Q3 2024 Beyond Air Inc Earnings Call
Operator: Good afternoon, and welcome everyone to the Beyond Air financial results call for the fiscal quarter ended December 31st, 2023. At this time, participants are in a listen-only mode.
Good afternoon, and welcome everyone to the beyond their financial results call for the fiscal quarter ended December 31 2023.
At this time participants are in a listen only mode.
Operator: A question-and-answer session will follow the formal presentation. Now, I'd like to turn the call over to Corey Davis of Lifestyle Advisors. Please go ahead.
<unk> and answer session will follow the formal presentation.
And now I'd like to turn the call over to Corey Davis lifestyle Advisors. Please go ahead.
Corey Davis: Thank you, operator. Good afternoon, everyone, and thank you for joining us. Today after the market closed, we issued a press release announcing the fiscal third quarter 2024 operational highlights and financial results. A copy of this press release can be found on our website, www.beyondair.net, under the News and 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 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, which could cause actual results to differ materially from those indicated.
Thank you operator, good afternoon, everyone and thank you for joining us today after the market close we issued a press release announcing the fiscal third quarter 2024 operational highlights and financial results.
A copy of this press release can be found on our website www dot beyond their dot net under the news and 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 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 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.
Corey Davis: 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 statement. Additionally, this conference call is being recorded and will be available for audio rebroadcast on our website. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 12, 2024. Beyond Air undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call.
Specific factors that may cause the 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 replay broadcast on our website.
Beyond Air Dot net Furthermore, the content of this conference call contains time sensitive information that is accurate only as of the date of the live broadcast February 12, 2024 beyond Air undertakes no obligation to revise or update any statements to reflect events or circumstances. After the date of this call joining.
Steve Lisi: Joining me today on the call are Steve Lisi, Chairman and Chief Executive Officer, and Douglas Larson, Chief Financial Officer. With that, I'll turn it over to Steve Lisi. Go ahead, Steve.
Joining me today on the call are Steve Lisi, Chairman and Chief Executive Officer, and Douglas Larson, Chief Financial Officer with that I'll turn it over to Steve Lisi.
Go ahead, Steve.
Steve Lisi: Thanks, Corey, and good afternoon to everyone joining us today. Today, we announce a strong step in the right direction with a greater than 60% increase in revenue this quarter versus last quarter. While this is a small number in absolute terms, there are several factors that give us confidence in hitting our fiscal year 2025 revenue guidance of $12 to $16 million. Pilters shipped in fiscal three Q grew by more than 100% compared with shipments in fiscal two. It's important to note that this growth does not yet reflect the software upgrade received from the FDA in September, as it takes time for such a manufacturing change to result in upgraded systems. Our first new hospital start with the updated system was on February 1st.
Corey and good afternoon to everyone joining us today.
Today, we announced a strong step in the right direction with a greater than 60% increase in revenue this quarter versus last quarter. While this is a small number in absolute terms. There are several factors that give us confidence in hitting our fiscal year 'twenty twenty-five revenue guidance of $12 million to $16 million.
Filter shipped in fiscal <unk>, you grew by more than 100 per cent compared with shipments in fiscal two Q.
It is important to note that this growth does not yet reflect the software upgrade received from the FDA in September as it takes time for such a manufacturing change to result in upgraded systems.
Our first new hospitals start with the updated system was on February 1st.
As this rollout of the new machines has just begun the financial impact of the March quarter will be a bit muted as compared with the levels of revenue, we expect to see in the June quarter.
Steve Lisi: As this rollout of the new machines has just begun, the financial impact of the March quarter will be a bit muted as compared with the levels of revenue we expect to see in the June quarter. It is important to understand that we will maintain a balance for the next several months between upgrading our existing customer base and adding new customers. The increase in demand for product evaluations has surged since our upgraded system was displayed at the American Academy of Respiratory Care in early November. Since the conference, we have completed, started, or definitively scheduled as many evaluations as we have completed in the previous 10 months. Prior to the upgraded system, we had zero multi-year contracts. I am pleased to announce today that we now have three such engagements, with more multi-year requests than single-year requests by a wide margin. There are, Upgrading our software removes all compatibility issues, reduces system noise, improves alarms, and improves sensor accuracy.
It is important to understand that we will maintain a balance for the next several months between upgrading our existing customer base and adding new customers.
The increase in demand for product evaluations has surged since our upgraded system was displayed at the American Academy of respiratory care in early November.
Since the conference. We have completed started we're definitively scheduled as many evaluations as we have completed in the previous 10 months.
Prior to the upgraded system, we had zero multi year contracts I am pleased to announce today that we now have three such engagements.
With more multi year requests than single year request by a wide margin.
For reference.
Grading our software removes all compatibility issues reduces system noise improves alarms and improves sensor accuracy.
Steve Lisi: We have told every hospital that we welcome a head-to-head comparison with any competitor in their hospital. However, not surprisingly, We have had very few instances where a competitor was willing to sit in the same room with us at a hospital to cycle through multiple use cases with our system and their system, while still in its early stages. We have also been pleased with the progress made since securing our innovative technology contract award from Vizient, the nation's largest provider-driven healthcare performance improvement company. We're excited by this opportunity to expand our reach through the Vizient Customer Network. We also anticipate adding LungFitPH to more group purchasing organization platforms over the course of the next year.
We are told every hospital that we welcome a head to head comparison with any competitor in their hospital.
However, not surprisingly.
We have had very few instances, where a competitor was willing to sit in the same room with us at a hospital to cycle through multiple use cases with our system and their system.
While still in its early stages.
We have also been pleased with the progress made since securing or innovative technology contract award from visit the nation's largest provider driven healthcare performance improvement company.
We're excited by this opportunity to expand our reach through the visiting customer network.
We also anticipate adding lungfish ph to more group purchasing organization platforms over the course of the next year.
Steve Lisi: To capitalize on this positive growth trajectory, we will continue to build out a field team based on the growth opportunities as they evolve. One last point to make about the U.S. nitric oxide market. Our PMA supplement for the expansion of our label to include cardiac surgery was accepted and is under substantive review by the FDA. Our clinical and regulatory team is to be commended for putting together a strong submission. While there is no firm date for FDA to complete its review, we would expect a decision before the end of calendar 2024.
To capitalize on this positive growth trajectory, we will continue to build out a field team based on the growth opportunities as they evolve.
One last point to make on the U S nitrogen oxide market, our PMA supplement for the expansion of our label to include cardiac surgery was accepted and it's under substantive review by the FDA our.
Our clinical and regulatory team is to be commended for putting together a strong submission.
Well there is no firm date for FDA to complete their review, we would expect a decision before the end of calendar 2024.
Steve Lisi: Once approval is received, we anticipate an impact on revenue growth within a few months. Looking outside of the United States, we still expect to receive the CE Mark in the first half of calendar year 2024. As we have mentioned previously, in addition to opening up doors in Europe for our system, receiving this CE Mark will trigger a milestone payment from our partner Getz Healthcare, which has signed an agreement with us to commercialize lung fit pH in several countries in the Asia-Pacific region, excluding Japan. Moving on to our pipeline. During the quarter, Beyond Cancer announced that its Phase 1 study evaluating ultra-high concentrations of nitric oxide, or UNO, in advanced relapsed or refractory unresectable primary or metastatic cutaneous and subcutaneous solid tumors has cleared the first cohort of 25,000 parts per million single-dose UNO by the Safety Review Committee with no reported dose-limiting toxicity. This means that there is an UNO dose of 25,000 parts per million nitric oxide that is safe for human use.
