Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking statements." We
intend such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
All statements other than statements of historical facts contained in this Form
10-Q, including statements regarding our future results of operations and
financial position, business strategy, prospective product candidates and
products, product approvals, timing of our clinical development activities,
research and development costs, timing and likelihood of success and the plans
and objectives of management for future operations and future results of
anticipated products are forward-looking statements. These statements involve
known and unknown risks, uncertainties and other important factors that may
cause our actual results, performance or achievements to be materially different
from any future results, performance or achievements express or implied by the
forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "expect," "plan," "anticipate," "expect," "could,"
"intend," "target," "project," "contemplate," "believe," "estimate," "predict,"
"potential" or "continue" or the negative of these terms or other similar
conditional expressions. The forward-looking statements in this Form 10-Q are
only predictions. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends
that we believe may affect our business, financial condition and results of
operations. These forward-looking statements speak only as of the date of this
Form 10-Q and are subject to a number of important factors that could cause
actual results to differ materially from those in the forward-looking
statements, including the factors described under the sections in this Form 10-Q
titled "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," Item 1A "Risk Factors" contained in our
most recently filed Annual Report on Form 10-K, as well as the following:
? our ability to successfully commercialize our LungFit® PH system in the U.S.;
? our ability to achieve a CE mark for LungFit® in the European Union (the
"EU");
? our expectation to incur losses for the next few years;
? our ability to predict accurately the demand for our products, and products
under development and to develop strategies to address markets successfully;
? the possibility that products may contain undetected errors or defects or
otherwise not perform as anticipated;
? the anticipated development of markets we sell our products into and the
success of our products in these markets;
? our future capital needs and our need to raise additional funds;
? our ability to build a pipeline of product candidates and develop and
commercialize our approved products;
? our ability to enroll patients in clinical trials, timely and successfully
complete those trials and receive necessary certifications or regulatory
approvals;
? our ability to maintain our existing or future collaborations or licenses;
? our ability to protect and enforce our intellectual property rights;
? federal, state, and foreign regulatory requirements, including the FDA
regulation of our approved product and product candidates;
? our ability to obtain and retain key executives and attract and retain
qualified personnel;
? our ability to successfully manage our growth, including as a commercial-stage
company; and
? our ability to address business disruption and related risks resulting from
the COVID-19 pandemic and the responses to curb the spear of COVID-19, which
could have a material adverse effect on our business plan.
Moreover, we operate in an evolving environment. New risk factors and
uncertainties may emerge from time to time, and it is not possible for
management to predict all risk factors and uncertainties.
You should read this Form 10-Q and the documents that we reference in this Form
10-Q completely and with the understanding that our actual future results may be
materially different from what we expect. We qualify all of our forward-looking
statements by these cautionary statements. Except as required by applicable law,
we do not plan to publicly update or revise any forward-looking statements
contained herein, whether as a result of any new information, future events,
changed circumstances or otherwise.
Beyond Air, Inc. the Beyond Air logo and other trademarks or service marks of
Beyond Air, Inc. appearing in this Quarter Report on Form 10-Q are the property
of Beyond Air, Inc. This Form 10-Q also includes trademarks, tradenames and
service marks that are the property of other organizations. Solely for
convenience, trademarks and tradenames referred to in this Form 10-Q appear
without the ® and ™ symbols, but those references are not intended to indicate,
in any way, that we will not assert, to the fullest extent under applicable law,
our rights, or that the applicable owner will not assert its rights, to these
trademarks and tradenames.
Introduction
We are a commercial-stage medical device and biopharmaceutical company
developing a platform of nitric oxide ("NO") generators and delivery systems
(the "LungFit® platform") capable of generating NO from ambient air. Our first
device, LungFit® PH, received premarket approval from the U.S. Food and Drug
Administration (the "FDA"), for persistent pulmonary hypertension of the newborn
("PPHN"), in June 2022. The NO generated by the LungFit® PH Systemsystem is
indicated to improve oxygenation and reduce the need for extracorporeal membrane
oxygenation in term and near-term (>34 weeks gestation) neonates with hypoxic
respiratory failure associated with clinical or echocardiographic evidence of
pulmonary hypertension in conjunction with ventilatory support and other
appropriate agents. The LungFit® platform can generate NO up to 400 parts per
million ("ppm") for delivery to a patient's lungs directly or via a ventilator.
LungFit® can deliver NO either continuously or for a fixed amount of time at
various flow rates and has the ability to either titrate dose on demand or
maintain a constant dose. LungFit® can be used to treat patients on ventilators
that require NO, as well as patients with chronic or acute severe lung
infections via delivery through a breathing mask or similar apparatus.
