RISK
FACTORS
Our business faces many risks. Past
experience may not be indicative of future performance, and as noted elsewhere in this prospectus, we have included forward-looking
statements about our business, plans and prospects that are subject to change. You should carefully consider the risks described
below, as well as those risks described in the sections titled “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” each contained in our most recent Annual Report on Form
10-K for the year ended June 30, 2017 and our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2017,
which have been filed with the SEC and are incorporated herein by reference in their entirety, as well as other information in
this prospectus or in any other documents incorporated by reference. Each of the risks described in these sections and documents
could adversely affect our business, financial condition, results of operations and prospects, and could result in a complete
loss of your investment. This prospectus and the incorporated documents also contain forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a
result of certain factors, including the risks mentioned above. In addition to the other risks or uncertainties contained in this
prospectus, 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 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
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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, Inc., we have incurred operating losses and negative cash flows from operations. Our net loss
was approximately $16.1 million for the year ended June 30, 2017 and approximately $10.7 million for the year ended June 30, 2016.
For the six months ended December 31, 2017, our net loss was approximately $7.7 million. As of December 31, 2017, we had an accumulated
deficit of approximately $79.8 million.
To date, we have
financed our operations primarily through the sale of common 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 based upon our platform. We have not completed development of or commercialized
any vaccine or therapeutic product candidates. We expect to continue to incur significant expenses and operating losses for at
least the next fiscal year. We anticipate that our expenses and losses may 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 efforts.
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To become and
remain profitable, we must succeed in commercializing our technology platforms or we, alone or with our licensees, must succeed
in developing and eventually commercializing products that generate significant revenue. In addition, our profitability will depend
on continuing to attract and maintain customers for the development, manufacturing and technology transfer services offered by
our subsidiary iBio CDMO.
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. Our profitability
also will depend on spending on iBio CDMO’s services by its customers and potential customers. 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 will
need substantial additional funding to 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 would be forced to delay, reduce or eliminate our product development
programs or commercialization efforts.
We have limited
financial resources and will need substantial additional funding in connection with our continuing operations. 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, to the extent that our efforts to outlicense our technology platforms and product
candidates are unsuccessful 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.
On July 24, 2017,
we entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), an Illinois
limited liability company, pursuant to which Lincoln Park has agreed to purchase from us up to an aggregate of $16,000,000 of
our common stock (subject to certain limitations) from time to time over the 36-month term of the agreement (the “Lincoln
Park Purchase Agreement” or “Purchase Agreement”). As a result, on July 24, 2017, 120,000 shares of our common
stock were issued to Lincoln Park as consideration for Lincoln Park’s commitment to purchase shares of our common stock
under the Purchase Agreement (the “Commitment Shares”), and 250,000 shares of common stock were sold to Lincoln Park
in an initial purchase for an aggregate gross purchase price of $1,000,000 (the “Initial Purchase Shares”). In connection
with the Purchase Agreement, on July 24, 2017, we entered into a registration rights agreement with Lincoln Park subsequent to
which we filed with the SEC a registration statement on Form S-1 to register for resale under the Securities Act of 1933, as amended,
or the Securities Act, the shares of common stock that have been or may be issued to Lincoln Park under the Purchase Agreement.
Since we entered into the Purchase Agreement with Lincoln Park, we have issued and sold 60,000 shares of common stock to Lincoln
Park pursuant to the Purchase Agreement, not including the Commitment Shares and Initial Purchase Shares.
The extent to
which we continue to utilize the Purchase Agreement as a source of funding will depend on a number of factors, including the prevailing
market price of our common stock, the volume of trading in our common stock and the extent to which we are able to secure funds
from other sources. The number of shares that we may sell to Lincoln Park under the Purchase Agreement on any given day and during
the term of the agreement is limited. Additionally, we and Lincoln Park may not effect any sales of shares of our common stock
under the Purchase Agreement during the continuance of an event of default under the term of the agreement. Even if we are able
to access the full $16.0 million under the Purchase Agreement, we may still need additional capital to fully implement our business,
operating and development plans.
On November 30,
2017, we completed a public offering of shares of our common stock raising gross proceeds of $4,500,000. The shares of common
stock were issued pursuant to an underwriting agreement entered into between the Company and Aegis Capital Corp.
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, as well
as through sales of common stock to Lincoln Park under the Purchase Agreement. Additional equity or debt financing or corporate
collaboration and licensing arrangements may not be available on acceptable terms, if at all. 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.
We expect that
our existing cash on hand as of December 31, 2017 in the amount of $7.3 million, together with the proceeds of this offering,
funds we expect to develop from future sales pursuant to the Lincoln Park Purchase Agreement, and proceeds realized in connection
with license and collaboration arrangements and the operation of our subsidiary, iBio CDMO LLC, will be sufficient to meet our
projected operating requirements going forward. 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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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
success and expansion of our existing collaboration with Fiocruz and any new license
agreements we may enter into;
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the
costs, timing and regulatory review of our product candidates;
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the
further obtaining and retention of developmental and manufacturing opportunities at the
CDMO;
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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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Conducting preclinical
testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never
generate the data necessary to attract additional licensees and we and our current licensees may never generate the data required
for product candidates to obtain the regulatory approvals necessary for product sales. Even if approved, product candidates may
not achieve commercial success. Currently, we expect our commercial revenues, if any, to be product development fees, development
milestone payments, and other license proceeds, including royalties derived from sales of products that we do not expect to be
commercially available for several years, if at all. Accordingly, to achieve our business objectives we will need to continue
to rely on additional financing which may not be available to us on acceptable terms, or at all.
If we are unsuccessful in raising additional
capital or other alternative financing, we might have to defer or abandon our efforts to commercialize our intellectual property
and decrease or even 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 license, service or product revenues, we expect to finance our cash needs through a combination
of equity offerings, collaborations, strategic alliances, 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,
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 technology platforms, identifying potential product candidates and undertaking, through third parties,
preclinical trials and clinical trials of product candidates derived from our technologies. Certain iBioLaunch™-derived
vaccine candidates have been evaluated in completed or ongoing Phase 1 clinical trials; however, all our other 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.
