Q4 2019 Earnings Call
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Yeah, ladies and gentlemen, welcome to the conference call of your Frontera IG to discuss full year 2019 Financial results at our customers requesting a conference will be recorded as a reminder. All participants will be in a listen-only mode after the presentation. There will be an opportunity to ask questions. If any package has difficulty hearing the conference, please press star key followed by Zara and your telephone operator system May and get you over to, like heck kind of investor relations. Well will lead you to just confirm please. Go ahead.
Thank you and good morning. Welcome to biofrontera earnings conference call for the full year 2019 yesterday. We issued a press release announcing Financial results for the fiscal year ended December 31st, 2019. We encourage everyone to read the press release as well as the annual 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 provision of the private Securities litigation Reform Act week off our staff during this call biofrontiers 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 a qualified by the cautionary statements Club.
Press releases and SEC filing this conference call contains time-sensitive information that is accurate only as of the date of this life broadcast wage today, April 21st, 2020 by a Frontera undertake 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 him and I will see
Yeah, thank you, And thank you very much. Ladies and gentlemen for taking the time to participate in today's call with me. Today is Thursday. I will see you fo I will summarize the general Business Development and clinical updates achieve during 2019 and will provide an update on the status of our commercial efforts Mister Shuffle will then present the financial results for the year.
Over the course of 2019 we continued of to achieve tremendous growth with sales going 48% over the previous year in addition to all Commercial Success. We continue to expand our Market opportunity for use in both the US and EU as well as completed our acquisition and integration in your life sciences. We closed out the year, very strong recording over highest quarterly sales figures in BIO fonterra's history delivered by significant growth in our us business as well as continued growth in Germany and Spain with a growing acceptance of daylight PDT.
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10 to 20 20 we continue to work with dermatologists in order to provide patients with highly effective treatments.
The covid-19 demek however has been negatively affecting sales worldwide since March 2020. The reason for this is the decreasing number of medical treatment, especially treatments that are carried out in doctors offices during this time. We are focusing on our long-term plan while working diligently to ensure that our cash position and liquidity remains adequate. I will let mr. Shuffle elaborate on how we plan to manage this current situation in more detail, but first let us review our operational and Commercial successes over the last year.
Starting off in our home Market Germany 2019 says go by 140% this strong growth is due to our European approval for daylight fortunate. I am so happy or PDT which we received in 2018 this label extension enabled us to make a significant Leap Forward in the largest European Farmers Market making on the loose with seventy 57% market share among its competitors the clear leader for PDT in Germany. We are very pleased by the skulls and intends to continue expanding our market share as the definitive market leader in Germany, especially since I'm a loose combination with tailored PTT is now fully reimbursed by the public health care System.
As we continue to educate Physicians about the benefits of PDT, we expect to continue to take market share from the much larger topical cream Market, which was basically favored by physicians as it was the simplest treatment option reimbursed by the public health care system in Spain. We continue to see a similarly positive market performance formal lose sales score approximately 10% which needs to be interpreted in consideration of a government-mandated price reduction of 28% Pharma lose. The price reduction was more than offset by The increased demand.
In the United Kingdom the focus of sales continue to be on hospitals in particular on the administrative steps to include animals in the respective Hospital pharmacies month-to-date. The company has seen success as some major hospitals no radar maloos as the First Choice PDT dark for the treatment of actinic keratosis and basil syrup to normal. These successes are beginning to translate into growing sales figures. However, the UK Still Remains a minor portion of the company's Revenue wage.
shipments
Since Bob Nelson other European countries declined significantly.
As has been the case of the last several quarters, the United States continues to be a major golf driver for biofrontera accounting for 75% of our total sales rep.
For the full year 2019 wife on Taylor Avenue in the United States amounting to approximately 23.3 million euros representative of the new goals of approximately 57% compared to 2018. This growth was driven by the continued expansion of our sales and distribution infrastructure month as well as improved reimbursement of PDT, which was increased in 2019 product says of active pack which has since been discontinued and except e contributed approximately eight hundred thousand Euros to sell since the acquisition of cutaneous life sciences.
