Good day, and welcome to the Beyond Air First Quarter 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Corey Davis. Please go ahead, sir.

Thank you, Sierra. Good morning, everyone. Thanks for participating in today's conference call for the company's first quarter of fiscal 2021. Leading the call will be Steve Lisi, Chairman of the Board and Chief Executive Officer of Beyond Air. Joining him will be Douglas Beck, Chief Financial Officer; and Amir Avniel, President and Chief Operating Officer. This morning, Beyond Air issued a press release announcing the financial results of its first quarter of fiscal '21. A copy of the release can be found on the Investor Relations section 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 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 SEC, including, without limitation, the company's Form 10-K, which identifies specific factors that may cause the 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. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, August 6, 2020. Beyond Air undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call. So with that, I would now like to turn the call over to Steve Lisi, Chairman of the Board and Chief Executive Officer of Beyond Air. Steve?

Thanks, Corey. Good morning, everyone. Thank you for joining us today. Considering we just had our fourth quarter call six weeks ago, I'll be brief. Today, we'll provide an update on our programs and upcoming milestones, after which, I will hand the call over to Doug to provide a review of our financial results. I will start today's call discussing the concept that is Beyond Air. As I look across our development pipeline, I see so many reasons to be excited about the benefits we offer patients and healthcare providers as well as the opportunity for us to build shareholder value. At the core of our story is our system's ability to generate nitric oxide from ambient air, on demand, with just the power from a standard electric outlet. The capability to generate NO from ambient air enables our devices to have a number of practical features that allow us to address a broad number of complex indications and also have a number of potential advantages in real-world settings compared to cylinder-based legacy systems currently in the market. The reason I wanted to start today's call highlighting this point is to emphasize the importance of our guidance today that we expect to file the U.S. premarket approval, or PMA, for the LungFit PH to treat persistent pulmonary hypertension of a newborn, or PPHN, to the FDA at the end of next month. This PMA will set us up for what we expect to be our first FDA approval and subsequent commercial launch of our LungFit platform technology. As I have mentioned in the past, we believe our system has the potential to disrupt the current NO supply chain to hospitals and eventually make the cylinder-based delivery system a thing of the past. With that said, let me now get into specific programs, starting with LungFit PH. As a reminder, the LungFit PH ventilator-compatible system is currently being developed to address PPHN and also for certain cardiac surgery patients outside the United States. This continues to be our lead program and consumes the vast majority of our engineering, regulatory, and quality teams' focus. As I just mentioned, we are in the process of preparing our PMA submission. I am certain that many of you who follow us closely are aware that the PMA submission timeline has been delayed by several months due to the COVID-19 pandemic impacting supply chains and logistics for testing. While we are confident in our filing guidance based on our current situation, we are not in complete control of this timeline given the overall macro environment in the U.S. today. I would like to emphasize that under the current circumstances, a delay of only a few months is an outstanding accomplishment for the Beyond Air team. Given the FDA guidelines for a 180-day review period for PMA, we anticipate the U.S. commercial launch could occur in the second quarter of 2021. Commercial launches outside the U.S. will be dependent on our ongoing partnering discussions and approval timelines in each jurisdiction. I would like to briefly highlight again the operational, safety, and cost advantages of our LungFit PH system over cylinder-based systems. Eliminating cylinders provides the hospital with instant savings on space inventory requirements, training, employee time, patient time in the ICU, and safety for both the patient and medical staff. For obvious reasons, we do not require a nitric oxide manufacturing facility or cylinder distribution infrastructure, and these advantages will position Beyond Air to take significant share of this market, which is estimated to be more than $300 million in the U.S. and more than $600 million worldwide. Turning to our COVID-19 program. As we have previously announced, the U.S. COVID-19 study started enrolling patients in June. To date, the study has shown an excellent safety profile for patients treated with nitric oxide. We anticipate the conclusion of this study within the next 60 days. As a reminder, the U.S. trial is an open-label study of up to 20 adult patients hospitalized with COVID-19. Subjects