Furthermore, we believe that there is a high unmet medical need for patients
suffering from certain severe lung infections that the LungFit® platform can
potentially address. Our current areas of focus with LungFit® are PPHN,
community-acquired viral pneumonia ("CAVP") including COVID-19 (previously acute
viral pneumonia), bronchiolitis, nontuberculous mycobacteria ("NTM") lung
infection and those with various severe lung infections with underlying chronic
obstructive pulmonary disease ("COPD"). The Company's current product candidates
will be subject to premarket reviews and approvals by the FDA, certification
through the conduct of a conformity assessment by a notified body in the EU for
the product to be CE marked, as well as comparable foreign regulatory
authorities. The Company's system will be marketed as a medical device in the
U.S.
An additional program of Beyond Air targets solid tumors, through our
majority-owned affiliate Beyond Cancer, Ltd. ("Beyond Cancer"). The LungFit®
platform is not utilized for the solid tumor indication due to need for
ultra-high concentrations of gaseous nitric oxide ("UNO"). A proprietary
delivery system has been developed that can safely deliver UNO in excess of
10,000 ppm directly to a solid tumor. This program has advanced to phase 1 as
enrollment is underway in the first human study.
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LungFit® PH is the first FDA approved system using our patented ionizer
technology to generate on-demand nitric oxide from ambient air and, regardless
of dose or flow, deliver it to a ventilator circuit. The device uses a medical
air compressor to drive room air through a plasma chamber in the center of the
unit where pulses of electrical discharge are created between two electrodes.
The system uses the power equivalent to a 60-watt lightbulb to ionize the
nitrogen and oxygen molecules, which then combine as NO with low levels of
nitrogen dioxide ("NO2") created as a byproduct. The products are then passed
through a Smart Filter, which removes the toxic NO2 from the internal circuit.
With respect to PPHN, the novel LungFit® PH is designed to deliver a dosage of
NO to the lungs that is consistent with current guidelines for delivery of 20
ppm NO with a range of 0.5 ppm - 80 ppm (low concentration NO) for ventilated
patients.
We believe the ability of LungFit® PH to generate NO from ambient air provides
us with many competitive advantages over the current standard of NO delivery
systems in the U.S., the EU, Japan and other markets. For example, LungFit® PH
does not require the use of a high-pressure cylinder, does not require
cumbersome purging procedures and places less burden on hospital staff in
carrying out safety procedures.
Our novel LungFit® platform can also deliver a high concentration (>150 ppm) of
NO directly to the lungs, which we believe has the potential to eliminate
microbial infections including bacteria, fungi and viruses, among others. We
believe that current FDA-approved NO vasodilation treatments would have limited
success in treating microbial infections given the low concentrations of NO
being delivered (<100 ppm). Given that NO is produced naturally by the body as
an innate immunity mechanism, at a concentration of 200 ppm, supplemental high
dose NO should aid in the body's fight against infection. Based on our
preclinical and clinical studies, we believe that 150 ppm is the minimum
therapeutic dose to achieve the desired pulmonary antimicrobial effect of NO. To
date, neither the FDA nor comparable foreign regulatory agencies in other
countries or regions have approved any NO formulation and/or delivery system for
>80 ppm NO.
LungFit® PH for the treatment of Persistent Pulmonary Hypertension of the
Newborn (PPHN)
In June 2022 the FDA approved LungFit® PH to treat PPHN. LungFit® PH is the
inaugural device from the LungFit® platform of NO generators that use patented
ionizer technology and is the first FDA-approved product for Beyond Air.
We also expect to receive the CE Mark under the Medical Device Regulation
("MDR") in the EU in the second half of calendar year 2022. According to the
most recent year-end report from Mallinckrodt Pharmaceuticals, sales of NO were
$448.5 million in 2021 (down from $574.1 million in 2020) for the United States,
Canada, Japan, Mexico and Australia, with ~90% in the United States. Outside of
the U.S. there are multiple market participants which translates to considerably
lower sales than in the U.S. We believe the U.S. sales potential of LungFit® PH
in PPHN to be greater than $400 million and worldwide sales potential to be
greater than $700 million. We initiated the first phase of our commercial launch
in June 2022 in the U.S. and will continue to work toward a potential launch in
the EU and globally in 2022 and beyond.
