Q4 2021 Beyond Air Inc Earnings Call
[music].
Good afternoon, and welcome everyone to the beyond Air financial results call for the fourth quarter and full fiscal year of 2021 financial results ended March 31.2021.
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 on the call over to Maria Young Young Kolsky head of Investor Relations at beyond Air. Please go ahead.
Sure.
Thank you operator, good afternoon, everyone and thank you for joining.
Today after market close we issued a press release announcing the fourth quarter of 2021 operational highlights along with a summary of our year and year end financial results. A copy of this press release can be found on the Investor Relations page of our website and will be on file with the 10-K filed today.
Before we begin I would like.
Everyone that we will be making comments and various remarks about future expectations plans and prospects, which constitute forward looking statements for 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 remind 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 Securities and Exchange Commission, including without limitation. The company's form 10-K, which identifies specific factors that may cause actual results or events to differ materially.
To me 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 dot beyond air Dot net.
Are there more of the content of this conference call contains time sensitive information that is accurate only as of the date of the live broadcast.
Cash June 10th 2021 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 today's call are Steve Lisi, Our chairman and Chief Executive Officer, Douglas Beck, Our Chief Financial Officer, and Duncan Scott <unk>, our Chief commercial officer.
<unk>, who will be available only during the Q&A with that I will turn the call over to Steve <unk>, Our CEO Steve.
Thanks, Brian and good afternoon to everyone and thank you for joining us on today's call.
Last 12 months have been very productive for beyond day during which we laid the foundation for success.
Officer next few years by achieving several key milestones.
Including the submission of our first ever PMA to the FDA for alongside device.
The significant expansion of our commercial organization by hiring several nitric oxide industry veterans to key leadership positions, including heads of sales and marketing.
And we made important progress on each of our clinical programs, which I will provide further details on in a few minutes.
We entered the current fiscal year executing on our vision of harnessing the power of nitric oxide in order to transform the lives of patients.
Most importantly, when approved.
Ph will be the first.
Our portfolio of devices able to generate natural offset from ambient air to reach the market further validating our technology.
As we look to the approval of our pending PMA application for lunch at ph, we envision a future of Tankless inhaled nitric oxide delivery in Nic use across the U S.
And eventually the world.
<unk> ph are designed to offer hospitals, a simple safe cost effective and convenient alternative to products that are currently on the market.
We are excited for the opportunities to introduce lumpy ph to the over 800 level 3 and level 4 Nic use in the U S over the next.
A few years.
Starting with a phased commercial launch.
That is scheduled to begin after PMA approval.
Recall, our strategy is to spend the first 6 to 9 months and the limited release phase targeting a group of select hospitals using a small number of systems at launch.
This will not require a significant spend and is easily attained with the amount of cash we have on hand to day.
As our commercial plan comes together, we aim to partner with the hospital staff to embrace the efficiency flexibility and innovation around which our system has been built.
Are.
<unk> interface designed to be an easy transition from existing user interfaces for N O delivery.
We are also able to avoid purging procedures, which along with the simplicity of our user interface will significantly reduce the training burden and time spent on system operation for clinical staff.
Lungfish ph allows for the removal of the burdensome inventory storage and disposal requirements that are necessary for cylinder based solutions offered by competitors.
Additionally, our system to minimize the likelihood of physical injury for health care workers, while also reducing the risk of nitrogen dioxide or <unk> exposure.
For all.
<unk> is toxic byproduct of ano, combining with oxygen that can irritate the airways of the human respiratory system and may have fatal consequences, which is the main reason behind the special storage requirements imposed by our competitors.
In contrast, our system relies.
On easy to store and dispose of smart filters that can last for 12 hours of continuous use.
N O 2 levels are monitored constantly and maintained well below the safety threshold, while it was being generated and delivered by our system.
Not only does the beyond air smart filter protect patients and medical staff.
Staff from <unk> toxicity in all devices in the lungs that family via a uniquely encrypted RFID chip.
Rendering the system unusable for cogeneration in its absence.
But the smart filter also acts as the razorblade it in on a razor razorblade business model.
In terms of current status for the FDA review.
Due process as you all know we submitted our PMA application to the FDA for al on <unk> ph system. This past November.
Which would normally have been subject to a 180 day review period.
I want to reiterate what I have been consistently communicating and note that due to the ongoing pandemic distribute process has been prolonged.
We can.
Continue to expect approval towards the end of the third quarter of calendar 2021 with the subsequent commercial launch in the fourth quarter.
I'm unable to comment further on the PMA review at this time.
Other than to say that we are happy to report a collaborative effort with FDA.
We have made many.
Strides on the commercial front over the last year, cementing our strategy and logistics plan.
