Q1 2023 Beyond Air Inc Earnings Call

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Good afternoon, and welcome everyone to the beyond Air Financial results Conference call for the first fiscal quarter ended June 30th 2022. At this time participants are in a listen only mode.

Question and answer session will follow the formal presentation. Please note that today's event is being recorded.

At this time I would like to turn the call over to you.

Corey Davis from lifestyle Advisors. Please go ahead.

Thank you operator, good afternoon, everyone and thank you for joining us.

Today after market close we issued a press release announcing the first quarter of fiscal year 2023 operational highlights and financial results.

A copy of this press release can be found in the Investor Relations page of our website before we begin I would like to remind everyone that we will be making comments and various remarks about future expectations plans and prospects constitute forward looking statements for purposes of the safe Harbor provisions under the private Securities Litigation Reform Act of 1995, <unk> cautions that these forward look.

These 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 Securities and Exchange Commission, including without limitation. The company's most recent Form 10-K, and Form 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward looking statements additional.

This conference call is being recorded and will be available for audio rebroadcast on our website www dot beyond their dot net.

Furthermore, the content of this conference call contains time sensitive information that is accurate only as of the date of this live broadcast August 11, 2022 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, Chairman and Chief Executive Officer Duncan VAT.

And Chief commercial Officer, and Douglas Larson, Chief Financial Officer of beyond Air.

With that I will now turn the call over to Steve Lisi, Steve go ahead.

Thanks, Corey and good afternoon to everyone joining us.

Today's call I'll begin by providing an update across our portfolio, including beyond cancer.

Before turning it over to our Chief commercial Officer Duncan backend will provide an update on the <unk> commercial launch.

This will be followed by an overview of our financial results for the quarter, Our Chief Financial Officer, Doug Washington, and then we will open the call up for questions.

I'd like to thank the beyond air team as they continue to embody the mission of our organization and developing and commercializing the <unk> platform to address several therapeutic indications.

This includes the <unk> ph, which is our initial device to receive FDA approval.

We believe this system has the potential to revolutionize the treatment of persistent pulmonary hypertension of the newborn or BPH, Ed in the United States and cardiac surgeries around the world.

Our sales and marketing teams have been working hard for the six weeks since approval implementing the initial phase of the commercial launch of <unk> 50 each.

At this point everything is as expected and the feedback from hospitals has been very positive.

We also anticipate launching internationally through a partner next year, given our current expectation of receiving CE Mark in Europe before year end.

We will provide more information on our global strategy as these matters unfold.

Turning now to our development pipeline I will be brief since we reported our fiscal year, just six weeks ago.

We are very pleased to let you know that we will be presenting incremental data from our at home Lungfish MTM study at the American College of chest physicians or chest 2022 in October .

As a reminder, we presented interim data on this 12 week study that showed high concentration inhaled nitric oxide was well tolerated. Following a total of 2000 and 323 installations self administered at home with no treatment related discontinuation reported an overall high treatment compliance.

Quality of life data trended strongly in favor of enough, which is what FDA is most recent guidance requires for the primary endpoint in MTM studies.

If ultimately approved we believe the lung fitzco has the potential to be a game changer for this patient population and could open the door for beyond air to the enormous home market of respiratory diseases.

To expand the landscape for both lung quid Pro NGO. We're currently planning to initiate a pilot study in 2023 that will evaluate the lung fits go treating severe exacerbations due to lung infections in COPD patients.

Moving on to our viral lung infection program, which uses the <unk> pro system at 150 parts per million to treat community acquired viral pneumonia in adults in bronchiolitis from children under two years of age.

We are pleased to show more data from our valve community acquired pneumonia study at a medical conference. This fall.

Our next milestone for this indication will be a discussion with the FDA over the next few months on a U S trial design with the intention of starting with such a study in the fourth quarter of calendar 2023.

As a reminder.