are being randomized 1:1 and treated with intermittent dosing using 80 parts per million nitric oxide administered over 40 minutes four times a day, in addition to standard supportive therapy or treated with standard supportive therapy alone. This lower dose of 80 parts per million is designed to prove the safety of this concentration before moving to a higher concentration that we expect is going to have a more optimal efficacy profile. The primary endpoint is the time to clinical deterioration. Other endpoints include reduction in viral load and safety in various biomarkers. We see a significant opportunity to use the LungFit system in mild-to-moderate patients diagnosed with COVID-19 caused by SARS-CoV-2. Considering the data compiled to date with high-concentration NO, most notably, the three completed pilot clinical studies in bronchiolitis where infants were hospitalized due to viral infections, we believe that this system could be a significant tool in the battle against this coronavirus. Staying with the viral lung infection theme, our bronchiolitis program has produced stellar efficacy and safety data to date. As I have previously mentioned, this program is on hold until the pandemic subsides. I'll give a quick review of the data presented to date, which lends support for our chances of success in COVID-19 patients. Last quarter, we announced positive top-line results from our third and final pilot study in bronchiolitis patients, which showed, on an intent-to-treat basis, that 150 parts per million nitric oxide were statistically significant when compared to both 85 parts per million nitric oxide and the control arms on both the primary endpoint of time for discharge and on the key secondary endpoint of hospital length of stay. In all cases, the key values were below 0.05 with hazard ratios north of two. It is important to note that the result far exceeded expectations given this was a small study with just 87 evaluated patients across the three arms. There were no serious adverse events associated with nitric oxide. It's important to emphasize that the low dose of 85 parts per million NO had no effect when compared to placebo. We look forward to publishing the data just like the previous two pilot studies that have been published. In our LungFit Home program, we are progressing rapidly towards initiating a multicenter 12-week, self-administered, at-home pilot study in 20 patients with nontuberculous mycobacteria lung infection. We expect to begin enrollment in the fourth quarter of 2020. In order to be enrolled in the study, a patient needs to be diagnosed with either Mycobacterium abscessus complex, or M. abscessus, or Mycobacterium avium complex, or MAC. Patients will be titrated up to 250 parts per million nitric oxide. The study will evaluate safety, quality of life, physical function, and bacterial load. The FDA has emphasized the importance of quality of life improvement and physical function as well as an improved safety profile as markers of success versus sole indication of the bacteria. Based on our current expectations, we expect to report interim data from the at-home study around the end of the first half of calendar 2021. As many of you are aware, we have a high confidence level for success in this study given our previously generated data. We're also quite encouraged by the simplicity of our LungFit system functionality. It's a simple 5-step process. First, plug the system into any standard electrical outlet. Turn on the power switch. Insert the smoke filter into the system. Place the breathing mask on the face, and press the start button. This is a very straightforward system. Our smoke filters have an RFID chip that communicates with the system and will dictate the dosing parameters, so the patient does not have much to be concerned with. As a reminder, LungFit automatically starts generating nitric oxide once the timer of the filter runs out. With a successful study, we believe our LungFit Home system opens the door to a very significant underserved market for chronic severe lung infections that can be treated in the home. This market includes COPD patients with severe exacerbations that are frequently precipitated by an infectious agent. There are over one million hospitalizations annually in the United States due to exacerbations caused by lung infections in COPD patients, and we would look to avoid rehospitalization of these patients. Clearly, this is quite a large unmet medical need. Finally, we turn to our solid tumor program. In June, we presented early but very promising data on colon and breast tumors in vitro and colon tumors in vivo. The data demonstrated very potent antitumor activity with eradication in vitro and antitumor immunity in vivo. We're very encouraged by this in vivo antitumor immunity, which was demonstrated with 25,000 to 200,000 parts per million nitric oxide in six mice versus seven to 12 mice. Tumors grew in all seven control mice, while none of the six mice previously treated with nitric oxide for an initial tumor had a secondary tumor present. We anticipate presenting more in vivo preclinical data before the end of this calendar year. With that, I will now turn the call over to Doug for the financial review. Doug?

