Biofrontera Inc. (BFRI) Earnings Call Transcript

Thanks, and good morning, everyone. Welcome to the conference call for Biofrontera Inc., where we'll cover the financial results for the fourth quarter and the full year 2025, along with a business update. I want to point out that some of what management discusses today falls under the Safe Harbor protections of the Private Securities Litigation Reform Act. A word of caution to those listening: management of Biofrontera Inc. will be offering forward-looking statements, and what actually happens could differ materially from what those statements state or suggest. Biofrontera Inc. has laid out, in its press releases and SEC filings, the various risks and uncertainties affecting its business—those documents qualify and describe them in detail. That set of materials also covers the company's Annual Report on Form 10-K covering the year that closed on 12/31/2025. Beyond that, whatever gets shared during this conference call is only valid for a limited window and should be considered correct solely on the day the live broadcast takes place. Unless the law demands otherwise, Biofrontera Inc. is under no duty to update any forward-looking statements so they reflect events or circumstances that come up after this conference call happens. During today's call, certain non-GAAP financial measures will be referenced by us. Biofrontera Inc. The company thinks these figures help investors, yet they aren't meant to stand in for GAAP and shouldn't be taken as an alternative to operating results figured under GAAP. A reconciliation bridging non-GAAP and GAAP numbers appears in today's press release, and you can also access it through the Investor Relations portion of the company's site, biofronteraus.com. Before we proceed, I want to note that our team will be discussing adjusted EBITDA. This is a non-GAAP financial metric, which we calculate by taking net income or loss and removing interest income and expense, income taxes, depreciation and amortization, along with certain other items that are either nonrecurring or noncash. Those items include changes in the fair value of warrant liabilities, stock-based compensation, gain on sale of assets held for sale, and expense issuance costs. Having said that, I'd like to hand things over now to Hermann Lubbert, who serves as CEO, Chairman, and Founder of Biofrontera Inc.

Absolutely. Thanks, Ben, and good morning to all of you on the call. For Biofrontera Inc., fiscal 2025 proved to be a year of transformation. It makes me proud to report that we achieved record annual revenues totaling $41.7 million, which reflects roughly 12% growth compared with the previous year, and we capped that off with a record fourth quarter, generating $17.1 million in revenues — the largest quarterly revenue figure in our company's history, up approximately 36% year over year. These numbers show how strong our commercial execution has been and how Ameluz PDT continues to gain adoption throughout the dermatology community. Because of a change to the agreement governing our business ties with Biofrontera AG, the company that used to be our parent — I'll go into the details shortly — Biofrontera Inc. turned a big profit during Q4 2025. Adjusted EBITDA came to $4.9 million, and on top of that we recorded a $700,000 capital gain tied to selling off Serpi Investigator, which left us with net income of $5.6 million. Before going further, let me look back at everything we accomplished across 2025, since those results drove the strong fourth quarter and set us up for a promising 2026 and the years after. Back in October 2025, we finalized a fresh asset purchase agreement with Biofrontera AG, our former parent. Those financial impacts took effect starting June 2025. This agreement stands as one of the biggest turning points we've ever had. We acquired every U.S. right, approval, and patent tied to Ameluz and RhodoLED — that includes the New Drug Application, the Investigational New Drug Application, all manufacturing rights and contracts, plus all intellectual property. Come December 2025, the FDA officially handed the NDA and IND over to us, which handed Biofrontera Inc. complete regulatory authority across the United States; we likewise wrapped up the transfer of 11 U.S. patents, 10 U.S. patent applications, and 19 international filings and registered designs. These transactions carry major financial weight. With the royalty or earn-out arrangement now in