Biofrontera - Earnings Call - Q2 2025

Executive Summary

• Q2 delivered 15% YoY revenue growth to $9.03M on higher price (+5%) and higher Ameluz volume (+9.5%), but losses widened due to elevated legal expense; Adjusted EBITDA was $(5.1)M and net loss was $(5.3)M.
• Mix and structural COGS tailwinds are material: the new royalty model (12–15% of net sales vs prior 25–35% transfer price) plus manufacturing control is expected to lift gross profit “quite substantially” from Q3 onward, while Q2 already showed higher gross margin vs last year.
• Q2 results beat revenue consensus but missed EPS: $9.03M vs $8.30M (beat) and $(0.57) vs $(0.39) (miss). Management does not plan a 2025 price increase; SG&A should normalize lower after a Q2 legal spike, improving operating trajectory into 2H25.
• Strategic catalysts: US rights acquisition from Biofrontera AG and $11M financing, sBCC FDA submission targeted for 2H25, peripheral AK and acne readouts targeted originally for Q4’25 (acne later updated to Q1’26 in an Aug 25 PR). These events frame the setup for estimate revisions and stock catalysts into 2H25/early 2026.

What Went Well and What Went Wrong

• What Went Well

  • Revenue growth from both price and volume: +15% YoY on +5% ASP and +9.5% Ameluz volume; “two very gratifying quarters” driven by segmentation and data-enhanced sales execution.
  • Structural COGS improvement underway: shift to 12–15% royalty (from 25–35% transfer price), manufacturing control and prior transfer-price reductions support substantial gross margin expansion ahead.
  • Commercial KPIs strengthening: 40 RhodoLED XL lamps placed YTD (18 in Q2) with >700 lamps in market; CMS MUE now supports up to 3 Ameluz tubes per treatment, potentially expanding treatment scope and throughput.

• What Went Wrong

  • Profitability still negative: Q2 net loss of $(5.3)M and Adjusted EBITDA of $(5.1)M, reflecting elevated legal costs and operating expense levels.
  • SG&A spiked on legal: $10.5M in Q2 vs $7.9M last year (+$3.4M legal), masking COGS progress; management expects SG&A to normalize in 2H25.
  • Timing risks on R&D/milestones: call guided acne and peripheral AK data for Q4’25, later updated post-call to acne topline in Q1’26 (introducing potential model timing shifts).

Transcript

Speaker 2

Good day, and welcome to the Biofrontera Inc. second quarter 2025 financial results and business update conference call. Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for 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 your telephone keypad. To withdraw your question, please press star, then two. Please note that today's event is being recorded. I would now like to turn the conference over to Andrew Barwicki, Investor Relations. Please go ahead, sir.

Speaker 0

Thank you. Good morning and welcome to Biofrontera Inc.'s second 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 the 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 day of this live broadcast, which is August 14, 2025.

Biofrontera undertakes no obligation to revise or update any forward-looking statements or 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 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 we issued. Please note, management will be referencing adjusted EBITDA, a non-GAAP financial measure defined as net income or loss excluding interest, income, and expenses, income taxes, depreciation, and amortization, and certain other non-recurring or non-cash items. With that said, I would like now to turn the call over to Hermann Luebbert, CEO, Chairman, and Founder of Biofrontera Inc.

Speaker 1

Thank you, Andrew, and thank you to everyone joining us this morning. I'm very pleased to share that Biofrontera has delivered record-breaking results this quarter and throughout the first half of 2025. I am here with Fred Leffler, our CFO, and we'll let Fred discuss the numbers in a few minutes while I focus on the actual business and the things that contributed to those numbers and our future. First and foremost, two very gratifying quarters were driven by the changes in our approach to our business in 2025, which turned out to be successful, and for the first time, we sold more than 50,000 units of Ameluz in the first half of the year. We transformed our customer segmentation, focused our strategy, and used more extensive data analysis to support our sales team effectively.

