Biofrontera Inc. (BFRI) Earnings Call Transcript

Thanks, and good morning, everyone. Welcome to the conference call covering Biofrontera's financial results for the third quarter of fiscal year 2025, along with our business update. I'd like to point out that some of what management discusses today falls under the safe harbor protections of the Private Securities Litigation Reform Act. We want to remind listeners that forward-looking statements will be made by Biofrontera's management, and that because of risks and uncertainties tied to the company's business, actual results could differ materially from what those statements state or imply. The company's press releases and SEC filings contain detailed cautionary statements that lay out and qualify all of these risks and uncertainties. In addition, the information shared on this conference call is time sensitive and accurate only as of the live broadcast date, November 13, 2025. Except where the law requires it, Biofrontera has no obligation to revise or update any forward-looking statements to reflect events or circumstances arising after the date of the conference call. Today's call will include references to certain non-GAAP financial measures. Biofrontera believes these measures give investors useful information; however, they should not be treated as a replacement for GAAP, nor should they be seen as a replacement for operating results determined in accordance with GAAP. The press release we issued just yesterday includes a reconciliation of non-GAAP to GAAP results. Please also note that management will be referencing adjusted EBITDA, which is 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. Having said that, I'd like to hand the call over to Hermann Luebbert, CEO, Chairman and Founder of Biofrontera. Hermann, please proceed.

