Half Year 2020 Biofrontera AG Earnings Call
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Thank you Hello, and welcome to 500 HERA earnings conference call for the first half or Twentytwenty yesterday, we issued a press release announcing financial results for six months ended June Thirtyth Twentytwenty encourage everyone to read the press release that must be intervene report both of the trial data both on site.
<unk> website at Www <unk> from parents Dot Com. Please note that certain information discussed on the call today, it's covered under the Safe Harbor provisions of the private Securities Litigation Reform Act.
We caution listeners that June it's called <unk> management will be making forward looking statement.
Actual results could differ materially from though they didn't want implied by these forward looking statements due to risks and uncertainties.
Needed with the company's [laughter].
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This conference call. It contains time sensitive information.
It is accurate only as of the data like rock there today August 27.
For care undertakes no obligation to it.
Wow beep any forward looking statements to reflect you mean.
What circumstances after the date of this call.
And with that I would now like to turned the corner over to our field, how many the but [noise].
Oh, Thank you Oh.
Thank you very much focused and gentleman for taking the time to participate in today's call.
With me today is still must shuffle, all chief financial Officer.
He will present the financial results in the second.
With that after the Somalia suggests another business development and clinical updates.
Mhm provides an update on the Colin status of our commercial efforts.
I would love and also briefly comment on some strategic topics.
But first let's have a look at the financial results for the first six months old Twentytwenty pulled out I would love to hand over to Thomas Shuffle.
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Thank you everyone on the course for companies they.
I would like to start giving you an all a few key financial results for the first half 20 training.
The first six months, we introduced the topic revenue.
60.1 million Jerome.
Increase of approximately 16% compared to the same period last year.
This however.
The one time onetime payment from a little under the license agreement, which we've talked in the press in April this year.
Revenues of 9.7 billion euros, because I know rights from product sales a decrease of 30%.
Comparable to the first half of 2019.
Sales, particularly the second quarter.
Strongly influenced by the effect of signaled the equivalent of ours twice.
Well that stays in the United States experienced a significant impact.
Q2, the pandemic amounted to 6.3 million euros, almost 38% less than at the first half of 29 too.
This amount includes.
<unk> 2 million euros from product says CP.
Given the circumstances, Jason Germany developed very positively.
The first six months 2020, if we were able to trend over 2.4 million an increase of 10%.
Got to the previous here.
Well first and the remaining European countries amounted to 1 million euro compared to 1.4 million euros from the prior year period.
Gross profit increased by 3.2 million euros and depressed six month 20 trendy.
14.6 million compared to 11.4 being in the previous shipyard.
Gross margin increased to 91%.
Got to 82% than the thank goodness last year.
Maybe if you take it comes from the onetime payment.
Somebody who under the license agreement.
It's not half and directly associated cost of sense.
Research and development costs of 2.4 million for the first half was 20, trendy, but slightly above last years levels of 2.3 minutes I conclude costs for clinical trials.
Right and its regulatory cost.
So I guess costs for obtaining maintaining and expand calling bucket off of these actions.
Let me make another administrative expenses amounted to 4.4 million euros, no reporting period compared to 7.8, maybe even the same period last year.
This decrease was driven by the cost said he must have some kids to cope with Nike dynamic.
I'd also significantly lower leader cost.
We were able to reduce our costs for sales and marketing by a total of 4 million euros.
She is especially Vidals optics IP licensing the amount of 2 million euros, which was recorded in the first quarter of this year on due to poor median are reflected in our income statement.
In total.
Our pandemic related cost cutting measures, therefore showed a particularly strong get back yard sense marketing.
For more work to a T X 50 license deal continue I'm, sorry business outlook.
Q2, the Colgate 19 crisis her has had an impact on the valuation of certain assets.
Liabilities off the company.
Reduced sales CP have resulted in a different assessment of to medium term business and profit outlook for this product and consequently in the re evaluation both dependency patio shipping by subs have to purchase price liability tomorrow.
Right now somewhat difficult at this time to compare our financial she goes well this reporting period.
So so same period nastier.
If you May remember last year, the consolidated changes for the first time.
And accounted for the purchase price allocation.