Thank you, Steve. Here's a brief review of our financial results for the first quarter of fiscal year 2021, which ended on June 30, 2020. Revenue for the quarter was $229,000 as compared to $627,000 for the three months ended June 30, 2019. All revenues related to the accounting for the payments made to Beyond Air will now be terminated commercial agreement for LungFit PH. Research and development expenses for the quarter were $4.3 million compared to $2.3 million for the three months ended June 30, 2019. General and administrative expenses for the quarter were $2.5 million compared to $2.2 million for the three-month period ending June 30, 2019. For the quarter, the company had a net loss of $6.7 million or $0.40 per share compared to a net loss of $6.2 million or $0.67 per share for the same period last year. As of June 30, 2020, the company had cash, cash equivalents, and restricted cash of $24.4 million. This cash is sufficient to fund operations well beyond 12 months from today. I'll now hand it back to Steve.

Thanks, Doug. Before we go to the Q&A, I just want to point out that we have signed our commercial supply agreement with Spartronics, formerly Sparton, for the LungFit and LungFit PH systems. This is a critical step as we prepare to submit our PMA. Now on to questions. Operator?

We'll go ahead and take the first question from Suraj Kalia with Oppenheimer & Co.

So Steve, a lot of information provided on the call. Let me start out with the PMA submission dossier. Between now and September 30, what still remains to be done to facilitate this timeline, obviously, with the caveat that COVID is still somewhat of a wild card out there?

Yes. So actually, there is testing to be done. We're wrapping up all different kinds of tests. And as you know, in a PMA, there's an enormous amount of documentation. So that's what's going on for the next roughly eight weeks here, and it's a lot of work. And we have the people who can do it, and that's the timeline that we are on. So there are still some outside vendors who are working on us, and they're doing a fantastic job with us. And knock on wood, no impact from COVID, and we'll hit our timelines.

Got it. Steve, one of the things you mentioned on the call, which even ResMed was talking about yesterday, is potential long-term lung damage with COVID. And you also mentioned about COPD in a home-based setting, the potential for iNO use. I guess, maybe you can help us understand what safety do you believe needs to be demonstrated in a home setting for this potential long-term use versus a PPHN, knowing that the latter one is ventilator compatible, so the form factor is different. But just from a safety perspective in a home setting, what additional hurdles do you anticipate for the longer-term opportunity?

Our study involving patients with nontuberculous mycobacteria will allow for self-administration at home. We expect to gather valuable data within nine to twelve months, including an interim look. The primary challenges we face relate to nitrogen dioxide safety. We aim to ensure that nitrogen dioxide does not become a concern in home settings. Our system is designed with alarms and shutdown mechanisms, along with various safety precautions. For instance, if a patient falls asleep while taking a dose, the system will automatically stop producing nitric oxide. We have implemented multiple fail-safes and safeguards. Additionally, our NO2 filtration ensures that harmful NO2 levels do not accumulate. The main issue to address is NO2 levels, and we have taken extensive measures to ensure safety both at home and in hospitals for our LungFit systems. In my view, NO2 represents the largest hurdle, but our focus must be on demonstrating safety in multiple patients in their homes to regulatory authorities worldwide. When the system is not in use, there is no risk of NO2 exposure since we do not store nitric oxide, and it cannot operate by itself. Only during operation, with a filter in place, is there any potential risk. The filter's role is to maintain NO2 levels within safe limits, and as I mentioned, we have alarms and automatic shutdown features in place. In summary, while NO2 is a key challenge, we are confident in our system's safety. Our goal is to demonstrate this through patient experiences at home. I hope this provides a comprehensive overview.

No problem. Finally, Steve, I will return to the queue regarding the international partnership discussions for LungFit PH. What is the current status? Can you provide any timelines or thresholds you are aiming to meet? I'm looking for some parameters and what we might expect for PH.

Thanks, Suraj. There's really no timelines outside the U.S. that we want to get specific on at this time. I think Europe, being the big market outside the U.S., I think there's still some uncertainty about when the changes in the rules will take place. That's obviously been delayed because of the pandemic, so there may be a window for us to get an approval before those changes are made. But we really have no visibility on that at the moment. It's still fairly chaotic. So I'm going to stay away from the kind of timing with partnerships ex U.S. at this time.

The next question is from Scott Henry with ROTH Capital.

I guess, starting with the COVID-19 program, when should we expect data from the Canadian trial?

Thanks, Scott. I think data from the Canadian trial is going to do well after anything from the U.S. trial, so I wouldn't count on seeing 150 PPM data from the Canadian trial in the next 60 days like we've been targeted to get for the U.S. trial ramped up. So it's going to be a little bit longer than that for obvious reasons that they don't have as many cases as the U.S. does. So it's not very prevalent, which is good for Canada. So just not the volume of patients there to be able to get that done as quickly as we'd like.

Okay. Regarding the At-Home NTM trial, you mentioned that the data would be interim by mid-2021. When can we expect the long-term data? I assume the interim data will include the full dataset with the primary endpoint, and we are trying to understand how to consider the overall data package, particularly in terms of longer-term safety.

The study consists of a 12-week treatment phase followed by a 12-week follow-up period. It is an open-label study, so we will monitor the incoming data regularly. We hope to provide interim data for patients who have completed the treatment phase after 12 weeks. Depending on enrollment, if we can gather a significant number of patients who have completed the treatment and are in the follow-up phase, we will determine the right time to release that interim data. Since it is open label, we will have access to the data frequently. However, the complete dataset will be available only after the last patient has finished the 12-week follow-up period. This means we aim to have the final dataset ready within four to six months following the interim report. I want to note that we may need to close sites and prepare reports before presenting the final dataset. Therefore, you can expect the complete dataset within this calendar year, not long after the interim report.

