Beyond Air, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended September 30, 2019; the quarter is the second quarter of the company’s fiscal year. The company develops LungFit, a nitric oxide generation and delivery system, and had not generated product-sales revenue.
Financial performance and position
| Metric | Three months ended September 30, 2019 | Six months ended September 30, 2019 | Comparable 2018 period |
|---|---|---|---|
| License revenue | $645,602 | $1,273,071 | $0 |
| Research and development | $2,849,990 | $5,173,503 | $647,866 and $1,711,011 |
| General and administrative | $2,064,872 | $4,247,430 | $1,765,489 and $2,458,494 |
| Operating loss | $(4,269,260) | $(8,147,862) | $(2,413,355) and $(4,169,505) |
| Net loss | $(4,097,740) | $(10,278,561) | $(2,389,219) and $(4,107,566) |
| Basic and diluted loss per share | $(0.38) | $(1.03) | $(0.28) and $(0.49) |
License revenue was recognition of deferred consideration for ongoing support under the Circassia agreement, not product sales. No gross margin or product margin is reported. Six-month other loss was $2.13 million, primarily reflecting a $2.16 million realized and unrealized loss on marketable securities.
- Cash flow: Six-month operating cash use was $5.63 million, versus $4.11 million in 2018. Investing activities used $3.13 million; financing provided $9.76 million. Cash, cash equivalents and restricted cash increased by approximately $1.0 million to $2.35 million.
- Liquidity: At September 30, cash and cash equivalents were $1.90 million, restricted cash $0.46 million, and marketable securities $7.49 million. Cash, cash equivalents and marketable securities totaled about $9.38 million, excluding restricted cash. Management estimated funds, including proceeds from selling all marketable securities, would fund operations for at least one year from the filing date.
- Debt and obligations: Loan payable was $88,582. Operating lease liabilities totaled $234,097, including $65,092 current. Total liabilities were $5.62 million; accumulated deficit was $47.92 million.
- Equity financing: The company raised net proceeds of about $7.84 million in a June private placement and $1.98 million through its at-the-market/Lincoln Park facility during the six months. Shares outstanding increased to 10,746,780 from 8,714,815 at March 31, 2019.
Material changes and business developments
- Compared with 2018, operating expenses rose substantially, particularly R&D, reflecting LungFit PPHN development, preclinical studies for other indications, hiring and stock-based compensation. G&A also increased, including professional fees, staffing, insurance and stock-based compensation.
- The company’s product-development focus includes persistent pulmonary hypertension of the newborn (PPHN), bronchiolitis and nontuberculous mycobacteria. It expects to submit a PMA application for its first product before March 31, 2020.
- The Circassia license covers PPHN and related low-concentration hospital uses in the U.S. and China. Up to $32.55 million in upfront and regulatory milestones may be payable, in cash or Circassia shares at Circassia’s discretion, plus royalties. Future milestone payments remain contingent on regulatory and commercial events.
- A $100 million shelf registration became effective in July 2019. Approximately $16.67 million remained available under the $20 million Lincoln Park purchase agreement as of September 30, 2019.
Outlook, risks and contingencies
- The company expects no product revenue for the next several years unless and until it obtains regulatory approval and commercializes its products. Management says additional financing will be needed to fund operations and development; financing may be unavailable or unacceptable, potentially delaying or reducing development programs.
- Regulatory approval is uncertain. LungFit requires FDA and potentially foreign approvals; the filing notes that no high-dose nitric oxide delivery system at 160 ppm or higher had been approved. Delays or denial could materially affect operations and liquidity.
- The company relies on two vendors to manufacture its delivery systems and filters and identifies supplier dependence, product acceptance, clinical-development costs, intellectual-property protection and foreign-exchange exposure as risks. It does not hedge foreign-currency risk.
- Empery litigation concerning adjustments to January 2017 warrants remains ongoing. The company is defending the claims; the outcome and probability cannot be assessed from the filing.
- The Circassia shareholding was valued at $1.89 million at period-end, down from $5.65 million at March 31, 2019, creating significant market-price exposure. The company reported no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the PMA submission occurred on the stated timetable and the FDA’s subsequent review and approval requirements.
- Actual cash burn, realizable value of marketable securities, and whether the stated one-year runway remains adequate as development costs evolve.
- Availability and potential dilution from the shelf registration and remaining Lincoln Park facility.
- Progress toward Circassia’s contingent milestones, any cash-versus-share payments, and the value and concentration risk of Circassia securities.
- Developments in the Empery warrant litigation and any material changes to manufacturing arrangements or clinical programs.