Beyond Air, Inc. (XAIR) Q2 2021 Earnings Call Transcript

Beyond Air, Inc.  (NASDAQ: XAIR) Q2 2021 earnings call dated Nov. 11, 2020

Corporate Participants:

Maria Yonkoski — Head of Investor Relations

Steve Lisi — Chief Executive Officer and Chairman of the Board

Douglas Beck — Chief Financial Officer

Analysts:

Suraj Kalia — Oppenheimer & Company — Analyst

Matthew Kaplan — Ladenberg Thalmann — Analyst

Scott Henry — ROTH Capital Partners — Analyst

Yale Jen — Laidlaw & Company — Analyst

Presentation:

Operator

Greetings and welcome to Beyond Air, Inc. Second Quarter 2021 Earnings and Corporate Update Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, Maria Yonkoski, Head of Investor Relations for Beyond Air. Thank you, you may begin.

Maria Yonkoski — Head of Investor Relations

Thank you, operator and good afternoon everyone. Welcome to Beyond Air’s second quarter of fiscal year 2021 earnings call. Speaking on today’s call are Steve Lisi, our Chairman of the Board and Chief Executive Officer, and Douglas Beck, our Chief Financial Officer. This afternoon, we issued — this morning, we issued a press release announcing the submission of the PMA for LungFit PH to treat persistent pulmonary hypertension of the newborn or PPHN. In addition, after the close, we issued a press release announcing the financial results for the second quarter of fiscal year 2021. A copy of both releases can be found on the Investor Relations page of our website.

Before we begin, I would like 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, this conference call is being recorded. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 11th, 2020. Beyond Air undertakes no obligations to revise or update any statements to reflect events or circumstances after the date of this conference call. With that, I would like now to turn over the call to Steve Lisi, our Chief Executive Officer. Steve?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Thanks, Maria. Good afternoon everyone, thank you for joining our call. Before we get started, I wanted to extend a huge thank you and congratulations to every member of the Beyond Air team for the submission of the PMA for LungFit PH to treat persistent pulmonary hypertension of the newborn or PPHN. Despite the difficulties imposed by the ongoing pandemic, our team was able to execute on this critical step, keeping us on track for U.S. commercial launch in the second calendar quarter of 2021 pending FDA approval.

As a reminder, LungFit PH is the lead product from our broader LungFit platform. It is a novel, cylinder-free device that is capable of generating nitric oxide or NO from ambient air that flows through a reaction chamber where pulses of electrical discharge are created between two electrodes simulating a lightning strike. The desired concentration of NO was achieved by controlling the voltage and duration of each electrical pulse giving us the capability to titrate dose on demand or maintain a constant dose for treatment. For PPHN, LungFit PH is designed to deliver a dosage that is consistent with current approved guidelines of 20 parts per million NO with a range of 0.5 to 80 parts per million.

Since nitrogen dioxide or NO2 is a toxic byproduct of NO generation, our proprietary NO2 filters, encrypted with RFID chips, are required to be securely put in place for the device to generate and safely deliver NO. Our smart filters serve as the razor in our razor-razorblade model. Overall, the LungFit PH is a much smaller and lighter alternative to the traditional fixed supply cylinder-based systems. It is important to note that our system operates with any standard electrical outlet. We believe that the removal of the cylinder makes it a more cost effective, convenient, and safe alternative for patients and medical staff.

I would like to now pivot slightly and discuss our initial target indication. PPHN is a serious breathing condition that occurs at birth when a newborn’s circulatory system is unable to adapt to breathing outside the womb. The newborn’s lung vessels or blood vessels are so constricted that oxygen and blood flow are restricted and manual ventilation is required. Since FDA approval in 1999, NO has been the standard of care for PPHN in the U.S., acting as a pulmonary vasodilator to improve oxygenation and reduce the need for ventilation. We estimate there are over — a little over 850 level 3 and level 4 neonatal intensive care units or NICUs that are equipped for NO delivery to treat PPHN today. According to published reports, the use of NO in the hospital setting had sales of greater than $500 million in 2019 in the United States alone.

Additionally, NO has been approved for PPHN in Europe since 2001 with a subsequent tubal expansion for use in certain cardiovascular surgeries. More recently, NO received regulatory approval in Australia and Japan for pulmonary hypertension in conjunction with heart surgery further expanding NO use in the worldwide cardiac market. From a commercial perspective in the U.S., cylinder systems have dominated for the past 20 years, dominated by one company until new players recently entered the market. These new players have the same, if not more disadvantages when compared to our LungFit PH. As I mentioned before, we believe that our novel technology has many advantages over the current standard.

First of all, our ability to generate NO from ambient air eliminates the space requirements and NO volume limitations of cylinders. In today’s environment, the hospitals are left to shoulder the burden as each cylinder can weigh up to 45 pounds and require special storage. Instead, our system relies on safely disposable smart filters that weigh approximately 2.5 ounces and lasts for 12 hours of continuous use. To be clear, our systems will not work without a filter in place confirmed by the RFID technology preventing both NO2 toxicity while protecting our business model. Additionally, our smart filter design ensures that hospitals are only charged for what they use, which is an advantage over some of our competitors that employ more aggressive pricing strategies. From a manufacturing perspective, our fixed costs are significantly lower than our competitors because you do not have any expenses associated with manufacturing, logistics, and transport of NO cylinders.

Finally, our user interface is designed to be easily used for providers and we also avoid purging [Phonetic] procedures, which both reduce training burden. Overall, operating economics and safety are vastly improved for the hospital. If approved after the 180-day FDA review period, the Beyond Air team will be ready for a U.S. commercial launch in the second quarter of 2021. We will discuss our commercial plan in greater detail as we approach this next milestone. Commercial launches outside of the U.S. are dependent on our ongoing partnering discussions and approval timelines in each jurisdiction.

