Q2 2024 Biofrontera Inc Earnings Call
Speaker Change: Good day, and welcome to the BioFrontera, Inc. 2nd Quarter 2024 Financial Results and Business Update Conference Call.
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Speaker Change: After today's presentation, there will be an opportunity to ask questions.
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Speaker Change: Please note, this event is being recorded.
Speaker Change: I would now like to turn the conference over to Andrew Barwicki. Please go ahead.
Andrew Barwicki: Thank you. Good morning and welcome to BioFrontier's second quarter fiscal year 2024 financial results and business update conference call.
Speaker Change: 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.
Speaker Change: We caution listeners that Biofrontera's 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 company's business.
Speaker Change: All risks and uncertainties are detailed in and are qualified by the cautionary statements contained in BioFrontier's press releases and SEC filings.
Speaker Change: Also, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, August 15, 2024.
Speaker Change: BioFrontera 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.
Speaker Change: During today's call, there will be references to certain non-GAAP financial measures.
Speaker Change: BioFrontera believes that these measures provide useful information for investors, yet should not be considered as a substitute for GAP.
Speaker Change: nor should they be viewed as a substitute for operating results determined in accordance with GAP.
Speaker Change: Reconciliation of non-gap-to-gap results is included in this week's press release.
Speaker Change: More specifically, management will be referencing 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 non-recurring or non-cash items.
Hermann Luebbert: With that said, I am pleased now to turn the call over to Hermann Luebbert, CEO, Chairman, and Founder of BioFrontera.
Hermann Luebbert: Yes, thank you Ambrud and my thanks to everyone joining us this morning.
Speaker Change: On today's call, I'll provide an overview of our accomplishments during the second quarter and first half of 2024.
Speaker Change: Fred Leffler, our CFO, will follow with a discussion on financial results and then both of us will be happy to answer questions after our prepared remarks.
Speaker Change: Starting with a business update, we have made tremendous progress across three critical areas, including one first and foremost our sales approach.
Fred Leffler: Increasing sales during the second quarter and first half of the year has been accomplished. We grew our sales by 34% for the quarter.
Speaker Change: In Q2, we managed to compensate the negative influence of the reimbursement challenges stemming from the Change Healthcare cyber security event and the consecutive sales decline in Q1.
Speaker Change: achieving a little over 8% growth compared to 2023 for the half year.
Speaker Change: 2. Managing our total operating expenses
Speaker Change: For example, during the second quarter of 2024, total operating expenses were $12.9 million, compared to $14.5 million in the second quarter of last year.
Speaker Change: Another example relates to our SG&A expenses, where in Q2 this year the SG&A was $7.9 million, compared to $11.6 million last year.
Speaker Change: 3. Strengthening our balance sheet by paying down all outstanding debt in the second quarter.
Speaker Change: I believe these three simple yet significant accomplishments on the commercial side of the company have enhanced our day-to-day operations and put us in a position for long-term growth.
Speaker Change: Together with the rise of Gross $8 million in May from exercised warrants, the company is in a stable financial condition.
Speaker Change: The second quarter was also a very anticipated time for us, as we began to sell the FDA approved Rhodolite XL lamp.
Speaker Change: Keep in mind, sales only begin on June 10th, which is the end of the quarter, but we feel very optimistic about the potential as we continue rolling it out and making it available to all our customers.
Speaker Change: It is important to understand the benefits for doctors and patients as we look to increase sales.
Speaker Change: The BF Rodolat XL lamp is designed to facilitate the treatment of extended photodamaged skin areas with actinic keratosis.
Speaker Change: which may require several illuminations with the original small BF Odellat lamp.
Speaker Change: While Amelus makes up most of our revenue, we are also proud to announce that in addition to the initial rhodolite excel LAMP cells,
Speaker Change: Fifty-seven of the original BF Roderled lamps were placed at physician offices during the first half of the year, compared to 52 in the same period last year.
Speaker Change: The growing number of lamps in the field reflects both first-time installations and additional lamps among dermatology practices already familiar with AMELU's PDT.
Speaker Change: facilitating growth through new and existing customers.
Speaker Change: Although we are very pleased with some reductions in costs such as SG&A and total operating expenses
Speaker Change: We continue to invest in our commercial and support teams by increasing a Salesforce-focused organization to invest in marketing, strategic accounts, medical, and reimbursement support.
Speaker Change: We believe this approach will increase AMELU's purchases by the doctors' offices, which then need unproblematic patient treatment and reimbursement to make this process financially viable for them.
Speaker Change: Although the Rodolat XL lamp began selling at the end of the quarter, in which sales were minimal, it is important to understand the benefits for patients as we look to increase sales.
Speaker Change: The Rhodolat XL is for the treatment of extended photodamaged skin areas with acinicuratosis.
