U.S. Markets closed

Edited Transcript of KKIC earnings conference call or presentation 14-Aug-19 8:30pm GMT

Q1 2020 Beyond Air Inc Earnings Call

NESS-ZIONA Aug 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Beyond Air Inc earnings conference call or presentation Wednesday, August 14, 2019 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Douglas J. Beck

Beyond Air, Inc. - CFO

* Steven Adam Lisi

Beyond Air, Inc. - CEO & Chairman of the Board

================================================================================

Conference Call Participants

================================================================================

* I-Eh Jen

Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst

* Matthew Lee Kaplan

Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research

* Monique Kosse

LifeSci Advisors, LLC - MD

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Greetings, and welcome to the Beyond Air, Inc. First Quarter 2020 earnings call. (Operator Instructions) As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Ms. Monique Kosse with LifeSci Advisors. Ma'am, you may begin.

--------------------------------------------------------------------------------

Monique Kosse, LifeSci Advisors, LLC - MD [2]

--------------------------------------------------------------------------------

Thank you, operator, and good afternoon, everyone. Thank you for participating in today's financial Earnings Conference Call for the company's fiscal first quarter ended June 30, 2019.

Leading the call today will be Steve Lisi, Chairman of the Board and Chief Executive Officer of Beyond Air. Joining him today will be Douglas Beck, Chief Financial Officer; and Amir Avniel, President and Chief Operating Officer.

Earlier this afternoon, Beyond Air issued a press release announcing its financial results for its fiscal first quarter 2020. A copy of the release can be found on the Investor Relations page of the company's website. Before we begin, I would like to remind everyone that comments and various remarks about future expectations, plans and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Beyond Air cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated. Beyond Air encourages you to review the company's filings with the Securities and Exchange Commission, including without limitation, the company's forms 10-Q, which identifies specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements.

As a reminder, this conference call is being recorded, and will be available for audio rebroadcast on Beyond Air's website, www.beyondair.net.

Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the live broadcast, August 14, 2019. Beyond Air undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

With that, I'd like to now turn the call over to Steve Lisi, Chairman of the Board and Chief Executive Officer of Beyond Air. Steve?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [3]

--------------------------------------------------------------------------------

Thanks, Monique, and good afternoon, everyone. Thank you for joining us today. We are pleased to be here with another update of our progress.

Since it's been just 6 weeks since our last earnings call and update we'll keep our remarks brief.

You will hear me refer to the LungFit family of generator and delivery systems on the call today. We have chosen this name to represent the Beyond Air product portfolio going forward. And we think it very strongly reflects our mission to transform the lives of patients with respiratory conditions. This quarter, we continued to work towards our goal of submitting a PMA for our LungFit pulmonary hypertension system, or LungFit™ PH, to treat persistent pulmonary hypertension of the newborn, or PPHN, and remain on track to do so in September. We also remain on track to run our pilot study in bronchiolitis in Israel this winter and plan to initiate a 12-week at-home study in patients with our system in nontuberculous mycobacteria, or NTM, patients in the second quarter of calendar 2020.

Before I provide more detail on each program, I would like to comment on our recently completed animal toxicology study. This study was performed with our LungFit system designed for use in bronchiolitis and NTM. Both male and female rats were studied at nitric oxide concentrations of 150, 250 and 400 parts per million in addition to a control arm. All concentrations were administered twice daily for 80 minutes for a total of 160 minutes of daily exposure. I would like to point out that our bronchiolitis treatment is expected to be administered 4 times per day for 40 minutes and with up to 5 days maximum at 150 parts per million nitric oxide.

For our NTM study, we plan on delivering 250 parts per million 4 times per day for 40 minutes initially, followed by 250 parts per million twice daily for 40 minutes for 10 weeks. Hence the treatment burden is more onerous for the rats as compared to either bronchiolitis or NTM patients.

All rat treatment groups saw methemoglobin levels return to baseline prior to the next inhalation. There were no deaths, clinical observations were normal, all groups showed normal weight gain, gross pathology on necropsy was clean. We are very encouraged by these preliminary results and we are waiting [for] the final clinical pathology and histopathology results expected in the fourth quarter of this calendar year.

