Q1 2022 Biofrontera AG Earnings Call
Anke Muhlen: On Tuesday, we issued a press release announcing the financial results for the three months ended March 31st, 2022. We encourage everyone to read the press release as well as the quarterly report, both of which are available on our website.
Speaker 1: We encourage everyone to read the press release as well as the quarterly report, both of which are available on our website.
Anke Muhlen: We would like to remind you that in today's conference call we will only provide a summary of their results. We caution the audience that Biofrontera's management will make forward-looking statements during this conference call.
Anke Muhlen: Actual results may differ materially from those expressed or implied by such forward-looking statements, due to the risks and uncertainties associated with the company's business.
Anke Muhlen: This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast today, May 19th, 2022.
Anke Muhlen: Biofrontera undertakes 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 it over to our CFO, Ludwig Lutter.
Ludwig M. Lutter: Thank you Anke, and many thanks to you, our shareholders, for taking the time to participate in our first quarter 2022 earnings conference call. I'd like to give you a brief update on the first three months of fiscal 2022 and then present the financial results in a bit more detail.
Ludwig M. Lutter: The first quarter was unique for Biofrontera because following the deconsolidation of Biofrontera Inc. in December, we're now accounting for the revenue rate contribution of the US business as license revenue for the first time, and in parallel, the operating expenses of the US business has been completely eliminated.
Ludwig M. Lutter: In some we were able to bring Biofrontera AG into the profit zone for this quarter, with an overall increase in sales of 20% compared to the same quarter of the previous year, and that, despite deconsolidation.
Ludwig M. Lutter: In the first quarter, Biofrontera generated sales of €6.6 million, which corresponds to the above-mentioned increase of about 20% compared to previous year's figure of €5.5 million. In this quarter, we received revenues of 4.8 million from our former subsidiary, Biofrontera Inc. which generated revenues of 3.8 million in the same period of the previous year. This represents an increase of US sales of just South of 25%. In contrast, sales in Germany were 17% below the previous year's result of 1.4 million at 1.2 million. However, we were able to more than compensate this decline with a positive sales performance in the rest of Europe, with an increase of 140% to 636,000 versus 265,000 last year. More details on this in a minute.
Ludwig M. Lutter: However, we were able to more than compensate this decline with a positive sales performance in the rest of Europe, with an increase of 140% to 636,000 versus 265,000 last year. More details on this in a minute.
Ludwig M. Lutter: Operationally there were also some very favorable news. The listing of the recently granted patent around the new Rodo LEDXL lamp in the FDA Orange Book and the authorization of Biofrontera GMBH as a contract laboratory for batch control and stability testing for Ameluz are important steps towards improving quality assurance and brand protection for Ameluz.
Speaker 2: The listing of the recently granted patent around the new rodoletticsx L lamp in the FDA Orange book and the authorization of bioofontera G mbh as a contract laboratory for batch control and stability testing for amulus are important steps towards improving quality assurance and brand protection for amulus.
Ludwig M. Lutter: To put a little bit more color to that, patents listed in the Orange Book are patents that protect FDA-approved products. With that, the FDA has confirmed that the patent hinders generic companies in launching generic products over the next decade, until the year 2040. This will strengthen our market presence initially and also simplify market monitoring in the years to come.
Ludwig M. Lutter: The approval of Biofrontera Pharma GMMH as a contract laboratory by the FDA and previously by the European Medicines Agency, EMA, gives Ameluz quality assurance a broader basis. Previously, quality assurance was performed entirely by Biofrontera's contract manufacturer in collaboration with third-party suppliers. Now, Biofrontera Pharma can carry out part of this required testing production batch shift at the headquarters itself. This reduces dependency on third-party suppliers and the risk of production downtime.
Speaker 2: Previously, quality assurance was performed entirely by Biofrontera's contract manufacturer in collaboration with third-party suppliers. Now, Biofrontera Pharma can carry out part of this required testing production batch shift at the headquarters itself. This reduces dependency on third-party suppliers and the risk of production downtime.