Furthermore, we have changed the hiring approach for our sales team, giving attitudinal factors and emotional intelligence priority over dermatology experience. I'm also pleased to say that 40 BF-RhodoLED XL lamps were placed at physician offices during the first half of 2025. These include installations at facilities that we have not been in before, as well as locations throughout the U.S. that now have multiple lamps in one office. As I have said many times in the past, lamp placements are the leading indicator for future growth, and we now have more than 700 out in doctors' offices. It is clear that dermatologists are seeing the promising and viable results as they are prescribing Ameluz for more and more patients. A transformational change for our commercial base was the major restructuring of our relationship with Biofrontera AG, by which Biofrontera Inc. becomes completely independent of Biofrontera AG.

The agreement includes the transfer of all rights and obligations for the U.S. market for Ameluz and the BF-RhodoLED lamp series to Biofrontera Inc. We are in the process of transferring all U.S. IP, the FDA approvals, and the contracts with third-party manufacturers, as well as the internal lamp manufacturing. Completing this will take a while, as some of these functions require agency registrations, but the financial consequences are already in place. Along with organizing manufacturing on our own, the previous transfer price for Ameluz, which was 25% to 35% of our sales depending on year and indication, was replaced by a 12% royalty in years where Ameluz sales were less than $65 million and 15% above.

Already last year, when we took our clinical trial over clinical trial responsibility on June 1, 2024, we negotiated a reduced transfer price reflected in the cost of revenue for the first six months, which were about $2.6 million lower than in the previous year, mostly due to the reduced transfer price. Shifting to the royalty model now will not only dramatically decrease our cost of sales further, but also significantly delay the time of the payments. The importance of this for our future was recognized by our investors, who financed this transformation with the required $11 million. By now, Ameluz, in combination with photodynamic therapy using our BF-RhodoLED lamps, is a proven and highly effective way of treating actinic keratoses of mild to moderate severity on the face and scalp. This is our driving force and one that we are so proud of as we run our day-to-day operations.

As we look to the future, as of July 1 this year, CMS has officially listed Ameluz in its MUE files for the use of up to three tubes, which is 600 units per treatment. This follows a change in the patient information of Ameluz, which the FDA has approved in the fall of 2024. Doctors can now rely on officially being reimbursed for the use of up to three tubes per treatment, which will be important for the treatments of AK on face and scalp, but even more for treatments of AK on other larger sites on the rest of the body. Such treatments are outside of our approved indications so far. However, during this reporting period, we have completed enrollment in a phase III study to demonstrate the efficacy and safety of Ameluz for treating actinic keratoses on the trunk, neck, and extremities.

Once the results become available, we plan to submit them to the FDA to expand our label and allow doctors to treat AK on the entire body. In parallel, we aim to include new indications into our label. The first one is going to be superficial basal cell carcinoma. Our phase III trial for this indication is completed, including the one-year follow-up data that the FDA has requested for this tumor indication. We expect this to offer a non-invasive treatment option with high efficacy and very positive cosmetic outcomes, which could benefit many patients. Up to now, no PDT drug has been approved in the U.S. for the treatment of a tumor disease. Currently, Ameluz is also only indicated to treat precancerous skin lesions, which may progress to invasive skin cancers, and extending this to treating potentially infiltrating tumors is an exciting development both scientifically and commercially.

We are also very encouraged about the potential for Ameluz to be an effective treatment for acne vulgaris. Acne is a chronic inflammatory skin condition affecting the pilosebaceous unit, which results from a combination of factors. While it's a very common condition during adolescence, it is becoming increasingly common in adults and can persist even into the 40s and 50s. We believe, from the data we see so far, that Ameluz has the potential to effectively treat this affliction as well. In the reporting period, we have been able to complete patient enrollment in a phase II trial treating moderate to severe acne, and we are now waiting for the last patient to finish their treatment for us to be able to analyze the data. Earlier this year, we received patent approval for the new improved formulation of Ameluz, extending patent protection of the drug through December 2043. Biofrontera Inc.