LungFit® PRO for the treatment of viral lung infections in hospitalized patients
Viral Community-Acquired Pneumonia (including COVID-19)
Viral pneumonia in adults is most commonly caused by rhinovirus, respiratory
syncytial virus ("RSV") and influenza virus. However, newly emerging viruses
(including SARS-CoV-1, SARS-CoV-2, avian influenza A, and H1N1 viruses) have
been identified as pathogens contributing to the overall burden of adult viral
pneumonia. COVID-19 is an infectious disease caused by SARS-CoV-2, that has
resulted in a global pandemic, causing over 6.6 million hospitalizations and
over 5 million deaths worldwide as of November 2021. Excluding the pandemic,
there are approximately 350,000 annual viral pneumonia hospitalizations in the
US, and up to 16 million annual viral pneumonia hospitalizations globally. For
the broader annual viral pneumonia hospitalizations, we believe U.S. market
potential to be greater than $1.5 billion and worldwide market potential to be
greater than $3 billion.
We initiated a pilot study in late 2020 using our novel LungFit® PRO system at
150 ppm to treat patients with VCAP. The trial is a multi-center, open-label,
randomized clinical trial in Israel, including patients infected with COVID-19.
Patients are randomized in a 1:1 ratio to receive either inhalations of 150 ppm
NO given intermittently for 40 minutes four times per day for up to seven days
in addition to standard supportive treatment ("NO+SST") or standard supportive
treatment alone ("SST"). Endpoints related to safety (primary endpoint), oxygen
saturation and intensive care unit admission, among others, were assessed.
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We reported interim data from this trial at the American Thoracic Society or ATS
International Conference 2021, which was held virtually from May 14, 2021
through May 19, 2021. At the time of the data cut off, the intent-to-treat
("ITT") analysis population included 19 COVID-19 patients (9 NO + SST vs 10
SST). The data readout showed that 150 ppm NO treatment administered via
LungFit® PRO was safe and well tolerated and demonstrated encouraging efficacy
signals. From a safety perspective, there were no treatment-related, or possibly
related, adverse events or severe adverse events. NO2 levels were below 4 ppm at
all timepoints (trial safety threshold is 5 ppm) and methemoglobin ("MetHb")
levels were below 4% at all times (trial safety threshold is 10%). With respect
to the requirement of oxygen support beyond hospital stay, 22.2% of subjects in
the NO + SST group compared with 40% of control subjects had this requirement.
There was an observable trend of shortening the duration of hospital stay and
duration on oxygen support for treated patients. The pilot study in adult viral
pneumonia, including COVID-19, remained active with trial sites open for
enrollment after these data were presented.
We presented additional detailed study results at the 32nd European Congress of
Clinical Microbiology & Infectious Diseases (ECCMID 2022), which took place from
April 23, 2022 through April 26, 2022 as a hybrid event both onsite in Lisbon,
Portugal and online. At the time of the data cut off, the trial enrolled a total
of 40 subject hospitalized for VCAP (SARS-CoV-2, n=39; other viruses n=1). The
ITT population included 35 subjects with 16 subjects in the inhaled NO group and
19 subjects in the control group. Safety data from the study showed that inhaled
NO treatment was well tolerated overall with no treatment related adverse events
as assessed by the investigators. NO2 levels were below 4.4 ppm at all
timepoints (trial safety threshold is 5 ppm) and MetHb levels were below 6.8% at
all times (trial safety threshold is 10%). There were two serious adverse events
reported in the group receiving inhaled NO along with SST, which were determined
to be related to underlying conditions and unrelated to study drug/device. From
an efficacy perspective, results showed a trend of shortening length of stay
("LOS") in favor of the inhaled NO treatment group by a factor 1.8 in favor of
inhaled NO treatment. Duration of oxygen support, measured in-hospital and at
home, was significantly shorter (p=0.0339) for inhaled NO treated subjects. In
addition, of subjects with unstable oxygen saturation during hospitalization,
66.7% of the inhaled NO treatment group reached stable saturation of ?93% during
hospital stay as compared to 26.7% in the SST group.
Bronchiolitis
Bronchiolitis is the leading cause of hospital admission in children less than 1
year of age. The incidence is estimated to be 150 million new cases a year
worldwide, with 2-3% (over 3 million) of them severe enough to require
hospitalization. Worldwide, 95%3 of all cases occur in developing countries. In
the U.S., there are approximately 120,000 annual bronchiolitis hospitalizations
and approximately 3.2 million annual child hospitalizations globally. Currently,
there is no approved treatment for bronchiolitis. The treatment for acute viral
lung infections that cause bronchiolitis in infants is largely supportive care
and is based primarily on prolonged hospitalization during which the infant
receives a constant flow of oxygen to treat hypoxemia, a reduced concentration
of oxygen in the blood. In addition, systemic steroids and inhalation with
bronchodilators are sometimes utilized until recovery, but we believe that these
treatments do not successfully reduce hospital LOS. We believe the U.S. market
potential for bronchiolitis to be greater than $500 million and worldwide market
potential to be greater than $1.2 billion.
