect our overall financial condition and ability to develop product candidates. At the federal level, the Trump administration’s
budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug
prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and
biosimilar drugs. On March 10, 2020, the Trump administration sent “principles” for drug pricing to Congress, calling
for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option
to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases. Further,
the Trump administration previously released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs
that contained proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare
programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products
paid by consumers. While some of these and other measures may require additional authorization to become effective, Congress and
the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control
drug costs. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control
pharmaceutical and biological product pricing.
We expect that additional state and federal healthcare reform
measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare
products, which could result in reduced demand for our clinical product candidate or additional pricing pressures. For example,
it is possible that additional governmental action is taken in response to the COVID-19 pandemic. Any reduction in reimbursement
from Medicare or other government programs may result in a similar reduction in payments from private payors.
For our
clinical product candidates, we intend to use our own manufacturing facility. Any manufacturing problems experienced by us could
result in a delay or interruption in the supply of our clinical product candidate until the problem is cured or until we locate
and qualify an alternative source of manufacturing and supply.
We currently manufacture
our clinical product candidates and do not have a second alternative manufacturer. If we were to experience any prolonged disruption
for our manufacturing, we could be forced to seek additional third-party manufacturing contracts, thereby increasing our development
costs and negatively impacting our timelines and any commercialization costs. If we change manufacturers at any point during the
development process or after approval of a product candidate, we will be required to demonstrate comparability between the product
manufactured by the old manufacturer and the product manufactured by the new manufacturer. If we are unable to do so we may need
to conduct additional clinical trials with product manufactured by the new manufacturer.
If we are not
able to manufacture sufficient quantities of our clinical product candidate, our development activities would be impaired. In addition,
the manufacturing facility where our clinical product candidate is manufactured is subject to ongoing, periodic inspection by the
FDA or other comparable regulatory agencies to ensure compliance with current Good Manufacturing Practice, or cGMP. Any failure
to follow and document the manufacturer’s adherence to such cGMP regulations or other regulatory requirements may lead to
significant delays in the availability of clinical bulk drug substance and finished product for clinical trials, which may result
in the termination of or a hold on a clinical trial, or may delay or prevent filing or approval of marketing applications for our
clinical product candidate. We also may encounter problems with the following:
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achieving adequate or clinical-grade materials
that meet FDA or other comparable regulatory agency standards or specifications with consistent and acceptable production yield
and costs;
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failing to develop an acceptable formulation
to support late-stage clinical trials for, or the commercialization of, our clinical product candidate;
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being unable to increase the scale of
or the capacity for, or reformulate the form of our clinical product candidate, which may cause us to experience a shortage in
supply, or cause the cost to manufacture our clinical product candidate to increase.
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we cannot assure you that we will be able
to manufacture our clinical product candidate at a suitable commercial scale, or that we will be able to find alternative manufacturers
acceptable to us that can do so;
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our facility closed as a result of regulatory
sanctions, pandemic or a natural disaster;
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shortages of qualified personnel, raw
materials or key contractors;
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failing to obtain FDA approval for commercial
scale manufacturing; and
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ongoing compliance with cGMP regulations
and other requirements of the FDA or other comparable regulatory agencies.
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If we encounter
any of these problems or are otherwise delayed, or if the cost of manufacturing is not economically feasible or we cannot find
another third-party manufacturer, we may not be able to produce our clinical product candidate in a sufficient quantity to meet
future demand.
These risks are
likely to be exacerbated by our limited experience with our current products and manufacturing processes. If demand for our products
materializes, we may have to invest additional resources to purchase materials, hire and train employees, and enhance our manufacturing
processes. It may not be possible for us to manufacture our clinical product candidate at a cost or in quantities sufficient to
make its clinical product candidate commercially viable. Any of these factors may affect our ability to manufacture our products
and could reduce gross margins and profitability.
Reliance on third-party
manufacturers and suppliers entails risks to which we would not be subject if we manufacture our clinical product candidate ourselves,
including:
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reliance on the third parties for regulatory
compliance and quality assurance;
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the possible breach of the manufacturing
agreements by the third parties because of factors beyond our control or the insolvency of any of these third parties or other
financial difficulties, labor unrest, natural disasters or other factors adversely affecting their ability to conduct their business;
and
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possibility of termination or non-renewal
of the agreements by the third parties, at a time that is costly or inconvenient for us, because of our breach of the manufacturing
agreement or based on their own business priorities.
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If we rely on
a third party contract manufacturer or its suppliers fail to deliver the required commercial quantities of our clinical product
candidate required for our clinical trials and, if approved, for commercial sale, on a timely basis and at commercially reasonable
prices, and we are unable to find one or more replacement manufacturers or suppliers capable of production at a substantially equivalent
cost, in substantially equivalent volumes and quality, and on a timely basis, we would likely be unable to meet demand for our
products and would have to delay or terminate our pre-clinical or clinical trials, and we would lose potential revenue. It may
also take a significant period of time to establish an alternative source of supply for our clinical product candidate and to have
any such new source approved by the FDA or any applicable foreign regulatory authorities. Furthermore, any of the above factors
could cause the delay or suspension of initiation or completion of clinical trials, regulatory submissions or required approvals
of our clinical product candidate, cause it to incur higher costs and could prevent us from commercializing our clinical product
candidate successfully.
Risks Related
to Dependence on Third Parties
Establishing
and maintaining collaborations is a key component of our business strategy. If we are unable to establish new collaborations and
maintain both new and existing collaborations, or if these collaborations are not successful, our business could be adversely affected.
Our current business
plan contemplates that we will in the future derive significant revenues from collaborators and licensees that successfully utilize
iBio technologies in connection with the production, development and commercialization of vaccines and therapeutic protein product
candidates. Our realization of these revenues and dependence on existing collaborations, and any future collaborations we enter
into, is subject to a number of risks, including the following:
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collaborators may
have significant discretion in determining the efforts and resources that they will apply to these collaborations;
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collaborators may
not perform their obligations as expected;
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collaborators
may not pursue development and, if successful, commercialization of product candidates or may elect not to continue or renew
development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available
funding, or external factors, such as an acquisition, that divert resources or create competing priorities;
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collaborators may
delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate,
repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;
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collaborators could
independently develop, or develop with third parties, products that compete directly or indirectly with our products or product
candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized
under terms that are more economically attractive than ours, which may cause collaborators to cease to devote resources to the
commercialization of our product candidates;
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collaborators with
marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient
resources to the marketing and distribution of such product or products; or commercialization of product candidates, might lead
to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of
which would be time-consuming and expensive;
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collaborators may
not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite
litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;
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collaborators may
infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;
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collaborations may
be terminated for the convenience of the collaborator and, if terminated, we would potentially lose the right to pursue further
development or commercialization of the applicable product candidates;
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collaborators may
learn about our technology and use this knowledge to compete with us in the future;
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results of collaborators’
preclinical or clinical studies could produce results that harm or impair other products using our technology;
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there may be conflicts
between different collaborators that could negatively affect those collaborations and others; and
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the number and type
of our collaborations could adversely affect our attractiveness to future collaborators or acquirers.
