Item 1A. Risk Factors 30
Item 1B. Unresolved Staff Comments 71
Item 2. Properties 71
Item 3. Legal Proceedings 72
Item 4. Mine Safety Disclosures 72
Item 6. Selected Financial Data 74
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 82
Item 8. Financial Statements and Supplementary Data 82
Item 9A. Controls and Procedures 83
Item 9B. Other Information 83
PART III 84
Item 10. Directors, Executive Officers and Corporate Governance 84
Item 11. Executive Compensation 89
Item 14. Principal Accounting Fees and Services 91
Item 15. Exhibits, Financial Statement Schedules 92
SIGNATURES 95
References
in this Annual Report on Form 10-K (this “Annual Report”) to the “Company,” “Beyond Air,” “we,”
“our,” or “us” mean Beyond Air, Inc. and its subsidiaries except where the context otherwise requires.
FORWARD-LOOKING
STATEMENTS AND MARKET DATA
This
Annual Report contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions
for forward-looking statements contained in Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section
21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements other than statements of historical facts
contained in this Annual Report, including statements regarding our future results of operations and financial position, business strategy,
prospective product candidates and products, product certifications or approvals, timing of our clinical development activities,
research and development costs, timing and likelihood of success, and the plans and objectives of management for future operations and
future results of anticipated products are forward-looking statements. These statements involve known and unknown risks, uncertainties
and other important factors that may cause our actual results, performance or achievements to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking statements.
In
some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,”
“expect,” “plan,” “anticipate,” “expect,” “could,” “intend,”
“target,” “project,” “contemplate,” “believe,” “estimate,” “predict,”
“potential,” or “continue” or the negative of these terms or other similar conditional expressions. The
forward-looking statements in this Annual Report are only predictions. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends that we believe may affect our business, financial condition
and results of operations. These forward-looking statements speak only as of the date of this Annual Report and are subject to a number
of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the
factors described under the sections in this Annual Report titled “Risk Factors” and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” as well as the following:
-
our status as a development-stage company and our expectation to incur losses in the future;
-
our future capital needs and our need to raise additional funds;
-
our ability to obtain U.S. Food and Drug Administration (“FDA”) approval of the premarket approval (“PMA”) application
for the LungFit® system (as defined below);
-
our ability to build a pipeline of product candidates and develop and commercialize products;
-
our ability to enroll patients in clinical trials, timely and successfully complete those trials and receive necessary certification
or regulatory approvals;
-
our ability to maintain our existing or future collaborations or licenses;
-
our ability to protect and enforce our intellectual property rights;
-
federal, state, and foreign regulatory requirements, including the U.S. Food and Drug Administration or the FDA regulation of our product
candidates;
-
our ability to obtain and retain key executives and attract and retain qualified personnel;
-
our ability to successfully manage our growth; and
-
our ability to address business disruption and related risks resulting from the COVID-19 pandemic, which could have a material adverse
effect on our business plan.
Moreover,
we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management
to predict all risk factors and uncertainties.
You
should read this Annual Report and the documents that we reference in this Annual Report completely and with the understanding that our
actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary
statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained
herein, whether as a result of any new information, future events, changed circumstances or otherwise.
Beyond
Air, Inc. the Beyond Air logo, and other trademarks or service marks of Beyond Air, Inc. appearing in this Annual Report are the property
of Beyond Air, Inc. This Annual Report also includes trademarks, tradenames and service marks that are the property of other organizations.
Solely for convenience, trademarks and tradenames referred to in this Annual Report appear without the ® and TM symbols,
but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our
rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.
MARKET,
INDUSTRY AND OTHER DATA
This
Annual Report contains estimates, projections, market research and other information concerning our industry, our business, markets for
LungFit® PH and our other product candidates and the size of those markets, the prevalence of certain medical conditions,
LungFit® PH market access, prescription data and other physician, patient and payor data. Unless otherwise expressly
stated, we obtain this information from reports, research surveys, studies and similar data prepared by market research firms and other
third parties, industry, medical and general publications, government data and similar sources as well as from our own internal estimates
and research and from publications, research, surveys and studies conducted by third parties on our behalf. Information that is based
on estimates, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances
may differ materially from events and circumstances that are reflected in this information. As a result, you are cautioned not to give
undue weight to such information.
SUMMARY
OF PRINCIPAL RISK FACTORS
This
summary briefly lists the principal risks and uncertainties facing our business, which are only a select portion of those risks. A more
complete discussion of those risks and uncertainties is set forth in Part I, Item 1A of this Annual Report, entitled Risk Factors. Additional
risks not presently known to us or that we currently deem immaterial may also affect us. If any of these risks occur, our business, financial
condition or results of operations could be materially and adversely affected.
Our
business is subject to the following principal risks and uncertainties:
Risks
Related to our Financial Position and Capital Requirements
● We do not have an FDA-approved product in the market.
● We will need additional funding.
Risks
Related to the Discovery and Development of Our Product Candidates
Risks
Related to our Reliance on Third-Parties
Risks
Related to Commercialization of our Product Candidates
Risks
Related to our Intellectual Property
Risks
Related to our Business Operations
Risks
Related to the Ownership of our Common Stock
Risks
Related to Employee Matters
● Our employees may engage in misconduct.