Speaker Change: To eliminate restrictions on reimbursement for the use of more than one tube of amylose in a single treatment.
Speaker Change: A 3 tube phase 1 safety study was completed and the data were submitted to the FDA and accepted for review.
Speaker Change: We expect to get FDA approval for including the use of up to three tubes per treatment into the amylose label during Q4 of 2024.
Speaker Change: In combination with the launch of the XL lamp, this will allow PDT of larger skin areas, constituting a crucial requirement for our further growth.
Speaker Change: As previously announced, the U.S. Food and Drug Administration, the FDA, has approved a new formulation of amylose-lacking propylene glycol for the treatment of actinic eratosis.
Speaker Change: First batches with this formulation have now reached the market.
Speaker Change: The formulation will improve tolerability for some of our patients while also reducing the generation of impurities over time, which may result in an extended shelf life.
Speaker Change: Between all our patents, currently granted by the U.S. Patent Office, PDT with Ameluth and VF-Rodolat is currently protected until 2040.
Speaker Change: A patent application for the new formulation is still pending and may extend the protection of all products until 2043 or even further.
Speaker Change: A transforming event for our company was the successful renegotiation of our license and supply agreement for Amelus and RadoLED lamps in February.
Speaker Change: according to the agreement
Speaker Change: We purchase amelus and the lambs from the German BioFrontera pharma and upon arrival in the United States We pay a percentage of our anticipated net sales price for amelus and the actual cost of manufacturing plus 10% for the lambs
Speaker Change: The cost of AMELUS has in the new LSA been reduced to almost half of what we have paid thus far.
Speaker Change: This will become effective when we order new batches, which we did not have to do in the first half of this year, due to an over-stacking situation by the end of 2023.
Speaker Change: However, we will need to purchase more envelopes in the second half of the year. Only then will the beneficial effects of the new LSA become effective.
Speaker Change: lowering our cost of AMELUs from about 50% to 25% of our net sales price for all orders in 2024 and 2025.
Speaker Change: On June 1, we transferred all clinical research with Atmelus from BioFrontera Bioscience to our wholly owned German subsidiary BioFrontera Discovery.
Speaker Change: While all our clinical trials are performed at centers in the U.S., the trials will nevertheless be organized and managed out-of-frontier discovery.
Speaker Change: We are planning to complete all ongoing trials and in parallel decide on new trials based on maximal commercial benefit for Biofrontera, Inc.
Speaker Change: Three ongoing trials are close to completion. The last patient in the one-year follow-up period for a Phase III trial for superficial basal cell carcinoma will be complete in November or December.
Speaker Change: This time point provides the data required for FDA approval for this new indication for AMLUs.
Speaker Change: Enrollment in a phase 3 study for aptenic keratosis on the extremities neck and trunk and a phase 2 trial for moderate to severe acne.
Speaker Change: is expected around the turn of the year. Currently, the extremities study is 69% enrolled, the acne trials is 78%.
Speaker Change: As the cost savings due to the renegotiated LSA have not started but we consume the cost of the clinical trials since June
Speaker Change: We will, for a few months, have an increased burn rate until the reduced cost of goods balances dissolved towards the end of the year.
Speaker Change: With that, I'll turn the call over to Fred to walk through the financial details of the second quarter and first half.
Fred Leffler: Thank you, Hermann, and it's great to be talking to everyone again.
Fred Leffler: I'll start with our strong second quarter 2024 results.
Fred Leffler: Total revenues for the second quarter of 2024 were $7.8 billion.
Fred Leffler: compared with $5.8 million for the second quarter of 2023, which is a 34% increase year-over-year.
Fred Leffler: The increase is due in part to a catch-up from lower sales in the first quarter driven by reimbursement challenges stemming from the Change Healthcare cybersecurity event, but also due to our effort to increase productivity of the sales force.
Fred Leffler: Total operating expenses were $12.9 million for the second quarter of 2024 compared with $14.5 million for the second quarter of 2023.
Fred Leffler: Cost of revenues was $4.3 million for the second quarter of 2024 compared with $2.9 million for the prior year quarter. The increase was driven by increased sales and the volume associated with that.
Fred Leffler: Selling general and administrative expenses were 7.9 million dollars for the second quarter of 2024 compared with 11.5 million dollars for the second quarter of 2023.
Fred Leffler: The decrease was due to our continued effort to control costs and lower legal expenses compared to the same period in 2023.
Fred Leffler: The net loss for the second quarter of 2024
Fred Leffler: with $257,000 compared with a net loss of $9.8 million for the prior year quarter.
Fred Leffler: The decrease in the net loss is attributed to lower selling general and administrative costs, as well as changes in non-cash P&L items, including the fair value of warrants and investments in related parties.