We may require additional financing
to sustain our operations and without it we may not be able to continue operations.
As of December 31, 2017, our accumulated
deficit was approximately $79.8 million. We do not currently have sufficient financial resources to fund our operations or those
of our subsidiaries. Therefore, we need additional funds to continue these operations.
We sold 250,000 shares of common stock
to Lincoln Park in an initial purchase under the Purchase Agreement on July 24, 2017, for an aggregate gross purchase price of
$1,000,000. Since July 24, 2017, we have sold an additional 60,000 shares of common stock to Lincoln Park for an aggregate purchase
price of $121,290. We may direct Lincoln Park to purchase up to an additional $14,878,710 worth of shares of our common stock
(excluding the initial purchase) under our agreement over a 36-month period generally in amounts up to 10,000 shares of our common
stock, which may be increased to up to 60,000 shares of our common stock depending on the market price of our common stock at
the time of sale and subject to a maximum limit of $1,000,000 per purchase, on any such business day.
The extent we rely on Lincoln Park as
a source of funding will depend on a number of factors including, the prevailing market price of our common stock and the extent
to which we are able to secure working capital from other sources. If obtaining sufficient funding from Lincoln Park were to prove
unavailable or prohibitively dilutive, we will need to secure another source of funding in order to satisfy our working capital
needs. Even if we sell all $16,000,000 under the Purchase Agreement to Lincoln Park, we may still need additional capital to fully
implement our business, operating and development plans. Should the financing we require to sustain our working capital needs
be unavailable or prohibitively expensive when we require it, the consequences could be a material adverse effect on our business,
operating results, financial condition and prospects.
Risks Related
to the Development and Commercialization of Our Platform Technologies and Product Candidates
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.
As a result, we may forego or delay pursuit of opportunities with other technology platforms 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 may not yield any commercially viable products.
We have based
our research and development efforts 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 of our exclusive use of our own technologies,
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 technology platforms. 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 are
very early in our development efforts. If we or our 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 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 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 the data that we and our collaborators have obtained from preclinical studies and Phase 1 clinical trials of iBio-derived
and iBio-enhanced product candidates has validated these technology platforms, our platforms have not yet, and may never lead
to, approvable or marketable products. Even if we are successful in further validating our platforms 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 technological approach, 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 licensees will
be able to commercialize product candidates based on our platform technologies 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 iBioLaunch and iBioModulator 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-derived or iBio-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 so reduce its attractiveness to prospective licensees that we will be unable to successfully develop and commercialize
such a product candidate.
If we are
not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our
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 adverse 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.
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 have no experience in the sales,
marketing and distribution of pharmaceutical products.
If we fail to establish commercial licenses
for our iBio products and technologies or fail to enter into arrangements with partners with respect to the sales and marketing
of any of our future potential product candidates, we might need to develop a sales and marketing organization with supporting
distribution capability in order to directly market product candidates we successfully develop. Significant additional expenditures
would be required for us to develop such an in-house sales and marketing organization.
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.
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 potentially 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. At June 30, 2017, Fiocruz represented
a significant percentage, greater than 10%, of our total revenues.
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.
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. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was
signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These include provisions
that affect the way patent applications are prosecuted and may also affect patent litigation. The U.S. Patent and Trademark Office,
or U.S. PTO, recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the
substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became
effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation
of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the
prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material
adverse effect on our business and financial condition.
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.
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
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.
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.
In January 2016,
we entered into a contract manufacturing joint venture operated through our subsidiary iBio CDMO. iBio CDMO operates on the basis
of three parallel lines of business: (1) development and manufacturing of third party products; (2) development and production
of iBio’s proprietary product(s) for treatment of fibrotic diseases; and (3) commercial technology transfer services. iBio
CDMO’s operations take place in Bryan, Texas in a facility controlled by an affiliate of Eastern Capital Limited (“Eastern”),
a stockholder of the Company, as sublandlord. The facility is a Class A life sciences building on the campus of Texas A&M
University, designed and equipped for plant-made manufacture of biopharmaceuticals.
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 manufacturing, development
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.
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.
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.
Our future success depends on our
ability to retain our officers and directors, scientists, and other key employees and to attract, retain and motivate qualified
personnel.
Our success depends on our ability to
attract, retain and motivate highly qualified management and scientific personnel. In particular, we are highly dependent on Robert
B. Kay, our Executive Chairman and Chief Executive Officer, our other officers and directors, scientists and key employees. The
loss of any of these persons or their expertise would be difficult to replace and could have a material adverse effect on our
ability to achieve our business goals. In addition, the loss of the services of any one of these persons may impede the achievement
of our research, development and commercialization objectives by diverting management’s attention to the identification
of suitable replacements, if any. There can be no assurance that we will be successful in hiring or retaining qualified personnel,
and our failure to do so could have a material adverse effect on our business, financial condition and results of operations.
We face intense competition, including
from companies with greater resources and experience than us, which may negatively affect our commercial opportunities.
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.
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.
For all the foregoing reasons, we may
not be able to compete successfully against our competitors.
Risks Related to Our Stock Purchase
Agreement with Lincoln Park
Sales of our common stock to Lincoln
Park may cause substantial dilution to our existing stockholders and the sale of the shares of our common stock acquired by Lincoln
Park could cause the price of our common stock to decline.
On July 24, 2017, we entered into the
Purchase Agreement with Lincoln Park pursuant to which Lincoln Park has agreed to purchase from us up to an aggregate of $16,000,000
of our common stock (subject to certain limitations) from time to time over the 36-month term of the Purchase Agreement. As a
result, on July 24, 2017, 120,000 shares of our common stock were issued to Lincoln Park as consideration for Lincoln Park’s
commitment to purchase shares of our common stock under the Purchase Agreement (the “Commitment Shares”), and 250,000
shares of common stock (the “Initial Purchase Shares”) were sold to Lincoln Park in an initial purchase for an aggregate
gross purchase price of $1,000,000 (the “Initial Purchase Amount”). Since we entered into the Purchase Agreement with
Lincoln Park, we have issued and sold 60,000 shares of common stock to Lincoln Park pursuant to the Purchase Agreement for an
aggregate gross purchase price of $121,290 not including the Commitment Shares and Initial Purchase Shares.
