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spk06: 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. A 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 Corey Davis from LifeSci Advisors. Please go ahead.
spk08: Thank you, operator.
spk04: Good afternoon, everyone, and thank you for joining us. Today, after market closed, 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 on 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, which constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. The ONDAIR cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated. We encourage everyone to review the company's filings with the Securities and Exchange Commission, including without limitation. a 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. Additionally, this conference call is being recorded and will be available for audio rebroadcast on our website, www.beyondair.net. Furthermore, the content of this conference call contains time-sensitive information and 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 Fatkin, 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.
spk05: Thanks, Corey, and good afternoon to everyone joining us. On 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 Fackin, who will provide an update on the LungFit PH commercial launch. This will be followed by an overview of our financial results for the quarter by our Chief Financial Officer, Doug Larson, and then we will open the call up for questions. To start, I would like to thank the Beyond Air team as they continue to embody the mission of our organization in developing and commercializing the LungFit platform. to address several therapeutic indications. This includes LungFit 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 PPHN, 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 LungFit PH. 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 lung fit NTM 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 2,323 inhalations self-administered at home with no treatment-related discontinuations reported and overall high treatment compliance. Body of Life data trended strongly in favor of NO, which is what FDA's most recent guidance requires for the primary endpoint in NTM studies. If ultimately approved, we believe the LungFit Go has the potential to be a game changer for this patient population and could open the door for BeyondAir to the enormous home market for respiratory diseases. To expand the landscape for both LungFit Pro and Go, we are currently planning to initiate a pilot study in 2023 that will evaluate the LungFit Go treating severe exacerbations due to lung infections in COPD patients. Moving on to our viral lung infection program, which uses the LungFit Pro system at 150 parts per million NO to treat community-acquired viral pneumonia in adults and bronchiolitis in children under two years of age. We are pleased to show more data from our viral 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 such a study in the fourth quarter of calendar 2023. As a reminder, we have now completed an adult pneumonia study, three bronchiolitis studies, two NTM studies, along with several other studies to give us in excess of 5,000 NO administrations at 150 parts per million to 250 parts per million to over 170 patients with an excellent safety profile. Moving to our private affiliate, Beyond Cancer, we announced in late June that the Phase I clinical trial opened 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 a 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 NO may be effective as a monotherapy, we are also examining where NO may be used in combination to treat a variety of solid tumors. Now it is with great pleasure that I hand the call over to Duncan Fatkin, Chief Commercial Officer of Beyond Air, to speak about the first six weeks of the U.S. commercial launch of the FDA-approved LungFit pH. Duncan?
spk01: Thanks, Steve, and good afternoon to our investors. With FDA approval received in late June, the past six weeks have been a truly exciting time for the whole Beyond Air team as we focus on our goal to fulfill the enormous potential for lung-fit pH. 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 lung-fit pH to a select group of hospitals that have level three or level four NICUs and staff experienced with inhaled nitric oxide. Our team is actively conducting demonstrations of the system to the staff of these hospitals, from which the feedback has already been overwhelmingly positive. The hospitals we have visited so far have been excited by the opportunity to eliminate cylinders and by the speed at which the LungFit pH system can generate a steady dose of nitric oxide. The hospital staff will typically comment on how simple LungFit pH is to use and are genuinely excited to evaluate the system. As one hospital director of respiratory care mentioned, we've been waiting and waiting for you to get approved. This interest was reinforced at the Near Heart Conference where our team exhibited last week in Los Angeles. attended by almost 1,000 delegates, where 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, our team will work closely with the hospital staff to ensure that Beyondair has optimized our logistics, customer service, and product performance. which we refer to collectively as the LungFlex 24-7 Partnership and Support Program. There are three components of this program that together make up what we believe will become the gold standard for the nitric oxide industry. First, as its name implies, we have designed the LungFlex business model to be flexible and transparent, providing an all-inclusive contract that includes the necessary number of LungFlex pH systems backup systems, and accessories for the period of their contract. This will allow hospitals to budget for their nitric oxide system with certainty. Secondly, we have recruited a very experienced clinical specialist team that will not only provide initial training, on-site 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 LungFlex service and support line will provide 24-7 access to all customers to technical, clinical, and commercial support. Our team will handle everything from routine orders and billing inquiries to emergency deliveries using our rapid replacement program. We do not expect these initial hospitals to require an abundance of devices up front. However, they will have a sufficient volume of hours per month to provide a rigorous test for lung-fit pH and the Beyond Air team. Of course, FDA approval is just the start of our commercialization journey. We anticipate the CE mark for the lung-fit pH system to be granted before the end of 2022. In addition, we are planning to submit our supplemental PMA to the FDA for an expanded cardiac label. Then, in the first half of calendar year 2023, we anticipate the start of phase two of our launch. We'll be expanding our commercial team to support this much broader sales effort and would expect this to lead to an acceleration in our commercial success. I will now turn the call over to Douglas Larson, our Chief Financial Officer, to provide an overview of our financial results for the fiscal quarter ended June 30th, 2022.
