Biofrontera - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue was $8.588M, up 8.7% YoY, but below S&P Global consensus of $10.55M; diluted loss per share was $(0.47) vs consensus $(0.29), implying a miss on both revenue and EPS. The revenue shortfall was ~$1.96M and EPS missed by ~$0.18; adjusted EBITDA improved slightly to $(4.378)M with margin -51.0% [- S&P Global estimates*].
• Cost structure improved: cost of revenues (related party) fell 22.1% YoY to $3.075M on lower transfer price (50%→25% through 2025), and SG&A decreased 6.5% YoY despite a $1.2M legal expense uptick linked to patent claims.
• Cash declined to $1.785M at March 31, 2025 from $5.905M at year-end, while inventories remained stable at ~$6.5M; management reiterated confidence in achieving record 2025 revenues supported by pricing, new customers, and RhodoLED XL momentum.
• Strategic milestones: final patient enrolled in Phase 3 AK (extremities/neck/trunk), last-patient-out completed for sBCC study, and patent approval for revised Ameluz formulation extending protection to December 2043—key long-term value drivers.

What Went Well and What Went Wrong

What Went Well

• Revenue growth +8.7% YoY to $8.588M, driven by Ameluz price increase (+$0.5M) and RhodoLED XL lamp contribution ($0.2M).
• Improved cost of revenues (related party) to $3.075M (-22.1% YoY) reflecting reduced transfer price; SG&A down $0.6M (-6.5% YoY) despite targeted legal spend.
• Management confidence and commercial traction: “We continue to see current customers reordering as well as new medical offices coming on board… illustrating the strength of our products and the success of our sales and marketing efforts.”.

What Went Wrong

• Missed Street estimates: revenue $8.588M vs consensus $10.55M* and EPS $(0.47) vs $(0.29), weighing on near-term sentiment [- S&P Global estimates].
• Cash balance fell to $1.785M from $5.905M in Q4, increasing focus on liquidity near-term.
• R&D expenses rose $1.2M YoY amid assumption of U.S. clinical trial activities, and legal expenses increased $1.2M due to patent claims, partially offset by personnel/financing savings.

Transcript

Operator (participant)

Good day, and welcome to the Biofrontera's First Quarter 2025 Financial Results and Business Update Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Andrew Barwicki. Please go ahead.

Andrew Barwicki (Analyst)

Good morning, and welcome to Biofrontera Incorporated's First Quarter Fiscal Year 2025 Financial Results and Business Update Conference Call. Please note that certain information discussed during today's call by management is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that Biofrontera's management will be making forward-looking statements and that actual results may differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. All risks and uncertainties are detailed in and are qualified by the cautionary statements contained in Biofrontera's press releases and SEC filings. Also, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 16, 2025.

Biofrontera undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as required by law. During today's call, there will be references to certain non-GAAP financial measures. Biofrontera believes these measures provide useful information for its investors, yet should not be considered as a substitute for GAAP, nor should they be viewed as a substitute for operating results determined in accordance with GAAP. A reconciliation of non-GAAP to GAAP results is included in the press release that was issued yesterday. More specifically, management will be referencing adjusted EBITDA, a non-GAAP financial measure defined as net income or loss excluding interest income and expense, income taxes, depreciation, and amortization, and certain other non-recurring or non-cash items.

With that being said, I would now like to turn the call over to Hermann Luebbert, CEO, Chairman, and Founder of Biofrontera. Hermann.

Hermann Luebbert (CEO, Chairman, and Founder)

Yes, thank you, Andrew, and my thanks to everyone joining us this morning. On today's call, I will provide an overview of our business during the first quarter. Fred Leffler, our CFO, will follow with a discussion on financial results, and then both of us will be happy to answer questions after our prepared remarks. Starting with the business update, our first quarter was a busy and exciting period for us. We continued our revenue growth while keeping our costs under control. Total revenues for the first quarter of 2025 were $8.6 million and a 9% increase from the same period of the prior year. Both our cost of revenue and our operating costs were lower than in the same period of the previous year, as Fred will explain in much more detail.

We strongly believe our past investments, execution, and tremendous efforts to increase the effectiveness of our sales force will allow us to achieve record revenues in 2025 without increasing our costs. On top of the positive financial development, we achieved several more milestones. An important development for our long-term future is the recent granting of a patent on the new formulation of Ameluz. This new formulation, which lacks the potential allergen propylene glycol, had already been approved by the FDA and is in use since last year. Having no patent protection on this Ameluz formulation until December 2043 gives us another 18.5 years of protection from generic competition. We announced the enrollment of the final patient in the phase three clinical trial evaluating Ameluz for the treatment of mild to moderate actinic keratosis on the extremities, neck, and trunk.

