Thank you for standing by. This is the conference operator. Welcome to the Beyond Air Inc. Fiscal Second Quarter 2020 Earnings Call. [Operator Instructions]. I would now like to turn the conference over to Monique Kosse of LifeSci Advisors. Please go ahead.

Thank you, operator, and good afternoon, everyone. Thank you for participating in today's financial earnings conference call for the company's fiscal second quarter ended September 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 second 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 reamarks 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 Form 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 today, of the live broadcast, November 6, 2019. Beyond Air undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call. With that, I would like to now turn the call over to Steve Lisi, Chairman of the Board and Chief Executive Officer of Beyond Air. Steve?

Thanks, Monique, and good afternoon, everyone. Thanks for joining us today. We are happy to be here with another update of our progress. I'm quite pleased to announce that just a few days ago, our final pilot study in bronchiolitis or BRO opened in Israel, and we treated our first patient today. Thanks to the great team in Israel for achieving this goal on schedule. To remain on track to complete our pivotal BRO study with the LungFit BRO system in the U.S. in the second quarter of calendar 2021, we are deferring our U.S. Premarket Approval or PMA submission of the LungFit system for persistent pulmonary hypertension of the newborn or LungFit PH by 1 quarter to the first quarter of 2020. This decision also allows us to keep our At-Home self-administration NTM study on track for a spring 2020 start. Let me give you a few more details on our decision to prioritize LungFit BRO and LungFit NTM over the LungFit PH in the very short term. Given the breadth of our development opportunities for the LungFit system and the current limitations of our resources, at times we are required to address the needs of our development programs on a sequential basis, we decided to elevate the prioritization of LungFit BRO and LungFit NTM. Preparing the U.S. Investigational Device Exemption or IDE submission for LungFit BRO before filing our PMA for LungFit PH does not materially change our anticipated launch timing for LungFit PH, which is scheduled for the fall of 2020. By elevating the priority of LungFit BRO, we will be able to maintain our ability to complete the LungFit BRO pivotal study in the second quarter of 2021. Remember, the LungFit BRO pivotal study must be completed in 1 winter season. If we were to delay…

Thank you, Steve. Here's a brief review of our second quarter results ended September 30, 2019. Revenue for the 3 months ended September 30, 2019 was $646,000. This revenue came from milestone payments from the -- from our partnership with Circassia. There was no revenues for the same period for the 3 months period of 2018. Research and development expense for the 3 months ended September 30, 2019, were $2.8 million compared to $648,000 expense in the same 3-month period of 2018. The increase was primarily due to the costs related to LungFit and preclinical studies. General and administrative expenses for the 3 months ended September 30, 2019, were $2.1 million compared to $1.8 million for the same 3-month period of 2018. The increase was primarily related to professional fees, hiring of employees and insurance, which was offset by noncash stock-based compensation expense. For the 3 months ended September 30, 2019, the company had a net loss of $4.1 million or $0.38 per share compared to a net loss of $2.4 million or $0.28 per share for the same 3-month period of 2018. As of September 30, 2019, the company had cash, cash equivalents, restricted cash and marketable securities of $9.8 million compared to $7.9 million at March 31, 2019. This cash is sufficient to fund operations for the next 12 months. Now I'll hand it back to Steve.

Thanks, Doug. All we have left to do is just take your questions. I'll turn it over to the operator.

[Operator Instructions] The first question comes from Scott Henry with Roth Capital.

Just a couple of questions. I guess first on the NTM trial, Steve, could you talk about how long it should take to enroll that trial?

Yes, we're thinking probably in the 4- to 6-month time frame. That's our best guess at this moment. So it's a 12-week treatment, 12-week observation. So once we kick it off, it should be less than a year before it's fully completed. And it's open label, so there will be an opportunity to probably provide an interim look before the final data set.

Okay. Great. And then on the bronchiolitis trial, the question is how challenging is it to do it in 1 season? Is there a time when you'd like to have that trial underway by? I'm just curious how we should think about that.

Yes, I mean you want to get it started in November, I mean, which is what we did in Israel. Like I said, we dosed our first patient today. We opened the first center, opened on Sunday in Israel to look at -- to screen patients. So not bad, we dosed just a couple of days later, and it's really not that cold over there. So November is really when you want to get started. December through March, the 4 biggest months. So we plan to be up and running about a year from now in the U.S., and we're on track to do that.

Perfect. And final question, just with regards to filing the PMA. Are there any gating factors or is it mostly just completing all the paperwork that we should be following with regards to the first quarter 2020 date?