place, the rate sits at 12% once annual U.S. When Ameluz's yearly sales stay under $65 million, the royalty is 15%; once sales go above that level, it's also 15%. That replaces an earlier transfer pricing arrangement that ran between 25% and 35% of revenue. As a result, our gross margin has begun to look better, which is what made Q4 so profitable, and Svet will walk through the specifics of that impact shortly. To back the AG transaction and keep growing, we raised $11 million by way of a private placement of Series C preferred stock, with Roseland Advisors and AIGH Capital Management leading. These institutional investors, who focus on healthcare, believe as we do in the Ameluz platform's long-term value. We've also wrapped up selling the license for our Xepi antibiotic cream to Pelaos Therapeutics. That deal brought in $3 million upfront, and there's a chance for as much as $7 million more through milestone payments. Together with the strong revenue we posted in the fourth quarter, these deals leave us with the resources and financial flexibility to carry out our plan. During 2025, we achieved impressive clinical advances on several fronts, and that momentum has continued into early 2026. Beginning with superficial basal cell carcinoma, or sBCC: back in November 2025, we submitted a supplemental New Drug Application to the FDA. It was backed by solid Phase III data from our randomized, double-blind, placebo-controlled study, which enrolled 187 patients. Looking at these tumors, 76% of them achieved complete histological clearance when treated with Ameluz PDT, while only 19% did so on placebo. For complete clinical clearance, the figure reached 83% of lesions, versus 21% with placebo. Some good news on the regulatory front: the FDA has accepted our filing, and the PDUFA target action date is set for 09/28/2026. If approved, Ameluz would be the first PDT drug in the United States indicated to treat a tumor, which opens up an additional commercial opportunity. Turning to actinic keratosis on the extremities as well as the head, neck, and trunk — the last patient wrapped up the treatment phase in 2025. We locked the database in January 2026. And I'm pleased to say that in February 2026, we announced positive Phase III results, with the primary endpoint having been met. Along with the Phase I pharmacokinetic study that's now finished, we plan to submit a supplemental NDA during 2026. The goal is to broaden the Ameluz label so it includes AK outside the face and scalp, covering a treatment area as large as 240 square centimeters. Because about 58 million adults in America have one or more actinic keratosis lesions, addressing sizable fields on the extremities, neck, and trunk represents a substantial addressable market for the RhodoLED lamps already in our installed base. Moving to the third item: for moderate to severe acne vulgaris, the treatment phase concluded in Q3 2025, and the database was locked in January 2026. Last week, we reported positive Phase II results. Looking at the three-hour incubation protocol, the reduction in inflammatory lesions came to 58% when using Ameluz, compared to 37% for the vehicle gel. Satisfaction among PDT patients turned out to be extremely strong, since 86% of them indicated they would choose PDT again as a treatment. With this data in hand, our plan is to talk with the FDA during 2026 about how a future Phase III program should be designed. Acne vulgaris is a long-term condition impacting millions of both adults and adolescents, and we think Ameluz PDT may provide a differentiated option for treating the moderate to severe form of this disease. During 2025, our patent portfolio became considerably stronger. We secured approval for the new and improved version of Ameluz, which does away with propylene glycol, a substance with allergenic potential, and this pushes patent protection out to December 2043. We also got some good news lately regarding our patent fight with Sun Pharma. The U.S. Patent Trial and Appeal Board came back with a final written decision, and it determined that every claim in Sun Pharma's patent that we had contested is unpatentable. That ruling helps us in protecting our market position, which is a favorable result, though we're aware Sun Pharma could pursue additional review. At this point I'd like to hand things over to George Jones, our Chief Commercial Officer, so he can give a more thorough update on how we're executing commercially. George?