The number of shares ultimately offered
for sale to Lincoln Park is dependent upon the number of shares we elect to sell to Lincoln Park under the Purchase Agreement.
Depending upon market liquidity at the time, sales of shares of our common stock under the Purchase Agreement may cause the trading
price of our common stock to decline. Lincoln Park may ultimately purchase all or only some of the $16.0 million of our common
stock that we may sell under the Purchase Agreement. After Lincoln Park acquires shares under the Purchase Agreement, it may sell
all, some or none of those shares. Sales to Lincoln Park by us pursuant to the Purchase Agreement may result in substantial dilution
to the interests of other holders of our common stock. The sale of a substantial number of shares of our common stock to Lincoln
Park, 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. However, we have the right to control the timing and amount
of any sales of our shares to Lincoln Park, and we may terminate the Lincoln Park Purchase Agreement at any time at our discretion
without any cost to us.
Our management has broad discretion
over the amounts, timing and use of the net proceeds that we may receive pursuant to the Purchase Agreement, you may not agree
with how we use the proceeds, and the proceeds may not be invested successfully.
Our management has broad discretion in
the timing and application of any net proceeds that we may receive from any future sales of common stock to Lincoln Park pursuant
to the Purchase Agreement. Management could use these proceeds for purposes other than those currently contemplated. Accordingly,
you will be relying on the judgment of our management with regard to the timing and use of these net proceeds, and you will not
have the opportunity as part of your investment decision to assess whether the proceeds are being used appropriately. It is possible
that the proceeds will be invested in a way that does not yield a favorable, or any, return for our company.
The extent to which we utilize the Lincoln
Park Purchase Agreement as a source of funding will depend on a number of factors, including the prevailing market price of our
common stock, the volume of trading in our common stock and the extent to which we are able to secure funds from other sources.
The number of shares that we may sell to Lincoln Park under the Purchase Agreement on any given day and during the term of the
Purchase Agreement is limited. Additionally, we and Lincoln Park may not effect any sales of shares of our common stock under
the Purchase Agreement during the continuance of an event of default under the Purchase Agreement. Even if we are able to access
the full $16.0 million under the Purchase Agreement, we may still need additional capital to fully implement our business, operating
and development plans.
We may not be able to access the
full amounts available under the Purchase Agreement, which could prevent us from accessing the capital we need to continue our
operations, which could have an adverse effect on our business.
Other than the Initial Purchase Amount,
all funds available under the Purchase Agreement are only available if our common stock per share value is $0.25 or higher at
the time we seek to sell stock, and the volume of any such stock sales under the Purchase Agreement may vary with our common stock
per share price. Changes in our stock price may limit the net proceeds we may receive under the Purchase Agreement.
Risks Relating to this Offering and
Ownership of Our Common Stock, Series A Preferred Stock or Series B Preferred Stock
Our stock price may be volatile or
may decline regardless of our operating performance, and you may not be able to resell Shares, Series A Preferred Shares or Series
B Preferred Shares at or above the price you paid or at all, and you could lose all or part of your investment as a result.
The stock market in general and the market
for biotechnology and other life sciences companies in particular, have experienced extreme volatility that has often been unrelated
to the operating performance of these companies. Therefore, the value of our common stock may decline regardless of our operating
performance or prospects. The market price of our common stock at any particular time may not remain the market price in the future.
The market price for our common stock may be influenced by many factors, including those factors described in this “Risk
Factors” section and:
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our perceived prospects and liquidity;
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additions and departures of key personnel;
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variations in our operating results and whether
we have achieved key business targets;
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changes in, or our failure to meet, earnings
estimates;
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changes in securities analysts’ buy/sell
recommendations;
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differences between our reported results and
those expected by investors and securities analysts;
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announcements of new contracts by us or our
competitors;
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regulatory actions with respect to our technologies
or products or our competitors’ technologies or products;
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developments or disputes concerning patent
applications, issued patents or other proprietary rights;
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the passage of legislation or other regulatory
developments in the United States and other countries affecting us or our industry;
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fluctuations in the valuation of companies
perceived by investors to be comparable to us;
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sales of our common stock by us, our insiders
or other stockholders;
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speculation in the press or investment community;
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announcement or expectation of additional financing
efforts;
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changes in accounting principles;
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market reaction to any acquisitions, joint
ventures or strategic investments announced by us or our competitors; and
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general economic, political or stock market
conditions.
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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.
Our failure to meet the continued
listing requirements of the NYSE American could result in a delisting of our common stock.
Our shares of common stock are currently
listed on the NYSE American. If we fail to satisfy the continued listing requirements of the NYSE American, such as the corporate
governance requirements, minimum bid price requirement or the minimum stockholder’s equity requirement, the NYSE American
may take steps to delist our common stock. Any delisting would likely have a negative effect on the price of our common stock
and would impair stockholders’ ability to sell or purchase their common stock when they wish to do so.
On January 4, 2018, as a result of the
Company’s then low per share price, the Company received notice from the NYSE American that we needed to effect a reverse
stock split or otherwise demonstrate sustained improvement in our share price within a reasonable period of time in order to maintain
our continued listing on the NYSE American.
To regain compliance with the NYSE American’s
listing standards, the Company held a special meeting of its stockholders on April 23, 2018, at which the stockholders approved
a proposal to effect an amendment our certificate of incorporation, as amended, to implement a reverse stock split at a ratio
to be determined by the Board in a range not less than one-for-two (1:2) and not greater than one-for-ten (1:10). Our Board determined
to implement a reverse stock split at a ratio of one-for-ten (1:10) shares of the Company’s common stock. The reverse stock
split was effective on June 8, 2018.
