Beyond Air, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended March 31, 2019. The filing’s principal fiscal-year comparison is against the year ended March 31, 2018, which is identified as unaudited. Although the request metadata refers to 2018 Q4, this filing covers the full fiscal year ended March 31, 2019.
Business context
Beyond Air, formerly AIT Therapeutics, is a clinical-stage medical-device company developing a nitric oxide generator and delivery system that produces NO from ambient air. Its programs target newborn pulmonary hypertension (PPHN), infant bronchiolitis and nontuberculous mycobacteria (NTM) lung infections. The system and indications remained subject to regulatory review; the company had no approved products and no product-sales revenue.
Financial performance and position
| Metric | FY ended March 31, 2019 | FY ended March 31, 2018 |
|---|---|---|
| Revenue | $7.724 million, entirely license revenue | $0 |
| Research and development expense | $3.930 million | $4.636 million |
| General and administrative expense | $6.853 million | $5.307 million in the comparison table |
| Operating loss | $3.059 million | $9.943 million |
| Net loss | $6.558 million; $0.77 per share | $10.716 million; $1.68 per share |
| Operating cash flow | $1.341 million provided | $8.692 million used |
Revenue arose from the Circassia license agreement, not product sales. Circassia consideration included shares; the company recognized $7.724 million of license revenue and reported $2.263 million of deferred revenue at year-end. The net loss included $3.581 million of realized and unrealized losses on available-for-sale securities, principally Circassia shares. The filing also reports a $3.733 million decline in the Circassia investment’s value for the year.
At March 31, 2019, cash and cash equivalents were $1.340 million, marketable securities $6.543 million, and restricted cash $0.017 million. Total current assets were $8.688 million versus current liabilities of $5.403 million. Accumulated deficit was $37.645 million. Current debt included a $0.264 million loan payable and $0.035 million of loans from related parties and others. No product gross margin was reported.
Operating cash flow was positive despite the net loss, reflecting noncash items and working-capital movements, including deferred license revenue. Investing activities used $1.794 million; financing activities provided $1.071 million. The company estimated available cash would fund operations into the third calendar quarter of 2020, based on its plan and including specified stock-sale proceeds through June 2019, but excluding proceeds from selling Circassia shares.
Material changes and notable events
- License revenue increased from zero following the January 2019 Circassia agreement; R&D expense decreased about $0.707 million, while G&A expense increased. Net loss narrowed year over year, partly offset by investment losses.
- The company received Circassia shares after meeting initial license milestones. The agreement provides for additional regulatory milestone payments and royalties, but Circassia may elect to pay milestones in shares rather than cash.
- After year-end, the company raised approximately $7.961 million gross in a June 2019 private placement and sold additional shares to Lincoln Park under a $20 million purchase agreement. It reported $17.482 million remaining under that agreement as of the filing’s stated date.
- Common stock began trading on Nasdaq in May 2019; the company changed its name to Beyond Air, Inc., effective June 26, 2019. The ticker remained AITB.
- The company adopted accounting guidance that moved changes in fair value of its marketable equity securities into earnings; it also reclassified warrants with down-round provisions to equity under adopted guidance.
Outlook, risks and contingencies
Management planned to submit a PPHN PMA to the FDA in the third quarter of 2019 and expected certain non-U.S. filings in the second half of 2019. It anticipated starting a bronchiolitis trial in late 2019, with further study and regulatory steps dependent on results. An at-home NTM study was anticipated in 2020. These are forward-looking plans, not established outcomes.
Early studies reported encouraging signals, including a 23-hour reduction in hospital stay in a 67-patient bronchiolitis pilot study; the reported primary endpoint had p=0.085. The filing cautions that studies were small and may not establish efficacy or support approval. High-dose NO also presents potential safety risks, including methemoglobin and nitrogen-dioxide toxicity.
- The company expected continuing losses and stated it would need additional financing; funding may be unavailable or dilutive. Its runway estimate excludes proceeds from selling its Circassia investment.
- Regulatory path, timing and clinical requirements remained uncertain. The filing describes a planned PMA submission, while the Circassia contract discussion says an FDA pre-submission meeting aligned on a pathway and indicated clinical trials would not be needed for approval. Investors should verify the precise FDA position and any conditions.
- The company depended on third parties for clinical work and manufacturing. It disclosed reliance on the Aeronox system for certain studies, without a continued-support agreement, and noted that it was not approved in the U.S. for the high NO concentrations needed for infection programs.
- Potentially significant contractual obligations include up to $87 million in Pulmonox development and sales milestones, NitricGen license milestones and royalties, and CareFusion royalties and fees. The filing also discloses a lawsuit by Empery over warrant adjustments; outcome and potential damages were not estimable.
- Circassia shares were volatile and exposed the company to investment-value and foreign-exchange risk. The company reported no hedging of foreign currency exposure.
Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2019. The auditor did not provide an attestation on internal controls.
Investor verification priorities
- Confirm cash, marketable-security values, Circassia share holdings and the assumptions behind the stated cash runway, including subsequent financing and any share sales.
- Reconcile Circassia consideration and revenue recognition: share counts and stated values vary in the filing, and $2.263 million remained deferred at year-end.
- Verify the FDA’s documented PPHN pathway, whether clinical trials are required, and the status and timing of the planned PMA submission.
- Assess the size, design, statistical strength and safety findings of the bronchiolitis and NTM studies, and the requirements for pivotal trials.
- Review dilution exposure from outstanding warrants, options, the Lincoln Park facility and potential future financing, as well as contingent license milestones and the Empery litigation.