In 2020, we set up our global supply chain through our subsidiary in Ireland and worked with our state of the art contract manufacturers to have everything on track for our systems and filters.
We secured our calibration gas supplier well over a year ago and are confident that we will have sufficient.
Available at launch.
Like I said earlier, we will spend the first 6 to 9 months in a limited release phase, where we will work closely with a select number of hospitals, who have staff experienced with inhaled nitric oxide.
In order to perfect our customer service and support functions.
This phase will not require.
Inventory significant inventory build since we are launching with a small number of systems.
Im pleased to report that we have a strong balance sheet heading into this event for reference we had $34.9 million on cash as of April 32021, which is sufficient to get us through the next 12 months and beyond inclusive of the initial launch.
On space.
Our actual cash burn for the March quarter was $5 million and we anticipate that the burn for the current June quarter will be even less in net.
Only once our go to market approach has been proven and stress tested well.
Well, we begin our ramp phase, which will include expanding our team and reaching out to the rest.
Require cash.
Leaving the preparation for the commercial launch of lumpy ph is our chief commercial officer Duncan family, who has been with us for 2 and a half years now.
He has over 30 years of experience in hospital based medical devices and it has worked in both Europe Asia and has spent the last 11 years in the United States over.
Over the past several.
Several months Duncan has been expanding his team and recruiting nitric oxide industry veterans to key leadership positions within our organization.
In May we announced the appointments of Rebecca Van Doorn as head of sales and Korean Taylor as head of marketing both of these talented women have worked with that carrier and subsequently mallinckrodt pharmaceuticals to drive.
The Marseilles and marketing initiatives for the current and on market leader.
They have extensive knowledge of the competitive landscape and I've had first row seats to both the successes and challenges faced by our competitors.
These 2 appointments along with a number of others.
Our part of our strategy to build a strong commercial team.
Drive such as crucial to the success of lump it Peach and then a central part of growing the entire loan franchise.
As Maria mentioned earlier Dunkin' us on the call with US today, and we'll be able to answer questions. During the Q&A portion of our call.
Outside of the U S. I am pleased to report that we remain on track to obtain CE Mark for.
The ph in Europe around the end of this calendar year.
As I have said in the past we have every intention of partnering this program ex U S. In fact, we recently appointed Peter senior to the newly created position of director of business development to spearhead this effort.
Peter joined our team after spending 26 years at Linda.
For lung he most recently served as a director of health care partnerships and external relations.
Peter was responsible for expanding Linda's health care portfolio. After the merger with Praxair, which made Linda our largest gas company in the world. He.
He's intimately familiar with the nitric oxide market the technology available and is hitting the ground running as we look to secure an ex U S.
Whereas in 2022 from <unk> ph.
Our ability to recruit unparalleled town speaks volumes for not only the capabilities of lung for ph, but also to the lung fit franchise and beyond air as a whole.
As an organization, we are ready to bring incredible benefits of inhaled nitric oxide therapy to patients.
Partnering. Additionally in May of this year, we reached a settlement agreement with former lung fit peach commercial licensee surpass him.
We retain full global rights to the assets in exchange for returning $10.5 million on upfront and milestone payments received by the company in early 2019.
We have secured an advantageous.
Pages payment structure for the $10.5 million.
That we are returning to cash here.
Beyond Air will begin making payments only after receiving FDA approval for loans that beach with the first payment being only 2 and a half million the second at 3 and a half million 1 year. After the first and the last payment 1 year after that.
Additionally, beginning in the third year post FDA approval.
So the cash you will receive a quarterly royalty payment equal to 5% of lung <unk> ph net sales in the U S. It.
It is important to note that this royalty will terminate once the aggregate payment reaches $6 million.
This structure allows us to make payments over time.
Only after we have a revenue generating assets and will have no impact on our ability to adequately fund the launch of loans with ph as well as invest in our pipeline development.
Our fiscal responsibility is in no way at the expense of our programs.
Expenses associated with submitting the PMA were significant and have now.
Okay.
Spend for our lung pro programs is winding down as we await the 'twenty 'twenty 2 'twenty 3 pneumonia season, when spend will certainly grow.
Our loans go study spend is that adequate as we've received a grant from the cystic fibrosis Foundation.
In fact, we have made progress on our 2 ongoing publicity.
Subside here.
Let's start with our viral lung infection program.
Which we recently reported acute brown pneumonia interim data along with further analysis of our bronchiolitis studies.
We began on a pallet study in acute brown pneumonia, including patients infected with Sars Covid 2 last November in Israel.
As you may recall our.
Our study is a multicenter open label randomized clinical trial.
Patients are randomized in a 1 to 1 ratio to receive inhalation of 150 <unk>.
Given intermittently for 40 minutes 4 times per day for up to 7 days.
In addition to standard supportive treatment versus standard supportive treatment alone.
