Beyond Air, Inc. (XAIR) Q3 2021 Earnings Report, Transcript and Summary

Greetings, and welcome to Beyond Air Incorporated Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Maria Yonkoski, Head of IR.

Thank you, operator. Good afternoon, everyone, and thank you for joining us on Beyond Air’s conference call. Today, after the close, we issued a press release announcing the financial results for the third quarter of fiscal year 2021. A copy of which can be found on the Investor Relations page of our website. Before we begin, I would like to remind everyone that we will be making comments and various remarks about future expectations, plans and prospects, which 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-K, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Additionally, this conference call is being recorded and will be available for audio rebroadcast on our website, www.beyondair.net. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, February 9, 2021. Beyond Air undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call. I am joined today by Steve Lisi, our Chairman and Chief Executive Officer, who will provide business updates; Douglas Beck, our Chief Financial Officer, who will review our financial results for the third quarter of fiscal year 2021; and Duncan Fatkin, our Chief Commercial Officer, who will be available during the Q&A. With that, I would like to now turn the call over to Steve Lisi, our Chief Executive Officer. Steve?

Thanks, Maria, and good afternoon, everyone. I hope you’re all staying safe and healthy during the current pandemic, which we all hope will subside this year. We appreciate you taking the time today to listen to our story, which we believe given our progress is an even more compelling investment opportunity now than it was in 2019 and 2020. Of course, this progress is attributable to the very strong capabilities of the Beyond Air team and their intense enthusiasm for what we are trying to accomplish for patients and our investors. I will spend a few minutes to provide a recap of our recent achievements and review our expected milestones, ahead of what I believe to be a transformative year for Beyond Air. Doug will conclude our prepared remarks with the review of our financial results, and then we will open up the call for questions. As you all know, we submitted a pre-market approval application to FDA for our LungFit PH this past November for the treatment of persistent pulmonary hypertension of the newborn or PPHN. The currently pending PMA is subject to a 180-day review period. Just in case, anyone was curious about our interactions with FDA, let me provide you with this. I will not be commenting on our interactions at this time, other than to say that we are very happy to be working with FDA on this application. In the meantime, we are actively preparing for a commercial launch of LungFit PH in the United States, which we expect will commence approximately four to six weeks after FDA approval. Please take note that we’ve already employed about two-thirds of our launch team, including several respiratory therapists. We continue to guide for controlled phased launch, which requires low upfront costs. We will spend the first six to nine months post approval in a limited release phase, where we will work closely with a select number of hospitals, we will have staff experience with NO to perfect our customer service and support functions. Once our commercial plan has proven to be successful during this limited release phase, we will expand our team and reach out to the rest of the market. As a reminder, there are over 800 Level 3 and Level 4 neonatal intensive care units or NICUs in the U.S., which most likely all use NO therapy. We estimate that approximately 20% of hospitals using NO represent roughly 80% of the market, which is the classic model. According to published reports, the use of NO in the hospital setting represents sales of greater than $500 million over the last 12 months in the United States alone. It is important to note that the majority of sales are in cardiovascular related indications, which are only on label outside of the U.S. We are planning to partner LungFit PH outside of the U.S. with the first agreement expected to be in place by the end of this calendar year, in line with the anticipated receipt of CE Mark. Considering the many advantages our novel technology offers compared to the legacy cylinder-based systems that have dominated the NO market for the past 20 years, we expect LungFit PH to be a disruptive force. Our goal is to revolutionize this industry with a truly integrated system, a