General
Risk Factors
PART
I
ITEM
1. BUSINESS
Business
Overview
We
are a clinical-stage medical device and biopharmaceutical company developing a nitric oxide (“NO”) generator and delivery
system (the “LungFit® system”) that is capable of generating NO from ambient air. The LungFit®
platform can generate NO up to 400 parts per million (“ppm”) for delivery to a patient’s lungs directly or
via a ventilator. LungFit® can deliver NO either continuously or for a fixed amount of time at various flow rates
and has the ability to either titrate dose on demand or maintain a constant dose. We believe that LungFit® can
be used to treat patients on ventilators that require NO, as well as patients with chronic or acute severe lung infections via delivery
through a breathing mask or similar apparatus. Furthermore, we believe that there is a high unmet medical need for patients suffering
from certain severe lung infections that the LungFit® platform can potentially address. Our current areas of focus
with LungFit® are persistent pulmonary hypertension of the newborn (“PPHN”), acute viral pneumonia
(“AVP”) including COVID-19, bronchiolitis (“BRO”) and nontuberculous mycobacteria (“NTM”) lung infection.
Our current product candidates will be subject to premarket reviews and certifications or approvals by the U.S. Food and Drug
Administration, (the “FDA”), as well as similar regulatory agencies in other countries or regions. If approved, our system
will be marketed as a medical device in the United States.
An
additional focus of ours is solid tumors. For this indication the LungFit® platform is not utilized due to need
for ultra-high concentrations of gaseous nitric oxide (“gNO”). We have developed a delivery system that can safely deliver
gNO in excess of 10,000 ppm directly to a solid tumor. This program is in pre-clinical development and will require approval from the
FDA or similar agencies in other countries to enter human studies. We expect to receive regulatory approval to enter a first in human
trial by the end of calendar year 2021.
Our
active pipeline of product candidates is shown in the table below:
†Caution
- LungFit® is an Investigational Device, Limited by Federal (or United States) Law to Investigational Use.
(2) Label expected to include cardiac surgery and PPHN
Our
programs represent large market opportunities:
†Caution
- LungFit® is an Investigational Device, Limited by Federal (or United States) Law to Investigational Use.
All figures are Company estimates for peak year sales: Global sales potential includes US sales potential
The
LungFit® system generates NO from ambient air by simulating the electric discharge caused from a lightning strike.
Our proprietary technology allows for this reaction to occur in a plasma chamber. We believe the on-demand delivery, either to a ventilator
circuit or directly to a patient’s lungs, is safe due to our system design and our proprietary nitrogen dioxide (“NO2”)
filter. The NO2 filter removes toxic NO2 for 12 hours when used for PPHN and shorter periods for treating other
conditions that require NO concentrations of 150 ppm or more.
With
respect to PPHN, our novel LungFit® PH is designed to deliver a dosage of NO to the lungs that is consistent with
current guidelines for delivery of 20 ppm NO with a range of 0.5 ppm – 80 ppm (low-concentration NO) for ventilated patients. We
believe the ability of LungFit® PH to generate NO from ambient air provides Beyond Air many competitive advantages
over the current standard of NO delivery systems in the U.S., European Union, Japan and other markets. For example, LungFit®
PH does not require the use of a high-pressure cylinder, does not require cumbersome purging procedures and places less burden
on hospital staff in carrying out safety procedures.
Our
novel LungFit® platform can also deliver a high concentration (>150 ppm) of NO directly to the lungs,
which we believe has the potential to eliminate microbial infections including bacteria, fungi, and viruses, among others. We believe
current FDA-approved NO vasodilation treatments would have limited success in treating microbial infections given the low concentrations
of NO being delivered (<100 ppm). Given that NO is produced naturally by the body as an innate immunity mechanism at a concentration
of 200 ppm, supplemental high dose NO should aid in the body’s fight against infection. Based on our pre-clinical and clinical
studies, we believe that 150 ppm is the minimum therapeutic dose to achieve the desired pulmonary antimicrobial effect of NO. To date,
neither the FDA nor equivalent regulatory agencies in other countries or regions have approved any NO formulation and/or delivery system
for >80 ppm NO.
LungFit®
PH for the treatment of Persistent Pulmonary Hypertension
of the Newborn
On
November 10, 2020 we submitted a premarket approval (“PMA”) application to the FDA for the use of LungFit®
PH in PPHN. There is a standard 180-day review process that starts upon FDA acknowledgement of submission, though due in part to
the ongoing COVID-19 pandemic, we anticipate an FDA response towards the end of calendar 3Q 2021. We also expect to receive CE Mark
under the MDR in the European Union around the end of calendar year 2021. According to the most recent year-end report from Mallinckrodt
Pharmaceuticals, sales of NO were $574.1 million in 2020 (up from $571.4 million in 2019) for the United States, Canada, Japan, Mexico
and Australia, with >90% in the United States. Outside of the U.S. there are multiple market participants which translates to considerably
lower sales than in the U.S. We believe the U.S. sales potential of LungFit® PH in PPHN to be greater than $300
million and worldwide sales potential to be greater than $600 million. If regulatory approval is obtained, we anticipate a product launch
in the U.S. in calendar 4Q 2021 and will continue to launch in the EU and globally in 2022 and beyond.
LungFit®
PRO for the treatment of viral lung infections in hospitalized
patients
Acute
Viral Pneumonia (including COVID-19)
Viral
pneumonia in adults is most commonly caused by rhinovirus, respiratory syncytial virus (“RSV”) and influenza virus. However,
newly emerging viruses (including SARS-CoV-1, SARS-CoV-2, avian influenza A, and H1N1 viruses) have been identified as pathogens contributing
to the overall burden of adult viral pneumonia. COVID-19 is an infectious disease caused by SARS-CoV-2, that has resulted in a global
pandemic. Excluding the pandemic, there are approximately 350,000 annual viral pneumonia hospitalizations in the US, and 16 million
annual viral pneumonia hospitalizations globally. For the broader AVP, we believe U.S. sales potential to be greater than $1.5 billion
and worldwide market potential to be greater than $3 billion.
