Beyond Air, Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and nine months ended December 31, 2019; filed February 7, 2020. The company is developing LungFit, a nitric oxide generation and delivery system, and had not generated product-sales revenue.
Financial performance and position
| Metric | Three months ended Dec. 31, 2019 | Nine months ended Dec. 31, 2019 |
|---|---|---|
| License revenue | $314,379 | $1,587,450 |
| Research and development expense | $2,580,622 | $7,754,125 |
| General and administrative expense | $2,471,714 | $6,719,144 |
| Operating loss | $4,737,957 | $12,885,819 |
| Net loss | $4,395,611 | $14,674,172 |
| Net loss attributable to common shareholders, including deemed dividend | $4,918,089 | $15,196,650 |
| Basic and diluted loss per share | $0.43 | $1.46 |
Revenue was license-related, not product sales, and arose from recognition of previously deferred Circassia agreement consideration. Operating expenses substantially exceeded revenue; the filing does not present a meaningful positive operating margin.
- Cash flow, nine months: Operating cash use was $10.39 million, investing cash use was $8.04 million, and financing provided $19.85 million. Cash, cash equivalents and restricted cash increased $1.42 million to $2.78 million.
- Liquidity at Dec. 31: Cash and cash equivalents were $2.14 million, restricted cash $636,364, and marketable securities $12.70 million. Management reported $14.8 million of cash, cash equivalents and marketable securities, excluding restricted cash.
- Debt and obligations: The $263,604 loan outstanding at March 31, 2019 was repaid; no loan payable remained at Dec. 31. Operating lease liabilities totaled $218,787. The company also reported $675,844 of deferred revenue and $4.74 million of total liabilities.
- Equity financing: The company received $10.17 million net from a December underwritten offering and private placement, in addition to earlier 2019 equity proceeds. It had $16.67 million remaining under its $20 million Lincoln Park purchase agreement and an effective shelf registration allowing up to $100 million of equity sales.
Material changes versus prior comparable periods
- For the quarter, revenue increased from zero to $314,379, while net loss widened from $2.37 million to $4.40 million. R&D expense rose from $588,256 to $2.58 million, primarily due to LungFit development, preclinical work and hiring; G&A rose from $1.81 million to $2.47 million, primarily due to professional fees.
- For the nine months, net loss widened from $6.49 million to $14.67 million. R&D increased from $2.30 million to $7.75 million and G&A from $4.27 million to $6.72 million. Other income of $84,680 in the prior period became an $1.79 million loss, largely reflecting a $1.85 million realized and unrealized loss on marketable securities.
- Operating cash use increased from $5.75 million to $10.39 million for the nine-month period. Financing cash inflow increased to $19.85 million, largely from stock offerings and sales to Lincoln Park.
- Shares issued and outstanding increased materially during the period through equity offerings and option exercises. The December warrant modification also resulted in a $522,478 deemed dividend and increased loss attributable to common shareholders.
Outlook, commentary and risks
- Management estimated available liquidity would fund operations for at least one year from the filing date, assuming planned spending and sale of marketable securities. The company stated that additional financing would be needed to fund development and commercialization; access to financing on acceptable terms is not assured.
- Management planned to submit a U.S. PMA for LungFit for PPHN in the first half of calendar 2020 and anticipated regulatory filings outside the U.S. during that period. A U.S. and Israel launch was anticipated in 2020, subject to regulatory approval; these are plans, not assurances.
- The company terminated its exclusive Circassia commercialization license on December 18, 2019, citing Circassia’s material breach or default. It was evaluating other commercialization options and warned that claims related to termination could arise. The company did not expect to recognize the next stated $12.6 million Circassia milestone.
- For bronchiolitis, a pilot study had begun; management expected data in the first quarter of fiscal 2021. The filing also described plans for future NTM studies, subject to development progress and financing.
- Key risks include regulatory approval and clinical outcomes, future financing needs, lack of product revenue, reliance on two manufacturing vendors, market acceptance, foreign-exchange exposure, and the possibility of claims arising from the Circassia termination. A separate warrant-related lawsuit by Empery remained active; discovery was complete and the company said it was defending the claims.
- Unusual items include the $1.85 million nine-month marketable-securities loss and $522,478 deemed dividend from repricing certain warrants. The filing reported no off-balance-sheet arrangements and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the planned PPHN PMA submission, regulatory decisions and anticipated launch timing were achieved, and what subsequent filings report about clinical and regulatory progress.
- Current cash runway and burn rate, including the assumptions behind management’s at-least-one-year liquidity estimate and the extent of future equity financing or dilution.
- Commercialization plans after Circassia’s license termination, including any disputes, claims, replacement partners or impact on milestone and royalty prospects.
- The status and potential financial exposure of the Empery warrant litigation and any claims related to Circassia.
- Share-count reconciliation: the balance sheet reports 13,901,745 shares at December 31, while the equity statement reports 13,901,945; the filing separately reports 14,384,014 shares outstanding at January 31, 2020.