is the only company organizing FDA-controlled clinical studies for PDT in dermatology in the U.S., and the extended patent life is relevant to recover the investment and profit from the resulting possibilities. I would like to thank our entire team for their continued dedication to execution and growth, which has enabled us to deliver the strong results Fred will now talk about. I also want to thank our shareholders for their confidence, in particular Roslyn Advisors and AIG Capital Management, for their leading role in the $11 million investment, which allowed us to fund the restructuring of our relationship with Biofrontera AG. At this time, I am pleased to turn the call over to Fred to go through the financial details of the second quarter and first half. Fred?

Speaker 2

Thank you, Hermann. It's great to be talking with everyone again. Let me first start with our second quarter results. Total revenues for the second quarter of 2025 were $9.0 million, compared with $7.8 million for the second quarter of 2024. This increase was driven by both a 5% higher unit sale price and 9.5% increases in the sale volume of Ameluz in the second quarter of 2025. The higher sales volume of Ameluz was due to improvements in direct sales team efficiency. Total operating expenses were $14.1 million for the second quarter of 2025, compared with $12.9 million for the second quarter of 2024. Cost of revenues decreased by $1.7 million, or about 42%, as compared to the three months ended June 30, 2024.

This was primarily due to the reduced Ameluz costs agreed to upon or with Biofrontera AG in February of 2024, in relation to us taking over the clinical trial costs last June. Selling, general and administrative expenses were $10.5 million for the second quarter of 2025, compared with $7.9 million for the second quarter of 2024. The increase was primarily driven by a $3.4 million increase in legal costs due to patent claims, partially offset by $0.5 million in personnel savings within both the direct sales team and general administrative staff, and a $3.3 million decrease in other general and admin expenses. The net loss for the second quarter of 2025 was $5.3 million, compared with a net loss of $0.3 million for the prior year quarter.

The increase in the net loss is attributed to the non-cash fluctuation in the change in fair value of warrants of $5.4 million in 2024. Adjusted EBITDA for the second quarter of 2025 was negative $5.1 million, compared with negative $4.7 million for the second quarter of 2024, reflecting higher SG&A costs offset by lower cost of goods sold. We look at adjusted EBITDA, a non-GAAP financial measure, as a better indication of ongoing operations, and this measurement is defined as net income or loss, excluding interest income, expense, income taxes, depreciation, amortization, and certain other non-recurring or non-cash items. I'll refer you to the table in the news release we released yesterday for reconciliation of these financial measures. Now I'll turn the attention to the first half of 2025.

Total revenues were $17.6 million for the first half of 2025, compared with $15.8 million for the first half of 2024. This 12% increase was driven by higher unit sales price, contributing $0.6 million, and increased sales volume of Ameluz, contributing $1 million, as well as about a $0.3 million increase in the sales of the BF-RhodoLED lamps. The higher sales volume of Ameluz was due to, again, continued improvements on the sales team efficacy and using data and some of the things Hermann Luebbert mentioned earlier. Total operating expenses were $27.2 million for the first half of 2025, compared with $26.3 million for the first half of 2024. Increased legal expenses were offset by reduced operational costs.

Cost of revenue decreased from the prior year to $5.5 million for the first six months of 2025, compared to $8.0 million for the first half of 2024, due to the reduced transfer price agreed upon with Biofrontera AG in February of 2024 in relation to taking over clinical development costs I mentioned earlier. Selling, general, and administration expenses increased to $19.2 million compared to $17.2 million in the prior year. The increase was primarily attributable to a $4.4 million increase in legal expenses driven by patent claim-related legal costs. The increased legal expenses were partially offset by savings in personnel of $0.9 million due to headcount fluctuations in our commercial team and administrative teams, as well as a decrease of $0.5 million in expenses relating to sales support functions and a decrease of about $0.4 million in issuance costs.