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If our collaborations
do not result in the successful development and commercialization of products or if one or more of our collaborators terminates
its agreement with us, we may not receive any future research and development funding or milestone or royalty payments under the
collaboration. If we do not receive the funding we expect under these agreements, our continued development of our product candidates
could be delayed and we may need additional resources to develop additional product candidates. There can be no assurance that
our collaborations will produce positive results or successful products on a timely basis or at all.
We seek to establish
and collaborate with additional pharmaceutical and biotechnology companies for development and potential commercialization of iBio
technology-produced and iBio technology-enhanced product candidates. We face significant competition in seeking appropriate collaborators.
Our ability to reach a definitive agreement for a collaboration depends, among other things, upon our assessment of the collaborator’s
resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation
of a number of factors. If we fail to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at
all, we may have to curtail the development of a product candidate, reduce or delay its development or the development of one or
more of our other product candidates, or increase our expenditures and undertake additional development or commercialization activities
at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain
additional expertise and additional capital, which may not be available to us on acceptable terms or at all.
If we fail to enter
into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization
activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our product
portfolio and our business may be materially and adversely affected.
If third parties on whom we or our
licensees will rely for the conduct of preclinical studies and clinical trials do not perform as contractually required or as we
expect, we may not be able to obtain regulatory approval for or commercialize our product candidates and our business may suffer.
We do not
have the ability to independently conduct the preclinical studies and clinical trials required to obtain regulatory approval
for our product candidates. We have not yet contracted with any third parties to conduct clinical trials of product
candidates we develop independently of collaborators. We will depend on licensees or on independent clinical investigators,
contract research organizations and other third-party service providers to conduct the clinical trials of our product
candidates. We will rely heavily on these parties for successful execution of our clinical trials but will not control many
aspects of their activities. For example, the investigators participating in our clinical trials will not be our employees.
However, we will be responsible for ensuring that each of our clinical trials is conducted in accordance with the general
investigational plan and protocols for the trial. Third parties may not complete activities on schedule, or may not conduct
our clinical trials in accordance with regulatory requirements or our stated protocols. The failure of these third parties to
carry out their obligations could delay or prevent the development, approval and commercialization of our product
candidates.
If revenue
from a third-party customer or client is concentrated in an amount that makes up a significant percentage of our total revenues,
we may be adversely impacted by the significant dependence upon that client, including but not limited to, receipt and collections
of outstanding amounts, continued operational allocations toward the client and related efficiencies, capacity and opportunity
costs.
At this time,
we are continually promoting our technologies and CDMO capabilities to further expand and grow our revenue base and business. We
will continue to consider any potential revenue and client related concentration risks. During the fiscal year ended June 30, 2020,
CC-Pharming accounted for approximately 77% of total revenue. During the fiscal year ended June 30, 2019, CC-Pharming accounted
for approximately 92% of our total revenues. Although we expect our revenues to increase significantly and further vary by client
over the next twelve months, there are no guarantees we will be correct in our assumptions.
If third-party
vendors, upon whom we rely to conduct our preclinical studies or clinical trials, do not perform or fail to comply with strict
regulations, these studies or trials may be delayed, terminated, or fail, or we could incur significant additional expenses, which
could materially harm our business.
We have limited
resources dedicated to designing, conducting and managing our preclinical studies and clinical trials. We have historically relied
on, and intend to continue to rely on, third parties, including CROs, consultants and principal investigators to assist us in designing,
managing, conducting, monitoring and analyzing the data from our preclinical studies and clinical trials. We rely on these vendors
and individuals to perform many facets of the clinical development process on our behalf, including conducting preclinical studies
and will rely on them for the recruitment of sites and subjects for participation in our clinical trials, maintenance of good relations
with the clinical sites, and ensuring that these sites are conducting our trials in compliance with the trial protocol and applicable
regulations. If these third parties fail to perform satisfactorily, or do not adequately fulfill their obligations under the terms
of our agreements with them, we may not be able to enter into alternative arrangements without undue delay or additional expenditures,
and therefore the preclinical studies and clinical trials of our clinical product candidate may be delayed or prove unsuccessful.
Further, the FDA,
the EMA, or similar regulatory authorities in other countries, may inspect some of the clinical sites participating in our clinical
trials or our third-party vendors’ sites to determine if our clinical trials are being conducted according to good clinical
practices, or GCPs, or similar regulations. If we or a regulatory authority determine that our third-party vendors are not in compliance
with, or have not conducted our clinical trials according to applicable regulations, we may be forced to exclude certain data from
the results of the trial, or delay, repeat or terminate such clinical trials.
We intend
to rely on third parties to conduct, supervise and monitor our clinical trials, and if those third parties perform in an unsatisfactory
manner, it may harm our business.
We will rely on
clinical trial sites to ensure the proper and timely conduct of our clinical trials, and we expect to have limited influence over
their actual performance.
We will rely upon
CROs to monitor and manage data for our clinical programs, as well as the execution of future nonclinical studies. We expect to
control only certain aspects of our CROs’ activities. Nevertheless, we will be responsible for ensuring that each of our
studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on
the CROs does not relieve us of our regulatory responsibilities.
We and our CROs
will be required to comply with the Good Laboratory Practices and GCPs, which are regulations and guidelines enforced by the FDA
and are also required by the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory
authorities in the form of International Conference on Harmonization of Technical Requirements for Pharmaceuticals for Human Use
guidelines for any of our product candidates that are in preclinical and clinical development. The Regulatory authorities enforce
GCPs through periodic inspections of trial sponsors, principal investigators and clinical trial sites. If we or our CROs fail to
comply with GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign
regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Accordingly,
if our CROs fail to comply with these regulations or fail to recruit a sufficient number of subjects, we may be required to repeat
clinical trials, which would delay the regulatory approval process.
Our CROs
will not be our employees, and we will not control whether or not they devote sufficient time and resources to our future
clinical and nonclinical programs. These CROs may also have relationships with other commercial entities, including our
competitors, for whom they may also be conducting clinical trials, or other drug development activities which could harm our
competitive position. We face the risk of potential unauthorized disclosure or misappropriation of our intellectual property
by CROs, which may reduce our trade secret protection and allow our potential competitors to access and exploit our
proprietary technology. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet
expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to
adhere to our clinical protocols or regulatory requirements or for any other reasons, our clinical trials may be extended,
delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize, any product
candidate that we develops. As a result, our financial results and the commercial prospects for any product candidate that it
develops would be harmed, its costs could increase, and our ability to generate revenues could be delayed.
If our relationship
with these CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable
terms. Switching or adding additional CROs involves substantial cost and requires management’s time and focus. In addition,
there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our
ability to meet our desired clinical development timelines. Although we intend to carefully manage our relationships with our CROs,
there can be no assurance that it will not encounter challenges or delays in the future or that these delays or challenges will
not have an adverse impact on our business, financial condition and prospects.
