Biofrontera Inc. (BFRI) Q4 2024 Earnings Report, Transcript and Summary

Thanks to everyone joining us this morning. On today's call, I'll provide an overview of our accomplishments throughout 2024 and how our initiatives and execution have resulted in a record sales year. Fred Leffler, our CFO, will follow with a discussion on financial results, and then both of us will be available to answer questions after our prepared remarks. I'm pleased with $37.3 million in sales in 2024. This represents an annual sales growth of 18.5% for Q4, and almost 10% for the entire year and is a record for our company. We strongly believe our past investments, business plan, and execution will allow us to achieve another record year in 2025. The year included some further milestones that we are very pleased with. First and foremost, we placed 52 RotoLite XL lamps in the fourth quarter alone, 100 between the launch in June 2024 and the end of 2024. Providing a larger PDT lamp to our customers is an important milestone in our overall strategy to extend the use of Ameluz PDT for treating mild to moderate actinic keratosis on the face and scalp and potentially further indications in the future that are currently in development. The state-of-the-art red light-emitting LED lamp is designed to revolutionize the photodynamic therapy of actinic keratosis aimed at enhancing the ease of use for healthcare providers by being highly maneuverable and capable of accommodating various patient treatment positions. It provides clinicians with the ability to illuminate a larger treatment area in a single session, which is particularly advantageous for treating extensive fields with multiple actinic keratosis lesions. Second, we obtained FDA approval to use up to three tubes of Ameluz per treatment. Ameluz, a photosensitizing agent and prodrug of protoporphyrin IX, is FDA approved for use in combination with both RotoLite lamp models and for lesion-directed and field-directed treatment of actinic keratosis of mild to moderate severity on the face and scalp. Treating larger fields is a second milestone in our overall strategy and complements the availability of a larger lamp. Third, we achieved significant results in a phase three study of Ameluz photodynamic therapy regarding the treatment of superficial basal cell carcinoma. We believe Ameluz has additional applications other than actinic keratosis and we are committed to exploring these opportunities. I can tell you that being able to treat actinic keratosis, which are precancerous lesions that may progress to squamous cell carcinoma, is a wonderful thing. But to expand beyond that to treating non-melanoma skin tumors, it's very encouraging and exciting for all of us at Biofrontera Inc. We expect to submit the new data to the FDA in the second half of this year. Additionally, early in 2024, we successfully negotiated the restructuring of agreements with our former parent company, Biofrontera AG, resulting in the transfer price of Ameluz being reduced from 50% to 25% for all purchases in 2024 and 2025. I strongly believe this was accomplished through the demonstration of our strong commitment towards promoting PDT in the USA and exploring the many open opportunities of this wonderful therapy. As part of the renegotiated agreements, we took control of all clinical trials with Ameluz in the USA. This allows us to speed up patient recruitment and the corresponding label expansions with the FDA. Just recently, we announced the recruitment of the final patient in our phase three study for multimodal actinic keratosis on the trunk, neck, and extremities. The goal is to extend our current label, which is restricted to treatments of AK on the face and scalp, 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. As a last building block for this label extension, the FDA has requested a phase one pharmacokinetics study with sixteen patients, which started in January and is currently recruiting. More long-term, we are aiming at getting Ameluz approved for the treatment of moderate to severe acne. Our ongoing phase two study in this indication is close to completing patient recruitment. The further development plan will be discussed with the FDA once the data of this study become available. Based on our recent successes, our continued improvements of Salesforce effectiveness, positive customer feedback, and the heightened level of customer engagement, we are excited about how 2025 is shaping up for the company. With that, I'll turn the call over to Fred to walk through the financial details of the fourth quarter and full year. Fred?