device that generates NO from ambient air and delivers it to the ventilator circuit. We are not limited by the space requirements of 45 pound cylinders or special storage requirements that are necessary for toxic chemical substances. Instead, our systems rely on easy to dispose nitrogen dioxide or NO2 smart filters that weigh approximately 2.5 ounces and lasts for 12 hours of continuous use. To be clear, our systems will not deliver NO without a Beyond Air smart filter in place. This prevents NO2 toxicity to patients and staff while protecting our business model. LungFit PH offers hospitals a simple, safe, and convenient alternative to products that are currently on the market. Our system eliminates NO2 purging procedures and our user interface is designed to be easy to use for providers. Overall, operational economics and safety are vastly improved for the hospital. Our fixed costs are significantly lower than our competitors, because we do not have any expenses associated with NO manufacturing or logistics associated with NO cylinders. I would like to emphasize that for the LungFit system to work all you need is air. In preparation for launch, we have our global supply chain set up through our subsidiary in Ireland and have everything on track with our contract manufacturers, for our systems and filters. We secured our calibration gas supply more than a year ago, and are confident that we will have sufficient inventory available at launch. As a reminder, these NO and NO2 calibration gases are manufactured solely for the purpose of calibrating sensors specific to nitric oxide, and nitrogen dioxide. Our LungFit systems are all equipped for the appropriate NO oxygen, and NO2 sensors for monitoring proper delivery of NO and oxygen, and safety levels of NO2. Leading the preparation for the commercial launch of LungFit PH is our Chief Commercial Officer; Duncan Fatkin, who has been with us for more than two years now. Prior to joining Beyond Air, Duncan was the Worldwide Vice President of the Becton Dickinson Diabetes Injection Franchise with prior experience at Zimmer Biomet, Smith & Nephew and Johnson & Johnson. He has over 30 years of experience in hospital-based medical devices and has worked in Europe, Asia and for the last 10 years in the U.S. Duncan choosing to lead our commercial efforts is yet another vote of confidence in our product. As Maria mentioned earlier, Duncan is on the call with us today and will be available to answer questions during the Q&A portion of our call. In addition to a potential FDA decision on our PMA, we also have two ongoing pilot studies that we expect to report interim data from, all within the next six months. Let’s start with our acute viral pneumonia study, which includes COVID-19. We began our pilot study in acute viral pneumonia, including patients infected with SARS-CoV-2 with the first site activating last November in Israel. Enrollment is ongoing and we have had more sites come online each subsequent month post initiation. As to be expected at this time, the majority of patients enrolled are confirmed COVID cases, but we expect to see an increase in other viral infections as Israel’s population continues to receive the COVID-19 vaccine at warp speed. As you may recall, our study is a multicenter open-label randomized clinical trial enrolling approximately 90 adult patients with an emphasis on patients infected with SARS-CoV-2. Patients are randomized in a one-to-one ratio to receive inhalations of 150 parts per million NO given intermittently for 40 minutes, four times per day for up to seven days, in addition to standard supportive treatment or standard supportive treatment alone. Endpoints related to safety, oxygen, saturation, fever, and ICU admission among others are being assessed. To-date, the LungFit PRO device is performing well with no safety issues. We expect to release interim results in spring 2021 with the top line for the full data set expected over the summer. Moving on to our ongoing non-tuberculous mycobacteria or NTM pilot study. As you may remember, we began screening patients for our LungFit GO program and NTM in December 2020. We recently dosed the first patient and are continuing to enroll. This is a single arm multi-centered 12-week trial in Australia that aims to enroll 20 cystic fibrosis or non-CF bronchiectasis patients with refractory NTM lung infection, both mycobacterium avium complex or MAC, or mycobacterium abscessus strains will be included. Patients are titrated up to 250 parts per million NO in the hospital over several days, and then sent home to complete the 12-week treatment period. Yes. I said