spk00: Thanks, Duncan, and good afternoon to our investors. Our financial results for the first quarter of fiscal year 2023, which ended on June 30, 2022, are as follows. On a GAAP basis, research and development expenses for the fiscal quarter ended June 30, 2022, were $3.2 million, compared with $2.7 million for the fiscal quarter ended June 30, 2021. On a GAAP basis, General and administrative expenses for the fiscal quarter ended June 30, 2022, increased to $8.2 million, compared with $3.9 million for the fiscal quarter ended June 30, 2021. This is 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 LungFit PH in the U.S. Other income and expense for the fiscal quarter ended June 30th, 2022, was a loss of $0.2 million, comparable with the loss of $0.2 million for the fiscal quarter ended June 30th, 2021. For the fiscal quarter ended June 30th, 2022, the company had a gap net loss of $11.7 million, of which $10.9 million, or 37 cents per share, was attributable to the shareholders of Beyond Air Inc., compared with a loss of $6.7 million, or 31 cents per share, for the fiscal quarter ended June 30th, 2021. Net cash used in operating activities, including those of Beyond Cancer, was $6.8 million during the quarter ended June 30th, 2022. As of June 30th, 2022, 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 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 LungFit PH in the US. We 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.
spk08: Thanks, Doug. Operator, let's go to Q&A.
spk06: We will now begin the question and answer session. To ask a question, you may press star, then 1. on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.
spk08: Today's first question comes from Greg Fraser with Truist. Please proceed.
spk11: 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 hospitals. I'm curious what attributes of the system are resonating the most. You mentioned speed as one, but is there anything else that you would point out? And has anything come up in the discussions that has been unexpected?
spk01: Hi, it's Duncan here. Thanks for the question. Yeah, certainly people are very impressed with how quickly it produces nitric oxide. think that there's the obvious reaction to the elimination of the the bulk of the cylinders and the logistics associated with that but also just a simplicity it's very easy to understand system and their expectation is that the training process isn't going to be at all onerous and transition would be quite straightforward so I think that what's happened with the demonstrations is they they typically don't last too long because it's such a straightforward system to use. And then the questions are all about how they can integrate that into the hospital and the whole process of actually reaching some kind of agreement. So we're getting the kind of feedback we expected to about the speed and the simplicity is really the other component that we're getting great feedback about. And then they're obviously intrigued at the system's ability to generate nitric oxide from room air. And the predictability of the system as well is something that they're excited about.
spk08: Great.
spk11: Can you comment on if there are any notable differences in the Lung FLETS program versus Melancholy Total Care program?
spk01: Well, the way that we're approaching it, certainly from a general perspective, there are very much similarities. But in terms of the response, we're aiming to be very flexible and transparent with our business model.
spk08: Sorry, can you hear me okay? Yep.
spk01: So I'm not sure how much of that you heard. I think we had an interruption, but... I'll repeat just in case. Oh, good. So the business model, we're certainly aiming to be very flexible and transparent. And depending 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 the cost or the flexibility that our system might offer. In terms of the locations of our systems, we're going to have a network of stocking locations that won't be particularly different. And the team that we've recruited, some of which have an incredible amount of nitric oxide experience, we expect to be able to offer at least as strong clinical backup. So I would 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 that I'm not going to go into because we have some unique capabilities that we've built into our logistical partner.
spk11: Got it. Very helpful. One more, if I may. Is the potential for cost savings tied to not having to deal with cylinders? Is that something that comes up in the discussions and is something that the hospitals are focused on? Logistics clearly would be an advantage, not having to transport, et cetera. But are there cost savings attached to that also that are important to hospitals?
