Q3 2021 Biofrontera AG Earnings Call
Ladies and gentlemen.
Welcome to the conference calls this call for Q3, 2021 and increased home.
At our customers' request this conference will be recorded.
As a reminder, all participants will be in listen only mode.
After the presentation, there will be an opportunity to ask questions.
Just any participant has difficulty hearing the conference please.
Crush sake.
Zero on your telephone.
May I now hand, you over to head of IR.
Our users.
Conference.
Please go ahead.
Thank you good morning, good afternoon, and welcome to <unk> earnings Conference call for the third quarter 2021.
Yesterday, we issued a press release announcing financial results for the nine months ended September 32021, we encourage everyone to read the press release as well as the Q3 earnings 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 provisions of the private Securities Litigation Reform Act.
We caution listeners that during this call biopharm tariff 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 business.
Risks and uncertainties are detailed in and are qualified by the cautionary statements contained in <unk> press releases and SEC.
SEC filings.
This conference call contains time sensitive information that is accurate only as of the date of this life broadcast today November 18th 2021.
<unk> undertakes no obligation to revise or update any forward looking statements to reflect events.
Circumstances after the date of this conference call.
And with that I would now like to turn the call over to him and Luca our CFO.
Thank you Pamela.
And thank you very much ladies and gentlemen for taking the time to participate in today's call.
With me today is slowed with Lotto CFO.
He will present the financial results in the second.
Following that I would.
I'd like to share with you updates regarding a regulatory and clinical development as well as the color on business performance and activities.
But first of all to the financial results of the first nine months of 2021 for that I would like to hand over to Luca.
Thank you Carmen and thank you all for joining us today.
Ill start by providing you with an overview of the financial results for the nine months ended September 32021.
Challenges, resulting from COVID-19 pandemic.
The companys sales experienced a slow start at the beginning of 2021. However from mid March onwards, a clear recovery in sales development became apparent. This includes our key markets. The U S. But we have been generating sales comparable to pre pandemic levels again since mid March as a result, we can look back.
On an encouraging nine months period.
But first let me talk about the general revenue development.
For the period January one to September 32021, <unk> group generated total sales of $18 5 million euros.
11% decrease compared to $20 8 million in sales in the same period last year. Please note that total revenue in 2020, and the 2020 reporting period included a onetime payment of $6 million received by the company under a license agreement in April 2020. Therefore, we believe it is important to compare.
Revenue generated from actual product sales.
Revenues from product sales in the first.
First nine months of 2021 were euro $14 3 million up 29% copper compared to the first nine months 2020.
The year on year sales recovery already received in mid March 2021, especially in our largest markets as market. The U S continued resulting from the recovery of the general epidemic situation in the U S as well as in Germany.
Due to the pandemic for better comparability, we not only compare the revenue development in the reporting period with prior year with the prior year period.
But also the revenue in 2019, the most recent pre pandemic here the comparison with product sales in 2019 shows that since the beginning of 2021 product sales and all markets have been back to pre pandemic levels. Despite the fact that the first few months, we're still heavily impacted by the pandemic.
Particularly in the U S.
Let's take a look a closer look at the U S. Our key markets.
And you asked the company generated revenues from product sales in the amount of $12 3 million euros in the first nine months of the year compared to $9 1 million in the same period last year, an increase of 36%.
While sales in the U S 2020 as well.
In January and February of 2021 were significantly lower than the previous year due to the pandemic about Frontera group was able to show a considerable year on year sales recovery, which started as mentioned about mid March 2021.
Compared to U S product phase in 2019, the company recorded a slight decrease a decrease of about 9% in the months January to September 2021, as already mentioned this was mainly due to the weak sales months of January and February this year due to the pandemic as well as the lack of.
Or lower sales of <unk> and zippy, respectively.
Moving on to the German market.