In the US, we see a number of long-term growth opportunities and we have devoted our R&D budget almost entirely to projects will help increasing on the US market for on the news for the mall. We expanded our product portfolio with the First new antibiotic and dermatology and about 10,000 years for the treatment of impetigo the successful integration of Catania, which we acquired from our strategic partner at major shareholder moho in March 29th will play a key role in all long-term strategy with this acquisition. We expanded our product portfolio in the US to include the FDA of old stock sepi.
Maybe also acquired a second approved for construction work for acne. We made the decision to discontinue this product last year due to an unexpected quality problems and production which could not be addressed in the short-term and would require a large Investments as a reminder. This decision was supported by all the financial consequences of the discontinuation.
Don't taking a look at is the only approved topical antibiotic that has been introduced into the US market in the past. Gage except e is approved to treat impetigo including skin infections caused by antibiotic-resistant bacteria such as Marissa.
Sophia has a double mechanism of action resulting and bacteria bacterial activity competing antibodies display only bacteriostatic activity Choice mechanism of action. When does the development of resistant bacteria extremely rare in total? There are approximately ten million prescriptions with an annual box in indications were except. It could be effective a large part of them by dermatologists. Therefore. We see significant goals potential for this product.
Blender truck selling at about $300 per tube. It competes with generic antibiotics at much lower prices. However all may I would pay us half in the meantime except except before unrestricted reimbursement giving about a hundred fifty million people in the US unlimited access to sap.
This together with the new co-pay program that we introduced on April 1st this year forms the basis for going in the future.
The fact that pay us are willing to cover except is higher price compared to competitors without any restrictions demonstrates the tremendous advantages and potential authors blog.
Tuning channel to our clinical and Regulatory activities which will help to sustain the goals of animal cells in the long term.
We achieved a number of milestones in both EU and us over the course of 2019 as well as in recent months.
In March 2020. We received formal approval from the European commission for the use of our models for the treatment of actinic keratosis on the extremities and tank and not disapprove was based on positive results from our face Street tire that were published last year the study which made its primary regulatory home and demonstrated A Min. On side per patient side of 86% Farm Aloo compared to 33% for Placebo earlier this year. We also reported 12 months follow-up results from this phase 3 study demonstrating lesion recurrence rates after one year of 14.1% of the families strong compared to 27.4% after Placebo treatment.
Along with the label expansion to a case in the periphery the European commission accepted the inclusion of phase 3 data into the European product information wage significantly lower recurrence rates after daylight PDT Witham lose compared to Daylight PDT with its competitor products.
This upgrade of the regulatory approval for animals in the EU continues to expand the market opportunity of mm lose and refer that I for long-term growth in Europe. We anticipate seeing this positive effect on our sales development once the consequences of social distancing for dermatology offices decline.
In the US we have been working diligently to address two of America's current competitive disadvantages first. Our current FDA-approved prescribing information only allows the reimbursement of one tube of animals per patient per day. This restriction on the on the loose label is reflected in the reimbursement guidelines for me lose Faith shoot at the end of 2018. In other words. There's no problem with the reimbursement of amused by Health insurers as such but a restriction in our Labor led to unexpected reimburse limitations.
as we see
Seeks to expand the Amadeus label to include the treatment of actinic keratosis on the extremity strong the neck. We will need to expand the reimbursement of a Medusa to include additional tubes.
After discussions with the US Food and Drug Administration. The agency has requested that we complete a corresponding from a pharmacokinetic study or a hold of em loose. We have initiated this be case study in order to examine the safety and efficacy of three tubes of animals, the study started patient received in February 2019, but then had to put to be put on hold due to the corner situation nevertheless. It is expected to be completed in the second half of 2020.
In Pennington in order to enable doctors to treat larger body areas with Amadeus. We are in the process of developing a next-generation PDT lamp the BFF to let XL the final prototype of the vfo toilet XL is ready and we expect to submit the application for approval to the FDA in the South half of twenty-twenty together with the results of the peak a tire.
For the mall, we are preparing studies to treat actinic keratosis also in the periphery as in the US the current label cover set and scalp only due to the current situation. The start of these tiles will likely be delayed until next year. All three of these developments the treatment of larger body areas with up to three tubes of em lose the divestment of a larger lamp and the approval of the treatment of actinic keratosis on the extremities together work to signify significantly improve or marketing job opportunity in the US.
