Q2 2023 Biofrontera Inc Earnings Call
Good morning, everyone and welcome to the Bio Frontier, Inc. Second quarter 2023 financial results and business update conference call.
At this time all participants are in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's prepared remarks, there will be an opportunity to ask questions.
To ask a question you May press Star and then one on your telephone keypad withdraw. Your question you May Press Star two.
Please also note today's event is being recorded and at this time I'd like to turn the floor over to tourists to tell with L. H a investor Relations. Please go ahead.
Good morning, and welcome to Bio Frontera, Inc. Second quarter 2023 financial results and business update conference call. Please note that certain information discussed during today's call by management is covered under the Safe Harbor provisions of the private Securities Litigation Reform Act.
We caution listeners that biomarin terrorists management will be making forward looking statements and that actual results may differ materially from those stated or implied by these forward looking statements due to risks and uncertainties associated with the Companys business.
All risks and uncertainties are detailed in and are qualified by the cautionary statements contained in buyer for terrorists press releases and SEC filings.
Also this conference call contains time sensitive information that is accurate only as of the date of the live broadcast August 11 2023.
I have a friend Terra undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this conference call, except as required by law during.
During today's call there'll be references to certain non-GAAP financial measures My friend Terra believes these measures provide useful information for investors yet should not be considered as a substitute for GAAP, nor should they be viewed as a substitute for operating results determined in accordance with GAAP a reconciliation of non-GAAP to GAAP results is <unk>.
In this morning's press release, more specifically management will be referring to adjusted EBITDA, a non-GAAP financial measure defined as net income or loss, excluding interest income and expense income taxes, depreciation and amortization and certain other nonrecurring or non cash items with that I would now like to.
To call turn the call over to Herman we bear CEO , chairman and founder of bio Terror Herman.
Yeah. Thank you Todd.
My thanks to everyone joining us this morning.
Today's call.
I'll provide an overview of our golf play energy and all our.
Accomplishments during the second quarter.
<unk> gone through a full menu value driving initiatives.
Let's let flow our CFO .
Follow with a discussion on financial results and then both of us will be available to answer questions.
Well I think there's a business update we have made tremendous progress across three critical lel's, including expanding our sales force.
Optimizing our cost structure and advancing R&D and clinical initiatives.
Regarding says I would like to commend the team as we announced that's why the new <unk> five point.
A 41% increase for the quarter year over year.
Well I'm Gonna Louis makes up the vast majority of the revenue.
We are appalled to also share that 55 b of older and that labs will place that physician offices during the quarter more.
More than twice the number a year ago.
No.
So going in our malls lumps in the fields reflects both first time installations and adding among dermatologists, so that you're familiar with it.
Pete.
More specifically after 55 installations.
Similarly trended so its already at the bottom left in place and bought a second lender to provide more loose PDP patients.
So the main thing about 35 offices on all set up to start I'm going to be a holder that's P. T.
Clearly there is launch a policy for future goals and we are delighted with the increasing recognition of BTG.
As an effective and patient friendly treatment for Sydney.
Yes.
During the last quarters call.
We introduced our strategy for growing the sales team.
We have achieved all golden off reaching 49 bus.
Subsequent to all Ingleside is false we have also gone into the medical and the new focus William Grossman support on.
On today's call I'll share some of the strategic shifts and all of that.
Rich and I'll be intends to best utilize that support our sales force.
To compensate for new slots in Chicago.
We have reduced the workforce in other parts of the disciplines.
Yeah.
So metropolitan regions have consistently shown high sense results I'm glad its full potential.
To maintain a leaner and more strategic Paul.
<unk> four goals.
We are adopting a more surgical approach to our sales strategy.
We will be channeling more resources, both in terms of human capital and medical Affairs.
Some support and you showed this.
And two metropolitan sales totally totally set that's demonstrated high 11, you potentially.
This includes enhanced training for all our existing sales teams, India and these L. Yes extended marketing campaigns and a potential increase in the number of self imposed until two stone bulge.
On the flip side the regions that have seen general agent comparatively lower revenues and below what return on invested as since we have decided not to extend all says teams all bid all you can tell it's always.
Certain cases, we have fully deployed all suites also stu lel's with guys the opportunity.
This shift is being driven by data and Optimizes all marketing stunt.
But being smart.
Our intention with all says efforts.
We're able to recalibrate our strategy if needed and ensure that we stay agile and responsive to market demands.
Homing in on the high end high value metals, we can achieve our goals towards profitability.
