Beyond Air, Inc. — Form 10-Q Summary
Reporting period: Three months ended June 30, 2020 (the first quarter of fiscal 2021); filed August 6, 2020. Comparisons are with the three months ended June 30, 2019, unless noted. Beyond Air is a clinical-stage medical device and biopharmaceutical company developing nitric oxide delivery systems and related programs. It reported no product sales.
Financial performance and position
| Metric | Quarter ended June 30, 2020 | Prior-year quarter |
|---|---|---|
| License revenue | $229,161 | $627,469 |
| Research and development expense | $4.33 million | $2.32 million |
| General and administrative expense | $2.49 million | $2.18 million |
| Operating loss | $6.60 million | $3.88 million |
| Net loss | $6.74 million | $6.18 million |
| Basic and diluted loss per share | $0.40 | $0.67 |
| Net cash used in operating activities | $5.49 million | $2.91 million |
| Net cash provided by financing activities | $4.71 million | $8.98 million |
- Revenue declined about 63%, principally reflecting recognition of deferred revenue from the Circassia license, which Beyond Air terminated in December 2019. The filing reports no product revenue.
- R&D expense increased about 86%, mainly due to LungFit development for PPHN, COVID-19 clinical work, completion of the bronchiolitis trial, and higher compensation and stock-based compensation. G&A expense rose about 14%, primarily due to stock-based compensation.
- Operating loss widened about 70%. Net loss increased about 9%; the prior-year quarter included a $2.31 million loss on Circassia marketable securities, while the current quarter had substantially higher interest expense. Loss per share narrowed as the weighted-average share count rose from 9.20 million to 16.53 million.
- No meaningful product gross margin is reported because the company had no product sales. Cash from operating activities was negative; the filing does not provide a product gross-margin figure.
- At June 30, 2020, cash and cash equivalents were $23.81 million and restricted cash was $0.64 million, totaling $24.45 million. Current assets were $25.65 million and current liabilities were $3.94 million. Restricted cash included $0.62 million designated for a contract manufacturer.
- Balance-sheet loan liabilities were approximately $4.58 million: a $4.37 million carrying value for the facility loan and a $0.21 million insurance-premium loan. The facility loan has a $5.0 million face amount, 10% stated interest (13.3% effective rate), and repayment installments beginning in 2023, with amounts due by March 2025.
- Equity financing generated $4.83 million in reported proceeds during the quarter, including ATM and Lincoln Park sales and warrant and option exercises. Common shares outstanding increased from 16.06 million at March 31 to 16.84 million at June 30; 17.15 million were outstanding August 3.
Outlook, management commentary, and risks
- Management estimated that available cash and liquidity would fund operations for at least one year from the filing date. The company nevertheless expects to need additional capital; financing may not be available on acceptable terms or at all. It reported $48.99 million remaining under its $50 million ATM and $37.21 million available under its $40 million Lincoln Park purchase agreement at June 30. The $25 million lender facility includes an additional $5 million tranche available before March 2022 and $15 million available only after FDA approval of LungFit PH.
- Management expected to submit a PMA for LungFit PH around the end of September 2020, make certain regulatory filings outside the United States later in 2020, and, if approved, launch in the United States and Israel in 2021. These are projections, not approvals or assured milestones.
- The company had FDA and Health Canada authorization to conduct COVID-19 studies and expected results in summer or fall 2020. It reported top-line bronchiolitis trial results: the 150 ppm arm was statistically significant versus control and the 85 ppm arm on the stated endpoints, with no nitric-oxide-related serious adverse events. COVID-19-related hospital constraints delayed the planned bronchiolitis pivotal trial; management anticipated starting it in Q4 2021. The NTM study was delayed about six months, with preliminary data expected in the first half of 2021. These timelines remain subject to change.
- Management reported supply-chain delays associated with the pandemic and estimated delays of 4–6 months for PPHN and NTM programs and at least one year for bronchiolitis. Reliance on two vendors for key LungFit components, regulatory approval requirements, clinical-trial execution, commercialization, and future financing are material risks.
- On August 6, 2020, the company entered into a supply agreement through December 31, 2024; in July it had placed a non-cancellable purchase order for approximately $1.3 million.
- Contingencies include an Empery lawsuit over warrant adjustments. The company said it believes it has defenses; an unfavorable outcome could result in a material loss. The company also noted possible claims related to the terminated Circassia agreement and was evaluating other commercialization options.
- Beyond Air reported no off-balance-sheet arrangements and concluded disclosure controls were effective as of June 30, 2020. It reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether the PMA filing, FDA review, and anticipated 2021 launch occurred on the stated schedule, and what approvals and commercial conditions apply.
- Actual cash burn and remaining runway, including the extent to which ATM, Lincoln Park, and lender-facility funding is available and the dilution or costs associated with using it.
- Clinical-study progress and results for COVID-19, bronchiolitis, and NTM, including pandemic-related delays and any changes to expected timelines.
- Supply-chain readiness, supplier concentration, and obligations under the new supply agreement and non-cancellable purchase order.
- Developments in the Empery litigation and any claims or resolution arising from the Circassia license termination.
- Reconciliation of cash-flow figures: the statements report $5.49 million of operating cash use, while portions of MD&A contain slightly different figures.