Beyond Air Inc (XAIR) 2020 Q4 法說會逐字稿

Good afternoon and welcome, everyone, to Beyond Air Financial Results Call for the fiscal year ended March 31, 2020. Today's conference call is being recorded.

At this time, I would like to turn the call over to Mr. Corey Davis of LifeSci Advisors. Thank you. You may begin.

Thank you, Devin, and good afternoon, everyone. Thank you for participating in today's financial earnings conference call for the company's fiscal year ended March 31, 2020. Leading the call today will be Steve Lisi, Chairman of the Board and Chief Executive Officer of Beyond Air and joining him will be Douglas Beck, Chief Financial Officer; and Amir Avniel, President and Chief Operating Officer.

This afternoon, Beyond Air issued a press release announcing its financial results for the fourth quarter and fiscal year 2020. A copy of the release can be found on the Investor Relations page of the company's website.

Before we begin, I want to remind everyone that comments and various remarks about future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Beyond Air cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated. Beyond Air encourages you to review the company's filings with the Securities and Exchange Commission, including, without limitation, the company's Form 10-K, 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, again, this conference call is being recorded and will be available for audio rebroadcast on Beyond Air's website at 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, June 22, 2020. Beyond Air undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this conference call.

So with that, I would now like to turn it over to Steve Lisi, the Chairman of the Board and Chief Executive Officer of Beyond Air. Steve?

Thanks, Corey. Good afternoon, everyone. Thank you for joining us today. Since our last quarterly call in February, Beyond Air, along with the rest of the world, has faced the far-reaching effects of the ongoing COVID-19 pandemic.

Our team has been quick to adapt, and I appreciate all their hard work and dedication to the continued advancement of our programs. I also want to thank the health care workers in the frontlines and hospitals across the country for their relentless work in the ongoing battle with COVID-19.

I'm very proud of the fact that in support of the scientific community's efforts to develop effective treatments for COVID-19, and consistent with the known antiviral effects of nitric oxide, or NO, we have initiated our own study of high concentration nitric oxide as a potential therapy. As we will discuss in more detail in a minute, we have enrolled our first patient in our U.S. COVID-19 study.

First, I will provide an update on our lead nitric oxide programs and upcoming milestones. Then I will discuss the new data for our proprietary system to administer nitric oxide at ultra-high concentrations directly to solid tumors that was included in the poster during the AACR Virtual Annual Meeting today.

After which, I will hand the call over to Doug to provide a review of our financial results.

I want to begin by stating that we are more confident than ever in the potential opportunities we see for our LungFit system. As a reminder, the LungFit has the ability to generate nitric oxide from ambient air, on demand, and then deliver it to a ventilator circuit or directly to a patient's lungs via a nasal cannula or a breathing mask. This capability differentiates our products from any other offerings in the nitric oxide space to a point where we believe the decades-old cylinder-based delivery systems will become obsolete over time once our first device obtains FDA clearance, which we currently expect to occur in the first half of 2021. Eliminating cylinders allows for the use of nitric oxide anywhere in the hospital, not just the ICU.

Eventually, we envision the LungFit being used anywhere there is an electric out for conditions that do not require hospitalization.

The LungFit has the capability to deliver high concentrations of NO safely, meaning no cylinders or stored NO and in a cost-effective manner by utilizing ambient air.

NO concentrations of 150 parts per million and higher would quickly deplete cylinders of nitric oxide that are used in current NO delivery systems, whereas we essentially have an unlimited supply of nitric oxide with the LungFit system.

Our offerings include the LungFit PH for use with ventilated patients requiring nitric oxide due to pulmonary hypertension. The LungFit for high concentration delivery to non-ventilated patients in the hospital setting, and the LungFit Home, which allows patients to self-administer nitric oxide therapy.

As a reminder, currently approved NO delivery systems are designed to deliver a maximum of 80 parts per million NO and the current FDA-approved NO concentration is only 20 parts per million. NO concentrations of 150 parts million and higher provide a broad antimicrobial effect, which we believe can play a key role in the fight against severe lung infections regardless of the pathogen.

Given the current environment, I will begin with our COVID-19 program. We believe our LungFit system cylinder-free design, ease of NO delivery at the patient's bedside, simplicity for both the respiratory therapist and patient and the potential effectiveness of higher concentration nitric oxide for treating patients with viral and other infections sets us apart from others trying to solve the COVID-19 problem.

Critical questions in addition to safety and efficacy are being asked of any therapy being developed during this pandemic, such as the logistics required to deploy treatment quickly over tens of thousands, if not hundreds of thousands of patients. We have the ability to scale up manufacturing quickly. There are no special requirements for LungFit distribution, and the burden on medical staff is low.

If NO is proven to be an effective therapy for COVID-19, we believe the LungFit is the only practical solution. As I just mentioned, we see a significant opportunity to use the LungFit system in hospitalized patients diagnosed with COVID-19 caused by SARS-CoV-2. Considering the data compiled to date with high concentration NO, most notably, the 3 completed pilot clinical studies in bronchiolitis where infants were hospitalized due to viral infections, we believe that this system could be a significant tool in the battle against this coronavirus.