Turning to our lead program. We remain on track to submit a PMA towards the end of this quarter for PPHN. Assuming a typical PMA review process time of 180 days, we anticipate a potential U.S. launch in the second quarter of 2020. We, along with our commercial partner Circassia, are eagerly anticipating the opportunity to enter the U.S. market.

Given the benefits of our LungFit PH device provides for the administration of nitric oxide, we anticipate capturing the majority of market share within a few short years after launch. PPHN is an attractive [in-hospital] global market, with Mallinckrodt currently leading the U.S. market with their cylinder-based system, bringing in over $500 million annually according to published company reports. Praxair is expected to launch with their cylinder based system before the end of 2019, making them second to market. With our planned launch in the second quarter of 2020, we'll be the first to market with a cylinder-free technology, which we believe will prove superior to any and all cylinder-based technologies. With a lighter weight cart, or no cart at all, better safety, no storage requirements, no purging requirements, no need for additional oxygen and overall cost savings, the potential benefits are tremendous. With our partner Circassia's U.S. commercial footprint of over 200 people, including a small hospital sales force, we believe we are well positioned for success.

In the EU, we continue to anticipate obtaining a CE Mark in the first half of calendar 2020. We expect to have a partner or partners for all ex-U. S. markets.

For our bronchiolitis program, we are on track to begin our pilot study in Israel in November. The data generated from this pilot study will optimize our U.S. pivotal study planned for the 2020, '21 winter season.

Recall that we have already completed 2 pilot studies in bronchiolitis with consistent positive data, hence our confidence in this program. As a reminder, our data to date have shown significant reduction in duration of clinical symptoms and hospital length of stay. Bronchiolitis market is one we believe we can commercialize in the U.S. on our own. It is hospital-based with no approved therapies, no competition and provides an economic benefit to the hospital. Our LungFit Pro systems are ready for prime time, as they have already been used to treat rats at 400 parts per million nitric oxide for 30 days.

Our NTM program is picking up steam and that was great news for both patients and our company. We're on track to initiate a multicenter 12 weeks self-administered at-home pilot study in patients with either abscessus or MAC lung infection, using our LungFit NTM system in the second quarter of calendar 2020. Patients will be titrated up to 250 parts per million nitric oxide under the care of a physician and then make the transition to treatment at home. We are encouraged by the preliminary animal data and believe that patients can safely administer 250 parts million nitric oxide. Data from our 9 patient study, compassionate use and in vitro testing provide the basis for our belief that we will see superior efficacy on both quality of life measures and bacterial load. I look forward to providing more details around the protocol as we get closer to the start of the study. Success with at-home treatment would not only be great news for NTM patients but for many patients with chronic refractory and persistent lung infections. Given our current body of data, both in humans and in vitro, we believe that nitric oxide can be effective for many patients with various infections. With proper resources, we anticipate having both a pseudomonas pilot study and a COPD pilot study initiating in 2021, assuming the NTM pilot study proves home administration is viable. With that, I'm pleased to now pass the call over to Doug Beck to discuss our financial results for the quarter. Doug?

--------------------------------------------------------------------------------

Douglas J. Beck, Beyond Air, Inc. - CFO [4]

--------------------------------------------------------------------------------

Thank you, Steve. Here's a quick review of our fiscal first quarter results ended June 30, 2019.

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [5]

--------------------------------------------------------------------------------

That was the fastest review of all time by any CFO. I think something happened with Doug's line, so I will run through this real quick.

Revenue for the 3 months ended June 30 was $600,000. This revenue represented the amount earned from milestone payments received from the license agreement with Circassia. There were no revenues in the same 3 month period of 2018.

Research and development expenses for the 3 months ended June 30, 2019, were $2.3 million compared with $1.1 million the same period of '18. The increase is primarily related to the development of the LungFit and preclinical studies.