Once approval is received we anticipate an impact on revenue growth after a few months looking.
Looking outside of the United States, we still expect to receive CE Mark in the first half of calendar year 2024, as we have mentioned previously in addition to opening up doors in Europe for our system, receiving the CE Mark will trigger a milestone payment from our partner gets health care, which has signed an agreement with us the commercialized lungfish ph in several countries.
In the Asia Pacific region, excluding Japan.
Moving onto our pipeline during the quarter beyond cancer announced that its phase one study evaluating ultra high concentration metric oxide Uno in advanced relapsed or refractory unresectable primary or metastatic cutaneous subcutaneous solid tumors has.
Has cleared the first cohort of 25000 parts per million single dose, who know by the safety Review Committee with no reported dose limiting toxicities.
This means that there is no dose of 25000 ports Boolean nitric oxide that is safe for human use and given the data shown in November at the Citi Conference. There should be confidence there is an immune response much like we saw in preclinical studies.
Steve Lisi: And given the data shown in November at the CITSE conference, there should be confidence that there is an immune response, much like we saw in preclinical studies. As a reminder, this is a first-in-human study that is being conducted in two parts, dose escalation and dose expansion. The dose escalation part will consist of three UNO dose cohorts, 25,000, 50,000, and 100,000 parts per million nitric oxide, or possibly a concentration below 25,000 parts.
As a reminder, this is the first in human study that is being conducted in two parts dose escalation and dose expansion.
The dose escalation part will consist of three dose cohorts 25050 thousand and 101000 ports familiar nitric oxide or possibly a concentration below 25000 parts per million.
The dose expansion portion of the study will begin once the recommended dose is determined with the primary objective of the trial to assess safety and Tolerability of you know with a secondary objective assessment of efficacy by immune biomarker response to immunotherapy.
Steve Lisi: The dose expansion portion of the study will begin once the recommended dose is determined, with the primary objective of the trial to assess safety and tolerability of UNO with a secondary objective of assessment of efficacy by immune biomarker response to UNO therapy. One last note is that we anticipate completing the Phase 1a study and presenting the data in the first half of this calendar year and then initiating a Phase 1b study in the second half of this calendar year, which will include combination therapy with anti-PD1 therapy. Given the strong combination data shown to date in the preclinical setting, I encourage all of you to visit the Beyond Cancer website to get better educated on this potential transformational therapy for those suffering from solid tumors. Our Viral Community-Acquired Pneumonia, or VCAP, study is underway.
One last note is that we anticipate completing the phase one study and presenting the data in the first half of this calendar year, and then initiating a phase one b study in the back half of the calendar year.
Which will include combination therapy with anti PD one therapy gives.
Given the strong combination data shown to date in the preclinical setting.
I encourage all of you to visit beyond cancer website to get better educated on this potential transformational therapy for those suffering from solid tumors.
Our viral community acquired pneumonia or recap studies underway.
Steve Lisi: As a reminder, this randomized, double-blind, placebo-controlled pilot study will treat hospitalized patients with 150 parts per million nitric oxide intermittently for up to 7 days. Additionally, due to viral pneumonia following seasonal patterns of activity, this is a seasonal study running through the fall and winter months. As a result, we have decided to conduct this study over two seasons. Thus, we expect to announce top-line data by the middle of calendar year 2025, with interim data updates when appropriate. This will not change the timing for a pivotal study in 25-26. Obviously, viral pneumonia is a significant unmet medical need given the times we live. Turning to our autism program, we are pleased that the program remains on track for human data in 2025.
As a reminder, this randomized double blind placebo controlled pilot study will treat hospitalized patients with 150 parts per million nitric oxide intermittently for up to seven days.
Due to viral pneumonia following seasonal patterns of activity. This is this seasonal study running through the fall and winter months. As a result, we have decided to conduct this study over two seasons. Thus, we expect to announce topline data by the middle of calendar year 2025, with interim data updates when appropriate.
This will not change the timing for a pivotal study in the 'twenty five 'twenty six season.
Obviously viral pneumonia is a significant unmet medical need given the times we live in.
Turning to our artisan program. We are pleased that the program remains on track for human data in 2025.
Please recall that this early stage development program is being conducted in partnership with the Hebrew University of Jerusalem, which continues to produce exciting preclinical data as.
Steve Lisi: Please recall that this early stage development program is being conducted in partnership with the Hebrew University of Jerusalem, which continues to produce exciting preclinical data. As a reminder, the data thus far have shown that reducing nitric oxide production by inhibiting neuronal nitric oxide synthase reduces nitrostative stress biomarkers in the brain and reverses the molecular, synaptic, and behavioral autism spectrum disorder associated pheno
As a reminder, the data thus far have shown that reducing nitric oxide production by inhibiting neuronal nitric oxide synthase reduces natural state of stress biomarkers in the brain and reverses the molecular synaptic and behavioral autism spectrum disorder associated phenotypes.
Douglas Larson: To be clear, a reversal of behaviors associated with autism was demonstrated in several different genetic mouse models of autism. We believe this program offers tremendous potential and look forward to providing updates as we progress throughout the year. Now, I will turn it over to our CFO, Doug Larson. Thanks, Steve, and good afternoon, everyone. Our financial results for the fiscal quarter ending December 31st, 2023 are as follows. Revenue for the fiscal quarter was $0.4 million as compared with $0.2 million for the previous quarter and zero for the fiscal quarter ending December 31st, 2020.
To be clear a reversal our behaviors associated with autism was demonstrated in several different genetic mouse models of autism.
We believe this program offers tremendous potential and look forward to providing updates as we progress throughout the year.
Now I will turn it over to our CFO, Doug Lars its Doug.
Thanks, Steve and good afternoon, everyone.
Our financial results for the fiscal quarter ended December 31, 2023 are as follows.
Revenue for the fiscal quarter was zero point $4 million as compared with zero point $2 million for the previous quarter and zero for the fiscal quarter ended December 31 2022.
Douglas Larson: While we are seeing positive operating margins on our individual contracts, there are three reasons why our overall gross margin remains negative. First, we incurred costs related to the software upgrade of the LungFit device. Note that there will be similar costs for the next two quarters as we complete the upgrade of all of our devices. Second, because we pre-built several hundred devices that are currently being upgraded, we have depreciation of devices that are not currently generating revenue. Third, consistent with this early stage of growth, we are suboptimal in our physical warehousing infrastructure. But as we grow, this effect will change. Our supply chain is committed to being a great partner to the hospitals we engage with, and having the right number of high quality upgraded systems in the right location is key. Research and development expenses for the fiscal quarter ended December 31st, 2022 were $6.8 million.
But we are seeing positive operating margins on our individual contracts. There are three reasons why our overall gross margin remains negative.
First we incurred costs related to the software upgrade of lung fit devices.
There will be similar costs for the next two quarters as we complete the upgrade of all of our devices.