We
initiated a pilot study in late 2020 using our novel LungFit® PRO system at 150 ppm to treat patients with acute
viral pneumonia, including COVID-19. The ongoing trial is a multi-center, open-label, randomized clinical trial in Israel, including
patients infected with SARS-CoV-2. Patients are randomized in a 1:1 ratio to receive either inhalations of 150 ppm NO given intermittently
for 40 minutes four times per day for up to seven days in addition to standard supportive treatment (“NO+SST”) or standard
supportive treatment alone (“SST”). Endpoints related to safety (primary endpoint), oxygen saturation, and ICU admission,
among others, will be assessed.
We
reported interim data from this ongoing trial at the American Thoracic Society or ATS International Conference 2021, which was held virtually
from May 14 – May 19. At the time of the data cut off, the intent-to-treat (“ITT”) analysis population included 19
COVID-19 patients (9 NO + SST vs 10 SST). The data readout showed that 150 ppm NO treatment administered via LungFit®
PRO was safe and well tolerated and demonstrated encouraging efficacy signals. From a safety perspective, there were no treatment-related,
or possibly related, adverse events or severe adverse events. NO2 levels were below 4 ppm at all timepoints (trial safety
threshold is 5 ppm) and methemoglobin (“MetHb”) levels were below 4% at all times (trial safety threshold is 10%). With respect
to the requirement of oxygen support beyond hospital stay, 22.2% of subjects in the NO + SST group compared with 40% of control subjects
had this requirement. There was an observable trend of shortening the duration of hospital stay and duration on oxygen support for treated
patients. Additional detailed study results may be submitted for presentation at an upcoming scientific meeting.
Bronchiolitis
Bronchiolitis
is the leading cause of hospital admission in children less than 1 year of age. The incidence is estimated to be 150 million new cases
a year worldwide, with 2-3% (over 3 million) of them severe enough to require hospitalization. Worldwide, 95%3 of all cases
occur in developing countries. In the U.S., there are more than 120,000 annual bronchiolitis hospitalizations and approximately 3.2 million
annual child hospitalizations globally. Currently, there is no approved treatment for bronchiolitis. The treatment for acute viral lung
infections that cause bronchiolitis in infants is largely supportive care and is based primarily on prolonged hospitalization during
which the infant receives a constant flow of oxygen to treat hypoxemia, a reduced concentration of oxygen in the blood. In addition,
systemic steroids and inhalation with bronchodilators are sometimes utilized until recovery, but we believe these treatments do not successfully
reduce hospital length of stay. We believe the U.S. market potential for bronchiolitis to be greater than $500 million and worldwide
market potential to be greater than $1.2 billion.
Our
BRO program is currently on hold due to the COVID-19 pandemic. The pivotal study for bronchiolitis was originally set to be performed
in the winter of 2020/21 but was delayed due to the pandemic. We have completed three successful pilot studies for bronchiolitis. A further
analysis of the three previously reported pilot studies was presented at the ATS International Conference 2021, which was held virtually
from May 14 – May 19. Analysis across the studies (n=198 infants, mean age 3.9 months) showed that 150 – 160 ppm NO administered
intermittently was generally safe and well tolerated with adverse event rates similar among treatment groups with no reported treatment-related
serious adverse events. The short course of treatments with intermittent high concentration inhaled NO was effective in shortening hospital
length of stay and accelerating time to fit for discharge – a composite endpoint of clinical signs and symptoms to indicate readiness
to be evaluated for hospital discharge. This treatment was also effective in accelerating time to stable oxygen saturation –
measured as SpO2 ≥ 92% in room air. Additionally, NO at a dose of 85 ppm NO showed no difference compared to control for all efficacy
endpoints, while 150 ppm NO showed statistical significance when compared to control.
We
believe the entirety of data at 150-160 ppm NO in both adult and infant patient populations supports further development of LungFit®
PRO in a pivotal study for patients hospitalized with viral pneumonia.
LungFit®
GO for the treatment of Nontuberculous mycobacteria (NTM)
NTM
lung infection is a rare and serious pulmonary disease associated with increased morbidity and mortality. Patients with NTM lung disease
may experience a multitude of symptoms such as fever, weight loss, cough, lack of appetite, night sweats, blood in the sputum and fatigue.
Patients with NTM lung disease, specifically Mycobacterium abscessus (M.abscessus) representing 20-25%
of all NTM and other forms of NTM that are refractory to antibiotic therapy, frequently require lengthy and repeated hospital
stays to manage their condition. There are no treatments specifically indicated for the treatment of M. abscessus lung
disease in North America, Europe or Japan. There are approximately 50,000 to 90,000 people with NTM infections in the U.S. In Asia, the
number of patients suffering from NTM surpasses what is seen in the U.S. There is one inhaled antibiotic approved for the treatment of
refractory Mycobacterium avium complex (“MAC”). Current guideline-based approaches to treat NTM lung disease
involve multi-drug regimens of antibiotics that may cause severe, long lasting side effects, and treatment can be as long as 18 months
or more. Median survival for NTM MAC patients is approximately 13 years while median survival for patients with other variations of NTM
is typically 4.6 years. The prevalence of human disease attributable to NTM has increased over the past two decades. In a study conducted
between 2007 and 2016, researchers found that the prevalence of NTM in the U.S. is increasing at approximately 7.5% per year. M.
abscessus treatment costs are estimated to be more than double that of MAC. In total, a 2015 publication from co-authors
from several U.S. government departments stated annual cases in 2014 cost the U.S. healthcare system approximately $1.7 billion. For
this indication, we believe U.S. sales potential to be greater than $1 billion and worldwide sales potential to be greater than $2.5
billion.