Currently, our label is restricted to treatments of AK on the face and scalp. The goal of this study is to extend the label to the entire body. This represents another important cornerstone in our overall strategy, complementing the use of three tubes and the availability of the larger lamp, both launched in 2024. As a last building block for this label extension, FDA has requested a phase one pharmacokinetic study with 16 patients, which started in January and is currently recruiting. Furthermore, we reached a key milestone in the phase three study for the use of Ameluz and autolytic PDT in the treatment of superficial basal cell carcinoma. The last patient completed the one-year follow-up visit, which is required for FDA approval in December 2024. We believe Ameluz has additional applications other than actinic keratoses, and we are committed to explore these opportunities.

So our next goal is approval for superficial basal cell carcinoma. I can tell you that being able to treat actinic keratoses, which are precancerous lesions that may progress to squamous cell carcinoma, is a wonderful feeling, but to expand beyond that to treating certain skin tumors is very encouraging and exciting for all of us here at Biofrontera. We expect to submit the new data to the FDA in the second half of this year. Following the approvals for AK on the entire body and for superficial basal cell carcinoma, we are aiming to at getting Ameluz approved for the treatment of moderate to severe acne. Acne is the most frequent indication seen by dermatologists, and the treatment options available for the more severely affected patients suffer from very considerable side effects. This creates a significant medical need for these patients.

Our ongoing phase two study in this indication is close to completing patient or it has completed patient recruitment, and data will be available towards the end of the year. The further development plan will be discussed with the FDA once the data of this study become available. As I look back on the first quarter, in addition to the achievements and milestones, we were able to lower the cost of revenue, total operating expenses, and SG&A. We continue to monitor and be very prudent in all aspects of our business and operations. Additionally, we increased EBITDA and gross profit, all of which support our goal of reaching break-even as quickly as possible. We believe we have built a foundation with the sales team and back-end support to continue to improve our results on a consistent basis.

With that, I'll turn the call over to Fred to walk through the financial details of the second quarter. And Fred?

Fred Leffler (CFO)

Thank you, Hermann. Pleasure talking with everyone again, and I'll cover our first quarter 2025 results. Total revenues for the first three months ended March 31st, 2025, were $8.6 million, an increase of $0.7 million or 8.7% as compared to the three months ended March 31st, 2024. This increase was driven by a $0.5 million increase in Ameluz sales due to an increased unit price and the launch of our RhodoLED XL lamp, which resulted in sales of the XL lamp of $0.2 million. Total operating expenses were $13.1 million for the first quarter of 2025, compared with $13.4 million for the first quarter of 2024. Cost of revenues related party were $3.1 million for the first quarter of 2025, compared with $4.0 million for the prior year quarter.

This decrease of $0.9 million, or 22.1%, compared to last year was due to the reduced cost structure under the last amendment of the Ameluz license and supply agreement. Selling general and administrative expenses for the three years ended or three months ended March 31st, 2025, decreased by $0.6 million, or 6.5%, as compared to the three months ended March 31st, 2024. Selling and marketing expenses decreased by $0.8 million, with a $0.3 million decrease coming from direct sales team personnel expenses due to headcount fluctuation and a $0.5 million decrease driven by reduced general marketing activity and spend on conferences. These decreases were partially offset by an increase in legal expenses of $1.2 million due to patent claims, which was partially offset by savings of $0.8 million in personnel and financing expenses.

Research and development R&D expenses for the first three months of 2025 increased by $1.2 million as compared to the first three months of 2024. The increase was is attributed to our assumption of all clinical trial activities for Ameluz in the United States effective as of June 1st, 2024, which allows us to for more effective cost management and direct oversight of trial efficiency. These increases in R&D expense were and will continue to be offset by a reduction in the transfer price of Ameluz from 50% to 25% for inventory purchases made through 2025. The net loss for the first quarter of 2025 was $4.2 million, or $0.47 per share, compared with a net loss of $10.4 million, or $2.88 per share for the prior year quarter.

The change in net loss reflects a decrease in the non-cash change in the fair value of warrant liabilities driven by a decrease in the outstanding population, a decrease in interest expense due to the payoff of high interest debt in 2024, and the aforementioned decreases in cost of revenues related party and selling general and administrative expenses partially offset by increased R&D spending. Adjusted EBITDA increased or yeah increased from $4.6 million for the first three months ended March 31st, 2024, to $4.4 or as compared to $4.4 million for the three months ended March 31st, 2025. The improvement was driven by an increase in gross profit of $1.5 million offset by $1.2 million increases in R&D expenses. These changes were driven by the reduced cost structure under the latest amendment of the Ameluz license agreement and the assumption of all clinical activities for Ameluz in the United States.