Moving on to acute viral pneumonia and COVID-19, we see a significant opportunity to use our novel LungFit platform technology to target acute viral pneumonia including infections caused by SARS-CoV-2. LungFit PRO is a direct delivery non-ventilator compatible system for use by an appropriate medical professional. It is designed to deliver NO at a concentration of 150 parts per million for 40 minutes, four times per day, which can be easily adjusted for other indications. LungFit PRO was previously referred to as LungFit BRO, named after our bronchiolitis program. It’s since been renamed because this device is applicable to many indications in the hospital setting. Nitric oxide is well understood to have an inhibitory effect on many viral infections.

Beyond Air and the broader scientific community have published data that show nitric oxide’s ability to inhibit the replication cycle of coronaviruses including severe acute respiratory syndrome, otherwise known as SARS-CoV. In fact in October, we presented our new positive in vitro data at the CHEST Annual Meeting 2020 that show anti-coronavirus properties against OC43 human coronavirus when administered either prior to or post infection at 150 to 250 parts per million nitric oxide. We believe these data suggest that the LungFit PRO system may be effective for both prevention and treatment of human coronavirus infection at the 150 PPM dose.

I’d like to provide an update on our clinical program in this indication. We have previously announced that we received approval from the FDA to run a study in COVID-19 patients using our LungFit system at 80 parts per million. We’ve also received approval from Health Canada to run similar or a similar study to the one approved by the FDA. The results from these studies along with other data has enabled us to receive approval from the Israeli Ministry of Health to perform a clinical study at 150 parts per million for the treatment of acute viral pneumonia including COVID-19. The study is a multi-center open-label randomized clinical trial targeting approximately 90 adult patients with an emphasis on patients infected with SARS-CoV-2.

Enrolled patients will be randomized in a one-to-one ratio to receive inhalations of 150 parts per million nitric oxide given intermittently 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 will be assessed. This is currently the only active trial that our company is performing in the acute viral pneumonia or COVID-19 setting. We expect to begin screening patients shortly. We anticipate results to be available around mid-year 2021 and will continue to provide updates as needed.

Sticking with LungFit PRO, I would like to provide a quick update on our bronchiolitis program. We recently presented data at the CHEST Annual Meeting from our bronchiolitis pilot study, which was a prospective, multi-center, double-blind randomized study that included 87 hospitalized infants, patients treated with 150 parts per million NO in addition to standard supportive therapy had a statistically significant shortening in time to fit to discharge, the primary endpoint of the study, than patients who received 85 parts per million in addition to standard supportive therapy or standard supportive therapy alone. We found no statistical difference between the lower dose of 85 parts per million NO and control.

Importantly, on a key secondary endpoint of hospital length of stay, the 150 parts per million arm was also statistically significant compared to both the 85 PPM and control arms. All treatments had similar safety profiles and were well tolerated with no serious adverse events associated with nitric oxide therapy. We look forward to publishing these data just as the previous two pilot studies have been published. This is our third consecutive successful study in infants hospitalized with viral lung infections and along with the previous two studies, provide the evidence we need to move forward with a definitive study to establish the efficacy and safety of nitric oxide generated and delivered by our LungFit PRO. Pivotal study for bronchiolitis was delayed due to COVID-19. We are planning on starting a pivotal bronchiolitis study in the fourth quarter of 2021, pandemic permitting. Please note that bronchiolitis is seasonal.

I will now provide updates for our LungFit GO which was previously named LungFit HOME. LungFit GO is a non-ventilator compatible system being developed for home use in nontuberculous mycobacteria lung infections or NTM. The GO is similar to the PRO with reduced functionality significantly reducing potential user error. For our LungFit GO program, we are aiming to initiate a single-arm multi-center 12-week self-administered at-home pilot study in 20 patients with NTM lung infection. We’ve had delays due to the pandemic, but are expecting to begin screening patients in December of this year.

We are focused on rolling refractory NTM patients infected with either mycobacterium avium complex or MAC or Mycobacterium abscessus. Patients we titrated are of the 250 parts per million NO in the hospital over several days and then sent home to complete the 12-week treatment period. The first two weeks will see 40 minute administrations four times per day and the remaining 10 weeks will be twice per day. The study will evaluate safety, quality of life, physical function, and bacterial 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 the bacteria.

Based on our current expectations, we expect to report interim data from the at-home study towards the middle of 2021 and final results toward the end of 2021. We recently published data from a compassionate use study performed at the National Institute of Health or NIH using our LungFit system. The 24-year old female cystic fibrosis patient with chronic and progressive pulmonary mycobacterium abscessus disease was treated with 160 parts per million nitric oxide for three weeks and then subsequently treated with 160 parts per million titrated to 240 parts per million NO five months later. Over the course of the follow-up period, after the first course of treatment that included 160 PPM inhaled NO, the patient had improved respiratory symptoms and quality of life and was able to lead a more active life. The second course of therapy was requested by the patient. This course of treatment had 240 parts per million nitric oxide was stopped on the eighth day for reasons unrelated to nitric oxide therapy. These results demonstrate the potential clinical benefits of NO in the treatment of this patient population and we look forward to initiating the 12-week pilot study next month.

As a reminder, our system is very easy to use. Thus, our enthusiasm for a successful outcome in the at-home study. I will walk you through the four-step process for an administration. Turn on the power switch, insert the smart filter into the system, place the breathing mask on the face, and press the start button. With a successful study, we believe our LungFit GO system opens the door to a very significant underserved market for chronic severe lung infections that can be treated in the home.