In Germany, the company generated product sales of $3 9 million euros, which is comparable with our with the previous year's level for added transparency and it is worth mentioning that revenues from product sales in Germany increased in 2020, despite pandemic related restrictions.
And the initial Colo Corona sharp swings in April 2020. This was aided by the possibility of daylight PDT, which can be performed without direct contact with a physician.
Compared to the first nine months of 2019 that is pre pandemic again the company recorded an increase of roughly 20% in Germany for the current reporting period and the rest of Europe sales improved by 64% to $2 2 million compared to $1 4 million euros in the nine months period in 2002.
<unk>.
Following galena cost distributions start of avenues and via <unk> and the Scandinavian countries by midyear. Another distribution license has been granted to Poland to meet.
German term because that sharper cleaner spits out <unk> the name of the company.
The onetime license fee payment of 50000 page two the company. Upon conclusion of this contract is included in the European sales.
Compared to the first nine months of 2019, we generated about 22% higher sales during the same period in 2021 and the European markets other than Germany.
Given the volatile sales development in our markets due to the constantly changing governmental restrictions we have been publishing preliminary sales numbers on a monthly basis from April through September this year.
This rather unusual short term disclosure practice, which was intended to show the capital markets that the SaaS recovery out of the pandemic.
Our aim was to give our shareholders a better opportunity to compare the normal slash non pandemic related business development.
As we are now thankfully back to pre pandemic SaaS level studies 2019 sales levels, we have decided to discontinue this mostly practice.
As of the month of September.
As of the month of September.
Furthermore, we would not want to impose this disclosure practice and our subsidiary <unk>, Inc, which recently completed its own IPO on Nasdaq.
Now back to the reporting period, the first nine months of 2021.
Gross profit decreased by $2 5 million in the reporting period too.
15.8 million euros compared to $18 3 million in the prior year period, the gross margin decreased to 85% compared to 88% in the prior year period again. This is mainly due to the onetime license payment received as part of a license agreement in the amount of $6 million included in the prior year's number.
Research and development cost increased to $4 5 million in the first nine months of 2021 compared to $3 4 million in the previous year periods, which is mainly due to the recommencement of clinical studies, which had been put on hold as a result of the COVID-19 pandemic.
Research and development expenses into the costs for clinical trials, but also the expenses for regulatory affairs that is for the granting maintenance and expansion of our approvals.
General and administrative expenses increased to $7 6 million in the nine months period 2021 from $6 9 million euros in 2020, mainly due to cost saving measures implemented in the previous year again as a result of the COVID-19 pandemic as well as the increase in the provision or accrue for.
Anticipated litigation cost for the <unk> litigation in the U S.
Sales and marketing expenses amounted to $16 3 million in the in the reporting period comparable with the previous year's level, which was however.
Two due to an impairment loss of 2 million euros on the <unk> license included in the prior year's figure.
Selling expenses, mainly includes the cost for our own sales force in Germany, Spain, the UK and the United States as well as marketing expenses.
And the 2021 financial year, EBITDA and EBIT.
Were introduced as key performance indicators for the management reporting.
<unk> have become established international as key performance indicators and are replacing the previously reported kpis of profit or loss from operating activities.
Group EBITDA included earnings before interest taxes, depreciation and amortization and decreased by $4 3 million to negative $9 7 million euros in the reporting period compared with negative $5 4 million euro in the prior year period, which again is also due to the previously mentioned one time.
License payment in April 2020, as well as impairment loss on the <unk> license in March 2020.
Group EBIT includes earnings before interest and taxes and decreased by $2 1 million euros to negative $12 one.
1 million euros, compared with negative 10 million euros in the first nine months 2020.
Cash and equivalents amounted to $29 5 million euros as of September 32021.
Compared to $16 5 million euros on December 31 of last year.
While the IPO far Fonterra, Inc. In October generated a gross emission proceeds of $18 million U S dollars as announced on November two 2021.