Now for a few more explanations.
Earnings before taxes amounted to.
Minus 5.2 million compared to last 9 million euros and the same period last year.
2019, we accounted so I think income and the amount of 17.4 million.
That will.
And 5.5, Megan from cost allocations to minimal.
These onetime effects excluded earnings before taxes has improved.
Approximately 2 million euros.
Cash and cash equivalents.
Yeah.
Amounted to pre 10.6 million euros compared to 11.1 million as of December 31.
This amount includes the onetime payment or six maybe get some rule.
But of course, not yet the proceeds of the recent kept at a measured in August last.
Last asked for them for due date.
Well secured the could the team to short term.
Good I 27, the company resolved to issue up to 2 billion 638150 points of a 1% qualified.
Or the in there or the native mandatory convertible fall.
2020 long.
As a nominal value.
Three euros, each and the total nominal value of up to 15.9 million euros.
On August 18.
We were able to now that the mandatory convertible bond plus when you close the.
Across proceeds from to issue.
Accordingly amounted to 7.9 million euros.
This has given us considerable financial ebay and above all has enabled us to confirm our going concern assumption.
The financing requirement for at least 5 million Euro space, given our endures financial report to 19.
Maintain business operations until the end of April 21, plus met by the successfully complete the capital measure.
The us bio terror currently that's sufficient liquidity as it had to deposit to sponsor.
And finally.
We confirm our revenue forecast of.
34 to 38 million euros for 2020 financial year.
However, due to the ongoing dynamic development of to Corona virus epidemic.
In particular in United States, our ability to forecast is still severely impact.
Competition continues to assume that expenditures in Q3 in Q4. This year. They returned to approximately two levers of Q1 20 trendy.
Industry in order to achieve Tampa mentioned revenue targets, it is necessary to increase spending and investing on sales and marketing.
Especially in United States.
I would now like to hand over back to have been different again, so that he can provide you with an update on current operational and strategic developments.
Over to Europe.
Thank you Thomas.
We have previously reported on several occasions that suits developed very positively at the beginning of this year.
This was before the cobot 19 pandemic with is associated with production severely impacted our business.
In January we significantly we organized our global says talk to which we had anticipated would further channel it says goals of the shorter.
Since then but until its global sales organizations and from two pillars.
Sales and marketing and the USA, but until its largest market at the uniform management of old sales organizations in Europe.
And the reporting periods since mid March dynamic development of the coal that 19 pandemic has led to declining says he goes especially in the USA.
That does forced us to implement companywide cost reduction measures.
We introduced short so invoking for all employees in Germany and to compel a bit measures at although although European locations.
Although a wholly owned U.S. subsidiary Bio until Inc.
Reduced its workforce by 17 employees and at the same time implemented a furlough pull them in which all employees both obliged to take to temporarily on page sleeve.
In the meantime.
Due to the improvement of the general economic situation at the balancing of savings with the delay or strategically important polkas.
These measures have been discontinued.
The overall decrease in revenues related to the button dynamic will also have a compensated by the positive says development in Germany, and the onetime payment from mobile under the licensing agreement.
As Mr. Shuffle has already mentioned total sales in the first half of the you have a significantly higher than in the previous you, although pure product sales declines.
Since March.
Increasing numbers of infections as well as steel officials recommendations by the American Academy of Dermatology, the largest dermatology organization in the United States.
To provide patients with remote diagnosis and treatment well possible during the crisis.
Resulted in a significant decline and the number of patients treated in dermatology practices as well as temple early plex disclosures.
As a result of what you episodes plummeted.
After sales of our products had initially to helps to almost seal in April.
We have been able to observe slowly kovalyov all U.S.. So you us business since May and June.
In many parts of the U.S. medical practices have at least partially we opened and patients are increasingly willing to undergo treatment book to Nickolatos is.
In spite of fully covering that tests and started we still find a difficult to assess the situation due to the continuing dynamics of the coal vitals causes which is developing with the time lag in many U.S. states.
It also remains to be seen.
Hold on on the traditional seasonality and auto sales will be this year compared to previous years.
The strengthening of the commercial alignment of the U.S. business, who the reorganization of both until Inc.