Last, but not least, we come to our solid tumor program. This program has generated exciting pre-clinical data demonstrating nitric oxide’s ability to elicit an anti-tumor systemic immune response when high concentration gaseous NO or gNO is administered directly to solid tumors. Our hypothesis is that gNO at extremely high concentrations greater than 10,000 parts per million and even up to 200,000 parts per million will cause local cell death when injected into solid tumors, thus exposing tumor antigens to the immune system. This exposure may result in a memory immune response that will recognize and attack subsequent primary tumor re-growth as well as distant metastasis for the same type of tumor, creating a type of in situ cancer vaccination. This program is early in development and will not use our LungFit platform due to the ultra-high concentrations of NO.

We have developed a novel delivery device, which we will discuss at a later date. We are extremely excited about this program especially since the checkpoint inhibitor market alone sold for $23 billion in revenue in 2019 and is still growing. We have presented our pre-clinical data at three different major conferences this year including the American Association for Cancer Research or AACR Conference in June, the NACLC for lung cancer as well as the AACR sub-section conference on Tumor Immunology and Immunotherapy this past October.

Given our goal of systemic anti-tumor immunity, we used a tumor challenge model to test this hypothesis in mice. Simply put, we treated tumor-bearing mice with a single treatment of high concentration gNO intra-tumorally with the intent to cause tumor cell death, not complete tumor ablation. After initial treatment, the remaining primary tumor was surgically removed. A challenged tumor with the same cancer cells as the initial primary tumor was introduced on the opposite side of the body. The percentage of tumor take or tumor regrowth was monitored as well as survival. There were control arms for comparison. In our largest study to date, colon tumor bearing mice received either 20,000 or 50,000 parts per million gNO. There were 11 mice per arm. Treatment was for five minutes during this first single treatment and then the mice were inoculated with the challenged tumor 21 days later.

At day 45, post challenge tumor inoculation, 0% of the colon tumor bearing mice treated with 50,000 parts per million were observed with a challenge tumor versus 100% of naive mice and 27% of 20,000 parts per million mice. So again, 0% for 50,000 PPM arm, 27% for the 20,000 PPM arm, and 100% over the naive mice at tumor growth. Similarly designed trials in breast tumor bearing mice and lung tumor bearing mice with smaller numbers of mice showed similar trends. To date, we have not observed any safety issues with these experimental models. The possibility of treating solid tumors and potentially treating and preventing metastases maybe truly groundbreaking.

To our knowledge, ours was the first and only program testing the concept of rejecting high concentration NO gas into solid tumors. Solid tumors and their metastases are responsible for approximately 90% of all cancer-related deaths and we are humbled by the huge unmet need for these patients. With that, I will now turn the call over to Doug for the financial review. Doug?

Douglas Beck — Chief Financial Officer

Thank you so much, Steve. Here is a brief review of our financial results for the second quarter of fiscal ’21, which ended September 30th, 2020. Revenue for the quarter ended September 30th, 2020 was $350,000 as compared to $646,000 for the three months ended September 30th, 2019, all of which was from deferred licensing revenue. Research and development expenses for the quarter ended September 30th, 2020 were $3.1 million compared to $2.8 million for the three months ended September 30th, 2019.

General and administrative expenses for the quarter ended September 30th, 2020 were $2.2 million compared to $2.1 million for the three months ended September 30th, 2019. For the quarter ended September 30th, 2020, the company had a net loss of $5.1 million or $0.30 per share compared to a net loss of $4.1 million or $0.38 per share for the three months ended September 30th, 2019. As of September 30th, the company had cash, cash equivalents and restricted cash of $22.4 million. This cash is sufficient to fund operations well beyond the next 12 months. I’ll now hand it back to Steve.

Steve Lisi — Chief Executive Officer and Chairman of the Board

Thanks, Doug. We’ll take questions now. Operator?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Suraj Kalia with Oppenheimer & Company. Please proceed with your question.

Suraj Kalia — Oppenheimer & Company — Analyst

Good afternoon, Steve. Can you hear me all right?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Yes, how are you, Suraj?

Suraj Kalia — Oppenheimer & Company — Analyst

Congrats on your PMA filing.

Steve Lisi — Chief Executive Officer and Chairman of the Board

Thank you.

Suraj Kalia — Oppenheimer & Company — Analyst

So I know it’s been a long journey, but hopefully we are coming to the end of it. So Steve, a bunch of questions. The 850 level 3 NICUs treating PPHN, for the audience, can you just walk us through the PPHN volume per center per year. How many feet on the ground would you need and have you’ll decided on the pricing of filters and also what else — at what point would the FDA need to review — come and review your manufacturing as we plan for a commercial launch?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Okay. So, yeah, there’s 850 of these level 3 and 4 NICUs in the U.S. roughly. There is use off-label in cardiac surgery. So I think you have to add some more hospitals to those who use nitric oxide. So I don’t know the total number, but probably another 300, 400, 500 hospitals you can add to that number. The market is reported by Mallinckrodt mostly is well over $500 million. So you can kind of just back into kind of volume per hospital, but this is pretty standard, top 20% of customers would roughly be 80% of the market, that classic 80:20 ratio. So I think you kind of get an idea of what kind of revenues are generated by certain number of hospitals, if that’s your question.