Our clinical
product candidates may cause adverse effects or have other properties that could delay or prevent our regulatory approval or limit
the scope of any approved label or market acceptance.
Adverse events caused by our clinical product candidates or
generally by plant-based therapeutics could cause reviewing entities, clinical trial sites or regulatory authorities to interrupt,
delay or halt clinical trials and could result in the denial of regulatory approval. If an unacceptable frequency or severity of
adverse events are reported in our clinical trials for our clinical product candidates, our ability to obtain regulatory approval
for such clinical product candidate may be negatively impacted. In addition, adverse events caused by any clinical product candidate
administered in combination with our product candidates could cause similar interruptions and delays, even though not caused by
our clinical product candidates.
Furthermore, if
any of our products are approved and then cause serious or unexpected side effects, a number of potentially significant negative
consequences could result, including:
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regulatory authorities may withdraw their approval of the clinical
product candidate or impose restrictions on its distribution or other risk management measures;
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regulatory authorities may require the addition of labeling statements,
such as warnings or contraindications;
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we may be required to conduct additional clinical trials;
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we could be sued and held liable for injuries sustained by patients;
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we could elect to discontinue the sale of the clinical product
candidate; and
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our reputation may suffer.
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Any of these events could prevent us from achieving or maintaining
market acceptance of the affected clinical product candidate and could substantially increase the costs of commercialization.
We rely on third parties to supply
most of the necessary raw materials and supplies for the products we manufacture on behalf of our customers and our inability to
obtain such raw materials or supplies may adversely impact our business, financial condition, and results of operations.
Our operations require various raw materials,
including proprietary resins, buffers, and filters, in addition to numerous additional raw materials supplied primarily by third
parties. We or our customers specify the raw materials and other items required to manufacture their product and, in some cases,
specify the suppliers from whom we must purchase these raw materials. In certain instances, the raw materials and other items can
only be supplied by a limited number of suppliers and, in some cases, a single source, or in limited quantities. If third-party
suppliers do not supply raw materials or other items on a timely basis, it may cause a manufacturing run to be delayed or canceled
which would adversely impact our financial condition and results of operations. If we experience difficulties acquiring
sufficient quantities of required materials or products from our existing suppliers, or if our suppliers are found to be non-compliant
with the FDA’s quality system regulation, cGMPs or other applicable laws or regulations, we would be required to find alternative
suppliers. If our primary suppliers become unable or unwilling to perform, any resulting delays or interruptions in the supply
of raw materials required to support our manufacturing of cGMP pharmaceutical-grade products would ultimately delay our manufacture
of products for our customers, which could materially and adversely affect our financial condition and operating results.
Furthermore, third-party suppliers
may fail to provide us with raw materials and other items that meet the qualifications and specifications required by us or
our customers. If third-party suppliers are not able to provide us with raw materials that meet our or our customers’
specifications on a timely basis, we may be unable to manufacture their product or it could prevent us from delivering
products to our customers within required timeframes. Any such delay in delivering our products may create liability for us
to our customers for breach of contract or cause us to experience order cancellations and loss of customers. In the event
that we manufacture products with inferior quality components and raw materials, we may become subject to product liability
claims caused by defective raw materials or components from a third-party supplier or from a customer, or our customer may be
required to recall its products from the market.
Any claims beyond our insurance coverage
limits, or that are otherwise not covered by our insurance, may result in substantial costs and a reduction in our available capital
resources.
We maintain property insurance, employer’s
liability insurance, product liability insurance, general liability insurance, business interruption insurance, and directors’
and officers’ liability insurance, among others. Although we maintain what we believe to be adequate insurance coverage,
potential claims may exceed the amount of insurance coverage or may be excluded under the terms of the policy, which could cause
an adverse effect on our business, financial condition and results from operations. Generally, we would be at risk for the loss
of inventory that is not within customer specifications. These amounts could be significant. In addition, in the future we may
not be able to obtain adequate insurance coverage or we may be required to pay higher premiums and accept higher deductibles in
order to secure adequate insurance coverage.
We may be subject to various litigation
claims and legal proceedings.
We, as well as certain of our directors
and officers, may be subject to claims or lawsuits during the ordinary course of business. Regardless of the outcome, these lawsuits
may result in significant legal fees and expenses and could divert management’s time and other resources. If the claims contained
in these lawsuits are successfully asserted against us, we could be liable for damages and be required to alter or cease certain
of our business practices. Any of these outcomes could cause our business, financial performance and cash position to be negatively
impacted.
Risks Related
to Intellectual Property
If we or
our licensors are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent
protection obtained is not sufficiently broad, competitors could develop and commercialize technology and products similar or identical
to ours, and our ability to successfully commercialize our technology and products may be impaired.
Our success depends
in part on our ability to obtain and maintain patent and other intellectual property protection in the United States and other
countries with respect to our proprietary technology and products. We seek to protect our proprietary position by filing patent
applications in the United States and abroad related to our novel technologies and product candidates, and by maintenance of our
trade secrets through proper procedures.
The patent prosecution
process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications
at a reasonable cost, in a timely manner, or in all jurisdictions. It is also possible that we will fail to identify patentable
aspects of our research and development output before it is too late to obtain patent protection.
The patent position
of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has
in recent years been the subject of much litigation. In addition, the laws of foreign countries may not protect our rights to the
same extent as the laws of the United States and we may fail to seek or obtain patent protection in all major markets. For example,
European patent law restricts the patentability of methods of treatment of the human body more than United States law does. Publications
of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States
and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot
know with certainty whether we were the first to make the inventions claimed in our owned patents or pending patent applications,
or that we were the first to file for patent protection of such inventions, nor can we know whether those from whom we license
patents were the first to make the inventions claimed or were the first to file. As a result, the issuance, scope, validity, enforceability
and commercial value of our patent rights are highly uncertain. Our pending and future patent applications may not result in patents
being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing
competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the United States
and other countries may diminish the value of our patents or narrow the scope of our patent protection.
Moreover, we
may be subject to a third-party pre-issuance submission of prior art to the U.S. PTO, or become involved in opposition, derivation,
reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the
patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope of,
or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us,
without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent
rights. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it
could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.
Even if our pending
or future patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection,
prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able
to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner.
The issuance of
a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the
courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate
or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop
others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection
of our technology and products. Given the amount of time required for the development, testing and regulatory review of new product
candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result,
our patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical
to ours.
We may become
involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming
and ultimately unsuccessful.
Competitors may
infringe our issued patents or other intellectual property. To counter infringement or unauthorized use, we may be required to
file infringement claims, which can be expensive and time-consuming. Any claims we assert against perceived infringers could provoke
these parties to assert counterclaims against us alleging that we infringe their intellectual property. In addition, in a patent
infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part, construe the
patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our patents
do not cover the technology in question. An adverse result in any litigation proceeding could put one or more of our patents at
risk of being invalidated or interpreted narrowly, which could adversely affect us and our collaborators.