Second because we prebuilt several hundred devices that are currently being upgraded we have depreciation of devices that are not currently generating revenue.
Third consistent with the early stage of growth, we are suboptimal in our physical warehousing infrastructure, but as we grow this effect will dissipate.
Our supply chain is committed to being a great partner to the hospitals, we engage with and having the right number of high quality upgraded systems and the right location is key.
Research and development expenses for the fiscal quarter were $6 $8 million compared with $5 million for the fiscal quarter ended December 31 2022.
Douglas Larson: Of the $1.8 million incremental spend, $1.2 million was due to development costs associated with our pipeline, mainly from the start of our recaps. Investment continued to ramp up in Beyond Cancer, but this was mostly offset by favourable comps in NTM and AUK. The remaining $0.6 million was almost exclusively due to loaded salaries in Beyond Air's R&D. SG&A expenses for the fiscal quarter were $9.8 million, compared with $8.9 million for the fiscal quarter ended December 31, 2020.
Of the 1.8 million incremental spend $1 $2 million was due to development costs associated with our pipeline mainly.
Mainly from the start of a recap study.
Investment continued to ramp up and beyond cancer, but this was mostly offset by favorable comps and N T M and autism.
The remaining zero point $6 million was almost exclusively due to loaded salaries and beyond air's R&D teams.
SG&A expenses for the fiscal quarter were $9 $8 million compared with $8 $9 million for the fiscal quarter ended December 31 2022.
Douglas Larson: The $0.8 million increase was mainly due to stock-based compensation and salaries, with the majority being non-cash compensation. Other income and expense for the fiscal quarter showed a $0.2 million loss compared with a $0.2 million gain for the fiscal quarter ended December 31st, 2020. There are a lot of moving parts again this quarter, but the biggest movers are an increase in interest expense of $0.8 million, being partially offset by a $0.4 million increase from gains in our market bulls. For the fiscal quarter ending December 31st, 2023, on a gap basis, the company recorded a net loss of $17.1 million, of which $16.1 million, or $0.50 per share, was attributable to the shareholders of Beyond Air, Net cash used in the quarter ended December 31st, 2023 was $12.7 million.
The zero point $8 million increase was mainly due to stock based compensation and salaries with the majority being noncash compensation.
Other income and expense for the fiscal quarter showed a zero point $2 million loss compared with a zero point $2 million gain for the fiscal quarter ended December 31 2022.
There's a lot of moving parts again this quarter, but the biggest movers are an increase in interest expense of zero point $8 million being partially offset by zero point $4 million increase from gains in our marketable securities.
For the fiscal quarter ended December 31, 2023 on a GAAP basis. The company recorded a net loss of $17 $1 million of which $16 $1 million or <unk> 50 per share was attributable to the shareholders of beyond Air Inc. Compared with a net loss of $12 $7 million or <unk> 43 cents a share for the fish.
Quarter ended December 31, 2022.
Net cash used in the quarter ended December 31, 2023 was $12 $7 million.
We alluded to a higher cash burn this quarter in our last call with payments required towards our recap study.
Douglas Larson: We alluded to a higher cash burn this quarter in our last call, with payments required for our VCAP study, development of our Gen 2 device, cancer, and advances in our Autism. We also raised $5.5 million on our ATM in the quarter to partially compensate for the planned cash flow. As of December 31st, 2023, the company had cash, cash equivalents, and marketable securities of $31.4 million.
Development of our Gen. Two device continued in human trials and beyond cancer and advances in our autism program.
We also raised $5 $5 million on our ATM in the quarter to partially compensate the planned cash burn.
As of December 31, 2023, the company had cash cash equivalents and marketable securities of $31 $4 million.
Douglas Larson: And as a reminder, we also have $5.2 million held on deposit by our contract manufacturer. And with that, I'll hand the call back. Thanks, Doug.
And as a reminder, we also have $5 $2 million held on deposit by our contract manufacturer.
And with that I'll hand, the call back to Steve.
Operator: We will now take any questions you may have. Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
We will now take any questions you may have.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.
If you'd like to ask you a question you May press star one on your telephone keypad.
Confirmation tone will indicate your line is in the question queue.
Operator: You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Jason Bednar with Piper Sandler. Please proceed with your question. Hey, good afternoon.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Jason Bednar with Piper Sandler. Please proceed with your question.
Hey, good afternoon, thanks for taking the questions here guys.
Jason M. Bednar: Thanks for taking the questions here, guys. If I could just start maybe on some of the recent developments, clearly some more steps forward on the contracting front, some wins you mentioned there. That's all good.
You can just start maybe in some of the recent developments are clearly some more steps forward on the contracting front and when do you mentioned there.
That's all good.
Steve Lisi: When I step back and think about where we're at in the context of your 12 to 16 million revenue guidance for next year, you're clearly signaling confidence about future contracting as well. So I guess when I back that up and consider needing a good jumping off point to exit this year in order to move into that 12 to 16 million dollar range, and also consider January tends to be, I think, a good contracting period or at least a lot of discussions happening here at the new year. Can you talk about, maybe, the commercial signals you've seen here early in calendar 24? Sure. Thanks, Jason.
Got back and think about where we're at in the context of your $12 million to $16 million revenue guidance for next year, you're clearly signaling confidence about future contracting as well.
So when I guess, when I back that up and you know needing a good jumping off point to exit this year in order to move into that $12 million to $16 million range and also consider January tends to be I think a good contracting period or at least a lot of discussions happening here at the new year can you talk about maybe the commercial signal you've seen here early in calendar 'twenty four.
Sure. Thanks, Jason appreciate the question.
Steve Lisi: I appreciate the question. Like we mentioned in some of the prepared remarks, you know, seeing customers who are asking for longer-term contracts with us, locking us in, which is very good, you know; we're very happy to do so. They want a contract for the long term with us.
Like we mentioned in some of the prepared remarks, you know seeing seeing customers.
Asking for longer term contracts with us locking us in which is very good.
Very happy to do so they won a contract for the long term with us.
Steve Lisi: Um, that's confidence in our system, especially with the upgraded software. Uh, we're seeing, as I said earlier in the prepared remarks, a massive increase for us in requests for evaluating our system. So we are, we are scheduled consistently over the next six to eight weeks, and we're scheduling more beyond that.
That's confidence in our system, especially with the upgraded software.
We're seeing as I said earlier in the prepared remarks.
Massive increase for us in requests.
For evaluating our system.
So we are we are scheduled consistently over the next six to eight weeks and we're scheduling more beyond that so the interest is certainly there.
Steve Lisi: So the interest is certainly there. Again, we are attending to our existing customers as well as entertaining new customers in parallel now and for the next couple of months. You know, our existing customer base is very important to us. They've helped us understand how to optimize our system, and they've been working with the system prior to this software update.
Again, we are.
Pretending to our existing customers as well as entertaining new customers in parallel.
Now and for the next couple of months you know our existing customer base is very important to us they they've helped us.
I understand how to optimize our system.
And they've been working with with.
The system prior to the software update so we appreciate that and are we going to take care of them as well as bringing some new customers as well so once they're taken care of and we can focus our efforts 100% on new customers.