Points related to safety.
Oxygen saturation fever, and ICU admission among others are being assessed.
We reported interim data at the American Thoracic Society International Conference on Ats, 2021, which was held virtually from may 14th through May 19.
At the time of the cutoff for these data we analyze the total of 19 patients on an intent.
Basis, not on the N O treatment arm and tenant control.
I am very happy to report that RFT parts million N O treatment administered by a lung fit pro was safe and well tolerated with no treatment related possibly related adverse events with severe adverse events.
On 2 levels stayed below 4 ppm for all treated patients at.
On to treatments.
Low the study safety threshold of 5 parts per million.
Similarly, methemoglobin levels were below 4% at all times well below the study safety threshold of 10%.
Methemoglobin levels, followed a predictable pattern rising during <unk> administration and falling back to normal.
Baseline.
At all times shortly after administration stuff.
The intermittent dosing regimen allowed for high concentration NOL to be administered without negative side effects.
Specifically addressing concerns from a hemoglobin union.
Safety data alone would have been a success for the study since the primary purpose is to evaluate safety of high concentration.
Line levels out.
However, despite the small number of subjects included in this mid study analysis, we also observed encouraging efficacy signals for clinically meaningful endpoints.
Only 22% of subjects in the <unk> treated group required ashington support beyond their hospitalization.
Compared to 40% of control.
With respect to duration of oxygen support.
<unk> treated patients average 2 days less in control.
Additionally, we saw a 26 hour reduction in mean duration of hospital stay between the <unk> treatment group and control when adjusting for extreme outliers to be clear.
These 2 outliers both in the control arm.
Were discharged from the hospital within 3% and 6 hours of enrollment respectively.
And therefore were not included.
Additional detailed study results will be submitted for presentation at an upcoming scientific meeting.
Today the trial sites remain open enrollment is ongoing however, it's important for us to realistically.
We consider the rate of enrollment going forward.
With Covid cases, receding, we anticipate recruiting patients with other viral lung infections more representative of the broader viral lung infection pivotal study we are planning.
Note that viral infection rates are extremely low during the summer months.
So this is a small pilot.
These efficacy and safety results in the adult population Echo the results of the 3 pilot trials, we've conducted in bronchiolitis.
Ranke led us to the term used for viral lung infection in infants that are hospitalized rather than the term acute viral pneumonia that is used for everyone above 2 years.
Or is it H.
Just last month, we presented further analysis of our 3 previously reported pilot studies at Ats 2021.
A total of 198 infants with a mean age of about 4 months participated across the 3 programs with 84 of them receiving high concentration and at a dose of 150.160 parts per million.
Analysis across the studies demonstrated that a short course of treatment with intermittent high concentration and held Ano was effective in shortening hospital length of stay by almost 1 day and accelerating the time to be fit for discharge from the hospital.
Additionally, inhaled nitric oxide was effective and accelerating time to stable auctions.
Oxygen saturation without supplemental oxygen.
Importantly in trial III, which was completed in the 2019.2020 winter. We studied <unk> in a dose of 85 parts per million, which showed no difference compared to control for all efficacy endpoints.
150 parts per million and showed statistical significance.
<unk> when compared to control for all efficacy endpoints.
In addition, when comparing 150 parts per million to $85.3 million 150 part per million arm was statistically significant on time to fit to discharge and hospital length of stay spec.
Expect to the efficacy endpoint of time to stable oxygen saturation without the need for some.
Washington.
The 150 part per million arm narrowly missed statistical significance in a small pilot study 87 subjects across 3 arms.
This leaves us to view 150 parts per million nitric oxide is the minimum effective therapeutic dose to be used in further studies.
Oh treatment was generally safe and well tolerated across the 3.
Trials with the adverse event rates similar among treatment groups.
We believe that taken together the entirety of data on 150 to 160 parts remain in hot both hospitalized adult and infant viral pneumonia patient populations is reproducible and demonstrates that and I was safe.
Our next steps would be to move.
To a pivotal all comer trial for lump it pro in patients hospitalized with viral pneumonia, we plan on submitting the entire data package to the FDA as it is supportive of either an adult or pediatric trial.
Due to the seasonality of most respiratory viruses, we anticipate starting this study in the fourth quarter of calendar 2.
<unk> thousand 22.
Moving onto our ongoing non tuberculosis mycobacteria or MTM pallet study.
There is currently a significant unmet medical need for treatment of chronic MTM lung infection in MTM is a disease area of focus for FDA.
Refractory MTM infection in the lungs has.
Calgary in fact, 50% of patients will die in less than 5 years from the initial diagnosis of the obsesses infection. Additionally.
Additionally.
As this is a progressive condition quality of life is substantially reduced prior to death we've.