In
December 2020 we began a 12-week, multi-center, open-label clinical trial in Australia and we plan to enroll approximately 20 adult patients
with chronic refractory NTM lung disease. We received a grant of up to $2.17 million from the Cystic Fibrosis Foundation to fund this
study and advance the clinical development of inhaled NO to treat NTM pulmonary disease. The trial is enrolling both cystic fibrosis
(“CF”) and non-CF patients infected with MAC or M. abscessus. The study consists of a run-in period
followed by two treatment phases. The run-in period provides a baseline for the efficacy endpoints. The first treatment phase takes place
over a two-week period and begins in the hospital setting where patients will be titrated from 150 ppm NO up to 250 ppm NO over several
days. During this phase patients receive NO for 40 minutes, four times per day while MetHb levels are monitored. Patients are
also trained to use LungFit® GO and subsequently discharged to complete the remaining portion of the two-week treatment
period at their home at the highest tolerated NO concentration. For the second treatment phase, a 10-week maintenance phase, the administration
is twice daily. The study is evaluating safety, quality of life, physical function, and bacterial load among other parameters.
We
anticipate reporting interim data in the second half of calendar year 2021, likely at a scientific conference. We will release top-line
results for the full data set approximately six months later. If the trial is successful, we would anticipate commencing a pivotal study
in the first half of calendar year 2023.
Our
program in chronic obstructive pulmonary disease (“COPD”) is in the pre-clinical stage and will remain there, subject to
obtaining additional financing.
Ultra-High
Concentration NO in solid tumors
For
our solid tumor program, we have released pre-clinical data at several medical/scientific conferences showing the promise of delivering
NO at concentrations of 20,000 ppm – 200,000 ppm directly to tumors. Results showed that local tumor ablation with NO conveyed
anti-tumor immunity to the host. In our most recent release of data, 8 of 11 mice treated with a single administration of 25,000 ppm
NO over 5 minutes were resistant to a subsequent tumor challenge and 11 of 11 mice treated with 50,000 ppm NO were resistant to a subsequent
tumor challenge. Pre-clinical work will continue throughout most of 2021 with a goal of receiving regulatory approval to initiate a first-in-human
trial by the end of calendar year 2021.
Background
and NO Mechanism of Action
NO
is recognized as a vital molecule involved in many physiological and pathological processes. NO is naturally produced by the body’s
immune system to provide a first line of defense against invading pathogens. It is a powerful molecule with a short half-life of a few
seconds in the blood, enabling it to be cleared rapidly from the body. NO has been shown to play a critical role in the function of several
body systems. For example, as vasodilator of smooth muscles, NO enhances blood flow and circulation. In addition, NO is involved in regulation
of a wound healing and immune responses to infection. The pharmacology, toxicity and other data for NO in humans is generally well known,
and its use has been approved by the FDA as a vasodilator. The precise effect of inhaled NO is dependent on concentration, oxidation
state and type of pathogen.
NO
has multiple immunoregulatory and antimicrobial functions that are likely to be of relevance to inhaled NO therapy. In vitro studies
suggest that NO possesses anti-microbial activity against common bacteria, gram positive and gram negative, as well as mycobacteria,
fungi, yeast, parasites and helminths. It has the potential to eliminate multi-drug resistant strains of the above. Anti-viral
activity covers respiratory viruses such as influenza, corona viruses, RSV and others. In healthy humans, NO has been shown to stimulate
mucocilary clearance, and low levels of nasal NO correlate with impaired mucociliary function in the human upper airway. Unlike other
inhaled drugs, NO is also a smooth muscle relaxant and avoids the concomitant bronchial constriction often associated with inhaled antibiotics
and mucolytics. A potential benefit of these multiple mechanisms may be that in addition to treating lung infections in CF patients,
this suggests that NO may be useful in directly treating the mucus caused by CF, which is the principal manifestation of the disease.
Nitric
Oxide and Infection
NO
possesses broad-spectrum anti-microbial activity acting against bacteria, fungi and viruses. NO is produced at high output as part of
the innate immune response. NO and its by-products (for example, reactive nitrogen species, or RNS) are responsible for the process of
killing microorganisms within white blood cells called macrophages and in organs such as the lungs and other mucolytic tissues.
More
than a decade ago, several research groups showed that NO and RNS possess anti-viral activity and affect several viruses including coxsackievirus,
RSV, influenza, severe acute respiratory syndrome, or SARS, coronavirus, rhinovirus, herpes simplex virus, Epstein-Barr virus, or EBV,
and others. NO has also been shown to be useful in preventing bacterial growth on surfaces.
Continuous
exposure to 150 ppm NO and above, especially in the lungs, may have side effects and cause damage to host cells. Intermittent exposure
to NO in cycles retains NO anti-microbial activity both in vitro and in animal model of infection. Exposure of bacteria to concomitant
30-minute treatments with 160 ppm NO resulted in a significant reduction in bacterial load. A similar dose has been shown to reduce viruses
(common influenza) by 30-100% in a canine kidney infection model. In vivo, in a pneumonia model in rats, inhaled 160 ppm NO, for 30 minutes,
every 4 hours, resulted in significant reduction in bacteria counts in the lungs, without affecting the body’s defense mechanisms,
and without any other adverse effect. In addition, we believe a daily dose of 160 ppm of NO can treat bovine respiratory disease (“BRD”)
in cattle.
