Monthly Archives: May 2019

iBio: An Undervalued CDMO Preparing for a Buyout

By Marc Keiser and Jim Tassano          19 May 2019  / Updated 5 June 2019

iBio: an Undervalued CDMO Preparing for a Buyout


Kenneth Dart and iBio appear to be preparing to sell the CDMO division, at the minimum, and maybe the entire company.

  1. 48% of iBio stock is owned by one investor, Kenneth Dart
  2. Kenneth Dart, by way of Eastern Capital, owns 30% of iBio CDMO LLC.
  3. Eastern Capital owns their huge, state-of-the-art, CMDO plant protein production facility in College Park, Texas
  4. Kenneth Dart created an Exchange Agreement, in 2017, exchanging all ownership in the iBio CDMO for one share of Preferred Trading stock.
  5. Kenneth Dart was given the power to appoint one board member.
  6. In 2019, IBio appointed a new board member, Thomas Isett. The press release spoke of Tom’s background in CDMO turn-arounds. His personal bio states that he has advised clients on over $20B in M&A transactions. Also, iBio has not appointed a new board member in many years.
  7. The May 10, 2019 10K had a note in it: that Tom Isett was going to be paid at a “rate of $40,000 per month, and on a time and materials basis for all other engagement resources provided by Consultant, which are billable at the rate of $85.00 to $450 per hour.” This information was not given in the press release.
  8. Concurrent to the notice of the appointment of Tom Isett to the board, Dr. Barry Holtz, President of the iBio CDMO resigned. We asked around, and it appears that iBio has no plans to replace him as president.
  9. An 8-K filed on May 30, 2019 shows that iBio will pay their CFO, James P. Mullaney, a $150,000 bonus, starting immediately, for “undertaking additional operational tasks”. This amount is, probably not coincidentally, almost the same as the compensation paid to Mr. Isett. These additional operational tasks are coming roughly three months after Thomas Isett presumably started working to find a buyer.
  10. On 3 June 2019 iBio issued a press release announcing the opening of a new sterile fill-finish services facility.
  11. On 3 June 2019. iBio uploaded a new landing page for the company, highly focused on the CDMO operation, and more aggressively soliciting business. They have a new trademark, FastPharming™.

We conclude that Kenneth Dart has been preparing to sell the CDMO operation, probably since he bought it, and leased it to iBio. That he did the exchange agreement in order to make the sale of the CDMO operation easy. That he appointed Tom Isett to the board, with the specific objective of finding a buyer and selling the CDMO portion of iBio, and maybe the entire company. That Thomas Isett has had several months to line up prospective buyers. That the CFO now needs to be paid a large bonus for additional operational duties, presumably related to the merger, and to make sure he stays with iBio to do this critical work, in face of potential management changes. That this merger will happen probably this year.

Given a current market cap of about $15 million for iBio, that the market is hot for CDMO mergers, which can sell in the billions, and that Kenneth Dart is doing this transaction, we anticipate a investment return of well beyond 10x in the near future.

Details and discussion follow.


iBio Inc defines itself as a contract development and manufacturing organization, CDMO, equipped to take clients from lab to launch. Their technological focus is on plant molecular farming (PMF), the practice of using plants to produce human therapeutic proteins. iBio did not start out as a CDMO; the change occurred relatively recently.

iBio was formed in July 2008 as a spin-off from Integrated Biopharma, a nutraceutical business. They believed that the spin-off would allow their subsidiary, InB:Biotechnologies, to be able to raise capital and form affiliations with other companies, more effectively, as a stand-alone. The spin-off would protect Integrated BioPharma (INBP) from the operating losses they were experiencing in funding iBioPharma’s research and development. The new company traded on the OTC Bulletin Board under the name “IBIO”. In 2009 they changed the name to iBio, Inc.

Robert B. Kay was the original CEO, and still serves in that position today.His brother, E. Gerald Kay, has remained as CEO of Integrated Biopharma. Click here to see an early history of Integrated Biopharma. 

