Shame on iBio (Nasdaq: IBIO) for pulling a dangerous stunt that could soon cost its shareholders a staggering fortune. No matter how tempted IBIO might have felt to further capitalize on the Ebola scare – or how thrilled it must be with the immediate results – the company should have known better than to hype a vague possibility so remote that it looks downright farfetched.
Get ready for the truth to unfold and reality to exact its inevitable toll.
Let’s cut to the chase and get straight to the point. In short, IBIO has suggested that its technology might play a serious role in the mass-production of a promising new Ebola drug that already utilizes a rival delivery system to handle that process instead. Since IBIO has so far tested its own delivery system on just a handful of vaccines in early-stage safety trials – and the company never even bothered to mention the word “Ebola” in its recent 92-page 10K report – the government might feel understandably reluctant to let some manufacturer casually substitute the firm’s experimental technology for the very platform used to engineer that vital treatment and simply hope that it produces the same kind of results.
Last week, in fact, the head of the government-funded lab where IBIO would like to offer its services, virtually ruled out the likelihood of any changes to the existing process to at all. Look at the revealing comments shared by Dr. Brett Girior, chief executive of the health science center at Texas A&M, in the following excerpt from a recent media report:
“’We believe there are substantial opportunities to increase the yield of ZMapp’ (the new Ebola treatment) in plants while keeping the product the same,’ Giroir said in an interview. The compound needs to be identical to what Mapp (the maker of the drug) has already vetted in animals, ‘or you would have to go back to the beginning for safety testing,’ he said.”
Based upon the information that we’ve uncovered while conducting our extensive research, we feel so confident that IBIO will play no role in the urgent mass-production of ZMapp that we dare the company to share any concrete evidence that clearly suggests otherwise. We also strongly encourage bullish investors to present the same type of request to IBIO or -- better yet -- Caliber Biotherapeutics, the firm that IBIO likes to treat as its potential ticket to the ZMapp production line, since they have put so much money on the line. We highly doubt that they will feel quite so confident in their investment once they finish that exercise, but we certainly invite them to share any feedback that might prove us wrong as well.
So far, of course, IBIO has simply hinted at the tantalizing prospect of an Ebola-related deal. If IBIO had any legitimate reason to expect an actual contract of some kind, its promotional nature strongly suggests, the company would have jumped at the first chance to broadcast that news in all of its glorious detail. By merely highlighting an unrelated agreement with one of the firms equipped to ramp up production of ZMapp, however, the company has relied on vague innuendo to make investors arrive at a favorable conclusion instead.
With little to hype beyond a somewhat dated agreement to supply its delivery system to Caliber for the development of an oncology drug (a pesky detail that management conveniently forgot to mention), IBIO hardly seems like a real contender in the race to produce that new Ebola drug at all.
Its chances look even slimmer with a rival like Icon Genetics already in the picture. Founded long before IBIO ever surfaced as an obscure penny-stock company, Icon developed its own plant-delivery system more than a decade ago and soon went on to forge such a close relationship with Mapp Pharmaceuticals and Kentucky Bio-Processing (KBP) – the creator and the manufacturer of ZMapp, respectively -- that, at one point, the trio practically decided to merge. While they may have changed their plans about that particular deal, they maintained their partnership (collaborating together for a total of eight long years at this point) and now credit the entire team for the potential success of their new Ebola drug.
Just ask Mapp how much it depended on both Icon and KBP throughout the process that led to that celebrated breakthrough.
“Two partnerships were crucial to us in the development of the plant system for ZMapp: Icon Genetics AG (Halle, Germany) and Kentucky BioProcessing (KBP, Owensboro, KY),” Mapp emphasizes on its own website. “Icon pioneered vectors for engineering Nicotania (a low-nicotine tobacco plant) to produce pharmaceuticals. KBP specializes in GMP manufacturing of therapeutic proteins” in that same kind of plant.
Mapp has shared credit with Icon and KBP in the media, too. This summer, in fact, The New York Times – none other than the self-proclaimed “newspaper of record” itself – specifically reported that Icon had developed the system used to introduce the genes from modified antibodies into tobacco plants and ultimately produce the new Ebola drug. By now, many other media outlets – ranging from Time magazine to all sorts of trade publications -- have cited Icon as the firm responsible for providing the unique delivery system required for that process as well.
Given that sort of publicity, IBIO must surely know the truth at this point. Unless the company has somehow managed to completely overlook Icon for some inexplicable reason, however, it must have decided to conveniently pretend as that German firm – far more established than itself – doesn’t exist at all. Mere days ago, in fact, a company spokesman reportedly told the press that “any lab that wants to make a ZMapp vaccine using plant-based technology would have to license it from IBIO” itself.
Wow. Talk about a bold statement. Perhaps IBIO should have decided to just kept its mouth shut.
After all, as its recent stock chart so vividly illustrates, IBIO immediately plummets as soon as investors sense any reason for doubt. Exploding one day and plunging the next, that volatile stock has swung all the way between $3.48 and $1.24 a share over the course of the past week alone.
Who knows where IBIO might trade by the time that it issues the mountain of stock that it just registered to sell under a prearranged fundraising deal? Still, we do know this much for sure: IBIO felt willing to sell more than 20 million shares of stock – enough to dilute the value of its current shares by roughly 30% -- for as little as 44 cents a share just a few short weeks ago. Plus, as recently as mid-September, a major IBIO shareholder (and a frequent seller of the company’s stock) continued to trim his position in the bleeding firm at a modest fraction of the current market price, too.
If anyone knows how much IBIO is really worth, the company and an investor who owns more than 10% of the firm certainly should. So maybe their actions make perfect sense.
Think about it.
With no mention of Ebola in its recent registration statement or its latest annual report – both comprehensive documents filed less than a month ago – IBIO likely never dreamed that it might somehow luck out and explode in value as a promising Ebola play. In fairness, given the circumstances, IBIO could have always changed its mind since that time. If IBIO suddenly realized that it might have a realistic shot at landing a contract to help produce a new Ebola drug, however, the company just missed the perfect chance to make that clear. IBIO failed to mention Ebola in the detailed prospectus that it filed just two short days ago as well.
Granted, IBIO seems to prefer playing it a bit safer by hyping its prospects in casual press releases instead. And now that it’s free to start selling all of that stock that it registered earlier this month, the company might just decide to test its luck once again.
IBIO better not count on such amazing results next time, however. By then, after all, investors will know all about this dirty trick.
*Important Disclosure: The owners of TheStreetSweeper established a short position in IBIO ahead of the publication of this report and stand to profit on any future declines in the stock price. As a matter of policy, however, TheStreetSweeper prohibits members of its editorial staff -- including the author of this story -- from taking financial positions in any of the companies that they cover. To contact Melissa Davis, the senior editor of TheStreetSweeper and the author of this story, please send an email to [email protected]