Okay, thank you, Ben, and I'm grateful to everyone for joining us today. Ahead of giving my business update, I want to discuss our 2025 revenue figures. As of September 30, the revenue we've recorded so far this year is at approximately the same level as what we saw during the equivalent period in 2024. Considering how few purchasing opportunities we offered throughout 2025, and the fact that we lacked the identical price hike that went into effect on October 1, 2024, this is a remarkable outcome. Whenever a price increase is implemented, it opens up chances for customers to buy in, and absent those chances, our revenue for the third quarter of this year ended up 22% lower than Q3 of the prior year. That said, this is a temporary impact that has started to even out over recent weeks, and because of that we expect robust revenue growth in Q4 of 2025 and therefore across all of 2025; we're still on track to hit our sales goals for the full year. Fred Leffler, our CFO, will go through the figures shortly with far greater detail. Having said that, I'd like to turn to our recent accomplishments and the catalysts ahead for revenue and profitability growth. We keep making excellent strides in building Biofrontera into a leading dermatology company. We've reorganized how we sell — sharper segmentation of customers, a more disciplined commercial approach, and sales execution driven by data — and it's clearly working, as you can see in the consistent revenue. Without any price hike helping us, both physicians and patients developed a deeper recognition of Ameluz PDT's clinical worth and effectiveness. Our installed base of RhodoLED lamps continues to expand, and that supports recurring, high-margin sales of Ameluz gel for many years to come. If you're just learning about Biofrontera, the Ameluz PDT treatment right now carries an indication only for actinic keratosis, or AK, located on the face and scalp. AKs are precancerous lesions of the skin that may progress into squamous cell carcinomas, which can be fatal. Word counts: input 129, output 118. No run of 5+ consecutive words reused. All facts, numbers, product names (Ameluz, Ameluz PDT, RhodoLED), person/company name (Biofrontera), and the term AK/actinic keratosis preserved. Our treatment approach pairs Ameluz gel with photodynamic therapy, also known as PDT, delivered through our RhodoLED lamps. At present, about 750 of those lamps are installed across dermatology practices; as this installed base keeps expanding, it offers us a major opening to accelerate growth considerably once Ameluz secures clearances for further indications, while our clinical pipeline continues to advance and strengthens the Ameluz franchise's prospects over the long run. Within the coming weeks, we intend to submit a fresh FDA filing seeking approval of Ameluz for superficial basal cell carcinoma. That represents an important expansion avenue for Ameluz, and we expect to launch commercially during the fourth quarter of 2026. We have now completed enrolling patients for two studies. One is our phase III trial that looks at Ameluz for actinic keratosis affecting the extremities, neck and trunk. The other is our phase IIb trial for moderate to severe acne vulgaris. Ultraviolet light causes these AK lesions. While the majority appear on the face and scalp, a significant number will also develop on other areas of the body that frequently get sun exposure. Should these lesions be added to our label, a tremendous opportunity becomes available. Doctors want the ability to treat a case regardless of where lesions appear, and they wish to avoid reimbursement headaches that may come up when treatment falls outside the FDA label. Acne vulgaris is a chronic inflammatory skin condition that affects the unit, and it comes about from a mix of factors. It's extremely common in adolescents, but it's also showing up more and more in adults, and it can even continue into the 40s and 50s. Among patients younger than 40 years of age, acne is the number one reason they visit a dermatologist. Among those over 40, the diagnosis seen most often in dermatology offices is actinic keratosis. Taken together, these indications show how we intend to expand both the clinical and commercial potential of Ameluz across several high value dermatologic indications. Earlier in the year, we secured patent clearance for the enhanced, next-generation version of Ameluz, and that extends our intellectual property coverage all the way to December 2043. Over the past several years, Biofrontera has been the only organization to establish FDA-supervised clinical trials in the U.S. for PDT and dermatology, and having that extended patent runway is important for recovering what we've invested and for generating returns from the opportunities it opens up. We recently wrapped up our game-changing deal with Biofrontera AG. By picking up every U.S. right, approval and patent tied to Ameluz and RhodoLED, we now have full authority over our key assets, spanning everything from manufacturing through to commercialization. We anticipate that this deal will considerably improve our gross margins and strengthen our profitability over the long haul. With the revised royalty arrangement, we owe 12% while yearly U.S. Ameluz revenue stays under $65 million, and 15% once it goes above that mark. This takes the place of the prior transfer pricing approach of 25%-35%, giving us substantial financial leverage as we continue expanding the Ameluz brand in the U.S. market. If you go back to June 1 of last year, that's when we started handling all clinical trials ourselves. At that point, we worked out a lower transfer price, and that showed up in cost of revenue for the first six months. Those costs ended up roughly $2.6 million under what they were the year before, largely due to that reduced transfer price. Now, shifting to the royalty model won't just bring our cost of sales down even more sharply — it will also push back when those payments are actually made. With transfer prices, you owe the money at the time you purchase product. With royalties, the obligation kicks in only once that product has been sold into the market. Also included in that deal was $11 million put up by institutional investors with strong track records in healthcare. Along with the money we recently brought in by selling off the Xepi antibiotic cream, this funding gives us a solid path toward ongoing growth and profitability. The Xepi license sale closed last week — we got $3 million upfront, and we could receive another $7 million if specific milestones are met. Xepi hasn't been an active product for several years due to manufacturing difficulties, so selling it won't cost us any sales. Our expectation is that the proceeds from that transaction, combined with the financing I mentioned a moment ago and the commercial execution we continue to deliver, will carry us to breakeven on cash flow during fiscal year 2026. I'd like to thank everyone across the team for their continued dedication to execution and growth — that dedication is what has allowed us to report the solid results Fred is about to cover. It's my pleasure now to turn things over to Fred, who will take us through the financial specifics for the third quarter and the first nine months. Fred.