In addition, the
uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue
our clinical trials, continue our research programs, license necessary technology from third
parties, or enter into development partnerships that would help us bring our product candidates to market. Furthermore, because
of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some
of our confidential information could be compromised by disclosure during this type of litigation.
Third parties
may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be
uncertain and could have a material adverse effect on the success of our business.
Our commercial
success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market and sell our product candidates
and use our proprietary technologies without infringing the proprietary rights of third parties. There is considerable intellectual
property litigation in the biotechnology and pharmaceutical industries. While no such litigation has been brought against us and
we have not been held by any court to have infringed a third party’s intellectual property rights, we cannot guarantee that
our technology, products or use of our products do not infringe third-party patents. It is also possible that we have failed to
identify relevant third-party patents or applications. For example, applications filed before November 29, 2000 and certain
applications filed after that date that will not be filed outside the United States remain confidential until patents issue. Patent
applications in the United States and elsewhere are published approximately 18 months after the earliest filing, which is referred
to as the priority date. Therefore, patent applications covering our products or technology could have been filed by others without
our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later
amended in a manner that could cover our technologies, our products or the use of our products.
We may become party to, or threatened with,
future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology,
including interference or derivation proceedings before the U.S. PTO and similar bodies in other countries. Third parties may assert
infringement claims against us based on existing intellectual property rights and intellectual property rights that may be granted
in the future.
If we are found
to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party
to continue developing and marketing our products and technology. However, we may not be able to obtain any required license on
commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our
competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing
the infringing technology or product. In addition, we could be found liable for monetary damages, including treble damages and
attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing
our product candidates or force us to cease some of our business operations, which could materially harm our business. Claims that
we have misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on
our business.
Intellectual
property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Even if
resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur
significant expenses, and could distract our limited number of personnel from their normal responsibilities. In addition,
there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if
securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the
price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the
resources available for development activities or any future sales, marketing or distribution activities. We may not have
sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be
able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial
resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could
compromise our ability to compete in the marketplace.
If we are
found to have failed to comply with our obligations in the agreements under which we license intellectual property rights from
third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual
property rights that are important to our business.
We are a party to an exclusive license
agreement with Planet Biotechnology, Inc., an exclusive license agreement with University of Pittsburgh, as well as a non-exclusive
license agreement with the University of Natural Resources and Life Sciences, Vienna, and may need to obtain additional licenses
from others to advance our research and development activities or allow the commercialization of our lead products or other product
candidates that we may identify. Our license agreements impose, and we expect that future license agreements will impose, various
development, diligence, commercialization, and other obligations on us. In spite of our efforts, our licensors might allege that
we have materially breached our obligations under such license agreements and might therefore attempt to terminate the license
agreements, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license
agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors
or other third parties might have the freedom to seek regulatory approval of, and to market, products identical to ours and we
may be required to cease our development and commercialization of our lead products or other product candidates that we may identify.
Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results
of operations, and prospects.
Moreover, disputes
may arise regarding intellectual property subject to a licensing agreement, including:
• the scope of rights granted under the license agreement and other interpretation-related issues;
• the extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;
• the sublicensing of patent and other rights under our collaborative development relationships;
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our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
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the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property
by our licensors and us and our partners; and
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the priority of invention of patented technology.
In addition, the
agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions
in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement
that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology,
or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have
a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over
intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially
acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have
a material adverse effect on our business, financial conditions, results of operations, and prospects.
Patent terms
may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Patents have a limited
lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years
from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection
it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired, we may
be open to competition from competitive products, including generics or biosimilars. Given the amount of time required for the
development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or
shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with
sufficient rights to exclude others from commercializing products similar or identical to ours.
If we are
unable to protect our trade secrets, our business and competitive position would be harmed.
In addition to
seeking patents for some of our technology and product candidates, we also rely on trade secrets, including unpatented know-how,
technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in
part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees,
corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties.
We also seek to enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite
these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets,
and we may not be able to obtain adequate remedies for such breaches. Our trade secrets may also be obtained by third parties by
other means, such as breaches of our physical or computer security systems. Enforcing a claim that a party illegally disclosed
or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some
courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets
were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom
they communicate it, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed
to or independently developed by a competitor, our competitive position would be harmed.
We may be
subject to claims challenging the inventorship of our patent filings and other intellectual property.
We or our licensors
may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed
patents, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we or our licensors may have
inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our
product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship or our or our
licensors’ ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors
fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights,
such as exclusive ownership of, or right to use, intellectual property that is important to our product candidates. Even if we
are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management
and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of
operations and prospects.
Intellectual property rights do not necessarily address
all potential threats to our competitive advantage.
The degree of future protection afforded
by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately
protect our business or permit us to maintain our competitive advantage. The following examples are illustrative:
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others may be able to make products that
are similar to our product candidates but that are not covered by the claims of the patents that we license;
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our licensors or collaborators might not
have been the first to make the inventions covered by an issued patent or pending patent application;
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our licensors or collaborators might not
have been the first to file patent applications covering an invention;
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others may independently develop similar
or alternative technologies or duplicate any of our or our licensors’ technologies without infringing our intellectual property
rights;
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pending patent applications may not lead
to issued patents;
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issued patents may not provide us with
any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors;
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our competitors might conduct research
and development activities in countries where we do not have patent rights and then use the information learned from such activities
to develop competitive products for sale in our major commercial markets;
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we may not develop or in-license additional
proprietary technologies that are patentable; and
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the patents of others may have an adverse
effect on our business.
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We
may choose not to file a patent application for certain trade secrets or know-how, and
a third party may subsequently obtain a patent covering such intellectual property.
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Should any of
these events occur, they could significantly harm our business, results of operations and prospects.
We may not
be able to protect our intellectual property rights throughout the world.
Filing, prosecuting
and defending patents on our product candidates in all countries throughout the world would be prohibitively expensive, and our
intellectual property rights in some countries outside the United States can be less extensive than those in the United States.
In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and
state laws in the United States. Consequently, we may not be able to prevent third parties from practicing our inventions in all
countries outside the United States, or from selling or importing products made using our inventions in and into the United States
or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to
develop their own products and may also export infringing products to territories where we have patent protection, but enforcement
is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual
property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant
problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries,
particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property
protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement
of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our
patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and
attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our
patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in
any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly,
our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial
advantage from the intellectual property that we develop or license.
We may be subject to claims that
our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
Many of our
employees, including our senior management, were previously employed at other biotechnology or pharmaceutical companies.