sent home for the remaining 11 plus weeks. We specifically designed our system to be simple to use by non-medical professionals and are confident in our ability to eventually bring NO treatment into the home for patients suffering from chronic severe lung infections. Unfortunately, there are a lot of these patients and we believe NO will become a key weapon in this ongoing battle. Going back to the trial design, during the first two weeks, patients received 40-minute administrations, four times per day, which then moves to two administrations per day for the remaining 10 weeks. The study is evaluating safety, quality of life, physical function, and bacterial load among others. If this trial is successful, we believe our LungFit GO system will be a game changer for the home setting, helping underserved patients, such as those with chronic severe lung infections with various underlying conditions, such as cystic fibrosis, bronchiectasis, and of course, COPD. Consistent with product guidance, we expect to report interim data from the at-home study around the middle of 2021 with top-line data about six months later. I would like to now turn to our solid tumor program, which is a relatively new indication for us and will not use the LungFit platform due to the ultra high concentrations of nitric oxide that are necessary to achieve anti-tumor immunity. Though this program is in early development, it has demonstrated exciting preclinical data, which we have presented at three different major conferences, the most recent being the AACR subsection conference on tumor immunology and immunotherapy this past October. our hypothesis is that gaseous nitric oxide at extremely high concentrations, greater than 10,000 parts per million and even up to 200,000 parts per million will cause local cell deaths when administered directly to a solid tumor, thus exposing tumor antigens and triggering the host immune system. This exposure may create a memory immune bank that will recognize and attack subsequent primary tumor regrowth, as well as distal metastases for the same type of tumor creating a cancer vaccination. Our goal for this program is to initiate a first inhuman study by the end of this calendar year. I would like to point out that at this stage, our expenditure is less than 10% of our spend through fiscal year 2022 for our solid tumor program. LungFit remains the overwhelming focus for the company, but the promise is evident and this program demands our commitment. 2012 bronchiolitis program, it remains on hold due to the ongoing pandemic. Bronchiolitis is the inflammation of the lower respiratory tract in children younger than two years old, and is the leading cause of infant hospitalizations globally. The most common cause of bronchiolitis is respiratory syncytial virus or RSV, but other respiratory viruses such as rhinovirus, influenza, and parainfluenza as well as coronaviruses can also be the costs. So, data thus far has showed that SARS-CoV-2 is not likely to trigger bronchiolitis. According to the CDC, RSV season onset has historically ranged from mid-September to mid-November with season peak from late December to mid February in the United States. In early 2020, SARS-CoV-2 appeared in the U.S. just as the RSV bronchiolitis season was waning and we have seen more than a 90% reduction in bronchiolitis so far this season. well, information is limited as to why bronchitis has essentially disappeared. One could surmise that parents of infants under the age of 12 months are not exposing them the same social environment as they had been prior to COVID. experts and regulatory bodies remain unsure how SARS-CoV-2 or its mutations could influence the upcoming 2021-2022 bronchiolitis season. This situation brings our program to a standstill as the Beyond Air team is unable to justify accompanying resources and capital for a study that would have to begin in nine months. Beyond Air remains committed to reducing the burden for hospitals, bronchitis patients, and their families. We have completed three pilot studies to-date, demonstrating strong safety and efficacy data at 150 parts per million and our pivotal study ready. However, we must make the best R&D investment decision related to bronchiolitis now, and that is to reallocate resources and funds to our other programs. The uncertainty surrounding this program with respect to potential enrollment difficulties will only be resolved. We believe when we have more visibility on COVID-19 waning and infants getting back to their normal social calendars. with that, I will now turn the call over to Doug for the full financial review. Doug?