I think you asked about when FDA is going to be inspecting us? There’s a standard review 180 days. We would expect FDA to do a pre-approval inspection at some point. My guess is probably somewhere around 90 to 120 days or so from now is pretty standard. So I really can’t speak for FDA. They’ll schedule — they’ll let us know, we don’t let them know, but that’s usually kind of the window that it’s in and we haven’t decided on price yet because we’re seeing how the markets are unfolding. There’s been competitors enter the market. So in certain hospitals where there has been some competition, we’ve seen some rational price decline.

So I think that we’ll be looking at pricing — our pricing structure would be more in line with where you’ve seen some competition already not really at the original pricing that Mallinckrodt had in the market as monopoly. So we have to see how things kind of play out, but again these price declines has been very rational, well within the ranges we expected to see when the competition entered. So, for us, it’s as expected. So we’re pretty happy about it. I don’t know if I missed anything in there, Suraj.

Suraj Kalia — Oppenheimer & Company — Analyst

Fair enough. I was just trying to squeeze in a number. So Steve, the market you talked about, there’s a lot going on, right? And you guys tend to disrupt the market when you’ll launch. Walk us through what’s going on currently and by that I mean one the key players is going through bankruptcy. The other player is lowering prices and trying to go into the cylinder-based approach. How does that factor in and just kind of tell us the touch point or the stress points you’ll are looking at, this is going to dictate your pricing and this is what could change the market given the dynamics currently as you view it?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Yeah, so I really can’t speak for what’s happening with Mallinckrodt. I have no idea what their focus is or attention is on this market. We only know what we hear in the marketplace from our initial commercial team. So there’s again pretty classic competition nothing out of the ordinary from what we would expect from a new player coming into the market. I don’t think it’s really impacting how we’re going to approach these things. Again, I think you earlier mentioned to us how — what a commercial sales force would look like. Our initial launch will be with a small force targeting a small number of hospitals to kind of get our feet wet and then as we get more comfortable we’ll branch out, but we don’t really see the total number of sales force or commercial organization being — it will still be in double-digits. We don’t think we need to be well below 100 people. I don’t think we have to even get close to that at peak.

So, again, the pressure points I guess for dealing with these accounts for hospitals, we need to give them what they need. They need relief from the price, which is already happening to an extent, but I think we can give them more, not just in the price that we offer, but also in the savings at the hospital level. We take up less space, we take up less time, less hassle, it’s much easier to track the usage of the filter with a countdown than how much is left in a cylinder. These are benefits that we derive for the hospital that save them direct costs rather than just saving them cost by charging them less. So I think it’s a combination of all of these things to help the hospital understand how much better our system is for them. I mean, again, I mentioned on the call and you can see on our website, I mean our system is much smaller. It’s 65 pounds on a cart versus 175 pounds. We can be taken off a cart for ease.

Again, there are no cylinders. I mean this is a huge, huge thing when a cylinder is taken out of the equation, there’s just so many factors that the different people in the hospital will tell you and. An RT will give you a different reason why they’re happy than the neonatologist or the anesthesiologist, the cardiac surgeon or the CFO. They all have different reasons why they’re happy to get rid of a cylinder. Again, our challenge as a company is to make sure that our system is reliable, which obviously we believe that it this and that we as an organization are reliable in customer service. It’s very important. I think that Mallinckrodt’s done an excellent job of customer service and we need to match that. I mean it’s very important that we match that and I think that just many of you who attended our Analyst Day earlier this year, you met our Chief Commercial Officer and he is quite impressive. So we’re not too concerned.

Suraj Kalia — Oppenheimer & Company — Analyst

Got it. And Steve final two questions, I’ll hop back in the queue. First, does it make sense to still pursue COVID studies given everything going on with vaccines. So that’s one thing. And the second thing on the solid tumor side, Steve, it’s a fascinating approach even I’ve talked offline about this and I appreciate you not wanting or wanting to hold off on the details of the delivery device for gNO. I guess my question, Steve, is how do you control the residence time for gNO to achieve a certain clinical response and is there a limit to the physiologic tumor access with such a device mechanism. Any color there would be greatly appreciated? Thank you for taking my questions and congrats again.

Steve Lisi — Chief Executive Officer and Chairman of the Board

All right, thanks, Suraj. I’ll start with COVID-19. I can’t really speak for vaccines. I know what you know from the minimal information released recently. So we’ll have to see what happens. I think we’ve all been in this industry a long time and I don’t think any of us have ever seen anything developed in six to nine months at any level of therapy, so let alone a vaccine, but we’ll see what happens and hopefully this is actually real and will help patients and will help everything get back to normal, but I still think there is a need for treatments, and if you’ve noticed in our study, we’re not just treating COVID-19, we are treating acute viral pneumonia, which is the broader condition.

So acute viral pneumonia can be caused by a number of viruses as you all know whether it be RSV or coronaviruses and such where SARS-CoV-2 is a coronavirus, a type of coronavirus. So we’ll be enrolling all comers in this study. Obviously, we want to focus, we want to have a good number of SARS-CoV-2 infected patients in our study so we can get a good sample in case COVID does last a lot longer and the vaccines are not as effective as they’re claiming to be. So if they are effective and if COVID dissipates, acute viral pneumonia doesn’t go away. This has been around for a long time. I don’t think we’re going to get rid of acute viral pneumonia.

So we’re looking at the broader indication and if we could help in COVID, obviously we will, we think it’s going to work, whether it’s SARS-CoV-2 or SARS-CoV-1 or RSV or adenovirus or you name it, we don’t care what viruses, we think our therapy is going to be successful and if we can help with the pandemic, that’ll be fantastic, we’re ready to develop. We’re ready to go as soon as we’re asked and can generate some data I believe before anybody is going to ask us, but again, there is an opportunity in COVID, I believe there will still be an opportunity in acute viral pneumonia, which is quite a large market. So this is why we are embarking upon this study. And again, if we were just doing COVID, I would understand your question, it would be a very good question for us to decide whether it’s a good use of our resources to go after COVID only, but that’s not what we’re doing, we’re covering the entire spectrum of viral pneumonia.