Importantly,
several studies report synergy between NO and antibiotic drugs. Adjunctive treatment combining NO together with inhaled tobramycin antibiotics
or other anti-microbial agents has been shown to greatly enhance the efficacy of the antibiotics in dispersing P. aeruginosa biofilms
and to increase their ability to elicit anti-microbial activity. These studies suggest that adjuvant treatment combining NO with antibiotics
might have a beneficial role by reducing bacterial infectivity, and therefore reduce the dependency on antibiotics.
Beyond
Air Technology
We
have developed the Beyond Air nitric oxide generator and delivery system which we call LungFit®, a novel and precise
delivery system that uses NO generated from ambient air with a novel NO generator. Our system provides continuous monitoring and control
of the gaseous content administered during intermittent and continuous NO inhalation treatments, as well as a precise and reliable monitoring
system that is able to monitor patient status and alert medical staff to any adverse effects.
The
LungFit® system is innovatively designed to provide patients with a gaseous dose of NO (ranging from 0.5 ppm up
to 400 ppm) combined with ambient air. The gaseous blend is supplied to the patient via a ventilator for concentrations up to 80 ppm
and a face mask, or similar apparatus, for concentrations above 80 ppm. LungFit® is designed to minimize the time
that NO is mixed with oxygen and air. The system is also designed to continuously monitor inhaled NO concentration, NO2 concentration
and oxygen. A dedicated screen allows for monitoring of the gas mixture. Further, our product candidates resemble other inhalation systems,
making them user friendly, with operation and maintenance that we believe will be immediately familiar to medical staff. Our LungFit®
system has been manufactured at commercial scale with a contract manufacturer.
When
programmed for lung infections, the LungFit®, is designed to specifically deliver a NO dosage of 150 ppm and higher.
We believe that the LungFit® has a number of advantages over other NO formulation delivery systems. For example,
it is:
● designed to be used by the patient, thus convenient and portable; and
We
believe that our solution has the potential for a number of additional benefits and opportunities, as follows:
NitricGen
License
On
January 31, 2018, we announced that we entered into a definitive agreement to acquire a global, exclusive, perpetual, transferable license
to the eNOGenerator and associated critical assets including intellectual property, know-how, trade secrets and confidential information
(the “License”) from NitricGen Inc. (“NitricGen”). The eNOGenerator is a novel and precise delivery system that
uses NO generated from ambient air with a novel NO generator.
The
Beyond Air LungFit® system, which incorporates the eNOGenerator, has been designated as a medical device by the
FDA. The eNOGenerator can generate NO on demand for delivery to the lungs at concentrations ranging from 0.5 to 400 ppm. With the License,
we expect that we will be able to target all conditions requiring NO at any concentration, regardless of the need for intermittent or
continuous dosing.
Under
the terms of the License, we agreed to pay NitricGen an aggregate of $2 million in up-front, clinical, and regulatory milestone payments,
with the majority pertaining to regulatory milestones, as well as royalties on net sales of the delivery system containing the eNOGenerator
at a percentage in the low-single digits. As partial consideration for the License, we issued to NitricGen warrants to purchase 100,000
shares of our common stock at an exercise price of $6.90 per share. To date, $200,000 has been paid for milestones that were earned.
Upon FDA approval, the next milestone of $1,500,000 will be due to NitricGen
and payable six months, thereafter.
Cystic
Fibrosis Foundation Agreement
On
February 10, 2021 we received a grant for up to $2.17 million from the CFF to advance the clinical development of high concentration
NO for the treatment of nontuberculous mycobacteria pulmonary disease, which disproportionally affects CF patients. Under the
terms of the agreement, the funding will be allocated to the ongoing LungFit® GO NTM pilot study. The
Company has met the first milestone of $425,000 and has recorded a reimbursement receivable on the March 31, 2021 balance sheet. The
reimbursement was recorded as an offset to research and development expenses for the year ended March 31, 2021 to the extent that reimbursable
expenses were incurred, with the excess reimbursement included in accrued expenses as of March 31, 2021.
Strategies
Our
objective is to build a leading medical device and biopharmaceutical company that develops and commercializes patented and proprietary
products for the treatment of respiratory infections and diseases, with an initial focus on the treatment of PPHN, AVP, BRO, NTM
and severe infections in COPD, and CF patients, among others. Additionally, we are exploring the effects of NO on solid tumors. If our
clinical trials for our product candidates are successful, we expect to seek certification or marketing approval from the FDA
and other worldwide authorities and notified regulatory bodies.
Our
Clinical Results to Date
We
have conducted several clinical trials to assess our ≥ 150 ppm NO inhalation-treatment in various indications. These trials include:
Date Study Indication Primary Results
2011 Pilot Safety (n=10) All comers Safety No SAEs
Cystic
Fibrosis and NTM Clinical Development
In
2011, a prospective, open label, controlled, single-center pilot safety study was conducted on ten healthy adults between 20 and 62 years
of age. The data were published in the Journal of Cystic Fibrosis in 2012. Subjects received 160 ppm NO for 30 minutes, five times a
day, for five consecutive days via direct inhalation to the lungs using a prototype delivery system. The primary objective of the study
was to determine the effect of inhaled 160 ppm NO on pulmonary function tests and characterize the relationship between high-concentration
NO administration and MetHb – a form of hemoglobin that is a biproduct of NO and hemoglobin that cannot bind oxygen – and
establish a MetHb safety threshold level to assess adverse events associated with the treatment. Secondary objectives of the study were
to assess the changes in cytokine levels. Multiple safety markers were continuously monitored including: NO levels, NO2 (a
biproduct of NO and O2 that can be toxic at high concentrations), FiO2, as well as MetHb and oxygen saturation
(“SaO2”). Vital signs, lung function, blood chemistry (including nitrite/nitrates), hematology, prothrombin time,
inflammatory cytokine/chemokines levels and endothelial activation (angiopoietin ratio) were also closely monitored. All individuals
tolerated the NO formulation treatment courses well. No significant adverse events occurred. The maximum amount of air one can forcefully
exhale in one second, known as forced expiratory volume in one second (“FEV1”) and other lung function parameters, serum
nitrites/nitrates, prothrombin, pro-inflammatory cytokine and chemokine levels did not differ between baseline and day five, while MetHb
increased during the study period by an average of 0.9%, as expected. These data suggest that inhalation of 160 ppm NO for 30 minutes,
five times a day, for five consecutive days is well tolerated in healthy individuals.