I want to emphasize the point I made earlier. NO is effective against multiple pathogens and many times patients have co-infections. Thus a therapy targeting SARS-CoV-2, most likely would not have any effect on other bugs in the lung, whereas nitric oxide most likely have a positive impact.

We recently started a study in the U.S. and anticipate enrolling patients for a study in Canada over the summer.

The U.S. trial is an open-label study of 20 adult patients hospitalized with COVID-19. Subjects will be randomized 1 to 1 and treated intermittently with 80 parts per million NO administered over 40 minutes, 4 times per day, in addition to standard supportive therapy or treated with standard supportive therapy alone.

This lower dose is designed to rigorously prove the safety of this concentration in only 20 patients before moving to a higher concentration that we feel is going to have a more optimal efficacy profile. The primary endpoint is timed to clinical deterioration, measured by the need for noninvasive ventilation, or high flow nasal cannula or intubation. Other endpoints include reduction in viral load, need for supplemental oxygen, hospital length of stay, mortality, safety and various biomarkers.

In Canada, we plan on running a bifurcated study, in which part 1 will assess safety at 80 parts per million NO in up to 10 adult patients and then upon the recommendation of a daily safety monitoring board, part 2 will begin, which is designed to assess safety and efficacy at 150 parts per million NO in up to 40 adult patients. Only part 2 will be randomized 1 to 1. In all other aspects, the design of the Canadian study is very similar to the U.S. study.

We are still early in the enrollment period for the U.S. study, and although we are optimistic for a rapid enrollment, it is too soon for us to give accurate projections for the trial's completion. We look forward to updating you as the study proceeds and announcing the results as soon as they are available.

From there, once we have established safety in this population, the plan would be to move quickly to a pivotal study upon appropriate consultations with regulatory authorities.

Let me now turn to our development program in bronchiolitis, which is the leading cause of hospitalizations for infants worldwide, with over 130,000 hospitalizations annually in the United States alone. With no drugs approved for the treatment of bronchiolitis, this indication poses an important unmet medical need. Just last month, we were excited to announce positive top line results from our third and final pilot study in bronchiolitis patients.

On an intent-to-treat basis, 150 parts per million NO were statistically superior to both the 85 parts per million NO and the control arms of the study for the primary endpoint of time to fit for discharge.

For the key secondary endpoint of hospital length of stay, on an intent-to-treat basis, the data also showed statistical significance of 150 parts per million NO arm compared to the other 2 arms.

Lastly, the data showed no difference between the 85 parts per million NO arm and control on either endpoint, underscoring our belief that higher concentrations of NO are required for efficacy in patients with viral lung infections. We look forward to publishing these data just as the previous 2 pilot studies have now been published.

Based on data from the 3 completed studies, we believe this program is ready for a pivotal trial in the U.S. However, due to the impact of the COVID-19 pandemic over recent months, we have no choice but to postpone the initiation of this pivotal study until some later time when the impact from COVID-19 dissipates. As a reminder, because of the seasonal incidence of bronchiolitis, and the need to begin enrollment in the fall, the commencement of this study will not happen until the fourth quarter of 2021 at the earliest. Again, I am very proud of the work our clinical team has done in executing the recent pilot study as well as the planning for the pivotal study.

This brings us to our LungFit PH system, which is currently being developed to address persistent pulmonary hypertension of the newborn or PPHN and also in certain cardiac surgery patients outside the U.S.

This continues to be our lead program and consumes the vast majority of our engineering, regulatory and quality teams [focus]. As we announced on our last earnings call, we're preparing for our U.S. premarket approval or PMA submission for PPHN. I am certain that everyone listening is generally aware of the impact COVID-19 has had on all of us. We at Beyond Air, have been working extremely hard to limit the impact to our LungFit PH program. However, the PMA submission timing has been delayed due to the COVID-19 pandemic impacting supply chains and logistics for testing. We currently anticipate the PMA to be submitted to the FDA in the second half of 2020. As this submission is a critical inflection point for Beyond Air, I am prepared to say that our target is to get this submission in by the end of September.

However, we are not in complete control of this time line given the overall macro environment in the U.S. today.

We will update all of you if this time line changes on our first -- fiscal first quarter call or sooner if it is warranted. This puts us on track to receive FDA clearance at some point in the first half of 2021 as FDA guidelines state a 180-day review period for PMA. We will plan to follow immediately with a commercial launch in the U.S. with a partner or on our own. Outside the U.S., partnering discussions are ongoing.

I would like to briefly highlight again the operational, safety and cost advantages of our LungFit PH system over cylinder-based systems. Eliminating cylinders provides the hospital with instant savings on space, inventory requirements, training, employee time, patient time in the ICU and safety for both the patient and staff.

We believe these advantages will position Beyond Air to take a significant share of this market, which is estimated to be more than $300 million in the U.S. and more than $600 million worldwide.

In our LungFit Home program, we are planning to initiate a multi-center 12-week self-administrated at-home pilot study in 20 patients with non-tuberculous mycobacteria lung infection by the end of 2020. If it were not for the pandemic, this study would be underway as our original goal was to start in June of this year. In order to be enrolled in the study, a patient may be diagnosed with either a Mycobacterium abscessus complex, also called an abscessus or Mycobacterium avium complex, also known as MAC.