So with respect to cancer, it’s obviously certainly very exciting and I’m glad you understand we’re not going to talk too much about our delivery system at this moment in time. Certainly not optimized yet, but we have a good idea of exactly what it will be. And look, I can’t even answer your question as to where the limits are. I think we’re still going through that to learn those limits, but I can tell you that we have efficacy and we haven’t seen — we haven’t bumped up against these limits where we’re putting so much nitric oxide into those problems. We haven’t seen any safety, you haven’t seen migration, we haven’t seen issues with too much gas or too much NO or NO2 or what have you. We haven’t seen any of that at this point in time, not saying we may not bump into it or run into it, but we are trying to figure out where those limits are. We’ve just gotten efficacy before we’ve hit those limits.

So we’re not too concerned about that at this moment in time, we’re more concerned about optimizing the delivery system and optimizing the concentration of nitric oxide and the amount of time we’re delivering it. I think that needs to be optimized at this moment in time before we progress to a first-in-man study. So that’s our goal right now is to optimize the delivery so that we can go into a first-in-man study towards the end of next year with our best shot on goal so to speak. Next question please.

Operator

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

Matthew Kaplan — Ladenberg Thalmann — Analyst

Thank you. Thanks for taking the questions and congrats on the PMA filing.

Steve Lisi — Chief Executive Officer and Chairman of the Board

Thanks, Matt.

Matthew Kaplan — Ladenberg Thalmann — Analyst

Wanted to zero in on your commercial strategy a little bit for the PPHN indication, LungFit PH. You mentioned razorblade being your filter. What are your expectations in terms of the device? Will you sell the device? Provide it for free? Rent the hospital the device? What’s your expectation in terms of that part of the program?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Well, Matt, it’s — I don’t think we’ve 100% settled in on exactly what we’re going to do, but I think to give you some parameters, I’m not sure the vast majority of hospitals are going to want to have a big upfront payment to buy a system. So I don’t think that’s a good way to go whether we lease it or rent it or so to speak for an amount of money, a nominal amount of money or what have you. I think that the main focus really needs to be on filters. So I think that’s where the bulk of revenues will come from. I think it’s the best model for the hospitals. Again, we’ll get more information from them now that we’ve submitted.

I think they will be willing to talk more with us about how things are going to look. Obviously, we can’t do that much until we get approval. We have to be aware that we can’t be our marketing product prior to approval, but I do think that it certainly — we’ll have some inbound calls from people asking us questions and we’ll do our very best to answer them within all the rules that are out there for what we can do as a pre-marketed product, but I think again, the best thing for the hospitals is for them to look at the filters and see them as a pay as you go type of instrument.

So again, truly think of the razor-razorblade. We got our razors at home, even though [Phonetic] we paid for it, we got it, doesn’t really cost much. Most of the time those razors come in a pack of razorblades, kind of they just throw it in there for an extra $0.50 or something to keep it and you go buy as many blades as you want, you buy four-pack, eight-pack, 12-pack whatever you want and every time you buy more, it’s a little bit of a discount. So you think there’ll be volume discounts and there are many different ways to do that volume discounts and there are many different ways to do that volume discount whether it’s buying a box of 10, 20 or 30 or whether its ordering a fixed amount for a month or a quarter or a year or what have you. There are many companies that are doing it, but I think you should think about focusing on how do we as a company price our filters so that we are helping the hospital have their cost to them in line with the reduced price we’ve seen with the competitors that have come into the market where they’ve competed. So some hospitals may still be paying original Mallinckrodt prices and some may be paying more of the new prices where there’s been competition.

So you look at those lower prices within the competition, I think we have to design a system for hospitals where they’re paying for our filters when they need them and that price is coming in on an annual basis, roughly in line with the others. That’s what we’re trying to do, but it’s really the filter that’s most important. We don’t want to have them bigger from payments. I think that’s not, it’s a non-starter for most of them and we also want to have something that’s not going to hurt them where there’s hidden costs or there’s penalties again of the year, things like that. We want to be very careful and helpful to the hospital.

Matthew Kaplan — Ladenberg Thalmann — Analyst

That’s helpful. And then you mentioned kind of a staged rollout, how should we think about that stage rollout into hospitals starting in the second quarter of next year? And can you give us maybe some of your thoughts in terms of the number of devices you hope to have in place by the end of the year or — the hospitals you hope to have engaged by kind of end of year next year, something like that?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Yeah, I mean in the beginning, I think it’s a small number — a dozen, give or take in the first six months. I think that’s kind of where we want to be, if we want to be targeted. We want to work through with hospitals that really want to switch. They really want to learn and understand that have higher volume, a lot of experience and we need to learn too, Matt. You don’t just do these — all these studies and go out there to a 1,000 hospitals and say it’s going to be perfect. So we need to go a little bit slow. It’s a new device, its lifesaving and we need to make sure that the hospital is comfortable. And then if there’s any little tweaks that need to be made in how we train or anything like that, we’d figure it out earlier. And then hopefully by the end of ’21, which would be about six, seven months or so on the market, we hope to start expanding.

