Beyond Air, Inc. (NASDAQ:XAIR) Q4 2023 Earnings Call Transcript

Beyond Air, Inc. (NASDAQ:XAIR) Q4 2023 Earnings Call Transcript June 22, 2023

Beyond Air, Inc. misses on earnings expectations. Reported EPS is $-0.67 EPS, expectations were $-0.47.

Operator: Good afternoon, and welcome everyone to the Beyond Air Financial Results Call for the Fiscal Year ended March 31, 2023. At this time, participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. And now, I would like to turn the call over to Edward Barger, Head of Investor Relations at Beyond Air. Please go ahead.

Edward Barger: Thank you, operator. Good afternoon, everyone, and thank you for joining us. Today after market close, we issued a press release announcing the fiscal fourth quarter and full year 2023 operational highlights and financial results. A copy of this press release can be found on our website, www.beyondair.net under the News & Events section. Before we begin, I would like to remind everyone that we will be making comments and various remarks about future expectations, plans and prospects, which constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Beyond Air cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated.

We encourage everyone to review the company’s filings with the SEC, including, without limitation, the company’s most recent Form 10-K and Form 10-Q, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Additionally, this conference call is being recorded and will be available for audio rebroadcast on our website, www.beyondair.net. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, June 22, 2023. Beyond Air undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call. Joining me on the call are Steve Lisi, Chairman and Chief Executive Officer; Duncan Fatkin, Chief Commercial Officer; and Douglas Larson, Chief Financial Officer.

And with that, I’ll turn the call over to Steve Lisi. Steve?

Steve Lisi: Thanks, Ed, and good afternoon to everyone joining us. Welcome to phase 2 of our commercial launch. This is an exciting time for us as we have visibility into what the PPHN market will look like over the next several years. With our initial limited launch completed, we are highly confident that we have gained the knowledge required to satisfy the needs of hospitals using nitric oxide. LungFit PH has been well received in the market, and we believe that our ability to support and service most hospitals has been established. Now is the time to increase the size of our commercial team and increase our market share. Our Chief Commercial Officer, Duncan Fatkin, will have more on this in a few minutes. Outside of LungFit PH commercial operations, we have been very busy and I am proud of what the Beyond Air and Beyond Cancer teams have accomplished.

LungFit PH cardiac label expansion application will be submitted before the end of this calendar year to FDA. This is later than we had hoped, but we want to be certain that the application is high quality and will satisfy FDA requirements. We also expect CE Mark in the EU for LungFit PH late next quarter. We anticipate LungFit PRO will be used in a community-acquired viral pneumonia study in the United States this coming winter. LungFit GO is scheduled for an at-home COPD study start in 2024 and NTM in 2025. Beyond Cancer anticipates phase 1a data this fall. As announced last week, we now have another NO related program, autism. Please refer to our announcement last week for details. Our portfolio consists of programs where NO was approved to treat acute pulmonary hypertension in newborns, is in human studies, hypoxemia associated with viral lung infection, chronic refractory persistent lung infection and solid tumors, and in preclinical development for autism.

We can consider ourselves the preeminent NO company with the investments we have made into NO research and development. We believe that we have only scratched the surface of the impact NO plays in human health. We recently secured debt financing of up to $40 million from funds managed by Avenue Capital Group. We believe this additional capital strengthens our position to execute on our strategy for LungFit PH and our other programs. In addition, I believe that securing this capital from a well-known healthcare investment firm with a history of investing in nitric oxide speaks volumes about our programs and the progress we’re making. Now, I will turn the call over to our Chief Commercial Officer, Duncan Fatkin, for an update on the LungFit PH commercial launch.

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Duncan?

Duncan Fatkin: Thanks, Steve, and good afternoon to our investors. As Steve just mentioned, we’ve made steady progress with our commercial launch over the past few quarters. The feedback from hospitals regarding LungFit PH continues to be extremely positive, and we would like to thank all the hospitals and clinical staff that have contributed to this first wave of clinical use. As I mentioned on previous calls, our go to market strategy is a multi-phased commercial approach. The initial phase represented a measured release of LungFit PH to a select group of hospitals that use inhaled nitric oxide on a regular basis. During this first phase, we received positive feedback from a variety of different hospitals on our logistics, customer service and the clinical performance of the device.