Patients will be titrated up to 250 parts per million nitric oxide. The study will evaluate safety, quality of life, physical function and bacteria load. The FDA has emphasized the importance of quality of life improvement and physical function as well as improved safety profile as markers of success versus solely eradication of bacteria.

Based on our current expectations, we expect to report interim data from the at-home study towards the end of the first half of 2021.

Based on the clinical and preclinical data generated to date, we are confident that this pilot study will succeed. Specifically, we are encouraged by the simplicity of our LungFit system, which allows patients to self-administer in the home setting. For the patient, it is a simple 5-step process. Plug the system into any standard electric outlet, turn on the power switch, insert the smart filter into the system, place the breathing mask on the face and press the start button. This is a very straightforward system to use.

Recall that our smart filters have an RFID chip that communicates with the system and will dictate the dosing parameters.

If this study is successful, we believe our LungFit Home system opens the door to a very significant underserved market for chronic, severe lung infections that can be treated in the home. And with proper resources, we could potentially explore a program in COPD patients with severe exacerbations that are frequently precipitated by an infectious agent.

There are over 1 million hospitalizations annually in the U.S. due to exacerbations caused by lung infections in COPD patients, quite a large unmet medical need. This brings me to the data announcement we issued this morning regarding in-vivo and in-vitro data that we believe shows the potential effectiveness of ultra-high concentration nitric oxide in treating various solid tumors.

These data are from 4 studies, including one in-vitro and 3 in-vivo studies and were presented today at the AACR Virtual Annual Meeting. The in-vitro study exposed mouse colon and breast cancer cell lines to gaseous nitric oxide, or GNO, versus air and control in order to test if GNO can eradicate cancer cells in-vitro. The cells were exposed to up to 50,000 parts per million nitric oxide for up to 180 seconds. Let me repeat this, 50,000 parts per million.

This is obviously several orders of magnitude higher than we are using for our pulmonary applications, but we're also not delivering NO to the lungs in this setting and have flexibility to ensure safety for patients and medical professionals. The viability of the cancer sales was then tested 24 hours after NO exposure. Results from the study show that exposure of the cells to 50,000 parts per million NO damage both colon and breast cancer cell viability by more than 95%.

The in-vivo studies treated tumors of colon tumor -- treated tumors for colon-tumor-bearing mice by up to 200,000 parts per million nitric oxide administered locally to test whether nitric oxide can ablate mouse colon cancer tumors. The study reported a complete response in 5 out of 30 mice.

In a second in-vivo study, colon-tumor-bearing mice were treated using 3 different protocols for destruction of the primary tumor. After receiving the nitric oxide treatment for the first tumor, all of the mice then rejected a second cancer cell inoculation. In other words, the data indicate that NO treatment resulted in antitumor immunity in the host. Not all of the mice in this study had complete removal of the primary tumor, yet 100% of the mice rejected the second tumor challenge. Hence, we have shown in a small study that local treatment of a tumor with ultra-high concentration of gaseous nitric oxide conveys immunity to the host for that tumor type.

We will conduct further studies to confirm this finding, but these data are quite encouraging that we are on a path to prevent tumor metastases.

In another study, spleen cells from a tumor-bearing mouse, which was previously treated with gaseous nitric oxide, were mixed with tumor cells and inoculated to naive mice. These spleen cells inhibited tumor growth to a naive mice. To be clear, we wanted to see whether the antitumor immunity conveyed to the host by NO treatment could be transferred to another naive subject. These positive data provide further confirmation that NO treatment may be working by an antitumor immune mechanism. These preclinical studies have provided positive data that high concentration gaseous nitric oxide shows a substantial cytotoxic effect on cancer cells. This innovative gaseous nitric oxide based therapy represents a novel treatment for cancer and may serve to treat solid tumors locally or be used as an adjunctive therapy for surgery and convey immunity to the host to prevent recurrence and metastases.

We also believe gaseous nitric oxide can be synergized with common anticancer therapies, such as chemotherapy, radiotherapy and immunotherapy to further enhance the effect.

With that, I will now turn the call over to Doug for the financial review. Doug?

Thank you, Steve. Here's a brief review of our financial results for the fiscal year-end, March 31, 2020. Revenue for the fiscal year-end March 31, 2020, was $1.4 million compared to $7.7 million for fiscal 2019. All revenue is related to the accounting for the payments need to Beyond Air for the now-terminated commercial agreement for LungFit PH. Research and development expense for the fiscal year-end March 31, 2020, were $10.6 million compared to $3.9 million in fiscal 2019.

General and administrative expenses for the fiscal year-end March 31, 2020, were $8.9 million compared to $6.9 million for fiscal 2019. For the fiscal year-end March 31, 2020, the company had a net loss to common shareholders of $20.5 million or $1.78 per share compared to a net loss to common shareholders of $6.6 million or $0.77 per share in fiscal 2019.

As of March 31, the company had cash, cash equivalents and restricted cash of $25.5 million. This cash is sufficient to fund operations beyond the next 12 months.

During the quarter, we entered into a $25 million line of credit that is available for 2 years. There are 5 available tranches of $5 million each, and the first 2 can be drawn at the company's discretion. The other 3 can only be drawn after FDA approval of LungFit PH. All tranches carry a 10% annual interest rate and warrant coverage of 10% to 25%, with the pricing based on a predetermined formula.