Prior to the 2008 spin-off, InB:Biotechnologies, announced the formation of a new Scientific Advisory Board. On the board were William Hartman, Ph.D, the Vice President of Fraunhofer USA, Inc, and Vidadi Yusibov, Ph.D., the Executive Director of the Fraunhofer USA Center for Molecular Biotechnology.  On March 4, 2010, iBio announced the appointment of Dr. Vidadi Yusibov as their Chief Scientific Officer. The Fraunhofer collaboration was very important to iBio, right from the start.

Fraunhofer collaboration turns sour

On June 3, 2010, news came out that iBio and the Fraunhofer USA Center for Molecular Biotechnology had entered into an agreement to provide global vaccine access for the Bill & Melinda Gates Foundation. This news started a huge climb in the value of iBio stock. 

In 2013, iBio discovered that Fraunhofer was working in secret with Canadian competitor PlantForm Corp, a private company. iBio also said that Fraunhofer formed a $1.8 million contract to develop Ebola antibodies for BARDA, the Biomedical Advanced Research and Development Authority. iBio was also negotiating with BARDA. iBio didn’t like this.

A complaint was filed on March 16, 2015, claiming breaches of contracts and misappropriation of iBio trade secrets and other intellectual property, causing damages to iBio in excess of $100 million. This truly was a damaging betrayal for iBio.

The case went to court, and, on July 29, 2015, the court ruled in favor of iBio, stating that iBio was entitled to exclusive ownership of the technology that the scientists of the Fraunhofer USA Center for Molecular Biotechnology in Newark had created or acquired during their decade-long partnership.

But Fraunhofer USA does not have the ability to pay, and iBio is hoping that Fraunhofer Gesellschaft, the parent organization, would be shown to be the instigator in this double-cross, and ultimately held responsible. The court case is not done, and a trial date is expected in the first half of 2020.   

For details on the current status of the lawsuit, see “iBio Provides Status Update on its Continuing Litigation Against Fraunhofer.”

Pipeline Candidate IBIO-CFB03

iBio had formed a collaboration with Dr. Carol Feghali-Bostwick of the Medical University of South Carolina, to develop a proprietary therapeutic product for the treatment of systemic scleroderma, with potential application to idiopathic pulmonary fibrosis and other fibrotic diseases. Dr. Feghali-Boswick, along with Dr. Terence E. Ryan (Chief Scientific Officer of iBio), along with Hal Padgett and Matt McGee of Novici (a company related to iBio) invented IBIO-CFB03. The patent link is here.

In July 2016, iBio announced that the FDA had granted Orphan Drug Status for iBio-CFB03. This story, from March 14, 2018, stated that iBio had selected an E4-Fc fusion protein as its lead candidate for further development of a drug against fibrotic diseases, including systemic sclerosis and idiopathic pulmonary fibrosis. 

To see where iBio is now, with IBIO-CFB03, we find this article from BioTuesdays, December 18, 2018, titled iBio spearheading plant-based biopharmaceuticals at CDMO plant, in which iBio CEO Robert Kay says that they temporarily slowed development of their lead drug candidate, IBIO-CFB03, to focus on restructuring the business model of the CDMO segment. The recent 10-Q mentions IBIO-CFB03 as their lead drug candidate, but it appears to be a secondary priority at this time. 

To learn more about IBIO-CFB03, see this blog post by Marc Keiser and this Pulmonary Fibrosis News article, titled “IBIO-CFB03 for Idiopathic Pulmonary Fibrosis”.

Currently, iBio is working with CC-Pharming on a plant-derived Rituximab for the Chinese market.

The Caliber Therapeutics collaboration

In 2008 the Defense Advanced Research Projects Agency (DARPA) awarded the joint venture team of G-Con Manufacturing and Texas A&M University, $40 million in grant funding to build a state-of-the-art plant-made pharmaceutical facility, and show that this plant-based pharmaceutical production method would work. It was called the GreenVax Project. Construction started in 2010. 

G-Con Manufacturing is a maker of prefabricated cleanrooms, a company founded by Dr. Barry Holtz,

iBio announced, on February 26, 2010, that they agreed in principle to license their technology and provide technology transfer services to G-Con for the development and manufacture of plant-expressed influenza vaccines at the new mega-facility.