From today's perspective, Biopharm Taro group has sufficient funds to implement the group strategy in the coming 12 months. The 8 million shares <unk> have also become tradable as a result of the IPO it could.
The available as an additional financial reserves.
In addition, I'd like to mention that the company has terminated the loan from the European investment Bank prematurely. The company amount announced on November three this year to repay the loan in full including interest and other fees still this year in 2021.
And with this summary, I'd like to hand over back to Harman.
Who will update you on the operational progress.
Thank you Ludwig.
I would like to take the opportunity to briefly outline the events of the last two months two for you.
In recent weeks there has been some upheaval at Vodafone Taylor.
Which also affects me personally.
Would like to explain to you. Some of you have been long standing company homes of Vodafone Taylor.
This leaves them.
I'd like to take this opportunity to provide you with a more detailed explanation of the decision making process.
<unk> actions.
It has become increasingly impossible for biopharm tailor AG to actively flexibly structure, the financial basis of the company due to the blocking that has existed for years in the implementation of the authorized capital which was always for us the shareholders.
<unk> annual general meetings.
Especially.
After the exceptional situation of the Corona pandemic.
Which we have managed to cope with successfully on the expense side as well as on the sales side.
We must makes the best possible use of the resulting growth momentum.
<unk> future clearly laws in the U S market.
This is where we have the greatest growth potential with our product.
Significantly increasing marketing and says efforts here.
Therefore, the cornerstone for successful cobalt calls.
However, due to the situation described the bus the investments required for rapid growth in the U S market can no longer be provided by <unk>.
The financial Independence of Biopharma, Inc.
Therefore, the only sensible ways to consistently pursue our expansion strategy.
Which we have been successful successfully pursuing for years.
With the independent IP all of our U S subsidiary Biopharma, Inc. At the end of October.
We have clear.
Please requisites for it to not be able to grow and develop flexibly and independently of the financing options of Buffalo Vodafone to achieve.
That is can effectively exploit the potential of the U S market.
The German bellerophon tailor companies with benefits directly directly from disclose who the license and supply agreement.
Therefore, it is irrelevant, whether Biopharma, Inc is still a controlled subsidiary or not to the contrary.
The chefs and Vodafone Taylor, Inc. By Vodafone.
<unk> has become marketable through the IPO and can be used flexibly to finance Vodafone.
Should it be required attempt.
The temperature increase of <unk> <unk> will become unnecessary for a long time.
Since the USA represents by far the largest sales market for the entire bias one Taylor who.
The all of the growth engine within the group and to buy the hotel.
The cost for future growth of the entire <unk> biopharma will be determined in Biopharma, Inc.
After originally agreed to extend my personal to them.
On the management board of Biopharma.
<unk> only until December 31, 2022.
No decided to remain at the disposal of the Vodafone group for a further three years.
We'd like to devote these three years, where I see the greatest possible benefits for the company.
On November 10, 2021 submit.
Submitted to my request for early retirement as CEO and member of the management Board to the supervisory board of Biopharma.
<unk>.
In the best interest of all the hotel companies will fully devote myself to module.
So I could do chairman of players want to ink in the future.
While I will continue to be a part of the company.
I would like to take this opportunity to you two thank you very much for the task to have placed in me and the entire company over the years.
I hope that the seats, we have planted over many years will finally come to fruition in the near future.
The succession plan for my position was initiated by the Supervisory Board when my contract was extended about a year ago and we.
We are confident that the appointment will be made in such a way that they.
It reflects the strategic approach of players.
G.
Along with these strategic steps <unk> has also continued to make progress on the regulatory side.
Following the FDA screen large for the approval process of the new larger PDT lamp hotel that excel in June 2021, we have finally received approval for the <unk>.
For the U S market in October.
This sets the stage for the production of the them. So that we can start sales in the U S. In the course of next year.
The lamp will already be used in our clinical trials, which are about to start.
Earlier this week, we announced that two clinical studies for our Menu's commencing in the USA Povich clinical sites are currently being initiated.