The warrant term is 5 years and all debt has a 5-year term, regardless of when the tranche is drawn. We have drawn the first $5 million tranche. Subsequent to the end of the quarter, on May 15, we entered into a new common stock purchase agreement and rights -- and legislation rights agreement with Lincoln Park Capital for up to $40 million. This new agreement extends until May 2023 and replaces the existing agreements that were set to expire in August 2021.

On August 2, a prospectus supplement relating to a $50 million [asset] market offering with interest and (inaudible) was filed with the SEC. These 3 financing vehicles provide us flexibility to draw additional capital as needed to support our activities, developments and anticipated milestones.

I'll now hand it back to Steve.

Thanks, Doug. In closing, we continue to see significant opportunities across our pipeline to address large and mostly unmet medical needs. Our team continues to execute on our programs, including pulmonary hypertension PMA, which is on track to be filed with the FDA later this year, the U.S. COVID-19 study is now enrolling patients, with the Canadian study not far behind.

The NTM pilot study with patients self-administering NO at home is expected to be initiated later this year. We completed our third positive bronchiolitis study, and we've shown promising preclinical data in solid tumors. We look forward to the data announcements and clinical milestones expected to occur over the next 12 months.

Despite the impact of the COVID-19 pandemic on certain clinical programs, Beyond Air team investigators have worked tirelessly to make sure that we will be able to move quickly and resume these programs as clinical sites and regulators resume normal activities.

I want to thank them for their dedication to the development of these programs and to the patient populations, which we are looking to serve.

We'd like to open up your call to questions at this time. Operator?

(Operator Instructions) Our first question comes from the line of Suraj Kalia with Oppenheimer.

Can you hear me all right?

Absolutely, Suraj. Thanks.

So Steve, 3 questions. First is, forgive me, I must have missed it, the number of patients treated under the U.S. COVID study and the Canadian 1 -- stage 1 of the Canadian study?

So the U.S. study will look to enroll 20 total patients. And the stage 1 of the Canadian study is 10 patients.

And have we treated any so far? In the U.S. one?

In the U.S., yes. Yes, yes, in the U.S., yes. Canada, we just got a approval from Health Canada recently. So it's going to take a little more time to get the sites up and running.

Did you -- and the timing for the U.S. study, did you talk -- forgive me I must have missed that remark.

Well, we just said that it's kind of hard to nail down an exact timing of completion of the study, given the environment that we're in. I mean, I'm sure everybody -- as you see patients pop up in different places at all times. It's kind of a guessing game where they're going to be. And there are lots of companies out there that are competing for these patients. So we didn't give a time line for completion of the study.

Fair enough. The PPHN, PMA, Steve, by end of September, the filing, if I heard you correctly, what only -- remains to be done between now to the actual submission?

So this has been a logistical nightmare for coordinating all of the testing, shipping of equipment and systems, moving people around because you need, obviously, highly skilled people who understand what we're trying to do here. So that's pretty much what's left to be done is getting all of these tests done and getting all of the final parts and pieces in for the final manufacture of the last few systems.

So you manufacture systems for testing, then you manufacture systems when the testing is completed. So these are the things that we're dealing with in terms of logistics on those -- on both of those, basically. Then we're just kind of in the home stretch here and kind of like, kind of -- we just can't. Yes, we can see the finish line, we just kind of running in place right now, if you can imagine.

So things are opening up, and we've got time lines from a lot of our partners out there, and it looks like we are on track to get this done before the end of September. And the only thing I can say to that is we don't control what may happen if things get shut down again, or if things get delayed because of COVID, or any other potential reason. I mean, there have been difficulties in getting certain things done, not just due to COVID, but due to a lot of the protesting that's been going on, it's also been difficult to manage around that sometimes.

So we're kind of at the mercy of the environment outside of our control. But if we can keep our time lines that we have right now, we'll be fine for September. So right now, as long as nothing goes wrong from that perspective, we keep reopening COVID -- the COVID pandemic stops, and we keep reopening on schedule as everybody is talking about, we should be fine. It's just not in our control.

Right. And, Steve, 2 others for now, and I'll hop back in queue. One is your updated expectations on a panel for PPHN, if there has been any change. And the second thing, and we can certainly take it offline, if need be, I was just curious about the data you'll -- your preclinical data you'll present it today in solid tumors. I mean, it's a fascinating concept. And I think the one thing that I wasn't able to connect the dots is, how do you do intratumoral injection of gaseous nitric oxide? Or when you try to avoid, how are you going to do that? Just mechanistically, if you could explain, we can certainly take it offline.

And congrats, again.

Thanks, Suraj. I was caught up in the cancer. What was your first question? (inaudible)

Just your thoughts on a PPHN panel, if any?

Oh, yes, the panel. Yes. We don't expect to have a panel. I mean, there's no human data. Not sure what we'll be discussing if we had a panel. There's nothing to discuss. This is all about having all of our paperwork and all of our reports and everything in order, having all of our testing done in the proper manner and getting our pre-approval inspection of our contract manufacturers. And that's really the what's happening here. There's no human data to discuss. So we don't think there's going to be a panel at all. We don't expect and we never expected one, and we're working with FDA to make sure that we get our PMA submission to be pristine. So it's not an expectation at all on our side.