How quickly we expand? I just don’t know. That’s a big question, so we certainly be looking to expand our team towards the end of next year, calendar year, that is, and we’ll see if that dozen or so hospitals goes to two or three dozen or more. But we’ll know more after the first six months on the market. I think the best thing to do is kind of track us and how we — how quickly or how many hospitals we’re able to convert. I mean, that’s probably the best metrics and your guess — we have good guesses internally. I’m just not going to tell you exactly what our guesses are but I’m sure you can do some research with the hospitals and figure out how long it’s going to take to switch and what we need to do, but again we’re not going out to 100. We’re going out to a dozen give or take and see how it goes and then we’ll branch out from there.

Matthew Kaplan — Ladenberg Thalmann — Analyst

Great. And in terms of we the program for bronchiolitis, you said you’re on track to start next year, next fall. What are kind of the rate moving steps to getting that — the bronchiolitis pivotal study off the ground next fall?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Right. We need to submit to the FDA for an IDE, so they can approve our pivotal study. I mean, if you recall the beginning of this year, we did submit and then the pandemic hit. So kind of put that to the side, obviously. Hopefully, when we talk to FDA over the winter again, the pandemic doesn’t seem to be going away and decisions have to be made early part of next year to be able to start in November of next year. As you know, you need a good six, eight, nine months to get all the sites up and running and everything. I mean for COVID studies everybody is running crazy. Normally, it takes time to get these sites up and running. So we really need to press the go button early part of next year. And it’s a difficult decision.

I don’t know if the FDA is going to say, well, we won’t approve a study with infants in the hospital with the pandemic going on, you’re out of your mind. I don’t know if that’s going to be the decision and it’s really going to be up to FDA about how things are progressing with the pandemic. And if it seems like it’s more under control and more studies are being done. Again, we’re talking about three, four-month-old babies going into the hospital for these studies. Now obviously, if the world’s open and these people are going to hospital anyway we can do the study. But we do anticipate that this winter is going to be one of the lowest on record for bronchiolitis hospitalizations because of the social distancing. So we’re glad we’re not running it this winter because we never enroll the patients.

So if this is going to be the situation next winter like we’re coming into this winter where there’s a lot of social distancing we wouldn’t be able to run the study anyway, so it doesn’t really matter. But I don’t know anybody has a crystal ball can tell me that we’re going to be wide open next winter or we’re going to be like this next winter. So the first step is to get FDA to agree that we can run the study and then the second step is to make an educated guess and I don’t know, September, October of next year see if we’re still on a lockdown. If we are, we can’t do the study. So we need to have hospitalizations to be able to get babies in trial. So, again, that’s kind of where we stand. I wish I had a better answer for you Matt, but this is an unpredictable situation.

Matthew Kaplan — Ladenberg Thalmann — Analyst

So just to be clear, it sounds like you plan to file the IDE sometime early next year and then make the go-no-go decision in terms of actually running the study depending on where the pandemic or status of the next pandemic sometime in April, something like that, late summer.

Steve Lisi — Chief Executive Officer and Chairman of the Board

Yeah, yeah, I mean good things and bad things. We get a COVID vaccine we can run our bronchiolitis study. We don’t get a COVID vaccine maybe the COVID-19 treatment is a winner. So we win both ways I guess. I guess we can’t lose. I don’t know.

Matthew Kaplan — Ladenberg Thalmann — Analyst

Alright. And then last question, there was some very interesting data in the oncology, cancer indication with high dose gaseous NO. What are your thoughts in terms of being able to move that into the clinic? What are the hurdles you need to overcome to get into the clinic as you hoped to late next year?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Yeah, I mean look, we as I said earlier, we need to optimize this delivery system and our regimen, it needs to be optimized. I mean we have had success at as you’ve seen all of our data we’ve seen success at 20,000 plus million all the way to 200,000 parts per million. So we’ve seen the 50, we’ve seen different concentrations and for different durations of administration. So we’re kind of work out what’s the best and mice are obviously different than humans in this situation. So, we’re talking to a lot of experts to try to figure out what’s the best way to go with respect to the best safety environment units. So there is a couple of different factors that we’re working on with our consultants because obviously we can go 20,000 up to 200.

We know we have efficacy in that range. It’s a very wide range, but there are a lot of other factors that have to be taken into consideration. So we need to do that work and satisfy the regulators, so that we’ve proven that we believe it’s safe to go into humans. So again, I don’t know what else to say so we are optimizing this and we also need to do it in more animals. I mean, we’ve done, I don’t know, about 80 or 100 animals total. I think we need to get that number up by a couple of multiples. So again, it’s not hard to do Matt. It just takes time to do properly. Can’t rush through this. This has to be done systematically, done properly, documented properly. We have to do everything as per the regulatory agencies require. So that’s why we’re giving ourselves about a year to get there –to start before we start the study. And I think the team has a good plan and will hit that timeline.

Matthew Kaplan — Ladenberg Thalmann — Analyst

Sounds great. Thanks. Thank you.

Steve Lisi — Chief Executive Officer and Chairman of the Board

Sure.

Operator

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

Scott Henry — ROTH Capital Partners — Analyst

Thank you. Good afternoon and congratulations on the filing.

Steve Lisi — Chief Executive Officer and Chairman of the Board

Thank you, Scott.

Scott Henry — ROTH Capital Partners — Analyst

Just a couple of questions. Steve when it comes to the product launch, are you preparing to launch it yourself or are you committed to launch it yourself? I mean would you still consider a partnership or is it — it’s just too late at this time?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Scott, I’d say it’s pretty late, but there’s a price for everything. So I can’t say that I’m telling you 100% there is no way we talk to anybody, but I would say if you don’t hear anything from us by the New Year, then I think it’s impossible to get a partner. Because there’s not enough time to bring somebody in and get this launch right away. I mean, again, there’s always a number but I mean it’s a big number right now. So we’re fully committed to launching this on our own. We’ve got — probably have — I don’t know two-thirds of the people on board right now that we need to launch with. So obviously, the rest of them will be hired right before we launch but we’re carrying these people right now and those expenses are already in our P&L for this quarter so we’re ready.