Steve Lisi: So we appreciate that, and we're going to take care of them as well as bring in some new customers as well. So once they're taken care of, and we can focus our efforts 100% on new customers, you know, that'll be very exciting for us as a team. And, you know, this is not just a Jan 1 start for hospitals. As you mentioned, that's certainly a busy time at the end of the first year, but there are other points in the year where there are lots of contracts starting up, July 1 being probably the biggest along with Jan 1. So there's a lot going on. There are starts and stops.
That that'll that'll be very exciting for us as a team and you know this is not just a jan one start for hospitals you mentioned that's certainly.
Busy time at the N. Gen. One beginning of the year, but there are other points in a year, where there's lots of contract starting up.
July one being probably the biggest along with Jan one so there there's a lot going on there starts we just like I mentioned earlier, we haven't started start on fab one.
Steve Lisi: We just, like I mentioned earlier, we have a start on Feb 1. There are hospitals starting mid-month. There are hospitals starting on the first of every month.
There are hospitals, starting mid month, there are hospitals, starting on the first day of every month. So it's just a matter of of of us having.
Steve Lisi: So it's just a matter of us having the supply available and making sure that our existing customers are taken care of. So we see what's coming. We're very excited about it. We'll be adding people to the team to be able to handle what's coming in the next, you know, three to six months. Well, that's all I can say. I mean, I don't know what else you'd want. What are the metrics that you need?
The supply available and making sure that our existing customers taken care of.
So we see what's coming our way.
We're very excited about it.
We will be adding people to the team to be able to handle what's.
What's coming in the next three to six months.
So that's all I can say I mean, I don't know what else you'd want what are the metrics you need but if you need some more metrics. Just just just go ahead and ask.
Jason M. Bednar: But if you need some more metrics, just go ahead and ask. No, that's super helpful. I'm just trying to get more anecdotal and qualitative to get a sense.
No. That's super helpful. I am just trying to get more anecdotal and qualitative to to get a sense of it sounds like things are moving in the right direction for sure maybe I'll use your your personnel reference there to segue to the next question is more.
Jason M. Bednar: And it sounds like things are moving in the right direction, for sure. Maybe I'll use your personnel reference there to segue into the next question, which is, you know, more just any more color you can give around Duncan's departure, just maybe how quickly you're looking to backfill this spot. You're obviously at a critical inflection point commercially, and I just want to make sure there's, you know, call it a seamless and quick transition here. I think that the transition will be seamless.
More just any more color you can give around Dunkin'. His departure, just maybe how quickly you're looking to backfill that spot.
You, obviously had a critical inflection point commercially just want to make sure. There's you know call.
Call it a seamless and quick transition here.
Yeah.
I think that the transition will be seamless.
Steve Lisi: I don't know when we'll have someone new in that role starting up, but, you know, we have a pretty strong team here internally. So we're certainly working together as a team to bring these things forward. I wish Duncan the best, and he's done a great job for us, but we're focused on the task at hand.
I don't know when we'll have someone new in that role starting up but.
We have a pretty strong team here internally.
So where we're where we're certainly working together.
As a team to bring these things forward I wish Dunkin', the best and he's done a great job for us, but you know we're focused on the task at hand and.
I think we have the right people.
Steve Lisi: I think we have the right people at the company right now, and obviously, we need to add more as we grow, as opportunities come our way. But we're going to wait for the right person, you know; bringing in the wrong person because we need someone quickly is not the right attitude. So I think that with what we have in place, we certainly can wait for the right person to come our way, whether that be in 30 days, 60 days, or 180 days. I can't tell you that right now because I don't know. But I want the right person in that role.
At the company right now and obviously, we need to add as we grow.
Opportunities come our way, but we're gonna wait for the right person you know, bringing in the wrong person because we need someone quickly is not the right attitude.
So I think that with what we have in place we certainly.
Can wait for the right person to come our way whether that be in 30 days 60 days or 180 days I cant tell you that right now I don't know.
I want the right person in that role.
Douglas Larson: Okay, all right, makes sense. And then one last one, Doug, you know, appreciate the help on some of the gross margin moving parts. I know it's we're super early days here, but just trying to get a sense, you know, is there a way to quantify or, you know, strip out, you know, what some of those one time costs would have been, it sounds like they were elevated here in the second quarter, or sorry, the fiscal third quarter, and they're, but they're going to be there for the next two quarters, just trying to get a sense as we model this out appropriately, you know, what maybe an adjusted gross margin would have looked like or adjusted cost of goods sold would have looked like for you in the quarter. Yeah, thanks, Jason. I am a little hesitant to break out the pieces.
Okay, Alright makes sense and then one last one Doug.
I appreciate the help on some of the gross margin moving parts I know, it's super early days here, but just trying to get a sense.
Or is there a way to quantify a.
Strip out what some of those one time costs would've been it sounds like they were elevated here in the second quarter or sorry, the fiscal third quarter.
But they're going to be there for the next two quarters, just trying to get a sense as we model. This out appropriately you know what maybe an adjusted gross margin would have looked like or adjusted cost of goods sold would've looked like for you.
In the quarter.
Yes, thanks, Jason.
I am a little hesitant.
Hesitant to break out the pieces.
Douglas Larson: But between the depreciation on machines that aren't deployed and refits for the devices that we were upgrading the software on, we're talking somewhere between four and 500, a thousand in the quarter. So I hope that gives you kind of an idea of, you know, I think that it'll recur next quarter again. And then, as the sales pick up, and we are done, you know, upgrading all the devices, those numbers are going to disappear. And then, as we get more revenue, obviously, that depreciation just becomes a normal part of our cost.
But between the depreciation on machines that are deployed.
And resets for the devices that we were upgrading the software on a we're talking somewhere between four and 500.
<unk> thousand and the in the quarter.
So that I hope that gives you kind of an idea of you know.
That battle recur next quarter again.
And then as the sales pick up and we are done.
Upgrading all the devices those numbers are going to disappear.
And then as we get more revenue obviously those that depreciation just becomes a normal part of our cost of sales.
Alright, perfect alright, thanks, so much.
Jason M. Bednar: All right, perfect. All right. Thanks so much.
Les Sulewski: Right. Our next question comes from the line of Les Sulewski with Truist. Please proceed with your question. Good evening.
Okay.
Our next question comes from the line of less soy ski with choice. Please proceed with your question.
Good evening, Thanks for taking my questions.
Les Sulewski: Thanks for taking my questions. Steve, just on the environment in the hospital setting, can you just explain how the pricing environment is driving the decisions among the hospital groups that you are engaging? And then I guess the second part to that, just give a little bit more color if you could around the sizing of the new of the three new engagements you've mentioned and what would be your expectations for the conversion rate on that? Let me start with that. What do you mean by conversion rate on that?
Dave just on the on the environment in the hospital setting can you just true up how the pricing environment is driving the decisions. Among the hospital groups that you are engaging and then I guess second part to that just give a little bit more color if you'd cut around the sizing of the new of the three new engagements. You've mentioned then would be would be your.
<unk> and the conversion rate on that.
Let me start with that.
What do you mean by conversion rate on that.
Steve Lisi: Conversion Contract. So we have those contracts. Those are inked.
<unk> you mentioned so we have those contracts those are inked those are just multiyear deals got it okay. One.