Fred Leffler: Adjusted EBITDA for the second quarter of 2024 was negative 4.7 million dollars compared with negative 7.9 million dollars for the second quarter of 2023 reflecting our lower selling general and administrative costs.
Fred Leffler: As Andrew mentioned, we look at adjusted EBITDA.
Andrew Barwicki: a non-GAAP financial measure as a better indication of ongoing operations and this measurement is defined as net income or loss excluding interest income, expense, income taxes, depreciation and amortization, and certain other non-recurring or non-cash items.
Speaker Change: I'll refer you to the table.
Speaker Change: and the news release or 10Q we issued yesterday for reconciliation of gap-to-non- GAAP financial measures.
Speaker Change: Now I'll summarize our first half 2024 results.
Speaker Change: Total revenues were $15.8 million for the first half of 2024, compared with $14.6 million for the first half of 2023. This 8% increase...
Speaker Change: was primarily driven by continued penetration and adoption of PBT within the AK markets.
Speaker Change: Total operating expenses were $26.3 million for the first half of 2024 compared with $28.8 million for the first half of 2023.
Speaker Change: cost of revenues increased
Speaker Change: from the prior year to $8.5 million for the first six months of 2024 compared to $7.5 million for the first half of 2023, again due to our increased volume.
Speaker Change: selling general and administrative expenses decreased to seventeen point two million dollars from twenty one point four million in the prior year again primarily as we see benefits of continued cost control efforts and lower legal expenses compared to the first half of 2023
Speaker Change: The net loss for the first half of 2024 was $10.7 million compared with a net loss of 17.3 million for the first half of 2023.
Speaker Change: Adjusted EBITDA was negative $9.3 million for the first half of 2024 compared with negative $11.9 million for the first half of 2023. Again, please refer to the table in our 10-Q for reconciliation between GAAP and non-GAAP financial measures.
Speaker Change: Okay, now turning to our balance sheet as of June 30th, 2024, we had cash and cash equivalents of 4.4 million dollars compared with 1.3 million dollars as of December 31st, 2023.
Speaker Change: We have been focusing on account receivable collections and improving our collection process,
Speaker Change: The expected summer seasonality of our business, we have reduced our AR from $5.2 million as of December 31st, 2023 to $3.5 million as of June 30th of 2024.
Speaker Change: As of July 10th, we have extinguished our short-term debt obligation as well.
Speaker Change: We are continuing to burn through our inventory that Hermann mentioned a moment ago, and we expect to have sold through this excess inventory in the next few months. As I mentioned before, we will hold safety stock, but at a lower amount, which is $1.5 million. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
Speaker Change: Potts.
Speaker Change: within typical industry standards.
Speaker Change: Following an annulus recall in the first quarter, which was outside of our responsibility, we have received the three batches of replacement inventory in July from our supplier at no cost to us.
Speaker Change: in May.
Speaker Change: Our stockholders approved an increase to increase our authorized common shares to $35 million. Upon the stockholder approval, the redemption rights and preferred liquidation rights were eliminated for the Series B preferred and any remaining B1 preferred stock.
Speaker Change: and any remaining B1 preferred stock automatically converted to series B2 preferred stock. As a result,
Speaker Change: of these changes to the rights and preferences, all series B convertible preferred stock was reclassified from mezzanine to permanent equity.
Speaker Change: On May 13th and 14th, 2024, 7,998 preferred warrants were exercised to purchase shares of the company's B3 convertible preferred stock, from which net proceeds were $7.4 million.
Speaker Change: As a result of the Series B Convertible Preferred Stock Reclass to Permanent Equity, along with the warrant exercise, our shareholders' equity increased to $10.9 million as of June 30, 2024.
Speaker Change: Finally!
Speaker Change: I would like to comment on our capital structure and walk you through what management considers to be the fully diluted common share total.
Speaker Change: As of August 12th, we had 5.5 million common shares outstanding.
Speaker Change: The B1 and B3 convertible preferred shares could convert to 17.7 million common shares.
Speaker Change: Our warrants, if exercised, would equate to 2.3 million common shares.
Speaker Change: I will note that of these warrants, 77,000 warrant shares are significantly out of the money with a strike price of $100. The more recent warrants all have a strike price of $3.55 and equate to 2.2 million common shares this exercise.
Speaker Change: Finally,
Speaker Change: Common shares converted by awards under our omnibus plan total 1.8 million common shares if all awards are realized and exercised.
Speaker Change: Chosel.
Speaker Change: As such, management believes our fully diluted common is approximately 27.3 million shares.
Speaker Change: So, with that overview of our business and recent financial performance, Hermann and I are now ready to take questions from our covering analysts. Operator?
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then 1 on your touchtone phone.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Jonathan Astroff with Ross. Please go ahead.
Speaker Change: Thank you. Good morning, guys. I was curious if I could just drill down on a quarter for sales of.