Pacifically.
<unk> sites being initiated for the phase <unk> study for the treatment of moderate to severe asthma in adults and eight sites for the phase one safety study in which the safety of photodynamic therapy with the simultaneous application of fleet tubes of <unk> will be investigated.
Certainly number one includes 126 adult patients suffering from moderate to severe <unk>.
Which will be treated with <unk> PDT or placebo.
<unk> of our modems PDT will be tested with incubation durations of one <unk> compared to placebo the primary endpoint of the studies.
The absolute change in the number of inflammatory lesions and an improvement in symptoms as assessed by the physician conducting the studies.
The other study.
Evaluates the safety and Tolerability of news in the treatment of AEP located on the face and scalp with PDT to the sudden you autolytic.
The study includes 100 patients with mild to severe actinic keratosis, each patient will receive the content of <unk> entire tubes of loose for field <unk> treatment. This.
This study comes on the back of a maximal use pharmacokinetics clinical studies completed in early 'twenty two a newborn as.
As announced in June.
This is the study results from the pharmacokinetics studies were presented to the FDA and that meeting the FDA requested another safety study focusing on trends and application side effects before allowing the amendment of the product information be changed to fleet tubes.
Treatment.
Currently the product information limits us to one tube of avenues per treatment.
Both studies are focused on optimizing market positioning and expanding market share for our FDA approved prescription drug <unk> for photodynamic Soho piece in our largest market the United States.
Studies have commenced with site initiations for both studies being underway, we expect patient recruitment to start before the end of the year.
Now a few words on the current sales performance.
As we have already heard from new tweaks. The Vodafone Taylor group can look back on an encouraging nine months periods due to a significant recovery in the second and third quarters of 2021.
The company has benefited in terms of revenue from photodynamic therapy with daylight or daylight PDT for short in the German market last year.
Even in the midst of this pandemic.
Pandemics.
All sales in Germany, having increased even in this year.
Pandemics set us back significantly last year, and our keens key markets the United States as a result of the Covid measures.
The reporting period, however, Vodafone Teva was able to create new sales momentum, particularly in the U S. Such that sales gradually picked up over the last two quarters and we were even able to go by comparison to the pre pandemic.
However, we are not out of the woods, yet with regards to the Covid related restrictions on visits to doctors offices, both for patients and our sales team.
Pandemic related restrictions has by no means completely disappeared in the doctor's offices and continue to make the work of our sales teams more difficult.
The recovery in ourselves shows that everyone involved is learning to cope with the situation. We firmly believe that the continued recovery will also translate into further says.
Of course, we also view the co development of the pandemic was concern.
Hope that there will be no further significant downward trend.
Briefly about.
Our second product in the U S portfolio.
Sippy could hardly be promoted during the pandemic and the scheduled relaunch could a new start in the past few days as the product shipment homeserve now or license, though was delayed.
At this time was used to work on product positioning and to prepare the new campaign.
Following the restocking of many U S pharmacy inventories our sales force is now able to start promoting the product again.
Clay.
All in all the.
The business performance in the first nine months of 2021 was in line with our expectations.
The oncology development in the past two quarters leaves us optimistic the.
The company fully maintained the guidance for the 2021 financial year published on April 12.
Accordingly, we expect our news is between 25, and 32 million euros as well as EBITDA loss of between 11 and $14 million, an EBIT loss of between 13 and $16 million.
On the forecast can be found in our annual report 2020.
Finally, I would like to express my sincere gratitude to our employees who have bought the companies through these difficult times without any major damage. Thank.
Thank you also dear shareholders for your patients and for taking the time to participate in our conference call today.
I would now like to open the line for questions.
Thank you and then we will now begin the question and answer session.
If you have a question for speeches Keystone zero.
And one on your telephone keypad Naughton PDT.
Yes.
Once your name has been announced you can ask your question.
If you find your question is on so just wanted you to just speak now.