As a result, several hospitals have signed contracts for LungFit PH. These accounts set an important foundation from which the team will build upon. In regard to our sales pipeline, we’re excited by the interest in LungFit PH. As one point of reference, we have conducted more than 150 in-person demonstrations that have resulted in positive feedback and help to optimize the LungFit PH system, our service and support, supply chain, logistics and back office operations. Based on our success to date, we moved into the second phase of our commercial program in the beginning of the current quarter. In this phase, we are expanding our commercial team, both field sales and clinical specialists, and expanding our network of reference hospitals and key opinion leaders.

We expect that this will lead to market share gains over the next 10 to 12 quarters before we enter the final phase of commercialization. In closing, we continue to be excited by the growing coalition of hospitals supporting this amazing new technology and believe the program has gathered tremendous momentum to drive future growth. We project the annual value of contract signings over the next six months to be measured in the millions. In addition, a key point to remember is that the customer base and commercial function that we’re establishing will support the future launch of LungFit PRO for additional indications for the hospital, if and when approved. With that, I will turn the call back to Steve for the pipeline review. Steve?

Steve Lisi: Thanks, Duncan. I will start with LungFit PH. I mentioned earlier that CE Mark is expected near the end of the next quarter and we expect the FDA submission for the cardiac label expansion before year-end. We continue to execute on our regulatory strategy in our interactions with the FDA and other regulatory authorities, prioritizing as needed. We are confident that both milestones will be achieved. With respect to our VCAP program, we are preparing to conduct a study this coming winter in the United States. This study will not be a pivotal study, but a small study that we would expect to lead to a pivotal study. As for LungFit GO, we look to initiate a pivotal study in the first half of 2025, pending discussion with the FDA for NTM.

We hope to initiate a pilot study in the second half of 2024 for COPD patients released from the hospital after having been hospitalized for an exacerbation. This is an exciting time for the clinical, regulatory and engineering teams. Before I move on to Beyond Cancer, I would just like to emphasize that, to date, we have completed multiple studies in several clinical settings where 150 parts per million to 250 parts per million nitric oxide has been delivered to the lungs in more than 145 patients and over 4,500 individual administrations with zero serious adverse events directly attributable to nitric oxide. In addition, strong efficacy trends were seen in multiple studies. This portfolio of clinical data, along with our preclinical data, leads us to believe that exogenous nitric oxide generated and delivered by LungFit will improve the lives of patients.

Earlier in the current quarter, we presented impressive new in vivo and in vitro data at the American Association of Cancer Research Annual Meeting. These data suggests that ultra-high concentration NO, or UNO, is effective in treating solid tumors as a single agent and in combination with checkpoint inhibitors such as anti-PD1 and anti-CTLA4. To be more specific, the data shown in mice were in a very aggressive triple negative breast cancer model called 4T1. An UNO therapy in combination with both anti-PD1 and anti-CTLA4 showed improvements in survival against each checkpoint inhibitor alone. Repeated UNO therapy suggests that repeat dosing is safe and effective. We remain very enthusiastic about our ongoing Phase 1a human clinical study, which is expected to have top line data later this calendar year.

I would like to emphasize that thus far the data from the human study are consistent with the preclinical animal studies with respect to immune biomarkers. Turning to our newest program, neuronal nitric oxide synthase, or nNOS, inhibitors. I would like to thank Dr. Haitham Amal and his team at the Hebrew University in Jerusalem for working with us over the past year. We expect big things going forward. The relationship is focused on what nNOS inhibition can do in neurological disorders and, as stated in our recent announcement, is initially focusing on reversing the effects of autism spectrum disorder. Considering we just held the conference call dedicated to the announcement of this particular program last week, I suggest anyone who didn’t listen to the live call, visit our website and listen to the archive of the call.

I will now turn the call over to Doug Larson, our Chief Financial Officer, to provide an overview of our financial results for the fiscal year ended March 31, 2023.

Douglas Larson: Thanks, Steve, and good afternoon, everyone. Our financial results for the fiscal year ended March 31, 2023 are as follows: Revenue for the fiscal year ended March 31, 2023 was zero as compared with zero for the fiscal year ended March 31, 2022. I’m very happy to say that this will be the last time you hear me say that revenues are zero. On a GAAP basis, research and development expenses for the fiscal year ended March 31, 2023 were $16.8 million compared with $11.8 million for the fiscal year ended March 31, 2022. The main driver of the $5 million increase was compensation costs from scaling up operations in Beyond Cancer. We also further increased staff in Beyond Air’s R&D team, recognized some of the initial work with autism, and had generated costs early in the fiscal year for the final push to get approval for the LungFit for PPHN.