These employees typically executed proprietary rights, non-disclosure and
non-competition agreements in connection with their previous employers. Although we try to ensure that our employees do not
use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these
employees have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such
employee’s former employer. We are not aware of any threatened or pending claims related to these matters, but in the
future litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to
paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in
defending against such claims, litigation could result in substantial costs and be a distraction to management. In
addition, while we require our employees and contractors who may be involved in the conception or development of intellectual
property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an
agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment
of intellectual property rights may not be self-executing or the assignment agreements may be breached, and we may be forced
to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we
regard as our intellectual property.
Obtaining
and maintaining our patent protection depends on compliance with various procedural, document submissions, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance
with these requirements
Periodic maintenance
fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to
the USPTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents
and/or applications. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside
counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require
compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process.
We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured
by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance
can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights
in the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would
have a material adverse effect on our business.
Changes in
patent law, including recent patent reform legislation, could increase the uncertainties and costs surrounding the prosecution
of our patent applications and the enforcement or defense of our issued patents.
Changes in either
the patent laws or interpretation of the patent laws in the United States could increase the uncertainties and costs surrounding
the prosecution of patent applications and the enforcement or defense of issued patents. Assuming that other requirements for
patentability are met, prior to March 2013, in the United States, the first to invent the claimed invention was entitled to the
patent, while outside the United States, the first to file a patent application was entitled to the patent. After March 2013,
under the Leahy-Smith America Invents Act, or the America Invents Act, enacted in September 2011, the United States transitioned
to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to
file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to
invent the claimed invention. A third party that files a patent application in the USPTO after March 2013, but before us could
therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third
party. This will require us to be cognizant of the time from invention to filing of a patent application. Since patent applications
in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot
be certain that we or our licensors were the first to either (i) file any patent application related to our product candidates
or (ii) invent any of the inventions claimed in our or our licensor’s patents or patent applications. In addition, the patent
positions of companies in the development and commercialization of pharmaceuticals are particularly uncertain. Recent U.S. Supreme
Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent
owners in certain situations. This combination of events has created uncertainty with respect to the validity and enforceability
of patents, once obtained. Depending on future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations
governing patents could change in unpredictable ways that could have a material adverse effect on our existing patent portfolio
and our ability to protect and enforce our intellectual property in the future.
Risks Related to iBio CDMO’s Operations
If
iBio CDMO is unable to provide quality and timely offerings to its customers, its business could suffer, which could have a material
adverse impact on our business and results of operations.
A failure of quality
control systems in iBio CDMO’s facilities could cause problems to arise in connection with facility operations or during
preparation or provision of products, in both cases, for a variety of reasons, including equipment malfunction, failure to follow
specific protocols and procedures, problems with raw materials or environmental factors. Such problems could affect production
of a particular batch or series of batches, requiring the destruction of products, or could halt facility production altogether.
In addition, failure to meet required quality standards may result in failure to timely deliver products to customers. Any such
incident could, among other things, lead to increased costs, lost revenue, reimbursement to customers, damage to and possibly termination
of existing customer relationships, time and expense spent investigating the cause and, depending on the cause, similar losses
with respect to other batches or products. If problems are not discovered before a product is released to the market, we may be
subject to regulatory actions, including product recalls, product seizures, injunctions to halt manufacture and distribution, restrictions
on our operations, civil sanctions, including monetary sanctions, and criminal actions. In addition, such issues could subject
us to litigation, the cost of which could be significant.
A failure
by iBio CDMO to attract and maintain customers and any reduction in spending or demand for iBio CDMO’s development, manufacturing
and technology transfer services could have a material adverse effect on our business.
iBio CDMO’s
operations will depend, in part, on its ability to attract and maintain customers for its development, manufacturing and technology
transfer services and on the amount of customer spending on such services. If iBio CDMO fails to attract customers or its customers’
and potential customers’ spending on iBio CDMO’s services is reduced, this may have a material adverse effect on our
business, results of operations and financial condition.
iBio CDMO’s
operations are subject to environmental, health and safety laws and regulations, which could increase costs and restrict operations
in the future.
iBio CDMO’s
operations are subject to a variety of environmental, health and safety laws and regulations, including those of the Environmental
Protection Agency and equivalent local and state agencies. These laws and regulations govern, among other things, air emissions,
wastewater discharges, the use, handling and disposal of hazardous substances and wastes, soil and groundwater contamination and
employee health and safety. Any failure to comply with environmental, health and safety requirements could result in the limitation
or suspension of production or monetary fines or civil or criminal sanctions, or other future liabilities. iBio CDMO is also subject
to laws and regulations governing the destruction and disposal of raw materials and the handling and disposal of regulated material.
Our operating
results will be adversely affected if we are unable to maximize our facility capacity utilization.
iBio CDMO’s
operating results are significantly influenced by our capacity utilization and, as such, if we are unable to utilize our facilities
to capacity, our margins could be adversely affected, and our results of operations and financial condition will continue to be
adversely affected. Further, while we continue to implement and execute our business plan and attract and maintain customers for
our development, manufacturing and technology transfer services, our revenue volume may be insufficient to ensure the economical
operation of our facilities, in which case our results of operations could be adversely affected.
A failure
by iBio CDMO to hire and retain an appropriately skilled and adequate workforce could adversely impact the ability of the facility
to operate and function efficiently.
iBio CDMO’s
operations will depend, in part, on its ability to attract and retain an appropriately skilled and sufficient workforce to operate
its development and manufacturing facility. The facility is located in a growing biotechnology hub and competition for skilled
workers will continue to increase as the industry undergoes further growth in the area.
Failure to comply with existing
and future regulatory requirements could adversely affect our business, results of operations and financial condition.
Our industry is highly regulated. We are
required to comply with the regulatory requirements of various local, state, provincial, national and international regulatory
bodies having jurisdiction in the countries or localities in which we manufacture products or in which our customers’ products
are distributed. In particular, we are subject to laws and regulations concerning development, testing, manufacturing processes,
equipment and facilities, including compliance with cGMP, import and export, and product registration and listing, among other
things. As we expand our operations and geographic scope, we may be exposed to new and more complex regulatory and administrative
requirements and legal risks, any of which may require expertise in which we have little or no experience. It is possible that
compliance with new regulatory requirements could impose significant compliance costs on us. Such costs could have a material adverse
effect on our business, financial condition and results of operations.
Our manufacturing services are highly
complex, and if we are unable to provide quality and timely services to our customers, our business could suffer.
The manufacturing services we offer are
highly complex, due in part to strict regulatory requirements. A failure of our quality control systems in our facilities could
cause problems to arise in connection with facility operations for a variety of reasons, including equipment malfunction, viral
contamination, failure to follow specific manufacturing instructions, protocols and standard operating procedures, problems with
raw materials or environmental factors. Such problems could affect production of a single manufacturing run or a series of runs,
requiring the destruction of products, or could halt manufacturing operations altogether. In addition, our failure to meet required
quality standards may result in our failure to timely deliver products to our customers, which in turn could damage our reputation
for quality and service. Any such incident could, among other things, lead to increased costs, lost revenue, reimbursement to customers
for lost drug substance, damage to and possibly termination of existing customer relationships, time and expense spent investigating
the cause and, depending on the cause, similar losses with respect to other manufacturing runs. With respect to our commercial
manufacturing, if problems are not discovered before the product is released to the market, we may be subject to regulatory actions,
including product recalls, product seizures, injunctions to halt manufacture and distribution, restrictions on our operations,
civil sanctions, including monetary sanctions, and criminal actions. In addition, such issues could subject us to litigation, the
cost of which could be significant.