I'll refer you to the table in the news release we issued yesterday for a reconciliation of GAAP to non-GAAP financial measures. Turning to our balance sheet as of March 31st, 2025, we had cash and cash equivalents of $1.8 million compared with $5.9 million as of December 31st, 2024. Finally, we have $6.5 million of inventory on hand as compared to $6.6 million of inventory as of December 31st, 2024. With that overview of our business and recent financial performance, Hermann and I are now ready to take questions from our covering analysts.

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star, then one on your touchstone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Our first question will come from Jonathan Ascoff with Roth Capital. Please go ahead.

Jonathan Aschoff (Managing Director and Senior Research Analyst)

Thank you. Good morning. I was curious over 1Q 2025, how many lamp units did you sell, both the original and the XL? Hello?

Fred Leffler (CFO)

Yep. Hey, Jonathan, right here. Sorry, I was on mute. So placements as of Q1 were, let me just 18. We placed 18 of the XL lamps.

Jonathan Aschoff (Managing Director and Senior Research Analyst)

And that's just in the first quarter?

Fred Leffler (CFO)

That's in the first. Yes, yes, exactly.

Jonathan Aschoff (Managing Director and Senior Research Analyst)

Okay. And how about the original ones?

Fred Leffler (CFO)

The original ones, I will have to double-check on that one. I don't have the original right at my fingertips.

Jonathan Aschoff (Managing Director and Senior Research Analyst)

That's fine. My second and last question is, any sales force attrition? Just, you know, there's a comment in the press release, you know, savings of $800,000 in personnel and financing expenses. I'm curious, you know, what is the current sales force headcount, say, versus the end of the year? You know, is there any attrition there that explains that drop in expense?

Fred Leffler (CFO)

Yes, Hermann, do you want me to take that one?

Hermann Luebbert (CEO, Chairman, and Founder)

Yeah.

Fred Leffler (CFO)

Yeah. Well, we are looking at how we're structuring our commercial team and what types of roles are a good fit for the larger territories and some things like that. So, you know, we're working on bringing in some, you know, more what we call like a more junior rep that's like ready to be on the road. Some of that comes with a bit lower salary. And then some of it has been some turnover, but we're committed to, you know, replacing that and reorganizing the territories and the team to be as efficient as possible to finish out the year strong.

Jonathan Aschoff (Managing Director and Senior Research Analyst)

All right. Thank you very much.

Operator (participant)

The next question will come from Bruce Jackson with the Benchmark Company. Please go ahead.

Bruce Jackson (Equity Research Analyst)

Hi, good morning, and thank you for taking my questions. Wanted to take a moment to look at the gross margins. So you've got the change in the transfer pricing, which gave you a little bit of a boost in the first quarter. How is that going to play out over the rest of the year?

Fred Leffler (CFO)

Yeah. So in the first quarter, we did burn off a bit of Ameluz inventory that was still under the prior LSA cost structure. So that should that's all gone. So we have all of the inventory we have now is at the 25% transfer price. And that's what we will see for the rest of the year. It might be offset. So if that was the only thing we sold, then the, you know, cost of goods would be 25%. However, there's going to be some fluctuation in that based on how many lamps we sell because the margin there is lower.

Bruce Jackson (Equity Research Analyst)

Okay. Okay. And then a question on the three-tube indication. Sometimes it takes time for the payers to get the reimbursement information into their databases. Can you just kind of give us an update on the status of the reimbursement for the three-tube indication, and is that all systems go now for you?

Hermann Luebbert (CEO, Chairman, and Founder)

Yeah. We paid a lot of attention to that when after we got approval and focused initially on Medicare, making sure that Medicare actually covers this, and then sent all the information to all the private payers. So from what we hear so far, I mean, we have to rely on feedback from the market. We are not aware of a single case where a doctor has been refused payment because of using more than one tube. So this seems to be completely solved.

Bruce Jackson (Equity Research Analyst)

Okay. Great. That's it for me. Thank you.

Hermann Luebbert (CEO, Chairman, and Founder)

Thank you.

Operator (participant)

This will conclude our question and answer session. I would like to turn the conference back over to Hermann Luebbert for any closing remarks.

Hermann Luebbert (CEO, Chairman, and Founder)

Yeah. Well, thank you, operator. As you heard, the first quarter has been a very exciting time for us, and we look forward to the rest of the year. Each day, our sales team gets new clients, which is a victory for the customer-facing strategy that we have implemented. I would like to thank everyone for participating in this call, and we look forward to speaking with you again when we report our second quarter results. Thank you and have a nice day.

Operator (participant)

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.