General, administrative expenses for 3 months ended June 30, 2019 were $2.3 million compared to $700,000 for the same 3 months period in '18. The increase is primarily related to professional fees, hiring of employees and also noncash stock-based compensation expense. For the 3 months ended June 30, 219, the company had a net loss of $6.2 million or $0.67 per share compared to a net loss of $1.7 million or $0.20 per share in the same 3 month period of 2018. As of June 30, 2019, the company had cash, cash equivalents, restricted cash and marketable securities of $11.7 million compared to $6.7 million at June 30, 2018. This cash is sufficient to fund operations through the third calendar quarter of 2020, exclusive of contributions from current or future partnerships. And with that, I'd like to once again, thank our investors for placing their trust in us. Everyone at Beyond Air is a shareholder and is working tirelessly to bring our LungFit system to market for all of the indications we're targeting. With that, we look forward to taking your questions. Operator?

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question today comes from Matt Kaplan from Ladenburg Thalmann.

--------------------------------------------------------------------------------

Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [2]

--------------------------------------------------------------------------------

Just want to dig in a little bit to the PPHN PMA for your LungFit program, the filing. I guess, number one, what is kind of the rate limiting step now? I guess near-term completion is expected in September. Any rate limiting step right now to getting that done?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [3]

--------------------------------------------------------------------------------

Well, Matt, thanks for the question, first of all. Second, this is in the hands of our engineers and our contract manufacturer at this moment. So if it was in my hands, I could give you a much more definitive response in telling you exactly what date it would be. But based on the information from our contract manufacturer, we're on track to get this done in September. And the rate limiting factor is just software debugging, to be honest with you, Matt. Everything is working perfectly, we just have to go through all that process because I'm not a computer programmer, but I can tell you from what they tell me these things just take time. It could take a couple of days or couple of weeks. Just kind of waiting for that to kind of bust through and get a definitive date. That's the rate limiting factor and it's not a factor that's a problem. In other words, it's not like, "Oh my God, we can't make it work." It's more like it's just got to not have any bugs when you are going to run this through for FDA, and do the testing that they require. So I'm sure everybody on the phone has used computers and programs and so forth and it's kind of annoying when those things happen. But when you have a life-saving product on the market, you can't have -- these things have to be perfect. So right now, we're just in the basically in the software debugging process and just kind of waiting, to be honest with you. That's it. I can't predict that timing Matt, I wish I could.

--------------------------------------------------------------------------------

Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [4]

--------------------------------------------------------------------------------

That's helpful. Then I guess now with anticipating the 180 day review and potential launch in the second quarter of calendar '20, what -- can you talk a little bit about your -- the preparations that you have in place for commercialization? I guess with Circassia?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [5]

--------------------------------------------------------------------------------

Sure, I mean pretty standard. We're doing our best to have a list of target hospitals that we would like to work with. We obviously aren't approved so we can't really engage with them. But we have -- we're making our lists of target hospitals in certain areas. We're getting our ducks in a row with Circassia, make sure that the plan in place. We're setting up our distribution, making sure that supply chain is in great shape. Thinking about what's going to be the reaction of people when we get to the market. What's going to be the action of our competitors, just kind of planning for those things. [Itchy fingers] to get going. But there's a lot of things we can't do until we get approved, so we're just kind of in the planning phase of preparing for this launch. Just putting in forecasts and so forth and making sure that our manufacturers are ready for that as well. It's just normal stuff that we're preparing for before launch. We still have, I guess, roughly 9, 10, 11 months or whatever it is until we launch. We're, I guess, 9, 10 months away from that launch, give or take. And there is nothing special going on, Matt, that I could point to.

--------------------------------------------------------------------------------

Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [6]

--------------------------------------------------------------------------------

And then in terms of preparing for reimbursement and getting those systems in place for the reimbursement, how do you initially expect to sell the device, so to speak? Do you expect to rent it? Do you expect to give it away? Do you expect to -- what's your model there?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [7]

--------------------------------------------------------------------------------

So all I can say about that is, there is a model that's been used by Mallinckrodt for a very long time. And normally, when you're coming into a market, change is difficult for people. So I think that we're going to do our best to make the transition from a cylinder-based business system to the generator-based business as simple as possible. So we don't want to throw anything new at the hospitals. Even our user interface is fairly simple to use based on what they've been doing in the past decade.