Steve Lisi: Those are just multi-year deals. Got it. Okay. Those are already done. Can you give a little more color on the sizing of that, if that's possible?
Those are already could you give a little more color on the sizing of that if that's possible.
Steve Lisi: Uh, you know, I would say that two of them are probably slightly below market average, and one of them is, Hubby, double what you consider market average. So, you know, these are, they're good-sized contracts, I really don't want to give too much detail on it, but, you know, these are good-sized hospitals. They're doing pretty good volume; even the two that I would consider to be a little bit below what the average size hospital would be do pretty good volume. But the other one isn't.
You know I would say that.
Two of them are probably slightly below market average and one of them is.
I'll be double.
What you consider market average so.
These are a good size contracts you know I don't really want to give too much detail on it but you know these are is a good size hospitals.
They're doing pretty good volume, even the two ones that I would consider to be a little bit below what the average size hospital would be do pretty good volume, but the other one is.
So a lot of volume I mean this.
Steve Lisi: It's a lot of volume. I mean, this. There's patience, there's a lot of patients every single day. I mean, we have We've got over 20 machines in that Big House.
This patients.
A lot of patients on every single day I mean, we have.
We've got over 20 machines in that hospital.
Big Hospital so.
Steve Lisi: I hope that helps. So, let me go back to your question. Um, you know, price certainly plays a role. There's no doubt about it. I think that's true in any situation.
Hope that helps so let me go back to your prior question.
You know.
It's price certainly plays a role there is no doubt about it.
You know I think that's true in many situations the hospital wants to get.
Steve Lisi: The hospital wants to get the best price that they can, but that's not the only thing that plays into a decision for the hospital, but it certainly plays a role. I mean, we can't be naive to that fact.
Get the best price that they can.
But that's not the only thing that plays into the decision for the hospital, but it certainly plays a role I mean, we can't.
Can't be naive to that fact.
Steve Lisi: And, you know, I think that I've said this before, I think that the pricing environment is not, It's not too far off from what we expected when we entered this market. It's pretty much within the range that we anticipated. You know, some hospitals will get better pricing than others based on certain factors, volume being probably the biggest factor. But, you know, I don't think it's the only factor. And I don't want to give you the impression that, you know, this is a race to the bottom in this market for price. It's just not true.
And no I think that I've said this before I think that the pricing environment is not.
It's not too far off from what we expected when we entered this market.
It's pretty much in within the range that we anticipated.
Yeah, some hospitals will get better pricing than others based on certain factors volume being probably the biggest factor, but you know.
I don't think it's the only factor and I don't want to give you the impression that this.
This is a race to the bottom in this market for price, it's just not true.
Les Sulewski: You know, I think it's a healthy pricing environment. Got it. Very helpful. On the VCAP study, can you just give a little bit more color on how this was extended into two seasons? And then separately, on the one-fold increase in your filter shipments, can you translate that into utilization, or is this just seasonal inventory stocking? Just give a little more commentary on that, if you could. Yeah, there's no seasonal inventory stocking here for these stuff.
I think it's a healthy pricing environment.
Got it very helpful. On the recap study can you just give a little bit more color on how this was extend into two seasons and then separately on one fold increase on your filter shipments can you you know translate that into to utilization or is this a seasonal.
Inventory stocking just just give a little more commentary on that if you could.
Yeah, there's no seasonal inventory stocking here for this stuff.
It's just it's just the growth I mean, that's just did it the numbers are what the numbers are there there's nothing no seasonality about it theres no no.
Steve Lisi: This is just, just growth. I mean, that's just it. The numbers are what the numbers are. There's nothing new seasonally about it. There's no, stocking up.
No stocking up I mean, these hospitals you know.
Steve Lisi: I mean, these hospitals, you know, normally they're ordering what they need for the next 30, 60, 90 days. It depends on the hospital. It's really, really bad. Individual hospitals will have different needs, but they don't need to stockpile a year's supply of this stuff. You know, this is not how it works. So it's just the true, real growth. So on the VCAP study, I mean, look, this is a safety study. You know, if you're doing efficacy, it needs to be in one season. But safety doesn't necessarily need to be in one season.
Normally they're ordering what they need for the next.
It depends on the hospital next 30, 60, 90 days I mean, it's really.
Individual hospitals will have different needs, but they don't need to stock up a year supply of this stuff. It's just not how it works. So it's just the true true growth so.
So on the recap study I mean look this is a safety study.
You know if youre doing efficacy it needs to be in one season safety doesn't necessarily need to be in one season.
Given that we won't change our date for a pivotal study.
Steve Lisi: Given that we won't change our date for a pivotal study, you know, to take a little pressure off my team, you know, we got the approval late in the June quarter last year. It was tight to get all the sites up and running on time for the season. So we made a decision around Thanksgiving that we would extend this for two seasons. It was always something that was in our back pocket just in case, but we just couldn't, you know, just couldn't get all the sites up and running as quickly as needed. And rather than try to spread ourselves thin, we decided to focus on a couple of core centers, and we'll spread it out. I think it's the best way to go, trying to get it done in one season, given the short timeframe. We gave it a shot, don't think we didn't, but you had to make a decision before we really got into the swing of the season on that, and that's what we did.
You know to take a little pressure off my team you know, we got we got the approval late.
In the June quarter last year.
It was tight to get all the sites up and running.
On time for the season. So we made a decision around Thanksgiving that we would extend this over two seasons. It was always something that was in our back pocket just in case, but we just couldn't just couldn't get all the sites up and running as quickly as needed and rather than try to spread ourselves then we decided to focus on a couple of core <unk>.
Centers, and a well spread it out I think it's the best way to go.
Trying to get it done in one season.
Given the short timeframe.
We gave it a shot I don't think we didn't but you had to make a decision before we really got into the swing of the season on that and that's what we did so it was always something we considered internally.
Steve Lisi: So it was always something we considered internally. Again, as long as it doesn't push out our pivotal study start, I don't think it's a problem at all. I think it's actually the right thing to do given the situation.
Again as long as it doesn't push out our pivotal study start.
I don't think it's.
I don't think it's a problem at all I think it's actually the right thing to do given the situation.
Got it that's helpful. Maybe maybe from a high level.
Les Sulewski: Got it. That's helpful. Maybe from a high level, could you kind of quantify the pecking order, your pipeline strategy, anything that could be pushed back further if there's risks involved, whether it's financial or time. Yeah, any kind of color around the high-level strategy process and thoughts around the pipeline. I mean, I think we're pretty much showing everybody what we're doing. I mean, VCAP, cancer, and autism are the ones that we are working on right now. Again, autism is relatively inexpensive compared to the other two programs.
Could you kind of quantify the pecking order pipeline strategy anything that could be pushed back further if it's you know if there's risks involved whether it's financial or or or time, yeah, any kind of color around the high level, our strategy process and thought.
It's around the pipeline.
I mean, I think we're pretty much showing everybody what we're doing I mean recap cancer autism are the ones that we are working on right now again autism as is relatively inexpensive compared to the other two programs. Obviously I mean, its preclinical it's not costing us a lot in.