spk01: Yeah, I think that it clearly varies from hospital to hospital. It depends on how they're 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 logistics, and the workflow, which can have direct cost savings, but also as significantly can make it just easier to use the system, allow the clinicians to focus more on the patient welfare. And also, when they're using the system, there's a predictability that is built into our system. So no matter what type of treatment that they're providing, and this is associated with the dose that they're providing and the ventilator use setting that they have. The filter time for us is 12 hours, no matter how the system is being used, no matter what the dose or flow is. 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.
spk08: Great, thanks for the color.
spk06: The next question comes from Scott Henry with Roth Capital.
spk02: Thank you, and good afternoon. Just a couple questions. First, the G&A of $8.2 million, you talked about what went into it. The 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 representative representative is the 8.2 million going forward.
spk05: Scott, it's Steve here. I think it's fairly representative, and you're right. As we get into the first half of next calendar year, it'll probably start to move as we begin our second phase of the launch. But you'll see in the queue that goes up probably in the next 20, 30 minutes that there's a little bit of of non-cash items in there as well.
spk03: Okay, great.
spk02: Thank you for the color. And then another question, the cardiac label. Can you talk about how the addition of a cardiac label impacts your product, particularly how it is positioned to the other players in the market?
spk05: So right now, the cardiac usage for nitric oxide is off-label. So hospitals that use it are not getting reimbursed, and it's certainly hurting the profitability on those surgeries where they need to use nitric. So getting it on label obviously allows us to target 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. I'm not saying others may not be pursuing it. I don't know. But, you know, I think it's going to be very helpful for us and for everyone in the market, actually. So I think, you know, eventually, if one of us gets it, I think over time, everyone will get that on label. But it'd be nice to be first, one to get that on label, that's for sure. It should be very helpful. But I think the hospitals would gladly... accept reimbursement for the use of nitric if they can get it.
spk02: Okay, great. Steve, what's the latest estimate of what percentage of the market is cardiac usage?
spk05: I think it's well more than half the market, cardiac usage. So you do have the newborn babies, PPHN babies. You certainly have a component of acute respiratory distress syndrome there and COVID-19 as well that it's being used for. But I would say that cardiac is more than all those other conditions combined for sure. Okay, great.
spk02: And a final question, and I don't know if you've given this, but the initial phase of launch, which we're in right now, Have you talked about how many centers you are targeting, whether a specific number or a range of hospitals? How should we think about the scope of the initial phase?
spk01: I'll take that, Scott. Thanks for the question. I think we've been pretty consistent on this. We're aiming for about a dozen hospitals in that first six to nine-month period. It may change depending on whether a couple of hospitals are connected to each other and they want to work in tandem, et cetera. But that's been the focus because we want to use that time to optimize the logistics service and make sure that everything's working as planned.
spk03: Okay, great.
spk08: Thank you for taking the questions. Thanks, Scott. The next question comes from Matt Kaplan with Leidenberg-Solomon.
spk06: Please proceed.
spk07: Hey, guys. Thanks for taking the questions. I guess just a quick follow-up to Scott's question. If you're targeting 12 hospitals, 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 chances for multiple systems?
spk05: Yeah, Matt... you know, you're probably looking in the, you know, anywhere from the mid-single digits to, you know, into the teens. It just depends on the hospital and where we're looking. And there are plenty of hospitals that have 25-plus, you know, units that they use. You know, in the beginning of our launch here, I don't think we're going to be committing, you know, 25, 30 units to one single hospital. You know, that's just during the first six to nine months. So, I don't think we're going to be going to hospitals where they're using one or two systems. We need to use... We've said before we're targeting hospitals that have a certain volume of hours per year so that our machines can get use and we can get feedback on how they're performing.
spk07: 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 as the revenue generating component for your business model?
spk05: The way the market works now essentially is the hospitals are charged per hour of usage of nitric. All of these other components for our competitors, delivery system, cylinder and all the connections and so forth, they're not really itemized. for pricing. They're included in the package of what they pay per hour for nitric. So we're going to try to keep things status quo with how things are done contractually and what they're charged for. So you can look at us as charging on an hourly basis, just like our competitors do, kind of throwing everything else in essentially for argument's 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 NO is or the flow or the type of vent being used, it lasts 12 hours. So it's very easy for us to track the time that the hospital has used our system for.
spk07: And then last question, in terms of your inventory of devices, 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 hospitals, the first 12 hospitals in the initial stage of launch?