We depend on spending and demand
from our customers for our contract manufacturing and development services and any reduction in spending or demand could have a
material adverse effect on our business.
The amount that our customers spend on
the development and manufacturing of their products or product candidates, particularly the amount our customers choose to spend
on outsourcing these services to us, substantially impacts our revenue and profitability. The outcomes of our customers’
research, development and marketing also significantly influence the amount that our customers choose to spend on our services
and offerings. Our customers determine the amounts that they will spend on our services based upon, among other things, the clinical
and market success of their products, available resources, access to capital and their need to develop new products, which, in
turn, depend upon a number of other factors, including their competitors’ research, development and product initiatives and
the anticipated market for any new products, as well as clinical and reimbursement scenarios for specific products and therapeutic
areas. Further, increasing consolidation in the pharmaceutical industry may impact such spending, particularly in the event that
any of our customers choose to develop or acquire integrated manufacturing operations. Any reduction in customer spending on biologics
development and related services as a result of these and other factors could have a material adverse effect on our business, results
of operations and financial condition.
We may be unable to manage our future
growth effectively, which could make it difficult to execute our business strategy.
We intend to grow our business operations
as demand increases and increase the number of our employees to accommodate such potential growth, which may cause us to experience
periods of rapid growth and expansion. This potential future growth could create a strain on our organizational, administrative
and operational infrastructure, including manufacturing operations, quality control, technical support and other administrative
functions. Our ability to manage our growth properly will require us to continue to improve our operational, financial and management
controls.
As our commercial operations and sales
volume grow, we will need to continue to increase our capacity for manufacturing, customer service, billing and general process
improvements and expand our internal quality assurance program, among other things. We may also need to purchase additional equipment,
some of which can take several months or more to procure, set up and validate, and increase our manufacturing, maintenance, software
and computing capacity to meet increased demand. These increases in scale, expansion of personnel, purchase of equipment or process
enhancements may not be successfully implemented.
If we are unable to protect the confidentiality
of our customers’ proprietary information, we may be subject to claims.
Many of the formulations used and processes
developed by us in manufacturing our customers’ products are subject to trade secret protection, patents or other intellectual
property protections owned or licensed by such customer. While we make significant efforts to protect our customers’ proprietary
and confidential information, including requiring our employees to enter into agreements protecting such information, if any of
our employees breaches the non-disclosure provisions in such agreements, or if our customers make claims that their proprietary
information has been disclosed, our reputation may suffer damage and we may become subject to legal proceedings that could require
us to incur significant expenses and divert our management’s time, attention and resources.
Our services and our customers’
products may infringe on or misappropriate the intellectual property rights of third parties.
Any claims that our services infringe
the rights of third parties, including claims arising from any of our customer engagements, regardless of their merit or
resolution, could be costly and may divert the efforts and attention of our management and technical personnel. We may not
prevail in such proceedings given the complex technical issues and inherent uncertainties in intellectual property
litigation. If such proceedings result in an adverse outcome, we could be required, among other things, to pay substantial
damages, discontinue the use of the infringing technology, expend significant resources to develop non-infringing technology,
license such technology from the third party claiming infringement (which license may not be available on commercially
reasonable terms or at all) and/or cease the manufacture, use or sale of the infringing processes or offerings, any of which
could have a material adverse effect on our business.
In addition, our customers’ products
may be subject to claims of intellectual property infringement and such claims could materially affect our business if their products
cease to be manufactured and they have to discontinue the use of the infringing technology which we may provide. Any of the foregoing
could affect our ability to compete or could have a material adverse effect on our business, financial condition and results of
operations.
If we do not enhance our existing
or introduce new service offerings in a timely manner, our offerings may become obsolete or uncompetitive over time, customers
may not buy our offerings and our revenue and profitability may decline.
iBio CDMO core services consist of the
following offerings:
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Process Development
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Manufacturing
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Fill / Finish
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BioAnalytics
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Factory Solutions
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Demand for any of our service offerings
may change in ways that we may not anticipate due to evolving industry standards and customer needs that are increasingly sophisticated
and varied, as well as the introduction by others of new offerings and technologies that provide alternatives to our offerings.
In the event we are unable to offer or enhance our service offerings or expand our manufacturing infrastructure to accommodate
requests from our customers and potential customers, our offerings may become obsolete or uncompetitive over time, in which case
our revenue and operating results would suffer. For example, if we are unable to respond to changes in the nature or extent of
the technological or other needs of our customers through enhancing our offerings, our competition may develop offerings that are
more competitive than ours and we could find it more difficult to renew or expand existing agreements or obtain new agreements.
Potential innovations intended to facilitate enhanced or new offerings generally will require a substantial capital investment
before we can determine their commercial viability, and we may not have financial resources sufficient to fund all desired innovations.
Even if we succeed in creating enhanced or new offerings, however, they may still fail to result in commercially successful offerings
or may not produce revenue in excess of our costs of development, and they may be rendered obsolete by changing customer preferences
or the introduction by our competitors of offerings embodying new technologies or features. Finally, the marketplace may not accept
our innovations due to, among other things, existing patterns of clinical practice, the need for regulatory clearance and/or uncertainty
over market access or government or third-party reimbursement.
Revenue amounts generated by iBio
CDMO have corresponding percentage rent expense components with minimum amounts due which may adversely impact the Company’s
financial position and liquidity as we undergo business development and growth.
In addition to
the base rent, iBio CDMO is required to pay to the Second Eastern Affiliate, for each calendar year during the term, a portion
of the total gross sales for products manufactured or processed at the facility, equal to 7% of the first $5,000,000 of gross sales,
6% of gross sales between $5,000,001 and $25,000,000, 5% of gross sales between $25,000,001 and $50,000,000, 4% of gross sales
between $50,000,001 and $100,000,000, and 3% of gross sales between $100,000,001 and $500,000,000. However, if for any calendar
year period from January 1, 2018 through December 31, 2019, iBio CDMO’s applicable gross sales are less than $5,000,000,
or for any calendar year period from and after January 1, 2020, its applicable gross sales are less than $10,000,000, then iBio
CDMO is required to pay the amount that would have been payable if it had achieved such minimum gross sales and shall pay no less
than the applicable percentage for the minimum gross sales for each subsequent calendar year. If iBio CDMO does not have sufficient
total gross sales to offset this rent expense, it may adversely impact the Company’s financial position and liquidity.
Risks Related to Business Operations
If we acquire companies, products
or technologies, we may face integration risks and costs associated with those acquisitions that could negatively impact our business,
results from operations and financial condition.