As we seek to further secure or medium-term goals in the US we continue to an all patients in our faces three studies examining the use of a great news for the treatment of superficial basal cell carcinoma. We have been working intensively on patient recruitment said since 6th, September 2018. However long to the extremely demanding study protocol mandated by the FDA, the recruitment process will likely take a considerable amount of time following successful FDA approval. I'm supposed to be the only dog in the United States for the treatment of superficial BCC a tumor indication with PDT actinic. Keratosis is still considered a precursor of such the approval for PC seeds will allow animals to be recognized as a stronger.
As long as I'm going to lose remains of our most important sales driver exploring you indications is essential as you may remember we plan to develop and lose further for you, and model is too severe acne recently FDA has provided feedback regarding our proposed design of the required technical titles and the program is ready to be initiated as soon as business has returned to normal. We will keep you informed about the progress in this indication.
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Aspect of developing the US PDT Market further is our contract with the US Department of Veterans Affairs or VA for short even though this will not be significant sales in the short-term and has therefore not received or primary attention so far. We believe that the agreement with the VA will provide further long-term business opportunities for us with many young doctors being trained in VA hospitals and being able to experience animals PDT. We will be able to use this platform to educate a new generation of opinion leaders and Innovation drivers in dermatology about the advantages of PDT in combination with a maloos despite the currently still Volvo business volume the VA Market remains a strategically important Market.
Just yesterday. We signed the final license agreement with mobile under which we got a license to commercialize. I'm a loose in East Asia and India given the nature of the Asian Dermatology Market who has a particular interest in the acne indication all who will make an upfront payment of 6 million euro as well as for the Milestone payments for the mall. We will receive royalties initially of 6% for any revenues recorded in that territory included in the agreement with oil two lights would increase with larger sales and decrease event when your network box hit the market. We are very happy that our strategic partnership with mobile home to news to the benefit of both parties.
Finally, we have continued to make progress in our research cooperation agreement with moho for the development of branded generics based on on a new emerging technology package. We have almost completely to completed the necessary preclinical work to enter into clinical studies these Blended genetics further bolster over Pipeline and we appreciate your support or a part number who has provided for the development of these products allowing us to focus our own financial resources on more short short term value drivers and still participate also in long-term value development.
But that's it. I would like to end the call over to our CFO Thomas Schaefer who will review our financials and provide an update on our outlook for a 2020. Thank you very much.
Thank you very much. And thank you everyone joining this call today. Good morning. Good afternoon, wherever you are. I would not like to give you an overview of the financial results month. Well the foods gear and the 2019 and provide our outlook for 2020.
for the
What year 2019 be received a total revenue of approximately 31.3 million euros compared to approximately 21.1 million for the for year 2018.
This corresponds to revenue growth of approximately 48% year-over-year.
I would like to note that the fourth quarter of 2019 was our best quarter ever receiving our highest quarterly sales expert driven by significant growth in ious business office. That's another aspect growth in Germany and Spain from The increased acceptance of daylight PTT.
Face in the United States. It's not account for 75% of total sales will fifty-seven percent approximately 23.3 million compared to five fifteen point nine million euros for 2018 growth was due to the continued expansion of our sales structures and improvements in the reimbursement of PDP for dermatologist job in u.s.
Chasing Germany amount to around four point six million euros for the full year 2019 compared to approximately 3.3 million euros in the year before God.
This corresponds to an increase of 40% increase in security is mainly due to the introduction of daylight penalty.
On face and the other European countries decreased in the reporting period by 5% So approximately 2.6 million compared to approximately 2.7 million and 2018.
Decline was primarily due to a decline in deliveries to license Partners. I would like to mention though that despite the substantial price with us in a speed volume growth of this price reductions and let the sales growth of approximately 10% as the number of prescriptions of Emma Louis continues to age of it.
cross traffic increased to 9.7 billion euros
99.7 million euros to approximately 26.4 million compared to approximately 16.7 million euros for the previous year. What's margin increased to 18% from 79% in 2018.