Okay, that's helpful. Regarding the income statement, are you still receiving co-promotion revenues? Will this be the last quarter for that in the income statement, or will some of it continue to be reflected?

Scott, it's an accounting anomaly related to how we recorded that deal, and it doesn't represent actual cash. It's just GAAP accounting. I'll hand that question over to Doug. I believe there's one more quarter, but Doug can provide a better answer. Doug?

That's really about the performance obligations that occur as we approach the filing for FDA approval. It comes into effect when we get closer to receiving that approval.

So Scott, it could be two or three more quarters is what Doug is saying. The numbers are small.

Yes, hardly makes a difference. Okay. And then on the R&D side, R&D kind of jumped up in Q1. Should we expect that to continue? Or is that kind of a timing-related event?

Yes, it's timing. I mean, in this quarter, we completely changed our bronchiolitis program into COVID, so there were some expenses to do that and trying to get that moving quickly. And there's also timing of payments to Spartronics for device manufacturing and so forth. So it's guided to $4 million to $5 million per quarter, and I think that the last quarter was a little high. And I think that it will smooth out in the next quarter.

There was also a lot of noncash charges this quarter of about $700,000 compared to the last quarter.

And the next question is from Matt Kaplan with Ladenburg Thalmann.

Just wanted to focus in on the LungFit PH PMA filing. More specifically, can you talk a little bit about your commercial preparations that you're putting in place and how we should think about the initial launch in the second quarter if you can get approval?

Well, Matt, we are preparing to launch this product independently. We are still in discussions regarding potential partnerships, so we will continue on both paths, as there’s no assurance that the partnership talks will result in a satisfactory deal for us. Therefore, we are ready to launch the product ourselves. For those of you who attended our Analyst Day in early March, you met our Chief Commercial Officer, and his presentation was excellent; we are all on board. We are confident in our ability to launch the product solo. However, there are also considerations that may lead us to partner. The product is expected to launch in the second quarter of next year, pending FDA approval. Can you remind me how you asked about our launch strategy? I didn't catch the second half of your question, sorry.

Yes. How are you planning to launch that? Previously, you mentioned a staggered or staged launch plan. Is that still your objective, or what are your thoughts on it?

Yes. I believe this is quite typical for devices. In particular, within hospitals, it's important to approach this carefully by starting with a small number of hospitals that use nitric oxide and can provide feedback. This is the approach we will take. Launching to over 1,000 accounts at once is likely not the best strategy. Therefore, we will maintain the same strategy I've discussed previously, implementing a slow, controlled, step-by-step launch.

And just one other question in relationship to the launch. Can you talk about the manufacturing capacity that you'll have and the number of devices you think you'll have in place as you prepare to launch the product this year?

We anticipate that, given the gradual pace in the first six to nine months after the launch, we will have an adequate supply of LungFit PH systems ready shortly after receiving approval. We expect to have a number of commercially viable systems available once we enter the PMA process, so capacity shouldn't be a concern. We can produce thousands of these systems annually with our current setup. Therefore, I am not particularly concerned about launching in the U.S. The bigger challenge will be when we expand internationally and start seeking approvals outside the U.S., at which point we might consider adding a second production line. However, for the U.S. market, one line is more than enough. Currently, there are likely fewer than 10,000 nitric oxide delivery systems in the entire United States, so demand on that front isn't substantial. The key component in our systems will be the filters, which are small and easy to manufacture. We have more than enough capacity for them. One production line might not be sufficient for global needs, but we only need to ensure we meet demands for PPHN at this stage. If we branch out into other indications, we may need additional lines for filters. For PPHN, we can easily ramp up filter production if necessary. They are not costly, and we can maintain a good inventory, so the concern you might have regarding inventory and supply chains primarily revolves around filters. The LungFit systems themselves are durable and will last over five years in the market, so we don't require large quantities of them initially. Once we establish our presence, our focus will be on managing the filter supply chain, which is much easier than handling the systems.

Great. That's very helpful. And then a few more questions, if I may. You mentioned previously that the Canadian trial, as there are not as many patients in Canada to really get the 150 parts per million trial going and data going, have you thought about initiating the 150 parts per million study elsewhere in the world? And I know you were just contemplating at one point Israel. And now with the resurgence there, is there a chance you could launch that study in Israel?

