Welcome to the Biofrontera Inc. First Quarter 2024 Financial Results and Business Update Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] After today's prepared remarks, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Andrew Barwicki with Barwicki Investor Relations. Please go ahead.

Good morning and welcome to Biofrontera Incorporated's First Quarter 2024 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 release and certain SEC filings. Also, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, May 16th, 2024. Biofrontera undertakes no obligations 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 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 announcing Q1 fiscal year 2024 results. 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 nonrecurring or noncash items. With that said, I would like to turn the call over to Hermann Luebbert, CEO, Chairman and Founder of Biofrontera. Hermann?

Thank you, Andrew, and many thanks to everyone joining us this morning. On today's call, I'll provide an overview of our operations during the first quarter, some events that occurred since the end of the first quarter and discuss our business strategy for the remainder of the year. Fred Leffler, our CFO, will follow with a discussion on financial results and then both of us will be happy to answer questions. I would like to start with the most positive event of the first quarter. We successfully renegotiated our license and supply agreement for Ameluz with Biofrontera AG, reducing our costs significantly. We will now be paying 25% for Ameluz during 2024 and 2025 compared to approximately 40% to 50% of our sales price under the prior agreement. This LSA will gradually step up to 35% by 2032. Any indication associated with acne will remain at 25% indefinitely. This represents a transformational event for Biofrontera Inc., significantly increasing our potential to become profitable in the near term. As part of this amendment, we will take over all US clinical trials effective June 1, which will allow for more effective cost management and direct oversight of the trial efficacy. The reduced cost of goods will allow us to finance R&D activities while continuing our commercial growth trajectory. With Ameluz making up most of our revenue, we believe this is a unique opportunity moving forward. Furthermore, I'm pleased to announce that in February, we raised $8 million minus financing expenses to support the growth and expansion of the company, including clinical trials. Later, the cost of the clinical trials will be covered in entirety by the savings from the reduced transfer price. Our February financing deal entailed warrants exercisable upon achievement of certain milestones by April 30 at the earliest. As we…

Thank you, Hermann and it is a pleasure to provide a financial update today on our first quarter results. Total revenues for the first quarter of 2024 were $7.9 million compared with $8.7 million for the first quarter of 2023. The decrease is due to health care reimbursement issues caused by the Change Healthcare data breach that created cash challenges for the entire health care industry throughout the quarter. As Hermann mentioned, we have seen recovery, and I do not expect this to be a long-term issue, and we'll continue to monitor for any further developments. Total operating expenses were $13.4 million for the first quarter of 2024 compared with $14.2 million for the first quarter of 2023. Cost of revenue was $4.1 million for the first quarter of 2024 compared with $4.6 million for the prior year quarter, with the decline in cost of revenue driven by the lower Ameluz sales. I've mentioned in earlier calls that we are burning through inventory that we have on hand for most of 2024. Later this year, once we purchase new inventory, we expect to see the positive impact of the LSA amendments on our cost of revenues. Selling, general and administrative expenses were $9.3 million for the first quarter of 2024 compared with $9.8 million for the first quarter of 2023. The decrease was primarily driven by a $1.1 million decrease in nonrecurring legal costs and a $3,000 decrease in sales and marketing expenses. The decrease was primarily offset by a $700,000 increase in fees and issuance costs associated with our most recent private placement transaction as well as a small increase in personnel expenses. The net loss for the first quarter of 2024 was $10.4 million or a loss of $2.88 per share compared with a net loss of $7.5…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Jonathan Aschoff with ROTH. Please go ahead.

Thank you. Good morning, guys. My first question is, does that greater than 5% Jan through April sales result, is that a big underestimation of the actual growth that simply fits the definition of one of the two milestones you had to hit to trigger the second $8 million investment or is it actually really close to 5%?

Hi, Jonathan. Fred Leffler here. I can take that. That was based on the milestone, like you said, that we had to hit. We didn't issue the specific number, but I can give an update on Q2, or we'll give the update on Q2 in August.

Okay. Are you guys still comfortable with cash flow breakeven around the year-end '25 or has that changed a bit?

That is still the expectation. As Hermann said, we are taking on the clinical costs and we will start seeing the savings of the LFA amendments later this year through 2025 to help fund that. And as long as we operate and hit our budget numbers, I don't foresee that as being an issue.

Okay. Did the last basal cell carcinoma patient have their final assessment last quarter and therefore, you're still expecting to give us data in the third quarter of this year?

That's correct. So the data we would provide -- we expect to provide for the clinical phase and the FDA wants us to submit the one-year follow-up. So the last patient out there would be in November or December. So the follow-up data would be available early in Q2 and then prepared for FDA submission.

Okay. And I remember hearing from the prior management that dermatologists, if they had to cover a greater area and only allowed to use one tube, they would use the Ameluz a little thinner than indicated so it could cover a greater area. Wouldn't that kind of, I don't know, imply that if they can use more than one tube that they would definitely do that so they could get a higher reimbursement per procedure?

Well, doctors, of course, if they can, tend to use the products according to label and the payers are more and more looking after that. And so our currently ongoing submission, FDA submission for three tubes is very, very relevant in that respect. So the timeline there hasn't changed. So we expect some kind of preliminary review results in early August and then the PDUFA date is in November.

Okay. Could you just help us with the enrollment for acne and peripheral AK?

Yes. So the enrollment for acne and peripheral AK, I have the numbers in the presentation. So for, one second, so for peripheral AK, current enrollment is 57% of the patients. And for acne, it's 74% of the subjects.

Thank you very much, guys. That was all.

Thank you.

The next question comes from Bruce Jackson with The Benchmark Company. Please go ahead.

Hi. Good morning and thanks for taking my questions. I'm trying to kind of sort through the impact from Change Healthcare. So we're up 5% year-to-date. How do you think the rest of the year unfolds? So second quarter is generally seasonally weak and then the back half year can have other anomalies to it. But how do you see the sales unfolding for the rest of the year?

As Fred said, we don't expect this to have a long-term impact. It was an impact mostly in February and March when this actually happened, doctors were not paid for our services. That's when all the services at doctors' offices actually came down, including, of course, PDT, with Ameluz. But then in April, we did already see the upswing and could not only make up for those 90% loss. But as we said, it's more than 5% above last year. So we don't expect a long-term effect of this and still expect the same kind of growth that we did at the beginning of the year.

Okay. And then my second question is about the XL lamp launch. I think I heard you're going to be receiving from the, I'm sorry, when is the XL lamp going to launch? That's my question.

It's going to launch by the end of Q2.

End of Q2. Okay. Super. That's it for me. Thank you.

Great. Thank you, Bruce.

Thanks. Thanks, Bruce.

This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

Yes. Well, thank you for everybody's time participation, the questions. And we look forward to our next call, where hopefully, we can again present positive news. Thank you and have a nice day.

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