Beyond Air, Inc. — Form 10-Q summary
Reporting period: Third quarter and first nine months of fiscal 2022, ended December 31, 2021; compared with the corresponding 2020 periods. Unaudited results. Unless noted, amounts are in millions of dollars.
Business context
Beyond Air is a clinical-stage medical device and biopharmaceutical company developing nitric oxide delivery systems. Its LungFit platform is being developed for persistent pulmonary hypertension of the newborn (PPHN), viral pneumonia, bronchiolitis and nontuberculous mycobacteria (NTM) lung disease. LungFit PH was under FDA premarket approval review. Beyond Air also retained 80% ownership of newly formed Beyond Cancer, which is developing ultra-high-concentration nitric oxide treatment for solid tumors.
Financial performance and liquidity
| Metric | Three months ended Dec. 31, 2021 | Nine months ended Dec. 31, 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.543 | $8.091 |
| General and administrative expense | $4.943 | $12.188 |
| Operating loss | $7.486 | $20.279 |
| Net loss attributable to Beyond Air | $7.739 | $23.174 |
| Basic and diluted loss per share | $0.29 | $0.95 |
| Net cash used in operating activities | Quarterly cash use: approximately $6.3 | $15.234 |
There is no meaningful operating margin to report because the company had no product revenue and reported operating losses. Total cash, cash equivalents and restricted cash were $92.707 at December 31, 2021, including $83.468 of cash and equivalents and $9.239 of restricted cash. Current assets were $94.684 and current liabilities were $6.178. Long-term debt, net, was $0.200; the prior $5 million facility was repaid and terminated, and the $0.557 short-term loan was repaid.
Financing activities generated $73.783 in cash during the nine months, including $30 million raised by Beyond Cancer and proceeds from Beyond Air equity sales and warrant exercises. Investing activities used $1.111. Management said available liquidity was expected to fund operations for at least one year from the financial-statement filing date, while noting future funding needs and uncertainty over obtaining financing on acceptable terms.
Changes versus the prior comparable periods
- Quarterly net loss attributable to Beyond Air increased to $7.739 from $5.770; nine-month loss increased to $23.174 from $17.643.
- Quarterly G&A expense rose to $4.943 from $2.471, mainly reflecting commercial and support staffing and potential-launch preparation costs. Nine-month G&A rose to $12.188 from $7.143.
- R&D expense decreased to $2.543 from $3.294 for the quarter and to $8.091 from $10.773 for nine months. Management cited lower spending on several programs and CFF grant offsets, partly offset by increased investment in the oncology program.
- License revenue was zero in both 2021 periods, versus $0.149 for the prior-year quarter and $0.728 for the prior-year nine months.
- Nine-month operating cash use increased to $15.234 from $14.070. Cash and restricted cash rose substantially, primarily due to equity and Beyond Cancer financing.
Outlook, risks and unusual items
- Management anticipated an FDA decision on the LungFit PH PPHN application and EU CE marking in the first half of calendar 2022; a U.S. launch was contingent on approval. These are forward-looking expectations, not assured outcomes.
- The company expected to report NTM study results in the first half of calendar 2022 and, if results supported it, considered a pivotal study in the second half of 2023 or first half of 2024. It planned a U.S. CAVP study in the fourth quarter of 2022, subject to FDA and pandemic conditions. Beyond Cancer aimed to begin its first human study in the first half of 2022.
- Beyond Cancer raised $30 million for 20% ownership; Beyond Air retained 80% and consolidated the affiliate. Beyond Cancer is to pay Beyond Air a single-digit royalty on future revenues. Related parties invested $1.1 million.
- Quarterly results included $0.412 of other expense associated primarily with accelerated costs from early termination of the loan facility. Nine-month other expense included a $2.742 contingent-loss charge related to Empery litigation.
- Empery obtained a trial-court decision awarding approximately $5.8 million; Beyond Air appealed and recorded a $2.4 million estimate for the loss. The company restricted $7.4 million as collateral for a supersedeas bond. Hudson Bay separately sued over warrant adjustments, alleging approximately $2.6 million in damages; the company said it would defend the claim. Further warrant adjustments could dilute shareholders and affect financing flexibility.
- A $10.5 million Circassia settlement, plus a potential 5% royalty, is payable only following FDA approval under the stated terms; no liability had been recognized at quarter end. Other potential obligations include up to $87 million in Pulmonox milestones and approximately $2.0 million of non-cancellable supplier purchase orders.
- Key risks include regulatory approval and clinical-trial outcomes, commercialization and market acceptance, additional financing needs, reliance on third-party suppliers, and possible COVID-19-related disruption. Management reported that prior LungFit supply-chain delays had been remedied but could not rule out future effects. Disclosure controls were assessed as effective at the reasonable-assurance level.
Important facts for investors to verify
- Subsequent FDA and EU regulatory decisions, and whether approval and launch timing matched management’s expectations.
- Actual cash burn, restricted-cash availability and the timing and terms of any further equity or debt financing; the filing disclosed a new $50 million ATM agreement after quarter end.
- Developments in Empery and Hudson litigation, the final potential cash exposure, and any additional warrant-related dilution.
- Clinical-trial enrollment, safety and efficacy results for NTM, CAVP and Beyond Cancer, including whether announced study timelines were achieved.
- The terms and financial effects of Beyond Cancer’s financing, consolidation, related-party investment and potential royalty to Beyond Air.