So the model right now is essentially based on time. Mallinckrodt charges by time, how long you have the valve open on the cylinder. So we have 12 hour filters, and that's what we'll do. People will buy filters from us and they'll use them -- 2 filters per day. That's pretty much the model. I mean we really don't have -- we want don't want to do anything to the hospitals where they have to have a large upfront payment for our system. They don't have to do that now. So we're just going to mimic kind of what's out there. Same thing for the reimbursement. We're not trying to re-create anything here. Just going to go with what's in place in the market to make it a simple transition for everybody.

--------------------------------------------------------------------------------

Matthew Lee Kaplan, Ladenburg Thalmann & Co. Inc., Research Division - MD & Head of Healthcare Equity Research [8]

--------------------------------------------------------------------------------

Right. And then just with the bronchiolitis pilot study that you plan to start later this year in November. With the bronchiolitis, I guess, season ending in April-ish time frame, do you think you'll be able to have a readout kind of middle of next year from that pilot?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [9]

--------------------------------------------------------------------------------

Absolutely. Yes. Expect it to be by the end of the second quarter next year.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

Your next question comes from I-Eh Jen from Laidlaw & Company.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [11]

--------------------------------------------------------------------------------

Couple of quick ones. First one is that regarding the reimbursement. Do you anticipate there will be a new [ID] code for that? Are do you can use the existing code for that?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [12]

--------------------------------------------------------------------------------

Well, thanks for the question, I-Eh. I don't want to say definitively what will happen or what we'll be doing. But again, I don't really want to try to make something new where it doesn't need to be done. So I think that there are sufficient reimbursement codes in existence. If you look at other products and launches into the hospital where they're considered medical devices, there could be things within a DRG or J-code and if there's existing things out there that the product fits into, usually that's what companies do. Creating new codes is a difficult time-consuming process. So if that can be avoided, it will be. And I don't anticipate us having to wait very long to get right into the mix with being reimbursed.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [13]

--------------------------------------------------------------------------------

Okay. So theoretically would that be by the time that the device gets approved, you and the partner will start to work with the agencies, starting to make sure that things -- that LungFit can be used with existing code, which I fully understand that will save a lot of effort by the hospital administrator and others. Would that with the time line we should anticipate?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [14]

--------------------------------------------------------------------------------

Yes. I think the hospitals would like it to be kept as simple as possible as well. So we're going to keep it simple for them. So I don't anticipate there being any problems with the reimbursement for the system. Again, we don't expect to have any advantage or disadvantage against any competitors.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [15]

--------------------------------------------------------------------------------

Okay. Great. That's very helpful. And maybe question about the clinical study. You mentioned that the total exposure of nitric oxide for the bronchiolitis will be somewhere around, I guess, I had written down 6,000 per day -- ppm per day. And what might that be for NTM? I understand there's a different patient cohort, so is there a sort of general rule of thumb for that total exposure per day?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [16]

--------------------------------------------------------------------------------

Sure. So just for bronchiolitis, it's maximum 5 days and it's 4 treatments of 40 minutes at 150 parts per million. That's what we're targeting to do -- well, we'll do that in our study. I don't know if that will end up being what's approved and on the market. But for our study, we're doing 150 parts per million 4 times a day for 40 minutes each up to 5 days. So that can give you a total exposure per day or for the max of 5 days -- obviously, if the infants' symptoms are resolved sooner, they won't get 5 days. In the last 2 studies we did, they were getting treated on nitric oxide for a little over 2 days, about 2.5 days to be exact.

