Biofrontera AG Sponsored ADR (BFRA) 2021 Q1 法說會逐字稿

Dear ladies and gentlemen, welcome to the conference call of Biofrontera AG to discuss the Q1 2021 financial results. (Operator Instructions)

May I now hand you over to Pamela Keck, Head of IR, who will lead you to this conference? Please go ahead.

Thank you. Good morning, and welcome to Biofrontera's conference call for the first quarter 2021. Yesterday, we issued a press release announcing financial results for the 3 months ended March 31, 2021. We encourage everyone to read the press release as well as the quarterly report, both of which are available on our website.

Please note that certain information discussed on the call today is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that during this call, Biofrontera's management will be making forward-looking statements. Actual results could 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.

This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast today, May 12, 2021. Biofrontera undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

With that, I would now like to turn the call over to Hermann Lubbert, our CEO.

Yes. Thank you, Pamela. And thank you very much, ladies and gentlemen, for taking the time to participate in today's call. With me today is Ludwig Lutter, our CFO. He will present the financial results in a second. Following that, I would like to share with you the current activities regarding market development, sales and clinical developments.

But first now to the financial results of the first quarter. For that, I would like to hand over to Ludwig.

Thank you, Hermann, and thank you all for joining us today. I would like to start by providing you with an overview of the financial results for the first quarter of 2021.

During the first 3 months, we achieved a total revenue of EUR 5.5 million, a decrease of 15% compared to last year's figure of EUR 6.5 million. However, the COVID-19 pandemic still had a major impact on our business, especially at the beginning of the year. In the pandemic year 2020, the crisis became apparent in terms of decrease in sales, starting in the second half of March. However, in March 2021, which was still in the current pandemic situation, we already -- we were already able to increase our sales compared to March 2020 by about 46%, which is quite encouraging. It indicates a clear recovery of our situation in our sales markets, which continued throughout April, and I will give you more details on that in a moment.

Let's start with the first quarter. In our largest sales market, the U.S., we achieved total product sales of EUR 3.8 million in the first quarter of 2021 compared to EUR 4.2 million in the prior year period, a decline of 9%. Sales in Germany improved to EUR 1.4 million compared to the first quarter of the previous year, an increase actually of 7%. In other European countries, sales decreased by 68% on a small level, EUR 0.3 million compared to EUR 0.8 million in the same period of the previous year.

Last Thursday, we published preliminary figures for April 2021 revenues. A very positive trend this month supports our expectation of a general recovery in sales. Preliminary pure product revenues of Biofrontera group in the month of April 2021 amounted to approximately EUR 2.5 million compared to EUR 0.5 million in April 2020, an increase of 406%. Now the magnitude is, of course, mainly due to the pandemic. For better comparability, we, therefore, also take a look at the monthly sales development prior to the pandemic in 2019, showing an 8% increase in product sales on average for all markets in April compares to 2019. This is comprised of a 3% increase in sales in the U.S., 25% increase in Germany, 20% increase in our remaining other European markets.

Back to the first quarter. Gross profit was EUR 4.6 million compared to EUR 5.7 million in the first quarter of 2020. The gross margin decreased slightly to 84% compared to 88% in the previous year. At EUR 1.3 million, research and development expenses were at previous year's level. These costs include clinical trial costs as well as the cost of obtaining, maintaining and expanding our product marketing authorizations. Our G&A expenses amounted to EUR 2.5 million in the reporting period compared to EUR 2.2 million in prior year's period. Sales and marketing expenses were EUR 4.8 million, a significant decrease of 45% compared to prior year's quarter. The strong decrease is mainly due to the impairment of our Xepi license of EUR 2 million included in last year's figure. As well as the large impact of cost savings measures implemented in 2020 due to the COVID-19 pandemic. In general, our sales and marketing expenses mainly to the cost for our own sales force in Germany, Spain, the United Kingdom and the U.S. as well as our marketing expenses.

In the 2021 financial year, EBITDA and EBIT, earnings before interest and taxes, have been introduced as key performance indicators for reporting purposes. Both have become established internationally as target metrics and will replace the previously reported key performance indicator profit loss from operations going forwards.