We have now completed and adult pneumonia study three bronchiolitis studies two MTM studies, along with several other studies to give us an excess of 5000 administrations at 150 parts per million to 250 parts per million to over a 170 patients with an excellent safety profile.

Moving to our private affiliate beyond cancer, we announced in late June at the Phase one clinical trial open for screening and we anticipate treating the first patient in the coming weeks.

As a reminder, this study is designed to evaluate the maximum tolerated dose safety and efficacy of ultra high concentration nitric oxide injection into solid tumors in the refractory setting.

Beyond cancer is also working towards presenting combination data in mice later this year.

While we remain confident that there are tumors, where <unk> may be effective as a monotherapy.

We are also examining where <unk> may be used in combination to treat a variety of solid tumors.

Now is with great pleasure that I hand, the call over to Dr. <unk> <unk> Chief commercial officer of beyond their speak about the first six weeks of the U S. Commercial launch for the FDA approved <unk> ph Duncan.

Thanks, Steve and good afternoon to our investors.

With FDA approval received in late June .

Six weeks have been a truly exciting time for the whole beyond that.

Focus on our goal to fulfill the enormous potential for luxury.

During this time, we have been busy executing against our go to market strategy, which includes a multi phased commercial approach.

The initial phase represents a measured release of luxury ph.

Group of hospitals that have level three level, four knickers and staff experience with inhaled nitric oxide.

Our team is actively conducting demonstrations of the system. So the staff at these hospitals.

From which the feedback has already been overwhelmingly positive.

The hospitals, we have visited so far.

Obviously by the opportunity to eliminate cylinder by the speed at which the luxury system can generate a steady dose of nitric oxide.

The hospital staff will typically comment on how simple luxury tiers.

To us and are genuinely excited to evaluate the system.

One hospital director of respiratory care I mentioned, we've been waiting and waiting for you to get approved.

This interest was reinforced EMEA, how it contrasts where our team exhibited last week in Los Angeles' attended by almost a thousand delegates.

We have the opportunity to engage with hospitals across the country.

As we look ahead, our focus is to sign contracts with the first wave of hospitals and make sure that everything runs smoothly.

Over the first six to nine months of an initial hospital engagement.

Team will work closely with the hospital staff to ensure.

Sure that beyond there has optimized our logistics customer service and product performance.

You referred to collectively as the lungs like $24 seven partnership and support program.

There are three components of this program that together make up what we believe will become the gold standard so the nitric oxide industry.

As its name implies.

We have designed the lung flex business model to be flexible and transparent.

Providing an all inclusive contracts that includes the necessary number of <unk> systems.

Backup systems and accessories for the period of that contract.

This will allow hospitals to budget for that nitric oxide system with certainty.

Secondly, we have recruited a very experienced clinical specialist team that will not only provide initial training onsite clinical expertise and support.

They will also be available on demand.

All members of our clinical specialist team are registered respiratory therapists and have specific experience in the nitric oxide industry.

Finally, the lung flex service and support line will provide 24, 7%.

The old customers with technical clinical and commercial support.

Our team will handle everything from routine autism billing inquiries, so emergency deliveries using a rapid replacement program.

We do not expect these initial hospitals to require an abundance of devices. Upfronts. However, they will have a sufficient volume of Fas per months to provide a rigorous test for luxury ph and the beyond that too.

Of course FDA approval is just the start up of our commercialization journey we.

We anticipate the CE mark for the lunch <unk> ph system to be granted before the end of 2022.

In addition, we are planning to submit a supplemental PMA to the FDA for an expanded cardiac label.

In the first half of calendar year 2023, we anticipate to start the phase II of our launch will.

We will be expanding our commercial team to support this much broader sales efforts and would expect this to lead to an acceleration in our commercial success.

I will now turn the call over to Douglas Boston, Chief Financial Officer to provide an overview of our financial results for the fiscal quarter ended June 32022.

Thanks, Duncan and good afternoon to our investors.