Our BRO program is currently on hold due to the COVID-19 pandemic. The pivotal
study for bronchiolitis was originally set to be performed in the winter of
2020/21 but was delayed due to the pandemic. We have completed three successful
pilot studies for bronchiolitis. A further analysis of the three previously
reported pilot studies was presented at the ATS International Conference 2021,
which was held virtually from May 14, 2021 through May 19, 2021. Analysis across
the studies (n=198 infants, mean age 3.9 months) showed that 150 ppm - 160 ppm
NO administered intermittently was generally safe and well tolerated with
adverse event rates similar among treatment groups with no reported
treatment-related serious adverse events. The short course of treatments with
intermittent high concentration inhaled NO was effective in shortening hospital
LOS and accelerating time to fit for discharge - a composite endpoint of
clinical signs and symptoms to indicate readiness to be evaluated for hospital
discharge. This treatment was also effective in accelerating time to stable
oxygen saturation - measured as SpO2 ? 92% in room air. Additionally, NO at a
dose of 85 ppm NO showed no difference compared to control for all efficacy
endpoints, while 150 ppm NO showed statistical significance when compared to
control
Additionally, long-term safety data for high concentration inhaled NO in
bronchiolitis was presented at the Pediatric Academic Societies Meeting 2022
(PAS 22), which was held in Denver, Colorado from April 21, 2022 through April
25, 2022. A total of 101 infants from the three prior pilot studies for
bronchiolitis (n=198) participated in the long-term follow-up study. Study
endpoints for the long-term safety study included the percentage of subjects
re-hospitalized for bronchiolitis related reasons, such as wheezing episodes,
pneumonia and asthma and the percentage of subjects re-hospitalized for any
reason. Data from the study showed the re-hospitalization rate per 100 Patient
Exposure Years (PEY) due to bronchiolitis related reasons trended favorably for
the inhaled NO group. In addition, the long-term subject re-hospitalization rate
for any reason was similar between inhaled NO and control groups. As such, the
study concluded that the treatment of hospitalized infants with acute
bronchiolitis by intermittent high dose inhaled NO shows a favorable long-term
safety profile.
We believe that the entirety of data at 150 ppm - 160 ppm NO in both adult and
infant patient populations supports further development of LungFit® PRO in a
pivotal study for patients hospitalized with VCAP or bronchiolitis.
LungFit® GO for the treatment of Nontuberculous mycobacteria (NTM)
NTM lung infection is a rare and serious pulmonary disease associated with
increased morbidity and mortality. Patients with NTM lung disease may experience
a multitude of symptoms such as fever, weight loss, cough, lack of appetite,
night sweats, blood in the sputum and fatigue. Patients with NTM lung disease,
specifically Mycobacterium abscessus (M. abscessus) representing 20% - 25% of
all NTM and other forms of NTM that are refractory to antibiotic therapy,
frequently require lengthy and repeated hospital stays to manage their
condition. There are no treatments specifically indicated for the treatment of
M. abscessus lung disease in North America, Europe or Japan.
There are approximately 50,000 to 90,000 people with NTM infections in the U.S.
In Asia, the number of patients suffering from NTM surpasses what is seen in the
U.S. There is one inhaled antibiotic approved for the treatment of refractory
Mycobacterium avium complex ("MAC"). Current guideline-based approaches to treat
NTM lung disease involve multi-drug regimens of antibiotics that may cause
severe, long lasting side effects, and treatment can be as long as 18 months or
more. Median survival for NTM MAC patients is approximately 13 years while
median survival for patients with other variations of NTM is typically 4.6
years. The prevalence of human disease attributable to NTM has increased over
the past two decades. In a study conducted between 2007 and 2016, researchers
found that the prevalence of NTM in the U.S. is increasing at approximately 7.5%
per year. M. abscessus treatment costs are estimated to be more than double that
of MAC. In total, a 2015 publication by co-authors from several U.S. government
departments stated that annual cases in 2014 cost the U.S. healthcare system
approximately $1.7 billion. For this indication, we believe U.S. sales potential
to be greater than $1 billion and worldwide sales potential to be greater than
$2.5 billion.