Thank you, Steve. Here’s a brief review of our financials for the third quarter of fiscal 2021, which ended on December 31, 2020. revenue for the quarter ended December 31, 2020 was $149,000 as compared to $314,000 for the three months ended December 31, 2019, all of which was from deferred licensing revenue. research and development expenses for the quarter ended December 31, 2020 were $3.3 million, compared to $2.6 million for the three months ended December 31, 2019. general and administrative expenses for the quarter ended December 31, 2020 were $2.5 million, compared to $2.5 million for the three months ended December 31, 2019. for the quarter ended December 31, 2020, the company had a net loss attributed to common shareholders of $5.8 million or $0.33 per share, compared to a net loss of $4.9 million or $0.43 per share for the three months ended December 31, 2019. as of December 31, 2020, the company had cash, cash equivalents and restricted cash of $22.7 million. I would like to provide our cash balance as of January 31, 2021, which is $30.5 million. We have previously mentioned that we had in-the-money warrants expiring in February 21, as well as access to equity lines, which provided this increase in cash for January. We believe this cash is sufficient to fund operations wealthy on the next 12 months. I’ll now hand it back to Steve.

Thanks, Doug. Now, moving to questions. operator?

[Operator Instructions] Our first question is from Suraj Kalia with Oppenheimer & Company. Please proceed with your question.

Good afternoon, everyone. Steve, can you hear me all right?

Yes, Suraj, I can.

Okay, perfect. So Steve, first and foremost, congrats on all the progress. I know it’s been a long haul with COVID, but looks like we are nearing the finish line at least on a PPHN indication. So congrats. And I know Steve, you specifically made a comment, you are not going to talk about the FDA interactions. So that throws out my first question. So, let me move on to the second one, Steve, remind us how many filters per case has your team analyzed internally on a per case basis in PPHN, when you launch in the first 12 or 20 hospitals, our NICUs that you guys believe are the key targets.

I’m sorry. what do you mean filters per case?

So, each patient on average will require so many days of usage. Remind us that filters, they will not be in a – is it one per case or is it required to be changed on the daily basis? Forgive me, my memory fails me here.

No problem. So, the filters are 12 hours. They last 12 hours. So, you’re changing it at that point in time. So, it’s two filters per day. And patients will require different lengths of therapy, but you can figure the average is somewhere around three, four days per patient, right, which you could see shorter than that longer than that, but that’s a good average to use.

Got it. Okay. And the thought process is pricing is going to be similar to what the cylinder based therapies for, let’s say, four days that are publicly reported, it’s going to be plus or minus the same.

Yes. I mean, I have Duncan Fatkin here, our chief commercial officer. So, Suraj, I’d love to introduce him to everyone and let him answer some of these questions. So, if you don’t mind, I’ll let him address this question for you, if it’s commercials, if that’s okay.

Sure. Hey, Duncan.

Hi, Suraj. Thanks for letting me answer the question. So, from a pricing point of view, we are expecting that the price is going to decline a little bit. We’ve guided that in the past and we are going to be competitive with the pricing that’s out there for the gas cylinders. And so yes, we will be pretty consistent with what is currently used over three or four-day period and we have the flexibility if we need to, to be more competitive, but we’re hoping that we can demonstrate the additional value of not having to have cylinders and maintain the price, somewhat close to that.

Got it. Okay, fair enough. Steve, maybe, I missed it. Were any patients recruited in the NTM trial, the LungFit GO NTM trial?

Yes.

Sorry, I must have missed the number then.

I didn’t give you the number. How many patients we’re just saying that yes, there was – basically, we have begun our enrollment.

Got it. Okay. Steve, just on – moving on to COVID, obviously that has been the prospect of INO in COVID and even Mallinckrodt towards the end of 2020 announced trial, I believe it was with farmer at. More specifically, Steve, as we all are evolving enough thought processes, do you think inhaled nitric oxide, could there be a differential to be demonstrated with some of the COVID variants that we are seeing over vaccines? I guess I’d love to get your updated thoughts, given everything we are seeing with vaccines with what’s happening with variants and where INO fits in this matrix?

Look, Suraj, we haven’t tested a nitric oxide against these variants. They’re so new. I don’t know of anybody else, who’s tested against these variants, but what I can say is that we do have data that came out of Sweden back in 2004, which was against SARS-CoV-1, and nitric oxide was clearly effective in that study, it’s been published and we actually have a copy of – or at least a picture of that front page of that publication in our corporate presentation, and then the same group put out a publication late last year against SARS-CoV-2, and had very similar results to what happened with SARS-CoV-1. So, you can make your own conclusions there, but I would say nitric oxide seems to be a broad spectrum against viruses and specifically, the coronaviruses here. we did work on the OC43 human coronavirus, in vitro, and we had success there. So, you can’t say for short, so you actually test it in these mutations and these new strains. but from the previous information we have about nitric oxide against SARS and against other coronaviruses, it would seem to look very promising.

Got it. And Steve, just generally speaking and maybe, we can take this offline. Do you ever envision LungFit GO to have a role in COPD? Thanks for taking my questions, everyone.