We began screening patients for our <unk> program in MTM in December 2000.
Hi, Mark this is a single arm multicenter 12 week trial in Australia that aims to enroll 20, cystic fibrosis or non CF bronchiectasis patients with refractory <unk> lung infections.
At a macro with term EBIT complex or Mac for Mycobacterium assesses.
Patients are titrated up from 150.
<unk> million dollars to 250 parts per million <unk> in the hospital over several days and then sent home to complete the 12 week treatment period.
We specifically designed our system to be simple to use by non medical professionals and are confident in our ability to essentially bring 1 could go into the home to treat patients suffering from chronic severe.
<unk> lung infections.
Coming back to the trial design during the first 2 weeks patients receive 40 minute administrations 4 times per day, followed by 2 administrations per day for the remaining 10 weeks.
Study evaluates safety quality of life physical function and bacteria load among others.
At.
We are pleased with the performance of lung fit go in this study and would like to note that the rate of enrollment those slow at first has picked up in the last few months from now on track to deliver top line results from the first half of 2022.
If this trial is successful we believe our lungs that go system will be a game changer for the home setting.
This potentially helping underserved patients with chronic severe lung infections with various underlying conditions, such as cystic fibrosis bronchiectasis and of course COPD.
N O treatment should be thought of as pan microbial.
And the broad spectrum activity of <unk> may allow for the treatment of a variety of different indications.
And markets.
Specific to the mechanism for eliminate bacteria.
Oh causes bacterial DNA damage bacterial enzyme inhibition and induction of lipid peroxidation.
Additionally, N O penetrates bound flow, which May result in improved delivery of concomitant lead delivered antibiotics and activation of the immune.
Our prior guidance has reporting interim data on the middle of 'twenty 'twenty..1. However, we believe that we will be fortunate enough to have the opportunity to show. These data at a conference in the fall of 2021. We believe this is preferable to a simple press release.
I would like to now turn to our solid tumor program, which will not use the lung fit platform due.
Due to the ultra high concentrations of nitric oxide that are necessary to achieve anti tumor effects.
Okay.
This program is early in development, but it's rapidly approaching submission to regulatory authorities to enter human studies.
As a reminder, we have presented data in mice at several conferences in 2020.
It's just that the key take home message is that N O as a monotherapy conveyed immunity to the host after a single administration of 5 minutes.
In our studies tumor bearing mice were treated intra tumor really with a single 5 minute 50000 part per million nitric oxide administration.
2 weeks later on.
Challenge tumor of the same cell type was implanted contra laterally in the treated mice as well as untreated controls.
100% of the treated mice resisted secondary tumor growth for the 45 day observation period, while tumor growth was observed in all of the control animals within 10 days after tumor inoculation.
These and.
Peter all available on our website suggest that tumor immunity may be conferred by <unk> treatment.
With that I will now turn the call over to Doug for the full financial review, Doug. Thank you, Steve Here's a brief review of our financial results for fiscal 'twenty, 1 which ended on March 31.2021.
The other day revenue for the fiscal year ended March 31, 2021 was 873000 as compared to $1.4 million for the fiscal year ended March 31, 2020, all of which was from deferred licensing revenue.
Research and development expenses for the fiscal.
Fiscal year ended March 31, 2021.
$12.6 million compared to $10.6 million for the fiscal year ended March 31.2020.
General and administrative expenses for the fiscal year ended March 31, 2021 were $10.5.
1 compared to $8.9 million for the fiscal year ended March 31.2020.
For the fiscal year ended March 31, 2021, the company had a net loss of $22.9 million or $1.27 per share.
Compared to a net worth of 20.
$25 million or $1.78 per share for the fiscal year ended March 31.2020.
As of March 31.
2021, the company had cash cash equivalents and restricted cash of $35.3 million.
I would like to reiterate our cash balance as.
As of April 32021, which was $34.9 million given net we recently provided this information in our press release.
<unk> said earlier, we believe this cash is sufficient to fund operations well beyond the next 12 months, including the initial U S commercial launch phase.
100 <unk> ph.
Ill hand back the call to Steve Thanks, Pat.
Operator lets go straight to the Q&A.
Thank you at this time, we'll be conducting a question and answer session. If you would like to ask a question. Please press star 1 on your telephone keypad and a confirmation tone will indicate that.
Your line is in the queue.
You May press Star 2 if you would like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, 1 moment, please while we poll for questions.
Our first question is from Suraj Kalia with Oppenheimer. Please proceed.
Good afternoon, everyone can you hear me all right.
Yes, yes, I, Ken Thanks, Ron.
Steve The obvious question I know you specifically said you don't want to talk much about the FDA discussions maybe you could characterize the timeline shift for PPA Chen from late.
Summer 2 end of Q3.
