Biofrontera Inc. (BFRI) Earnings Call Transcript

Hello everyone, and thanks for joining us for Biofrontera Inc.'s conference call covering our second quarter 2026 financial results and 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. Listeners should be aware that Biofrontera's management will be sharing forward-looking statements, and that actual outcomes could differ materially from what those statements state or suggest, given the risks and uncertainties tied to the company's business. During this call, we'll be touching on several forward-looking items: the revenue targets Biofrontera has set for the entire 2026 fiscal year; what we anticipate from the International Trade Commission's orders and the remediation plan we've put in place; our liquidity position and whether we can stay afloat as a going concern; the potential outcomes of proceedings that are still pending; and the chance that Ameluz gets approved for and launches additional indications. All of the risks and uncertainties are described thoroughly, and they're governed by the cautionary language included in Biofrontera's press release and SEC filings — among them the Form 10-Q quarterly report covering the quarter that closed June 30, 2026, plus the Form 10-K annual report for the year that ended December 31, 2025. Also, the details shared on this call are time-sensitive and correct only as of today's live broadcast. Biofrontera is not obligated to revise or update any forward-looking statements to reflect events or circumstances arising after this conference call, unless the law requires it. On today's call, we will mention certain non-GAAP financial measures. Biofrontera thinks these measures offer helpful information to investors, but they should not be treated as a replacement for GAAP, nor should they be seen as a replacement for operating results determined under GAAP. You can find a reconciliation between non-GAAP and GAAP figures in the press release that came out today; it's also posted on the company's website, www.biofrontera-us.com, in the Investor Relations section. I want to point out that management will be talking about adjusted EBITDA, which is a non-GAAP financial measure. We define it as net loss, excluding interest expense, net income taxes, depreciation, and amortization, plus certain other non-recurring or non-cash items — that includes changes in fair value of warrant liabilities, panel remediation expense, and the related inventory write-down and stock-based compensation. With that said, I'll turn things over now to Hermann Luebbert, who is CEO, Chairman, and Founder of Biofrontera. Hermann, go ahead.