Our financial results for the first quarter of fiscal year 2023, which ended on June 32022 are as follows.

On a GAAP basis research and development expenses for the fiscal quarter ended June 32022 for $3 $2 million compared with $2 $7 million for the fiscal quarter ended June 32021.

On a GAAP basis general and administrative expenses for the fiscal quarter ended June 32022 increased to $8 2 million.

Compared with $3 $9 million for the fiscal quarter ended June 32021.

This was mostly attributable to the staffing and scaling up of beyond cancer in both the U S and Israel as well as the continuous investments necessary to support the commercial launch of lung <unk> ph in the U S.

Other income and expense for the fiscal quarter ended June 32022 was a loss of <unk> 2 million comparable with the loss of <unk> $2 million for the fiscal quarter ended June 32021.

For the fiscal quarter ended June 32022, the company had a GAAP net loss of $11 $7 million.

Of which $10 9 million or <unk> 37 per share attributable to the shareholders of beyond Air Inc, compared with a loss of $6 $7 million or <unk> 31 per share for the fiscal quarter ended June 32021.

Net cash used in operating activities, including those of beyond cancer with $6 8 million during the quarter ended June 32022.

As of June 32022, the company reported cash and cash equivalents of $72 8 million.

We still expect our average quarterly cash burn for fiscal 2023 to be within a range of $8 million to $10 million.

As such we believe our current cash and cash equivalents are sufficient to fund operations well beyond the next 12 months, including through the initial commercial launch phase of lung ph in the U S.

Expect to start showing revenue in our third fiscal quarter.

In addition, we expect to report low or even negative gross margins for the next two quarters.

As we start to incur some supply chain expenses, which will be classified as cost of goods sold.

And with that I'll hand, the call back to Steve.

Thanks, Doug operator, let's go to Q&A.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys you would like to withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

Today's first question comes from Greg Fraser with <unk>. Please proceed.

Great. Thanks, so much for taking the question.

I was hoping you could talk a bit more about the feedback that you've been getting from the Haas Bill.

Curious what attributes of the system or resonate about commissions.

You mentioned speed as one.

There anything else that you would point to add anything.

Come up in the discussion that has been unexpected.

Yeah.

Hi, It's Duncan here. Thanks for the question, Yes suddenly people are very impressed with how quickly.

Produces nitric oxide.

There's the obvious reaction to the elimination of the bulk of the cylinders and the logistics associated with that but also just the simplicity.

Sorry.

Easy to understand system.

Their expectation is that the China.

Process isn't going to be at Ola onerous and transition would be quite straightforward. So I think that.

What's happened with the demonstrations as they typically.

Doesn't last too long because it's such a straightforward system to use and then the question is are all about how they can integrate that into the hospital and the whole process eventually.

Reaching some kind of agreement. So we are getting the kind of feedback we expect it to about the speed and simplicity Israeli the other component that we're getting great feedback.

And then there are obviously intrigued.

The system's ability to generate nitric oxide.

From room.

And the predictability of the system as well as something to that.

Excited about.

Great.

Can you comment on if there are any notable differences in the loan program versus non credit total care program.

Well the way that we're approaching it certainly from a general perspective.

I much similarities.

But in terms of the.

The response, we're aiming to be very flexible and transparent with our.

Business model.

Sorry can you hear me okay.

Yes.

So im not sure how much of that you had I think we had an interruption, but I'll tell you just in case.

All right.

Okay. So the.

The business model within Lee.

Aiming to be very flexible and transparent and dependent on the hospital that may be a significant difference in terms of their ability to.

Use the system.

Beyond what they might be currently using it because they have potentially got protocols in place to limit the use of nitric oxide because either.

<unk> cost all of the flexibility.

Our system might offer.

In terms of the locations of our systems, we're going to have a network of.

Stocking locations that we're in.

Particularly different and the team that we've recruited some of which.

Half.