Thank you, Hermann. It's my pleasure to be here today and provide you an overview of our 2024 financial performance. I'll start off with the fourth quarter 2024 results. Total revenues for the fourth quarter of 2024 were $12.6 million, an increase of $2.0 million or 18.5% compared with the $10.6 million in revenue for the fourth quarter of 2023. This growth reflects the continued adoption of Ameluz, the launch of the RotoLite XL lamps, and a price increase in Q4 of 2024. Total operating expenses were $14.3 million for the fourth quarter of 2024 compared with $14.5 million for the fourth quarter of 2023. Cost of revenues was $5.3 million for the fourth quarter of 2024 compared with $5.4 million for the prior year quarter. This reflects the lower transfer pricing Hermann mentioned a moment ago. Selling, general, and administrative expenses were $8.2 million for the fourth quarter of 2024 compared with $9.1 million for the fourth quarter of 2023. The net loss for the fourth quarter of 2024 was $1.4 million or $0.19 per share, versus a net income of $3.5 million or $1.65 per share for the prior year quarter, with all share figures on a split-adjusted basis. This change was driven by a gain from a legal settlement recognized in Q4 of 2023. Adjusted EBITDA for the fourth quarter of 2024 was negative $1.4 million compared with negative $3.2 million for the fourth quarter of 2023, reflecting higher revenues, partially offset by increased SG&A costs. Adjusted EBITDA, a non-GAAP financial measure, is defined as net income or loss excluding interest income, expenses, income taxes, depreciation, and amortization, and certain other non-recurring or non-cash items. I'll refer you to the table in the press release we issued earlier today for reconciliation. I will now summarize our full year 2024 results. Total revenues were $37.3 million compared with $34.1 million for 2023, an increase of approximately 9.5% and was primarily driven by higher volume, a higher average selling price of Ameluz, and the launch of the RotoLite XL lamps. Total operating expenses were $54.5 million for 2024 compared with $56.7 million for 2023. Cost of revenues increased to $18.6 million in 2024 from $17.4 million in 2023. And this increase was due to sales, but offset by the lower transfer prices that impacted Q4 2024 cost of goods sold. Selling, general, and administrative expenses for 2024 decreased by $5.3 million or 13.5% compared to 2023. This was primarily driven by a $3 million reduction in general administrative expenses, primarily attributable to a decrease in external legal expenses and expenses related to financing activities. The decrease was further driven by more strategic investment of promotional spend, which resulted in savings in general sales and marketing of about $1.8 million. The net loss for 2024 was $17.8 million or $3.22 per diluted share compared with a net loss of $20.1 million or $13.02 per share for 2023. Adjusted EBITDA was negative $15.3 million for 2024 compared with negative $19.5 million for 2023. The decrease was primarily driven by an increase in gross profit due to the increased sales and the reduction in transfer price, and a decrease in SG&A expenses. Again, I'll refer you to the table in the news release earlier today for a reconciliation of GAAP to non-GAAP financial measures. Turning to our balance sheet, as of December 31, 2024, we had cash and cash equivalents of $5.9 million compared with $1.3 million as of December 31, 2023. This is due to our strong growth and additional capital raised in the fourth quarter. Our inventory balance as of December 31, 2024, was $6.6 million compared to $10.9 million on December 31, 2023. We believe we've gotten our inventory levels to an adequate level and expect inventory to be maintained around this level. During the year ended December 31, 2024, net cash provided by financing activities was $14.8 million, which consisted of proceeds of $7.7 million net of capitalized issuance costs from the issuance of preferred stock and warrants, $7.4 million from the exercise of warrants for preferred stock, plus $4.1 million net of issuance costs received from the issuance of convertible notes. This was offset by repayments of $4.3 million for our short-term debt. So with that overview of our business and recent financial performance, Hermann and I are now ready to take questions from our covering analysts. Operator?

We will now begin the question and answer session. Our first question today is from Jonathan Aschoff with Roth Capital. Please go ahead.

Thank you. Good morning, Hermann and Fred. I was curious, what was the Q4 2024 Ameluz unit growth year over year?

Hermann, do you want me to take that one?

Yep. If you have the number in front of you. Yes, please.

Approximately 2%.

Two percent. Thank you. And was there any sales force addition or attrition over 2024? As far as the number of salespeople. Purely number.

Commercially, no. It held approximately constant.

Okay. And lastly, what's the acne enrollment number? Maybe I missed that in your call. And are you still comfortable with the data timing you gave last?

Yeah. The enrollment number is 116. However, as the data look right now, we may be able to conclude that trial a bit earlier.

Okay. So with 116 or maybe a few more?

Maybe a few more.

Alright. And okay. So clearly, the data timing, I guess, if that number is gonna be lower, should still be safe. Right?

Yes.

Thank you very much.

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

Hi, good morning and thanks for taking my questions. Moving over to the income statement. Now that you've got the more advantageous transfer pricing, how do you think that could impact gross margins in 2025?

So we have a transfer price of 25% through 2025. And so while Q4 we saw the impact of that in Q4, as I mentioned, we had higher sales in Q4, higher revenues, and yet the cost of goods sold was slightly down. So Q4 had a slight mix of that, but for 2025, it's gonna be almost exclusively at the lower 25% transfer price.

Okay. Great. And then you mentioned that there was a price increase in the fourth quarter. Can you tell us how much of a price increase there was in percentage terms? And then also, did it have any effect on forward buying?

Yes. So that was a 5% price increase. So our tube of Ameluz is $363. And there were certain customers we do see customers do a bit of a buy-in before price increases. So that was reflected in Q3.

Okay. Then last income statement question for me. The SG&A and the R&D have both been kind of coming down a little bit. Is that gonna continue to trend that way in 2025?

For the SG&A piece of it, we're expecting to hold approximately steady. We've adjusted some of the cost structure, like the headcount and things like that, to what we believe is an appropriate level. So no adjustments on the commercial SG&A or anything like that. I'll pass it over to Hermann to speak about R&D if that was part of your question.

Yeah. It's the same about R&D. It's going to be stable compared to the last couple of months.

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

Thank you.

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.

We are pleased with the sales growth we had in 2024. And as we plan for the future, we are putting a great deal of emphasis on becoming cash flow positive and managing our expenses without sacrificing sales. Although we reached record sales annually of $37.3 million in 2024, which is more than double from the $18 million in 2020, we continue to make changes and pivot at times to improve our sales and marketing efforts. Every day, our sales team gets new clients, which is a victory for the customer-facing strategy we previously implemented. We look forward to speaking with you again when we report our first quarter 2025 results. Thank you, and have a nice day.

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