So on the NTM side, we expect to have the patients titrated up to 250 parts per million. In initial induction phase, I guess, you can call it, is 250 parts per million 4 times a day for 40 minutes. So a much higher concentration than for the infants. And then in the 10 weeks after that initial phase, they'll be doing 250 parts per million twice per day. So a little less total, it would be about half the total exposure per day in that maintenance period. Again, the flow rates are going to be much higher for the NTM patients than it would be for bronchiolitis given the size of the lungs of the patients. So you have to take that into account as well.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [17]

--------------------------------------------------------------------------------

And just make sure that for NTM, it is 250 -- titrate up to 250 ppm 4 times a day and each one is 40 minutes, and that will be, what, 7 days a week for the duration for each week?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [18]

--------------------------------------------------------------------------------

It's every day. Yes. There's no break, every day. So again, for the 4 times it's only for a short period of time. It's not for the entire trial. So for the final 10 weeks of the study, it's going to be twice a day. So twice a day is much more palatable for a patient to be able to have a normal life, whereas 4 times a day, obviously, it's very difficult to do anything outside of the home. So that's only a short period of time with 4 times a day. Then 2 times a day is for the vast majority of the time the patient is being treated so they can live their lives.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [19]

--------------------------------------------------------------------------------

Okay. Great. Maybe the last question here, which will be, you mentioned earlier there's 2 indications that you're going to explore starting 2021. Unfortunately, I missed that. Maybe you can just sort of reiterate that a little bit?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [20]

--------------------------------------------------------------------------------

Sure. So the first one would be a pseudomonas lung infection. It should be patients with some underlying chronic lung infection -- or lung disease, excuse me, typically cystic fibrosis. It could be non-CF bronchiectasis or COPD, but these -- we'll be targeting patients with pseudomonas infections that are chronic and refractory to antibiotic therapy and persistent. We have some in vitro data showing much -- or far superior killing ability of nitric oxide versus pseudomonas than we've seen with NTM abscessus. We also had some of our patients we've treated in our studies in the past who had pseudomonas lung infections and we saw some good results in 4 patients with pseudomonas. We had -- 2 of them were eradicated, these were patients who were co-infected with NTM abscessus. So we feel pretty good about pseudomonas. But again, I think it's important to see if patients are able to self-administer at home on their own safely before moving to the pseudomonas space.

Now the second indication was COPD. That's obviously a little bit more expensive, a little bit more involved. But for COPD patients, there are many infections that can cause exacerbations in the more severe COPD patients. That's probably who we'd be targeting. So there's bacterial, fungal and viral infections that can cause these exacerbations. So nitric oxide has efficacy across-the-board in killing these things in vitro. Some are easier than others. So we would like to see what we can do for these COPD patients who are getting exacerbations on a regular basis.

--------------------------------------------------------------------------------

I-Eh Jen, Laidlaw & Company (UK) Ltd., Research Division - MD of Healthcare Research & Senior Biotechnology Analyst [21]

--------------------------------------------------------------------------------

That's very helpful. And maybe just to make sure I get the last sort of addition to that, which is what might be the proposed dose for those 2 indications, 2 conditions? Would that be something between NTM and bronchiolitis? Or that has not been determined?

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [22]

--------------------------------------------------------------------------------

I think it hasn't been determined. I think certainly it'd be higher than bronchiolitis. I think we need to go higher. Bronchiolitis, I can't really speak about, if it will be 250 or higher or lower or more frequent, less frequent, longer duration or not. Again, all we can really go on right now is what we're seeing from an in vitro perspective and I think we need to get into humans before we can talk about what it would be.

But right now I would say it's probably not going to be above 250 since we're working with 250 right now based upon keeping the patients safe with methemoglobin levels below 10%. So until we get past this study, it's kind of hard for me to -- any further details on that, we have to see what happens in this first home study.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

(Operator Instructions) And ladies and gentlemen, I'm showing no further questions at this time. I would like to turn the floor back over to management for closing comments.

--------------------------------------------------------------------------------

Steven Adam Lisi, Beyond Air, Inc. - CEO & Chairman of the Board [24]

--------------------------------------------------------------------------------

Thanks everybody for taking the time today to hear the Beyond Air story. Hopefully, in the future, we'll get a few more of you to not be so shy and ask some questions. But until next time, thanks again.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.