If we are presented with appropriate
opportunities, we may acquire or make investments in complementary companies, products or technologies. We may not realize
the anticipated benefit of any acquisition or investment. If we acquire companies or technologies, we will face risks,
uncertainties and disruptions associated with the integration process, including difficulties in the integration of the
operations of an acquired company, integration of acquired technology with our products, diversion of our management’s
attention from other business concerns, the potential loss of key employees or customers of the acquired business, and
impairment charges if future acquisitions are not as successful as we originally anticipate. In addition, our operating
results may suffer because of acquisition-related costs or amortization expenses or charges relating to acquired intangible
assets. Any failure to successfully integrate other companies, products or technologies that we may acquire may have a
material adverse effect on our business and results of operations. Furthermore, we may have to incur debt or issue equity
securities to pay for any additional future acquisitions or investments, the issuance of which could be dilutive to our
existing stockholders.
We depend on key personnel and the
loss of key personnel could harm our business and results of operations.
We depend on our ability to attract and
retain qualified scientific and technical employees as well as a number of key executives. These employees may voluntarily terminate
their employment with us at any time. There can be no assurance that we will be able to retain key personnel, or to attract and
retain additional qualified employees. Our inability to attract and retain key personnel may have a material adverse effect on
our business.
Risks Relating to Our Common Stock
iBio is subject to compliance under
the NYSE American continued listing standards of the NYSE American Company Guide, the failure of which can result in delisting
from the NYSE American.
In order to maintain its listing with NYSE
American, we must remain in compliance with the continued listing standards as set forth in the NYSE American Company Guide (the
“Company Guide”), including the listing standard set forth in Section 1003 of the Guide, which applies if a listed
company has stockholders’ equity below certain threshold amounts and has sustained losses from continuing operations and/or
net losses in its five most recent fiscal years.
On October 16, 2019, we received notification
from the NYSE American (the “Exchange”) that we were not in compliance with Section 1003(a)(ii) of the NYSE American
Company Guide (the “Guide”), which applies if a listed company has stockholders’ equity of less than $4,000,000
and has reported losses from continuing operations and/or net losses in three of its four most recent fiscal years, and Section
1003(a)(iii) of the Guide, which applies if a listed company has stockholders’ equity of less than $6,000,000 and has reported
losses from continuing operations and/or net losses in its five most recent fiscal years. On December 9, 2019, we received a further
notice from the Exchange that we were below the Exchange’s continued listing standards set forth in Section 1003(a)(i) of
the Guide, which applies if a listed company has stockholders’ equity of less than $2,000,000 and has reported losses from
continuing operations and/or net losses in two of its three most recent fiscal years. The December 9, 2019 notification from the
Exchange also stated that the Exchange had determined that our securities have been selling for a low price per share for a substantial
period of time and pursuant to Section 1003(f)(v) of the Guide, our continued listing on the Exchange was predicated on us effecting
a reverse stock split or otherwise demonstrating sustained improvement in its share price within a reasonable period of time, which
the Exchange determined to be no later than June 9, 2020. The Exchange notified us on June 9, 2020, that we had regained compliance
with this section of the Exchange’s listing standards.
On January 10, 2020, we received notice
from the Exchange that NYSE Regulation has accepted our November 15, 2019 plan to regain compliance with the Exchange’s continued
listing standards set forth in Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii) of the Guide and has granted a plan period through
December 9, 2020, subject to periodic review by the Exchange, including quarterly monitoring, to regain compliance with the initiatives
outlined in the plan. The Exchange notified us on October 1, 2020, that we had regained compliance with all of the Exchange’s
continued listing standards set forth in Part 10 of the Guide. Specifically, the notification stated that we had resolved the continued
listing deficiency with respect to Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii) of the Guide by meeting the requirements of
the $50 million market capitalization exemption in Section 1003(a) of the Guide.
There can be no assurance that we will
continue to meet all of the Exchange’s continued listing standards, or exemptions therefrom, in the future.
Our operating results may vary significantly
in the future, which may adversely affect the price of our common stock.
It is likely that our operating results
may vary significantly in the future and that period-to-period comparisons of our operating results are not necessarily meaningful
indicators of the future. You should not rely on the results of one quarter as an indication of our future performance. It is also
possible that in some future quarters our operating results will fall below our expectations or the expectations of market analysts
and investors. If we do not meet these expectations, the price of our common stock may decline significantly.
Provisions in our certificate of
incorporation, bylaws and under Delaware law could discourage a takeover that stockholders may consider favorable.
Provisions of our certificate of incorporation,
bylaws and provisions of applicable Delaware law may discourage, delay or prevent a merger or other change in control that a stockholder
may consider favorable. Pursuant to our certificate of incorporation, our Board of Directors may issue additional shares of common
stock or preferred stock. Any additional issuance of common stock could have the effect of impeding or discouraging the acquisition
of control of us by means of a merger, tender offer, proxy contest or otherwise, including a transaction in which our stockholders
would receive a premium over the market price for their shares, and thereby protect the continuity of our management. Specifically,
if in the due exercise of its fiduciary obligations, the Board of Directors were to determine that a takeover proposal was not
in our best interest, shares could be issued by our Board of Directors without stockholder approval in one or more transactions
that might prevent or render more difficult or costly the completion of the takeover by:
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diluting the voting
or other rights of the proposed acquirer or insurgent stockholder group,
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putting a substantial
voting bloc in institutional or other hands that might undertake to support the incumbent Board of Directors, or
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effecting an acquisition
that might complicate or preclude the takeover.
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Our certificate of incorporation also allows
our Board of Directors to fix the number of directors in the by-laws. Our certificate of incorporation does not contemplate cumulative
voting in the election of directors and thus, under Delaware law, cumulative voting in the election of directors is not permitted.
The effect of these provisions may be to delay or prevent a tender offer or takeover attempt that a stockholder may determine to
be in his, her or its best interest, including attempts that might result in a premium over the market price for the shares held
by the stockholders.
We have a staggered Board of
Directors, which could impede an attempt to acquire the Company or remove our management.
Our
Board of Directors is divided into three classes, each of which serves for a staggered term of three years. This division of our
Board of Directors could have the effect of impeding an attempt to take over our company or change or remove management, since
only one class will be elected annually. Thus, only approximately one-third of the existing Board of Directors could be replaced
at any election of directors.
We do not anticipate paying cash
dividends for the foreseeable future, and therefore investors should not buy our stock if they wish to receive cash dividends.
We have never declared or paid any cash
dividends or distributions on our capital stock. We currently intend to retain our future earnings to support operations and to
finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
The sale of our common stock through
current or future equity offerings may cause dilution and could cause the price of our common stock to decline.
We are entitled under our certificate of
incorporation, as amended, to issue up to 275,000,000 shares of our common stock and 1,000,000 shares of preferred stock.
