Biofrontera Inc (BFRI) 2024 Q3 法說會逐字稿

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, November 14, 2024. Biofrontera takes 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 this Wednesday's press.

In today'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 would like to turn the call over to Hermann Leubbert, CEO Chairman and founder of Biofrontera. Herman.

Thank you and many thanks to everyone joining us this morning on today's call. I will provide an overview of our accomplishments during the third quarter and first 9 months of 2024. Fred Leffler, our CFO will follow with a discussion on financial results. Both of us will be happy to answer questions after all prepared remarks.

Let me start by highlighting the tremendous progress we made in previous months.

First, comparing the first 9 months of 2024 with 2023 the total number of Ameluz tubes ordered by our customers has greatly increased while we significantly reduced costs.

Second, we improved our FDA label adding value to our product.

Third, we got outstanding clinical results for a new indication.

Fourth, we launched our RhodoLED XL lamp and finally, fifth, we transferred all clinical trial activities on Ameluz to Biofrontera Inc with the first point of increasing revenue and reducing cost.

Revenues in the third quarter increased by 1.5% to $9 million.

Furthermore, delivery of 4,640 tubes of Ameluzvalued at $1.5 million was delayed to October due to hurricane Milton.

Without this delay, our Q3 growth had been 19% compared to the previous year.

All the delayed product was shipped to customers early in October and will be recognized as sales in the current quarter. For the first 9 months, our sales grew by $1.3 million to $24 8 million an increase of 5.6%. Without the impact of hurricane Milton on the delivery of Ameluz, the growth would have been 12%. By growing our business, we strongly controlled our costs and were able to reduce our SG&A expenses by 14% in the first 9 months of the year compared to last year.

About the second point. The improvement of our FDA label, FDA decided on October 4 to approve the use of up to three tubes of Ameluz for treatment.

This allows health care professionals greater flexibility in addressing larger or multiple treatment areas for patients undergoing photodynamic therapy for AK on the face and scalp leading to greater convenience for both health care providers and their patients.

AK is the second most common diagnosis made by dermatologists in the United States with an estimated $13 million treatments provided each year in the US.

The restriction of one tube per treatment has slowed the growth of Ameluz cells (inaudible) and lifting this will help Ameluz take a larger piece of the PDT market.

2.3% is our progress in clinical trials. We performed several clinical trials with the aim to improve our label and enhance the use of our products in Actinic Keratosis but also to add other indications like moderate to severe acne to the label.

We believe that this indication as a major medical need as current medication is less than ideal, thus moderate to severe acne has the potential to be a major potentially blockbuster market for Ameluz PDT.

Our phase two study in this indication is progressing as planned with 106 of 126, that is 84% of the patients currently enrolled. We anticipate the readout of the data in the fall of next year. Most recently however, we have locked the database in our superficial BCC phase three study. The results are very encouraging with the histological clearance end point achieving 75.9% of total clearance at a high degree of statistical significance.

We expect the last station to complete the 1st year of a five-year follow up phase this month, one year follow up data has been by the requirement for approval by the FDA. Such that now we are awaiting this important milestone.

With this coming up, we expect submission to the FDA at the end of the first half of 2025 with approval and the spring of 2026. (Inaudible) is a subgroup is the most common form of skin cancer and the most frequently occurring form of all cancers in the US alone. An estimated 3.6 million cases are diagnosed each year. A subset of which is superficial based carcinoma BCCs arise from abnormal uncontrolled growth of so-called basal cells at the bottom of the epidermis.

They rarely spread beyond the original tumor site. But if untreated can become locally invasive, go wide and deep into the skin and destroy skin tissue and even the bone.

The fourth point I mentioned is the launch of our RhodoLED XL lamp.

This lab offers an alternative for doctors who wish to treat larger skin regions with Ameluz PDT.

Many doctors have chosen this option while others prefer the smaller easier to handle (inaudible) model. Since its launch in June and until September 30 we installed 39 RhodoLED XL lamps along with an additional 66 BF-RhodoLED lamps in the first three quarters of 2024 ourselves. Thus, has had a good mix of our older BF-RhodoLED lamp model and our recently launched RhodoLED XL lamp.

Together, these are 105 new lamp out in the field slightly higher than the 101 lamp in the same period of 2023.

We are optimistic that our land sales will continue to increase at a strong pace, supporting increased Ameluz usage as our customers can now get better Ameluz reimbursement following the recent FDA approval of up to three Ameluz tubes per treatment. By renegotiating the performance of all clinical research early in the year, the responsibility for which we have assumed since June 2024 we took control over the further development of Ameluz in the US. Since these releases the German Biofrontera AG from the obligation to perform certain clinical trials. We agreed on a significantly reduced transfer price for Ameluz, a game changing development, rendering Biofrontera Inc. more profitable and bringing the breakeven point closer.