On June 6, 2018, the Company received
notice from the NYSE American that the Company currently is below the NYSE American’s continued listing standards set forth
in Section 1003(a)(iii) of the NYSE American Company Guide, which applies if a listed company has stockholders’ equity of
less than $6,000,000 and has sustained losses from continuing operations and/or net losses in its five most recent fiscal years.
The exchange indicated that a review of the Company shows that the Company is below compliance with Section 1003(a)(iii) since
it reported stockholders’ equity of $4.2 million as of March 31, 2018 and net losses in its five most recent fiscal years.
The Company must submit a plan of compliance
to the NYSE American by July 6, 2018 that explains how the Company intends to regain compliance with Section 1003(a)(iii) of the
NYSE American Company Guide by December 6, 2019. If the Company does not submit a plan of compliance, or if the plan is not accepted
by the NYSE American, the Company will be subject to delisting procedures as set forth in Section 1010 and Part 12 of the NYSE
American Company Guide. If the plan is accepted by the NYSE American, the Company will be subject to periodic reviews including
quarterly monitoring for compliance with the plan.
The Company believes it can provide the
NYSE American with a satisfactory plan by July 6, 2018, to show that it will be able to return to compliance with Section 1003(a)(iii)
of the NYSE American Company Guide by December 6, 2019.
The Company’s common stock will
continue to be listed on the NYSE American while it attempts to regain compliance with the listing standards noted, subject to
the Company’s compliance with other continued listing requirements. The Company’s common stock will continue to trade
under the symbol “IBIO,” but will have an added designation of “.BC” to indicate that the Company is not
in compliance with the NYSE American’s listing standards.
If our common stock loses its status on
the NYSE American, we believe that our shares of common stock would likely be eligible to be quoted on the inter-dealer electronic
quotation and trading system operated by Pink OTC Markets Inc., commonly referred to as the Pink Sheets and now known as the OTCQB
market. Our common stock may also be quoted on the Over-the-Counter Bulletin Board, an electronic quotation service maintained
by the Financial Industry Regulatory Authority. These markets are generally not considered to be as efficient as, and not as broad
as, the NYSE American. In the event of any delisting, it could be more difficult to buy or sell our common stock and obtain accurate
quotations, and the price of our stock could suffer a material decline. Delisting may also impair our ability to raise capital.
Provisions in our charter documents
and under Delaware law could discourage a takeover that stockholders may consider favorable.
Provisions of our certificate of incorporation,
as amended, first amended and restated 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, as amended,
our Board of Directors may issue additional shares of common 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 block 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, as amended,
also allows our Board of Directors to fix the number of directors in our bylaws. Cumulative voting in the election of directors
is specifically denied in our certificate of incorporation, as amended. 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 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.
Since we do not intend to pay cash dividends, your ability to receive a return on your investment will depend on any future appreciation
in the market value of our common stock. There is no guarantee that our common stock, Series A Preferred Stock or Series B Preferred
Stock will appreciate or even maintain the price at which our holders have purchased such securities.
There is no active, public market
for the Series A Preferred Shares or Series B Preferred Shares being offered in this offering.
There is no established public trading
market for the Series A Preferred Shares or Series B Preferred Shares being offered in this offering. We do not intend to apply
to list the Series A Preferred Shares or Series B Preferred Shares on a securities exchange. Without an active trading market,
the liquidity of the Series A Preferred Shares and Series B Preferred Shares will be limited.
The Series A Preferred Stock and
Series B Preferred Stock have limited voting rights.
Holders of Series A Preferred Stock and
holders of Series B Preferred Stock will not have the right to vote for members of the Company’s board of directors and
will not vote on an as-converted to common stock basis for matters brought before the Company’s common stockholders. The
holders of Series A Preferred Stock will have the right to vote only on certain material changes in the terms of the Series A
Preferred Stock and on other matters as may be required by Delaware law. The holders of Series B Preferred Stock will have the
right to vote only on certain material changes in the terms of the Series B Preferred Stock and on other matters as may be required
by Delaware law.
Our management will have broad discretion
over how the Company will use the funds raised in this offering and may use them in ways that you may not agree with and that
may not enhance our operating results or the price of our common stock.
Our management will have broad discretion
over the use of proceeds from this offering and could use these proceeds for purposes other than those contemplated at the time
of this prospectus. Accordingly, you will be relying on the judgment of our management with regard to the timing and use of these
funds, and you will not have the opportunity as part of your investment decision to assess whether the proceeds are being used
appropriately. It is possible that the proceeds will be invested in a way that does not yield a favorable, or any, return for
our company. Our failure to apply these funds effectively could harm our business and cause the price of our common stock to decline.
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 million shares of common stock, par value $.001 per share, and 1 million shares
of preferred stock, with no par value, one of which is designated as iBio CMO Preferred Tracking Stock, par value, $0.001. As
of June 8, 2018, we had issued and outstanding approximately 11.6 million shares of common stock and one share of iBio CMO Preferred
Tracking Stock. No other shares of preferred stock are outstanding. In addition, as of June 8, 2018, 1.38 million options to purchase
shares of common stock were outstanding and we had approximately 124,000 shares of common stock reserved for future issuance of
additional option grants under our 2008 Omnibus Equity Incentive Plan.
Accordingly, we are able to issue up to
approximately 262 million additional shares of common stock (which includes common stock issuable under this prospectus) 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, Series A Preferred
Stock or Series B Preferred 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 and we are offering Series A Preferred Shares and Series B Preferred Shares. Our Board of Directors may, at
any time, authorize the issuance of a 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, 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 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.
DESCRIPTION
OF SECURITIES
Capital Stock
We are authorized to issue 275,000,000 shares
of common stock, par value $0.001 per share, of which 11,591,827 shares were issued and outstanding as of June 20, 2018, and 1,000,000
shares of preferred stock, no par value, one of which is designated as iBio CMO Preferred Tracking Stock, par value, $0.001, per
share. As of June 20, 2018, one share of iBio CMO Preferred Tracking Stock is issued and outstanding and no other shares of preferred
stock are outstanding.