Yes, thank you, Ben, and good morning everyone joining us. Our second quarter of 2026 turned out to be the strongest operating Q2 we've ever recorded, and the first six months of the year made up the best H1 since this company started running as an independent U.S. operation. We saw net product revenue rise 33%, landing at $12 million. Gross margin was approximately 80%, compared with roughly 71% in the same quarter a year ago; adjusted EBITDA reached $200,000, which is basically breakeven, against a $5.1 million loss during last year's second quarter; those impressive Q2 results, coming in what's normally our weakest period, are far from just a one-off three-month anomaly. They show what happens when a commercial team builds momentum and pairs it with cost control throughout the whole company; reorder velocity among our physician accounts is picking up, which tells us demand generation underneath is solid. George and Fred will walk you through the specifics shortly. These results also capture more of the benefit from the strategic deal we closed in October 2025, through which Biofrontera gained complete ownership and control of every U.S. right, approval, and patent tied to the Ameluz and RhodoLED portfolio, and swapped a transfer pricing arrangement of 25% to 35% of revenue for a 12% earn-out on net sales. Before turning to operations, let me speak about the International Trade Commission case, since I assume it's top of mind for you. On May 6, the Commission handed down its final determination, concluding that a Section 337 violation occurred involving two Sun Pharmaceutical patents that cover certain components of our RhodoLED XL lamp. With that ruling, the Commission went against what the U.S. Patent Office's Trial and Appeal Board had decided, which, sharing our view, had earlier determined that each contested claim in one of those patents was unpatentable. The Commission imposed a limited exclusion order along with cease and desist orders, all of which became effective on July 7. Importing or selling the existing RhodoLED XL lamp inside the United States is no longer permitted for us. In addition, we cannot sell Ameluz for use alongside the RhodoLED XL. There are three points to grasp regarding how far this reaches. First, the XL lamp is what's impacted. The original BF-RhodoLED lamp remains entirely unaffected, and that product accounts for the substantial majority of the lamps we have installed. Physicians relying on those lamps face no change, and Ameluz sales to accounts using the BF-RhodoLED lamp keep going as usual. Number two: we put together a fix-it plan designed to allow sales of a changed XL lamp that sits beyond the reach of the two Sun Pharmaceutical patents. In Q1 we recorded about $500,000 as our best guess at what that remediation would cost, and the number hasn't moved since. Because the vast bulk of lamps already out in the field aren't affected, and because we expect to win clearance to sell a modified RhodoLED XL version positioned outside the patented area, our view is that the exclusion order will push orders later in time instead of shrinking overall demand. Number three, and as a final point: from where we sit, this fight continues, and we've left on the table the possibility of appealing the Commission's decision to the Federal Circuit. How those proceedings turn out, or on what timeline, is not something I'll guess at. What I can say is that even as we pursue each path open to us, none of them is something our commercial plan hinges on. The reason we'll succeed commercially is our ongoing commitment to physicians and patients, plus the money we put into developing Ameluz and PDT so they can serve additional indications. Let me now shift to the clinical pipeline, since nothing shows more clearly how this company grows in 2027 and afterward. Starting with superficial basal cell carcinoma. On the Ameluz PDT front, for treating superficial basal cell carcinoma, our supplemental New Drug Application has been accepted for filing by the FDA, and they've given it a PDUFA target date of September 28, 2026. If approved, Ameluz would be the first PDT in the US with a clearance to treat cancerous skin tumors, and a full launch is what we're aiming for in Q1 of 2027, with the first customer outreach taking place in Q4 of 2026. A launch like that would go directly into the BF-RhodoLED lamps that are already installed at our sites and our existing dermatology call points. Our commercial infrastructure is already built out. Moving on to actinic keratosis on the extremities, neck, and trunk. Earlier in the year, we shared results from a Phase III top-line readout that were both favorable and statistically significant, and the trial met its primary endpoint. That evidence supports our intention to file a supplemental NDA around the end of Q3 2026, expanding the Ameluz label beyond AKs on the face and scalp so it covers a treatment area of as much as 240 square centimeters. We anticipate the FDA will grant approval during Q3 2027. Because about 58 million adults in the United States have one or more AK lesions, extending treatment to the extremities, neck, and trunk — plus that bigger field size — meaningfully increases the eligible use of every lamp already deployed. The third item: moderate to severe acne and further indications. During the Phase 2B trial, Ameluz achieved a 58% decrease in inflammatory lesions, compared with 37% for vehicle, and 86% of patients said they'd choose PDT again. At this point, we're setting priorities and working out the design for the next stage of clinical development, aiming to expand the addressable market for our products, and acne is going to be a key part of that conversation. We'll update you as those plans take shape. To sum up, sBCC should launch in the first quarter of 2027, the relevant AK label extensions are expected in Q3 2027, and our acne program is progressing toward Phase III. Each of these expands sales by leveraging the very same installed lamp and customer base, along with the identical sales team that's already been established and funded. That's how we'll achieve growth in 2027 and afterward. Additional approved applications moving through infrastructure that already exists. At this point, I'd like to hand things over to our Chief Commercial Officer, George Jones. George?

Thanks, Hermann, and good morning to all of you. In Q2, our product revenues came in at $12 million, which represents growth of roughly 33% compared with the same period last year. Two factors drove that gain: unit volume for Ameluz rose by about 30%, and we also had the benefit of the price increase that took effect in Q4 of 2025. On the volume side, we moved 33,300 tubes of Ameluz during Q2 of 2026, versus about 25,300 tubes in Q2 of 2025. Part of the growth this quarter reflected order timing from some customers who were getting ahead of the supply restrictions tied to the ITC that Hermann talked about. That timing works in our favor, since customers typically go through Ameluz more quickly when they've got product sitting on their shelves, and it positions us well going into a strong fourth quarter. The key point is that the exclusion order doesn't affect the substantial majority of our installed lamp base, so we don't anticipate this shift having any effect on our revenue goals for the full year 2026. Now for RhodoLED lamp placements: during Q2 2026, we placed 21 lamps — 16 XL lamps plus 5 RhodoLED lamps. That brought our installed base to roughly 801 lamps spanning approximately 740 physician offices. On sales execution, we're experiencing meaningful momentum in every part of our business. Our order count for the first half of 2026 rose 18.6% compared with the first half of 2025, and average tubes per order climbed 10%. We've also been monitoring those largest customers who made big purchases ahead of the Q4 2025 price increase. More than 81% of them placed further orders during the first half of 2026, and among those who did reorder, their Ameluz volume increased 41%. That matters because it shows our sales efforts are paying off and that our customers are raising their Ameluz PDT throughput inside their practices. I'd also like to call out our new account growth. We added 66 new accounts in the first half of 2026, compared with 69 new accounts in the first half of 2025. That slight decline probably reflects the emphasis on existing XL customers during May and June, before the ITC orders took effect. Finally, following up on our prior call, I want to draw attention to our inside sales efforts, which keep producing results — generating approximately 1,070 tubes of Ameluz from whitespace in smaller accounts, plus another 920 tubes from covering vacant territories in the first half of 2026. The first half of 2026 has left me very optimistic about our commercial strategy and how our team has performed. That stronger execution, combined with our clinical programs — including the near-term sBCC approval and launch, the upcoming label expansion for AKs on the extremities, neck, and trunk, and the progress of our acne program — gives us multiple paths and significant opportunities for continued growth. With that, I'll hand the call over to Fred Leffler, our Chief Financial Officer. Fred?