Steve Lisi: It's preclinical, and it's not costing us a lot. And, you know, I think once you know, getting it to the first in humans for that one in 25 and getting some data, I mean, that's not a high cost. I mean, when we start to go into, you know, maybe Phase 1B or Phase 2A for that program, that's when the costs will really kick in. But until then, it's not overly expensive.
Once you know getting into first in humans for that one in 'twenty five and getting some data I mean, that's not a high cost I mean, when we start to go into.
You know maybe phase one b phase two way for that program. That's when the costs will really kick in.
But until then its not overly expensive.
Steve Lisi: Um, NTM is our next program up. I think we'll be meeting with FDA before the end of this year, calendar year that is, to get some ideas from them and work with them on our trial design. Hopefully, that'll be a pivotal trial design. That's our goal. GOPD obviously has not been moving forward.
N T. Ms. Our next program up I think we'll be meeting with FDA before the end of this year calendar year that is to get some ideas from them and work with them on a on a trial design.
Hopefully that'll be a pivotal trial design, that's our goal.
COPD, obviously has not been moved forward that's evident in our court.
Steve Lisi: That's evident in our Corporate Presentation. So that's the one that's kind of just sitting there on hold at the moment. Bronchiolatus is also on hold.
Corporate presentation. So that's the one that's kind of just sitting there on hold at the moment Bronchiolitis also on hold I think that's been clear for the last couple of years.
Steve Lisi: I think that's been clear for the last couple of years. So I think it's very clear what our priorities are in the pipeline and where they are. So I don't know if there's, I don't know if I answered your question, but I think I gave you the rank there.
So I think it's very clear what our priorities are on the pipeline.
And where they are so I don't know if there's I don't know if I answered your question, but.
I think I gave the ranked there.
No. That's helpful. Thank you for that Steve I appreciate it.
Steve Lisi: No, that's helpful. Thank you for that, Steve. I appreciate it. Our next question comes from the line of Yale Gen with Leigh Law & Company. Please proceed with your question. Good afternoon and good evening.
Yes.
Our next question comes from the line of Yale Jen with Laidlaw <unk> Company. Please proceed with your question.
Good afternoon.
Thanks for taking the questions maybe.
Maybe let's talk.
Yale Gen: Thanks for taking the question. Have you guys actually reported the total number of hospitals that have been using the system, including the three multi-contract ones that are to be used?
H.
Have you guys got to deal with.
What's the total number of hospital has been using the system, including the three multi contract to be use already using.
The device.
Yeah, Yeah, we haven't said how many hospitals are out there we don't want to.
Steve Lisi: Yeah, yeah, we haven't said how many hospitals are out there. We don't want to give any information out to the general public about how many hospitals we're in, where they are, you know, who they are. We're not gonna, we're not going to comment on that, but, Okay, that's fine. That's good. Maybe just a little bit more color in terms of the software update, in terms of the specific or general aspects of the updates, which make a significant difference compared to the earlier one. Yeah, so just a little tiny background.
Give any information.
Out to the general public about how many hospitals were in a where they are.
You know who they are so were not going on we're not going to comment on that but.
Okay, that's fine.
Maybe just a little bit more color in terms of the software update.
But in terms of the specific or general aspect of the updates which meet.
Yeah.
So you can make a difference compared to the.
They already are one.
Yeah. So just just a little tiny background remember, we froze the design of our system in early 2019 so.
Steve Lisi: Remember, we froze the design of our system in early 2019. So, you know, then we had this lovely global pandemic. So it took a while to extend the time to submit an application for approval. So, there's a lot of things that. Three and a half years of no changes in our system where the rest of the world is experiencing changes, you know, makes it.
Then we had this this lovely global pandemic. So it took a while to it extended the time for submission extended the time to approval.
So there's there's a lot of things that you know three.
Three and a half years of this.
No changes in our system, where the rest of the world as having changes you know it makes it difficult.
Steve Lisi: Difficult for us to catch up right away. So, Essentially, this software update gave us, you know, optimal accuracy with our sensors for monitoring and delivery. It gave us compatibility with all the systems out there that are important. I would say all the systems.
Difficult for us to catch up right away so.
Essentially this software update gave us.
You know optimal accuracy with our sensors for monitoring and our delivery.
He gave us compatibility with.
All the systems out there.
That work or that are important.
I would say all of the systems I don't I don't think we're incompatible with anything at this moment in time.
Steve Lisi: I don't think we're incompatible with anything at this moment in time. It's very important for us to be compatible with all the Ventilators that are out there that are used. You know, there's a little bit of noise from some of our compressors, so the software is able to reduce that noise.
So that's very important for us to be compatible with all the.
The ventilators.
That are out there that are used.
<unk>.
There, there's a little bit of noise from some of the compressors. So the software is able to reduce that noise.
Steve Lisi: I don't think that was a big, big deal, but certainly nicer for the hospitals to have that, and we were able to improve on the alarms. So that's really it. I think the compatibility and the sensor accuracy are probably the two biggest things that it did for us.
I don't think that was a big big deal, but certainly nicer for the hospitals to have that.
And we were able to improve on the alarms.
<unk>.
So.
That's really it I think the compatibility and the sensor accuracy are probably the two biggest things that.
Got it did for us.
Steve Lisi: So. That's it. I mean, I would say those two things are really the driver for why we did this.
<unk>.
So.
That's that's it I mean, I would say that those two things are really the driver for why we did this in a little frustrating that it took as long as it did but its here now and the feedback is as.
Yale Gen: It's a little frustrating that it took as long as it did, but it's here now, and the feedback is, As expected, you know, everybody is very pleased and happy with it. And I, like I said earlier, we're getting a lot of interest and a lot more looks from hospitals since we displayed this in early November at the American Academy of Respiratory. Okay, maybe my last question here is that in terms of the NTN, just a company recently, ANQ Therapeutics, paused their phase two, three study of a similar indication at this point, based on, I guess, the Paw, efficacy Do you see any impact on your development in Deloitte from this indication or any comments on that? I'm sorry. What company was it that you were mentioning? I didn't hear his name.
As expected you know everybody is very pleased and happy with it and I like I said earlier, we're getting a lot of a lot more interest and a lot more looks from hospitals.
Since we displayed this in early November at the.
American Academy of respiratory care.
Okay.
Last question here is that.
In terms of the N T.
Just a company recently in.
<unk> therapeutics.
Ill pass their phase II III study after similar indications at this point based on I guess.
[laughter] CSC they indicated.
Yale Gen: It's called AN2 Therapeutics. Yeah. Yeah, yeah, I believe that. Leave there using an antibiotic, is that correct?
Uh huh.
Do you see any impact on your.
Development in the La go go for.
Steve Lisi: Right. And then basically, they suggest that the they have to pause. Advocacy, at least they hinted in their press release, and that's the reason they paused the Phase 2, 3, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 40, 41, 42, 44, 45, 46, 47, 48, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 60, 67, 67, 68, 69, 70, 71, 72, 71, 72, 73, 74, 75, 78, 76, 79, 78, 79, 79, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, 80, Look, anything that's positive for these patients is a big win. So I'm very happy to hear that they may be able to help patients. That's fantastic. So, you know, it's more options for these patients. They have very few.
For this indication.