I mean yes, the gating factor is the resources. We got to finish the IDE submission for bronchiolitis, so we can get our people back on the PMA to get it done. So that's -- like I mentioned in the prepared remarks, it's really a matter of prioritizing what we need to get done in this time period. So I also mentioned at the end of the prepared remarks we're going to be at the AARC meeting in New Orleans this weekend with our LungFit PH system. So anybody -- I know it's a big Wall Street meeting down there, but anyone who wants to come down and see it, we'll be having it on display there. So I think the system is well on its way to being completed in a timely manner. I don't want to say it's 100% done, Scott. There's still some mandatory testing by FDA that needs to be done which we have some started, we have it planned and we'll have everything done on time, so it's not 100% done. But it's -- we're through the hard part, I would say. And now it's just, like you said, it's a lot of paperwork and a lot of preparations for FDA. But again, we've diverted some resources to make sure we don't miss the timing on the bronchiolitis study. So I think the biggest factor in terms of when we actually submit is going to be when we can shift those resources back.

The next question is from Matt Kaplan with Ladenburg.

I just wanted to dive into the NTM study and the At-Home system a little bit. Where are you in terms of completing the At-Home system and being able to facilitate or launch that starting next year?

Thanks, Matt. Yes, I mean the system is ready to go. I mean we used the system in the animal studies at 250 for the 12-week studies, the 2 12-week studies we did and also used it at 400 parts per million in the 30-day study. Again, the system is -- it's not identical but it's fairly similar to the bronchiolitis system. Again, it will be a little different because it will be used at home, but operationally, it's pretty much the same. So right now, it's done. It's ready for prime time. I would say the only thing really left that we have to do is make sure that we program the filters properly. So in this study, we're going to be using -- we're going to be titrating patients up to 250. We don't just start them at the 250 from day 1. So there will be a couple of different filters that are programmed for different doses, different concentrations so we can get up there. So there's a little bit of programming there to make sure the system can handle the different concentrations that are necessary during the titration phase. So that's probably the only thing that we're adding to it that we didn't have in the animal studies. But this is -- again, this is not a problem. We can do the doses up to 400, clearly. We just need to just make sure that the filters are programmed properly and the system can read them. So that's -- it's that simple. I mean that's really not even something -- we don't even consider that an issue. We just consider it, we have to do it, and that's not a problem. The systems will be built -- or the systems are being built now for both bronchiolitis and NTM as we speak. So when we prepare the IDE, building bronchiolitis we're building NTM system at the same time. So it's really not much of a burden.

And in terms of the bronchiolitis pilot study, what do you hope to accomplish with that study as you prepare to do the pivotal study next year in terms of, I guess, working out the kinks and that kind of thing? What do you hope to learn in the pilot study?

Yes, sure, definitely working out some kinks, getting my team more experience and running this study in Israel as close to a U.S. study as you possibly can run it. We have a new Head of Clinical Development who was not here when we did the first -- when we did the second pilot study in Israel, so getting her up to speed on everything has been very valuable. We're also optimizing the breathing mask, which is important. So if we didn't do this study, we wouldn't have any way to really make sure we have the right mask for the pivotal study. So it is very important to do that. Plus, there are a few things, and they were very reasonable things that we discussed with FDA about what we don't know exactly. And if we had to put -- answer all of these questions, and they're not primary endpoint questions, these are some other types of things that FDA would like to know about. We'll be able to answer those in this study. And that would be able to, we hope, reduce the number of patients that are necessary in the pivotal study. So I kind of feel like we're doing it again. We have the team in Israel in place. The hospitals know what they're doing. We're going to learn a lot more. We have a lot more confidence in running the pivotal and being successful. And in the end, we actually may end up spending the same money because the savings on reducing the size of the pivotal study may make up for what we're spending in Israel right now. So when we analyze this before we -- last year or early this year, we analyzed it to figure out what's the best path, that's what we came up with. And it was definitely the right move to do the study there. So I know I'm kind of not giving you every little bit of detail, but we really shouldn't be disclosing everything that's discussed with FDA so...

Sure, fair enough. And then just a question in terms of your -- the IDE submission, it seems like you're pretty close to completing that and then you would be able to shift back your focus on the PMA submission. Can you give us a sense of the time line in terms of the IDE?

Yes, I mean the IDE is something that is slated -- we really can't file this IDE beyond January or we -- that would be very difficult for us to make it to November. So that's really the timing. If we can get it done before the end of the year, fantastic. If we can get it done first, second, third week of January, fantastic. If it's a February thing, now we're in danger, right. We're in danger. If it's beyond February, we just -- we wouldn't even try. We wouldn't even try. So just to give you an idea of that kind of timing, I can tell you we're highly confident we're going to make the time line to keep us comfortable in terms of being able to enroll the study and start it in November. So again, we made this decision so we don't have to worry. If we tried to do both, it would have been very difficult. I don't know if we would have been able to do it if we tried to do both programs in parallel. In fact, I think my team is probably screaming into the phone right now, Steve, you're crazy, we had no chance if we did them in parallel. So we had to prioritize.