So with respect to cancer, I mean, we probably should take it offline, and I can get you on the phone with some of my team members to walk you through. But we've mentioned we had a proprietary delivery system. We also mentioned that we had 3 different methods for delivery. So yes, it's still a question mark. How do you keep the nitric oxide from spreading beyond the tumor.

That's not -- we're not going to tell you how we do it. We're not going to let anybody know how we do it, not yet anyway. But that's definitely something you have to be concerned with. Nitric oxide at those high concentrations will kill anything. It's not just going to kill the cancer cells. We're not -- we don't have some kind of a biomarker where it's drawn to inside the tumor. So I mean there are several ways to get it directly to the tumor. Yes, I mean, we're just not really going to go into detail on how we're doing it right now. But it is -- we did mention, it's intratumoral delivery. So the nitric oxide is kind of set inside the tumor mass itself and it kills from the inside. So obviously, as time goes on, we'll reveal more and more. But happy to get you on the phone with my team, if there's some other questions.

Our next question comes from the line of Matt Kaplan with Ladenburg Thalmann.

Just wanted to dig in a little bit more to Suraj's question in terms of PMA, what needs to be done to complete the filing. I guess, specifically, has the pre-approval inspection of the contract manufacturers been scheduled yet? And...

Well, that doesn't happen, Matt, until you actually submit the PMA. You've to submit the PMA to FDA before you get on their schedule. So we have to make sure that we can -- we have to complete all testing.

So as you can imagine, starting in the middle of March, everything was shut down. And things get backed up, and everybody wants to get to the starting line when things open back up. So that's what we're in a position to do. And these vendors are doing their best to open back up. They're all over the country. Sometimes you get lucky or unlucky depending on where you -- which site of theirs you were scheduled to be in.

If you're scheduled to be in a place where there's not a lot of COVID, then that's great. Scheduled to be in place where there's a lot of COVID, that's a problem. If you're scheduled to be in a place where there's been a lot of protesting, it's a problem. Scheduled to be in place where there's not a lot, it's not a problem. So these are things that just -- you couldn't have predicted 4 months ago when you were setting up all this -- all of these logistics, you couldn't think of these things impacting your business plans.

It's kind of a -- global pandemic is a new one for us. I'm sure it is for everybody. You kind of don't expect it. You don't really know how to plan for it. So we've reacted well. We're keeping these time lines pretty tight in terms of a couple of months delay here, it could be much worse, and we've worked very hard with our suppliers and partners out there to make it a very short delay.

So again, I don't know what else you want me to say in terms of testing. I mean, I could -- we could rattle all 15 different tests, but it's just electrical safety and human factors, things like that. This is a medical device, let's remember.

All right. So has any of the testing been completed? Or you need to -- every test that's necessary for a submission of PMA still needs to be done?

No, some testing has been done. Sure. I mean, we at Madison, Wisconsin and our engineers, they've been rolling, they haven't missed a day. I mean, they're in the office, they're in the lab, doing everything they can do. But you have to understand that they don't have everything in-house. We don't have -- even if we were 10x the size of company, we still have to have some outside vendors doing some of these tests, you can't do them all on your own. Some of them -- these have to be validated -- testing houses on some of these tests. So we have to go outside no matter what.

No, no. Just shifting gears in terms of...

Wait, Matt, can I mention one thing, Matt?

Yes, yes.

All the testing for our LungFit system that we're using for COVID that we're going to be using for NTM, that's passed all of the tests, all of them. That one has been perfectly tested. All the tests, it's been done.

I mean, this [is just for our] ventilated compatible system. So we have to repeat all the tests for the ventilated compatible system. We've done the test for the other systems already, and we've passed.

Great. Yes. So it's just really kind of getting them done, that's the thing. So help us understand what were the learnings from the third bronchiolitis pilot study versus the first 2? What did you learn that's new specifically from the third study?

Well, the third study had 85 parts per million NO in it. So that's -- we consider -- we would consider a low concentration of nitric oxide when you're looking to have an antiviral effect. And what we saw here was that there was no effect on these infants. So that's something new that there seems to be a dose response, and we can show that 85 parts per million had no effect versus control and 150 parts per million had a -- was statistically significant on the primary and key secondary endpoint, which is hospital length of stay.

I mean, this is a small study. This was 89 patients in 3 arms. So we weren't expecting to hit these robust p values, but the effect was so strong that we hit it. So I would say that, one, we certainly learned that you have to get to higher concentrations to have this effect, number one; and number two, I think that by the third study, the team and the engineers on our side have learnt how to maximize the situation.

I mean, these are infants, they move around quite a bit. We learnt -- we went from 5 times a day to 4 times a day in treatment. So it's one less treatment. They got more rest. You don't have to annoy them 5 times, you're only doing it 4 times a day. And we used a new mask. We adjusted the breathing circuit. So we did a lot of tweaks here and there for the system. And you see the results are extremely strong.

So this study taught us how to run a much better study and fine-tune the equipment. And it also taught us -- or it didn't teach us, it confirmed to us what we already knew.

What do you think the bronchiolitis data provides with respect to read-throughs or potential read-throughs to the COVID-19 trial? Obviously, higher concentrations or better. But what do you think -- does it provide us anything in terms of potential utility of higher doses of NO in the COVID-19 setting?