According to the agreement, we assume control over the management of all clinical trials with Ameluz as of June 1, 2024. This force was seamless and none of the ongoing clinical trials were negatively affected.

We are in the process of completing three clinical trials. I did already mention the superficial BCC phase three and the acne phase two trials for our phase three trial on (inaudible) that means on extremities and neck and trunk. We have now enrolled 130 of about 165 patients corresponding to 79%.

Thus, enrolment for all ongoing studies is coming to an end in the coming 6 to 9 months, exciting and important events for the development of our product and our company.

With that, I will turn the call over to Fred to walk through the financial details of the third quarter and first 9 months.

Thank you Herman and it's great to be talking with everyone again.

I will start with our third quarter. 2024 results total revenues for the third quarter of 2024 were $9.0 million compared with $8.9 million for the third quarter of 2023.

This increase was driven by a $600,000 increase from sales of devices specifically the RhodoLED XL lamp since its launch in June of 2024. This was offset by a net decrease in the sales of amylose of $0.5 million.

The decrease of Amello sales and units was impacted by the delayed shipping of 4,640 units at the end of September 2024 due to hurricane Milton forcing office closures and shipping delays throughout the southeast had the orders been delivered in the third quarter. Revenues would have been about $10.5 million or growth of about 19% quarter over quarter. Total operating expenses were $14 million for the third quarter of 2024 compared with $13.5 million for the third quarter of 2023. Cost of revenues were $4.9 million for the third quarter of 2024 compared with $4.6 million for the third for the prior-year quarter.

This was driven by an increase of $0.5 million due to the increase in RhodoLED product revenue partially offset by a decrease of $0.2 million due to the weather-related delays in the sales of Ameluz which I just mentioned earlier. We will see the impact of both the revenue and the associated cost of goods for these delayed shipments in the fourth quarter.

Selling general and administrative expenses were $8.4 million for the third quarter of 2024 compared with $8.6 million for the third quarter of 2023. The decrease was primarily driven by about a $0.5 million dollars decrease in general Business administration expenses, as well as a decrease of non-personnel sales and marketing expenses of about $0.2 million and a $0.3 million decrease in personnel costs due to changes in head count and reduced severance that we saw in the prior year. This was offset by about $0.8 million increase in legal expenses related to the complaints followed filed by DOA Pharmaceuticals with the International Trade Commission (ITC) and the US District Court for the District of Massachusetts.

The net loss for the third quarter of 2024 was $5.7 million compared with a net loss of $6.3 million for the prior year quarter. The decrease in the net loss is primarily driven by a lower change in fair value of our investment in related parties as we have unwound that position in the past 12 months and this was, this was partially offset by a loss due to a change in our in the fair value of our warrants. Adjusted EBITA for the third quarter of 2024 was negative $4.6 million compared with negative $3.9 million for the third quarter of 2023 reflecting higher SG&A costs driven primarily by R&D activities that we took over in June of this year. We look at adjusted a non-GAAP financial measure as a better indication of ongoing operations. And this measurement is 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.

I'll refer you to the table and in our news release, we issued yesterday for a reconciliation of GAAP to non-GAAP financial measures.

I will now summarize our performance in the first 9 months of 2024 total revenues increased by $1.3 million or 5.6% as compared to the same period last year from $23.4 million to $24.7 million.

This increase was driven by both a higher unit sale price of Ameluz in the first 9 months of 2024 and revenue increase associated with device sales due to the launch of the RhodoLED XL lamp in June of 2024. After a revenue decline in the first quarter followed by 8% growth in the first half of 2024. We would now be at about 12% growth year-to-date. Had there been no shipping impact from hurricane Milton.

Total operating expenses were $40.2 million for the nine months ended September 30, 2024, compared with $42.3 million for the same period last year. Cost of revenue increased from the prior year to $13.3 million for the nine months ended September 30, 2024, compared with 12.1 million for the same period last year, selling general and administrative expenses decreased to $25.6 million compared to $29.9 million in the prior year. The decrease was primarily driven by reduced SG&A from lower sales and marketing spend where we are managing our personnel and non-personnel expenses very closely, along with lower legal expenses to fight the 2024 ITC complaint expenses I mentioned earlier. We expect to see the bulk of these ITC related legal expenses in the next several months. Adjusted EBITDA was negative $13.9 million for the nine months ended September 30,2024 compared with negative $15.8 million for the same period last year.

Again, please refer to our press release we issued yesterday for a reconciliation of GAAP to non-GAAP financial measures.

Now turning to our balance sheet as of September 30, 2024, we had cash and cash equivalents of $2.9 million compared with $1.3 million as of December 31, 2023. We received the replacement product in July for the three recalled lots of Ameluz that happened earlier this year and moved that value from other assets related party back to inventory.