Scott Henry — ROTH Capital Partners — Analyst

Okay, great. That makes sense. And do you need clarification of the situation with Circassia to launch or can do those two things go in parallel?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Yeah, they can go in parallel. We don’t need any clarification there.

Scott Henry — ROTH Capital Partners — Analyst

Okay. And then I believe you talked about enrolling the pilot study for NTM. I didn’t get — how many patients do you expect to have in that pilot study and how long would you expect it to take to complete enrollment?

Steve Lisi — Chief Executive Officer and Chairman of the Board

So it’s 20 patients. Probably finish enrollment in second quarter of next year sometime, it’s our best guess. And then it’s 12 weeks of treatment and 12 weeks of follow-up. So if we’re able that — I said in prepared remarks we show final dataset towards the end of next year. So if we’re able to get enrollment done by the end of June 12 weeks treatment, 12 weeks observation, we’re good, and it’s an open label study so it won’t take too much time to put the deal together and get it out.

Scott Henry — ROTH Capital Partners — Analyst

Okay, great. And then on the oncology front, I know you put a target out there first-in-man perhaps end of next year. Any catalyst data point that we should focus on in the interim or I guess we’ll find out as we go?

Steve Lisi — Chief Executive Officer and Chairman of the Board

For cancer, you’re saying?

Scott Henry — ROTH Capital Partners — Analyst

Yes.

Steve Lisi — Chief Executive Officer and Chairman of the Board

Okay. So it depends, Scott. If we get data and we’re in — and it comes into our hands and we haven’t missed a deadline for a conference then we’ll show it, that’s probably what we do. I’m not so sure we press released anything at this point that might change, but I think if we have a conference that we’d like to show data out and we have a new and meaningful data, we’ll show it. So I think it’s going to be a real tough given how quick, how early deadlines off of conferences to see anything in the first half of next year, but maybe in the early part of the second half there might be some conferences that we can get some data at, but again, that will depend on the conference and what their dates are for submission to be able to show you data there. But I don’t think we’re going to be press releasing data as we have in the past for cancer. I think we’ve got an update out of a proof of concept and we’re just focused on getting the first-in-man. But again, we do want to show it to the scientific and medical community. So if there is an opportunity, we’ll do it. I just don’t know if it would make it — if we’d start first-in-man based on those deadlines.

Scott Henry — ROTH Capital Partners — Analyst

Okay, great. That should do it for me. Thank you for taking the questions.

Steve Lisi — Chief Executive Officer and Chairman of the Board

All right. Thanks, Scott.

Operator

Our next question comes from the line of Yale Jen with Laidlaw & Company. Please proceed with your question.

Yale Jen — Laidlaw & Company — Analyst

Thanks for taking the questions and again, congrats on the progress Steve.

Steve Lisi — Chief Executive Officer and Chairman of the Board

Thanks Yale.

Yale Jen — Laidlaw & Company — Analyst

No problem. In terms of the PMA filing just want to confirm I understand. If FDA has time for making decisions to whether to accept the application or not like the drug or they can just accept when they receive it and start to eventually review it?

Steve Lisi — Chief Executive Officer and Chairman of the Board

No, just the device division just like the drug division has timelines and time points where they say whether they’ve accepted it for review or not. They do. They have the same kind of structure. So we’re not at that point yet.

Yale Jen — Laidlaw & Company — Analyst

Is that again maybe two months or 60 days or?

Steve Lisi — Chief Executive Officer and Chairman of the Board

Yes, about there. It’s around there.

Yale Jen — Laidlaw & Company — Analyst

Would you also I guess — report announce that I guess accept the application or just you would just wait until the 180 days for the decision.

Steve Lisi — Chief Executive Officer and Chairman of the Board

No, I tell you if they don’t accept it, but I mean this is a very, very rare occurrence, and we — you got to understand the team that we have at Beyond Air, we’ve got a team of engineers. I mean, these guys invented the nitric oxide delivery market. They wrote the rules at FDA. These are the best guys in the business. Our regulatory team I mean, they’ve been doing this for 40 years, ex-FDA people. I wouldn’t want anybody else to file something in nitric oxide other than this team. I don’t care what company you’re talking about. I mean, remember, what the INOmax system is, I mean they came from another company, they went through like five companies before it became part of Mallinckrodt and these are the guys who built it, built everything. So I’m not really worried about this, I mean that’s just a — I know it’s a technicality and it’s a good question to ask. But when you look at the team we have here, this is not something that really occurs to us as a possibility. I mean, it’s just not something we are thinking about. It’s just a formality.

Yale Jen — Laidlaw & Company — Analyst

Okay, great. I mean, I appreciate the confidence and I think that’s very helpful for investors as well. In terms of NTM study [Indecipherable] with the CF also could be included in this study or they will be excluded?

Steve Lisi — Chief Executive Officer and Chairman of the Board

In the NTM study. Yeah, so in the NTM study, we can take CF, or non-CF bronchiectasis patients. It doesn’t matter. We’re not forcing either one. It will be up to the physicians, we’ve given them the leeway whether they’re CF patients or non-CF patients, its fine; whether they are NTM abscessus or NTM MAC patients, its fine. That’s really up to the investigators. We obviously have done all CF patients in the past. So we obviously prefer to get some non-CF patients and we’ve done only abscessus in the past so we before we get some MAC patients as well, but again, we’re not restricting the sites.