I presume that is driven by your conservatism rather than the FDA, specifically requesting any more testing or incremental data.
No.
No.
So suraj.
Summer summer ends in the end.
The September so it's almost the same thing.
Net.
That's how I view it I mean was the first day of fall is like September 21st or second I believe so.
It's just a different way of wording. It basically the same thing so it wasn't really trying to change any and any timing.
And Steve when you talk about.
The PPA channel launch maybe you can talk about.
On the number of sites you all are expecting to target.
Feet on the ground ROI calculations, you know how do you for the first few sites you're looking to target maybe you can just kind of walk.
Because through X number of sites.
How are you.
You all are looking for and then expand to a more broader population.
Yeah, So I'm.
I'll quickly comment on ROI, and then I'll pass it over to Duncan.
You know rich.
Turn on investment for these first few sites.
<unk> is going to be small I think we've told people is first.
On a 6 to 9 months. After we launched is again targeted as you're saying and.
And we don't expect to see big numbers from that I mean, it'll be at a very small number of.
Hospitals, so the return on that investment is really.
On the knowledge that we gained.
From this early phase so that we can branch out further once this phase is done so to answer the rest I'll turn it over to Duncan.
Thanks, Steve So suraj.
This first phase, we're going to be working with about a dozen hospitals over the last 6 to 9 month period.
As Steve said, we don't anticipate a significant investment.
Just on.
<unk> the appointment of 2 outstanding leaders.
On the sales on the marketing side and they have a really good experience in the nitric oxide market, we know the <unk>.
Sites that are interested in working with us.
And it's a fairly straightforward exercise to bring them on.
To run on evaluation and during that period, we're going to be focusing on refining our supply chain understanding any logistical.
Nuances with specific hospitals and learning as Steve said, so that we can make sure that we have the optimal product when we expand after that phase 1 period.
Got it.
And finally, Steve in terms of CE, Mark maybe you can walk us through the timing of filing and when do you all expect.
Discussions with potential partners because these statements seem to be pretty definitive that you all will sign a partnership in FY 'twenty..2 maybe you can just walk us through.
So you see the cadence.
The the regulatory filing discussions with potential partners any color there would be greatly appreciated. Thank you for taking my questions sure. Thanks Suraj.
So Europe is a little different in the U S.
We work through a notified body.
Like everyone else so.
From a fluid process, there's really no.
Hard date, we submitted and it was accepted for review of like FDA does it it's more of a.
On ongoing process and based upon that process and where we are right now we think that will happen around the end of this year.
This calendar year.
From our perspective.
It's best for Us too.
To wait.
On to partner until after we've received our CE Mark we think that puts us in the best position to.
To optimize.
The the terms that we partner on.
So that's where we are and you know suraj debt.
In the U S. You can you can go to market relatively quickly after approval where in Europe. There are several steps after a pool on a country by country basis.
That you need to take which makes launching the product there take quite a bit longer than in the U S. So we do.
Do have some time on I don't think we're losing much.
By waiting to optimize our terms until out to see Mark I don't think we're going to be delaying the launch.
By much if at all.
Thank you our.
Next question is from Matt Kaplan with Ladenburg Thalmann. Please proceed.
Hi, Steve Thanks for taking the questions and congrats on the progress.
Just wanted to.
Yeah, just a follow on to Scott's.
Question in terms of can you talk a little bit about <unk>.
Thoughts on expansion phase following the.
The first 6 to 9 months on how we should think about that that phase of the launch as you. After you get all of your systems and everything in place.
And that first.
The first few.
Few months on the launch and then what happens next.
Okay sure I'll, let Duncan take that yeah. Thanks, Matt.
So.
After that first period, we should have all the information we need to optimize the supply chain et cetera. So it's really a question of just building themselves organization and with the leadership that we brought in.
Rebecca Van Doren has 10 years experience building, a sales organization nitric oxide industry and <unk>.
Tyler has been working in the health care marketing space for a long time, including working on nitric oxide. So both of them understand what's required we're very clear about how we would ramp up and it's not going to take much for us to expand our sales organization in terms of target and there's already a really.
Very good awareness.
Orient in the respiratory community of nitric oxide. So we don't anticipate much trouble fly.
Finding the right locations to expand them.
And depending on when contracts fall, we estimate that typically between 1 and 3 years of the 850 hospitals, where the NICU unit, we still.
On a certainty of hospitals will be ready to do the evaluations and then start to contract. So for US the investment is not significant the expansion of the sales team.
Bear in mind that the market leader and never had more than really 50 to 60 salespeople out.
That's for that $500 million worth of business. So we don't think it's going to be a big challenge for us to have the right team in place to expand so really it's really about execution at that point.
And is there a metric you put on it or have revenues per hospital.
Is that a way to think about it or.
