Beyond Air, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended September 30, 2022; filed November 8, 2022. Amounts below are in U.S. dollars unless stated otherwise. The company develops nitric oxide delivery systems and has not yet generated product revenue.
Business context and developments
- The FDA approved LungFit PH in June 2022 for persistent pulmonary hypertension of the newborn (PPHN). The company began its first phase of U.S. commercial launch in June and expected to begin generating revenue in fiscal 2023.
- Beyond Air also owns 80% of Beyond Cancer, which is developing ultra-high-concentration nitric oxide treatments for solid tumors. Beyond Cancer’s Phase 1 study was enrolling; its results and costs are included in the consolidated statements.
- Other programs include LungFit PRO for viral pneumonia and bronchiolitis, LungFit GO for nontuberculous mycobacteria (NTM), and a preclinical COPD program.
Financial performance and liquidity
| Metric | Three months ended September 30, 2022 | Six months ended September 30, 2022 | Prior-year comparison |
|---|---|---|---|
| Revenue | $0 | $0 | $0 in both comparable 2021 periods |
| Cost of revenue | $179,000 | $179,000 | $0 in both comparable 2021 periods |
| Research and development | $4.452 million | $7.678 million | $2.807 million and $5.548 million, respectively |
| General and administrative | $7.990 million | $16.203 million | $3.395 million and $7.245 million, respectively |
| Operating loss | $12.621 million | $24.061 million | $6.201 million and $12.793 million, respectively |
| Net loss attributable to Beyond Air | $11.968 million | $22.902 million | $8.692 million and $15.435 million, respectively |
| Basic and diluted loss per share | $0.40 | $0.77 | $0.36 and $0.67, respectively |
| Operating cash used | — | $16.059 million | $8.898 million for the six-month period |
- Gross loss was $179,000 in the quarter and six-month period, as there was no revenue. The company attributed the cost primarily to establishing U.S. warehouse locations for future deliveries.
- Cash and cash equivalents were $29.829 million at September 30, 2022, compared with $80.242 million at March 31, 2022. Marketable securities were $32.617 million and restricted cash was $10.106 million. Combined, these balance-sheet amounts totaled approximately $72.552 million; the filing separately cites approximately $65.0 million of cash, cash equivalents, marketable securities and certain restricted cash, including $40.8 million attributed to Beyond Air excluding Beyond Cancer.
- Six-month investing cash outflow was $33.835 million, principally the $32.617 million purchase of marketable securities and $1.221 million of property and equipment. Financing cash outflow was $403,000. Cash, cash equivalents and restricted cash at period-end were $39.934 million, excluding marketable securities.
- At September 30, current liabilities were $11.598 million and total liabilities were $18.387 million. Debt included a $310,000 current loan portion and $200,000 of long-term debt, net. These figures exclude the separate $4.5 million long-term Circassia settlement liability.
- Management estimated available liquidity would fund operating requirements for at least one year from the filing date. It identified approximately $49.8 million remaining under its $50 million ATM and $18.1 million available under its $40 million Lincoln Park stock purchase agreement.
Material changes versus the prior comparable periods
- Operating expenses rose substantially: for the quarter, R&D increased by $1.7 million and G&A by $4.6 million; for the six months, R&D increased by $2.2 million and G&A by $9.0 million. The filing cites higher development and UNO program spending, commercial and corporate infrastructure, and stock-based compensation; G&A growth also reflected Beyond Cancer.
- Six-month net loss attributable to Beyond Air increased to $22.902 million from $15.435 million, while loss per share increased to $0.77 from $0.67. The weighted-average share count also rose to 29.9 million from 23.1 million.
- Operating cash use increased to $16.059 million from $8.898 million for the six months. Financing changed from $23.068 million provided in the prior-year period, largely from stock offerings, to $403,000 used in the current period.
- Other expense was lower than in 2021, when the company recorded a $2.4 million contingent legal loss. The current period included foreign-exchange losses.
Outlook, commentary and risks
- Management expected to pursue a LungFit PH launch in the U.S. and work toward EU and global opportunities. It expected a CE Mark in the EU around calendar year-end 2022. The company’s U.S. sales-potential estimates are management estimates, not reported sales or guidance.
- Management anticipated a pivotal VCAP study in calendar 2023 following FDA discussions, a pivotal NTM study late in calendar 2024 following FDA discussions, and possible COPD clinical entry in calendar 2023 subject to additional financing.
- The company stated that its ability to operate beyond the fourth calendar quarter of 2023 would depend substantially on LungFit PH commercialization, international partners and additional financing. It expects losses for the next few years; future financing may not be available on acceptable terms or at all.
- Risks include commercialization and market acceptance, regulatory approvals and clinical outcomes, reliance on third-party and concentrated suppliers, manufacturing and supply-chain disruption, and the need for additional capital. Two vendors supplied approximately 69% of materials purchased in the six months.
- Legal matters include the Empery warrant dispute, for which a trial-court judgment awarded approximately $5.8 million and an appeal was perfected in September 2022; approximately $7.4 million of cash is restricted as appeal-bond collateral. Hudson Bay separately sought approximately $2.6 million in damages and filed a summary-judgment motion on November 7, 2022. The company said it believed it had defenses in both matters.
- The Circassia settlement requires $10.5 million in installments following FDA approval, with a further contingent royalty on U.S. LungFit PH net sales beginning in year three after approval, subject to a stated cap. A $2.5 million installment was triggered by approval, and $3.5 million was accrued at September 30, 2022.
- Management reported disclosure controls were effective at the reasonable-assurance level and no material changes to internal control over financial reporting during the quarter.
Important facts for investors to verify
- Commercial launch progress, customer adoption, and when LungFit PH begins producing revenue.
- Actual cash burn and available liquidity, including cash attributed to Beyond Cancer, restricted cash, and remaining ATM and Lincoln Park capacity.
- Regulatory and clinical milestones, including the EU CE Mark and planned VCAP, NTM and COPD studies.
- Outcomes and potential cash impact of the Empery and Hudson Bay litigation, Circassia installments and royalties, and other contingent obligations.
- Supplier concentration and the company’s ability to manufacture, commercialize and finance its programs without material delay or dilution.