In
2014, we completed a pilot open label, multi-center study in nine CF patients (≥10 years old). Patients received intermittent (30
minutes, three times a day) inhalation of 160 ppm NO formulation, five days a week, over a two-week period. The study was performed in
two centers, Soroka Medical Center and Schneider Children’s Medical Center of Israel. The primary endpoints of the study were to
determine the MetHb percentage, adverse events associated with inhaled NO and the percentage of subjects who prematurely discontinued
the study due to adverse events (“AEs”) and/or severe adverse events (“SAEs”), or for any other reason. AEs were
reported by five (55.5%) subjects. There were no SAEs related to NO therapy, no treatment-related withdrawals due to AEs, and no deaths.
AEs considered by the investigator as possibly or probably related to treatment were reported for two (22.2%) subjects. There were no
AEs of MetHb elevation >5% or NO 2 elevation >5 ppm (study safety threshold of MetHb and NO2, respectively).
In total, seven cases of hemoptysis were reported in two subjects and all events were mild in severity. There was no cumulative
effect of MetHb exposure during the study. The maximum MetHb level reported was 4.6%. Several secondary efficacy analyses were conducted
in this study, and though the study was not powered for efficacy, results show various positive effects of the treatment regime. Bacterial
and fungal sputum load analysis results were highly variable, though marked reductions of MSSA, Achromabacter, P. aeruginosa, and Aspergillus
were seen in several subjects. These results suggest non-specific targeting of bacteria and fungi that commonly manifest in CF patients.
In subjects with systemic inflammation (CRP >5 mg/mL) at baseline, CRP levels decreased over the treatment period, showing the effect
of NO in the reduction of systemic inflammation. There were no statistically significant or clinically relevant changes in FEV1 over
time, and lung function indices also remained relatively constant throughout the study duration.
In
2016, Rambam healthcare campus in Israel conducted a compassionate use treatment for two patients with CF who suffer from M, abscessus
lung infections. The data were published in the Pediatric Infectious Disease Journal in 2017. The NO treatment regime, as
well as the device for this treatment, was supplied by BA Ltd. our wholly owned subsidiary. Patients received intermittent 30-minute
treatments of 160 ppm NO, with two different regimes including hospitalization (5 times a day) and ambulatory treatment (2-3 inhalations
a day). Treatment was well tolerated with no evidence of any serious side effects. We observed significant improvement in sputum production
(up to 5-10 time more sputum), and subjective improvement in the well-being of both patients. Significant reduction in systemic inflammation
was observed in the first patient, as observed by reduction of CRP (C-reactive protein, a systemic inflammation marker that rises in
response to inflammation) levels during treatment. In addition, the first patient had a 2 log (100-fold) reduction in M.
abscessus during treatment (an effect that was lost after the treatment regime changed to ambulatory). The second patient showed
a significant increase in the 6-minute walk (“6MW”) test and the sputum culture became negative, which is consistent
with eradication of M. abscessus. Further information is needed, but we believe these results suggest that the treatment
of M. abscessus with high-concentration inhaled NO is effective.
In
2017, we treated one patient with CF who suffered from NTM infections (specifically, M. abscessus) under compassionate
use in the United Sates at the National Heart, Lung and Blood Institute with our generator based NO delivery system. The patient saw
improvements in 6MW, FEV1, most Quality of Life measures and had no SAEs. The bacteria was not eradicated. The patient requested
to be treated again and this treatment was commenced in February 2018. A total of 38 treatments were administered over 8 days, 29 of
them at a concentration of 240 ppm, with no SAEs believed to be related to NO reported.
Additionally
in 2017, we completed a single-arm, open-label Pilot trial in nine patients with M. abcessus lung disease, who were refractory
to standard-of-care. The patients were treated with inhaled NO at a concentration of 160 ppm for 30 minutes, in addition to treatment
with standard-of-care. Our inhaled NO treatment was administered intermittently five times per day over a 14-day period, followed by
a seven-day period with three treatments per day. The primary endpoint of safety, as measured by NO-related SAEs, over the 21-day treatment
period was met with no SAEs reported. Secondary endpoints of a 6MW test FEV1, Quality of Life and M. abscessus
load in sputum all trended positively. 6MW showed an increase of >40 meters at the end of treatment at day 21 versus baseline
and an increase of >25 meters on day 81 (60 days after the cessation of therapy). The mean percentage change in FEV1 at day 21 and
day 51 (30 days after the cessation of treatment) was > 3.5% with FEV1 returning to baseline at day 81 (60 days after the cessation
of therapy). At day 81 (60 days after the cessation of therapy) bacterial load was 65% lower than baseline. 1 of 9 patients saw culture
conversion. This study was published in the Journal of Cystic Fibrosis in 2019.
In
2018, an additional CF patient infected with M. abscessus was treated over a 4-week period with 76 of 84 treatments
at 250 ppm NO in Israel at Soroka Medical Center. The patient saw improvements in 6MW, FEV1 and most Quality of Life measures.