We have successfully reduced our inventory levels closer to industry standards. It was $6.5 million at the end of the third quarter, including both Ameluz and RhodoLED XL lamps and we'll receive two shipments of Ameluz in the fourth quarter.

We have been evaluating the strategic options for our Xepi product and have concluded to deeply explore this position of that asset. We have progressed in the disposition process far enough that we have moved the Xepi asset to held for sale. Finally, we paid down the outstanding balance of our bridge loan early in the third quarter. So, with that overview of our business and recent financial performance, Herman and I are now ready to take questions from our covering analysts operator.

(Operator Instructions)

The first question comes from Jonathan Aschoff with Roth capital. Please go ahead.

Thank you. Good morning, guys. I was curious at first, you know, when will the cost of revenue start to better reflect the 25% that you said is valid through next year rather than more closely reflect the older 50% that we still see.

Hi John, I'm Fred here. We expect that to see that impact in the fourth quarter, we needed to go through our older inventory first.

Okay. Do you still expect to be cash flow break even by the end of next year and to still grow revenue this year? 20% over 2023.

A we expect to be in yeah, have revenue growth similar to prior years this this year. So mid to high 10s and then cash flow, cash flow break even. We will, we expect that towards the end of 2025 and the 2026.

Okay, that's.

That's totally helpful, you know, with the orders that actually with the shipments that fell into October, did you stick them with the October 1 price hike or did you, you know, grandfather in the older, the older price.

We had, we, grandfathered in the older price. All the orders were placed in Q3. It was just that whether it was office closures in Florida, Georgia, et cetera or FedEx having delayed, they just got there and therefore just rev in, in Q4.

But we all the orders were placed in Q3 and, had the price pre price increase as of October 1st.

Okay. Lastly, can I just have the enrolment numbers for the Acne and the peripheral AK trials?

Yes. So the enrolment for the peripheral AK is now 130 of 165 patients and the enrolment of the ACNE study is 106 of 126.

Thank you very much, Herman. That's all from me.

Thank you, Jonathan.

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

Hi, good morning and congratulations on all the progress. Two questions around the fourth quarter. So traditionally, with revenue forecasting after a price increase, it's a little bit difficult to know what the drop off might be. So, I'm curious to know given the dynamics with the delayed order and everything, how you see the fourth quarter developing in terms of revenue after the price increase. And also, can you tell us remind us what the price increase amount was?

Sure. So, the price increase was 5% similar to what we did in 2023.

We expect, like I mentioned just a moment ago, we expect growth to be in line with prior years, you know, not high 10s.

We expect to have a very strong Q4. Traditionally, Q4 is typically our strongest quarter as its quote unquote PDT season or if there Herman, if you want layer anything on there, I'll pause.

Yes. You know that Q4 is always the strongest quota. And the question is, of course, how much has been pulled into Q3 because of the, because of the price increase.

We did the same kind of price increase also for the same 5% last year. So, we can use that year as something to orient ourselves. And in spite of the price increase in Q3 and I in Q3, Q4 was still with quite some distance, the strongest quarter.

So, the factors that are actually important for Q4 and those factors are probably that doctors tend to do more PDT during the winter so that they order more, the use and order more in Q4.

But also, there may be tax reasons why they tend to order before the end of the year. So those reasons are still the same in spite of the price increase. So even with the price increase, we expect a very strong Q4. And on top of that, we have the 4,000 plus tubes that adds to the normal development and, and, and come on top.

Okay. And then one other, one other element of the fourth quarter is the new three tubes approval. So, I'm kind of curious to know if you've seen any customer response yet to the new labelling. If that's had any impact on the orders.

We have not so far because we didn't, we didn't want to, and we actively prevented it.

The reason is that having the three tubes in the label does not automatically mean that the doctors also get reimbursed, and we wanted to avoid a situation where a doctor believes that because of the label change, he can do it and that he does not get paid.

And before we wanted to go ahead with this, we had to remove the so called me MUE at CMS.

Now this has happened. There is no MUE anymore on Ameluz.

That from now on and all the, all the insurance companies also, the private payers have been notified that they should change their systems. We believe that starting next week, we can actually actively promote the possibility of using three tubes. And then in December, we hopefully see the uptake based on this.

Okay, great. That's it for me. Thank you for taking my questions.

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

Well, thank you operator. So, as you heard the third quarter, and the first 9 months of this year have been very positive with a significant increase in the tubes ordered even if a few 1,000 couldn't be delivered due to the hurricane and taking into account the FDA approval and outstanding clinical results. We are very optimistic about the future of bio.

I would like to thank everyone for participating in this call and we look forward to speaking with you again when we report our fourth 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.