26
In December 2020 we began a 12-week, multi-center, open-label clinical trial in
Australia intended to enroll approximately 20 adult patients with chronic
refractory NTM lung disease. We received a grant of up to $2.17 million from the
Cystic Fibrosis Foundation ("CFF") to fund this study and advance the clinical
development of inhaled NO to treat NTM pulmonary disease. The trial is enrolling
both cystic fibrosis ("CF") and non-CF patients infected with MAC, M. abscessus
or any strain of NTM. The study consists of a run-in period followed by two
treatment phases. The run-in period provides a baseline for the efficacy
endpoints. The first treatment phase takes place over a two-week period and
begins in the hospital setting where patients will be titrated from 150 ppm NO
up to 250 ppm NO over several days. During this phase patients receive NO for 40
minutes, four times per day while MetHb levels are monitored. Patients are also
trained to use LungFit® GO and subsequently discharged to complete the remaining
portion of the two-week treatment period at their home at the highest tolerated
NO concentration. For the second treatment phase, a 10-week maintenance phase,
the administration is twice daily. The study is evaluating safety, quality of
life, physical function, and bacterial load among other parameters.
We reported positive interim results in October 2021. At the time of data cutoff
on September 6, 2021, eight subjects were successfully titrated up to 250 ppm NO
in the hospital setting, and none required dose reductions during the subsequent
at-home portion of the study. The mean age of subjects was 56.6 years (range: 22
- 73 years) with the majority female (87.5%), a distribution consistent with
real-world NTM disease, and occurring at a higher rate in older adult women than
men. 250 ppm NO was well-tolerated in all subjects with no study
discontinuations or treatment-related serious adverse events observed.
Methemoglobin and NO2 concentrations remained within acceptable ranges in all
subjects during NO treatment, below the safety thresholds of 10% and 5 ppm,
respectively.
We reported additional positive interim results at the American Thoracic Society
International Conference 2022 (ATS 2022), which was held in San Francisco from
May 13, 2022 through May 18, 2022. At the time of data cutoff on April 4, 2022,
a total of 15 subjects were enrolled in the pilot study. The mean age of
subjects was 62.1 years (range: 22 - 82 years) with the majority female (80%), a
distribution consistent with real-world NTM disease. The data show that high
concentration inhaled NO was well tolerated following a total of 2,323
inhalations self-administered at home with no treatment related discontinuations
reported and overall high treatment compliance. All 15 subjects were
successfully titrated to 250 ppm NO in the hospital setting, and none have
required dose reductions during the subsequent at-home portion of the study.
Methemoglobin and NO2 concentrations remained within acceptable ranges in all
subjects during NO treatment, below the safety thresholds of 10% and 5 ppm,
respectively. Patients are followed up for 12 weeks after the 12-week treatment
period is completed and the last patient visit at the end of week 24 is expected
to occur in August 2022. The totality of the data will be used to evaluate
efficacy measures, including quality of life, physical function, and sputum
bacteria as compared to baseline measurements. The study is no longer enrolling
patients, and we anticipate reporting the complete efficacy and safety results
later in calendar year 2022. If the trial is successful, we would anticipate
commencing a pivotal study in calendar year 2024.
Our program in COPD is in the preclinical stage and, subject to obtaining
additional financing, is expected to enter clinical trials in calendar year
2023.
Ultra-High Concentration NO (UNO) in solid tumors through majority-owned
affiliate Beyond Cancer, Ltd.
In the fourth calendar quarter of 2021, Beyond Cancer, our newly formed,
majority-owned affiliate, raised $30 million in a private placement of common
shares. The investors purchased a 20% equity ownership in Beyond Cancer, while
Beyond Air maintained 80% equity ownership in Beyond Cancer. The funding is
expected to be used to accelerate ongoing preclinical work including the
completion of IND-enabling studies, completion of a Phase 1 study, expansion of
preclinical programs for combination studies, hiring of additional Beyond Cancer
team members, and optimization of the delivery system, as well as for general
corporate purposes.
Beyond Cancer will benefit from Beyond Air's NO expertise, IP portfolio,
preclinical oncology team, and regulatory progress, and will pay Beyond Air a
single digit royalty on all future revenues. Beyond Cancer will be led by a
seasoned leadership team with experience in emerging healthcare companies and
clinical oncology.
Selena Chaisson, MD, joined Beyond Cancer as Chief Executive Officer.
Previously, Dr. Chaisson was the Director of Healthcare Investments at Bailard,
where she spent 16 years focusing on highly specialized, emerging healthcare
opportunities with more than one-third of her portfolio dedicated to investing
in oncology companies. Prior to Bailard, Dr. Chaisson held senior executive
roles at RCM Capital Management and Tiger Management. RCM Capital Management was
acquired and then merged with Allianz Global Investors U.S. in 2013. Dr.