Group EBITDA includes earnings before interest and taxes, depreciation of property, plant and equipment as well as amortization of intangible assets and decreased by EUR 0.5 million or 19% to a loss of EUR 3.2 million in Q1, 2021 compared to a loss of EUR 2.6 million in the prior year period.

EBIT includes earnings before interest and taxes and improved by 29% year-on-year to a loss of EUR 4 million compared to a loss of EUR 5.6 million in prior year's period. This was due to higher depreciation and amortization in the previous year as a result of the unscheduled amortization of the Xepi license. Earnings before income taxes amounted to a loss of EUR 4.9 million in the same 3 months of 2021, an improvement of EUR 622,000 compared to a loss of EUR 5.5 million in the same period of the previous year, again, mainly due to the performance impairment of the Xepi license in 2020.

Cash and equivalents amounted to EUR 37.3 million as of March 31, 2021, an increase of EUR 20.7 million compared to December 31, 2020. That includes gross proceeds of EUR 24.7 million from the capital increase executed in February of 2021. So from today's perspective, Biofrontera Group does have sufficient liquidity available in the upcoming 12 months to execute on the group's corporate strategy.

And with this summary, I'd like to hand over back to Hermann, who will update you now on the operational progress.

Yes. Thank you, Ludwig. The March and April revenue development leaves us quite confident that the pandemic-related impact on our business is increasingly becoming much less severe. We expect that, in particular, our already well-established flagship product, Ameluz, will benefit from this in the near future. The now significantly advancing vaccination rate in Europe, but even more so in the United States, leads us to expect further easing of lockdowns and a return to a certain degree of normality.

With a marketing campaign planned towards the middle of the year, we intend to take advantage of the upturn to push Ameluz' presence among U.S. dermatologists. Ameluz is positioned in a market environment with enormous growth potential. We have one of the most effective products for the treatment of sun-induced skin damage, and we aim at aligning our product with market requirements, such that we can convert its enormous potential into commercial success.

Our medium-term clinical development strategy focuses on adapting Ameluz even better to market and patient needs of the U.S. market. In doing so, we aim not only to improve the positioning of Ameluz within the photodynamic therapy market segment, but in particular, to drive its expansion into the segment of other treatment options. For Europe, this has already been achieved to a large extent so that we have been able to show a consistently positive sales trend year after year, even despite the severe restrictions of the past year.

For Xepi, our second product marketed in the U.S.A., a campaign is being prepared to market Xepi in the course of the second half of the year with considerably greater effort than was previously possible under pandemic conditions following the extensive opening of dermatology practices to patients and field visits. Despite the significantly higher price than the generic competitor products, all major private payers have agreed to provide unrestricted reimbursement for Xepi. This, together with the new copayment program that we introduced on April 1, 2020, forms a solid basis for the planned marketing campaign. Unfortunately, last year, marketing measures largely fizzled out, especially at the beginning of the pandemic, and we need to make a fresh start.

On the regulatory side, we made some significant progress in the first quarter of this year. In February and March, we announced 2 submissions to the U.S. Food and Drug Administration, the FDA, 1 for the use of up to 3 tubes of Ameluz per treatment and the other for approval of a larger lamp. In agreement with the FDA, a meeting is to be held in June for both submissions to determine how to proceed.

An important milestone in the first quarter was the capital increase, which we completed and fully placed in February '21, with gross proceeds of EUR 24.7 million. The issuance of the new shares was received with considerable enthusiasm on both sides of the Atlantic. This was confirmed by a significant oversubscription, especially in the U.S. capital market.

The fresh injection of capital will enable the company to further improve Ameluz' market positioning and thus consistently pursue the group's medium-term strategy. The latter focuses on better exploiting the existing market potential for Ameluz and for Xepi in the U.S. market.

Additionally, clinical trials are intended to pave the way for opening up potential new growth markets, such as the treatment of basal cell carcinoma or acne with Ameluz in the U.S. market.