Looking at R&D, we have spent $2.1 million during the first half of 2025 on our active clinical trials. We've been working efficiently on execution, and spending is proceeding as planned. I would like to note that these costs have been more than offset by the reduced transfer price, resulting in lower cost of goods sold of about $3.5 million. Adjusted EBITDA for the first half of the year was negative $0.9 million compared with negative $9.3 million for the first half of 2024. Again, please refer to the table in our news release for reconciliation of these financial measures. Turning to our balance sheet, as of June 30, 2025, we had cash and cash equivalents of $7.2 million compared with $6.0 million as of December 31, 2024. This is driven by both the growth in sales and the capital raised associated with our last transaction.

We constantly monitor our inventories and communicate with our commercial team to ensure we have product availability to support our increasing sales. We are not carrying any excess inventory currently and are in a good spot. When we take over manufacturing of Ameluz, we will have better control of the entire process and a shorter lead time for the product. This puts us in a better operational and financial position, especially when it comes to inventory levels and working capital, add to which the restructuring deal will allow us to better address impacts from any potential tariffs in the future. As we announced in the past, and Hermann Luebbert mentioned a few moments ago, the support of an $11 million investment has enabled us to get to this point.

I want to thank again the folks at Roslyn Advisors and AIG Capital Management for working with us, the financial commitment, and the support to expand our opportunities in making Ameluz and the lamps available for medical treatments. The first tranche is on our balance sheet as of June 30 as a liability, and will be reclassed into mezzanine equity in July, and finally permanent equity after we hold our special shareholder meeting in September of this year, pending shareholder approval. With that overview of our business and recent financial performance, Hermann and I are now ready to take questions from our covering analysts. Thank you. We will now begin. Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your headset before pressing the keys.

To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Jonathan Aschoff with ROTH Capital Partners. Please proceed.

Speaker 3

Hi. Good morning, guys. Thank you. It's just a few questions. How many of each lamp were placed into Q2 2025?

Speaker 2

We placed.

Speaker 0

The XL.

Speaker 2

Go ahead.

Speaker 0

No, go ahead.

Speaker 2

We placed 18 BF-RhodoLED XLs in 2025. Hermann, if you have the BF-RhodoLED, I just didn't memorize that one.

Speaker 3

I have the first quarter, so I can just do the math. How much of the small one? In what time period?

Speaker 2

Sorry, John. That was what I was saying. I don't have that one, the small one memorized, but I can get back to you on that.

Speaker 3

Okay. You said a total of about 700 lamps all told ever since you started, correct?

Speaker 2

Correct.

Speaker 3

That would be U.S. and D.

Speaker 2

How many XLs this year?

Speaker 1

40 BF-RhodoLED XL lamps in the first half of 2025.

Speaker 3

Okay. Forty, not eighteen. Where did that eighteen come from, Fred?

Speaker 2

I thought you said for Q2. 22 in Q1 and 18 in Q2.

Speaker 3

Excellent. That's totally good. You don't have that data for the smaller lamp still, correct?

Speaker 2

Yeah, I'll get that.

Speaker 3

Okay. When do you think you'll receive the $2.5 million? Is that still a third quarter 2025 event?

Speaker 2

Yes, that's correct.

Speaker 3

Okay. Is the data timing still as it was last reported, meaning acne in Q2 2025, and I never saw a data release timing for the peripheral AK. You have timing for pretty much everything else around it, but when do you think we'll see the data for that? Is acne still fourth quarter and when data for the peripheral AK? I'm sorry.

Speaker 1

Yeah, also in the fourth quarter.

Speaker 3

Okay. Also, both in the fourth quarter. Great. Any 5% hikes for price coming soon? Soonish like they did last year, I think it was October.

Speaker 1

We don't expect to do this this year.

Speaker 3

Okay. Any change in the rate at which you are converting Levulan users to at least also use Ameluz? Basically, do they typically use both initially, or do they abandon Levulan once you sell them on Ameluz?

