Q3 2020 Biofrontera AG Earnings Call
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Thank you and good morning, and welcome to buy from terrorists earnings conference call for the third quarter and nine months ended September Thirtyth Twentytwenty.
Yesterday.
We issued a press release announcing financial results for the nine months ended September.
Thirtyth 2020, we encourage everyone to read the press release as well as the interim report both of which are available on a bioterrorist website.
Please note that certain information discussed on the call today is covered under the safe Harbor provisions of.
The private Securities Litigation Reform Act.
We caution listeners that during this call by Frontera 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 Companys.
<unk> business.
All risks and uncertainties are detailed in a qualified by the cautionary statements contained in by a frontier as press releases.
And SEC filings.
This conference call contains.
Time sensitive information that is accurate only as of the date of Thislife broadcast today.
Okay November 12.
2025 from Chira undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this conference call and with that I would now like to turn the call over to our CEO permanently.
Thank you Pamela.
And thank you very much ladies and gentlemen for taking the time to participate in todays call.
With me today is Thomas Scheffer, our CFO he will present the financial results in the second.
I will then summarize the general foot before.
Once off all commercial efforts provide clinical updates and the belief Lee Commons on some strategic topics.
But first let's have a look at the financial results for the first nine months of 2024.
I would like to hand over to Thomas Schaeffer.
Thank you Herman.
Thank you all for joining us today good morning, good afternoon to everyone.
I would like to start giving you an overview of the financial results for the nine months ended September Thirtyth Twentytwenty.
The Corona virus crisis has also dominated the third quarter of 220.
The first nine months.
We achieved total revenue of 20.8 million euros.
An increase of approximately 9% compared to the 19.1 billion in the same period last year.
This includes however, the onetime payment from Merck worldwide, but the license agreement.
Which we cited a presence.
Next year.
Revenues of 14.3 million euros generated from product sales.
Decrease of 23% compared to 18.7 million euros in the first nine months of 2090.
The decline in revenues from product sales mainly.
The ongoing crisis development in the United States, they're buying from Terra has experienced the greatest impact offset crisis.
U.S. product fair step four amounted to 9.9 9.1 million euros about 33% compared to.
These are 2.6 million euros, the same period last year.
This amount included approximately 8.2 million euros from products and succeed.
The declining say there was however compensated.
By the positive sense development in Germany, and the one off payment from.
No.
Revenues for the first nine months in Germany increased by 19% to 3.9 million compared to 3.3 million euros.
In the same period last year year, our sales team was able to successfully take advantage of the label extension.
Include the treatment effect kidney care tells us on the body and extremities Axcelis day like Peter Keith.
Well, let's face it never many European countries amounted to 1.4 million euros compared to 1.8 million in the prior year period.
Gross profit increased.
We spent 3.4 million euros for the first nine months of 2022.
18.3 million compared to the 14.9 million euro in the previous year.
Gross margin increased to 88% compared to 78%.
In the same period of last year, mainly due to the.
From the onetime payments from rule under the license agreement without any direct gave related cost of sales.
Research and development costs.
Of 3.4 million euros for the first nine months of 2020, but similar to last year's amount.
Of approximately 3.2 million I think.
Include costs for clinical trials.
Regulatory of chefs such as cost for trading maintaining and expanding our market overview nations.
General and administrative expenses amounted to 6.9 million euros, the reporting period.
Yes.
Include 12.1 million in the same period last year.
This significant decrease was driven by the cost saving measures into introduced Q2, the COVID-19 pandemic and significantly lower legal costs.
Furthermore, the previous year's number includes costs from the first time conciliation.
Keeping in life sciences in the amount of approximately 2 million euros.
Jason marketing costs amounted to 60.3 million.
Compared to 20.6 million euros in the same period last year.
Represents a significant reduction.
Our pandemic related cost saving measures.
Sure the particular strong impact here.