On April 25, 2011, Caliber Biotherapeutics proclaimed the “opening of the world's largest plant-made pharmaceutical manufacturing facility, in Bryan, Texas, with the capability of producing 10-100 million doses of infectious vaccines per month, and hundreds of thousands of doses of protein biotherapeutics such as monoclonal antibodies”.

The College Station facility, funded by DARPA, came in at a cost of approximately $68 million.

On a side note, development of the new DARPA-funded facility was led by physician-scientist and biodefense expert, Brett Giroir, M.D., and Dr. Barry Holtz. Dr Giroir is now the U.S. Assistant Secretary for Health

The facility is huge. This 2013 Australian 60 minutes video on Aquaponics and City Farms, at 7:35, shows the Caliber Biotherapeutics vertical farm facility. The Australians travelled all the way to Texas to film it.

On February 19, 2013, iBio and Caliber Biotherapeutics established a license and collaboration relationship.

Becoming a CDMO

In January 2016, iBio made an important announcement: the formation of a joint venture with affiliates of Eastern Capital, to create a new subsidiary, iBio CMO LLC, to take control of the Caliber Biotherapeutics.  

Eastern Capital is a subsidiary of Dart Enterprises, Kenneth Dart’s investment company. 

The single largest stockholder in iBio is billionaire Kenneth Dart. As of March 15, 2019, he owned 9,427,364 shares of iBio, just under 50% of the stock. He made his first sizeable purchase of iBio stock in 2013. 

iBio approached Kenneth Dart and asked if he would help with the merger of iBio and Caliber. The Brazos County records show that Eastern Capital, via yet another subsidiary, took control of the Caliber facility in December 2015.

Here is an insight, given by Mark VanDevelde, Kenneth Dart’s top man, the CEO of Dart Enterprises: “We have an excellent working relationship with iBio and a shared vision of its potential, both as a contract manufacturing organization and as a developer of biopharmaceutical products.”  “iBio’s commanding IP position in low cost plant-based biologics manufacture and its conservative capital management contributed to Eastern’s decision to substantially increase its financial investment in iBio.” Source.

On January 12, 2016, Eastern Capital gave iBio $15 million dollars in cash for a 30% stake in the facility, and iBio arranged to sell Eastern Capital an additional 10 million shares of stock at $0.62, a 30% premium over the closing stock price that day (this was pre-reverse split). iBio contributed research and manufacturing licenses of iBio's proprietary intellectual property for plant-made production of biopharmaceuticals. iBio retained a 70% equity interest. 

Caliber Biotherapeutics became part of iBio. A number of staff joined iBio, including Dr. Barry Holtz, who became president of the new iBio CDMO LLC.

iBio’s College Station facility is owned by Eastern Capital, and leased to iBio. The property is owned by Texas A&M.

The lease details are given in iBio’s September 18, 2018 10-K. Basically the lease payment is $2,100,000 yearly, with CPI adjustments and additional payments, depending on revenue.

Note that Ken Dart is limited to owning no more than 48% of iBio stock, due to a standstill arrangement.

Note too, that iBio CDMO has capabilities beyond plant protein production. They also have classified manufacturing space for device manufacturing. So iBio CDMO is truly broad spectrum in its CDMO offerings.

The Exchange Agreement

From the 10-Q: “On February 23, 2017, the Company entered into an exchange agreement with the Eastern Affiliate, pursuant to which the Company acquired substantially all of the interest in iBio CDMO held by the Eastern Affiliate in exchange for one share of the Company’s iBio CMO Preferred Tracking Stock, par value $0.001 per share. After giving effect to the transaction, the Company owns 99.99% of iBio CDMO. See Note 9 for a further discussion.”

From Note 9:  “At the election of the Company or holders of a majority outstanding shares of Preferred Tracking Stock, each outstanding share of Preferred Tracking Stock may be exchanged for 29,990,000 units of limited liability company interests of iBio CDMO. Such exchange may be effected only after March 31, 2018, or in connection with a winding up, liquidation or deemed liquidation (such as a merger) of the Company or iBio CDMO. In addition, such exchange will take effect upon a change in control of iBio CDMO.”