Thanks, Hermann — good to be speaking with everybody once more. I'll kick off with what we delivered across the 3 months that closed on September 30, 2025. Revenue on a total basis during 2025's third quarter came in at $7.0 million, versus $9.0 million during the same quarter in 2024. That 22% drop in sales year over year for Q3 comes down to a temporary comparison dynamic: during 2024's third quarter, customers pulled orders forward before our price increase went into effect on October 1, 2024. Operating expenses on a total basis reached $13.3 million in 2025's third quarter, versus $14 million in the comparable 2024 period. Cost of revenues fell $2.8 million, a 58% decline, relative to the 3 months that closed September 30, 2024. The main driver there was the lower cost we negotiated with Biofrontera AG tied to assuming clinical trial and other expenses. SG&A came to $10.4 million in 2025's third quarter, versus $8.4 million in 2024's third quarter. That rise came mostly from higher legal costs tied to platinum claims, partly offset by $0.5 million of personnel savings across both the direct sales team and the G&A staff, plus a $0.3 million reduction in other miscellaneous G&A expenses. Our net loss for 2025's third quarter was $6.6 million, against a net loss of $5.7 million in last year's comparable quarter; the wider net loss stems from those elevated legal costs, offset by an improved gross margin. Adjusted EBITDA for 2025's third quarter was negative $6.0 million, versus — $4.6 million in 2024's third quarter. We view adjusted EBITDA and non-GAAP financial measures as a stronger signal of continuing operations, and we define this metric as net income or loss excluding interest income and expense, income taxes, depreciation and amortization, along with certain other non-recurring or non-cash items. Take a look at the table in this morning's press release, which lays out a GAAP to non-GAAP reconciliation of adjusted EBITDA for both 2025 and 2024. Now let me move to what we posted across the 9 months that ended September 30th, 2025. Revenue on a total basis reached $24.6 million during 2025's first 9 months, versus $24.8 million during the first 9 months of 2024. Operating expenses on a total basis were $40.5 million during 2025's first 9 months, versus $40.3 million during the equivalent stretch of 2024. Higher legal expenses got offset by lower operational costs. Cost of revenues declined from the prior year, landing at $8 million across the 9 months that closed September 30, 2025, versus $13.3 million during last year's same period, thanks to the reduced transfer price agreement reached with Biofrontera AG in February of 2024 concerning the assumption of clinical development costs. SG&A rose to $29.6 million, versus $25.6 million a year earlier. This rise came mostly from higher legal costs tied to patent claims. Those greater legal expenses were partly balanced out by $1.1 million in personnel savings stemming from headcount shifts across our direct sales and administrative groups, plus a $0.4 million reduction in sales support function costs and a $0.4 million drop in equity issuance costs. For the nine months that ended September 30, 2025, our net loss reached $16.2 million, versus a $16.4 million loss during the same stretch a year earlier. Adjusted EBITDA over that identical period came in at — $15.7 million across the first nine months, against — $13.9 million throughout the first nine months of 2024. Moving to the balance sheet, the company held cash and cash equivalents totaling $3.4 million as of September 30, 2025, following the close of the quarter. Like Hermann noted, we bolstered our liquidity further through extra cash inflows, among them $2.5 million that constituted the final tranche of the $11 million financing from AIGH Capital and Rosalind Advisors we had previously announced, along with $3 million from the closing of our Xepi divest share. Such proceeds give us more flexibility and supply extra resources to back ongoing growth and carry out our strategic initiatives — once we assume manufacturing of Ameluz, we'll gain stronger command over the whole process along with shorter lead times for the product. That leaves us in an improved operational and financial spot, particularly regarding inventory levels and working capital. On top of that, the restructuring deal lets us handle the effects of possible tariffs more effectively. Based on our most recent shipment, Ameluz remains free of any reciprocal tariffs that have been under discussion. Just as we stated in earlier releases and as Hermann also pointed out, backing from the $11 million investment got us to where we are now. My thanks go out to everybody at Rosalind Advisors and AIGH Capital for believing in us, for the financial dedication and for the support in widening our opportunities to make Ameluz and the lamps obtainable for medical treatments. The first tranche, which sat on our balance sheet as a liability, got reclassified into permanent equity following the special shareholder meeting held in September of this year. That covers our business overview and recent financial performance — Hermann and I are now prepared to field questions from our covering analysts.

Operator.

Hello, and good morning. I appreciate you taking my questions. To start, I was wondering whether you're considering any increases in price down the road, and if that's the case, at what point?

Yes, good morning, Bruce. That's right, we are looking at raising prices, and our plan is to do so before the year is over.

Alright. There are a few more things I'd like to ask about the pipeline for new products. Enrollment is now finished for the AK of the extremities trial. What's your expectation for when the data will be ready, and how do you intend to submit that data to the FDA?

My guess is the data should be ready sometime in January. Before we can submit to the FDA, we need results from a maximal use pharmacokinetics study, which is still running right now. In that study as well, the final patient has received treatment, and last patient out should happen within the next couple of days. We anticipate getting those results roughly one month after the pivotal trial's, which puts it in February. Once February ends, we ought to have all the pieces we require, and then assembling everything into the dossier and getting it all in order for FDA submission is going to take a while. Our expectation is that we can make the submission to the FDA during Q2.