The Next-Generation LungFit PH System Will Open New Markets

Key Takeaways

• International revenue could significantly impact growth due to CE Mark approval and distribution partnerships, especially in the EU.
  
• Efforts to control costs have lowered cash burn, potentially improving net margins if sustained.
  
• Regulatory and financial challenges, along with fluctuating revenue streams, may hinder Beyond Air's growth and revenue projections in both domestic and international markets.

Catalysts

A commercial-stage medical device and biopharmaceutical company, develops the Lungfit platform, a nitric oxide (NO) generator and delivery system platform.

• Sequential quarterly revenue growth driven by new hospital signings and onboarding of the LungFit PH system is expected to continue, bolstering revenue prospects.
  
• The CE Mark approval allows Beyond Air to market LungFit PH in the EU and other regions, which could significantly impact international revenue, particularly with distribution partnerships in place.
  
• The next-generation LungFit PH transport-capable system is anticipated to drive future growth with its expected submission to the FDA, potentially opening up new revenue streams.
  
• Beyond Cancer’s Phase Ib trial and ongoing development in anti-PD-1 therapy for solid tumors could lead to significant long-term earnings from the oncology market.
  
• Efforts to control costs, including reductions in staff and closing offices, have substantially lowered cash burn, which should contribute to improved net margins if these costs remain under control.

Beyond Air Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Beyond Air's revenue will grow by 134.0% annually over the next 3 years.
• Analysts are not forecasting that Beyond Air will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Beyond Air's profit margin will increase from -1258.4% to the average US Medical Equipment industry of 12.3% in 3 years.
• If Beyond Air's profit margin were to converge on the industry average, you could expect earnings to reach $5.9 million (and earnings per share of $1.17) by about August 2028, up from $-46.6 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 21.7x on those 2028 earnings, up from -0.3x today. This future PE is lower than the current PE for the US Medical Equipment industry at 29.3x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.49%, as per the Simply Wall St company report.

Beyond Air Future Earnings Per Share Growth

Risks

• Potential regulatory delays and staffing issues at the FDA could impact the approval process for the next-generation LungFit PH, affecting future revenue growth assumptions.
  
• The significant net loss of $13 million for the quarter indicates ongoing financial challenges, which could impact earnings if expenses aren't controlled effectively.
  
• Ex-U.S. market growth might be slower than expected due to the diverse regulatory environments, which could delay revenue contributions from international markets.
  
• Money constraints could become a problem beyond 2026 if the company's internal revenue estimates or cost-control measures don't materialize as planned, impacting net margins.
  
• Fluctuations in hospital contract signing and starting dates may lead to variable revenue streams, making it difficult to predict consistent revenue growth.

Valuation

• The analysts have a consensus price target of $19.4 for Beyond Air based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $40.0, and the most bearish reporting a price target of just $11.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $47.5 million, earnings will come to $5.9 million, and it would be trading on a PE ratio of 21.7x, assuming you use a discount rate of 9.5%.
• Given the current share price of $2.84, the analyst price target of $19.4 is 85.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.