Beyond Air, Inc. — Form 10-K Summary
Business context and reporting period
This is Beyond Air’s annual report for the fiscal year ended March 31, 2020—not a report for calendar 2019 Q4. The company is a clinical-stage medical-device and biopharmaceutical developer with no approved products and no product-sales revenue. Its main program, LungFit, generates inhaled nitric oxide from ambient air; programs target newborn pulmonary hypertension (PPHN), COVID-19, bronchiolitis and nontuberculous mycobacteria (NTM). Solid-tumor and COPD programs remain preclinical.
Financial results and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| License revenue | $1.39 million | $7.72 million |
| Research and development expense | $10.65 million | $3.93 million |
| General and administrative expense | $8.88 million | $6.85 million |
| Operating loss | $18.14 million | $3.06 million |
| Net loss | $19.94 million | $6.56 million |
| Net loss per share, basic and diluted | $1.78 | $0.77 |
| Net cash used in operating activities | $15.25 million | Cash provided: $1.34 million |
The company had no product-sales revenue; FY2020 license revenue came from the Circassia agreement, which was terminated in December 2019. The reported loss attributable to common shareholders was $20.46 million, including a $522,478 non-cash deemed dividend related to warrant modification. Gross margin and product margins are not meaningful because the company had no product sales.
At March 31, 2020, cash and cash equivalents were $19.83 million and restricted cash was $5.64 million, for total cash and restricted cash of $25.47 million. Restricted cash included $5.0 million from the first tranche of a loan facility held in escrow at year-end and subsequently released, plus approximately $619,000 designated for a contract manufacturer. Marketable securities were zero, versus $6.54 million a year earlier. Total current assets were $26.68 million; current liabilities were $4.87 million. Total liabilities were $9.34 million, including a $4.34 million net carrying value for the facility loan and a $335,000 insurance-premium loan.
Operating cash burn was funded principally by equity financing and debt. Financing activities provided $34.93 million in FY2020, including equity offerings and sales, warrant and option exercises, and $5.0 million drawn under the facility. Management estimated cash would fund its current business plan for at least one year from the filing date, while also stating that additional capital would be needed. The facility permits up to $25 million in five tranches; it bears 10% stated interest (13.3% effective), with later tranches subject to FDA approval. Subsequent financing arrangements included an at-the-market offering of up to $50 million and an LPC purchase agreement of up to $40 million; availability does not establish that these amounts were raised.
Material changes versus the prior year
- License revenue fell about 82% as the Circassia arrangement ceased to provide new milestone consideration; R&D expense rose about 171%, primarily from LungFit development and clinical/preclinical work.
- Operating loss widened to $18.14 million from $3.06 million, and net loss widened to $19.94 million from $6.56 million.
- Cash and restricted cash increased to $25.47 million from $1.36 million, primarily reflecting equity financing and the facility draw. Operating cash flow shifted from $1.34 million provided to $15.25 million used.
- Shares issued and outstanding increased to 16.06 million from 8.71 million. The company recorded a $522,478 deemed dividend after warrant exercise prices were adjusted to $3.66 in connection with the December 2019 offering.
Outlook, management commentary and key risks
- PPHN: Management planned to submit a PMA to the FDA near the end of Q3 2020, pursue filings abroad later in 2020, and target a 2021 launch if approved. These are projections, not approvals or guaranteed launch dates.
- COVID-19: FDA and Health Canada had authorized studies. The FDA study was planned to compare LungFit plus standard care with standard care alone in 20 hospitalized patients; results were anticipated in summer/fall 2020. The filing cautions that the opportunity could diminish if the pandemic recedes or other treatments prove more effective.
- Bronchiolitis: In an 89-infant pilot, the 150-ppm arm was reported statistically significant versus control and 85 ppm on the primary discharge-readiness endpoint and key secondary hospital-stay endpoint; 85 ppm was not different from control. No NO-related serious adverse events were reported. The pivotal U.S. study was delayed by COVID-19; management projected a Q4 2021 start and completion in Q2 2022, followed by a potential PMA submission about six months later.
- NTM: Management projected an at-home study using LungFit, with preliminary data in the first half of 2021 and a full dataset in the second half; timing had slipped about six months due to COVID-19. Prior studies were small and largely involved patients with cystic fibrosis and NTM abscessus.
- Other programs: Solid-tumor work remained preclinical; reported mouse results do not establish human safety or efficacy. COPD development was contingent on additional financing.
- Principal risks: substantial recurring losses, operating cash burn and reliance on further capital; clinical and regulatory uncertainty, including the need for pivotal evidence and possible PMA review; COVID-19-related trial delays; dependence on third-party manufacturers and suppliers; competition; and potential adverse effects from high-dose nitric oxide, including methemoglobin and nitrogen-dioxide toxicity.
- Legal and financing contingencies: Circassia termination may result in claims, though the filing does not quantify a potential loss. Empery litigation over warrant adjustments remained pending; an adverse outcome could increase warrant shares and reduce the exercise price from $3.66 to $1.57, potentially causing dilution and a material loss.
- Controls: Management concluded disclosure controls and internal control over financial reporting were effective as of March 31, 2020. The auditor did not provide an internal-control attestation because the company was not an accelerated filer or large accelerated filer.
Most important facts for investors to verify
- Whether the planned PPHN PMA submission, FDA review and 2021 launch occurred, and what evidence supports the regulatory pathway.
- Updated results, enrollment and timelines for COVID-19, bronchiolitis and NTM trials, including whether findings were confirmed in larger controlled studies.
- Current cash, restricted cash, operating burn, debt service and actual proceeds from the ATM and LPC arrangements; the filing’s one-year runway estimate is dated to the filing period.
- Whether Beyond Air secured alternative commercialization partners after terminating Circassia, and whether Circassia asserted claims.
- The outcome and financial/dilution effects of the Empery litigation and outstanding warrants, including anti-dilution provisions.
- Manufacturing readiness, supplier concentration, regulatory compliance and any material safety findings for high-dose nitric oxide.