Incredible amount of nitric oxide experience, we expect to be able to offer at least strong clinical.

Backup so I'd say, it's the flexibility and transparency of the business model, that's going to be the most obvious difference initially and then over time, we're hoping that they'll also see some other benefits, but I'm not going to go into because we have some <unk>.

Unique capabilities.

That we've built into our logistical partner.

Got it very helpful.

If I if I may.

Yes.

Is that potential for cost savings tied to not having to deal with calendar is that something that comes up in the discussion.

The hospitals are focused on logistics clearly.

The answer is not having that.

Great.

Et cetera.

Are there cost savings attached to that also that are important to hospitals.

Yes, I think.

Really varies from hospital hospital depends on how Thats set up so I wouldn't want to assume that it's the same for every hospital.

However, generally there's a couple of reactions to the ease of use the elimination of the logistics and workflow which can have.

<unk> cost savings, but also asked significantly can make it just easier to use the system allows the clinicians to focus more on the placement welfare.

And also when they are using the system.

There's a predictability is built into our system so no matter what.

Type of treatment that provide and this is associated with the dose that provide in the.

The ventilator use stats in the half.

At the time.

The filter time for US is 12 hours no matter how the system is being used no matter what the dose all flows.

So that kind of predictability and ease of use allows them to plan much more effectively and potentially.

Avoid overrun charges that exist with cylinders or just general use of additional cylinders, which we know is.

For sure happening. So we've stated before we don't intend to.

Compete aggressively on price rather on value and as I said that of course depends.

On hospital from hospital to hospital.

Great. Thanks for the color.

The next question comes from Scott Henry with Roth Capital.

Thank you and good afternoon, just a couple questions first.

The G&A of $8 2 million.

You talked about.

What went into it.

Question is.

Is that a good go forward number should we think about that I mean, I imagine there'll be some additional selling expenses as we go but how represented representative as the $8 2 million going forward.

Scott Steve here.

Notice of this.

I think it's fairly representative and you're right as we get into the.

First half of next calendar year, it will probably start to move and as we begin our second phase of the launch but youll.

Youll see in the Q.

That that goes up.

Probably in the next 2030 minutes that there's a little bit of.

Of noncash items in there as well.

Okay, great. Thank you for that.

The color and then another question.

Cardiac label can you talk about how the addition of a cardiac label.

<unk> product, particularly how it is positioned to the other players in the market.

So right now the cardiac usage for nitric oxide is off label.

So hospitals that use it or not getting reimbursed and it's certainly hurting me.

<unk> ability on those surgeries that where they need to use nitric.

So getting it on label, obviously allows us to target those those.

Physicians and hospitals, where it's being used.

And give them the reimbursement.

That comes along with the label. So I think that's a very important piece of the equation for US right now no one else has that on label.

Saying, others may not be pursuing it I don't know but.

I think it's going to be very helpful.

For us and for everyone in the market actually.

I think.

Eventually if one of US gets it I think over time, everyone will get that on label, but nice to be first wanted to get that on label. That's for sure it should be very helpful. But.

I think the hospitals would gladly.

Except reimbursement.

The use of nitric if they can get it.

Okay, Great and Steve.

Whats the latest estimate of what percentage of the market is cardiac usage.

I think it's well more than half the market.

Cardiac usage.

You do have a newborn baby's PVH N babies, you certainly have a component of.

Acute respiratory distress syndrome, there in COVID-19 as well.

It's being used for so, but I would say that cardiac.

<unk> is more than all of those other conditions combined for sure.

Okay, Great and then.

Final question and I don't know if you have given this but the initial phase.

Phase of launch, which we're in right now have you talked about how many centers you are targeting whether it's specific number or a range of hospital.

How should we think about the scope of the initial phase.

So I will tell you that Scott.

For the question. So I think we've been pretty consistent on this we were aiming for about a dozen hospitals in that first six to nine months period.