Chaisson received a BS in microbiology in 1987 from Louisiana State University
in Baton Rouge, LA, where she graduated summa cum laude. She earned her MBA and
MD from Stanford University in 1992 and 1993, respectively.
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The Beyond Cancer Board of Directors consists of six members:
? Steve Lisi, Chairman of the Board, and CEO and Chairman of the Board of Beyond
Air
? Selena Chaisson, MD, Director, and Chief Executive Officer of Beyond Cancer
? Amir Avniel, Executive Director, and COO and Co-Founder of Beyond Air
? Robert Carey, Director, and Board Member of Beyond Air
? David Dvorak, Director
? Gregory Berk, M.D., Director
UNO has shown anticancer properties in preclinical trials by eliciting an immune
response from the host. We have released this preclinical data at several
medical/scientific conferences showing the promise of delivering NO at
concentrations of 20,000 ppm - 200,000 ppm directly to tumors. Results showed
that local tumor ablation with NO conveyed anti-tumor immunity to the host. We
recently presented new in vivo and in vitro preclinical data at the American
Association for Cancer Research ("AACR") Annual Meeting 2022. The in vivo study
assessed the mode of action following a single 5-minute gaseous NO ("gNO")
treatment provided data showing an effect on the primary tumor 14 days post
treatment. These data showed that intratumoral injections of concentrations of
gNO at 20,000 and 50,000 ppm led to increased recruitment of T cells, B cells,
macrophages and dendrocytes to the primary tumor. An elevated number of T cells
and B cells were also detected in the spleen and blood 21 days following gNO
treatment. In addition, at the same timepoint, a marked reduction in the number
of myeloid derived suppressor cells was seen in the spleen. Results from the in
vitro study showed that exposure of six different cancer cell lines - including
human ovarian and pancreatic and mouse lung, melanoma, colon, and breast- to UNO
of gNO ranging from 10,000 ppm to 100,000 ppm for up to 10 minutes resulted in a
dose-dependent cytotoxic response. The higher concentration doses of gNO led to
near instant cell death, while the lower concentration doses required a longer
exposure period to elicit cell death. Cell viability was assessed using two
assays: XTT and clonogenic assay. After one minute of exposure to 25,000 ppm
gNO, less than 10% viability was observed in all cell lines.
COVID-19
The development of our product candidates and the commercialization of our
approved product could be further disrupted and adversely affected by a
resurgence of the COVID-19 pandemic. We experienced significant delays in the
supply chain for the LungFit® system due to the redundancy in parts and
suppliers for ventilator manufacturing which has since been remedied. We
continuously assess the impact that COVID-19 may have on our business plans and
our ability to conduct the preclinical studies and clinical trials as well as on
our reliance on third-party manufacturing and our supply chain. However, there
can be no assurance that we will be able to avoid part or all of any impact from
COVID-19 or its consequences if a resurgence occurs.
Critical Accounting Estimates and Policies
A critical accounting policy and related estimates are both important to the
portrayal of a company's financial condition and results of operations and
requires management's most difficult, subjective or complex judgments, often as
a result of the need to make estimates about the effect of matters that are
inherently uncertain.
Our unaudited consolidated financial statements are presented in accordance with
U.S. GAAP, and all applicable U.S. GAAP accounting standards effective as of
June 30, 2022 have been taken into consideration in preparing the unaudited
consolidated financial statements. The preparation of unaudited consolidated
financial statements requires estimates and assumptions that affect the reported
amounts of assets, liabilities, expenses and related disclosures. Some of those
estimates are subjective and complex, and, consequently, actual results could
differ from those estimates. The following accounting policies and estimates
have been highlighted as significant because changes to certain judgments and
assumptions inherent in these policies could affect our consolidated financial
statements:
? Contingent loss judgments and estimates,
? Research and development expense recognition,
? Licensed right to use Technology,
? Stock-based compensation valuation and attribution, and
? Income taxes
Off-Balance-Sheet Arrangements
As of June 30, 2022, we did not have any off-balance-sheet arrangements as
defined in the rules and regulations of the Securities and Exchange Commission
(the "SEC").