Very good, very good. And then last question, just following up on Scott's question on the PMA. In terms of once you shift your focus there, kind of what's the rate lending step that we need to complete to get that PMA in the first quarter.

That -- once we switch people back over, it's just a matter of documentation at that point because we -- there'll be a lot of the testing. There -- I mean there'll be some testing that will be done after we complete the IDE, but some other stuff, some other testing is -- we can kind of get it going. Some of it's outsourced so we can do that testing because we're not actually performing it in-house. So again, it will be mostly paperwork. I won't say there's no more testing after that. There's still some but once we submit that IDE, I think it's probably going to be a, give or take, another 6, 8 weeks from when we do that so that we can get everything done. It's just -- again, it's going to depend on what's left from that perspective. And again, we have our [ country manufacturer spartan ] has been fantastic in the last few months, allocating resources. So again, we'll -- hopefully, we can keep those resources on top of things for us and we'd get it done. It's really just going to be can we get enough people and the right people? Put it this way: if there's -- if a flu bug hits and we -- half the guys are out for 2 weeks [ it's spartan ] because they're up in a really cold place then that, that could be a problem. Other than that, I think we're good. I just tell them, say, if you feel sick, Matt, I'll tell them, take some nitric oxide and they'll be fine. So we're good.

[Operator Instructions] The next question is from David Sherman with LifeSci Capital.

I was just wondering, in terms of laying out a plan of attack for a potential commercial launch. Do you have a good sense of where target hospitals are in their lease cycles with Mallinckrodt?

Thanks for that question, Dave. It's a great question, and I'm not going to give you a direct answer because I can't let anybody know what we know. But yes, I mean, that's -- it's a major question, obviously. And of course, we're probably not going to have it our way. We're not going to have the top 50 hospitals we want to target all having their contracts up for renewal, 6 to 12 or 15 months after we get approval. It's just not going to go perfectly that way. But again, it will probably be a mix. There will be x percent of those hospitals that are going to have their contracts coming up for renewal in a time frame that's advantageous to us. And just to set the kind of stage, this is not a -- we get approval, we call up the hospital and they say, yes, we're switching tomorrow. It's more like, all right, you're approved. Let's -- give me a couple of systems, and we're going to have a trial period for you. So again, we don't need somebody whose contract is up in a month. That doesn't help us. We really want someone whose contract is up somewhere between 9 -- 6 to 9 months, maybe 15 months on the outside. That's kind of what we're looking for because we want them to do a trial period with us, get comfortable with the system, make sure that it works as advertised, and they're happy, right? So it's a life-saving medication, right? I mean these newborn babies -- you have to have it. So can't have any mistakes. So again, when you think about this, there's the trial period and then there's the switching the contract over. So maybe some of the hospitals see us approved and they have to renew their contract. Maybe they don't go for the long term, maybe they do the -- a 1-year renewal because they want to try us out. So I think it's going to work out fine, and that's something I hope you can figure that, again, if someone is about to renew, they kind of do a short term because they see us coming. And if someone's got time left on it, they'll try us out anyway and they'll switch us when the contract is up. So it's actually a -- I've always told people the first year is going to be slow because we have to be tried out. So I think things are going to work out good for us. Does that make sense, Dave? I hope I didn't give too much.

Yes, yes, yes. One more for me. I was just wondering if you could talk a little bit more about kind of plans for monitoring patients in the At-Home NTM study, just kind of frequency and what other metrics are going to be taken in there.

Yes, so there's going to be reasons for the patient, obviously, that we're going to be taking a sputum sample. We have to look at the bacteria load and if there was any kind of culture conversion. So that's going to happen once a month. So you can imagine probably in a study, you probably want the patients coming in for that instead of just doing it themselves. So there'll be touch points at least once a month with a physician at a minimum, just to give you an idea. And probably you can think the other way. We're not dropping 12 weeks' worth of filters in someone's house, all right. So again, there will be touch points there to drop off filters in certain stages. Systems do need to be calibrated. They're not -- calibration is not good for 3 months. So you will have touch points where you're going to have a medical professional going in there and seeing the patient several times during the study, and they'll also have touch points with their physicians by visiting their physician. And of course, there's always going to be a hotline just in case, right?

Of course.

This concludes the question-and-answer session. I'd like to turn the conference back over to Steve Lisi, CEO, for any closing remarks.

So thanks, everybody, for calling in. I appreciate the interest. I hope you like what you heard, and try to come and see us. We'll be trying to demonstrate our systems as much as possible or display them as much as possible in the coming months since we now have multiple systems, and I can probably carry one around with me. So I look forward to showing people what we have. All right, thanks again.

Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.