Beyond Air, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended September 30, 2023, the company’s fiscal second quarter and first half of fiscal 2024. Figures are in U.S. dollars; financial amounts are rounded to millions unless otherwise noted.
Business context
Beyond Air is a commercial-stage medical-device and biopharmaceutical company developing nitric oxide (NO) generation and delivery systems. Its FDA-approved LungFit PH system treats persistent pulmonary hypertension of the newborn (PPHN); U.S. marketing began in July 2022. The company is also developing NO-based treatments for lung infections and, through its 80%-owned affiliate Beyond Cancer, ultra-high-concentration NO for solid tumors. A separate preclinical program targets neurological conditions, initially autism spectrum disorder.
Financial performance and liquidity
- Revenue: Q2 revenue was $0.239 million, versus none in the prior-year quarter. First-half revenue was $0.298 million, versus none. Revenue to date was limited; the filing attributes the increase to the commercial launch.
- Gross profit and margins: Q2 cost of revenue was $0.432 million, producing a $0.193 million gross loss (approximately -81% gross margin). First-half cost of revenue was $0.735 million and gross loss was $0.437 million (approximately -147%). The company says costs exceeded sales partly because of commercial infrastructure and depreciation on devices not yet deployed.
- Operating expenses and losses: Q2 R&D was $7.130 million and G&A was $10.211 million; operating loss was $17.535 million. First-half R&D was $11.826 million, G&A was $21.147 million and operating loss was $33.410 million. Net loss was $17.426 million for Q2 and $32.481 million for the first half. Net loss attributable to Beyond Air was $16.220 million and $30.315 million, respectively; loss per share was $0.51 and $0.96.
- Cash flow: First-half cash used in operating activities was $31.472 million, compared with $16.059 million a year earlier. Investing used $11.421 million; financing provided $22.036 million, including $15.8 million net loan proceeds and ATM equity proceeds. Cash, cash equivalents and restricted cash fell by $20.876 million to $18.410 million.
- Liquidity: At September 30, the company held $13.179 million in cash and equivalents, $25.463 million in marketable securities and $5.231 million in restricted cash. Cash, equivalents and marketable securities totaled $38.642 million, excluding restricted cash. Management said available cash and marketable securities were expected to fund operating requirements for at least one year from the filing date.
- Debt and equity: A June 2023 senior secured loan agreement provided $17.5 million in initial principal; the balance sheet reported $14.044 million in long-term debt and $0.275 million in current loans payable. The loan carries interest of at least 12%, is secured by substantially all company and guarantor assets, and requires at least $5 million of unrestricted cash. The company raised $6.5 million net through its ATM in the first half and had $39.8 million of ATM capacity remaining. Shares outstanding rose to 31,972,434 at September 30 from 30,738,585 at March 31.
Changes versus the prior comparable period
- First-half net loss increased to $32.481 million from $24.452 million; loss attributable to Beyond Air increased to $30.315 million from $22.902 million. The company cited higher R&D and G&A, including staffing, preclinical work and stock-based compensation.
- Operating cash use increased to $31.472 million from $16.059 million, partly reflecting settlement payments and higher operating costs.
- Commercial revenue began to appear, but remained small and below related cost of revenue.
- Interest expense rose with the new borrowing. Reported other income included gains from remeasurement of warrant and derivative liabilities, as well as investment income; these fair-value gains should not be confused with operating performance.
Outlook, commentary and risks
- Management expects losses to continue and says operations beyond the first quarter of fiscal 2025 will depend substantially on LungFit PH commercialization, international partners and/or additional financing. Funding may not be available on acceptable terms or at all.
- The company said it submitted a PMA supplement in November 2023 to expand the LungFit PH label for certain cardiac surgeries and expected EU CE marking during fiscal 2024, with potential EU and global launch activity in early 2024 and beyond. These are forward-looking expectations, not reported outcomes.
- Management anticipated completion of a U.S. VCAP clinical trial in Q2 calendar 2024; a pivotal NTM trial was anticipated in calendar 2025 following FDA discussions; and the nNOS program was expected to reach a Phase 1 trial in 2025. Beyond Cancer expected to present Phase 1a results and begin Phase 1b in 2024.
- Key risks include commercialization and market acceptance, regulatory approvals and clinical outcomes, continuing cash burn and financing needs, dependence on suppliers, intellectual-property protection, and product development costs. Two vendors supplied approximately 88% of materials purchased in Q2.
- The filing added Israel-related operational risk following the October 2023 attacks and ongoing war. The company reported temporary office closures and noted that employee military service or wider disruption could adversely affect operations.
- Unusual cash and contingency items included payment of $7.6 million to resolve the Empery judgment in April 2023 and $3.1 million in defense and indemnity costs related to the Hudson Bay settlement in the quarter. A $4.5 million Circassia settlement payment remains accrued and is due in fiscal Q2 2025; the agreement also provides for royalties on LungFit PH U.S. sales, subject to a cap.
- Management concluded disclosure controls were effective at the reasonable-assurance level; no material changes to internal control over financial reporting were reported during the quarter.
Most important facts for investors to verify
- Progress in LungFit PH sales, deployments, gross margins and any expanded-label or EU regulatory milestones.
- Actual cash runway against the reported $31.5 million first-half operating cash use, including the $5 million minimum unrestricted-cash covenant and future financing needs.
- Loan terms and availability of additional tranches: the further $10 million tranche is conditional on revenue performance, while the $12.5 million discretionary tranche requires lender approval and mutual agreement.
- Clinical-trial timelines and evidence supporting the VCAP, bronchiolitis, NTM, Beyond Cancer and nNOS programs.
- Settlement and royalty obligations, supplier concentration, and the operational effect of conditions in Israel.
- Share dilution from future ATM sales, equity awards, warrants and the loan’s conversion feature.