These are definitely different patients. I mean bronchiolitis babies are different than mostly elderly patients with acute viral pneumonia. So there are definitely different setting here. It's kind of hard to draw direct comparisons. What we can do is say that, certainly, higher concentration nitric oxide is going to have an effect on the virus. That we can say. We certainly didn't have SARS-CoV-2 in these infants. It didn't exist when we did the study.

So -- but we did have some coronavirus there. I mean, as you know, most of this is RSV, about 65% 70% of bronchiolitis is RSV. But the rest of it is mixed viruses, we did have some coronavirus in all of our space. So how much difference there is with SARS-CoV-2 versus SARS-CoV-1, or any of the other human coronavirus, I can't tell you, I think we're still learning. I know there's some human coronavirus surrogates that people are testing, that are saying that they aren't surrogates for SARS-CoV-2. So I think that this is telling us, there will be some kind of an impact on the viral load and how the virus is attacking these patients. But it is a different setting. So it really is hard for me to say with any definitive nature here that because we help these babies, it's going to work in COVID-19 patients, it's just a completely different setting.

So what about from a safety point of view as well, just beyond efficacy?

So yes, I mean, look, the FDA has asked us to do 80 parts per million first. So clearly, they have a concern on the safety side. We, as a company, aren't as concerned. We've seen -- we've used this up to 250 parts per million in humans with no problems. We've gone up to 400 parts per million in animals with no problems, 30 days in those animals at 400 parts per million. We're really not worried about safety profile here. We have to make sure that we're enrolling patients before they have progressed to ARDS. That's where there could be some trouble. But as long as we get the patients before that, and that's what our enrollment criteria dictated, we really don't see much concern on the safety side.

But again, FDA's main concern is safety. That's what they're there for, to protect patients. So we'll take this small half step to satisfy their concerns. I mean, theoretically, you can come up with lots of things, but there's nothing proving -- nothing to prove that nitric oxide is going to cause problems in these patients being -- when you're dosing it intermittently. So we're really not concerned. Again, there's been no SAEs in any patients bronchiolitis, NTM, CF patients, healthy volunteers, all the animals we've treated, we've seen nothing. So this intermittent delivery is really lending itself to show that it can be done safely.

Last question, Steve. With the AACR data now presented at the preclinical, both in-vitro and in-vivo, can you -- it seems very exciting with respect to the anti-tumor response you're observing. Can you give us some more detail on that tumor response in terms of speculation, in terms of the mechanism there that's generating the prolonged antitumor effect that you're seeing in the animals when they're rechallenged.

Okay. So yes, the challenge. Look, I mean, this is probably nothing new to people who have been looking at solid tumors. I mean this is -- the immune system is learning from the tumor antigen release by the ablation of the tumor. So when this tumor is ablated locally, there's tumor antigen release, at least when nitric oxide is doing it. I know there are other ablation techniques out there that don't necessarily convey what we're seeing here. So the nitric oxide is doing it locally. The immune system is not impacted. And the tumor antigen release is there for the immune system to learn from. And essentially, that's what's happening, on a layman's term level. If we want to get into more detailed immunology discussion, I think, we could probably take that one off-line. And I'm very happy to provide our immunologist to you for that discussion. But suffice it to say, the data speaks for themselves.

It wasn't just one mouse, it was several. And all of them had the immunity. Every one of them.

Our next question comes from the line of Scott Henry with ROTH Capital.

I guess, I'll start on the financial side, just to go through that. You've been pretty consistent in terms of operating costs quarter-to-quarter, certainly in 2020. Should we see any deviations to that in 2021 given COVID-19, given some of the delays, meaning, will expenses kind of dip down a little bit? Or how should we think about 2021 fiscal?

I think you're going to see it. It's hard to say, it will be fairly consistent, but I think that this spend of $4 million to $5 million a quarter is probably where we're going to be excluding the launch expenses, if we were to launch on our own. So -- and it might be a little choppy because we may pay for -- a lot of our systems may come in, in one quarter. And we pay for all of our systems, or we could have a run on COVID patients where they come in, a lot of them when we pay in that quarter. So things can get smoothed out or things could be chunky, it's kind of hard to tell because of the timing of when we are paying for our systems that we're building and the timing of the COVID trial in terms of when the costs hit us. So we have an idea of when they'll come, but it could be June and July. It could be September, October. So it's a little bit tough, Scott, to really tell you exactly what it will be quarter-by-quarter. But I think if you average $4 million to $5 million a quarter for the next year, for 2021, I think, that's a good place to be. Of course, if we are launching the LungFit PH on our own, that launch is taking place in the first half, you would see some costs, or some expenses prelaunch, of course, in the fiscal year.

Okay. That's helpful. And the balance sheet, I see almost $6 million in restricted cash. Any color on -- will that be restricted long-term or wasn't sure how available that cash is going forward?

Yes. So $5 million of that is the line of credit cash, the $5 million tranche, the first one we took down. It just -- we took it down before March 31, but it's kind of scary, the reason we didn't get it by March 31 is because of COVID. So people aren't at work, they're not at the banks, no one's around. We had money, some money came in, some was in escrow. It was just a mess with COVID. I mean, imagine, I think back it was the back half of the month of March. I mean it was ridiculous. So we have that as restricted cash just because it technically wasn't in our bank account. It was in escrow. So...