Thanks, Hermann, and good morning, everyone. It's a pleasure to take you through the commercial strides we made in 2025. As Hermann mentioned, we posted record revenues for the fourth quarter and reached roughly 11% growth in annual revenue. Driving that revenue increase was about $4.1 million in organic volume growth. What I'd like to highlight today is the fundamental quality of that growth, along with the executional enhancements that made it possible. To start, let's look at Ameluz unit volume growth. For the full year 2025, Ameluz unit volumes rose substantially. Q4 unit volumes came in especially strong, at roughly 49,840 tubes, which lifted the full-year unit volume to about 121,000 tubes. That works out to roughly 10% volume growth compared with 2024; these unit growth milestones highlight how effective the executional changes we put in place during 2025 have been, and I'll cover those later in this section. Turning to RhodoLED lamp placements, in 2025 we placed about 85 RhodoLED lamps in dermatology practices, roughly 70 of which were the newer XL model. As of 12/31/2025, our installed base sits at approximately 745 lamps spanning about 686 dermatology offices across the country. Now for our commercial execution: our revamped commercial strategy, built around refined customer segmentation, a more focused and data-driven targeting approach, and greater accountability, produced tangible results in 2025. We recorded a significant rise in sales call activity over the year and, importantly, more in-person activity, which we know has the greatest impact with our customers. Digging a bit deeper into the business, our 2025 churn rate — a measure of lost business from accounts that bought from us during the past year — was the lowest it has been since 2021. Beyond that, we opened over 150 new accounts and drove a significant volume of Ameluz tubes through those new accounts. We also kicked off an inside sales pilot in Q4 to cover vacant territories, white space, and smaller accounts that our in-person sales team found harder to reach. Given how well this pilot performed, we plan a full rollout of inside sales in 2026. All in all, I'm very encouraged by everything I've seen in my first six months at Biofrontera Inc. I'm impressed by the talent and drive of the team, and excited about the business's overall trajectory. The growing installed lamp base, expanding customer adoption, continued refinement of our commercial strategy, and the potential for near-term label expansions in sBCC and AK of the trunk and extremities give us multiple vectors for continued growth in 2026 and beyond. I look forward to updating you on our progress in the coming quarters. With that, I'll hand the call over to Fred Leffler, our Chief Financial Officer, to walk through the financial results. Fred?

Thanks, George, and good morning to all of you. I'll go over the numbers we posted for the fourth quarter as well as the entire year that closed on 12/31/2025. Unless I say otherwise, everything I mention is being compared with the equivalent period a year earlier. You can find a complete reconciliation between our GAAP and non-GAAP figures in the press release that went out this morning, and it's also posted on our website. Let me begin with how we did in the fourth quarter of 2025. Revenue came in at roughly $17.1 million, up against $12.6 million for 2024. That works out to growth of about 36%. It marked the biggest quarterly revenue figure ever recorded by this company, and the credit goes to solid Ameluz sales execution along with the pricing adjustments we put in place during December 2025. Our related-party cost of goods sold, which we call COGS, fell 45% versus the same period last year. The reason is that we moved away from the transfer pricing model that existed under our earlier license and supply agreement and shifted to the much lower earn-out structure that arrived with the strategic transaction involving Biofrontera AG that Hermann described a few moments ago. With the new setup, our cost of revenues per unit has come down consistently to roughly 15%, whereas under the old agreement it sat somewhere between 25% and 35%. Because of that, gross profit on sales rose substantially, climbing from around 58% to 82% in 2025, and that's a terrific result stemming from all the effort everyone at Biofrontera Inc. devoted to this transaction. Total operating expenses for the quarter reached $12.5 million, versus $14.3 million in 2024. Once you take COGS out of the picture, costs landed at approximately $9.4 million in each of those years. Selling, general, and administrative expenses, or SG&A, went up by $300,000, which is about 4%, reaching $4.8 million in 2025; legal costs were the primary driver behind that. Research and development expenses held steady at $800,000 for the fourth quarter compared with the same quarter last year. That spending went straight toward backing the clinical programs Hermann mentioned a moment ago, among them the effort to finish the Phase III AK extremities trial and the Phase II acne trial. Operating income for the quarter totaled $4.6 million, which represents a $6.3 million swing upward from a net loss of $1.7 million in 2024. Net income for the quarter came to $5.6 million, a $7.0 million gain relative to a net loss of $1.4 million in 2024. The forces behind that gain were greater revenues and a dramatically reduced cost of revenues brought about by the strategic transaction, though those benefits were partly counterbalanced by increased legal and R&D expenses. Switching over to our non-GAAP metric, adjusted EBITDA for the quarter was $4.9 million, compared