The link to the Exchange Agreement is here. Note, too, this line: “The amendment provides that Bryan Capital Investors may continue to appoint one manager to iBio CMO’s board of managers,..”

A March 14, 2019 follow-up to the Exchange Agreement is here.

My understanding is that the one Preferred Tracking Stock is convertible to the original 30% ownership, in case an exchange is executed.

Dr. Kevin Yuejun Wang and CC-Pharming

On July 9, 2018, iBio announced a strategic relationship with CC-Pharming, of Beijing, China. Kevin Yueju Wang, Ph.D., is the founder of CC-Pharming Ltd. He received a Ph.D. in Horticulture from Oregon State University, and did postdoctoral research at the University of California-Berkeley and University of Texas-Austin. He also worked at the Weill Cornell Medical Center in New York City. Here is a link to one of his patents. 

As his bio states, in 2017, Dr. Wang left his tenured faculty position in the U.S. to create CC-Pharming in Beijing, applying plant transient expression technology to produce biological pharmaceuticals. His focus is plant molecular farming, and he is enthusiastic about iBio’s technology.

The press release states that the service fees payable to iBio, for this first phase, will be approximately $4.7 million. iBio will provide process development and manufacturing services at its Texas facility for initial product development, and will assist CC-Pharming in facility design and optimization, for eventual manufacturing in China. CC-Pharming will manage all operations in China with iBio participating through joint ownership of the China business and ongoing collaboration. The Chinese press published the same news release.

On October 2, 2018, iBio and CC-Pharming held their first strategy meeting, in Texas, which began the operational aspects of the collaboration.

Since then, iBio has not issued any press releases relating to the collaboration. Marc Keiser, however, discovered that there was another meeting, this time in China, in March of this year. Marc posted news and links on Twitter, and it appears he sort of forced iBio to post a note about it, which they did rather tardily, Strangely, they did not post it on their website; they did it on LinkedIn. When I asked Investor Relations why they’d not issued a press release, I was told they did not think it was important enough. That was odd.

The news of the meeting was big for CC-Pharming, in China, however. The CC-Pharming press release page gives links to numerous Chinese news stories about the meeting. It got zero exposure in the US and lots in China.

The CC-Pharming deal is huge for iBio. $4.7 million is more revenue than they have received, in years, as you can see in the table below. And long-term, recall they will have joint ownership of the operation in China. If they are successful, this could be a huge, as the China market is amongst the largest in the world.

iBio adds Tom Isett to the board

iBio added Thomas Isett to their board in April 2019. He is the founder and managing director of i.e. Advising, which provides strategy and management consulting. The press release states he has “notable focus upon biologics contract development and manufacturing organizations (CDMOs).”

The press release goes on to say: “Mr. Isett was the founder of Becton Dickinson’s BD Advanced Bioprocessing business, which he led from inception to over $60 million in revenues by 2009; by 2018, revenues reached $100 million and the business was sold for $477 million. At Lonza, he contributed to the rapid growth of the cell & gene therapy CDMO unit as Head of Cell Processing Technologies. Notably, while with GE Life Sciences, he accelerated growth for the North American BioProcess business via the introduction of an integrated solutions strategy, along with new commercial and operating mechanisms to support execution.”

Tom is also a Senior Advisor at Popper and Co., an advisory firm for mergers and acquisitions of medical technologies. 

You can see Tom Isett on this YouTube video.

The financial situation is still bad

The company has had relatively little income, compared to operating expenses, and has shown an increasing net loss over the last five years.

Year Revenue $ Total Operating Expenses $ Net loss $
2018 444,000 14,671,000 14,227,000
2017 394,000 14,668,000 14,274,000
2016 948,000 9,893,000 8,945,000
2015 1,851,000 8,517,000 6,666,000
2014 205,000 4,045,000 3,840,000
2013 1,007,000 7,674,000 6,667,000

You will notice, from the net loss table, that operating expenses increased in 2016, and then jumped by $5 million a year. The reason was the increase in expenses related to operating the CDMO facility.