Thanks, Suraj. So yes and no, I’ll do the no part first. We’re not going to be treating the underlying COPD – nitric oxide wouldn’t treat COPD per se, but most COPD patients, especially those that are progressing to moderate-to-severe COPD will be experiencing lung infections that are causing severe exacerbations. So, they are more susceptible to these than healthy patients or those with mild COPD and those exacerbations again, can be very severe cost hospitalizations, and there are data out there showing that if you are hospitalized due to a severe exacerbation with underlying COPD, this will reduce your life expectancy. So that’s where nitric oxide can be beneficial. We believe that we can treat these patients, who are hospitalized and they can go home with nitric oxide and hopefully, improve their – the mortality rates. And we can reduce that mortality rate for those types of patients and perhaps in these patients, who are at high risk for these exacerbations, we could be treating them chronically in their home, so that we prevent these exacerbations from ever happening. That’s really the target for COPD. And I think this study in NTM, we’re treating patients in their home, where they’re self-administering in their home is the first step towards having LungFit GO in the home and treating these COPD patients.

Thank you.

Our next question is from Scott Henry with ROTH Capital. please proceed with your question.

Thank you and good afternoon, just a couple of questions. I guess first, when it comes to the launch, I think you mentioned that two thirds of the launch team is already in place. How should we think about the kind of the promotional budget as well? Should that be, is that also partially in the current expenses, when you think about trade shows and any sort of sampling or anything that you’ll have to do in line with a launch?

Thanks, Scott. I’ll take a little bit of the question. I’ll pass it over to Duncan. I mean, obviously, promotional expenses and marketing expenses are very minimal now since we can’t promote. So, there are a few things that we are covering in our current budget, but obviously, the bulk of that will be once we do launch the product, but I’ll let Duncan expand upon this. As you can imagine, this is not a – we’re not doing any DTC advertising, that’s for sure. So Duncan?

yes. thanks for the question, Scott. So, we have accounted and budgeted for some significant activity, obviously for launch. but prior to launch, we continue to respond to inbound calls. We’re building on the conferences that we attended pre-COVID. We continue to attend those virtually and the cost of doing that is certainly not prohibitive and that’s really not a problem. when we get into the launch phase and we are starting, as Steve said, with a limited release, a specific number of hospitals. and we think that the actual trial phase will only be a matter of weeks that they actually have to trial the system and it’s going to be relatively cost effective for us. So, we certainly have all of that covered. We don’t anticipate it to be very difficult at all.

Okay, great. Thank you for that color. And then Steve, I believe you said, we would start to see first-in-man for the oncology indications by the end of calendar year 2021. How should I think about – how long till we see some data there? Should these be relatively marker – shorter marker based trials? Just trying to get a sense of when we should get readouts in that area.

Yes, Scott, I would – it’s tough at this point to really predict when we’ll be able to show data from that, but I think you’re on the right path that this is not going to be a very long-term first-in-human study. It will be – there will be biomarkers we’ll be targeting and there’ll be safety and so forth. So it should be relatively short for oncology studies. So it’s hard for me to commit to a specific quarter that we would be showing data. But if we can get started by the end of 2021, I think it’s fair to say we could probably have something out there by the end of 2022. But again, let’s see how that goes. It’s almost two years from now, so got a couple of things to accomplish before I can really nail down that timing.

Okay, great. Thank you. And then just final question, I believe with regards to the balance sheet a real-time cash figure was given. Was [indiscernible] $30.5 million? And if I hear that correctly, is the difference mostly warrant exercises? Just trying to think like how we should think about that there is an outstanding line?

Thanks, Scott. So, yes, it was $30.5 million was what Doug said in the prepared remarks. And it was a mix of the warrant exercises as well as use of our ATM and equity line of credit. So it was a combination of those three things.

Okay, perfect. Thanks for the clarification, and thank you for taking the questions.

Thanks, Scott.

Our next question is with Matt Kaplan with Ladenburg. Please proceed with your question.

Thanks. Good afternoon, guys.

Hey, Matt. How are you?