Research and development cost increased slightly to approximately 4.6 million compared to approximately 4.4 million in the prior year.
East cost include the cost of policy and you can studies but also the cost of Regulatory Affairs including The Branding maintenance and expansion of our approvals.
General administrative expenses came in at approximately 16.3 million and the reporting period compared to approximately 13 million and 2018.
Increase with you to the dealership conservation of cutaneous further due to legal and Consulting costs for the defense of the use of pharmaceutical lawsuit as well as a ministrative cost in the United States.
Since marketing costs amounted to around twenty eight point nine million euros a significant increase or most 17.7 million in the previous year.
This was cute to the cost for the further expansion of our sales organization in the United States is that it says cost incurred. I will says cost include the cost for a home sales forces in Germany and Spain in the UK and then the United States as well as marketing expenses.
Other expenses and income totaled approximately 21.2 million and 2019. This includes the negative difference arising from the purchase price and location of the assets and liability items carry it at fair market value the amount of approximately 14.8 million euros.
Yeah, it's also includes cost reimbursements from of approximately 6.2 million euros based on a purchase agreement.
I have Frontera reported a net loss before taxes of around 4.8 million and after taxes of around seven point four million the difference or the income tax reported of two point six million. Euros is a non-cash item every dispute to the use of our tax asset in connection with positive results of our subsidiary bio-pharma.
But mainly in the amount of 2.4 million due to the reduction in the municipal trade tax rate of the city of Liverpool and a corresponding reduction of our tax Acid Bath.
cash and cash equivalents amounted to approximately 11.1 million euros as of December Thirty One 2019 compared to approximately 19.5 million as of phone number 31 2018
that concludes our financial performance for the full year 2019.
We have prepared all financial statements on the going concern assumption and every sieved confirmation from our statutory auditors.
However, the potential impact of the covid-19 demek. This is continuing to work around the world and it's causing massive disruptions in Global Supply chains consumer markets and the economy as a whole. It's also been impacting our business significantly.
The current situation remains Dynamic and has severely limited our predictability.
And as it is currently impossible to foresee how long and how strongly depend emek will affect the economy. No reliable estimate or more precise quantification of the specific implications for sales or earnings can be made for the 2020 Financial year at this point in time for this reason our ability to focus the statistically compared to at this time.
in our
Ignition parts for 2020 we had a few 25% increase in Revenue compared to the previous year operating cost of approximately the same level as in previous month. However, the effects of the coronavirus pandemic may lead to significant deviation from previous projects and to the notice of the decline in sales compared to previous plans and possibly even compared to the previous Financial year.
Anticipated reduced Revenue, but also have a negative impact on the profitability and liquidity of fire Frontera in the 2020 Financial year. That's the lack of Revenue might not be fully offset. The cost reduction measures at the same time cost reduction measures already initiated in March 29th will continue these measures include in particular the introduction of short time work in Germany and comparable measures in Spain in the UK.
reduction of the workforce United States, but almost 20%
It's mandatory unpaid leave all the previous in the US.
Steps to secure liquidity and strengthen cash flows have given highest priority.
If you are aware, you have to control our offer to issue convertible bonds or eighty hours in the United States a few weeks ago as the capital markets went off to remote that the placement became possible that a reasonable price.
If the company requires for the financing in light of sustained economic situation, we have decided that we will propose a regular Capital increase of up to 20% off the share Capital to the annual general meeting which will be held on May 28th. We trust that all our shareholders will endorse and support this decision off the proceeds from this Capital increase initially. We used to finance our current operations, which as you know have quite heavily been impacted by the covid-19 crisis.
Let me further be used to continue financing clinical studies for the further development of em Loose as well as for sales and marketing expenses of animals particularly in the United States.
Long-term structural both drivers including the reimbursement framework in the US label extensions for Emma Lewis and decreasing acceptance of daylight PDT in Europe Romania fact that we would likely accelerate wants to covid-19 crisis is over at this point. I would like to hand over to Herman for some closing remarks off. Thank you.
You know, thank you very much Thomas.
As we move into 2020 we will continue to work towards strengthening the market positioning of a Medusa across the United States and Europe with additional label expansion pack and improve the embarrassment.