We were able to reduce our lessors marketing costs for a total of 6.3 million Euro. However, this was partially offset by especially a write down of 650 license in demand of about 2 million in the first quarter of 2020.
The continued uncertain business outlook due to the cold at night in crisis has for the impact on the valuation of certain assets and liabilities of the company.
Reduced sales of CP have resulted in a different assessment of the medium term business.
And profit outlook for creepy and consequently in the re evaluation.
Both the balance sheet value after shipping license and to purchase price liability tomorrow.
Both recorded in the first quarter of 2020.
It's somewhat difficult still these time this time to compare all financial figures of this reporting period.
It goes up to same period last year.
The consolidated cutaneous first time last year and accounted for the purchase price allocation.
For a few further explanations.
Other expenses and income totaled two minus 1.6 million and the reporting period compared to other banks.
Interest income.
Of Euro plus $20.8 million in the previous year.
The prior year figure included onetime effects from the acquisition of cutaneous alive census in the amount of $19.3 million.
These onetime effects.
Other income and expenses of the prior year.
Amounted to plus 1.6 million euros.
And thus decreased by about $3.2 million in the current year.
This is mainly due to exchange rate fluctuations in devaluation of foreign currency receivables and liabilities.
We're an income of 1.3.
3 million euros was recorded in the same period last year versus an expense of.
1.8 million had to be considered in the reporting period.
However, this item has no effect on our liquidity.
Cash and cash equivalents as of September Thirtyth 2020, Amanda.
Wanted to 16.6 million euros compared to 11.1 million euros as of December 31, 2019.
This amount includes the proceeds from the issuance of the mandatory convertible bond.
Gross proceeds of 7.9 million euros.
Just a quick reminder.
Secure liquidity in the short term the company resolved to issue eight.
What percent qualified subordinated mandatory convertible bond 20, 2021, with a total nominal value of up to.
7 million nine of these 14000 euros.
In August 2020, we announced.
That the mandatory convertible bond was fully placed.
As mentioned before the cross proceeds from this issuance amounted to 7.9 million euros.
This has given us considerable financially and above all.
As enabled us to confirm our going concern assumption.
Hi.
Announcing requirement of at least 5 million euros stated in our annual financial report 2019 to maintain business operations until the end of 28 for 21.
Was met and over exceeded by the successfully completion of the capital measure.
Thus by Frontera currently has sufficient liquidity at its disposal.
And this morning, we announced that prevented now exercised our right to mandatory conversion of stability in.
Investors do not need to do anything this will be handled automatically by the custodian banks try.
Aging of support this therefore.
For expected to cease on November 18.
Finally buyer Frontera continues to feel the economic and social impact after Corona pandemic as a result, it is still very difficult to forecast of business performance.
However, as in previous years, the company expect to significantly.
Increase in sales in the fourth quarter.
I would now like to hand over to Herman at the back end of that.
He can provide you with an update on current operational and strategic development.
Over to Europe.
Yes, Thank you Thomas.
The Copano virus Pandemics.
It continues to be a tremendous challenge for all of us.
The situation is disrupting economic activity and continues to dictate the behavior of people and businesses.
As we have already hurt in the first nine months of Twentytwenty, we have recorded a 20.
The percent decline in revenue from product sales compared to the same period last year large.
Largely due to the crisis development in the us.
This decrease is already much smaller.
Then after the first six months and Twentytwenty when the decline in sales was 30 per.
Ascent compared to the first six months in 2019 in.
In Q fleet.
The decline was only 9% compared to Q3 last year.
We are also optimistic for the fourth quarter, which August shows the highest sales by far due to seasonality.
Overall the decline.
Sales in the USA was compensated by the strong sales performance in Germany, and the one off payment or mobile.
Compared to the second quarter, our largest markets the USA.
Has been showing the first signs of stabilization in line with the typical seasonality.
In many parts of the U.S. medical practices have fully opened and patients are willing to undergo PDT treatment for auction Nickolatos sees.