spk05: I don't think we're concerned about the initial stage. I think we're good there. And we're looking out 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, we're good. We're covered. Okay. So we have time to gather more components and build more systems.
spk07: Great. 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 eight months ago in TM at CHEST in October. What should we expect to see there in terms of numbers of patients and type of data that you're going to have there?
spk05: You're going to see 15 patients, and we'll have to see what the data are going to be. I actually don't know, Matt, because my statistician won't tell me. He says when I'm done, you'll know. So that's it. I don't bother him.
spk07: Okay, fair enough. And then last question, in terms of the phase one study for your oncology program, you opened screen in June. You said you're going to involve first patients this quarter. Can you give us a sense in terms of where the centers are, and is this a worldwide study, one country only? Israel.
spk05: It's a phase one person in human, so it's just There's no way it's multi-countries. It's just Israel.
spk07: And do you expect to have an IND opened in the U.S. in the near term?
spk05: Depends what you mean by near term. But yes, we're going to get one of those in the U.S. at some point, yes, absolutely.
spk08: Thanks, Steve. Thanks, Matt.
spk06: The next question comes from Yale, Jen, with Laidlaw and Company. Please proceed.
spk10: Thanks, Dave, for squeezing me in. Just one quick one. How do you assess that the Phase I is mature enough to enter into the Phase II commercialization? Simply just by the time, dozens of hospitals, or any other matrix to measure? to make assessment, and thanks.
spk01: Yeah, thanks for the question, Yael. I think that initially we're taking the view that we need that time, the six to nine months, to fully evaluate and allow any adjustments to be made. If we really don't see those kind of obstacles and things are going really well, we will aim to try and accelerate. So there's no specific milestone. It's 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 Guy certainly at that point into the phase two or a little bit earlier. It just depends on how that initial work goes.
spk08: Okay, great. Thanks a lot. I appreciate it and good luck. Thanks, Shiel.
spk06: The next question comes from Suraj Kalia with Oppenheimer.
spk08: Steve, can you hear me all right? Yes, yes. Thanks, Suraj.
spk09: Okay. So, Steve Duncan, for either one of you, the high-level NICUs that you're talking about, the 9 to 12 for PPHN, how should we envision the construct of a typical contract exclusive, non-exclusive, volume-based, registry-based data, minimums? Just kind of give us some additional parameters that you could.
spk05: Look, 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 hourly rate and an estimate of how many hours will be used per year. And we're going to do the same thing. These 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 is 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 not something that we're going to change or adjust. if that makes sense to you.
spk09: Okay. And Steve, one of the questions in terms of beyond cancer, so 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, diffusion, any, you know, what old data at the other end, you know, from beyond cancer should we start gleaning or looking out for that would help us better understand, you know, what has been theorized for long, but you guys could put it to practice more so from a PK profile, just how the thing is going to work. Gentlemen, thank you for taking my questions.
spk05: Sure. So this is a local administration. There won't be any PK profile and we don't enter the bloodstream. So, that answers one part of your question. We've put out our data, and you can see it on the Beyond Cancer website, that we've dosed for a duration of five minutes intratumorally. It's fairly a simple system at this point because we're doing, let's say, exposed tumors, skin surface or near skin surface tumors. So it's just a simple catheter with a needle, so we always deliver it. So I'm not going to give any more detail than that because there is a certain amount of proprietary information about exactly how we do it. And we do have a proprietary system to deliver inside the body, but we're going to reserve that for either Phase 1B or probably Phase 2 studies. In the current study that we're in, we're just using the current system and we're targeting skin and near-skin surface tumors. So what people need to look for, And again, if you look in the Beyond Cancer website, you'll 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 human study is obviously safety, first and foremost. But hopefully we'll be able to see some biomarkers that will give us an idea of of the immune system being armed against this tumor type, which is what we saw in the mice. And we'll be looking, you know, for activity in T cells and B cells and many other areas of the body. So it's something that everyone should look for. Hopefully we'll see some activity in humans like we've seen in the mice. And, you know, when we get that data, obviously we just opened the study. So hopefully in the next, you know, six months, we'll get a bunch of patients in and we'll be able to let people know what the data look like. And in the meantime, you know, we hope to show some more data in animals and 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 if 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.
spk08: Thank you.
spk06: At this time, we are 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.
spk05: I just want to thank everybody for joining today, and we'll talk to you next time.
spk08: The conference is now concluded. Thank you for attending today's presentation.
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