Okay. So it should free up?

It's already free. It's already free. It was free in April. So the other couple of hundred thousand that's left over has to do with our contract manufacturer. That's kind of normal when you're ordering parts for systems. It's normal to have some restricted cash there (inaudible).

Okay. Perfect. Alright. And then one more sort of financial related, but when should we expect some resolution on the Circassia deal? Anytime soon? Or just any color if you have any at this point in time?

I don't have any color because there's really nothing to report. There's nothing.

Okay. All right. Fair enough. Just switching gears to the COVID-19 clinical program. Let's say, you get the U.S. data, you get some data from Canada and the higher doses. Let's say, it's pointing in the right direction. What's the next step? Would it be a pivotal trial, post the Canadian trial? How should we think about that development plan? Assuming that the data is what you want it to be, obviously.

Well, based on what we've seen from others in terms of what they've done and then moving on to larger and more pivotal-type studies. I think if we had the data from U.S. and Canada, I think, the next data will be pivotal, for sure. So I can't imagine 70 patients not being enough to move forward in COVID-19. But again, that's still a discussion that we have to have with regulatory agencies. But my expectation would be that, yes, given that's -- given what's going on with the pandemic, and if we have something -- some data trending in the right direction, that's safe. I would think, yes, it would be pivotal. But again, I can't predict regulatory agencies and what they're going to say. It's just is my opinion.

Okay. That seems to be the program for others to go pretty quick to pivotal. I guess, final question, and I don't know if you can add anything to this or not, but whenever I look at in-vivo data, I've never known really how quite to interpret it. Can you put it into context at all and how nitric oxide performed in-vivo relative to other treatments? Or just any kind of comparison, any sense of how we should view this data, given that it's early stage?

Sometimes you can compare it to the way other products worked at the same stage. I don't know if you have any, but I was curious.

Yes. I don't have any specific examples for you. You and I, Scott, have been doing this a long time. I haven't seen too many companies with -- even if you just take our ablation, I mean, 5 out of 30 complete responses is pretty good in mice to begin with, let alone the immunity that's being conveyed to the host. When you're -- I can't recall too many studies where you're conveying immunity to the host and prevention of new tumors or prevention of metastases. And so I -- this is rare. I just don't have the knowledge to tell you how rare. But I can tell you that our team, our cancer team internally is very excited by this. Our advisers that we've shown this to, who we've brought on board, are very excited by this. And we're going to be running more studies to confirm this with larger numbers. I think that's important since this is dozens of mice. And now we want to go to hundreds. I think that's what's next -- the next step is to just do it again and confirm in larger number of mice, which is normal, kind of like in humans. We do 10, 15 patients, then we go to 100 patients. So here, we'll do the same thing. And we'll be showing more of that, hopefully, before the end of this year, we'd hope to have some more data out on cancer and confirming what we've already seen and maybe trying to do some new things in terms of trying [to show a] mechanism and trying to [show] -- predict the effect that it would have in humans. So it's very exciting, but we still -- we have to start somewhere. I mean this is where you start, in mice. And the data looks really strong, very strong. So we'll see what happens.

Our final question comes from the line of Yale Jen with Laidlaw & Company.

In the COVID-19 trials that -- first of all, is that a 10-day treatment? Or is that some longer treatment?

It's up to 7 days for COVID. It can be less. But it can't be more, but it can be less.

And the remdesivir potentially could be in the standard of care or that's being excluded?

No. Standard of care is standard of care. If someone wants to use remdesivir, go right ahead.

Okay. And would you be able to -- would you be able to prospectively, at least, try to segregate the patient with or without it as well as in the placebo or this is too a small number to -- of patients to do that?

I think it's too small a number of patients. And I also just remembered that this first 20 patients in the U.S. is really geared more towards safety. I mean, we don't think the antiviral activity is very strong at 80. If there's any benefit to the patient, it's going to be on oxygen saturation, which -- there should be benefit there. And potentially on the anti-inflammatory properties of nitric oxide. But I don't think we're going to see any antiviral activity at 80. So this is really safety, so we can move to the more efficacious concentrations.

Okay. That's very helpful in terms of the expectation. In terms of pulmonary hypertensions, you mentioned about that things could happen outside of -- before you submit to the FDA for PMA. Do you also anticipate any possibility of the FDA may delaying things, although there's supposed to be a finite time they need to make decisions. Is there any possible concern there as well?

Yes, I really don't know. There's always concern because FDA is -- you never know what's going on at FDA in terms of their resources. And right now, obviously, they're stretched with COVID. So there could be something, I don't know. But what I will say is that, again, our ventilated compatible system is -- it is something that can help. I think, if you all remember, everybody was using lots of ventilators early on with COVID-19. I'm not so sure if everybody realized that they were using nitric oxide on these ventilated patients as well. And there was a lot of demand for nitric oxide at that time, and there still is.