Which came into effect and generally.
We will continue in the second half of the here.
In particular, the marketing expertise and the company has been significantly strengthened the coal India and will be further expanded in the future.
Pool broadening of our marketing resources as well as the system successful establishment of except be copayment pull them for patients.
We expect a more efficient exploitation of the market potential for both products are medusa, except beep.
Thus further goals in the USA.
In Germany.
Marketing and sales were able to successfully used believes some label extension for the treatment of up to Nickolatos says on the extremities and tongue and Nick to communicate the advantages of among those two dermatologists.
During the crisis or but on the and listen all electronic format.
It was precisely during this period of contactless questions on the bulletins.
That the advantages of daylight PDT became Vilia, powerade, which could easily be performed in the consistently good weather. We had this year at results direct contacts talkatone.
And the remaining EU markets, we've a unique should be able to recall developed positive sales trend, particularly in Spain.
Revenue growth was exceptionally strong polyol till the slick blocked on measures introduced to the pandemic.
However, already we can detect still recovery in sense, though as wireless in the UK.
This speaks us confident that we will soon be able to boot on also said successes to date an experience of epidemic of audiences.
There was also positive news beyond off geographical key markets.
Subsequent to the end of the first quarter on April 20 of this year.
We signed an exclusive licensing agreement with Rahul Paul the commercialization that further development of on the loose and all indications in East Asia and LCR Neil.
This partnership gives us the opportunity to generate long term revenues in markets at low cost and low business risk.
That we would not be able to serve with all our own resources in the foreseeable future.
At the same time it allows us to focus on the USA anew loop, which are the most significant an already established markets for us.
The agreement has a total of 15 yields from the commencement of suits and includes milestone payments royalties on sales and above all an immediate upon payment of 6 million new lows, which we have already received in April.
Alongside our commercial achievements since the beginning of the yield.
We also recorded further successes in the clinical and regulatory side.
In March the European Commission approved the label extension form loose to include the treatment of up to Nickolatos is on the extremities as well as the Tongon that.
This puts I'm going to lose one further step ahead of its competitive product.
Furthermore, the yield to be in commission has allowed the inclusion of an additional superiority claim compared to the competitive product into the among those product information.
Compared to the identically competitive products metrics unto itself.
The follow up of the competitive study with daylight PDT showed significantly lower FICO loans lights off the PDT with windows.
During the reporting period, the first patients and mode and the pharmacokinetic study in the USA.
Well.
Pleaded to evaluate the safety of PDT using fleet cubes of on the news.
This study is a prerequisite for the treatment of law jump audio iOS, the simple chips of our models and aligning reimbursement modalities with those of the U.S. compared to to product.
Following a template worthy until interruption of the study.
Patients cleaning has already been resumed following the first relaxation of the contact them in the United States.
We also working diligently to complete the development of the new PDT Lam be affordable ethics.
Which enables the application of our mills on larger Healios.
Despite some delays due to the ongoing condemning the covalently propelled application from Barclays marketing authorization to.
Together with the results of the pharmacokinetic study.
This is expected to be submitted to the FDA in the second half of the year.
And we are continuing to pursue patient recruitment into phase three study for the treatment of basal cell carcinoma terminals in the United States.
Despite the difficult conditions, we're striving to maintain the various clinical tires and to meet the communicated timelines to the extent possible.
An additional collide substantial market for PDT in the USA is moderate to severe acne.
After the FDA has already responded to all proposed clinical development program.
The necessarily clinical ties are expected to begin anytime.
Assuming the company can commit the necessarily financial resources.
The study Ssli client by the FDA to the extent the level of on the lose to the treatment of the K also in extremities and tongue that Nick also depend on the funding of the continued through to the old of biopharm tail over and above the lease sublease successfully completed capital measure.
This leads me to my next point.
If we are too quickly we lost the considerable future goals potential that we see probably frontage along we need additional capital to support this goal.
The company's growth strategy is supported by the vast majority of all showed us at the annual General meeting in May this year and ordinarily capital increase of up to 20% off the company's share capital loss approved.
The funds from this capital income increase ought to be used for chegg related growth and the implementation of the study plans.
That said.
