Today, we’re highlighting Beyond Air, Inc. (NASDAQ:XAIR). The company is accelerating the deployment of its first approved product and is working on other assets. Analysts like the stock, but the company recently had to seek additional financing, which came with some onerous restrictions. Can Beyond Air get enough momentum in the market to avoid further dilution? An analysis is provided below.

 

Overview of the Company

This modest medical device and biopharmaceutical company is located just outside of New York City. The company currently has one product on the market and is working on developing more based on its LungFit platform, which is a nitric oxide generator and delivery system.

The following products are in the company’s portfolio/pipeline:

LungFit PH

Approved for the treatment of newborn persistent pulmonary hypertension. The company recently completed the first step of a restricted commercial launch of LungFit PH, securing partnerships with a number of hospitals. Beyond Air is now preparing to market this product on a larger scale.

LungFit PRO

In development for the treatment of viral lung infections in hospitalized patients, including as community-acquired viral pneumonia and bronchiolitis. In the fourth quarter, the business plans to begin a trial to test this device for the treatment of viral community-acquired pneumonia (VCAP).

LungFit GO

The drug is being developed for the treatment of nontuberculous mycobacteria. A pilot trial to test this device on a subset of COPD patients who have recently been discharged from hospitals is planned for late 2024. A clinical trial using LungFit Go for the treatment of individuals with nontuberculous mycobacteria is planned for the first half of 2025.

The company’s innovative nitrous oxide therapy is also being developed to treat several types of solid tumors as a single agent and in combination with checkpoint inhibitors (anti-PD1 and anti-CTLA4). Those attempts are too early in their development stages to be relevant to our review.

The stock is now trading for slightly more than $4.50 a share, with a market capitalization of approximately $140 million. The fiscal year of the corporation begins on April 1st.

Analyst Commentary & Balance Sheet

Oppenheimer ($10 price target) and BTIG ($15 price target) both reaffirmed Buy ratings on XAIR this week. Truist Financial did the same in February, but reduced their price target to $18 per share from $20 earlier. So far in 2023, that is the only analyst firm activity I can discover on the stock.

Several insiders, including the company’s CEO and CFO, purchased about $900,000 in stock during the first quarter, while the stock was trading above $8 per share. So far in 2023, there has been no insider trading in the stock. Currently, around 9% of the outstanding float is owned short.

After a GAAP net loss of $59.4 million, the company completed the fourth quarter with little more than $45 million in cash and marketable securities on its balance sheet. Beyond Air also owes $8 million to Circassia, which will be paid in two installments in FY2024 and FY2025. In FY2023, the company burned through $37.9 million in cash and forecasts a cash burn rate of around $10 million per quarter in FY2024.

Beyond Air then received $17.5 million from a new four-year $40 million credit facility with stringent terms. The first three years of repayment can be interest-only, but at a 12% interest rate. The corporation was also required to issue over 233,000 warrants at a conversion price of $5.88 per share to the lender.

Bottom Line

According to the current analyst estimate, the company will lose $1.77 per share in FY2024 as sales increase from zero in FY2023 to slightly under $20 million this fiscal year. They expect losses to reduce to $1.40 per share in FY2025 as revenues exceed $50 million. It is vital to note that experts’ revenue projections for FY2024 and FY2025 vary greatly.

The corporation has finance in place for six quarters based on its forecast cash burn rate. The challenge is predicting whether revenues would climb sufficiently to avoid additional dilutive funding. Unfortunately, Beyond Air is still too early in its marketing rollout phase to make accurate predictions about how the sales ramp will unfold. One reason analyst firm forecasts are currently all over the place. Given that uncertainty, as well as my current cautious posture on the general market, I am refraining from making any investment recommendations on Beyond Air.

By the end of this year, the business should have obtained the CE Mark for LungFit PH in the EU as well as a cardiac label expansion application for this product in the United States. As a result, this is a story we will revisit once the company has posted a couple quarters of sales data and its growth trajectory is more predictable.

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