Yale Jen — Laidlaw & Company — Analyst

[Indecipherable].

Steve Lisi — Chief Executive Officer and Chairman of the Board

Yes.

Yale Jen — Laidlaw & Company — Analyst

Maybe two more quick questions. The first one, it’s really rephrasing a question a little bit earlier, which is what do you anticipate the capacity in terms of manufacturing? The machine or the filter, let’s say, in the second half of this year, maybe third quarter roughly this time next year and whether the manufacturing capability can catch up to it or you will need additional production capacity?

Steve Lisi — Chief Executive Officer and Chairman of the Board

So with respect to the filters, our contract manufacturer was worried, we wouldn’t order enough filters for them. So one commercial line can make an enormous amount of filters. So we’re good there. We could probably make three years worth of filter needs in about four or five months. I mean, it’s just not — volume on filters is not a problem, lead time on filters is not a problem, which is not concerned. We have a great partner. The facility is outstanding and again we’re looking forward to making them happy so we can get it to a volume where they can appreciate us. With respect to the LungFit device; look, we have a commercial line, Spartronics now, before they spun, now called Spartronics, they have the lineup in that facility. They’re excellent.

I mean, what they’ve given us so far has been fantastic. It’s only getting better every time we make more machines, it gets better and better. The lead time on this is long, that’s probably the biggest challenge is lead time and estimating what we’re going to need when we need it. Capacity is not the issue. We can with that one line, we can probably make enough systems to cover the entire United States in one year. If you said in a year, make as many as you can, I can make enough to cover the entire U.S. for the next five or six years. No problem. So that’s really not the issue. No one wants to do that, wouldn’t have the money. It’s a waste of everyone’s time. So we have to try to figure out how to work with them so that we are able to manage that inventory properly.

That’s really the biggest challenge. It’s not about capacity. It’s more about managing the inventory property because there’s a lot of components, many different lead times on things. So we’re actually very happy with Spartronics on the commercial side with their ability to help us manage that process. So we’re not really worried about not being able to make enough; really more worried about making sure our supply chain is in great shape. So that when we lead things we can get them in a timely manner. That’s the biggest challenge for us. Again, putting up a second line it’s — I don’t know 90 days, give or take. We could put it out on line. So it’s not really hard for us to increase capacity and when you go to LungFit PROs, which would be for acute viral pneumonia, COVID-19, and bronchiolitis, you know, we already have a commercial line up for those as well for line as well, the LungFit PRO line. So that one’s up early, obviously. We put her up early just in case there was success with COVID and the devices were needed. So we’re ready to go there and that actually has more annual capacity than the LungFit PH line, so we can make more per year than we can for PH. So capacity is not an issue for us at the moment at all.

Yale Jen — Laidlaw & Company — Analyst

Okay, great. Maybe the last quick question here or maybe that’s not that quick, which is that I do note in the cardio surgicals or equipment side, revenue presumably is bigger, greater than from the NICU in the real world although that sort of off-label use. Is there any thought how would you be able to penetrating that market without violating any law or other things?

Steve Lisi — Chief Executive Officer and Chairman of the Board

We’re not going to do anything different than what others are doing out there. I mean, again, there is no intent to break any laws, there is no — nothing, we’re just going to market just like Mallinckrodt and Praxair do, going after PPHN and physicians in the United States have every right to use drugs or products off-label at their discretion. So it will be at their discretion. It won’t be us doing any kind of marketing. We will at some point request to FDA to expand the label officially. So I believe one of the companies in the market has already said recently that they’re going to be requesting that as well. So I hope they do. I hope it becomes on label for the good of patients and reimbursement for hospitals, so everybody will be happy.

So again, I don’t see it as competitive disadvantage. No one has it on label, so there is no competitive disadvantage here. We’re just going to do what others do and let the chips fall where they will getting it on label obviously be a big help, but I think if one company gets you on label, it won’t be too long for the others to get it on label as well. I don’t believe that it would really be a competitive advantage for anybody for any significant length of time, but I do think it’s important to get it on label, I do think on label would help expand the market. It would give hospitals a little bit more comfort that they can use it a bit more freely in these patients who need it.

Yale Jen — Laidlaw & Company — Analyst

Okay, great and maybe just tackle that one. Have you noticed whether Mallinckrodt at this stage have decided or not decided to do that study you mentioned?

Steve Lisi — Chief Executive Officer and Chairman of the Board

So I only go by what they’ve announced publicly and I think they did announce publicly that they would, if I recall and you can check their public information that they said they’d be submitting at some point and they already have I don’t know for I believe it was juvenile cardiac surgery if I’m not mistaken was the wording, but I think it was in children adolescence if I’m not mistaken, but I don’t know if they have submitted yet or not, I don’t know, but they did talk about them submitting it. So we’ll see. I don’t know what their timing is. You have to ask them, but again, if they get it or we get it first, I think the other one will just piggyback off the other one. So it’s good for patients and good for the expansion of the market. Again, like I said, I don’t think it’s a huge win for either company to get it first.

Yale Jen — Laidlaw & Company — Analyst

Okay, great. And thanks a lot and again, congrats on the — today’s news.

Steve Lisi — Chief Executive Officer and Chairman of the Board

Thanks very much, Yale.

Operator

That is all the time we have for questions today. I’d like to hand the call back to management for closing remarks.

Steve Lisi — Chief Executive Officer and Chairman of the Board

Just like to thank everyone for attending the call and look forward to talking to you in the near-term. Goodbye.

Operator

[Operator Closing Remarks]