Beyond Air, Inc. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2023, three months ended June 30, 2022; comparable period is the three months ended June 30, 2021. Financial amounts below are in U.S. dollars.
Business context and reporting period
Beyond Air develops nitric oxide (NO) generation and delivery systems. On June 28, 2022, the FDA approved its first product, LungFit PH, for persistent pulmonary hypertension of the newborn (PPHN). The company began the first phase of its U.S. commercial launch in June. It also develops LungFit products for lung infections and, through its 80%-owned affiliate Beyond Cancer, ultra-high-concentration NO treatments for solid tumors. Beyond Cancer is consolidated in the company’s financial statements.
Financial results and liquidity
| Metric | Q1 FY2023 | Q1 FY2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $3.2 million | $2.7 million |
| General and administrative expense | $8.2 million | $3.9 million |
| Operating loss | $11.4 million | $6.6 million |
| Net loss | $11.7 million | $6.7 million |
| Net loss attributable to Beyond Air | $10.9 million | $6.7 million |
| Basic and diluted loss per share | $0.37 | $0.31 |
| Net cash used in operating activities | $6.8 million | $3.9 million |
There was no revenue or gross margin to report. The company said it recognized no revenue in the three days between FDA approval and quarter-end. G&A growth principally reflected Beyond Cancer costs and higher stock-based compensation, salaries and commercial-support expenses. Research and development spending increased, primarily due to the oncology program, partly offset by lower NTM study costs and a research grant credit.
At June 30, 2022, cash and cash equivalents were $72.8 million, including $26.1 million held by Beyond Cancer; cash and cash equivalents excluding Beyond Cancer were $46.7 million. Restricted cash was $10.0 million, including $7.4 million collateral for litigation and $2.6 million designated for long-lead manufacturing materials. Current assets were $85.4 million and current liabilities were $10.2 million. Total liabilities were $20.6 million, including $0.6 million of current loan payable, $0.2 million long-term debt, lease liabilities and settlement-related accruals.
Cash, cash equivalents and restricted cash totaled $82.8 million at quarter-end, down $7.5 million during the quarter. Operating cash use was $6.8 million, investing cash use $0.3 million and financing cash use $0.5 million. Management stated cash would fund operating expenses and capital expenditures into the fourth fiscal quarter of 2024; the notes also state liquidity is expected to cover at least one year from filing. The company had $18.1 million available under its LPC stock purchase agreement and $50.0 million available under its ATM program.
Material changes versus the prior comparable period
- Net loss attributable to Beyond Air increased to $10.9 million from $6.7 million; loss per share rose to $0.37 from $0.31.
- Operating cash use increased to $6.8 million from $3.9 million. The prior-year quarter included $8.5 million of equity financing proceeds; no equity proceeds were reported in this quarter.
- Weighted-average shares outstanding increased to 29.9 million from 21.9 million.
- Stock-based compensation increased to $4.6 million from $1.2 million, contributing to higher operating expenses.
Outlook, commentary, risks and unusual items
- Management expected LungFit PH revenue to begin in fiscal 2023 and anticipated seeking a CE Mark in the EU in the second half of calendar 2022. These are expectations, not reported results or guaranteed outcomes.
- The company expects losses for the next few years and says future funding needs depend on commercial uptake, development costs, clinical progress and regulatory approvals. Additional financing may be required; availability and terms are uncertain.
- Clinical programs include viral community-acquired pneumonia, bronchiolitis, NTM and COPD. The bronchiolitis program was on hold due to the pandemic. The NTM pilot study had stopped enrolling; complete results were anticipated later in 2022, with a pivotal study contemplated for 2024 if results supported it. COPD was preclinical, with trials subject to financing.
- Beyond Cancer reported a $3.6 million quarterly loss before intercompany eliminations; Beyond Air’s reported non-controlling interest reflected the outside owners’ 20% share. Beyond Cancer’s assets may be used only to satisfy its own obligations.
- The Circassia settlement requires $10.5 million in installments following FDA approval, with a potential U.S. net-sales royalty beginning in year three post-approval, capped at $6 million. The filing recognized the $10.5 million liability.
- In the Empery warrant litigation, a trial court awarded approximately $5.8 million; the company appealed and pledged approximately $7.4 million of restricted cash for a supersedeas bond. A $2.4 million contingent-loss estimate had been recorded. Hudson Bay separately claimed approximately $2.6 million; the company disputed the claim and said it would defend itself.
- Other commitments include approximately $3.0 million of outstanding non-cancellable supplier purchase orders and up to $87 million of potential Pulmonox milestones across three indications, largely sales-based. A $1.5 million NitricGen payment due six months after FDA approval was accrued.
- Management cited regulatory, commercialization, clinical-trial, manufacturing and third-party supplier risks, including continuing uncertainty about global supply-chain effects. Disclosure controls were assessed as effective; NetSuite implementation changed certain reporting processes and controls.
Important facts for investors to verify
- Whether LungFit PH commercial launch generates revenue and adoption at the pace assumed in management’s runway outlook.
- How much of reported cash is available for Beyond Air operations, given Beyond Cancer’s separately held cash and restricted cash.
- Whether cash runway estimates remain valid as commercialization, clinical programs and operating expenses evolve, and whether equity financing is needed.
- Regulatory milestones and complete clinical results for LungFit programs, including the EU CE Mark timeline and NTM efficacy and safety data.
- Outcomes and potential cash effects of the Empery and Hudson disputes, Circassia settlement payments and other milestone or royalty obligations.
- Potential shareholder dilution from the ATM, LPC facility, options, restricted stock and outstanding warrants.