Speaker 1

No, they typically use both initially. Most use both, particularly since we don't have approval for the arms, which Levulan has. Obviously, when we convert Levulan users and they start trying some Ameluz and then growing it from there. You know.

Speaker 3

What is the fraction of use where you're currently approved? What fraction of the overall use is that? I guess really you can only speak for Levulan. What fraction is their use where you are approved now versus all over?

Speaker 1

Probably our part of the market is roughly about a third.

Speaker 3

I'm saying just in Levulan alone, so you can do an apples-to-apples comparison, what fraction of overall Levulan use is just in the, you know, the face and scalp where you're approved?

Speaker 1

Oh, I see. It's probably in the range of 20%. 20% is on the arms.

Speaker 3

How about just the face and scalp where you're approved?

Speaker 1

For them, it would be 80%. For us, it's 100%, almost.

Speaker 3

Right. Okay. Okay. Great. 80% head and scalp for Levulan. Can we assume that the higher two-quarter 2025 SG&A spend is more predictive of future quarterly SG&A than the lower first quarter amount?

Speaker 2

I would not make that conclusion as we definitely had a spike in legal spend during Q2 with our patent claim defense.

Speaker 3

That's good news. That's all I had. Thanks for answering them.

Speaker 2

The next question is from Bruce Jackson with The Benchmark Company. Please proceed.

Speaker 3

Hi. Good morning, and thank you for taking my questions. With the gross margins in the quarter, we had a nice step up here. How do you see those unfolding over the next couple of quarters given the new agreement with Biofrontera AG?

Speaker 2

Bruce, this is Fred. You broke up for me a little bit. Would you mind repeating that question, please?

Speaker 3

Yeah. My question is, we've got the gross margins heading higher in the second quarter. What's going to happen going forward for the next couple of quarters?

Speaker 2

Okay. I gotcha. Yeah. The gross margin did increase in Q2 because of the restructuring of the LSA agreement last year. We had a decent amount of inventory that was under the old LSA structure. We burned that off through the end of 2024 and a little bit flipped into 2025. Once we got to the 25% transfer price product, that's what's driving everything year to date. We are working with the manufacturers right now to get exact prices and things like that. Our cost of goods sold and therefore our gross profit should increase quite substantially as a result of this most recent transaction. We'll pay the 12% royalty, and then plus a little bit for the two versus the 25% to 35% that Hermann Luebbert mentioned.

Speaker 3

Okay. Would you care to quantify the substantial bit of that?

Speaker 2

No, it's just I would say that it's going to drop from, you know, 25%. Probably it'll improve by, you know, 12%, 13%, 13% I would estimate. We're still working through that, as I mentioned.

Speaker 3

Okay. That's fine. I guess the one thing that's hard to get a handle on from a modeling standpoint is the legal expenses. They can be unpredictable. They can be lumpy. The timing is uncertain. Can you give us just roughly a sense of how long this might continue and if there's going to be any ongoing impact here, at least for the next couple of quarters?

Speaker 2

Yeah. The legal expenses, as I said, spiked in Q2. That should come down, and our SG&A run rate should be much more in line with historical amounts, you know, Q3 and Q4.

Speaker 3

Okay. Last question for me is just on the FDA submission for the superficial basal cell carcinoma indication. Do you have any ideas around the timing for that? I apologize if I missed that earlier.

Speaker 1

No, we didn't talk about that. The FDA submission is currently being prepared. It requires a pooled analysis of safety between the European basal cell carcinoma study and the U.S. study, which is now completed. Everything is now being put together for FDA submission, which will come sometime in the second half of this year.

Speaker 3

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

Speaker 2

Bruce, I'm going to answer Jonathan's question. We shipped nine small lamps year to date. This does conclude today's question and answer session. I would now like to turn the conference back over to Hermann for any closing remarks.

Speaker 1

Thank you all. First, the analysts for the questions and everybody else for taking the time and being here. We had two very encouraging quarters, and I can't say how excited I am to see the results of the second half of this year. Thank you very much and have a nice day.

Speaker 2

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