In Germany, we are well on our way, where our new campaign helped clips all forgotten is finished.
Which is a German diverge play for the obligation to prevent skin cancers.
It has generated a lot of attention among dermatologists despite the pandemic.
The extension of the approval in March to include the treatment of attend Nickolatos sees on the body and extremities as well as the benefits of day.
Slide 30.
Have led to a very significant increase in sales of 36% compared to the third quarter of 22 Andy.
Often to 20 and 29 team.
In the remaining in your markets, we've initially over to recall.
The very positive sales trend, particularly in Spain.
The new growth was exceptionally strong prior to the various flip flopped on measures introduced in Spain due to the pandemic.
However in.
In spite of the continuing situation there we do see recovery in sales.
Data and also similarly in the UK.
So that on the European except Germany sales side in Q fleet Twentytwenty, we've only 15% below the third quarter revenue of 2019.
This leaves us with confidence that we will soon be able to build on our.
Sales successes polyol to the pandemic over.
Overall in all European markets, including Germany, we did exceed the previous CEO sales in both the third quarter and the nine month period of Twentytwenty compared to the same period last year.
Operator.
Our selling expenses were significantly lower in Q3, 2020 compared to the same period last year in particular sales and marketing expenses reduced year over year.
Additionally, the decreased administrative expenses to profit from lower legal costs as a result of.
Our operating result improved considerably compared to the third quarter of 2019.
On the clinical and regulatory side we.
We continue to be successful beyond the European label extension in the first quarter of Twentytwenty.
In October the clinical phase.
Most of the pharmacokinetic study to evaluate the safety of PGT using fleet types of under loose was completed.
This study is necessarily for the approval of the treatment of launch our body areas with several virtual EPS of under Luiz and the adjustment of the Imbursement modalities with those of our competitors.
At a product.
We expect the study, including the completion of the study report to be finished by the end of the year.
At the same time, we are working diligently on the new B of order that X L land to be completed.
Which enables the application.
On the loose on larger skin areas due.
Due to the delays in the supply of parts for the first manufacturing batch costs by the co owner wireless cases the.
The dossier for market marketing approval within all be submitted to the FDA in the first quarter of 2021.
Of both on Taylor continues to work intensively to continue patient recruitment for the phase three study for the treatment of superficial basal cell carcinoma with on the loose in the USA during the crisis.
However, the complex study protocol in combination with the limitations imposed by the pond.
They make due to him, but the little recruitment of patients for this study.
And additional market for PGT in the USA is moderate to severe acne.
After the FDA has already responded to our proposed clinical development plan the.
The necessarily clinical trials are expected.
And begin anytime assuming the company can commit to necessarily financial resources.
The study is required by the FDA to extend the label of AMR lose to the treatment of active nickolatos sees on extremities and tonka neck also depend on the funding for the continued foods, our future goals of payer frontier all.
To enter buff the recently successfully completed capital measure.
Delays in the company's goal financing due to legal disputes bring me to the next topic, namely ongoing legal proceedings.
And it's a ruling on September 22nd Twentytwenty the.
The German.
All federal Supreme Court overturned or holding of the Cologne higher regional Court of November 15, 2018, which had been directed against the company.
The reverse judgment of the Cologne higher regional court concerned on action for decision analytics by the shareholder Deutsche.
Slot on AG, which is directed against resolutions of the annual General meeting on May 24 2017 the.
The matter has now been referred back to the Cologne higher regional court for the tile and decision.
In its leasing for the decision.
Cologne higher regional court.
I would assume that the management board hasnt severely and on a crude oil khalif violated the requirement of equal treatment of shareholders in connection with a capital increase carried out in October and November 2016.
No the German federal Supreme Court has determined that.
The violation of law assume positive Cologne higher regional court has not at all occurred.
The company has.
Yes, no file to another application, but the control and higher regional court for the release of the urgently needed capital increase that was approved at the Twentytwenty Andy.