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Results of Operations and Comprehensive Loss
Below are the results of operations for the three months ended June 30, 2022 and
June 30, 2021:
(in thousands)
For the Three Months Ended
June 30,
2022 2021
Revenue $ - $ -
Operating expenses:
Research and development 3,226 2,741
General and administrative 8,214 3,850
Operating expenses 11,440 6,591
Operating loss (11,440 ) (6,591 )
Other income (loss)
Dividend and interest income 8 1
Interest expense (48 ) (162 )
Foreign exchange gain / (loss) (177 ) 10
Other income 2 -
Total other income (loss) (215 ) (152 )
Net loss $ (11,654 ) $ (6,743 )
Net loss attributable to non-controlling
interests (720 ) -
Net loss attributable to Beyond Air, Inc. $ (10,934 ) $ (6,743 )
Foreign currency translation gain 172 -
Comprehensive loss attributable to Beyond Air,
Inc. $ (10,762 ) (6,743 )
Net basic and diluted loss per share $ (0.37 ) $ (0.31 )
Weighted average number of shares of common
stock used in computing basic and diluted net
loss per share 29,888,004 21,945,235
Comparison of Three Months Ended June 30, 2022 with the Three Months Ended June
30, 2021
Revenue
On June 28, 2022 the FDA approved LungFit® PH to treat PPHN. No revenue has been
recognized in the three days between approval and June 30, 2022, the end of the
first fiscal quarter.
Research and Development Expenses
Research and development expenses for the three months ended June 30, 2022 were
$3.2 million as compared to $2.7 million for the three months ended June 30,
2021. The increase of $0.5 million was primarily attributed to an increase in
spending on UNO for $0.7 million, a $0.2 million increase in stock-based
compensation, partially offset by a net decrease of $0.5 million in NTM studies
(due mainly to a decrease in net costs for $0.3 million plus the receipt of a
$0.2 million R&D credit).
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2022 and
June 30, 2021 were $8.2 million and $3.9 million, respectively. The increase of
$4.3 million was attributed primarily to an increase of $2.8 million due to the
creation of the Beyond Cancer entity ($0.3 million of salary expense, $1.9
million of stock-based compensation and $0.3 million of recruiting, office
expenses and travel) plus an increase of $1.5 million in Beyond Air ($0.7
million increase in salaries and benefits for commercial and support staff, $1.0
million increase in stock-based compensation, $0.1 million increase in insurance
$0.1 million increase in travel spend and $0.1 million increase in IT was
partially offset by a reduction in legal fees of $0.4 million).
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Other Income (Loss)
Other Income (Loss) for the three months ended June 30, 2022 and June 30, 2021
was a loss of ($0.2) million and a loss of ($0.2) million, respectively. A
decrease in interest expense of $0.1 million from the cancellation of long-term
debt was offset by a loss from foreign exchange of $0.2 million.
Net Loss Attributable to Non-controlling Interests
Net loss attributed to non-controlling interests for the three months ended June
30, 2022, was $0.7 million, compared to $0 for the three months ended June 30,
2021. Non-controlling interests represent 20% of the net loss of our Beyond
Cancer subsidiary, which was established in November 2021.
Net Loss Attributed to Common Stockholders
Net loss attributed to common stockholders for the three months ended June 30,
2022, was ($10.9) million or a loss of ($0.37) per share, basic and diluted. Our
net loss attributed to common stockholders for the three months ended June 30,
2021 was ($6.7) million or a loss of ($0.31) per share, basic and diluted.
Cash Flows
Below is a summary of the Company's cash flows activities for the three months
ended June 30, 2022 and June 30, 2021:
Three Months Ended
June 30,
(in thousands) 2022 2021
Net cash provided by (used in):
Operating activities $ (6,840 ) $ (3,918 )
Investing activities (264 ) (27 )
Financing activities (536 ) 8,306
Effect of exchange rate changes on cash and cash
equivalents 172 -
Net increase (decrease) in cash, cash
equivalents and restricted cash $ (7,468 ) $ 4,360
Operating Activities
For the three months ended June 30, 2022 the net cash used in operating
activities was $6.8 million which was primarily due to the Company's net loss of
$11.7 million, which includes $4.6 million of stock-based compensation, and $0.5
million reduction in prepaid expenses (mainly related to prepaid insurance),
partially offset by ($0.3) million for inventory purchases and ($0.2) million
for the increase in grants receivable.
Investing Activities
For the three months ended June 30, 2022 and June 30, 2021, net cash used in
investing activities was $0.2 million and $0, respectively, which was mainly for
the purchase of property and equipment.