Selling, general and administrative expenses for the fiscal year ended March 31, 2023 increased to $34.7 million from $18.4 million for the fiscal year ended March 31, 2022, mainly due to $9.2 million in structural investments in Beyond Cancer, with the remaining $7.1 million mainly driven by the U.S. commercial launch. Other operating expenses for the fiscal year ended March 31, 2023 were zero compared with $10.5 million, which were entirely related to the contingent liability for the Circassia settlement from May of 2021. As a reminder, we paid $2.5 million to Circassia in the second fiscal quarter of 2023, we have another $3.5 million to pay in the second fiscal quarter of 2024, with the final $4.5 million not due until the second quarter of fiscal 2025.

Other income and expense for the fiscal year ended March 31, 2023 was a net loss of $7.3 million compared with $3.4 million for the fiscal year ended March 31, 2022. The $3.9 million increase is from a non-product related legal matter that was previously partially reserved for and resolved in the fiscal fourth quarter. For the fiscal year ended March 31, 2023, the company had a GAAP net loss of $59.4 million, of which $55.8 million or $1.86 per share was attributable to the shareholders of Beyond Air, Inc., compared with a net loss of $43.2 million or $1.68 per share for the fiscal year ended March 31, 2022. Net cash used by the company, including Beyond Cancer, was $37.9 million during the fiscal year ended March 31, 2023. We forecast our average quarterly cash burn to be approximately $10 million per quarter as we head into fiscal 2024.

As of March 31, 2023, the company had cash and cash equivalents of $45.9 million. We believe that this amount in addition to the $17.5 million secured through our agreement with Avenue Capital is sufficient to fund operations for at least the next 12 months. And with that, I’ll hand the call back to Steve.

Steve Lisi: Thanks, Doug. Hope everyone is as pleased as I am with the execution and progress at Beyond Air. Operator, let’s go to Q&A.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Marie Thibault with BTIG. Please proceed with your question.

Marie Thibault: Hi. Thank you for taking the questions this evening. Very glad to hear that we will be seeing revenue this next coming quarter. We’d love to hear a little bit about how the fiscal fourth quarter went, the timing of some of these contracts that you described us as signing, and what you can tell us about what’s taking place commercially in the last couple of months here as the — as you’ve shifted to phase 2?

Steve Lisi: Thanks, Marie. Appreciate that. I’m going to turn this over to Duncan, our Chief Commercial Officer, to comment on that.

Duncan Fatkin: Thanks, Marie, for the question. So, the contracts typically — there’s quite a few that start in the first quarter of — first month of a quarter. And so you get that kind of effect and so we afford to get some of these to start a little bit earlier. But the timing of the negotiations and the way that kind of fell just pushed us a little bit further. But certainly nothing that’s put us off our long-term schedule. From a learning’s point of view, we continue to get really good clinical feedback. The training has gone really well, and we’ve refined the way we train and go to the hospitals and we’ve certainly made some improvements to the software to make the system work even better than it has been. It’s certainly fair to say that we’re a little bit behind where we want it to be.

Some of the supply chain challenges from earlier in the fiscal year, it kind of flowed through, and we’ve taken our time to work with our team and they’ve done an amazing job actually to make sure we can stay close to where we need to be. And going forward, we’re focusing on expanding. And as you can see from the prepared remarks, we’re going to increase the team now, because we feel like we’re ready to support that expansion, something that we were a little bit more cautious about earlier on in the year.

Marie Thibault: Okay. That’s really helpful, Duncan. Maybe I can ask as a follow-up. How should we think about that commercial sales force expansion? What do you think is the right number for this phase? And how quickly are those folks getting hired? And then, as a second part of that question for Doug maybe, if I look at the SG&A this quarter and exclude the $9 million or so that was invested in Beyond Cancer, I’m getting to about $25 million. Is that the right level that you would have us look at for SG&A here in this next fiscal year?

Steve Lisi: Hey, Marie. So, it’s Steve. I’ll take the sales force expansion. So, it’s an expansion to what we would believe would be our peak size. And I think we’ve said that number would be somewhere around 70 to 80 total people. That wouldn’t just be sales reps, that would be everybody, clinical specialists and operations and marketing and so forth. So that’ll probably take us the next 18 to 24 months to bring those people on in an orderly manner, get them on, train them, deploy them and go back and bring more people on. So that’s how it will happen. We’re not in any rush to bring the people on in one big fail swoop like maybe a much larger company might do. So this is a good 18 to 24 month exercise that we’ve begun to go from a sub-20 number and multiply that by 4x to 5x. I don’t know, does that answer your question, Marie?

Marie Thibault: That does. I wonder if Doug could comment on the $25 million in spend this quarter and what it might look like going forward.