We expect pretty comfortably in sense in the second half of the year, along with a slowdown in infection lights on some normalization of the economic situation, particularly in the U.S.
As mentioned by Mr. shuffle, we allow for maintaining our revenue guidance for Twentytwenty.
Regardless of the equivalent implications of the pandemic Vila remain convinced that this talk to growth drivers for which both from tale of the benefit in the long term remain intact.
Up to Nickolatos. This is the large pharmaceutical market both in the USA and the new.
The reimbursement flame book in the U.S. continues to expand.
We continue to be granted important label extensions for month to date.
Okay, let PDT is gaining additional acceptance in Europe.
Demand for new antibiotics is undisputed.
Before I open the line for questions I would like to believe fleet with less one more topic.
In recent weeks our securities on NAFTA.
So called American depots until the share house, all adss for showed.
Which is equivalent to two ordinary shares each have experienced increased demand and in conjunction with this high volatility in the shell pause.
Apparently the adss have been heavily traded and certainly to trading platforms and automated plating platforms with list oriented to pour funds.
As a result pies dispersion could be observed between the exchanges and they go into us and in Germany.
The reason for this loss that during the subscription period of the odds issue.
The conversion of shifts into adss and vice versa.
Ads to be temporarily suspended and thus short term arbitrage trading was not possible.
After completion of the capital measure the prices of the two securities converged to gun within a few days.
I would now like to open the line for questions.
We'll now begin all question answer session.
Jeff a question our speakers please five bureau, and one on the telephone keypad now to enter the keys.
Once again and then you could ask your question.
And your questions and Jeff search and just speak you can dive into Jakafi your question.
If you think speaker equipment today, it's just the handset.
Your next Gen.
Please.
Question.
The first question is from Thomas Besson Lake Street Capital markets. Your line is now open.
Thank you good morning, and thanks for taking the question.
Couple of questions on the financials.
Comments in your comment you mentioned that operating expenses would be back to Q1 levels. In Q3 Q4 does that include the sales line as well because that was significantly down and I'm, assuming that's because the cost cutting reductions of us. So I just wanted to confirm that we're expecting a significant rebounded sales costs as well.
Yes, I think not having to our cost yes.
Also this has caused some.
Our horses costs, mainly driven by by two factors.
While new Steve personnel expenses.
This will be Q is significant for Q2 short term market in Europe.
Im showing no program behind in United States, but also in United States, Q twos, and some somebody else.
And the second factor instance team marketing expenses marketing.
Nick Dempsey per SKU.
So I think.
Revenue growth in Q3 in Q4 be but then also be able to invest a little more into.
Into our marketing projects soft compensating.
At least some of the expenses sentry safe due to the mail.
It May then.
Correct.
And then with respect to the the to the revenue guidance. So if we if we if we take out the payment from Maru Ho and just for for round numbers say that there was about 10 million product sales in the first half.
You are looking at about doubling our product sales in the second half over the first half to meet that guides and am I understanding that correctly.
That's correct.
Okay.
And then just one final one.
Is there anything qualitative are you could.
Provide us with risk with respect to experience in sales and the rest of July and August I know you said you have a nice rebound in May and June and what we've heard from a number of other companies is that levels. In July were given worker pre co. Rick time from people have referred back to 2019 is there anything qualitative you could share there are with respect to what you're seeing in the rigor.
Yeah I think.
I think we can say a couple of votes to that.
If you if we look back to last year last year, we hope to evaluate strong seasonality in the all in all sales.
There's also relates to the expectation of two thirds of the sense in the fall.
It's exactly what we saw last year and.
The PDT market is weak and some long.
No this year.
What we see in July and August is.
Quite similar sales at should lead to what we had last year.
But those will the low some offsets on the big question. This will receive the same.
Upswing and before that we saw last year or perhaps even more since may be pent up demand.
All this that off going to happen.
All at the at a lower pace.
So thats really the question that we are asking ourselves and that obviously, we're not able to answer yet, but we feel we are actually quite confident that we see strong market development in the in default similar to last two last year.
That's great and then sorry, just one more.
With respect to your cash position with the with the recent raise which was obviously successful you mentioned Thomas the you will you had.