It may change depending on whether a couple of hospitals are connected to each other and that want to work in tandem etc.

That's been the focus because we want to use that time to optimize logistics service and make sure that everything is working as planned.

Okay, great. Thank you for taking the questions.

Thanks Scott.

The next question comes from Matt Kaplan with Ladenburg Thalmann. Please proceed.

Hey, guys. Thanks for taking the questions.

I guess, just a quick follow up too.

Scott question.

If you are targeting 12 hospitals, how many how many devices do you hope to place in those 12 hospitals should we think of it as kind of one system per hospital or is there chance for multiple customers.

Yes, Matt.

You're probably looking in.

Anywhere from the mid single digits.

The teams just depends on the hospital and where we're looking and there are plenty of hospitals that have 25 plus.

<unk> that they use.

And in the beginning of our launch here I don't think we're going to be committing 25 30 units to one single hospital.

No. That's just during the first six months to nine months so.

I don't think we're going to be going to hospitals, where they are using one or two systems, we need to use.

We've said before we're targeting hospitals that that.

Have a certain volume of hours per year, so that our machines can get use and you can get feedback on how how theyre performing.

Okay.

And then just going back to the business model in terms of.

Revenue generating how should we think about this.

The devices device component and perhaps.

The filter component.

The revenue generating.

<unk> for your business model.

So.

The way the market works now essentially is the hospitals a charge per hour of usage of nitric so.

All of these other components for our competitors' delivery system cylinder and all the connections and so forth.

They are not really itemized for.

For pricing they're included in the package of what they pay per hour.

Nitric so.

We're going to try to keep things status quo with how things are done contractually and what they are charged for so you can look at it is charging on an hourly basis.

Just like our competitors do kind of throwing everything else in essentially.

For arguments sake, and the way, we'll be able to track that is our filters last 12 hours and no matter. What the situation is no matter what the concentration of <unk> is where the flow or the type of event being used.

Last 12 hours, so it's very easy for us to track the <unk>.

Time that.

The hospital has used our system for.

Okay, and then last question in terms of your inventory.

License.

Can you talk a little bit about that and kind of any constraints that you see in terms of being able to supply devices to the hospital. The first 12 hospitals.

And in the initial stage of launch.

I don't think we're concerned about the initial stage I think we're good there.

And we're looking out nine.

Nine months plus to supply what the demand will be at that moment in time.

We face the same challenges that everybody else in the world faces.

With electronics and supply so.

We're no different when we get to phase two from everybody else out there phase one.

It recovered okay. Okay.

Okay. So we have we have time to.

Gather more.

Components and build more systems.

Great and then and then just two quick questions and I'll jump back in the queue on the pipeline.

You said, you're going to have updated data on the <unk> at <unk>.

First in October .

What should we what should we expect to see there in terms of numbers of patients and type of data that you're going to have there.

You're going to see 15 patients.

And.

We will have to see what the data are going to be.

I actually don't know, Matt because my statistician won't tell me he.

He says when I'm done Youll know, so thats it I don't bother them.

Okay Fair enough and then last question in terms of the.

Phase one study for our oncology program.

You opened screening in June you said, you're going to enroll the first patient this.

This quarter can you give us a sense in terms of where the centers are and.

Is this a worldwide study.

Country, only Israel Israel.

So phase one first in.

In humans so it just.

No way its multi countries just Israel.

And do you expect to have an IND.

Opened in the U S in the near term line.

Depends what you mean by near term.

But yes, we're going to have we're going to get one of those in the U S. At some point, yes, absolutely.

Thanks, Steve.

Matt.

The next question comes from Yale Jen with Laidlaw <unk> Company. Please proceed.

Thanks, Dave.

And just one quick one.

How do you assess that the phase one is mature enough to.

Entering into two the phase two commercialization simply just by the time.

It doesn't.

Hospitals.

Any other metrics.

Cool.

To make that assessment.

Thanks.

Yeah.