Provisions of our certificate of incorporation,
as amended, our first amended and restated 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, as
amended, our Board of Directors may issue additional shares of common 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,
·
Putting
a substantial voting block in institutional or other hands that might undertake to support the incumbent Board of Directors, or
·
Effecting
an acquisition that might complicate or preclude the takeover.
Our certificate of incorporation, as amended,
also allows our Board of Directors to fix the number of directors in our bylaws. Cumulative voting in the election of directors
is specifically denied in our certificate of incorporation, as amended. 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.
Common Stock
Holders of common stock are entitled to
one vote per share on all matters to be voted upon by the stockholders and are not entitled to cumulative voting for the election
of directors. Holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to
time by the Board of Directors out of funds legally available therefor subject to the rights of preferred stockholders. We do
not intend to pay any cash dividends to the holders of common stock and anticipate reinvesting our earnings. In the event of liquidation,
dissolution or winding up of our company, the holders of common stock are entitled to share ratably in all assets remaining after
payment of liabilities and the preferences of preferred stockholders. Shares of common stock have no preemptive, conversion or
other subscription rights. There are no redemption or sinking fund provisions applicable to common stock.
Preferred Stock
We are authorized to issue 1,000,000 shares
of preferred stock, with no par value, and the Board of Directors is authorized to create one or more series of preferred stock,
and to designate the rights, privileges, restrictions, preferences and limitations of any given series of preferred stock. Accordingly,
the Board of Directors may, without stockholder approval, issue shares of preferred stock with dividend, liquidation, conversion,
voting or other rights that could adversely affect the voting power or other rights of the holders of common stock.
Series A Convertible Preferred Stock
The following is a summary of the material
terms of the Series A Preferred Stock. This summary is not complete. The following summary of the terms and provisions of the
Series A Preferred Stock is qualified in its entirety by reference to the Series A Preferred Stock, the form of which has been
filed as an exhibit to the registration statement of which this prospectus is a part.
General
Our board of directors has designated up to 6,300 shares of the 1,000,000 authorized shares of preferred
stock as Series A Convertible Preferred Stock, par value $0.001 per share. When issued, the shares of Series A Preferred Stock
will be validly issued, fully paid and non-assessable. Each share of Series A Preferred Stock will have a stated value of $1,000
per share.
Rank
The Series A Preferred Stock will rank
on parity to our common stock and Series B Preferred Stock and junior to our iBio CMO Preferred Tracking Stock described below
under “Preferred Tracking Stock”.
Conversion
Each share of Series A Preferred Stock
is convertible into shares of our common stock (subject to adjustment as provided in the related certificate of designation of
preferences, rights and limitations) at any time at the option of the holder at a conversion price equal to $0.90. The conversion
price is subject to adjustment if, at any time during the two (2) years following the first issuance of shares of Series A Preferred
Stock, we issue any shares of common stock or options, warrants or other securities exercisable for or convertible into common
stock at a price per share less than the conversion price in effect at such time. In such case the conversion price will be adjusted
to the higher of the price per share in such subsequent issuance or $0.05. Certain exempt issuances, such as options to purchase
common stock issued to officers, directors and employees pursuant to an option plan duly adopted by a majority of the non-employee
members of our Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose,
issuances of shares of common stock pursuant to convertible securities currently outstanding, and issuances of shares in connection
with strategic transactions approved by a majority of our disinterested directors do not result in an adjustment to the conversion
price.
Any holders of Series A Preferred Stock
will be prohibited from converting Series A Preferred Stock into shares of our common stock if, as a result of such conversion,
such holder, together with its affiliates, would own more than 4.99% of the total number of shares of our common stock then issued
and outstanding. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided
that any increase in such percentage shall not be effective until 61 days after such notice to us.
Liquidation Preference
In the event of our liquidation, dissolution
or winding-up, holders of Series A Preferred Stock will be entitled to receive the same amount that a holder of our common stock
would receive if the Series A Preferred Stock were fully converted into shares of our common stock at the conversion price (disregarding
for such purposes any conversion limitations) which amounts shall be paid pari passu with all holders of common stock and holders
of Series B Preferred Stock.
Voting Rights
Holders of Series A Preferred Stock will
not have the right to vote for members of the Company’s board of directors and will not vote on an as-converted to common
stock basis for matters brought before the Company’s common stockholders. The affirmative vote of the holders of a majority
of the then outstanding shares of Series A Preferred Stock is required to, (a) alter or change adversely the powers, preferences
or rights given to the Series A Preferred Stock, (b) amend our certificate of incorporation or other charter documents in any
manner that materially adversely affects any rights of the holders of Series A Preferred Stock, (c) increase the number of authorized
shares of Series A Preferred Stock, (c) issue any shares of Series A Preferred Stock other than pursuant to the certificate of
designation of preferences, rights and limitations of the Series A Preferred Stock, or (d) enter into any agreement with respect
to any of the foregoing.
Dividends
Shares of Series A Preferred Stock
will not be entitled to receive any dividends, unless and until specifically declared by our board of directors. The holders of
the Series A Preferred Stock will participate, on an as-if-converted-to-common stock basis, in any dividends to the holders of
common stock.
Redemption
We are not obligated to redeem or repurchase
any shares of Series A Preferred Stock. Shares of Series A Preferred Stock are not otherwise entitled to any redemption rights
or mandatory sinking fund or analogous fund provisions.
Exchange Listing
We do not plan on making an application
to list the Series A Preferred Stock on any national securities exchange or other nationally recognized trading system.
Series B Convertible Preferred
Stock
The following is a summary of the material
terms of the Series B Preferred Stock. This summary is not complete. The following summary of the terms and provisions of the
Series B Preferred Stock is qualified in its entirety by reference to the Series B Preferred Stock, the form of which has been
filed as an exhibit to the registration statement of which this prospectus is a part.