Speaker 2: Now Bio fronterra pharma can carry out part of this required testing production batch shift at that quarter's itself.
Speaker 2: This reduces dependency on third-party suppliers and the risk of production downtime.
Ludwig M. Lutter: The withdrawal of the Spanish price decree on April 1 this year was a significant milestone, particularly for the development of our European business. A price cut was imposed on Biofrontera by the Spanish Health Authority in November of 2020, forcing us to reduce the original selling price of Ameluz in the Spanish market by 50%, down from 150 to €75.
Ludwig M. Lutter: This reduction came into effect due to an incorrect classification of Ameluz in terms of the concentration of the active ingredient contained. We contested this classification by the authorities in various ways over the past year and a half. Firstly, we appealed directly to the authority with an administrative complaint. Secondly, we took legal action against this price decree with success. As a result, the new legislation was imposed. The classification of active ingredients has now been revised so that the incorrect classification of Ameluz has been removed and Ameluz can now be sold again on the Spanish market for the original price of euro 150.
Ludwig M. Lutter: As we are in the market environment in Europe where different pricing threatens price stability throughout the market, the entire European market, we're now very pleased that we have been able to solve this problem.
Ludwig M. Lutter: In particular, the German market was confronted with the impact of [inaudible] imports resulting from the price reduction, where sales in Q1 lagged significantly behind, although tube sales reached record levels.
Ludwig M. Lutter: In the clinical development program, particularly for the BCC [inaudible] carcinoma study, positive progress was achieved after patient recruitment was considerably delayed due to the challenging protocol of the Phase III study. 75% of the planned 186 patients have been enrolled in the study to date, so that patient recruitment is expected to be completed by the end of this year.
Speaker 2: So that patient recruitment is expected to be completed by the end of this year.
Ludwig M. Lutter: Now back to the numbers in more detail. Biofrontera Group generated a total of revenues of €6.6 million in the first quarter of 2022, an increase of 20% compared to the previous year's period, which was 5.5 million.
Speaker 2: Biofrontera Group generated a total of revenues of six point point: €6 million in the first quarter of 2022, an increase of 20% compared to the previous year's period, which was five point five million.
Ludwig M. Lutter: Product sales decreased by 3.7 million euros year-on-year to 1.8. The previous year was 1.5, however, this is mainly due to a change in PNL line items resulting from deconsolidation of the revenues of Biofrontera Inc. in the amount of 3.8 million in the previous year. Now, revenues from product supplies to Biofrontera Inc. under the license agreement were accounted for as licensed revenue in the amount of 4.6 million this fiscal year.
Ludwig M. Lutter: Sales in Germany decreased by 17% compared to the same periods of the previous year to 1.2 million, the previous year was 1.4. As mentioned, this decline is mainly due to the reimports, as just mentioned. However, on the basis of the numbers of tubes sold, we were able to achieve record levels in Germany.
Speaker 2: As mentioned, this decline is mainly due to the reimports, as just mentioned. However, on the basis of numbers of tuop sold, we were able to achieve record levels in Germany.
Ludwig M. Lutter: In the other European countries, we were able to increase not only the number of tubes sold but also total product sales by 140% to 637,000 as opposed to 265,000 last year, again partly due to a countereffect of these re-imports.
Speaker 2: As opposed to two point zero six five million last year, again partly due to a countereffect of these re imports.
Ludwig M. Lutter: Gross profit increased by 877,000 in the first three months to 5.5 million, compared to 4.6 million in the same period of the previous year. The gross margin decreased slightly to 83% compared to 84% same period last year. Research and development cost increased by 22% to 1.6 million in the reporting period compared to 1.3 million in the previous year, primarily due to increased clinically research activities.
