Business context and reporting period
Beyond Air, Inc. filed this unaudited Form 10-Q for the quarter and nine months ended December 31, 2023 (fiscal 2024). The commercial-stage medical device and biopharmaceutical company markets LungFit PH for persistent pulmonary hypertension of the newborn (PPHN) and is developing additional LungFit indications, a solid-tumor program through its 80%-owned Beyond Cancer affiliate, and a preclinical nNOS-inhibitor program for autism spectrum disorder.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data. Comparisons are with the periods ended December 31, 2022; balance-sheet comparisons are with March 31, 2023.
| Metric | Three months | Nine months |
|---|---|---|
| Revenue | $0.391 vs. $0 | $0.689 vs. $0 |
| Cost of revenue / gross loss | $0.748 / $(0.356) | $1.483 / $(0.794) |
| Research and development | $6.838 vs. $5.000 | $18.664 vs. $12.679 |
| General and administrative | $9.768 vs. $8.941 | $30.915 vs. $25.144 |
| Operating loss | $(16.963) vs. $(14.010) | $(50.372) vs. $(38.070) |
| Net loss | $(17.258) vs. $(13.798) | $(49.739) vs. $(38.250) |
| Net loss attributable to Beyond Air; loss per share | $(16.220); $(0.50) vs. $(12.747); $(0.43) | $(46.535); $(1.46) vs. $(35.649); $(1.19) |
Revenue began following the commercial launch; cost of revenue exceeded sales, which management attributed mainly to launch-related supply-chain infrastructure and depreciation on devices not yet deployed. Gross margin was therefore negative. Interest expense rose to $0.919 million for the quarter and $1.991 million year to date, principally reflecting the Avenue loan.
- Cash and liquidity: At December 31, cash and cash equivalents were $7.971 million, marketable securities $23.292 million, and restricted cash $0.231 million. The filing cites $31.3 million of cash, cash equivalents and marketable securities, plus $5.2 million on deposit with the contract manufacturer for future purchases.
- Cash flow: Nine-month operating cash outflow was $45.289 million, versus $24.569 million a year earlier. Investing outflow was $10.568 million and financing inflow was $27.274 million. Cash, cash equivalents and restricted cash declined $28.565 million to $8.202 million.
- Debt: The company had $17.5 million principal outstanding under its senior secured Avenue term loan. The loan bears interest at the greater of prime plus 3.75% or 12%, is due June 2027, and requires at least $5 million of unrestricted cash. Principal repayments are scheduled to begin January 2025, subject to possible deferral conditions.
- Balance sheet and dilution: Total assets were $51.911 million, total liabilities $28.440 million and total equity $23.471 million. Common shares outstanding increased to 35.478 million from 30.739 million at March 31, 2023. ATM sales raised $12.0 million net from 4.35 million shares during the nine months.
Material changes versus the prior comparable period
- Revenue increased from zero to $0.391 million for the quarter and $0.689 million year to date, but remained small relative to operating costs.
- Year-to-date operating loss increased by $12.302 million. R&D spending rose $5.985 million, mainly due to clinical and preclinical studies, staffing and stock compensation; G&A rose $5.771 million, including higher salaries and stock-based compensation.
- Year-to-date operating cash use increased by $20.720 million. Management cited litigation and settlement payments, including $7.6 million to resolve the Empery suit and payments related to Circassia and Hudson Bay.
- Financing shifted from net cash use of $0.713 million to $27.274 million provided, primarily from the Avenue loan and ATM equity sales. Stock-based compensation was $19.010 million year to date, compared with $15.204 million.
Outlook, commentary, risks and unusual items
- Going concern: Management expects continuing losses and significant cash outflows for at least the next 18 months, states additional funding will be required within one year of issuance, and concludes substantial doubt exists about the company’s ability to meet obligations with cash on hand. The filing says continued operations beyond the first fiscal quarter of 2025 depend largely on LungFit PH commercialization, partnerships and additional financing.
- Potential funding: Management cites up to $34.3 million remaining under the ATM, a possible $10 million Avenue tranche subject to product-revenue conditions, a further discretionary tranche of up to $12.5 million subject to lender approval and mutual agreement, and a shelf registration statement. Availability and sufficiency are not assured.
- Product and clinical outlook: The company submitted an FDA supplement in November 2023 to expand LungFit PH labeling to certain cardiac surgeries and expected EU CE marking in the first half of calendar 2024. It anticipates completing a U.S. VCAP trial in Q2 2025, beginning a pivotal NTM trial in 2025 after FDA discussions, and advancing the nNOS program to a first-in-human trial in 2025. Beyond Cancer reported no dose-limiting toxicities among the first six subjects at 25,000 ppm and planned progression to the next dose cohort; the company expected to present Phase 1a data and begin Phase 1b in 2024.
- Key risks: Commercial adoption and revenue growth, regulatory approvals and trial outcomes, further capital needs, and dependence on third-party suppliers are material uncertainties. Two vendors supplied about 92% of materials purchased in the quarter. The filing also warns that conflict and military call-ups in Israel could disrupt operations and personnel.
- Commitments and contingencies: A final $4.5 million Circassia settlement payment is due in the second quarter of fiscal 2025; future U.S. LungFit PH sales are also subject to a 5% royalty under the settlement, capped at $6 million aggregate royalty payments. The Avenue loan is secured by substantially all company and guarantor assets and includes customary covenants and default provisions. The Empery judgment was paid in April 2023; the Hudson Bay matter was settled in July 2023.
Most important facts for investors to verify
- Cash runway and the timing, terms and availability of additional financing, including any further Avenue borrowing and ATM sales.
- Quarterly LungFit PH sales, device placements, recurring revenue, gross margins and evidence that commercialization can meet loan-tranche revenue conditions.
- Progress and outcomes for the FDA label supplement, EU certification, VCAP and NTM trials, and Beyond Cancer’s dose escalation and next study.
- Debt service, the $5 million minimum unrestricted-cash covenant, settlement obligations and any restrictions on additional financing or operations.
- Supply continuity and operational exposure to Israel-related disruption; also monitor share issuance, stock compensation and resulting dilution.