On the reservoirs as they're on.
On the line.
Oh man I wouldn't look at it that way these are.
On hospitals vary in size.
And in demand of nitric oxide zone.
I would look at it more it's hard for me to tell you, which hospitals, we're going to get first a lot of it is based upon on the contracts that these.
These hospitals are currently under so they could be up 2 or 3 years left on their contract and we might get a shot on them and they could be the big ones or.
1 coming up when we launch so.
It's you know you can use the classic you know 80.20 rule you know 80% of the Rab is going to be generally by 20% on the customers I just it's just not it's not that we can.
Target those top 20% day 1.
It's more of a <unk>.
Timing issue.
Which hospitals, we can target and win and that's not a bad thing for us.
As Duncan has mentioned this this is kind of a phased approach.
It gives us the opportunity to kind of map things out over the first 2 years post.
Post approval of where we're going to go geographically.
And which hospitals will be targeting so it actually works very well on our favorite to be.
To have it.
Kind of.
Staggered over the next few years in terms of the opportunity to target hospitals.
Great great.
And just shifting gears a little bit in terms of you.
You mentioned lung fit go in the ongoing on T M.
At home study.
The interim results that are expected.
Paul.
What how should we think about those in terms of number of pay.
But we should see a potentially a small lift yourself.
So this.
This is a study where we're looking to enroll 20 patients so I wouldn't.
Look for 20 patients in that in that look and you know the exact number is tough to get to because we're not exactly sure of the cutoff.
Patients will be able to put the data into any.
Any presentation.
Presentation that we'd be accepted for it at a conference. So its tough number to nail down Matt, but it'll be enough patients that it'll be in our opinion it will be meaningful.
To people when they see it.
Okay.
For winning and then.
Lastly, the.
The EU opportunity for PPA Chen.
Hey, Ron.
Th.
Can you give us some color on that.
Yes so.
As far as he is concerned the 2.
The big 5 of the obvious markets that we would be expecting to target and of those U K and Germany are probably the most advanced in terms of the market opportunity, it's clearly significantly less than the U S. Because price is.
As depressed compared to the U S. But we think there is an opportunity because.
Cause that.
There are a lot of restrictions on the use of nitric oxide in Europe as it's matured.
And that's how they've driven the price on the usage down and we think that our system is going to be more simple and flexible to use and will be potentially used in a broader.
A broader set of circumstances.
It's definitely a significantly smaller opportunity, but it's still a lot of opportunity for growth and by other markets that we would target initially.
Okay. Thank you that's helpful. Thanks.
Thanks for taking the questions.
Thanks, Matt.
Yes.
Yes.
Thank you. Our next question is from.
Fraser with true Securities. Please proceed.
Good afternoon folks thanks for taking the questions.
Nitric oxide is a large item from any hospital managing utilization is clearly important for hospitals to control costs do you see any material gross to the MLP market from last wells pushing on the use of alternative.
Greg.
Money like Sildenafil that might contribute to volume erosion overtime.
Not at all.
I think she'll denna fill in.
The other PD force.
We are not going to be able to replace nitric oxide in this context.
Turning to perhaps need pulmonary arterial hypertension space day, but they may have some bench.
Benefits and may be able to impact that market, but.
I think with respect to <unk>.
PPA Chen and outside the U S. Obviously on label as the cardiac surgery patients.
I don't see it.
The sales down infill type products, having an impact here.
Got it Okay and then just following up on the lung pick those studies or MTM lung infections, where the entry on our results include safety and efficacy data and how would you set the bar on what you need to see in this study efficacy wise.
Do you consider it a success.
So most.
And in this interim look we'll see safety, obviously safety Tolerability I think it's important to see the dose that.
We go to rent, we titrated from $1.50 to 250 parts per million.
I would like to see $2.50.
And as many patients as possible.
Again patients tolerating it for the full 12 weeks of treatment.
From an efficacy standpoint on.
On the early data I think will be we should get a decent look at quality of life.
Possibly physical function data, which are 2 critical.
Lions.
I think debt bacterial load is going to take longer I don't think were going to see much if any on the interim look.
As you know this.
These type of data takes time.
We send it out to a lab the central lab.
Work is done there and thats that.
That's something that will take a bit longer and remember that we do filed.
1 points for 12 weeks after the 12 week treatment period total 12 weeks of observation, where we're still.
Gathering data, especially on on bacterial load so.
I think that.
Safety Tolerability as well as quite away from physical functions is what you should be looking for.
<unk>.
As.
Page 4.
What do we need to see to be excited we're happy about that improvement improvement quite a life improvement on physical function.
This is.
An open label study single arm and we are getting baseline numbers.
So these patients will act as their own controls.
Youll be able to.
As for the.
The effect.