During Q2, we made the difficult decision to implement a small reduction in false.
The reduction was centered primarily on oleds less solution to a I'll call them trace of calls.
This decision was driven by the necessity to streamline our operations.
It's to reduce costs.
However, while we took a step back in certain areas.
We simultaneously took two steps forward and such.
Such as installing a new generating positions.
Alright dialing in these adjustments, we are positioned well to be leaner and more agile with a heightened focus on driving revenues.
Let me turn now to the innovation and R&D, taking place at the tail.
A key value driver is our portfolio of active label expansion studies for AMR Lewis.
Just yesterday we.
We announced that an old a month of all humbled 86 patients is now complete and the phase III clinical study evaluating <unk> in combination with be a hold on that all the placement of superficial basal cell carcinoma, well S. P. C C.
Approximately two thirds of non melanoma skin cancer cases in the U S. B C C.
Leading to a significant unmet medical need for more effective less invasive and cost efficient therapies, that's tweet BCC as well as underlying malignancies adult ionizing radiation.
We look forward to sharing results from this phase III study in mid 2024.
Adding S. ACC took a label if all goes well.
No no don't close in addition to treating individuals SBC C. Lesions to include six lesions into the treatment of larger sun damage fields, but I'm going to spare fortinet PDT as it just won't be approved for actinic keratosis.
Just the next logical step and all go to Alpha one field selected treatment for all southern Jews neoplastic damage and largest skin L. A S.
Regarding extending the I'm going to sleep in a couple of doses.
It's a large and growing demand for our highly effective therapy to treat AK beyond the phase and Scott.
We have an ongoing phase <unk> study evaluating the use of honolulu's PDT in the extremities neck Tong currently on the holding.
And that's those 58 patients across 10 cents to us.
We aim to enroll a total of 456 subjects solidified by the region.
Let's see.
After the final patient completed justify the clinical phase of the study.
We're currently analyzing results from our open label Multicenter Phase <unk> safety and Tolerability study investigating fleet you, so I'm gonna lose for treatment.
This safety study.
The potential to be the final study required for F D. A.
All this leads to treatment with <unk>.
Will you be available very soon as we remain on track for FDA submission before year end.
As most of you are aware.
Oh, well PDT lamps, B F older and older less XL.
The market with solutions in dermatology and the only but lots of push by the FDA for use in photodynamic therapy.
However, the cold and postponed to a fault PTT, it's mostly fixed and limited to dermatology clinics all specialized facilities.
Recognizing the constraints close by the station that lead nature of Colm could you T labs, and the growing demand for flexibility in Cleveland locations.
In June we have announced the a quality of two granted U S patents and the engagement of a completely manufacturer to develop a new low cost portable P. D T lab.
The prototype.
Under development and aims to deliver the quality.
Also all the lead times, and a new and more accessible for them.
In line with both the physician and the patient in mind.
Columbus designs to be compact and lightweight, enabling easy storage and allowing clinicians to bring the land to the patient.
Its portability allows it to be an option that physicians often says the space constraints.
Mobile dermatology clinics.
And so each England mulch, all underserved areas.
And part of the Lumpiness or the mall.
The oil each to a mall dermatologists and more offices from a sales perspective is it also a sales team to give life demonstrations at physician offices.
And part of it.
<unk> can be transported in the back of our call I'll be presented easily at Confluences.
Well, Unfortunately, PDT lamp and bodies FIFO until its commitment to innovative solution set.
Other types of care and expand access.
I look forward to keeping you updated during the development process.
Yeah.
That's fine.
I'm proud of our commitment to patient care and innovation during the second quarter, we look onto the new patents related to a PTT protocol that is expected to be less painful but equally as effective.
With an incubation between application of the gel that's exposure to life.
With a baseline spectrum similar to some knowledge.
Although by a 10 minute, but 10 minutes, although that lunch and human nation.
This novel Protocol is far more patient friendly.
This is the fourth patent protecting Omega was granted by the U S patent office in the last 18 months.
And it expires in April of 2039.
Plenty of protocols will help to enable high efficacy P. D T four more patients in the R&D line.
Used excess to PBT.
We look forward to providing updates on all of these programs and more later this year with that.
The call also to pledge to walk through the financial details of the quarter.
Alright.
Thank you Herman.
So net revenue was $5 8 million for the three months ended June 30th 2023.
The increase of $1 4 million or 31% over the prior year.
For the first six months net revenue was $14 6 million compared to $14 2 million last year.