So I don't know if it's going to be something that would slow us down, giving the opportunity for hospitals to have another source of supply for nitric oxide to help with this pandemic, if they want to use it on ventilated patients so they would want to use it in other capacities. I mean you can see that they've been using nitric oxide in many, many ways to help with COVID-19. Again, we're not trying to say anything gets used off-label here. We're just trying to say that it's another option for physicians to have in their arsenal when they're looking to use nitric oxide, whether it be cylinder-based or the Bellerophon system or someone else's system and so forth. Because I think that nitric oxide is being tried in many, many different areas right now for COVID-19, different systems, in different concentrations, so I'm not so sure that a nitric oxide product would be impacted or slowed down. I could be wrong, Yale, I don't know, but it seems like NO is something that the FDA has moved pretty quickly on, not just for us, but for others as well in the nitric oxide space. So I think it's an important tool right now for COVID.

So if COVID is still a problem, I don't feel like we'd be slowed down. And if COVID's not a problem, then we wouldn't be slowed down.

So we feel pretty good about the fact that FDA would be open to reviewing our PH system on a regular timeline.

Okay. Great. That's very helpful. And maybe a good segue way actually to the off-label in terms of we knew that beforehand, Mallinckrodt what seems suggesting they are doing some studies on the cardiovascular side. Do you have any update on that? And presumably, that could be something also other the leeway for you guys to also expand it into cardiovascular achievement though without much sort of additional [apparatus] -- [say, it lead the way.] Do you know -- do you have any updates on that?

I have no updates on that. That's a Mallinckrodt program. It's up to them to update people on that. But I would say that outside the U.S., it's on label for cardiac surgery. So I'm not so sure that in the U.S., I don't know if -- I would think FDA is not averse if you presented them with the right data and the right package to putting it on label. But you need to justify it. And I think that -- I don't think it's overly difficult to do that, if you take your time and do it the right way.

So I think Mallinckrodt can probably do it. We can do it. I don't think it's far off that everybody in this space would have cardiac surgery on their label. I don't think that's something that's going to take 5 to 10 years to do. I think it's going to be a lot quicker than that. And it's good for everybody. It's good for all the players. It's good for patients, it's good for everybody to have it on label.

So hopefully, if Mallinckrodt doesn't do it, we'll do it. But one of us will get it done.

And maybe last 1 or 2 questions here on the oncology. Do you anticipate the next set of studies? Or is that sufficient potentially to look into whether you have any increase of -- [set of expertise there] or other immune responding cells, which you are suggesting -- also -- or be consistent with the sort of anti-tumor effect comes from, for example, releasing of the new antigen or other kind of immune [activities].

So yes, that's probably a little bit too much for me. So I do have our immunologist, I think she's still on the line. So Hila, are you on the line? And can you answer that question? Or do you want them to repeat it?

Yes. I'm on the line, yes. So yes, we actually have started to measure and to analyze the immune response cells that actually take an active part in this immune response against cancer.

And well, I'm not sure if, at this moment, we would like to share all the data that we have, but we do see differences that actually explain the immune response that we see.

But just to say that, in general, in tumor ablation, so usually -- sorry?

No, I'm not -- go ahead, please.

Yes, okay. So just to say that according to the tumor ablation concept, so in general, antigen-presenting cells usually are recruited to the ablated site. And these cells belong to the innate immune response. So they just ingest tumor antigens, and they present them to the adaptive immune response cells. So basically, we are focusing on these cell types, T cells, B cells, cells that actually belong to the adaptive immune response because this is the most important response if we would like to have a specific immunity that can actually attack different metastases.

Okay. Great. That's very helpful. And maybe the last question to Steve is that, you do have the tumor side of the story in early stage, and you mentioned about the COPD, so you do have a lot of more in your hands. Just overall, how do you sort of prioritize these different programs at this point besides the sort of main programs that currently you want to pursued?

Yes. So COPD is not prioritized at all. It's just -- we don't have the bandwidth on many aspects to tackle COPD. So we'll do our NTM study first because I think the most important thing is to make sure that patients can self-administer at home safely and that we see a positive response in these NTM lung-infected patients before we would embark upon our COPD program.

So we have some time before we get going on COPD. We -- if we had the resources, we certainly could do it sooner, but I think that's our plan for COPD. So it will kind of take a back seat for now. With the oncology side, this is in animals still. We're not going to be looking at a human study for at least a year. So sometime 12 to 18 months, sort of at the back half of next year, we're targeting.

So we have some time before that expense hits. And it would be a small first-in-man study. As you can imagine, it's not overly expensive. It's not COPD, where that takes a lot of patients. So we have time, and we -- it's not very expensive for us. So in Israel, we have our own animal facility. So it's something we control. We control the expense. We control what kind of experiments we're doing and how frequently we're doing them.

So this is not our big expense center for us at this moment in time. The real big expense center is obviously is manufacturing and doing all the testing for the PH program. And obviously, the studies that we run, the clinical studies we're running, are expensive with respect to COVID and the NTM At-Home study. So those are the 3 priorities right now, COVID, NTM At-Home and LungFit PMA with cancer still moving along and bronchiolitis is on hold because we have no choice. And COPD is not going to start because we don't have the resources.

It's kind of how we look at it.

Okay. Great. And congrats on the progress so far.

We have reached the end of our question-and-answer session. And I would like to turn the call back over to Mr. Steve Lisi for any closing remarks.

Well, thanks, everybody, for joining us today. We look forward to speaking to all of you in the next couple of weeks. Take care now.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.