Or any comment on that I'm, sorry, you know what what company was it that you were mentioning I didn't hear the name is called and two therapeutic Oh, yeah, Yeah, Yeah yeah.
Yes, I believe that.
These are using an antibiotic is that correct.
Right.
They have some.
That's a good the at least.
In the press release and that that's real.
<unk> D caused the phase two three study.
Look or anything that's positive for these patients is a big win so I'm very happy to hear that they.
They may be able to help patients so that's fantastic.
So it's more options for these patients they have very few so I think it's a good thing.
And.
I think that it could even make the path easier through.
Through FDA, perhaps we have to see we have to wait and see what happens with them, but you.
You know right now our studies are being done on top of antibiotic therapy. So I think we would just be.
Steve Lisi: So I think it's a good thing. And, you know, I think that it could even make the path easier through FDA, perhaps. We have to see. We have to wait and see what happens with them. But, you know, right now, our studies are being done on top of antibiotic therapy. So I think we would just be used together with antibiotics. I, I, I.
Used together with antibiotics.
I don't.
Don't know if we're going to be doing any monotherapy studies in the near term so.
At this point any any success with antibiotics is great for us great for patients.
Steve Lisi: I don't know if we're going to be doing any monotherapy studies in the near term. So at this point, any success with antibiotics is great for us, great for patients. You know, nitric oxide enhances the efficacy and certainly helps with the tolerability of antibiotics, as we've seen in our studies.
You know nitric oxide enhances the.
The efficacy.
And certainly helps with the Tolerability of antibiotics as we've seen in our studies so yes.
Steve Lisi: So I think- Yeah, I think they actually, I think they paused their study because they didn't have enough efficacy in their studies. Oh, it was a failure, yeah? I hadn't seen the data. So was it stopped for negative reasons? for negative reasons.
The equity.
I think that caused their study because.
We don't have enough efficacy studies Oh, it was a failure yeah I hadn't data yes.
Was it was stopped for negative reasons.
Negative reasons, it's not though.
Yale Gen: It's not an early stop. Okay, well, that's too bad. Again, these patients need options. So we'll be hoping that things will work for them. So it doesn't change our strategy at all.
Scott.
Okay well.
You know.
That's too bad again these patients need options. So it would be hoping that things would work for them.
So it doesn't change our our strategy at all I mean, we're just going to be used with existing antibiotic background therapy.
Steve Lisi: I mean, we're just going to be used, you know, with existing antibiotic background therapy. If there's any way we can go up front, treat de novo patients as a monotherapy, that'd be great. But at this point in time, I think it's a little early to do that. But, you know, we'll speak with FDA. You never know.
If there's any way we can we can.
So upfront do de novo patients as a monotherapy that'd be great, but at this point in time I think it's a little early to do that but we will speak with FDA you never know but.
Steve Lisi: But, In any case, this doesn't change our strategy; we are certainly a unique mechanism of action for treating NTM lung disease. So, it's not going to change the way we look at things. Our data speaks for itself.
In any case this doesn't change our strategy you know we are certainly a unique mechanism of action for for treating and T M lung disease. So.
You know, it's not going to change.
The way, we look at things.
Our data speaks for itself I mean, we had very strong data in the last study we did so we're pretty excited about it.
Steve Lisi: I mean, we had very strong data in the last study we did, so we're pretty excited about it. Okay, great. Thanks a lot.
Okay great.
Marie Dibalt: I appreciate it, and congratulations on the progress at this moment. Thanks, y'all. Appreciate it. Our next question comes from the line of Marie Dibalt with BTIG. Please take the question. Hey, good afternoon. This is Sam Lieber on for Marie.
Sure.
The problem with at this moment.
Thanks, Yeah I appreciate it.
Our next question comes from the line of Marine type all with <unk>.
<unk>. Please proceed with your question.
Hey, Good afternoon. This is Sam library onto Murray, Thanks for taking the questions. This afternoon.
Steve Lisi: Thanks for taking the questions this afternoon. You know, maybe I can start on the CE marks as we get closer to approval here. Just any thoughts on how to think about the ramp both in Europe and APAC? Any target markets that you'd highlight for us revenue contribution and anything included in the fiscal 25 guidance for international at this time? Yeah, I, You know, Sam, I don't think that we're going to have anything from the European Union in 25. Yeah, I mean, we still have to get the CE mark, and then we'll ink a deal, and then we have got to ramp things up. It takes time in Europe, Australia, and New Zealand.
Maybe I can start on on the CE, Mark as we get closer to approval here.
Just any thoughts on how to think about the ramp both in Europe, and APAC any target markets that you'd highlight for us revenue contribution than anything included in the fiscal 'twenty five guidance for international at this time.
Yeah.
No.
I don't think that we're gonna have.
Anything from the from the European Union.
In.
25.
Yeah, I mean, we still have to get the CE. Mark then will anchor deal in and then we got a ramp things up and it takes time in Europe Oh.
Australia and New Zealand.
Steve Lisi: You know, I think that the TGA approval in Australia will lag the CE mark, give or take 90 days. I mean, you can't be sure, but that's a rough estimate, and then we'll have to ramp things up. You know, if there's any effect from there, it'll be minimal in fiscal year 25. So I wouldn't think it would be very impactful.
You know I think that the.
T G. A approval in Australia will lag the CE, Mark give or take 90 days I mean, you can't be sure but.
That's a rough estimate and then we will have to ramp things up so.
If there's any effect from there would be minimal.
In 25 fiscal 'twenty five so.
I wouldn't think it would be very impactful I think that this is more of a fiscal 'twenty six 'twenty seven impact for us on both fronts.
Steve Lisi: I think that this is more of a fiscal 2627 impact for us on both fronts. Okay, that's helpful to think about. And maybe I can just use my follow-up here on some of the comments around adding to the field team, I guess just any way to, you know, quantify or think about that ramp here and obviously incremental contribution to operating expenses in the back half of this year in fiscal 25. Yeah, I mean, we already budgeted for this, right?
Okay. That's helpful to think about and maybe I can just use my follow up here on.
Some of the comments around adding to the field team I guess, just any way to.
Quantify or think about it.
That ramp here and obviously incremental contribution to the operating expenses you know on the.
Back half of this year in fiscal 'twenty five.
Yeah, I mean, we we already budget for this right we.
Steve Lisi: We, you know, in our budget, in our forecasts, we already have people being added, you know, and what we're doing now is adding based on the interest in what we see coming our way, right? So we need to be prepared for this. We need to bulk up our team a little bit for the interest in our system, so it's in our budget. It's not going to change anything, you know, whether we are one or two people ahead or one or two people behind in a certain quarter; it's all going to smooth out over the next four to six quarters. I mean, we're probably going to be where we are in four to six quarters.
In our budget and our forecast we already have people being added.
You know.
And what we're doing now is adding based upon.
The interest in what we see coming our way right. So we need to be prepared for this we need to.
Bulk up our team a little bit for the interest in our system. So it's in our budget I'm, just not going to change anything.
You know, whether we are one or two people had a one or two behind in a certain quarter, it's all going to smooth out over the next you know.
Four six quarters, I mean, we're probably going to be where we are in 46 quarters.