Selling Equity to Fund Operations

Given the low income, iBio’s has depended mostly on the sale of equity to finance operations. In November 2017, iBio issued additional shares, and the stock dropped. 

In June of 2018, they again had an equity offering, and the stock dropped yet again.

The stock dilution necessitated a reverse split, 1 for 10, also in June of 2018.   

Here is the main risk, as I see it. The revenue, although the highest it has been in years, is still not enough to cover expenses. Traditionally iBio has issued shares to fund the operations, and without changes, an equity offering would be a real possibility.  But, as we will discuss shortly, there appears to be a change coming. And we will see that there is a massive mismatch between the risk and the reward.

A Note on Institutional Ownership and Analyst Coverage

Total institutional ownership of iBio was at 1.28% in April 2019. In May the number increased to 1.55%. The largest holder is the Vanguard Group, with 112,962 shares in April, but they increased it to 127,915 shares in May. Institutional ownership,is still miniscule, but it is starting to increase. 

A check of Yahoo finance shows there are no analysts covering iBio. I confirmed that with iBio IR.

In chapter eight of “One Up on Wall Street”, Peter Lynch states he likes stocks that institutions don't own and analysts don't follow, as these stocks have more of a chance of being undervalued. In the same section, Lynch says he is enthusiastic about once popular stocks the professionals have abandoned.

The Case for an Impending Buyout

Let’s summarize and put this together.

The company’s management is aging, and has not changed for years. The average age of the directors is 78, not including the newest board member, Thomas Isett, who is 54 years old. There has been no new blood added to the board in years.

Look at the ages of the board members, and the length of their associations:

name position age Served since
Robert B. Kay Chairman, CEO 78 2008
Glenn Chang Director 70 2008
Gen (Ret) James T Hill Director 72 2008
John D. McKey, Jr. Director 75 2008
Arthur Y. Elliott, Ph.D *resigned 4-1-19 Director 82 2010
Philip K. Russell, MD Director 86 2010
Seymour Flug Director 83 2012

iBio director, Arthur Y. Elliot, resigned April 1st.

iBio announced the appointment a new board member, Thomas Isett, on April 1st. In reading the May 10th 10-Q, we discovered some important information, not mentioned in the press release, about the appointment of Tom Isett:

“Also, effective April 1, 2019, Thomas Isett was appointed as a member of the Board to serve as a Class I director. Mr. Isett’s term as a Class I director will expire at the Corporation’s 2021 annual meeting of stockholders.

Director Consulting Agreement

Effective as of May 1, 2019, the Company entered into a Statement of Work (the “May 1 2019 SOW”) pursuant to a Consulting Agreement, dated as of February 22, 2019, between the Company and i.e. Advising, LLC (the “Consultant”). Thomas Isett, a director of the Company, is the Managing Director and sole owner of i.e. Advising, LLC.

The consultant has been retained by the Company as a strategy and management consultant through December 31, 2019, with services to be provided pursuant to statements of work that may be entered into between the Company and Consultant from time to time. The May 1, 2019 SOW has a term from May 1, 2019 to August 31, 2019. The engagement under the May 1, 2019 SOW is being conducted on a retainer basis for Thomas Isett, as the primary engagement resource, at a rate of $40,000 per month, and on a time and materials basis for all other engagement resources provided by Consultant, which are billable at the rate of $85.00 to $450 per hour.”

We see that he is not only a board member, but is being retained as a consultant. And he is being paid $160,000 for four months of work. He has been hired to do something important, and to do it soon.

The $85.00 to $450.00 per hour is likely money intended to pay attorneys.

Why add a consultant to the board, and pay him such a huge amount of money?

Do they need him on the board to help effect some type of turn-around, or re-engineering of the company, or to improve the technology of the company? We don’t think so. They could hire his company, i.e. Advising, to do any of that, without adding him as a board member.

Why did they choose Tom Isett? He has a lot of experience in the pharma field, but he is not a plant pharma guy.