Jonathan Astroff: each type of lamp, the second quarter and so far in this quarter. Can you give me four numbers, each type of lamp, how many you placed, second quarter and so far in the third quarter?
Speaker Change: In the second quarter,
Speaker Change: we placed
Speaker Change: 57 of the original lamps.
Speaker Change: And we placed in the last weeks of June, we shipped four of the XL lamps.
Speaker Change: We haven't published anything on the third quarter.
Speaker Change: That's no problem, thank you. What will be the price hike percentage on October 1?
Speaker Change: I got the gun, the pliers?
Speaker Change: Thank you very much.
Speaker Change: price increase for Amelo's will be 5%.
Speaker Change: By the way, for the acne and the AK extremity trials, do you still expect to publicly release data when you originally said in mid-25 and second half 25, respectively, for acne and AK? Is that still holding?
Speaker Change: Yeah, it will be second half of 25 for both of them.
Speaker Change: okay
Speaker Change: So, when will the royalty savings from the renegotiated LSA become higher than the costs of the trials? You know, when does that whole LSA redo turn positive for you, do you think?
Speaker Change: So that's obviously attached to our ordering of inventory, which we will start to do in the fourth quarter of 2024. And then by, you know, depending on when the shipments come in and
Speaker Change: everything either late Q1 or early Q2 we all sort of flipped and had more savings than we spent on on the clinical trials.
Speaker Change: Okay, and lastly is there any update on the timing of that low-cost portable lamp development?
Speaker Change: or even what has just happened, you know, irrespective of timing.
Speaker Change: Well, we are nearing the first prototype.
Speaker Change: and after that we have to go into a more formal...
Speaker Change: development according to the design controls rules of the FDA.
Speaker Change: All right, that's all that I had. Thank you very much.
Jonathan Astroff: Thanks, Jonathan.
Jonathan Astroff: The next question comes from Bruce Jackson with the Benchmark Company. Please go ahead.
Bruce Jackson: Hi, good morning, and thank you for taking my questions
Bruce Jackson: I wanted to look at the sales numbers for the quarter in a little bit more detail. Generally, the second quarter is seasonally a little bit...
Speaker Change: weaker than the rest of them. And I'm kind of curious to know, with the ordering patterns, how much of the results in the quarter were a
Speaker Change: a rebound because of the change health.
Speaker Change: incident, and how much of that is organic growth? And then the second part of that question would be looking forward, how do you expect the rest of the year to play out in terms of seasonality?
Speaker Change: Thank you for watching!
Speaker Change: I think most of the rebound we had in April.
Speaker Change: So we can consider that May and June are already more or less normal months.
Speaker Change: And in all three months, we had significant growth compared to last year.
Speaker Change: I would, if I had to guess, I would think, this is really a guess, we can't give you any real numbers on this, but at most half is a rebound effect.
Speaker Change: Okay.
Speaker Change: And then in terms of the R&D spend going forward, what's the run rate on the R&D expense going to be, do you think, for the next couple of quarters?
Speaker Change: Thank you.
Speaker Change: [inaudible]
Hermann Luebbert: Yeah, Hermann, I can.
Hermann Luebbert: take that. So we're expecting to spend a couple million, so we took over
Hermann Luebbert: clinical trials
Hermann Luebbert: on June 1st, as Hermann mentioned, and as far as the
Hermann Luebbert: The run rate here, we were expecting spending about 2.4 million dollars or so this year in R&D spend.
Hermann Luebbert: So that's for the entire year.
Speaker Change: That is correct.
Speaker Change: from June 1st.
Speaker Change: I would say maybe a million each quarter, I think as of right now we believe it's going to be smooth.
Speaker Change: but that does depend on the recruiting and if there's a pop there etc so but but we do think that it's you know over the next six months it'll it'll be somewhere in that ballpark.
Speaker Change: Okay, and then you mentioned the data from the DAK and the acne trials, sorry, the extremity and the acne trials in the second half with the basal cell carcinoma. Are you gonna be releasing data on that as well?
Speaker Change: Yes, we will release, we expect to be able to release data from the clinical trial, a clinical part of the BCC trial.
Speaker Change: still this year, and then the follow-up part in the first half of next year.
Speaker Change: Okay. All right, great. That's it for me. Thank you.
Speaker Change: Thank you both.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Hermann Luebbert for any closing remarks.
Hermann Luebbert: Thank you. The second quarter and first half of the year has been a thriving and very encouraging time for us with a significant growth in our revenues.
Speaker Change: I would like...
Speaker Change: all of you to participate in this call and I would also take the opportunity to thank all our employees for the tremendous effort that went into this progress.
Speaker Change: We look forward to speaking with you again when we report our third quarter twenty-four results. Thank you and have a nice day.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.