Doing well, thanks. Just want to ask you a couple of questions with respect to the planned launch that you have for LungFit PH. You mentioned a phased launch. Can you describe kind of how – what the phases are and how the – what the first phase will look like as you kind of launch the product later this year?

Matt, I’m going to pass that over to Duncan. Thank you.

Thank you.

Hey, Matt.

Hi, Duncan.

Thanks for the question. I certainly regard it as a best practice for us to take a steady approach where we call it limited release. So that first phase is probably going to be around six to nine months and we expect to go to something like 10 to 12 hospitals. And the purpose of that phase is to optimize the supply chain, the service model and learn whatever we can, particularly anything that we haven’t anticipated. And the goal is to make sure that after that period, when we get to the 9 to 12 month phase, we can then broaden it to a much larger group of hospitals. And we will be able to accelerate at a much faster rate with a lot of confidence. We don’t have any constraints on our supply chain that have made us made that decision. We just think it’s prudent and the appropriate way to launch a medical device something that I’ve certainly had plenty of experience that has gone well and some haven’t gone well, it tells me this is the right thing to do. And then the pace that we expand across the U.S. will obviously depend on how things play out after that first phase, as we start to accelerate. We’re hoping that we’ll be able to go quickly and just move as fast as supply chain allows at that time.

It makes sense. Okay, great. That’s very helpful. And in terms of – what are you thinking about in terms of how you charge for the device itself? And then, let’s call it the razor and then the razor blades, is it – how are you going to monetize each of those?

Sure. Thank you. Yes, I think that we’re still working through the specifics of that model, but we have a pretty good idea. You can imagine we don’t want to reveal exactly the details because we want to maintain that competitive advantage, but I will say that we intend to be flexible. We intend to make sure that there is an incentive for people to increase their usage of nitric oxide, which I think is something that hasn’t been there. In fact, I think there’s been a trend to put in protocols to kind of restrict usage because of the business model that’s in existence. And we’re going to just make it easy for us to do – easy for them to do business with us.

All right. All right. Thanks. And then I guess, Steve, for you. You have some, I guess, significant initial data readouts coming up in the relative near-term. Can you help us understand what we should be looking for, I guess in the – from a LungFit PRO acute viral pneumonia interim data that you expect to present or announce it in the spring?

Yes, I think, obviously most important is safety. LungFit PRO being used in this number of patients for the first time in a study, it’s important to make sure that it’s a reliable system, it’s safe and simple to use as we’ve been telling you for the past couple of years here. In addition, we will have F-Scan points there obviously. And typical, whatever we’ve been doing with – for COVID-19 studies, what you’ve been seeing, people are looking for patients resolving symptoms, how quickly they resolve them, how quickly they get out of a hospital, how patients not progressing and going to the ICU. Those kinds of things will all be recorded. And again, I mentioned COVID because most of the patients are COVID at this time. And for acute viral pneumonia patients as well, you would look for the same things. So it’s pretty consistent there. So I think it’s pretty standard of what you’re seeing from other companies right now.

And then out of the 90 patients that you plan to enroll in the study, how many should we expect in the spring?

Yes, we’ll see. We will have a point where we’ll have to cut the data in terms of this is it, this is the date and we’re going to compile it and then put that release out. We’re not looking for any specific number per se. It’s more of a timing issue from a date. We just have to kind of pick one at some point and say that’s it. And whatever we have at that point, we’ll put out in the press release. So, no, we haven’t really made that decision at this point in time of what that date will be, but the season’s pretty much over in – by the time we get into May, unless COVID just continues to go the way it’s going. But Israel seems to be vaccinating very quickly. So I don’t think it’s going to last too much longer than that. So that’s why we feel that we’ll have something out in the spring clearly on an interim basis, but I don’t know the exact number of patients who would be.

Sure.

Enough to draw some initial conclusions. That’s for sure.

Great. And then I guess similarly for the LungFit GO program and NTM interim data, you’re expecting I guess mid this year. And what should we be looking for there? Will you have kind of culture conversion data at that point? What efficacy data we would have at that point?