General
Our board of directors has designated up to 5,785 shares of the 1,000,000 authorized shares of preferred
stock as Series B Convertible Preferred Stock, par value $0.001 per share. When issued, the shares of Series B Preferred Stock
will be validly issued, fully paid and non-assessable. Each share of Series B Preferred Stock will have a stated value of $1,000
per share.
Rank
The Series B Preferred Stock will rank
on parity to our common stock and Series A Preferred Stock and junior to our iBio CMO Preferred Tracking Stock described below
under “Preferred Tracking Stock”.
Conversion
Each share of Series B Preferred Stock
is convertible into shares of our common stock (subject to adjustment as provided in the related certificate of designation of
preferences, rights and limitations) at any time at the option of the holder at a conversion price equal to $0.90. The conversion
price is subject to adjustment if, at any time during the two (2) years following the first issuance of shares of Series B Preferred
Stock, we issue any shares of common stock or options, warrants or other securities exercisable for or convertible into common
stock at a price per share less than the conversion price in effect at such time. In such case the conversion price will be adjusted
to the higher of the price per share in such subsequent issuance or $0.05. Certain exempt issuances, such as options to purchase
common stock issued to officers, directors and employees pursuant to an option plan duly adopted by a majority of the non-employee
members of our Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose,
issuances of shares of common stock pursuant to convertible securities currently outstanding, and issuances of shares in connection
with strategic transactions approved by a majority of our disinterested directors do not result in an adjustment to the conversion
price.
A Holder of Series B Preferred Stock will
be prohibited from converting Series B Preferred Stock into shares of our common stock if, as a result of such conversion, such
holder, together with its affiliates, would own more than 48% of the total number of shares of our common stock then issued and
outstanding.
Liquidation Preference
In the event of our liquidation, dissolution
or winding-up, holders of Series B Preferred Stock will be entitled to receive the same amount that a holder of our common stock
would receive if the Series B Preferred Stock were fully converted into shares of our common stock at the conversion price (disregarding
for such purposes any conversion limitations) which amounts shall be paid pari passu with all holders of common stock and holders
of Series A Preferred Stock.
Voting Rights
Holders of Series B Preferred Stock will
not have the right to vote for members of the Company’s board of directors and will not vote on an as-converted to common
stock basis for matters brought before the Company’s common stockholders. The affirmative vote of the holders of a majority
of the then outstanding shares of Series B Preferred Stock is required to, (a) alter or change adversely the powers, preferences
or rights given to the Series B Preferred Stock, (b) amend our certificate of incorporation or other charter documents in any
manner that materially adversely affects any rights of the holders of Series B Preferred Stock, (c) increase the number of authorized
shares of Series B Preferred Stock, (c) issue any shares of Series B Preferred Stock other than pursuant to the certificate of
designation of preferences, rights and limitations of the Series B Preferred Stock, or (d) enter into any agreement with respect
to any of the foregoing.
Dividends
Shares of Series B Preferred Stock will
not be entitled to receive any dividends, unless and until specifically declared by our board of directors. The holders of the
Series B Preferred Stock will participate, on an as-if-converted-to-common stock basis, in any dividends to the holders of common
stock.
Redemption
We are not obligated to redeem or repurchase
any shares of Series B Preferred Stock. Shares of Series B Preferred Stock are not otherwise entitled to any redemption rights
or mandatory sinking fund or analogous fund provisions.
Exchange Listing
We do not plan on making an application
to list the Series B Preferred Stock on any national securities exchange or other nationally recognized trading system.
Preferred Tracking Stock
On February 23, 2017, our Board of Directors
created a series of preferred stock, designated as the “iBio CMO Preferred Tracking Stock,” par value $0.001 per share
(the “Preferred Tracking Stock”), out of our 1,000,000 authorized shares of preferred stock. On February 23, 2017,
we filed with the Secretary of State of the State of Delaware a certificate of designation, preferences and rights of the Preferred
Tracking Stock (the “Certificate of Designation”) which became effective on February 23, 2017, authorizing one share
of Preferred Tracking Stock and establishing the designation, powers, preferences and rights of the Preferred Tracking Stock.
Dividends on Preferred Tracking Stock
The Preferred Tracking Stock accrues dividends
at the rate of 2% per annum on the original issue price of $13 million per share. Accrued dividends are payable if and when declared
by the Board of Directors, upon an exchange of the shares of Preferred Tracking Stock and upon a liquidation, winding up or deemed
liquidation (such as a merger) of the Company. No dividend may be declared or paid or set aside for payment or other distribution
declared or made upon our common stock and no common stock may be redeemed, purchased or otherwise acquired for any consideration
by us unless all accrued dividends on all outstanding shares of Preferred Tracking Stock are paid in full.
Voting Rights of Preferred Tracking
Stock
The holders of Preferred Tracking Stock,
voting separately as a class, are entitled to approve by the affirmative vote of a majority of the shares of Preferred Tracking
Stock outstanding any amendment, alteration or repeal of any of the provisions of, or any other change to, our certificate of
incorporation, as amended, or the Certificate of Designation that adversely affects the rights, powers or privileges of the Preferred
Tracking Stock, any increase in the number of authorized shares of Preferred Tracking Stock, the issuance or sale of any additional
shares of Preferred Tracking Stock or any securities convertible into or exercisable or exchangeable for Preferred Tracking Stock,
the creation or issuance of any shares of any additional class or series of capital stock unless the same ranks junior to the
Preferred Tracking Stock, or the reclassification or alteration of any of our existing securities that are junior to or pari passu
with the Preferred Tracking Stock, if such reclassification or alteration would render such other security senior to the Preferred
Tracking Stock. Except as required by applicable law, the holders of Preferred Tracking Stock have no other voting rights.