Financing Activities
Net cash used in financing activities for the three months ended June 30, 2022
was $0.5 million, mainly from the payment of loans related to the financing of
directors and officers insurance. Net cash provided by financing activities for
the three months ended June 30, 2021 was $8.3 million, including $1.0 million
from the issuance of common stock related to a $40 million stock purchase
agreement with Lincoln Park Capital Fund, LLC ("LPC") dated as of May 14, 2020
(the "Stock Purchase Agreement") and $7.5 million from the issuance of common
stock through the prior At-The-Market Equity Offering Sales Agreement (the
"ATM"), partially offset by loan payments of $0.2 million.
Contractual Obligations
There have been no material changes to our contractual obligations since March
31, 2022. For a summary of our contractual obligations, see Item 7 of Part II of
our Annual Report on Form 10-K for the year ended March 31, 2022 (the "2022
Annual Report"), filed with the SEC on June 29, 2022.
30
Liquidity and Capital Resources
Overview
We have not generated any revenue from the sale of products, but now that we
have obtained regulatory approval for LungFit® PH, we expect to begin generating
revenue in fiscal year 2023. We had an operating cash flow decrease of $6.8
million for the three months ended June 30, 2022 and we have experienced an
accumulated loss of $134.6 million since inception through June 30, 2022. As of
June 30, 2022, we had cash and cash equivalents of $72.8 million and $10.0
million restricted cash. We believe that our cash and cash equivalents as of
June 30, 2022 will enable us to fund our operating expenses and capital
expenditure requirements into the fourth fiscal quarter of 2024.
Our future capital needs and the adequacy of our available funds beyond one year
from the date of filing these financial statements will depend on many factors,
including, but not necessarily limited to, the cost and time necessary for the
development, clinical studies and certification or regulatory approval of our
other medical devices, indications as well as the commercial success of our
approved product and any product candidates that receive marketing approval by
the FDA. We may be required to raise additional funds through the sale of equity
or debt securities or through strategic collaborations and/or licensing
agreements in order to fund operations until we are able to generate enough
product or royalty revenues, if any. Financing may not be available on
acceptable terms, or at all, and our failure to raise capital when needed could
have a material adverse effect on our strategic objectives, results of
operations and financial condition.
On February 4, 2022, we entered into a new At-The-Market Equity Offering Sales
Agreement with Truist Securities, Inc. and Oppenheimer & Co, Inc. (the "2022
ATM"). Under the 2022 ATM, we may sell shares of our common stock having
aggregate sales proceeds of up to $50 million, from time to time and at various
prices. If shares of our common stock are sold, there is a 3% fee paid to the
sales agent. As of June 30, 2022, there was a balance of $50 million available
under the 2022 ATM.
On May 14, 2020, we entered into the New Stock Purchase Agreement with LPC,
which replaced the former $20 million purchase agreement with LPC, dated August
10, 2018. The New Stock Purchase Agreement provides for the issuance of up to
$40 million of our common stock, which we may sell from time to time in our sole
discretion, to LPC over a period of 36 months, subject to the conditions and
limitations in the New Stock Purchase Agreement. As of June 30, 2022, there was
a balance of approximately $18.1 million available under the New Stock Purchase
Agreement.
Our ability to continue to operate beyond the fourth fiscal quarter of 2024 will
be largely dependent upon the successful commercial launch of LungFit® PH, as
well as obtaining partners in other parts of the world, and the raising of
additional funds to finance our activities until we are generating cash flow
from operations. Further, there are no assurances that we will be successful in
obtaining an adequate level of financing for the development and
commercialization of our other product candidates.
There are numerous risks and uncertainties associated with the development of
our NO delivery system and we are unable to estimate the amounts of increased
capital outlays and operating expenses associated with the completion of the
research and development of our product candidates.
Our future capital requirements will depend on many factors, including:
? the effects of the COVID-19 pandemic on our business, the medical community
and the global economy;
? the progress and costs of our preclinical studies, clinical trials and other
research and development activities;
? the costs of commercializing the LungFit® system;
? the scope, prioritization and number of our clinical trials and other research
and development programs;
? the costs and timing of obtaining certification or regulatory approval for our
product candidates;
? the costs of filing, prosecuting, enforcing and defending patent claims and
other intellectual property rights;
? the costs of, and timing for, strengthening our manufacturing agreements for
production of sufficient clinical quantities of our product candidates;
? the potential costs of contracting with third parties to provide marketing and
distribution services for us or for building such capacities internally;
? the costs of acquiring or undertaking the development and commercialization
efforts for additional, future therapeutic applications of our product
candidates;
? the magnitude of our general and administrative expenses; and
? any cost that we may incur under current and future in-and out-licensing
arrangements relating to our product candidates.
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