Weather in the short-term as the covid-19 and Amex continues to affect global Supply chains clinical trials and Medical Treatments. It's difficult to predict or forecast remainder of the year.
Well, we moved through this pandemic. We will continue to implement a number of cost reduction measures and look forward to returning to a period of strong growth. Once the situation is resolved.
Until then we returned our cash and prepare the company for a rebound in business once the markets if we covered The Upfront payment of 6 million month hole will help the company to stay financially secure during this unprecedented crisis. We appreciate the continued dedication of our employees who have faith exception accepted salary reductions until the business improves again, as well as the support of our shareholders through this difficult time with that said I would know like to open the call for questions.
Thank you very much. Then. We will not begin our question-and-answer session. If you have a question for our speakers, please dial zero and one on your telephone keypad now to enter the key. Once your name has been announced. You can ask a question. If you find your questions answered before the searching to speak you can dial zero and to to cost your question. If you're using speaker appointment today, please lift the handset before making your selection. One moment, please for the first question.
And we perceived the first question. It is Bruce Jackson of The Benchmark Company, please go ahead your line is not open.
Thank you. Good morning. The first place I'd like to start is with the the cash position and you're going to be receiving the The Six Million a payment from Rue a second to be booked in the first quarter or the second quarter.
That would be booked in the second quarter. We signed the contract yesterday and we expect the payment from the rule within the next few days.
Okay, and then you were discussing the the operating expenses were originally expected to be flat over 2019 looking forward don't have much visibility on the revenue side, but maybe we've got some visibility on on the expense side of things. Um, where do you where do you think the choices um could land right now and and What proportion of that is is fixed cost.
Unfortunately, we can't really give guidance for for the remainder of the current Financial year. However with the customer service rep is deceptively expect a significant reduction in our cost compared to compared to the previous years. Our costs are mainly given by our personal expenses. So Force alone, we we keep the the headcount and the employees that we currently employ is cost up. I must fix if you wanted to make further significant Cuts in our costs that would require layoffs and we could certainly try to avoid this if at all possible.
Okay last question on the cost side last year we had the the litigation expense was fairly active. Is that going to be back in 20 20 or about the same or what's the trend for the litigation cost?
A legal costs are too vast majority of our legal costs refer to the defense of litigation and ask the truck has been snow. These costs are I don't want to sit down to zero but they significantly reduced if we all waiting for a tow truck to come forward with something with a plan as how this drive is going to to go go forward most of the costs spent. We're doing the investigation. Um.
That's required.
Okay. Thank you for taking my questions. I'll hop back in q.
Thank you, Bruce.
Thank you. But next question is from Thomas Leighton of Lake Street Capital markets, please still have your line is now open.
Thank you. And thanks for taking the questions just following up on the questions with respect to cost-cutting. I think you mentioned that you had a 20% reduction in force in the US. Can you, yeah, was that primarily on the commercial organization or can you provide some color on on where those with those reductions took place?
They were across the organization both field-based people as well as office space people.
And just Switching gears the first quarter sales. So you pre-announced on Friday the first quarter numbers which were a bit below certainly our expectations for where the first quarter could come in given everything that's going on. Could you provide some color on you know the sequence of events in the in the first quarter where things proceeding wage plan until the middle of March when it seems that most companies started seeing covid-19 pact or can you provide some just some commentary around how the first quarter evolved relative to your expectations?
We can certainly do that. So when we went into the the first quarter was quite strong and Europe. So wage most Filipino, although European markets particularly. Germany was buff strongly above budget and and then the sales dropped off close to zero on the middle of March and and still you have come out pretty much at budget wage or less by the end of March because it had been so strong be before that. The US market hasn't been as long in in January particularly. We were still seeing effects of some stocking that went on by the end of last year due to the price increase on January 1st, June.
So the comparably slowly into the into the year picked up in February and done by the by the beginning of May was actually we we expected you ourselves to be and and we thought it would still be a very strong quarter month and when does but mnemic actually happened and then all the offices either closed down or they are trying to avoid seeing patients in physically in the office in the offices.
So for the for the sales team that that remains in place are are there activities that they're conducting, you know, either virtually or or some other way to control educating cuz I'm I'm assuming positions are still available to be contacted may be outside of the office setting obviously, but can you comment on any ongoing commercial activities you have going on?