Exchange of Preferred Tracking Stock
At our election or the election of 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.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our certificate of incorporation, as amended,
will provide for indemnification of our officers and directors to the extent permitted by Delaware law, which generally permits
indemnification for actions taken by officers or directors as our representatives if the officer or director acted in good faith
and in a manner he or she reasonably believed to be in the best interest of the corporation.
As permitted under Delaware law, our first
amended and restated bylaws contain a provision indemnifying directors against expenses (including attorneys’ fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by them in connection with an action, suit or proceeding
if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of our company,
and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful.
The separation and distribution agreement
that we have entered into with Integrated BioPharma provides for indemnification by us of Integrated BioPharma and its directors,
officers and employees for some liabilities, including liabilities under the Securities Act and the Securities Exchange Act of
1934 in connection with the distribution, and a mutual indemnification of each other for product liability claims arising from
their respective businesses, and also requires that we indemnify Integrated BioPharma for various liabilities of iBio, and for
any tax that may be imposed with respect to the distribution and which result from our actions or omissions in that regard.
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions,
or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
MATERIAL
U.S. FEDERAL INCOME AND
ESTATE
TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summary of the material
U.S. federal income tax consequences of the ownership and disposition of our common stock to Non-U.S. Holders (defined below),
but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based
upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations promulgated thereunder,
administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed or subject to differing
interpretations, possibly with retroactive effect, so as to result in United States federal income tax consequences different
from those set forth below. We have not sought and will not seek any ruling from the Internal Revenue Service, or the IRS, with
respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS
or a court will agree with such statements and conclusions.
This summary also does not address the
tax considerations arising under the laws of any United States state or local or any non-United States jurisdiction, the 3.8%
Medicare tax on net investment income or any alternative minimum tax consequences. In addition, this discussion does not address
tax considerations applicable to a Non-U.S. Holder’s particular circumstances or to a Non-U.S. Holder that may be subject
to special tax rules, including, without limitation:
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banks, insurance companies or other financial institutions;
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tax-exempt or government organizations;
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brokers of or dealers in securities or currencies;
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traders in securities that elect to use a mark-to-market method
of accounting for their securities holdings;
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persons that own, or are deemed to own, more than five percent
of our capital stock;
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certain United States expatriates, citizens or former long-term
residents of the United States;
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persons who hold our common stock as a position in a hedging
transaction, “straddle,” “conversion transaction,” synthetic security, other integrated investment,
or other risk reduction transaction;
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persons who do not hold our common stock as a capital asset
within the meaning of Section 1221 of the Code (generally, for investment purposes);
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persons deemed to sell our common stock under the constructive
sale provisions of the Code;
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real estate investment trusts or regulated investment companies;
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partnerships, or other entities or arrangements treated as partnerships
for United States federal income tax purposes, or investors in any such entities;
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persons for whom our stock constitutes “qualified small
business stock” within the meaning of Section 1202 of the Code;
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integral parts or controlled entities of foreign sovereigns;
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tax-qualified retirement plans;
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controlled foreign corporations;
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passive foreign investment companies and corporations that accumulate
earnings to avoid United States federal income tax; or
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persons that acquire our common stock as compensation for services.
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In addition, if a partnership, including
any entity or arrangement classified as a partnership for United States federal income tax purposes, holds our common stock, the
tax treatment of a partner generally will depend on the status of the partner, the activities of the partnership, and certain
determinations made at the partner level. Accordingly, partnerships that hold our common stock, and partners in such partnerships,
should consult their tax advisors regarding the United States federal income tax consequences to them of the purchase, ownership,
and disposition of our common stock.
You are urged to consult your tax advisor
with respect to the application of the United States federal income tax laws to your particular situation, as well as any tax
consequences of the purchase, ownership and disposition of our common stock arising under the U.S. federal estate or gift tax
rules or under the laws of any United States state or local or any non-United States or other taxing jurisdiction or under any
applicable tax treaty.
Definition of a Non-U.S. holder
For purposes of this summary, a “Non-U.S.
Holder” is any beneficial owner of our common stock that is not a “U.S. person,” and is not a partnership, or
an entity disregarded from its owner, each for U.S. federal income tax purposes. A U.S. person is any person that, for United
States federal income tax purposes, is or is treated as any of the following:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity taxable as a corporation for
U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District
of Columbia;
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an estate, the income of which is subject to United States federal
income tax regardless of its source; or
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a trust that (1) is subject to the primary supervision of a
U.S. court and the control of one or more U.S. persons (within the meaning of Section 7701(a)(30) of the Code), or (2) has
a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes.
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Distributions
As discussed in the section entitled “Market
Price and Dividend Information” beginning on page 33 of this prospectus, we do not anticipate paying any dividends on our
capital stock in the foreseeable future. If we make distributions on our common stock, those payments will constitute dividends
for United States income tax purposes to the extent we have current or accumulated earnings and profits, as determined under U.S.
federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits,
they will constitute a return of capital and will first reduce a Non-U.S. Holder’s basis in our common stock, but not below
zero. Any excess will be treated as capital gain and will be treated as described below under the “Gain on Sale or Other
Disposition of Common Stock” section. Any such distributions would be subject to the discussions below regarding back-up
withholding and Foreign Account Tax Compliance Act, or FATCA.
Subject to the discussion below on effectively
connected income, any dividend paid to a Non-U.S. Holder generally will be subject to U.S. withholding tax either at a rate of
30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. To receive
a reduced treaty rate, a Non-U.S. Holder must provide us or our agent with an IRS Form W-8BEN (generally including a United States
taxpayer identification number), IRS Form W-8-BEN-E or another appropriate version of IRS Form W-8 (or a successor form), which
must be updated periodically, and which, in each case, must certify qualification for the reduced rate. Non-U.S. Holders should
consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
Dividends paid to a Non-U.S. Holder that are
effectively connected with the Non-U.S. Holder’s conduct of a United States trade or business within the United States and
that are not eligible for relief from United States (net basis) income tax under the business profits article of an applicable
income tax treaty, generally are exempt from the (gross basis) withholding tax described above. To obtain this exemption from
withholding tax, the Non-U.S. Holder must provide the applicable withholding agent with an IRS Form W-8ECI or successor form or
other applicable IRS Form W-8 certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct
of a trade or business within the United States. Such effectively connected dividends, if not eligible for relief under the business
profits article of a tax treaty, would not be subject to a withholding tax, but would be taxed at the same graduated rates applicable
to U.S. persons, net of certain deductions and credits and if, in addition, the Non-U.S. Holder is a corporation, may also be
subject to a branch profits tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty).