But he is experienced in mergers and acquisitions.  Recall that Thermo Fisher just bought a company that Thomas Isett founded, Advanced Bioprocessing, in October 2018. It had $100 million in revenue and sold for $477 million. He also worked with Lonza, another company active in the CDMO M&A space. 

Why did iBio put him on their board? Our guess is that by being on the board, he has real power. In negotiations, a potential buyer would be talking to a board member, not someone who has to report to the board.  And what about those expenses? He can negotiate and work with attorneys, all on his own, as he needs to, without delay. He can get the job done by himself.

Recall that Kenneth Dart was allowed to appoint a board member. We believe that Kenneth Dart choose Thomas Isett to be on iBio’s board.

Let’s look again at the Exchange Agreement. Originally, Eastern Capital owned 30% of iBio CDMO LLC. Then, via the Exchange Agreement, Eastern gave, basically, 100% ownership to iBio, in exchange for the one share of Preferred Tracking Stock.

Why do that, why go through that trouble? We believe that if Kenneth Dart wants to sell the CDMO, and iBio owns all of it, then the negotiations, and final paperwork, would be a lot easier. The fewer the barriers and hindrances, the better the deal should be.

Notice the wording of the Exchange Agreement, saying he could exchange his Preferred Tracking Stock share in case of a merger. That sounds like, and is, proper wording for an agreement like this, but in light of what we are seeing now, with Tom Isett added to the board, it appears that Kenneth Dart has been working towards this objective for a couple of years.

What we are saying is, that we believe that the iBio board, and Kenneth Dart, did not appoint Thomas Isett to help with strategy, but to engineer a deal to sell the CDMO division, and that Ken Dart has planned this for some time.

Recall, too, that Dr. Barry Holtz left iBio in April. He was the president of iBio CDMO.  Why would he leave? We postulate that he left to get out of the way. The timing of his departure, to the appointment of Tom Isettt, is not a coincidence.

We checked around to see who was going to replace Dr. Holtz as President of iBio CDMO. What we hear is that iBio has not appointed a new president. We have not heard of talk about replacing him, and we understand that iBio President, Bob Erwin, is doing the job. Bob has a long history in this field, as he was a co-founder and CEO of Large Scale Biology Corp, a company similar in many ways to iBio. But we think the company does not plan on replacing Dr. Holtz, as the new owners would likely install their own management.

Update 1): This appeared on a new 8-K filing, May 30, 2019:

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 30, 2019, the Compensation Committee of the Board of Directors of iBio, Inc. (the “Corporation”) approved bonus payments payable to James P. Mullaney, Chief Financial Officer of the Corporation, in recognition of Mr. Mullaney’s services in undertaking additional operational tasks for the Corporation outside his regular duties as Chief Financial Officer. Subject to Mr. Mullaney’s continued employment with the Corporation, the Committee approved the following bonus payments payable to Mr. Mullaney: (a) $50,000 payable promptly after May 30, 2019, (b) $50,000 payable on August 1, 2019, and (c) $50,000 payable on November 1, 2019. To earn and receive a bonus payment, Mr. Mullaney must remain actively and continuously employed by the Corporation through the applicable payment date. …

The filing further indicates something big is coming. They are paying their CFO $150,000 for additional services, over the same time period of the Thomas Isett contract, and to retain him during this period. And the amount they are paying Mr. Mullaney is almost identical to what Tom Isett’s compensation is for this same time period. Why do this? Why pay him this extra bonus, if Tom Isett was just going to do re-organization? That activity would not create much extra work for him. But a merger would. That would create a huge amount of work, and iBio would want to keep him there during this critical period, and would delay both his search for a new position, elsewhere, and departure, in the face of the management changes that would likely come after a merger. (Thanks to tradingmy2cents for that insight).

Recall Mark VanDevelde's comment, from above, about them liking iBio's "conservative money management"? To increase costs by $310k is not conservative, but it does reflect on how important this action must be. A merger would explain, and warrant, this large added expense.