This growth was driven by higher amyloid volumes due largely to our sales force expansion and higher adoption of AMOLED is by dermatologists, even with an absence of any by buying impact due to a price increase.
As a reminder, in 2022, we increased the price for analysts by 5% on April 1st.
Causing dermatologists to accelerate some of their purchases into Q1.
We have not raised the price of amyloid as in 2023, and thus revenues in Q2 2023 we're not impacted by any such actions and we are still ahead of our 2022 revenues, indicating strong growth.
And you know.
Our solid second half of the year.
Total operating expenses were $14 5 million for the second quarter of 2023, compared with $10 7 million for the second quarter of 2022.
And $28 7 million year to date compared with $23 5 million for the first six months of last year.
The cost increase of $5 2 million was driven by approximately $3 million due to our sales force expansion and increased investment in medical affairs and reimbursement along with some severance costs as we pivoted resources to more revenue generating roles as Herman mentioned.
And approximately $1 7 million of the increase.
But due to onetime legal fees from a settlement of litigation in the first half of 2023.
Cost of revenue for the quarter was $2 9 million, which was about 13% higher than the second quarter last year and reflects higher sales of analyst.
Cost of revenue for the first six months was $7 5 million compared with $7 7 million last year.
Selling general and administrative expenses were $11 5 million for the quarter up approximately 15%.
For the first six months of this year SG&A expenses were $21 4 million compared with $17 7 million in the first six months of 2022.
As I mentioned, the increase was primarily driven by realigning SG&A costs and do revenue generating functions. The expansion of our sales force and also includes the nonrecurring legal expenses.
The net loss for the second quarter of 2023 was $9 8 million for $7 23 per share and this compares with a net loss of 850000 or <unk> 90 per share for the prior.
Your quarter I will note that these figures are on a post split basis.
Net loss for the first six months of 2023 was $17 3 million compared with a net income of $4 7 million for the first six months of 2022, which was primarily a result of the change in the fair value of outstanding warrants as net income or loss comprises multiple noncash items, we referred to.
Adjusted EBITDA for a better representation of the business the status.
Adjusted EBITDA was negative $7 9 million for the quarter compared with negative $7 1 million last year. The decrease was driven by higher SG&A costs, partially offset by increased revenues adjusted EBITDA for the first six months of the year with negative $11 8 million compared to.
$9 5 million during the same period in 2022.
I refer you to the table in the news release, we issued earlier this morning for a reconciliation of GAAP to non-GAAP financial measures.
Yeah.
Turning to our balance sheet.
As of June 30th.
We had cash and cash equivalents of $4 5 million compared with $17 2 million as of December 31 of 2022 aside from operations. We have spent more on inventory in 2023, then I would like due to some lingering supply chain concerns.
Into early 2022 we increased inventory orders in 2023, we're not anticipating making any inventory purchases for the first half of 2024 as a result, and we will continue to manage our working capital very closely.
Based on the quarter's strong results we are on track to hit our previously announced goals with an optimized.
Sales force able to produce higher returns along with label expansion opportunities advancing on track.
We are affirming our 2023 financial guidance with.
With the strongest months for PDT ahead of us and based on multiple positive indicators for the year. So far we expect at least 25% growth in revenue compared with 2022 and expect to be cash flow positive within approximately one and a half years.
So with that overview of our business and recent financial performance permanent I are now ready to take questions from our covering analysts.
Operator.
Ladies and gentlemen at this time well begin the question and answer session to ask a question you May Press Star and one did withdraw your questions you May press star two.
Our first question today comes from Jonathan Aschoff from Roth M. Cam. Please go ahead with your question.
Thank you guys and good morning, I'm, sorry, if you mentioned this in the call I'm juggling three calls myself did you update acne and trunk extremity enrollment or.
Or if you did not can you repeat it.
We.
We update it on the whole.
And of the tongue and and extremities.
That that's a study that's been the whole time no I'm kidding.
T 58 patients.
We did not update the akamai on all of them.
I would have to look at that for a few minutes.
Maybe if you go on with the ice creams.
Yeah, So Herman I can baidu that time by asking a financial question. The SG SG&A. How is how is that going to look to the best that you can that youre comfortable giving.
You know that was a decent top second quarter. So how much of that is one time stuff.
So one time.
Don't have that number off of off the top of my head I E. The suffering but the run rate savings that's excluding the increase in sales force.
Is expected to be about $1.8 million.
After the severance is cleared out and we.
Higher one work position that we were.