On June 26, 2018, we closed an underwritten
public offering with total gross proceeds of approximately $16,000,000, before deducting underwriting discounts, commissions and
other offering expenses payable by us. The securities offered by us consisted of (i) 4,350,000 shares of common stock at $0.90
per share, (ii) 6,300 shares of Series A Convertible Preferred Stock, with a stated value of $1,000 per preferred share, and convertible
into an aggregate of 7,000,000 shares of common stock at $0.90 per share, (iii) 5,785 shares of Series B Convertible Preferred
Stock, with a stated value of $1,000 per preferred share, and convertible into an aggregate of 6,427,778 shares of common stock
at $0.90 per share. We granted the underwriters Alliance Global Partners, a 45-day option to purchase up to an additional 2,666,666
shares of common stock to cover over-allotments, if any. On July 12, 2018, we received approximately $1,350,000, before deducting
underwriting discounts, commissions and other offering expenses payable by us, from the proceeds of the sale of 1,500,000 over-allotment
shares of common stock purchased at $0.90 by the underwriter during the 45-day provision.
On October 29, 2019, we closed a public
offering of (i) 2,450,000 shares of our common stock, (ii) 4,510 shares of our Series C Convertible Preferred Stock, (iii) 25,000,000
Series A warrants to purchase shares of our common stock and (iv) 25,000,000 Series B warrants to purchase shares of our common
stock. The net proceeds to us from the sale of these securities was approximately $4.5 million after deducting underwriting discounts
and commissions and other offering expenses payable by the Company.
As of the date of the filing of this
Annual Report, we issued and sold an aggregate of (i) 28,394,064 shares of our common
stock for gross proceeds of $66,879,647 pursuant to the equity distribution agreement with UBS Securities, (ii) 19,473,013
shares of our common stock for gross proceeds of $25,228,437 pursuant to the Lincoln Park March 2020 Purchase Agreement and
815,827 shares of our common stock as a commitment fee to Lincoln Park, and (iii) 1,000,000 shares of our common stock for
gross proceeds of $1,090,000 in our offering in May 2020 with Lincoln Park.
As of October 8, 2020, we had issued
and outstanding approximately 180.3 million shares of common stock and one share of iBio CMO Preferred Tracking Stock. As of
October 9, 2020, 3.47 million options to purchase shares of common stock were
outstanding and we had approximately 2.9 million
shares of common stock reserved for future issuance of additional option grants under our 2018 Omnibus Equity Incentive Plan,
as amended.
Accordingly, we will be able to issue up
to approximately 33.4 million additional shares of common stock and 999,999 shares
of preferred stock. Sales of our common stock offered through current or future equity offerings may result in substantial dilution
to our stockholders. The sale of a substantial number of shares of our common stock to investors, or anticipation of such sales,
could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we
might otherwise wish to effect sales.
The issuance of preferred stock or additional shares of
common stock could adversely affect the rights of the holders of shares of our common stock.
Our Board of Directors is authorized to
issue up to 999,999 shares of preferred stock without any further action on the part of our stockholders. Our Board of Directors
has the authority to fix and determine the voting rights, rights of redemption and other rights and preferences of preferred stock.
Currently, we have one share of preferred stock outstanding. Our Board of Directors may, at any time, designate a new series of
preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments
before dividends are distributed to the holders of common stock, and the right to the redemption of the shares, together with a
premium, before the redemption of our common stock and authorize the issuance of such series of preferred stock, which may have
a material adverse effect on the rights of the holders of our common stock. In addition, our Board of Directors, without further
stockholder approval, may, at any time, issue large blocks of preferred stock. In addition, the ability of our Board of Directors
to designate and issue shares of preferred stock without any further action on the part of our stockholders may impede a takeover
of our company and may prevent a transaction that is favorable to our stockholders.
We rely extensively on our information
technology systems and are vulnerable to damage and interruption.
We rely on our
information technology systems and infrastructure to process transactions, summarize results and manage our business, including
maintaining client and supplier information. Additionally, we utilize third parties, including cloud providers, to store, transfer
and process data. Our information technology systems, as well as the systems of our suppliers and other partners, whose systems
we do not control, are vulnerable to outages and an increasing risk of continually evolving deliberate intrusions to gain access
to company sensitive information. Likewise, data security incidents and breaches by employees and others with or without permitted
access to our systems pose a risk that sensitive data may be exposed to unauthorized persons or to the public. A cyber-attack or
other significant disruption involving our information technology systems, or those of our vendors, suppliers and other partners,
could also result in disruptions in critical systems, corruption or loss of data and theft of data, funds or intellectual property. We
may be unable to prevent outages or security breaches in our systems. We remain potentially vulnerable to additional
known or yet unknown threats as, in some instances, we, our suppliers and our other partners may be unaware of an incident or its
magnitude and effects. We also face the risk that we expose our vendors or partners to cybersecurity attacks. Any
or all of the foregoing could adversely affect our results of operations and our business reputation.
Any failure to maintain the security
of information relating to our customers, employees and suppliers, whether as a result of cybersecurity attacks or otherwise, could
expose us to litigation, government enforcement actions and costly response measures, and could disrupt our operations and harm
our reputation.
In connection with the sales and
marketing of our products and services, we may from time to time transmit confidential information. We also expect to have
access to, collect or maintain private or confidential information regarding any clinical trials conducted by us and the
patients enrolled therein, employees, and suppliers, as well as our business. Cyberattacks are rapidly evolving and becoming
increasingly sophisticated. It is possible that computer hackers and others might compromise our security measures, or
security measures of those parties that we do business with now or in the future, and obtain the personal information of
patients in our clinical trials, vendors, employees and suppliers or our business information. A security breach of any kind,
including physical or electronic break-ins, computer viruses and attacks by hackers, employees or others, could expose us to
risks of data loss, litigation, government enforcement actions, regulatory penalties and costly response measures, and could
seriously disrupt our operations. Any resulting negative publicity could significantly harm our reputation, which could cause
us to lose market share and have an adverse effect on our results of operations.
We have
identified a material weakness in our internal controls over financial reporting,
and we cannot provide assurances that this weakness has been effectively remediated or that additional material weaknesses will
not occur in the future.
As a public company,
we are subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act. The Sarbanes-Oxley Act requires,
among other things, that we maintain effective disclosure controls and procedures, and internal control over financial reporting.
Our
management has identified a material weakness in our internal control over financial reporting and has concluded that, due to such
material weakness, which related to certain sales of common stock being recorded on the settlement date as opposed to the trade
date, our disclosure controls and procedures and our internal control over financial reporting were not effective as of June 30,
2020 and March 31, 2020. If not remediated properly, our failure to establish and maintain effective disclosure controls and
procedures and internal control over financial reporting could result in material misstatements in our financial statements and
a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial
condition and the trading price of our common stock. Any failure to implement and maintain effective internal
control over financial reporting could also adversely affect the results of management reports and independent registered public
accounting firm audits of our internal control over financial reporting that we may eventually be required to include in our periodic
reports that will be filed with the SEC. Ineffective disclosure controls and procedures, and internal control over financial reporting
could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative
effect on the market price of our common stock.