Yes, I don’t know think there’s going to be anything on cultural conversion at that point, it will be too early. This is a 12-week treatment, 12-week observation. So the culture conversion stuff would be after 24 weeks. So we won’t have anything on that, but we’ll have physical function, data and safety and tolerability data. I don’t know if we’ll have any quality of life data at that point in time, to be honest with you, I’m not sure we can compile it that quickly. But I think it’s important, Matt, that we see patients going home with the system and that they’re using it themselves safely in their home, and that the machine is holding up and without many problems and the patients aren’t complaining and they’re taking their doses and they’re happy with it, and we get good feedback from these patients, I mean, that’s the most important thing here. And when we put the final dataset out, then we can talk about cultural conversion, but it would be interesting to see how the safety and tolerability of our system at home looks as well as data on physical function.

Great. Thanks, Steve, and thanks for the added detail.

All right. Thank you.

[Operator Instructions] Our next question is with Yale Jen with Laidlaw & Co. Please proceed with your question.

Good afternoon, Steve, and congrats for finally getting to the finish line for LungFit PH.

Thanks, Yale. We’re not finished yet, but we’re close, but thank you.

It’s 95 or 96 yards, I guess? The first question is that how do you guys see the market at this point that being – giving the one sort of generic machine already at the cylinder already been in the market? Do you see the total market value being eroded? And what do you anticipate, should you guys coming in, would that be further so to reduce, because of a competition reason?

So, the first thing I’ll say, Yale, is that we’ve been saying since 2017 that this is a $300 million plus market, knowing that the sales in there were at that time pushing $500 million run rate. And now before Praxair started to take market share, it was pushing closer to $600 million run rate. And we’ve always said, we think it’ll settle in around $300 million plus, just because Praxair was coming. It was well-known, well telegraph, they were coming. And we think that it won’t go much lower than that in terms of the price has kind of been set by Praxair’s entry. So, I think we were anticipated as well. We projected this market would be the size, and I think it’s actually occurring as we anticipated over the last couple of years. And then I’ll let Duncan talk about what he thinks will happen when we come in.

Yes. thanks, Steve. I think that Steve’s comments, I think that’ll hold with the optimistic view that we’ll start to grow the market again. We do know, as I said earlier that a lot of hospitals have put in protocols to try and restrict the use of nitric oxide. And we’re hoping that our business model encourages them to change those protocols and increase to use, as well as the ease of use of our system and the relative reduction in time for them to use any efficiency, removing all the obstacles around logistics, et cetera, et cetera, so, our goal is that more patients are treated with nitric oxide. So that would be the cancer. We’re certainly not expecting that we will quarterly market further down. We think that we’ve got enough advantages to a strong enough story to prevent that from happening. But obviously, it’s a competitive world and it’ll depend from hospital to hospital, but certainly, that’s our goal.

Okay, great. That’s very helpful. Maybe, it’s just a one more question, at least on the marketing side, which is the cardiovascular use, presumably the large portion of nitric oxide, also that’s off-label. I know you guys cannot promote that, but was there any strategy, at least on top of –from 10,000 feet inch point for you guys to the thinking entering that market?

Yes. Thanks for that question. I mean, we know the usage pattern that already exists. So of course, we can’t promote that off-label use, but we certainly can promote the hospitals with a NICU and we tend to do that. And as we enter the market, we’ll definitely be looking to expand our own indication to include cardiovascular use as well. So, we’re going to respond to the inquiries of our customers and we’re going to just make sure that it’s easy for them to use our system, and we’ll have clinical specialists and people who can respond to any off-label requests. So, we certainly hope that we can be part of expanding the use formerly and getting some reimbursement.

Okay. Maybe, a last question here, I know, Steve, you say, I’m not going to ask about the interaction between you guys and the FDA, but a general question in terms of have the agency already inspected, for instance, the manufacturer and other aspects>? or that’s still something in progress at this moment.