Yes. Matt, Israel is likely the only option we can consider because we cannot send anyone anywhere. If we attempt to conduct a study in another country outside of the U.S. and Canada, where we do have some presence, we have no resources in those other countries. We are not going to be shipping our LungFits to places without personnel who can receive, inspect, configure, and train users on the devices. This process is more complex than simply sending a drug to a country and instructing them to administer it. We are limited to conducting studies in locations where we have staff on the ground dealing with COVID-19, which restricts us to only a few countries. I know there are COVID-19 reports globally, and while it may appear straightforward to conduct studies in places with high case counts, transporting our team there and then bringing them back to the United States poses significant challenges. This is currently a limitation for us. We will focus our efforts in the U.S. and, hopefully, move forward from there.

And then the solid tumor program, you announced some initial data already this year. What should we expect to see? You mentioned that there should be additional preclinical data for that program. What should we expect to see there later this year? And then secondly, on the solid tumor program, can you paint a little picture for us in terms of the path to IND and the path to the clinic in terms of in-human studies?

You'll need to wait for the data we plan to present. We're aiming to showcase a different tumor type than colon in vivo. We'll see if that comes together. There may be additional data, but we have to wait for some projects to be completed, written up, and presented. Regarding the timeline for a first-in-man study, we expect that to happen in about 12 to 15 months, likely in the second half of next year, around September to December. We still have several tasks to complete, including testing a volume of animals and deciding on the optimal tumor type for our advanced study, which hasn't been determined yet. We also recently set up our own animal house, which has been operational for about a month. It will take time to finalize that setup and obtain licenses, providing us with flexibility in our approach and timing. We've just resumed more in vivo studies, so that's all we can share at this time.

And we'll take the next question from Yale Jen with Laidlaw.

I apologize for not arriving earlier, so I may have missed some of the points you mentioned. However, I would like to follow up on the COVID-19 press release, where you indicated that safety has been established. My question is whether the Canadian study has started. Additionally, can the process progress more quickly and reach the 150 PPM for treating patients? Any updates on this would be appreciated.

The trial has not yet started because we haven't enrolled any patients. What I mentioned in the release and my prepared remarks pertains to the 80 parts per million study in the United States, which has shown a clean safety profile regarding nitric oxide. That’s all I was referring to, and I didn’t intend to suggest anything about the Canadian study, which we have not initiated yet.

Maybe to follow up a little more. In terms of the U.S. studies, you still need to go through the entire cohort before you can contemplate the next move or the data at this point could be sufficient to contemplate other sort of future path or future trials.

We have already considered our next steps. We are currently waiting for enough supporting data to proceed. As you mentioned, I can’t specify whether we need to complete 10, 15, or 20 patients in our study before moving forward with our strategy. I wish I had a definitive answer for you. However, it's a question that time will clarify. I’m not sure if anyone can provide a concrete answer to that. If we need to complete the full 20, then we will do so. If we can stop at 16 or 14, we will. Ultimately, it will depend on the data we gather and what the FDA's next steps will be.

Two quick questions here. The first one is that is there any updates in terms of the old data set for the U.S., whatever that number is? And the second is when the Canadian study is going to start?

So with respect to the U.S., again, we're probably going to be talking with the FDA about the data at study before we have any kind of a press release on the data set. This is something that we, as a company, want to work closely with FDA, not putting press releases out about every two or three patients that come into the study. That's not our goal. Our goal is to use this information more closely with the FDA on how we can move forward. So I think you won't be seeing us putting out any press releases on any kind of data set for these patients until we share it with FDA first. So that will take care of the U.S. question. And the Canadian question, it's a good question, when will we start? That's something we're debating internally, when we will start it or if we will. At this point, it's a matter of is it worth our resources to push forward in Canada. Given what we know over the last couple of months since we got approved from Health Canada to run this study, we've pilot there. And we're deciding whether it's worthwhile for us to even entertain trying to get the study there. And again, you have to understand the progress we've made in the U.S., what's going on in Israel and what we learned in Canada. So we have to put all these things together and make a strategic decision. So I can't answer your question because I don't know if we're going to try to start the study. And if we do try to start the study, what that day would be, when that would actually start to enroll the first patient. So I'm sorry, I don't have an exact answer for you at the moment, but it's just not something that we made a decision on yet.

Okay. That's fine. I assume most of that will depend on the infection rate in Canada or particularly in the near future, which will determine whether it's appropriate to start the study there.

Yes, yes. Those are the factors for sure.

And it appears there are no further questions at this time. Mr. Lisi, I'd like to turn the conference back to you for any additional or closing remarks.

Thank you, everyone, for joining and listening to our call today. Have a nice day.

That concludes today's call. Thank you for your participation. You may now disconnect.