with negative $1.4 million in 2024. That's a $6.3 million step up. Our adjusted EBITDA margin went from negative 11% a year ago to positive 29%, which mirrors the beneficial effect of stronger gross profit and better management of operating costs. Just to remind everyone, adjusted EBITDA leaves out interest, taxes, depreciation, amortization, changes in the fair value of warrant liabilities, stock-based compensation, gain on sale of assets, and expense issuance costs. A complete reconciliation is available in our press release or on our website. Now let me move on to our results for the full year 2025. For 2025, total GAAP net revenues came in at $41.7 million, up from $37.3 million across the whole of 2024 — roughly a 12% gain. Volume-related organic growth in Ameluz of $4.1 million was the main factor behind that. Related-party cost of goods sold fell by $7.7 million, which works out to 43%, landing at $10.1 million versus $17.9 million in 2024; this too stemmed from moving away from the old transfer pricing model under the previous license and supply agreement toward the much lower earn-out structure that began in 2025. With the new arrangement in place, starting July 2025, cost of revenue per unit steadily dropped to roughly 15%, whereas under the earlier agreement it had run about 25% to 30%. On top of that, $2.0 million in purchase price accruals tied to the prior agreement were forgiven when the deal closed; those reductions were partly offset by $2.2 million of earn-out payments under the new agreements. Consequently, our gross profit on product sales rose substantially, from roughly 50% to 74% for full-year 2025. We anticipate the entire advantage of the new cost structure will show up on an annualized basis during 2026, since the new 12% rate applied to only around 45% of Ameluz sales volume in 2025; over the longer term, we look for our gross profit margin to fall somewhere between 80% and 85%. Total operating expenses for 2025 reached $53.1 million, versus $54.5 million in 2024 — a drop of $1.5 million, or about 3%. Inside that figure, selling, general, and administrative expenses rose $4.0 million, approximately 12%, to $38.4 million. That rise came from a $6.0 million jump in legal expenses tied to patent claims, partly offset by a $1.1 million cut in direct sales personnel expense thanks to lower headcount, $500,000 saved from reduced sales support activity levels, a $300,000 decline in intangible asset amortization, and a $200,000 reduction in bad debt expense. Research and development expense grew $1.6 million to $3.7 million in 2025, which reflects our bearing responsibility for all U.S. clinical trials across the full year, a duty that only began in June 2024. That spending directly backed the clinical programs Hermann mentioned, among them completing all of the clinical trials referenced earlier. Our operating loss for full-year 2025 totaled $11.3 million, a major step up from a net loss of $17.2 million in 2024 — a cut of about 34%. Net loss for 2025 was $10.5 million, a major improvement over the $17.8 million net loss in 2024, a reduction of roughly 41%; higher revenues, substantially lower costs from the strategic transaction, and a decline in interest expense drove that gain, partly offset by greater legal and R&D expenses. Now to our non-GAAP measure: adjusted EBITDA for full-year 2025 was negative $10.6 million, compared with negative $15.3 million in 2024 — an improvement of $4.7 million, or 31%. Turning to adjusted EBITDA margin, it went from negative 40.9% a year earlier to negative 25.4%, which shows the benefit we got from stronger gross profit along with better management of operational costs. For further detail, please see our press release or our website. And now, moving to the balance sheet and liquidity: on 12/31/2025, cash and cash equivalents stood at $6.4 million, versus $5.9 million on 12/31/2024. Across 2025, gross proceeds of $11.0 million came in from the private placement of Series C preferred stock, $3.0 million came from the initial closing of the Xepi divestiture, and product revenue reached $41.7 million. Operating activities used $13.4 million in cash for the full year, which mirrors our net loss along with working capital changes. Now that the strategic transaction has closed, we hold more control over the supply chain, face shorter lead times for our products, and have better inventory management. Those operational gains, together with the much lower cost structure provided by the new earn-out agreement, should bring down our cash consumption as we move toward our objective of reaching cash flow breakeven. As our filings have noted, backing from our institutional investors — Roslyn and Biters and AIGH Capital — has been key in putting us in position to carry out the strategic transaction and put money into our clinical pipeline. Their confidence and commitment mean a great deal to us. That covers our business and financial results, so we're now ready to answer questions from the analysts who cover us. Operator?

Morning, and thank you for fielding my questions. I'd like to discuss the gross margin gain you expect in 2026. Q4 came in pretty robust. How do you see that unfolding across the year? Will it fall off and then build back up? And what level do you expect as we finish 2026?

Bruce, it's great to speak with you once more. Regarding gross profit margins, our projection is a figure somewhere from 80% to 85%, and that spread exists due to the sales blend of Ameluz versus devices. That said, this began on January 1, and we anticipate staying inside those bounds starting January 1 and all the way through 2026.