Okay. Another meeting.
We hope to be able to access the capital already approved by the general meeting as soon as possible. So.
So that we can resume our strategically important growth path as quickly as possible with much needed investments in marketing and sales, especially especially specifically in the us as well.
Well us in clinical studies.
As you are already aware the company has been engaged in a process of mediation with the Deutsche a button globe by order of the US District Court of the Southern District of New York Since September of this year.
Within the framework of the ongoing process of mediation.
And you inexperienced entity known mediator has been engaged to resolve ongoing legal disputes in order to have sufficient time for the complex negotiations. The party smoot mutually agreed to extend the original deadline of November 11th Twentytwenty until the end of February 20 Twond.
New one.
This leads me to my final litigation update the tail off to the pharmaceuticals, inc. or do some in short.
Filed in March 2018, with the district Court of Massachusetts against the buyer for Teva group.
In October the further proceedings.
Been referred to as seen by the decision by as Julie attire date has not yet been set.
The lawsuit include see alleged infringement of tusa patents for the sale of Pier order, let in the USA.
Claims based on our north of us use of alleged trade secrets as well as torches.
And for interference with contractual relations and deceptive and unfair trade practices.
To sum has asserted consider the claims for damages in these proceedings.
However.
The company considers these to be unfounded and unsubstantiated we remain confident.
That the allegations made producer on turnover, which is why we are vigorously defending ourselves against them.
The economic and social effects of the pandemic evident for bio frontier.
As a result, it is still very difficult to forecast the business performance.
For the traditionally very strong here and say is our.
However, the stabilization of sales in the USA Havana's us optimistic about the sales performance in the fourth quarter.
I would now like to open the line for questions.
Thanks.
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Our first question is from Bruce Jackson, The benchmark company. Your line is now open.
Hello, and thank you for taking my question.
So.
So if we could talk a little bit more about fourth quarter.
And your next some sort of a three part question here first can you comment on just generally.
Procedure volume at the dermatology offices with some of the other specialties they've been running at approximately 70% to 90%.
The previous patient flow.
Could you comment on just generally the market conditions and that the dermatology offices secondly, the timing of annual price increases can have some impact on the seasonality trends. So do you plan on taking approach.
Nice increase this year during the fourth quarter and then finally can you just sort of Directionally tell US do you expect the the fourth quarter sales to be up.
Quarter to quarter, and then also year to year.
Yes, so quite a number of cost.
So let me let me start.
With the development of fulfill quota.
The competitors into other products.
So we do in fact see.
Increased sales in the fourth quarter.
Obviously, we cannot really put Dick.
What's going to happen for the rest of the year volume.
Very much depends on the development of the crisis.
Compared to other products.
Our mills is actually doing doing okay. So is the decline that we see with some of those.
Is reflecting the until market as far as we can say so all other products have also gone down into that in a similar fashion.
What was the other question.
Sure I'm sorry.
So and then with the that's usually you've taken price.
Price increases in the third quarter or the fourth quarter do you anticipate taking any price increases this year during the fourth quarter.
We anticipate to take a price increase starting.
Our newly first.
Okay.
And then finally brings.
Thank you last.
It's from raws, probably recording quota in quarter and year over year performance.
Certainly be in particular, the United States, we were certainly.
Increased quarter on quarter Q3 versus Q4.
We.
We may not reach the level of Q4 last year in the United.
Great.
Okay.
Thank you. Thank you.
We haven't received further questions I will hand back to the speakers.
[noise].
So I mean do you want to own code yes.
Yes, and so no I was waiting with somebody else wants also question since it's not the case. Thank you very much for listening.
And taking the time this morning or this afternoon.
Thank you very much.
Thank you very much from my side.
And clearly the rest of the day and until next quarter.
Ladies and gentlemen, thank you for your attendance. This call has been concluded you may disconnect.
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