Good day, and welcome to the Biofrontera Inc. Second Quarter 2024 Financial Results and Business Update Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andrew Barwicki. Please go ahead.

Thank you. Good morning, and welcome to Biofrontera's Second Quarter Fiscal Year 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 releases and SEC filings. Also, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 15, 2024. 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 that 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 this week's press release. 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 said, I'm pleased now to turn the call over to Hermann Luebbert, CEO, Chairman and Founder of Biofrontera. Hermann?

Yes. Thank you, Ambu, and my thanks to everyone joining us this morning. On today's call, I'll provide an overview of our accomplishments during the second quarter and first half of 2024. 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. We have made tremendous progress across three critical areas, including, one, first and foremost, our sales report. Increasing sales during the second quarter and first half of the year has been accomplished, we grew our sales by 34% for the quarter. In Q2, we managed to compensate the negative influence of the reimbursement challenges stemming from the change health care cybersecurity event and the consecutive sales decline in Q1 achieving a little over 8% growth compared to 2023 for the half year. Two, managing our total operating expenses. For example, during the second quarter of 2024, total operating expenses were $12.9 million compared to $14.5 million in the second quarter of last year. Another example relates to our SG&A expenses, where in Q2 this year, the SG&A was $7.9 million compared to $11.6 million last year. Three, strengthening our balance sheet by paying down all outstanding debt in the second quarter. I believe these three simple we had significant accomplishments on the commercial side of the company, have enhanced our day-to-day operations and put us in a position for long-term growth. Together with the rise of gross $8 million in May from exercise warrants, the company is in a stable financial condition. The second quarter was also a very anticipated time for us as we began to sell the FDA-approved RhodoLED XL. Keep in mind, sales only began on June 10, which is the end of…

Thank you, Hermann, and it's great to be talking to everyone again. I'll start with our strong second quarter 2024 results. Total revenues for the second quarter of 2024 were $7.8 compared with $5.8 million for the second quarter of 2023, which is a 34% increase year-over-year. The increase is due in part to a catch-up from lower sales in the first quarter driven by reimbursement challenges stemming from the change health care, cybersecurity events, but also due to our effort to increase productivity of the sales force. Total operating expenses were $12.9 million for the second quarter of 2024 compared with $14.5 million for the second quarter of 2023. Cost of revenues was $4.3 million for the second quarter of 2024 compared with $2.9 million for the prior year quarter. The increase was driven by increased sales and the volume associated with that. Selling, general and administrative expenses were $7.9 million for the second quarter of 2024 compared with $11.5 million for the second quarter of 2023. The decrease was due to our continued efforts to control costs and lower legal expenses compared to the same period in 2023. The net loss for the second quarter of 2024 was $257,000 and compared with a net loss of $9.8 million for the prior year quarter. The decrease in the net loss is attributed to lower selling, general and administrative costs as well as changes in non-cash P&L items, including the fair value of warrants and investments in related parties. Adjusted EBITDA for the second quarter of 2024 was negative $4.7 million compared with negative $7.9 million for the second quarter of 2023, reflecting our lower selling, general and administrative costs. As Andrew mentioned, we look at adjusted EBITDA as a non-GAAP financial measure as a better indication of ongoing operations…

[Operator Instructions] The first question comes from Jonathan Aschoff with ROTH. Please go ahead.

Thank you. Good morning, guys. I was curious if I could just drill down on a quarter for sales of each type of land the second quarter and so far in this quarter. Can you give me 4 numbers, each type of lamp, how many you placed second quarter and so far in the third quarter?

In the second quarter, we placed 57 of the original lamps, and we placed in the in the last weeks of June, we shipped four of the XL lamps. We haven't published anything on the third quarter.

That's no problem. Thank you. What would be the price hike percentage on October 1?

Price increase for Ameluz will be 5%.

Got it. Thank you. And by the way, for the acne and the AK extremity trial, do you still expect to publicly release data when you originally said in mid-'25 and second half '25, respectively, for acne and AK. Is that still holding?

Yes, it will be second half of 25% for both of them.

Okay. That's very helpful. So when will the royalty savings from the renegotiated LSA become higher than the costs of the trials. When does that whole LSA redo turn positive for you?

Yes. So that's obviously attached to our ordering of inventory, which we will start to do in the fourth quarter of 2024. And then depending on when the shipments come in and everything either late Q1 or early Q2, we'll sort of flip and have more savings than we spent on the clinical trials.

Okay. And lastly, is there any update on the timing of that low-cost portable lamp development? Or even what has just happened irrespective of timing?

Well, we are nearing a first prototype and after that, we have to go into a more formal development according to the design control rules of the FDA.

All right. That’s all I had. Thank you very much.

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

Hi, good morning. And thank you for taking my questions. I wanted to look at the sales numbers for the quarter in a little bit more detail. Generally, the second quarter is seasonally a little bit weaker than the rest of them. And I'm kind of curious to know with the ordering patterns, how much of the results in the quarter were a rebound because of the change health incident? And how much of that is organic growth? And then the second part of that question would be, looking forward, how do you expect the rest of the year Q1 play out in terms of seasonality?

Most of the rebound we had in April. So we can consider the May and June already more or less a normal month. And in all three months, we had significant growth compared to last year. So I would -- if I had to guess, I would think that this is really a guess. We can't give you any real numbers on this. But at most, half is a rebound effect.

Okay. And then in terms of the R&D spend going forward, is that going to -- what's the run rate on the R&D expense going to be, do you think, for the next couple of quarters?

Yes. Hermann, I can take that. So we're expecting to spend a couple -- so we took over clinical trials on June 1, as Hermann mentioned. And as far as the run rate here, we were expecting two points spending about million or so this year in R&D spend.

So that's for the entire year?

That is correct.

From June 1. So then we'd be looking at -- okay, I got it.

Yes, we have, I would say, maybe $1 million each quarter. I think as of right now, we believe it's going to be used, but that does depend on the recruiting and if there are a pop there, et cetera. So -- but we do think that it's -- over the next six months, it will be somewhere in that ballpark.

Okay. And then you mentioned the data from the AK and the acne trials -- sorry, the extremity and the acne trials in the second half with the basal cell carcinoma, are you going to be releasing data on that as well?

Yes. We will release -- we expect to be able to release data from the clinical trial -- clinical part of the BCC trial still this year and then the follow-up part in the first half of next year.

Okay. All right, great. That’s it for me. Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Hermann Luebbert for any closing remarks.

Yes. Thank you, operator. The second quarter and first half of the year has been a thriving and very encouraging time for us with a significant growth in our revenues. I would like all of you to participate in this call, and I would also take the opportunity to thank all our employees for the tremendous effort that went into this process. We look forward to speaking with you then when we report our third quarter 2024 results. Thank you, and have a nice day.

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