In the reimbursement area.
Okay. So it could be a little a little more than say 10 million a quarter.
Something like that maybe.
Maybe I.
A little less than $10 million a quarter [laughter], okay, alright, even better. So do you think the third quarter sequentially goes up given that there was no <unk> price hike.
Do you think that is something that.
Well facilitate a bit more smooth.
Right.
Had in prior years.
Yes, we are expecting.
The third and fourth quarter to be to be higher.
And hopefully the fourth quarter substantially higher.
Yes that should be a very strong bid or gross.
Herman if you still want some more time I can ask why did you feel.
Still the number okay for acne what is it.
It's 56, although a pump of 26.
Thank you very much and the 58 patients have trunk extremities out of how many wanted.
Almost 65.
Okay great.
And then my last question did you guys lose any of the people you hired when you hired that bolus of sales and marketing people.
We.
When you all that stuff like every company, we have a certain tone on what turnover both people, but not higher than.
Other companies.
It wasn't much in the in the.
On the average of all companies of all kinds.
So we did not specifically Louis people wouldn't be able to get in line for since Legion smell.
Okay.
That's all I have thank you very much.
Oh.
Our next question comes from Bruce Jackson from the Benchmark Company. Please go ahead with your question.
Good morning, and thank you for taking my questions.
I wanted to get back to the seasonality in sales just so I understand this correctly.
Now with the price increase you were talking about is it this year or next year.
You're not taking the price increase.
So hi.
Hi, Bruce.
So we.
We have not taken a price increase since April 1st of.
2022.
And we are evaluating.
When we should do that and what that should be.
Okay, and then and so when we're looking at the back half of this year will it.
Followed that that standard pattern, where the fourth quarter is the biggest quarter of the year.
Because in the past sometimes he had the forward buying in anticipation of the price increase in the fall.
Yeah. So.
Yeah, just trying to kind of get my arms around us.
Understood.
So if there is some sort of a price increase we would expect to see.
Significant.
Significant buying.
As we mentioned that happened in.
The March late February early March of 2022.
But typically business goes up in the third and fourth quarter naturally as as well so.
Like I said, we're evaluating different scenarios.
As far as the price increase goes.
But regardless, we expect the third quarter and fourth quarter that significant growth.
Okay. Good that's that's helpful.
Then I wanted to just congratulate you on getting the D. C. C trial didn't world that's been a amazing major ordeal for Ya a nice to have that complete.
Can you help me understand how all the pieces are going to come together with with this approval you said that the next step is field treatment with the BCC.
Lesions included do you do you have to get a separate label for that or with the data that you have now for this trial can you immediately go to doing the the field therapy with <unk>.
A different niche in platelets.
Hmm, we have gene therapy, with our models and the labor, Although I did you locked into cohort analysis.
What it basically means is that something we can if we have a peaceful.
Lynn.
Oh skin with several well attended to her toes lesions and we complete those entire allele.
Not only the disease spots. So we can basically tweet.
Healthy skin.
Assuming that maybe unbilled that healthy skin.
The other thing is hiding that automotive has been physically.
So that's our that's what we have from the label.
Gathering.
See you pool, but what that means is that if one of these out of the house, which is at least some damage caused multiple ak's, although some damage.
Cosmetic Sunday, which maybe is that also has superficial D. C. Six then they can be taught you did along with Brookfield streams modems that we provide to the patient so we do not need.
Treatment specifically for BCC.
Okay.
And then when we get the the three tier data submitted than.
Theoretically that in some time.
If that's kind of the year then it's pretty much all systems are go for the field treatment.
And in 2024 and getting that out to the physicians.
Yes, so the fleet you.
It is important has been that's been holding us back since a number of years. The fact that we can only do one tube.
Hum.
So but this is the.
The final study if we got that into the label towards the middle of next year.
This should be.
A big jump in.
And says Gee.
Okay, Great Alright, that's it for me thank you.
Ladies and gentlemen, with with that will be concluding today's question and answer session I'd like to turn the floor back over to Hermann for any closing remarks.
Okay.
Thank you all those questions.
So thank you to all the listeners.
So some of ours.
Well you're in college.
Strong sales growth, we have delivered this past quarter.
The increase in the number of beautiful installation.
Installations.
As mentioned, we remain on track to go other news by 25% this year.
Primarily.
Who says under maturing sales force.
We look forward to speaking with you again, but I'm really proud of our third quarter 'twenty to 'twenty three results.
Thank you and have a nice day.
Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.