Thanks, George, and hello everyone on the line. I'll take you through what we delivered in Q2 and in the first six months of the year that closed on June 30, 2026. Where I don't say otherwise, everything is measured against the equivalent period a year ago. You can find a complete reconciliation between GAAP and non-GAAP figures in the press release we put out earlier today, which is also posted on our website. So, turning to the numbers: second-quarter revenues came in at $12 million, versus $9 million during Q2 of 2025. That works out to growth of 32.9%. As George explained, unit volume was up by roughly 30%, and the remainder of that growth came from the price increase we finished implementing during the fourth quarter of 2025. Moving to the first half, revenues reached $22.1 million, which is 25.4% higher than the $17.6 million recorded in 2025. Cost of revenue in the quarter totaled $2.4 million, down from $2.6 million, which gave us gross profit of $9.6 million and a gross profit margin of roughly 80%, versus approximately 71% in the comparable quarter last year. That represents an expansion of about 920 basis points. In the first half, gross margin likewise stood at 80%, compared with a gross profit margin of 67% during the first half of 2025. The main driver of this improvement was the shift away from the previous transfer pricing agreements toward a cost structure made up of Ameluz direct cost plus the 12% earn-out on net revenue. That structure is contractual and durable, and we expect it to persist. Selling, general, and administrative expenses came to $9.7 million for the quarter, versus $10.6 million in 2025, which we assumed control of after completing the strategic transaction. I'd point out that legal spend tied to litigation depends on how quickly active matters move and can fluctuate from one quarter to the next. For the first half, SG&A was $20.7 million, compared with $19.3 million, which is an increase of $1.4 million. The main drivers were investment, reduced turnover within the commercial organization, and the new manufacturing and regulatory functions I mentioned a moment ago. Those factors were partly offset by lower legal fees related to litigation. Research and development expenses were $0.4 million for the quarter, versus $0.9 million in 2025, and $1.3 million for the first half of 2026, versus $2.1 million for the first half of 2025, which reflects the fact that the current vintage of clinical trials has really come close to substantial completion. As Hermann noted, we intend to run additional clinical development in the years ahead, with the goal of broadening the reach of our products, though this depends on the funds available to us. Net loss for the quarter was $0.6 million, or $0.05 per share, against a net loss of $5.3 million, or $0.57 per share, in 2025. For the first half, net loss came to $5.4 million, or $0.44 per share, versus $9.5 million, or $1.05 per share. Adjusted EBITDA for the quarter was negative $0.2 million, compared with negative $5.1 million in the prior year quarter. That's an improvement of roughly $5 million, with an adjusted EBITDA margin of negative 1.4%, against negative 56.9% in 2025. During the first six months, adjusted EBITDA came in at negative $3.7 million, which compares to negative $9.5 million in the prior year. Adjusted EBITDA margin stood at negative 16.9% against negative 54%. Moving on to the balance sheet and liquidity, on June 30, 2026, our cash and cash equivalents totaled $4.7 million, versus $6.4 million on December 31, 2025. Cash used in operations during the first half of 2026 amounted to $1.7 million, a decline from $7.2 million the previous year. That final number also reflects a $3.7 million one-time paydown of related party payables tied to the strategic transaction that took place in the first quarter of 2026. When that item is included, working capital changes represented a net source of cash during the period. We keep moving closer to cash flow breakeven in 2026. Total liabilities came to $18.1 million, basically flat versus year end 2025. The sole indebtedness we have outstanding consists of $4.6 million of convertible notes that mature in November of 2027. We carry no bank or term debt. Total shareholders' equity was $6.0 million, compared with $10.5 million on December 31, 2025. As disclosed in our filings, the company has included a going concern qualification in its financial statements. Although we've shown substantial progress toward cash flow breakeven, and we believe we'll get there this year, and this quarter offers the clearest proof of that progress. Our present capital resources mean we must keep growing commercial operations and keeping expenses in check; we intend to handle this through continued expansion of Ameluz revenue, receipt of the next milestone payment of $1 million from the XEPI divestiture, and, should it become necessary, obtaining a working capital line of credit or a comparable facility when and if needed; with that summary of our results, we're now prepared to take questions from the analysts who cover us. I'll turn it back over to you, operator.