Yes. Thanks, Yale. I will answer this one now. So, FDA has not yet done formal inspections of the facilities. It’s a little bit early in the process for them to do that. So, you will see that will occur in the last about 30 days, 45 days before the 180-day clock is up. So, we’re not quite there yet. So, when we get there, I’m sure it will happen and we’re looking forward to it.

Okay. Maybe, just tackle one more question that in terms of the European CE Mark, you anticipate potentially approval by, I guess, year-end. question is that is there additional information that you need to supply to the agency over there, or the process already ongoing, whether the train already left this station?

Yes. All the trains already left the station there. I mean we – the data is extremely similar. There are some subtle differences and you need to be aware of them. And we have a great team that’s dealt with Europe before. so, we’re at the beginning of this process with the EU. And like you said, by the end of the year, we expect to get CE Mark and there’s no more work left to be done per se in terms of generating data for them. It’s just a matter of working through the process with the EU, which is obviously, different than FDA.

Okay, great. I really appreciate that just one more you have to go.

Thanks, Yale.

Our next question is with Gregg Gilbert with Truist. Please proceed with your question.

Thank you. Steve, on the inspection theme, can you speak to your confidence in your partners? I know you can’t talk about how and when, and whether they get inspected, but can you talk about maybe, historical track record in your confidence overall? And then maybe, for Duncan, can you speak to what degree customers are locked up with contracts and how those tend to work in terms of when they roll off? And the second part of that, is the all-you-can-eat consumption model becoming more popular among your potential customers? or is that still the exception and how they’re doing business with the incumbents? Thanks.

Thanks, Greg. I will be hitting all-you-can-eat buffet tonight, that’s for sure. So, the manufacturers, the contract manufacturers, we’re using our partners for both the filter and the LungFit system, obviously they’re two separate contractors. They are at the top of their game. They are at that the top tier of this industry with the kind of products that were – the product that we’re manufacturing with them. They have a very clean record with the FDA. They do manufacture many products globally. Really, we went with these guys, because of their vacation many years ago. And it’s certainly worth every penny that we spent with these guys and we get to this point, and there’s just really not much of a concern on our part. They’re – it’s – I don’t lose sleep over the fact that they’re going to go in and see our contractor for LungFit or for our filters in any way, shape or form. So, I hope that answers your question on that side. And Duncan?

Yes. Thanks.

Yes. So, Gregg, the first part of the question, the contract lens. they typically are between one and three years. Definitely, one of the strategies of the incumbent is try and lengthen those contracts. At the same time, the hospitals and particularly, respiratory therapy community, which is very tight-knit community, are very aware of the comment of Beyond Air and we’ve definitely talked to a lot of them. So, they’re resisting those changes. So, I think it’s a mixed bag. There are also clauses in a lot of these contracts that allow hospitals to break for new technology, and we would certainly regard ourselves to differentiate from that point of view. So, I think that when you consider that there are about 850 hospitals in the U.S. with NICUs that we can speak to, I think there should be plenty that are going to be coming off contract, and I don’t see that as a NICU [ph]. So, I’ll pause to see if that answers your question, Gregg, before I go on to the second half.

Yes, it does. Thanks. Now, on to Steve’s buffet.

Yes. So, the all-you-can-eat, we haven’t trademarked that, but I’ll think about that one. So again, that definitely was the trend the last few years was to try and sort of lock down longer term contracts and the trade-off would be to provide sort of incentives so unlimited type contracts. So, the reality is that they’re not really unlimited, they’re only unlimited for the period of the contract, and in some cases, less than that. Our goal is to make sure that our business model isn’t restrictive in any way. And we’re also in a very strong position from a point of view of the more people use our cost structure certainly can handle that much better than our competitors, but we’re going to try and change the way people think about the use of nitric oxide. So, it doesn’t really matter to us. The kind of contract is more making sure that they are available to speak with us in a reasonable timeframe.

Thanks, guys. Good luck with the review.

Thank you, Gregg.

Thanks, Gregg.

Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to management for closing remarks.

Thanks, everyone for joining us today. I really appreciate the interest and we’ll see you at the buffet.

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