Solved the going concern question through April of next year, but if we just maybe speak about that a little differently with the cash you have on hand, right now and operations that you're projecting what is your cash runway is it began on April 2021, or should we use that as the dates for current cash reserves.
Hi, it's helpful.
Chris Mills at this point in time give make that going concerns assumption.
<unk> million blessings assumption to find then consumer financing requirement the highest medium launching assumption that we made.
And then be published online last year's dimension of report that cross in April and we had two.
Explain how much more financial needs to be half.
To continue operations for another tough months.
So now we have going concern assumption based on the acute thirtyth financial so that.
That's also means we have sufficient liquidity to finance our operations at least on care.
Last month after June Thirtyth.
So Steve could you key that being said relative to the company goes beyond decades.
Excellent. Thank you very much taking the questions.
Thank you.
The next question is from projection from the benchmark company Your line open.
Hi, Thank you for taking my questions. So in addition to the changes in the sales and marketing organization in the United States. I believe this can be a change in 2021 to the reimbursement codes for corrector. If he could you run through that real quickly and describe how that might be an advantage.
For AML is.
The biggest change we expect in 22 and move on with respect to reimbursement isn't isn't bleed into the client the title quotes.
It's the.
Immune modulation the doctors to win that starting in January.
For an office visit.
And this office visit will be remunerated much much better than in the past.
Now what happens is not in the past.
When patients came into a doctor's office to Dr. did nothing to that patient, except diagnosis and provide a prescription you got certain them although money.
And if you did to Kyle at that visit the new clubs equaled five the cold.
While this code is exclusive of the cold used to document the office visits so he can get these all.
So they the tendency was to do value at the same visit and take the much audiocodes.
No. This office visits codes will be amazed.
To pretty much the same level of other clinical quotas.
So if in the future adopt decides to do cardio.
He will not get additional money.
No the speedy team.
When it all kind of and the patient visits a doctor.
The Doctor Gutsy office visit cold and usually for PDT. The patient this lease scheduled knowing that second visit.
The Doctor can only claimed the PDT code.
It's also exclusive similar to the Cleo code, but since as all of us done in a separate visit.
It doesn't really eliminate the office visit called.
No for the doctors the situation as snow that either they do the kaleo in the first visit and than they have to do it for fleet.
Basically.
All they lease schedules the patients for a second visit residue the but they do with Ricardo and only done they've got to page. This eliminates a major advantage of Copel telecom.
Compounds to PDT.
Okay.
And then with the.
Timing of the.
The FDA submissions for the XL and the.
PK PD study you said second half of this year should we be thinking more like fourth quarter in terms of the timing.
Yes, it would be towards the end of the year.
The.
We have some delays in the and the.
Paul Glum, and our development program, which are mostly related to the availability of parts.
Those parts, we have to buy from other companies.
So a number of these companies currently have difficulties with.
With delivering these parts, that's well the delays actually come for.
We're still very confident that we at least on all we're confident that we wouldn't be able to justify the content of the yield before the end of the yield.
And the hopes to be volunteer any any of any major catastrophe business with respect to the availability of parts before that.
As you know we have two we have to manufacture zeal whole sealys of at least.
A few lamps.
And with the final procedures.
The the the portal quotes for this zelos heelys manufacturing are part of the documentation that you have to submit to the FDA sobi before we can.
Successfully.
Manufacture labs, we can also not submit.
Okay got it and then.
Lastly on the seasonality trends in the second half you also have the timing of price increases.
Do you have any plans for price increase.
This year and when might that be.
Last year, we increased.
The pies all of this year, we increased deposits on gen newly post.
Which is.
Many pharmaceutical companies to at least a small price increase.
Two which extend to the.
We'll do this also next year, we haven't decided yet.
Alright Thats it for me thank you.
Thank goodness.
As a reminder, if you would like to ask the question Please press and warm.
There are no further questions I hand back to speakers.
Yes.
We'd like to thank you again for attending the presentation until you interest on the timing of spend.
Thank you very much can have an unstable away.
Thank you very much bye bye.
Ladies and gentlemen, thank you for your attendance. This call US then concluded you may disconnect now.
[music].