The bacteria was not eradicated. Importantly, there were no SAE’s reported and all treatments were completed without incident.
BRO
Clinical Development
In
2014, we completed a double blind, randomized Pilot study for infants with bronchiolitis (n=43) for which the data were published in
the Pediatric Pulmonology Journal in 2017. The study was performed at Soroka University Medical Center in Israel. Forty-three
infants between the ages of two to 12 months diagnosed with bronchiolitis were randomly assigned to either the treatment group or the
control group. The treatment group comprised 21 subjects who received intermittent (30 minutes, five times a day) inhalation of 160 ppm
NO formulation, in addition to supportive O2 treatment for up to five days. The control group, 22 subjects, received ongoing
inhalation of the supportive O2 treatment. Primary endpoints included determination of the MetHb levels, adverse events associated
with the inhaled NO formulation and proportion of subjects who prematurely discontinued the study. Baseline clinical score, indicating
disease severity at screening, was similar between treatment groups (~8). Results were encouraging, with similar overall incidence of
AEs between the treatment groups. Out of 43 patients, 39 (~90%) completed the study per protocol (“PP”), with similar percentages
(90%) for both the control and the treatment groups, individually. Only one subject from the treatment group discontinued treatment due
to an adverse event, namely – repeated MetHb levels above 5%. Adverse events were reported by 23 (53.5%) subjects overall, with
ten (47.6%) subjects in the NO group reporting a total of 22 AEs, and 13 (59.1%) subjects in the control group reporting a total of 22
AEs. Serious adverse events were reported by four (19.0%) subjects in the NO group and four (18.2%) in the standard treatment group.
There were no treatment-related SAEs in the NO treatment group.
In
the NO group, six (28.6%) subjects had any MetHb measurement >5% during the study treatment period, and three of these subjects had
more than one MetHb >5%. The maximum MetHb level was 5.6% in one subject in the NO group. There was no cumulative effect of MetHb
exposure during the study. The MetHb levels in this study were defined to <5% as a safety measure, though previous findings have shown
that higher levels (6.4%) are non-toxic in children. Secondary and exploratory analyses were performed, and results show positive impact
of the treatment regime. In a subgroup of subjects that stayed at the hospital at least 24 hours (Length of Stay (“LOS”)
>24 hours), a statistically significant treatment benefit of NO versus standard treatment was demonstrated. Mean results for subjects
with LOS > 24 hours show that LOS was shortened by approximately 34% in the NO group compared to the standard treatment group, with
a one-day difference between the groups (PP, N=24). Time to normal oxygenation ((SaO2 of 92%) was shortened by approximately 44% (27.75
hours) in the NO group compared to the standard treatment group (PP, N=24). An 80% improvement in time to clinical score (indicating
improvement in disease severity) and time to normal oxygenation (92%) was observed in favor of the NO group (PP, N=24).
In
2018 we completed a second pilot study in bronchiolitis in 6 centers in Israel. The data were published in Nature in 2020. The prospective,
randomized, double-blind, controlled pilot study enrolled 67 patients, aged 0-12 months, who were hospitalized due to bronchiolitis.
The patients received either standard of care (“SOC”) (typically oxygen and hydration) or SOC plus inhaled NO at a concentration
of 160 ppm for 30 minutes 5 times per day for up to 5 days. The primary endpoint of hospital LOS was met with a 26.7-hour reduction in
hospital length of stay demonstrated (p=0.04). Secondary endpoints of time required to achieve a clinical score of 5 or less on the modified
Tal score and time required to achieve oxygen saturation (SaO2) of 92% or greater showed improvement versus the standard-of-care.
There were no issues with NO2 or MetHb and no SAEs were recorded.
In
2020 we completed a third pilot study in bronchiolitis in 8 centers in Israel and presented the data at CHEST Annual Meeting 2020. The
prospective, randomized, double-blind, controlled pilot study enrolled 89 patients (ITT n=87), aged 0-12 months, who were hospitalized
due to bronchiolitis. The patients were randomized 1:1:1 to receive either SOC (typically oxygen and hydration) or SOC plus inhaled NO
at 85 ppm or SOC plus inhaled NO at 150 ppm for 40 minutes 4 times per day for up to 5 days. There were no SAEs related to NO therapy.
Efficacy results are shown in the table below.
150 ppm vs. 85 ppm Hazard Ratio (p-value) 150 ppm vs. SST Hazard Ratio (p-value)
We
plan to seek certification or regulatory approval for our current product candidates and, if approved, we expect they will be
marketed as medical devices.
If
we reach the commercialization stage, we expect that we will collaborate with companies outside the U.S. for all indications. We are
still determining whether to attempt to collaborate for any indication in the U.S.
Our
Pre-Clinical Results to Date
We
have completed 4 separate toxicology studies in animals.
