Biofrontera Inc. (BFRI) Q3 2025 Earnings Report, Transcript and Summary

Welcome to the Biofrontera Inc. Third Quarter 2025 Financial Results and Business Update Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Ben Shamsian with Lytham Partners Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to Biofrontera Inc.'s Third 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 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 the live broadcast, November 13, 2025. Biofrontera undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of the 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 just issued yesterday. Please note, management will be referring -- will be referencing adjusted EBITDA, non-GAAP financial measure defined as net income or loss, excluding interest income and expense, income taxes, depreciation and amortization and certain other 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, please proceed.

Yes. Thank you, Ben. And my thanks to everyone who is joining us this morning. Before I begin with my company update, I want to address our 2025 revenues until September 30. Our year-to-date revenues were approximately flat to the same period in 2024. This is a wonderful achievement as we have offered few buying opportunities in 2025, and we did not have the equivalent price increase that we had on October 1, 2024. A price increase presents buy-in opportunities to customers and lacking these opportunities, our revenues in the third quarter of this year were 22% lower than in Q3 last year. However, this is a transient effect, which has begun to normalize in recent weeks. And as a result, we anticipate strong revenue growth in the fourth quarter in 2025 and consequently throughout 2025. We remain on track to achieve our full year sales objectives. Fred Leffler, our CFO, will discuss the numbers in a few minutes in much more detail. Now with that said, I would like to focus on our recent achievements and upcoming catalysts for revenue and profitability growth. We continue to make great progress in advancing Biofrontera as a premier dermatology company. Our revamped sales approach centered on refined customer segmentation and more focused commercial strategy and data-driven sales execution has proven effective as shown by the stable revenues without the booster of a price increase. Both physicians and patients gain a deeper understanding of Ameluz PDT's clinical value and efficacy. The installed base of RhodoLED lamps continues to expand, supporting recurring high-margin sales of Ameluz gel for years to come. For those new to Biofrontera, the Ameluz PDT treatment currently has indication only for the treatment of actinic keratoses or AK on the face and scalp. AKs are precancerous skin lesions, which may progress to potentially fatal squamous cell carcinomas. Our therapy consists of the Ameluz gel in combination with photodynamic therapy or PDT using our RhodoLED lamps. As of now, we have approximately 750 RhodoLED lamps installed in dermatology offices. This expanding platform provides us with an incredible opportunity to meaningfully accelerate revenues once Ameluz is approved for more indications. Our clinical pipeline continues to advance and further strengthen the long-term potential of the Ameluz franchise. In the coming weeks, we will submit a new FDA application for Ameluz to treat superficial basal cell carcinoma. This represents an important expansion opportunity for Ameluz with commercialization expected in the fourth quarter 2026. We also completed patient enrollment in our Phase III trial evaluating Ameluz for actinic keratoses on the extremities, neck and trunk and in our Phase IIb trial for moderate to severe acne vulgaris. AKs are ultraviolet light-induced lesions. And while most occur in face and scalp, a significant number will also appear on other body parts that are frequently exposed to the sun. Adding the treatment of such lesions to our label, will add tremendous opportunity as physicians want to be able to treat AKs wherever they occur without worrying about reimbursement difficulties, which they may face if they treat outside of the FDA label. Acne vulgaris 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 adolescents, it is becoming increasingly common in adults and can persist even into the 40s and 50s. For patients under 40 years of age, acne is the most frequent reason to see a dermatologist. For those older than 40, actinic keratosis is the most frequent diagnosis in dermatology offices. Together, these indications highlight our ambition to grow the clinical and commercial potential of Ameluz across multiple high-value dermatologic indications. Earlier this year, we received patent approval for the new improved formulation of Ameluz, extending our patent protection through December 2043. Biofrontera is the only company that has organized FDA-controlled clinical studies for PDT and dermatology in the U.S. in recent years, and the extended patent life is relevant to recover the investment and profit from the resulting possibilities. We recently completed our transformational agreement with Biofrontera AG. By acquiring all U.S. rights, approvals and patents for Ameluz and RhodoLED, we now have full control over our most important assets from production to commercialization. This transaction is expected to significantly enhance our gross margins and strengthen our long-term profitability. The new royalty structure, 12% when U.S. Ameluz revenue is below $65 million per year and 15% when it exceeds that threshold, replaces the prior transfer pricing model of 25% to 35%, creating meaningful financial leverage as we continue to grow the Ameluz brand in the U.S. market. Already on June 1 last year, when we took over the responsibility for all clinical trials, we negotiated a reduced transfer price reflected in the cost of revenue for the first 6 months, which were about $2.6 million lower in the previous year, mostly due to the reduced transfer price, lower than in the previous year. Shifting now to the royalty model will not only dramatically decrease our cost of sales further, but also significantly delay the time of the payments. Transfer prices are due when we buy product, royalties become into effect after such products are sold into the market. As part of this transaction, we also secured an $11 million investment from well-established health care-focused institutional investors. Combined with the recent addition of the proceeds from the divestment of Xepi antibiotic cream, this capital positions us with a clear runway to sustained growth and profitability. We did complete the sale of our Xepi license last week, receiving $3 million at closing with the possibility of an additional $7 million as certain milestones are achieved. Xepi has been an inactive product for years due to manufacturing difficulties, and therefore, the divestment will not result in the loss of a portion of our sales. We believe the proceeds from this and the financing I mentioned a moment ago and of our continued commercial execution will bring us to cash flow breakeven for fiscal year 2026. 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 talk about. At this time, I'm pleased to turn the call over to Fred to go through the financial details of the third quarter and first 9 months. Fred?