If you are eligible for a reduced rate of
withholding tax pursuant to a tax treaty, you may be able to obtain a refund of any excess amounts currently withheld if you timely
file an appropriate claim for refund with the IRS.
Gain on Sale or Other Disposition of Common
Stock
Subject to the discussion below regarding
backup withholding and FATCA, a Non-U.S. Holder generally will not be required to pay United States federal income tax on any
gain realized upon the sale or other disposition of our common stock unless:
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the
gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or
business within the United States and not eligible for relief under the business profits
article of an applicable income tax treaty, in which case the Non-U.S. Holder will be
required to pay tax on the net gain derived from the sale under regular graduated U.S.
federal income tax rates, and for a Non-U.S. Holder that is a corporation, such Non-U.S.
Holder may be subject to the branch profits tax at a 30% rate (or such lower rate as
may be specified by an applicable income tax treaty) on such effectively connected dividends,
as adjusted for certain items;
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the
Non-U.S. Holder is an individual who is present in the United States for a period or
periods aggregating 183 days or more during the calendar year in which the sale or disposition
occurs and certain other conditions are met, in which case the Non-U.S. Holder will be
required to pay a flat 30% tax on the gain derived from the sale, which tax may be offset
by U.S. source capital losses (even though the Non-U.S. Holder is not considered a resident
of the United States) (subject to applicable income tax or other treaties); or
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our
common stock constitutes a U.S. real property interest by reason of our status as a “U.S.
real property holding corporation” for U.S. federal income tax purposes, or a USRPHC,
at any time within the shorter of the five-year period preceding the disposition or the
Non-U.S. Holder’s holding period for our common stock. We believe we are not currently
and do not anticipate becoming a USRPHC. However, because the determination of whether
we are a USRPHC depends on the fair market value of our United States real property interests
relative to the fair market value of our other business assets, there can be no assurance
that we will not become a USRPHC in the future. Even if we become a USRPHC, however,
gain arising from the sale or other taxable disposition by a Non-U.S. Holder of our common
stock will not be subject to United States federal income tax as long as our common stock
is regularly traded on an established securities market and such Non-U.S. Holder does
not, actually or constructively, hold more than five percent of our common stock at any
time during the applicable period that is specified in the Code. If the foregoing exception
does not apply, then if we are or were to become a USRPHC a purchaser may be required
to withhold 15% of the proceeds payable to a Non-U.S. Holder from a sale of our common
stock and such Non-U.S. Holder generally will be taxed on its net gain derived from the
disposition at the graduated United States federal income tax rates applicable to U.S.
persons (as defined in the Code).
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Backup Withholding and Information Reporting
Generally, we must file information returns
annually to the IRS in connection with any dividends on our common stock paid to a Non-U.S. Holder, regardless of whether any
tax was actually withheld. A similar report will be sent to the Non-U.S. Holder. Pursuant to applicable income tax treaties or
other agreements, the IRS may make these reports available to tax authorities in the Non-U.S. Holder’s country of residence.
Payments of dividends or of proceeds on the
disposition of stock made to a Non-U.S. Holder may be subject to additional information reporting and backup withholding at a
current rate of 24% unless such Non-U.S. Holder establishes an exemption, for example by properly certifying its non-U.S. status
on an IRS Form W-8BEN, IRS Form W-8BEN-E, IRS Form W-8ECI, or another appropriate version of IRS Form W-8 (or a successor form).
Notwithstanding the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual
knowledge, or reason to know, that a holder is a U.S. person.
Backup withholding is not an additional tax;
rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the
required information is furnished to the IRS in a timely manner.
Foreign Account Tax Compliance Act
FATCA imposes withholding tax on certain types
of payments made to foreign financial institutions and certain other non-United States entities. The legislation imposes a 30%
withholding tax on dividends on, or, on or after January 1, 2019, gross proceeds from the sale or other disposition of, our common
stock paid to a “foreign financial institution” or to certain “non-financial foreign entities” (each as
defined in the Code), unless (i) the foreign financial institution undertakes certain diligence and reporting obligations, (ii)
the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined
in the Code) or furnishes identifying information regarding each substantial United States owner, or (iii) the foreign financial
institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial
institution and is subject to the diligence and reporting requirements in (i) above, it must enter into an agreement with the
U.S. Treasury requiring, among other things, that it undertake to identify accounts held by “specified United States persons”
or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about
such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these reporting and
other requirements. If the country in which a payee is resident has entered into an “intergovernmental agreement”
with the United States regarding FATCA, that agreement may permit the payee to report to that country rather than to the U.S.
Department of the Treasury. Prospective investors should consult their own tax advisors regarding the possible impact of these
rules on their investment in our common stock, and the possible impact of these rules on the entities through which they hold
our common stock, including, without limitation, the process and deadlines for meeting the applicable requirements to prevent
the imposition of this 30% withholding tax under FATCA.
Federal Estate Tax
Common stock owned (or treated as owned) by
an individual who is not a citizen or a resident of the United States (as defined for United States federal estate tax purposes)
at the time of death will be included in the individual’s gross estate for United States federal estate tax purposes unless
an applicable estate or other tax treaty provides otherwise, and therefore may be subject to United States federal estate tax.
The preceding discussion of United States
federal tax considerations is for general information only. It is not tax advice. Each prospective investor should consult its
tax advisor regarding the particular United States federal, state and local and non-United States tax consequences of purchasing,
holding and disposing of our common stock, including the consequences of any proposed change in applicable laws.