Yes. Thanks for the question Yeah, I think initially we have taken the view that we need that time, the six to nine months too.

Fully evaluate and allow any.

So adjustments to be made.

If we really don't see that as kind of obstacles.

Things are going really well, we will aim to try and accelerate.

So theres no specific.

Milestone is more us.

Making sure that we allow enough time to be prepared for anything and deal with anything that comes our way.

We're hopeful that we'll be able to get gyn.

Certainly at that point into the phase III or a little bit earlier, just depends on how that initial.

Work goes.

Okay, great. Thanks, a lot I appreciate it and good luck.

Thanks, Jeff.

The next question comes from Suraj Kalia with Oppenheimer.

Steve can you hear me all right.

Yes, yes, thanks Ross.

So Steve Duncan for either one of you.

In the Q that Youre talking about the nine to 12 for PPA Chen.

Should we envision that.

The construct.

Of a typical contract exclusive nonexclusive volume based registry based data minimums, just kind of give us some additional parameters that.

Good.

Look it's again, it's fairly standard out there the way the contracts are made by our competitors. So we're going to be pretty consistent with them.

And it's based on an.

An hourly rate.

And an estimate of how many hours will be used per year, and we're going to do the same things hospitals know what they're doing for the past 22 years of using nitric. So we're going to work with them and stick with the same system that's out there.

So it's really not much variability of what its existing at the current time.

I think that would probably be.

Something that would confuse them and be another barrier to them using us. So we're trying to make it as simple as possible. So.

It's just.

Not something that we're going to change or adjust if that makes sense to you.

Okay.

And Steve.

One other question in terms of beyond cancer.

Injected nitric oxide into solid tumors can you give us some additional color in terms of how we should think about the delivery mechanism the residence time.

Fusion.

<unk> data at the at the other end.

From beyond cancer should be start leaning.

Looking out for that could help us better understand.

What has been theorized for long, but you guys could put into practice.

So from a PK profile just how the thing is going to work gentlemen, Thank you for taking my questions.

Sure. So this is a local administration there won't be any PK profile.

And we don't enter the blood stream.

Sure.

That's one part of the answer is one part of your question.

We've put out our data and you can see it on the beyond cancer website that.

We have dose for a duration of five minutes.

<unk>.

It's fairly.

Simple system at this point because we are doing.

Let's say exposed tumors skin surface near skin surface tumors.

So it's just too.

Simple catheter with a needle so we will deliver it so I'm not going to give any more detailed than that because there is certain amount of.

Proprietary information about exactly how we do it.

And we do have a proprietary system to deliver in.

Inside the body, but when a reserve that for either phase <unk>, probably phase III studies.

In the current study that we're in we're just using the current system and we are targeting skin in your skin surface tumors.

So what people need to look for.

And again this is if you look into beyond cancer website, Youll see we show what we believe to be.

A description of the mechanism of action and what happens in the body. So what we'll be looking for in this first in human study is obviously safety.

First and foremost, but hopefully we'll be able to see some some biomarkers that will give us an idea of the immune system being being armed against this tumor type, which is what we saw in the mice.

And we'll be looking for for activity in T cells, and b cells and many other areas.

The body so it.

Something that everyone should look forward hopefully, we'll see some activity in humans like we've seen in the mice.

When we get that data obviously, we've just opened study so hopefully in the next.

Six months, we'll get a bunch of patients and then we'll be able to let people know what the data look like and in the meantime, we hope to show some more data in.

In animals.

We should have some combination studies.

That we're working on now hopefully we can present them before the end of the year at a medical conference.

We have that opportunity so that might give us a little bit more information as to what that mechanism is and how it works in combination with other therapies.

Thank you.

At this time, we're showing no further questioners in the queue and this concludes our question and answer session I would now like to turn the conference back over to Steve Lisi for any closing remarks.

Just want to thank everybody for joining today.

And we will talk to you next time.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

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