On Tuesday, Beyond Air (NASDAQ:XAIR) experienced a shift in its stock rating, as BTIG downgraded the company from Buy to Neutral. The downgrade was prompted by a series of concerns including a lagging commercial ramp-up, a lowered revenue forecast for fiscal year 2025, and challenges related to profitability and near-term cash requirements.
Beyond Air reported fourth-quarter fiscal year 2024 revenue of $470,000, which fell short of both BTIG's estimate of $694,000 and the consensus of $743,000. The modest increase from third-quarter sales was attributed to the company's focus on providing current customers with the updated LungFit PH system rather than acquiring new hospital clients. Despite the system's use in over 50 hospitals across 10 states, treating more than 1,100 patients, its commercial rollout has been slower than anticipated.
The company has adjusted its fiscal year 2025 revenue outlook, now expecting it to exceed $10 million, a reduction from the previous forecast of $12 million to $16 million. Beyond Air's reported adjusted cash burn for fiscal year 2024 was $46.2 million, and it concluded the year with $34.5 million in cash, equivalents, and marketable securities. In response to its financial position, Beyond Air has reduced its workforce by more than 20% since the start of the year and has suspended several research and development projects. These measures are projected to decrease the net cash burn to under $30 million in fiscal year 2025, with further reductions anticipated in fiscal year 2026, aiming for cash flow breakeven in the fourth quarter of fiscal year 2026.
Despite these cost-saving initiatives, the analyst expressed concern over Beyond Air's immediate cash needs and the unsatisfactory sales results, coupled with the stalled progress towards profitability. Beyond Cancer, a subsidiary of Beyond Air, has shown promising early results in its use of ultra-high concentration nitric oxide for treating solid tumors in relapsed or refractory cases, but this remains an illiquid asset for now.
The company does have potential avenues to boost adoption of its technology, such as the Innovative Technology contract awarded by Vizient in October 2023, which could lead to significant contracting opportunities. Additionally, contract renewals have been consistent, and management is optimistic about improved revenue in the first quarter of fiscal year 2025. A new Chief Commercial Officer is set to begin in the coming weeks, which could further influence the company's commercial strategy. Despite these positive aspects, BTIG has withdrawn its price target and moved to a neutral stance on Beyond Air's stock.
InvestingPro Insights
As Beyond Air (NASDAQ:XAIR) navigates through its financial and commercial challenges, key metrics and tips from InvestingPro provide a sharper financial perspective on the company's situation. With a market capitalization of $61.5 million, Beyond Air holds more cash than debt on its balance sheet, which is a positive sign in terms of financial stability. However, the company's gross profit margin for the last twelve months as of Q3 2024 stands at -159.94%, indicating that it is quickly burning through cash and suffering from weak gross profit margins. This aligns with BTIG's concerns regarding the company's profitability and near-term cash requirements.
InvestingPro Tips highlight that Beyond Air is not expected to be profitable this year and has not been profitable over the last twelve months. Additionally, the company's price has seen a significant fall over the last year, with a 71.06% negative return. On a positive note, Beyond Air's liquid assets exceed its short-term obligations, providing some cushion for immediate financial liabilities. With the company's next earnings date scheduled for August 9, 2024, investors will be keen to see if the new Chief Commercial Officer's strategies can start to turn the tide.
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