Ludwig M. Lutter: General and administrative expenses amounted to €1 million in the first quarter 0f 2022, previous year was 2.5 million and thus decreased by a total of 1.5 million compared to the previous year. This was mainly due to the deconsolidation of the GNA expenses of the former subsidiary Biofrontera Inc in the amount of 1.2 million in the previous year, as well as reduced costs for legal disputes, particularly due to the out-of-court settlement last year of the legal district with Dusa Pharmaceuticals.
Speaker 3: This was mainly due to the deconsolidation of the GNA expenses of the former subsidiary bioofterary ING in the amount of one point two million in the previous year, as well as reduced costs for legal disputes, particularly due to the out-of-court settlement last year of the legal district with DSA Pharmaceuticals.
Ludwig M. Lutter: Selling expenses amounted to 1.7 million in the first three months, a decrease of 3.1 million compared to the previous year, again mainly due to the deconsolidation of Biofrontera Inc as of December 31st, 2021, whose share of selling expenses was included in the previous year figure with 3.4 million euros.
Ludwig M. Lutter: The group's EBITDA improved by 4.4 million to a positive 1.3 million in the first quarter of 2022. In the same period of the previous year, this figure was still negative at €3.2 million. This is also mainly due to the previously described fallout effects from the deconsolidation of Biofrontera Inc in December 2021. These effects also had a corresponding impact on EBIT, which improved year-on-year to a positive 1.1 million as opposed to a negative 4.0 million in the last year.
Speaker 2: This is also. This is also mainly due to the previously described fallout effects from the deconsolidation of biofrontier anG December 21. these effects also had a corresponding impact on EBIT, which improved year on year to a positive one point one million as opposed to a negative four point four point zero million in the last year.
Ludwig M. Lutter: Earnings before income taxes amounted to negative 28.1 million in the first three months of 2020, decreasing by 23.2 million, compared to the prior year figure of negative 4.9 million.
Speaker 2: 23.2 million, compared to the prior year figure of negative four point nine million.
Ludwig M. Lutter: This large negative amount is a result from the fair value remeasurement of our investment in Biofrontera Inc as of March 31st, which was initially required to be reported at the market value as of December 31st, 2021.
Ludwig M. Lutter: Cash and equivalence in the group amounted to 4.9 million as of March 31st, 2022, compared to 6.9 million as of the end of last year.
Ludwig M. Lutter: Taking into account the earnings expectations, the capital increase resolved in our extraordinary shareholder meeting on April 7th, and the holding of 8 million liquid shares in Biofrontera Inc, Biofrontera AG group consequently has sufficient liquid funds or funds that can be liquidated short term to implement the group's strategy in the upcoming 12 months, in addition to the possibility of raising debt capital.
Ludwig M. Lutter: Lastly, in addition to the lawsuits filed by the Balloton group in February regarding the competence of the general meeting to decide on the IPO of Biofrontera Inc. last year, we were also served with a lawsuit filed by our second-largest shareholder, [inaudible] GMBH on May 16, 2022, complaining about the resolution passed by the extraordinary shareholder meeting on April 7th this year regarding the capital increase.
Ludwig M. Lutter: However, in summary, I'm reasonably satisfied with the outcome of the first quarter. Therefore, I would like to highlight Biofrontera group is well positioned, particularly after the deconsolidation of Biofrontera Inc. to achieve sustainable profitability, also on an annual do basis shortly.
Ludwig M. Lutter: And with that, I would like to now open the line for questions.
Operator: Ladies and gentlemen, we will now begin our question and answer session. If you have a question for our speaker, please dial zero and one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask the question. If you find your question has been answered before your turn to speak, you can dial zero and two to answer your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment please for the first question.
Operator: As a reminder, if you want to ask a question, please press zero and one.
Operator: There are no questions for the moment and so I'll hand it back to you.
Multiple speakers: Well, thank you. After a really favorable quarter, looking back and a nice outlook, I can understand that there are not that many questions out there. So we're reasonably happy and set aside with our business right now and therefore, I'd like to thank you for your time, for listening in, and look forward to hopefully presenting some equivalently nice numbers and developments during our next call for the half-year review. Thank you very much and bye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may now disconnect.