Despite the setbacks caused by the pandemic, the structural growth drivers from which Biofrontera will benefit in the long-term remain unchanged. Actinic keratosis is a vast market, both in the U.S. and in Europe. Reimbursement modalities in the U.S. are developing favorably for photodynamic therapy. For Ameluz, we continuously obtain important label extensions. Daylight PDT is experiencing increasing acceptance in Europe and the unconditional need for new topical antibiotics is undisputed.

Business performance in the first quarter of '21 was in line with our expectations and the encouraging development since mid-March leaves us very positive. The company fully maintains the guidance for the '21 financial year published on April 12.

Accordingly, we expect annual sales between EUR 25 million and EUR 32 million, as well as EBITDA loss of between EUR 11 million and EUR 14 million and EBIT loss of between EUR 13 million and EUR 16 million. Details on the forecast can be found in our Annual Report 2020.

Overall, the Biofrontera group is exceptionally well positioned for the anticipated growth after the pandemic. We owe this primarily to our employees who have used the unplanned downturn caused by the pandemic to sharpen our profile and our processes. I would like to express my severe gratitude to all our employees for this.

With this, I would now like to open the line for questions.

(Operator Instructions) The first question we've received is from Bruce Jackson, The Benchmark Company.

So last year, there was some reorganization in the United States' sales force. Can you just kind of remind us where you stand right now in terms of the number of reps who are on staff? And then is that -- just give us a general sense of the preparedness and are you ready to be out in the field? And what's generally the reception right now in terms of practices who are open and ready to meet with people? A percentage would be good.

Currently, we have 32 reps out there. And most of the offices are actually opening up. And more and more are now receiving visits on the field. So there is a very positive trend to be observed.

Okay. And then just briefly a question about Xepi. So all of the payers are providing reimbursement. Are there any formulary restrictions over any kind of treatment restrictions in terms of physicians being able to use Xepi?

There are actually no such restrictions. There's obviously a copayment that we agreed upon with them, and this copayment is softened for the patients by our copay card program. But there is -- there are no requirements that the insurance companies need for a prescription of Xepi.

The next question is from Thomas Flaten of Lake Street Capital Markets.

Hermann, I wanted to go back to the June meeting with FDA to discuss the 3 tubes and the large lamp. Could you just give us some insight into what prompted that meeting and what you expect the outcome of that will be?

Yes. We don't really know what's driving the FDA. And I have no idea what the outcome of that meeting is going to be. In the end, it comes down to what the FDA expects from for the new data that we presented for these 2 changes, the data that we have is -- that we have presented to the FDA, a new PK study with 4 tubes performed with 32 patients, half on the face and scalp and half on the periphery. Now the periphery for the current approval is not so relevant. What's relevant is face and scalp because currently, that's where we -- where Ameluz is approved. And we don't see why this shouldn't be sufficient because that's strictly following FDA guidelines.

For the lamp, we have shown extensive technical equivalents. For this lamp, with the existing lamps following both our own label, the Ameluz label and the review process by the FDA during submission, everything that we presented to the FDA should be sufficient for approval. So we are very positive about the outcome of the meeting. And yes, we'll see how the FDA is going to position itself.

So is it safe to say you were surprised by the meeting request? Or had you expected it?

It's difficult to say. So it's neither or nor.

And then just 1 question on guidance. If we look at the significant activity in April and use that as a guide for the rest of the year, even with a soft first quarter, it puts you well into the guidance range, well above the lower end. What factors are you looking for that would give you confidence in perhaps updating that guidance to be a bit more aggressive, particularly on the low end? Or are there things out there that still give you pause with respect to the pandemic reopening? Or is this just a question of time?

Well, as you know, our business has always been very, very much focused on the last quarter of the year. And we fully agree with the March and April almost, we are also very positive that we will be well within the guidance. But with just looking at those 6 weeks, we don't feel that we have enough evidence now to change the guidance of -- to the more positive side.

Got it. And then just 1 final question. Is the acne study still on track to start in the second half of this year?

Yes.

Thank you. At the moment, there are no further questions. (Operator Instructions) We haven't received any further questions. So I would like to hand back to you.

Yes. Then I would like to say goodbye to everybody, and thank you for taking the time to participate in our call.

Thank you.

Thank you. Talk to you next time.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.