Update 2) On June 3, 2019, iBio issued a press release saying they had introduced new cGMP sterile fill-finish capabilities for pharmaceutical products. This will make their CDMO even more attractive and valuable to prospective buyers.

iBio is the leader in plant molecular farming. They operate what is probably the largest, and most modern, PMF facility in the world, and with capability to make biomedical devices as well. This is top-line technology, a top-line CDMO, that should be taking off, but hasn’t. The CC-Pharming deal shows the potential that the technology has. But they are not making money, the Board is aging, and, we presume, Kenneth Dart wants to get a return on his sizeable investment. The market is hot now for CDMOs.

Thermo Fisher is investing in the CDMO space. This article states “Thermo executives zeroed in on the CDMO space as a particularly lucrative one, and have followed that up with a $100 million investment last year and, now, another $150 million this year.”

Thermo Fisher just finished the acquisition of Brammer Bio on May 1, 2019, for $1.7 billion, cash. They have been acquiring between two and four companies a year since 2016. Thermo Fisher bought Patheon, a CDMO, in 2016, for $7.2 billion.

But Thermo Fisher is not alone in searching for CDMO investments. There is something of a frenzy in CDMO consolidations right now. Lonza Group has been buying, and Tom Isett worked for them, for over two years, as Head of Cell Processing Technologies. As that latest link states: “In December 2016, Switzerland’s CDMO Lonza acquired Capsugel, a development and manufacturing specialist for gelatin capsules, for US$5.5 billion.” So Tom Isett has connections to at least two large companies that are buying firms in the CDMO space. He must have been involved in many other mergers, too, as that is what his company does.

Ken Dart paid $15 million for a 30% stake in iBio CDMO LLC. That makes it $50 million for the whole facility. iBio’s 70% share would total $35 million, at that base price. The market cap for iBio is around $16-$17 million. That means the assumed minimum value of this hidden asset is twice the value of iBio as a whole, for their share. There have been improvements made in the facility, and they acquired that facility for much less than the $68 million spend to build it. We could argue that iBio’s stake in the CDMO facility is worth 3 times the total current value of iBio.

Kenneth Dart has no need to sell, as iBio is a very minor holding of his, and he is happily occupied doing development on the Cayman Islands. If iBio sells its CDMO division, we can expect an excellent price, relative to the current stock price. And it would be a fair price, too, as the facility is worth much more than iBio’s $35 million share of it. Kenneth Dart owns nearly 50% of iBio’s stock. He would not make a deal that would also hurt iBio. And we think that Kenneth Dart would not be satisfied with breaking even. 

Kenneth Dart is not going have iBio pay Tom Isett $160,000 for four months of work without expecting something seriously valuable in return. The clock is ticking for Tom.  It appears he has until August 31st to do the job, or make critical progress. 

There are other possibilities. Maybe Tom Isett really was brought in to help with the CC-Pharming project, to advance it somehow.  But his background is not in this area. Maybe iBio plans to acquire another company. But they don’t have sufficient capital to do that. Maybe he is there to get a turn-around going. But they did not need to place him on the board for that.

The one scenario that accounts for all the observations is they are going to sell.

If they sell, then we can ask, “for how much?” iBio has, in addition to the CDMO facility:

  • intellectual properties
  • rights to IBIO-CFB03
  • the possibility of actually getting paid by Fraunhofer after next year’s court case
  • the CC-Pharming contract with its appealing prospect of entering the Chinese pharmaceutical market
  • other collaborations
  • and an apparently growing operation. See this recent article.

The value of all the assets, both tangible and intangible, that would go with the sale of the CDMO, would be a matter of negotiation. So we cannot say, but it is many times the current market value of the company.

An investment in iBio might be viewed, in part, as a bet on Kenneth Dart’s business ability, and that would be a good bet. We think he came here to for the big bucks. And it appears this recent move is part of a grander scheme. In any case, iBio is a highly undervalued CDMO, and it looks like something big is going to happen, and soon.  

For more details on iBio, see Marc Keiser's Investment blog: He has numerous articles available.

Next.. see iBio: Why I Think a Buyout Deal is on the Table, Right Now.