On these patients whatever however, many it is at that interim look.
I mean, we.
We expect to see improvement if we see a decline in physical function and plenty of what's that that's bad.
But we expect to see improvement that would be a big positive from for these patients.
Got it that's very helpful and then just on on.
On the planned pivotal study for patients hospitalized with valves and on your question. It sounds like Youre going to make a decision on whether the target.
Or your guidance is that correct.
And if that is right.
How you decided which way to go.
Yeah, we.
You see bolt choose 1 or the other.
Going into a winter season.
Doing it pivotal study for both of those at the same time, it's just not possible.
So.
We will pick 1 and that decision will be made towards the end of this year on when we've gather all the data.
We will gather is still gathering and we've made an evaluation with with.
With the experts internally it beyond there and as well as those experts that are working with us from outside the company and what we'll figure it out at that point in time right now we don't have the answer.
Got it okay. Thanks for taking the question.
Thank you. Our next question is from Scott Henry with Roth Capital. Please proceed.
Thank you and good afternoon, I've been jumping around so I apologize if any of these questions have been asked.
Starting off on the clinical side.
Steve The Australian study for the at home pilots.
Thanks, Greg.
Did you say, how many patients we're going to be on that trial.
Yes, the target is 20 patients total.
Okay, and it sounds like we should be pretty comfortable that the COVID-19 is not going to have any significant delays there.
So on your statements is that fair.
Yes, I think the delays related to coal.
Covid have already occurred.
I can't see.
Say for sure that it won't have any impact over the next you know.
Several months I don't know Australia is handling it differently than we have in other places so they're pretty tight over there.
So I just don't know.
Hope, there's no more impact from Covid anywhere, especially on our trial, but we certainly faced challenges over the first.
Half of this year on the first 6 months of this year.
And I think they are subsiding and like I said in my prepared remarks that enrollment is certainly picking up recently and we're very happy to see that.
Great.
Fair enough and then on the.
The pilot study in Israel, when should we expect data from that trial.
So.
The data that we showed in Etfs.
Yes.
The data that we have.
Was available at the time.
I think that the next time, we show data from this trial will probably be.
In the first half of next year right.
Right now the team is focused on gathering this information.
Again, we still have.
Open in case more patients are rolling in on a slow basis in the summer months.
But our goal is to.
Do our best to analyze all the data and put it together for FDA. So that we can approach them around the end of this year and have a discussion about our pivotal study beginning in the fourth quarter of 'twenty 2 so that's our goal.
The sites our goal is not to try to get more data out by the end of this year. Our goal is to prepare for FDA and go with them by the end of this year and perhaps in the first half of 'twenty..2 we would show more data from this study.
Okay, great. Thank you and then.
Cleaning up this or coffee.
Paul.
A nice positive for the company.
Is there any accounting noise, we should expect from that any 1 time charges or any changes.
Just the factor into the model.
No I think.
It's pretty much laid out is is this is going to be a pain.
Payment due once.
Good day approval and then the other payments would obviously be do as well so right now there's there's no accounting changes until we see approval and once that happens you'll see the payments made as they were laid out on in the press release.
A month or so okay.
Perfect and then just final question I.
We give kind of you've given us a lot of bits and pieces around it already but.
How should we think about the first year of that P. P. M. R. R.
The PPA Jan launch in terms of.
How long from when you launch to when you start.
Accruing <unk>.
No.
And how should we just think about revenues in that first year.
As far as expectation.
Yeah I think.
Based on on GAAP accounting Youre going to be a crew you're trying to match the revenues with the period that you.
You know when your expenses in the same period. So we may recognize.
Revenue revenues fairly quickly with.
With cash coming in a few months after.
So.
It should be you know if we launch in this in this fourth quarter of this calendar year on them.
The third quarter of our fiscal year, which is what we were planning on doing I.
I would say you would see revenues in the following quarter. So you would see reps in our fiscal fourth quarter.
Again, I would caution everyone that we're on.
Looking at large revenues, we're looking at.
A low low level of revenues for that quarter.
So I think that does that answer your whole.
<unk> Rep, Scott Yeah, Yeah, I mean, that's that's helpful.
Guess, what I'm, just trying to think about from a ramp it sounds like we should think about those first 12 months as a sort of a pilot process with kind of an inflection point, perhaps later in the cycle I just I just want to make sure I'm thinking about that on the right way.
Uh huh.
I think you are thinking about on that in the right way that these are we're calling on a 6 to 9 month period of on.
On a focused launch and that won't start the day, we get approval is going to be.
Probably about you know I don't know on close to 2 months before we start to really get out there 16 weeks call. It.
And that would take.
US too close to the first 12 months after approval and I think that yeah, there should be very modest expectations for top line revenues for that during this period.