And two to come to your question.
Using speaker equipment today.
Handset before making a selection.
In interest of time, we'd like to you just two questions.
So Paul two questions.
One moment please for the first.
Jim.
This does question. We received is from Bruce Jackson Benchmark Company. Please go ahead. Your line is now open.
Hi, Thank you for taking my questions and congratulations on all of the progress.
My first question is about the.
Revenue guidance and the interpretation. So now that you have successfully spun out.
The U S subsidiary.
The revenue guidance includes sales for the subsidiary.
When the guidance was originally put out it was for the so the total AG entities. So maybe you could just help us interpret the revenue guidance for the rest of the year.
Yes.
Since Vodafone.
She is still the controlling shareholder of <unk>.
Inc.
Both are until the ink is still fully consolidated.
As such the guidance contains as.
Is unchanged contains both companies.
Okay. Good and then the.
The other question I've got right now is around the mechanics of the licensing agreement for animal is to the U S subsidiaries.
I understand it's on a sliding scale.
How is that.
Net interest so.
In terms of the revenue thresholds for the licensing fee percentage is it calculated on an annual basis or is it calculated on a quarterly basis.
Does the does the licensing fee shift when you hit a certain run rate or does it hit.
Change when you.
Cross certain calendar points.
Sure.
Calculated on an annual basis, so the first $30 million.
For the first $30 million in revenues.
Transfer pause is 50%.
Of the of the nuts pause then for the next $20 million, it's 40% another thing above 30%.
There's a scoping noted on AR.
On an annual basis, so as we close off generally starts in new.
Okay got it alright, thank you very much I'll hop back in queue.
Thanks Bruce.
The next question is from Thomas Layton Lake Street Capital markets. Please go ahead. Your line is now open.
Thanks, and I appreciate you taking the questions back to the guidance could you, perhaps it's a pretty wide range.
About a quarters worth of revenue that you could put between the the higher end the lower bound can you explain to us a little bit the assumptions that go into either the low end or the high end and what would need to happen to be one or the other ends of the guidance.
Well when we look at the assumptions.
For the low end.
<unk>.
To end up at the low end, we would have to see significant worsening of the corona situation to the point.
Making the revenues would be extremely difficult.
Or the high end.
As you probably or certainly you would remember from previous years, we always have this this upswing towards the end of the of the year when the doctors offices actually filled our feed stocks.
In previous years, we have had.
Our price increase on January 1st this year.
We have decided not to have a pause increase.
And because of that we are not certain what to expect on the upswing of towards the end of the year, but this will be in the same range.
That could bring us to the to the upper end of the.
Of the.
So of the range.
Or more likely.
So don't be too the same happening to the same extent as in previous years and then we use.
Probably be comfortably.
Okay.
Lynch.
Got it and then.
Another question on <unk>.
How are you going to manage the cash that's the fri allocated versus AG allocated so for example.
With respect to sales force expansion in the U S would that be BFR I cash do they have to contribute to R&D projects that are managed by AG could you just give us some insight into how you guys plan on managing that.
All of this is determined in the in the license and supply agreement between the between the two companies.
So until the inks tasks to take care of marketing messages.
Expenses, so extending the sales force would be on the books of <unk>, Inc.
Buy a home Taylor Ags tasked to do all the regulatory work to do pharmacovigilance.
To perform the clinical tires. These clinical trials that's volume.
AG has to perform.
Clearly defined in the other city.
And for those tires and the one the two that I was just starting just two oldest at least for those tires all the cost will be on the books of <unk>.
Got it I appreciate you taking the question. Thank you.
Sure. Thank you.
Thank you there are no further questions. So I would like to come back.
So if there are no further questions then thank you.
You very much.
For taking the time and listening.
Have a nice day.
Jamie up till next time, thank you.
Ladies and gentlemen, thank you for your attendance. This call has been concluded.
You may disconnect.
[music].