Oh, this is a gun different between between Europe and the us because of the different approvals in Europe. The major Focus obviously right now is to long to use some sort of distant approaches like sending letters or telephone calls to to advertise daylight PDT and the new label extension that we had while in the US the apps title page to stay in touch with was with customers who the same kind of measures but not so much with the goal of of short-term selling because I'm nobody's going to buy know but with the goal of preparing the upswing that we expect once the office is can open again. So most of the time what the what the what time
Let's do is tied to stay in.
Touch with the customers as good as possible and at the same time analyze analyze the the customer Market the B team and tie to prioritize the customers better particularly with respect to the balance between between animals and stepping and Thursday and and use the time that we have now to again prepare for what comes after this this entire thing is over.
And then one final question assuming that you're able to raise the capital following approval at the Met shareholders meeting given your cash position wage today. How what kind of cash Runway does that provide you against your maybe most conservative models internally?
I just never a guarantee but in all likelihood this should be more than sufficient to bring the company to break even.
Excellent. Thank you so much for taking the questions.
Thank you, Thomas.
Thank you. I'll take the questions of Bruce Jackson. The line is not open.
Hi, thanks for the the follow-up questions first. So you said that the FDA trial designed for acne is ready to go and you're ready. You're prepared to start the trial. Can you maybe give us a few details on what that trial is going to look like in terms of the the number of sites number patients the after things like Thursday.
Yes, certainly. So the the the to the first time will be a face to be trial in which we look back at a different incubation times. So if you'll recall the process of PDT first Iraq is applied and then the is an incubation wage. First of all, the laws the active ingredient to enter the cells and then the active ingredient has to be has to be metabolites just to to the actual light sensitive compound and that takes a certain time and the longer you wait the more sensitive or if the skin eventually gets for the PTT treatment and um, so here we will look at different time points and four years.
Just one groups of 30 patients each to actually compare the effect in this with different incubation times.
So Thirty patients each for for how many groups?
Oops, oops, okay, and then if we could move over to zappy the the the availability of the reimbursement is certainly a positive development. One of the the other questions about was the the marketing channel piece of it. So the dermatologists um, do prescribe some of it. I believe there's also a fair amount that um is Faith in hospitals. So how do you feel about your your channel coverage for sepia? And is there a a different marketing strategy for the product compared to analyst?
Yes, I certainly a different marketing strategy and that is a viable drug. So we sell directly to the doctor and the doctor has to buy the dark with his personal money and then try to get reimbursement afterwards while except he is a normal doc like most other drugs that are actually bought into the pharmacy and then sold out of the pharmacy if a if a patient presents with a prescription and
and here we still have an an open issue with except he's so when we when we took the product open over there were basically three major issues we had to work on one was reimbursement and we have been very successful with that one with the 350 million people now covered without without any restrictions and the second was an improved and and more adequate with respect authors profit more adequate copay system, which we introduced in April 1st, and now the next step would be to them improve the the availability and and local pharmacies and this is a a little bit of a catch-twenty-two situation if you if you sell little then the pharmacies wage
Don't stock it. And then if a patient comes it takes a while to actually get the product and obviously since we are looking at a at a at an acute infection the patient wants treatment to start immediately and not wait a day or two for the product to arrive and this is currently Bewitched with a sample that we give to the doctors. But that is a solution which we hope is is temporary and and with going sales we can actually move away from that and make the product readily available and local pharmacies.
Okay. Okay, great. And then the last question for me with the the Branded generic project with the page. What's the next step for that project?
Well the next step for that would be would be clinical tires. So it would go straight into into phase two. And so we actually looking at bringing this into into those findings studies.
Okay, great. Thank you very much.
Thank you.
Thank you, Sarah. No further questions. I would like to unpack to you.
And then I would like to thank you all again for the time that you took to participate in this telephone conference and the interest in biofrontera, and we bought a very nice State. Thank you.
Yeah, thank you very much. John. Stay healthy everyone.
Ladies and gentlemen, thank you for your attendance. This call has been concluded you may disconnect.
Dead dead dead.