And again Duncan said, we once we get that confirmation that everything is.
Is all the wrinkles on smoothed out in the process.
We will be moving very quickly to expand so I would see it.
Quite large expansion off of that first 12 months and the second 12 months in terms of revenues that we'll be bringing in.
Okay, great. Thank you for taking my question.
Sure. Thanks, Scott.
Thank you.
Our next question is from Yale Jen with Laidlaw <unk> Company. Please proceed.
Good afternoon, and thanks for taking the questions.
Started with some housekeeping questions that the last quarter, the R&D expenses seems substantially lower than that.
Prior quarters, and how should we think about that.
For the fiscal 2020 to close to getting done on R&D quarterly quarter over quarter.
Thanks, Joe Yeah. So.
We spent a lot of money.
On the R&D side and you know.
We think of R&D in 2 ways R&D for our clinical studies as well as R&D for engineering.
And the R&D engineering numbers went down significantly since we had submitted the PMA in the spend subsided.
Subsided on that variable spend.
For engineering.
Is it even on the.
Clinical trial side.
We didn't have a lot of expenses on the MTM side and on.
That's obviously picked up but again it'll be offset by the CF grant.
And the study in Israel, a lot of those expenses occurred.
Upfront in the December.
Remember quarter, so yeah that number went down a bit and I don't anticipate it going up much in my prepared remarks, I said that.
Overall.
Actual cash expenditure will be lower in the June quarter than it was in the March quarter, and that's going to come from R&D.
Because again, we're not spending on trials now.
We're kind of in a little bit of a low here.
And that spend obviously will pick up again not on the R&D side, but it will pick up on the commercial side once we get approval.
So I think the R&D spend will begin to pick up.
In the back half of.
Of calendar 'twenty 2.
At that time, we'll be prepping for a pivotal study in either bronchiolitis or viral pneumonia.
As well as the expenses are probably be picking up as well on our cancer program.
We should be.
Quite a ways through our phase 1 study.
And as you can surmise there'll be a little bit of.
Kind of phase 1 a 1 b, where it would be <unk> be a little more expensive and that would be later in the year.
And as we wrap up the MTM studying.
<unk> and plan for a pivotal there.
I don't know if those expenses kick in in 'twenty, 2 but it's probably more on the in the first half of calendar 'twenty 3 of initial to see those expenses pick up so that kind of back half of 'twenty 2 into the first half of 'twenty..3 is when R&D expenses will start to ramp back up until then it's going to remain fairly low.
Okay, Great. That's very helpful. Maybe you could along the same thing first of all in terms of the foundation.
Funding would that be recorded on the license revenue.
Well no.
Oh that's separate.
It's an offset of expenses.
And we recorded net.
And in terms of your thought presumably starting from a marketing effort will end up.
On the it until the fourth in the fourth quarter of debt yes.
We anticipate a bump P&L perspective, a separate.
Line of marketing.
That's how the expenditure or that will be blended into the SG&A altogether.
Yes, it will.
I don't know yet.
I know some companies will breakout this sales and marketing and G&A separately.
I don't know if were going to do that.
In the next couple.
The orders we might do it.
Maybe in the next year or 2 I don't see it happening in the near term, but we'll.
We'll see what we can do.
Okay, maybe just 1 more on marketing.
The question here.
Is that.
On a net off site sales the revenue.
Couple of quick dominant.
Orkin com from the cardiovascular labs, and I understand that the off label.
Off label use and what your thought at this moment also from <unk>.
Spanning into that space with.
Would that be something.
After the initial.
On top of launch or is that something you will contemplate that sometime in the future.
Yeah Ali it's Duncan here, thanks for the question.
So as far as the cardiovascular label, it's something we plan to submit for.
Soon as possible post approval.
Obviously right now the indication is for PPA churn and that's how we will promote the products we sell.
We will respond to all the hospitals that want to use it in any other fashion and.
Because the.
The nitric oxide has.
It's been used for over 20 years depends a very well established so we don't expect it to be particularly different for us, but obviously, we will do it in exactly the right manner. So.
That's how we're going to move forward.
Are you, referring that you will have a formal submission.
Approval or simply.
Wally.
Is that what you're.
Suggesting.
We'll be submitting for Cardiome to label expansion the label expansion.
Okay great.
I appreciate that.
Congrats on the power business.
Thanks, Jeff.
As a reminder, if there are any other questions you May press star 1.
On your telephone keypad and another confirmation of the ones that hit your line is on the Q.
Yeah.
There are no more questions at this time I would like to turn.
The call back to management for closing remarks.
Thanks, operator, thanks, everyone for joining today.
We'll be around if there's any more questions.
Okay.
Okay.
This ends today's conference you may disconnect. Your lines at this time. Thank you very much for your participation.
And have a great day.