Competition
The
biotechnology, pharmaceutical and medical device industries are highly competitive. There are many pharmaceutical companies, biotechnology
companies, medical device companies, public and private universities and research organizations actively engaged in the research and
development of products that may be similar to our product candidates. We are aware of several companies currently developing and selling
NO therapies for various indications such as pulmonary hypertension. For example, Mallinckrodt Pharmaceuticals (“Mallinckrodt”)
commercializes INOMAX® (nitric oxide) for inhalation, which is approved for use to treat newborns suffering from HRF-PPHN,
in the U.S., Canada, Australia, Mexico and Japan. Praxair markets a generic version of the Mallinckrodt offering with their delivery
system called NOxBOX®, acquired from Bedfont, in the United States. The Linde Group has marketing rights to INOMAX®
in Europe. Air Liquide sells a similar product in Europe, called VasoKINOXTM, together with their delivery platform called
OptiKINOXTM, for the treatment of pulmonary hypertension that occurs during or after heart surgery. In Europe, Bedfont Scientific
Ltd. has a delivery system called NOxBOX® and Air Products PLC has a gas product called NOXAP®, each used
in delivering inhaled NO formulations. Bellerophon Therapeutics is developing NO-based products for pulmonary arterial hypertension and
pulmonary hypertension associated with COPD. VERO Biotech LLC (formerly known as Geno LLC) received FDA approval for their delivery system
GENOSYL DS for PPHN in 2019. In addition, other companies may be developing generic NO formulation delivery systems for various dosages.
Ceretec, Inc., a company affiliated with 12th Man Technologies Inc., recently obtained clearance from the FDA to market a NO gas product
for use in membrane diffusing capacity testing in pulmonary function laboratories in the U.S. Novoteris, LLC previously received orphan
drug designation from the FDA and the European Medicines Agency (“EMA”) for the use of inhaled NO-based treatments in treating
CF.
Our
competitors, either alone or through their strategic partners, might have substantially greater name recognition and financial, technical,
manufacturing, marketing and human resources than we do and greater experience and infrastructure in the research and clinical development
of pharmaceutical products, obtaining FDA and other regulatory approvals of those products and commercializing those products around
the world.
We
have contracted with third-party contract manufacturers, Spartronics LLC (“Spartronics”), and Medisize Ireland
Limited (“Medisize”) who have completed a substantial portion of the commercial manufacturing process for our LungFit®
PH system. In addition, we will be reliant on our partners for commercial manufacture of our systems for both clinical studies
and commercial supply, if regulatory approval is received.
We
own or have exclusively licensed patents, pending patent applications, know-how and trade secrets that relate to our NO generator, NO2
filtration, delivery systems, devices configured for delivering NO to patients by inhalation, methods of exposing patients to inhalation
of NO, and methods for treating subjects in need of NO inhalation.
In
particular, we are party to a global, exclusive, transferable license agreement with NitricGen, Inc. for the eNOGenerator, its components,
and all associated patents and know how related thereto. Additionally, we have a broad intellectual property portfolio directed to our
product candidates and mode of delivery, monitoring parameters and methods of treating specific disease indications. Our intellectual
property portfolio consists of issued patents and pending applications, which includes patents we acquired pursuant to the exercise of
an option in 2017 granted to us by Pulmonox Technologies Corporation (“Pulmonox”).
CareFusion
Non-Exclusive License Agreement. In October 2013, we entered into a non-exclusive worldwide license agreement with CareFusion, whereby
we licensed seven issued U.S. patents and corresponding foreign counterparts. Our intellectual property licensed from CareFusion, for
which the earliest expiring patent term was 2019 and the last to expire is 2025. The term of the agreement extends through the life of
the patents and may be terminated by either party with 60 days’ prior written notice in the event of a breach of the agreement,
and may be terminated unilaterally by CareFusion with 30 days’ prior written notice in the event that we do not meet certain milestones.
Pursuant to the agreement, we are required to pay CareFusion royalty payments of 5% of the net sales of a licensed product by the Company
and an annual fee of $50,000, which is creditable against the royalty payments for the respective year.
Pulmonox
Patents and Assets - Option to Acquire. On August 31, 2015, we entered into an agreement with Pulmonox (the “Option Agreement”)
whereby we acquired the option to purchase certain intellectual property assets, including Pulmonox’s rights in 17 issued U.S.
patents, including eight patents jointly owned with CareFusion which are directed to:
● a device and methods for treatment of surface infections; and
● use of NO as a mucolytic agent and for treatment and disinfection of biofilms.
We
exercised the Option in January 2017, acquiring Pulmonox’s rights in the patents described above. Upon exercise of the Option,
we became obligated to make certain one-time development and sales milestone payments to Pulmonox, commencing with the date on which
we receive regulatory approval for the commercial sale of the first product candidate qualifying under the agreement. These milestone
payments are almost entirely sales-related and are capped at a total of $87 million across three separate and distinct indications that
fall under the agreement with the majority of them, approximately $83 million, being sales-related based on cumulative sales milestones
for each of the three products. In addition, the Company issued a fully vested warrant to purchase up to 178,570 shares of our common
stock at an exercise price of $4.80 per share for each share of common stock. On May 10, 2018, we issued to Pulmonox, an additional fully
vested warrant to purchase up to 29,763 shares of our common stock at an exercise price of $4.80 per share.
Patent
Applications. We have filed over 35 US and foreign patents and patent applications, including Patent Corporation Treaty (“PCT”)
patent applications.
A
PCT patent application is a filing under the Patent Cooperation Treaty to which the U.S. and a number of other countries are a party.
It provides a unified procedure for filing a single patent application to protect inventions in those countries. A search with respect
to the application is conducted by the International Searching Authority, accompanied by a written opinion regarding the patentability
of the invention. A PCT application does not itself result in the grant of a patent, and the grant of patent is a prerogative of each
national or regional authority where the PCT application is filed during national phase filings.
Government
Regulation
U.S.
Regulation.In the U.S., the FDA regulates drug and medical device
products under the Federal Food, Drug, and Cosmetic Act (“FD&C Act - The Act”), and its implementing regulations. Our
products have been designated as devices by the FDA and will be regulated by the Center for Devices and Radiological Health (CDRH). Given
that currently approved NO products and delivery systems were approved either separately (NO drug approval and NO delivery systems cleared