Congrats on the quarter. I'd like to begin with the basal cell carcinoma launch. It uses the same call point and functions with the lamp we already have. Are there any other things that must be handled, such as establishing reimbursement or getting the sales team trained? What other steps remain before we launch?

I'll handle that. To begin, thank you for asking. What's excellent regarding the sBCC indication is how well it aligns with the call point we have now and the strategic priorities we currently hold. The steps that truly must occur to prepare for this launch involve completing our marketing materials, getting those pre-cleared with the FDA, training our sales force, and also finalizing our reimbursement strategy. Beyond those, we are set to go and can start selling this and start discussing it once approval comes.

All right. All right, and next I'd like to dig into what you said about the ITC. From what I understand, this involves 2 patents, and you managed to overturn 1 of them, the inter partes review. Could the second patent also be taken up for review? In other words, is there a way to essentially get the entire matter thrown out? That's part one of my question. And if that isn't possible, could you share more details about the remediation plan, and would it call for a redesign of the lamp, which would then need to go back through the FDA process?

Yes, I'll handle that one. Appreciate the question, Bruce. Well, starting with the situation regarding the second patent. That other patent cannot be handled this way. This second patent is essentially the same as the first one, and the outcome would very likely be identical. But we are unable to challenge that patent using the same mechanism, since the current approach taken by the director of the patent office is to disallow that approach for patents that have already been addressed in a forum such as the ITC. So purely on procedural grounds, that isn't something we can do. That said, we do have the option to appeal the ITC's ruling. And that appeal will be pursued for both patents. Once we reach that stage, the arguments for both patents can be combined. Now, whether that ultimately succeeds isn't really the key issue, given the workaround strategy we are putting into place right now. And this workaround strategy relies on extremely small modifications to the lamp. When you consider patents in an area where there's not much genuinely new in one of these lamps — I mean, it's a 5-panel lamp, and the panels are joined with hinges. Lamps of that kind were everywhere. So there's a particular hinge component that Sun asserts it invented. We clearly don't agree, yet the ITC sided with them. And to get outside the scope of those patents, we need to take out that hinge component. So it's truly a small modification that we're bringing into the lamps.

Regarding that small adjustment, is FDA clearance required for it?

That's right — the FDA must review it under something known as a CBE-30 procedure, and we've submitted our application for that. The agency has also confirmed this is the correct pathway, and as far as the FDA is concerned, we've already been cleared to market it.

Alright, and now for one final follow-up. Regarding how the product has performed, is this identical to the one that will be...

Apologies for cutting in. For clarity, I ought to mention that this reflects only the FDA's standpoint. And at this point the border control must concur that this will additionally carry us beyond the scope of the ITC ruling. That is what we are presently awaiting. So in principle, from the FDA's angle, we could sell, yet in practice we cannot, since we must wait for that subsequent step.

Alright, and that brings me to my final question. Regarding this change to the XL's feature, is there any meaningful performance difference the customer is going to pick up on?

Not at present — the lamp will keep being operated in precisely the manner for which it currently holds FDA approval.

If I'm hearing you correctly, 243 XL lamps are in the field, and the overall count is 101. Is that correct? My apologies — the total is 801. Is that right?