Thank you, Hermann, and it's great to be talking with everyone again. I'll start with our results for the 3 months ended September 30, 2025. Total revenues for the third quarter of 2025 were $7.0 million compared with $9.0 million for the third quarter of 2024. The 22% year-over-year sales decline in the third quarter reflects the temporary comparison effect as customers advanced purchases in the third quarter of 2024 ahead of the company's price increase that took effect on October 1, 2024. Total operating expenses were $13.3 million for the third quarter of 2025 compared with $14.0 million for the third quarter of 2024. Cost of revenues decreased by $2.8 million or 58% as compared to the 3 months ended September 30, 2024. This was primarily due to the reduced costs agreed upon with Biofrontera AG in relation to taking over clinical trial and other costs. Selling, general and administrative expenses were $10.4 million for the third quarter of 2025 compared with $8.4 million for the third quarter of 2024. The increase was primarily driven by increased legal costs due to patent claims, partially offset by $0.5 million in personnel savings, within both the direct sales team and the general administrative and administrative staff and a $0.3 million decrease in other miscellaneous general and administrative expenses. The net loss for the third quarter of 2025 was $6.6 million, compared to a net loss of $5.7 million for the prior year quarter. This increase in net loss is attributed to the higher legal costs, offset by a better gross margin. Adjusted EBITDA for the third quarter of 2025 was negative $6.0 million compared with negative $4.6 million for the third quarter of 2024. We look at our adjusted EBITDA and 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 and amortization and certain other nonrecurring or noncash items. Please refer to the table from our press release this morning, which presents a GAAP to non-GAAP reconciliation of adjusted EBITDA for 2025 and 2024. Now I will turn to our results for the 9 months ended September 30, 2025. Total revenues were $24.6 million for the first 9 months of 2025, compared with $24.8 million for the first 9 months of 2024. Total operating expenses were $40.5 million for the first 9 months of 2025 compared with $40.3 million for the same period in 2024. Increased legal expenses were offset by reduced operational costs. Cost of revenues decreased from the prior year to $8 million for the 9 months ended September 30, 2025, compared to $13.3 million for the same period last year due to the reduced transfer price agreement with Biofrontera AG in February of 2024 in relation to taking over clinical development costs. Selling, general and administrative expenses increased to $29.6 million compared to $25.6 million in the prior year. The increase was primarily attributable to increased legal expenses driven by patent claim-related legal costs. The increased legal expenses were partially offset by savings in personnel expenses of $1.1 million due to headcount fluctuations in our direct sales and administrative teams as well as a decrease of $0.4 million in expenses related to sales support functions and a decrease of $0.4 million in equity issuance costs. The net loss for the 9 months ended September 30, 2025, was $16.2 million compared to a loss of $16.4 million the prior year. Adjusted EBITDA for the same period was negative $15.7 million for the first 9 months compared with negative $13.9 million for the first 9 months of 2024. Turning to our balance sheet. As of September 30, 2025, the company had cash and cash equivalents of $3.4 million subsequent to quarter end, as Hermann mentioned, we further strengthened our liquidity position with additional cash inflows, including $2.5 million, representing the final tranche of the previously announced $11 million financing from AIGH and Rosalind and $3 million from the -- at the closing of our Xepi divestiture. These proceeds enhance our flexibility and provide additional resources to support continued growth and execution of our strategic initiatives. As we take over the manufacturing of Ameluz, we will have better control of the entire process and shorter lead times 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 now allows us to better address impacts of any potential tariffs. As of our latest shipment, Ameluz is still exempt from any reciprocal tariffs that have been discussed. As we announced in past releases and Hermann mentioned as well, the support of the $11 million investment has enabled us to get to this point. I want to thank everyone at Rosalind Advisors and AIGH Capital for their trust in us. The financial commitment and the support to expand our opportunities in making Ameluz and the lamps available for medical treatments. The first tranche that was on our balance sheet as a liability has been reclassed into permanent equity after the special shareholder meeting, which took place in September of this year. So with that overview of our business and recent financial performance, Hermann and I are ready to take questions from our covering analysts. Operator?

[Operator Instructions]. And your first question today will come from Bruce Jackson with the Benchmark Company.

First, I wanted to ask, are you contemplating any price increases in the future? And if so, when?

Yes, we are contemplating a price increase, and we are planning this before year-end.

Okay. And then a couple of additional questions on the new product pipeline. So you've completed enrollment in the trial for AK of the extremities. When do you think the data will be available? And what is the plan for submitting the data to the FDA?

I think the data will be available probably in January. And to submit to the FDA, we are waiting for the results of a maximal-use pharmacokinetic study, which is [indiscernible] and we expect the results of that one about a month later than from the pivotal trial, so in February. So by the end of February, we should have everything that we need. And then putting all of that together into the dossier and fixing it all up for FDA submission will take some time. So we think that we'll be able to submit this to the FDA in Q2.

Okay. Okay. And then the -- a similar question for the acne trial. When will we see some data? And then what is the next step for that program from a regulatory standpoint?

Well, the next step after that, so data will be pretty much in parallel with the data in the periphery, so also early next year. The next step then will be an end of Phase II meeting with the FDA. And then based on that, at the end of Phase II meeting and based on how the FDA positions themselves, we will plan the Phase III studies.

Okay. Okay. Got it. And then last question for me on the plan for breaking even. Should we think of it similar to the seasonality that we see on the income statement where the individual quarters in 2026 might bounce around between losses and gains and then the fourth quarter will be fairly large, resulting in a breakeven profit situation for the full year. So how we should be modeling that?

Bruce, yes, it's Fred here. Yes, that's exactly right.

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 for the questions, and thanks, everybody, again, to all our shareholders and to the health care professionals and especially the patients that we are proud to serve, to help the company progress, and thank you for your time this morning and your interest in the company. Thank you.

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