Steve Lisi: You know, just each quarter might be a little bit different in terms of who starts when, but this is all part of the plan. It's in our budget. It's in our guidance for burn.
Just each quarter might be a little bit different in terms of who starts win but this is all part of the plan. That's in our budget, it's in our guidance for burn.
Steve Lisi: It's all there. This is nothing new. It's not gonna increase our expenses. I mean, it's exactly what we expect to happen.
So all their this is nothing new it's not going to.
Increase our expenses.
Exactly what we expect to happen when we see the demand coming we're going to bring people on.
Steve Lisi: When we see the demand coming, we're going to bring people on board. Okay, well understood. Thanks for taking the questions, Steve. Great. Thanks. I appreciate it. Our next question comes from the line of Matt Kaplan with Latimbert Delman. Please answer your question. Hey, guys, thanks. Thanks for taking the questions. Just wanted to, If you can give us a little bit more color on why you're confident in your guidance in terms of the 12 to 16 million for 2025 and what you need to see, I guess, in terms of conversions of some of these conversations that you're having with with with different hospitals. Thanks, Matt. You know, so look, you don't win them all.
Okay, well understood. Thanks for taking the question Steve.
Great. Thanks, I appreciate it.
Okay.
Our next question comes from the line of Matt Kaplan with Ladenburg Thalmann. Please proceed with your question.
Hey, guys. Thanks, Thanks for taking the questions.
Just wanted to.
If you can give us a little bit more color on why you're confident in your in your guidance in terms of the $12 million to $16 million for 2025, what you need to see I guess in terms of.
Conversions of some of these conversations that youre, having with with with different hospitals.
Thanks, Thanks, Matt. So look you don't win them all there there's no way, we expect about 1000 here.
Matt Kaplan: There's no way we expect about a thousand here, but we do expect to be winning a good portion of these discussions that we're having, you know. What we need to see is, you know, keeping our existing customers and re-signing them because a lot of the re-signings are coming up in the next couple of months.
But we do expect to be winning a good portion of these discussions that we're having.
You know.
What we need to see is.
Keeping our existing customers re signing them because there's a lot of the re signings are coming up in the next couple of months I think that'll be important and it will also be important to bring on some new customers.
Steve Lisi: I think that'll be important, and it'll also be important to bring in some new customers. You know, what we need to see is, you know, June, July, August type things where we, I believe we'll be bringing in significant numbers of new customers because we'll have already taken care of our existing customer base by the time we get out there, and we'll have time to have built up our inventory to a point where we can take on more hospitals. So that's what we need to see. And we're already seeing it.
What we need to see is June July August type things or where we.
I believe we will be bringing on cigna.
Significant numbers of new customers, because we will have already taken care of our existing customer base by the time, we get out there and we'll have time to have built up our inventory to a point, where we can take on more hospitals. So that's what we need to see and we're already seeing it you know we mentioned we had the new start fab one we had another start in February so.
Steve Lisi: You know, we mentioned we had the new start, Feb 1. We had another start in February, so two hospitals opening in the month of February.
Two hospitals, starting in the month of February.
Steve Lisi: And we'll have more coming. You know, I think we're gonna be seeing hospitals, hospital starts. You know, every month, multiple hospitals start every month, hopefully, and the sizes will vary. Some are small, some are medium, some are big.
And we will have more.
You know I think we're going to be seeing hospitals hospital starts.
You know every month multiple hospital starts every month hopefully.
And the sizes will vary you know some some are small some are medium summer big.
Steve Lisi: You know, we might even get lucky, Matt, and get one of those giant-sized customers. We'll see. We'll see if we can break into that club of having some of the big, big, huge uses of nitric oxide in the United States. And then, in terms of the PMA supplement for cardiac surgery, obviously, the label and approval took a lot longer than you expected for the initial indication. How's the review going? Is it just starting? And how do you expect it to progress? Is this something you expect to be completed later this year? You know, Matt, I don't like to comment on things I have no control over, but, you know, I think before the end of this calendar year is a fair assessment that we'll hear back from the FDA one way or the other. It could be, you know, it could be sooner than that. It could be, you know, it could be the summer. It could be the fall.
Now, we might even get lucky and get one of those.
Giant size customers, we'll see we'll see if.
We can break into that.
That club of having some of the big Big huge uses of nitric oxide in the United States.
Okay, Great that's helpful.
And then in terms of the PMA supplement for for cardiac surgery.
Obviously the knee.
Label and approval took a lot longer than you expected for an initial indication.
How is the housing or wherever you're going and it's just starting and and how do you expect that to progress is this something you expect to be completed later this year.
You know, Matt I don't like to comment on things that have no control over.
But.
You know I think before the end of this calendar year is a fair assessment that will we'll hear back from the FDA, one way or the other.
You know.
It's.
You know it could be it could be sooner than that it could be it could be the summer it could be the fall I mean, it's very difficult to pinpoint it in and I don't want to give.
Steve Lisi: I mean, it's very difficult to pinpoint it, and I don't want to, you know, give a hard date here. But, you know, I would say it's going to take more than 180 days, which some people may think. So please don't put 180 days.
To give a hard date here, but.
I would say, it's going to take more than 180 days that some people may think so please. Please don't put 180 days don't don't think we're getting the approval in the month of May.
Steve Lisi: Don't don't think we're getting approval in the month of May. I would think it's going to take, you know, several months beyond that. And right now, it's a pure guess on my part because the interactions with FDA, as you know, we're still a little bit short of when you would normally hear feedback from FDA. We're still a little bit of a ways away from getting a full, complete picture of FDA's first pass of our application. So that's just a guess on my part. We do feel confident in our application. We think that the data that has been generated are very strong. And we really look forward to discussing this with FDA. I mean, my team can't wait.
I would think it's going to take several months beyond that.
And right now it's a pure guess on my part because the interactions with FDA as Youre aware were still a little bit short of when you would normally hear feedback.
FDA.
We're still a little bit a ways away from getting a full.
Full picture of Fda's first pass of our application. So that's just a guess on my part we.
We do feel confident in our application.
That the data that had been generated a very strong.
And we really look forward to discussing with FDA I mean, my team can't wait we're gearing up.
Steve Lisi: We're gearing up, You know, we're sitting here twiddling our thumbs, trying to prepare, you know, guess what questions will be asked and try to be ready for them. That's all we can do. So, hopefully, for the next update in June, I'll have a little bit more information for you. But right now... You know, it's just our opinion.
You know sitting here to it on our phones, you know trying to prepare.
Questions will be asked and try to be ready for it.
That's all we can do.
So hopefully next update in June.
I'm, a little bit more information for you, but right now.
Just just our opinion.
Right, Okay, alright, well, thanks for taking the questions.
Matt Kaplan: All right, well, thanks for taking the question. Perfect. Thanks, Matt. I appreciate it. There are no further questions in the queue. I'd like to hand the call back to Steve Lisi for closing remarks. Thanks, everyone, for tuning in. It is much appreciated. I look forward to sharing with you our progress on the next call. Thank you. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.
Perfect. Thanks, Matt appreciate it.
There are no further questions in the queue I'd like to hand, the call back to Steve Lindsey for closing remarks.
Well, thanks, everyone for tuning in much appreciated and look forward to sharing with you our progress on the next call. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.