Biofrontera (NASDAQ:BFRI) Q2 2026 Earnings Call

0:00 Welcome to the Biofrontera Second Quarter twenty twenty six Financial Results and Business Update Conference Call. At this time, all participants are in listen only mode. After today's prepared remarks, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Good morning, and welcome to Biofrontera Inc. Second Quarter twenty twenty six Financial Results and Business Update Conference Call.

0:55 Please note that certain information discussed during today's call by management is covered under the Safe Harbor provisions of the Private Securities Litigation Act. 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. Forward looking statements on today's call include statements regarding the company's full year 2026 revenue goals, the anticipated effects of the International Trade Commission orders and the company's remediation plan, the company's liquidity and the ability to continue as a going concern, the outcome of pending patent proceedings and the potential approval and launch of new indications for Ameluz.

1:49 All risks and uncertainties are detailed and are qualified by the cautionary statements contained in Biofrontera's press release and SEC filings, including the company's quarterly reports on Form 10 Q for the quarter ended 06/30/2026, and the company's annual report on Form 10 ks for the year ended 12/31/2025. Also, this conference call contains time sensitive information that is accurate only as of the date

2:20 of this live broadcast. 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. During today's call, there will be references to certain non GAAP financial measures. Biofrontera 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 included in the press release issued today and is available on the company's website at www.biofronteraus.com under the Investor Relations section.

3:10 Please note management will be referencing adjusted EBITDA and non GAAP financial measure defined as net loss excluding interest expense, net income taxes, depreciation and amortization and certain other non recurring or non cash items, including changes in fair value of warrant liabilities, panel remediation expense and the related inventory write down and stock based compensation. With that said, I would now like to turn the call over to Herman Lubert, CEO, Chairman and Founder of Biofrontera. Herman, please proceed. Yes. Thank you, Ben, and thank you to everyone joining us this morning.

3:56 The second quarter of twenty twenty six was the strongest operating Q2 and the first half year was the strongest H1 in the company's history as a standalone U. S. Business. Net product revenue grew 33% to $12,000,000 Gross margin reached approximately 80% compared to approximately 71% a year ago And adjusted EBITDA came to €200,000 of breakeven against a loss of €5,100,000 in Q2 of last year. These strong results in Q2, which for us is traditionally a weaker quarter, are not just one quarter out of the ordinary.

4:48 They reflect the buildup of a commercial organization that is executing along with the expense discipline across the entire organization. We are seeing the pace of reorders from our physician accounts accelerate, which reflects the strength of underlying demand generation. George and Fred will take you through the details in a moment. The results also further reflect the strategic transaction we completed in October 2025, which gave Biofrontera full ownership and control of all U. S. Rights, approvals and patents for the Ameluz and RhodoLED portfolio and replaced the transfer pricing model of 25% to 35% of revenue with a 12% earn out on net sales.

5:43 Before diving into the business, I want to address the International Trade Commission matter because I expect it is on your minds. On May 6, the commission issued its final determination finding a valuation of Section three thirty seven with respect to two Sun Pharmaceutical patents covering certain components of our RhodoLED XL lamp. In the decision, the commission contradicted the conclusion of the U. S. Patent Office's Trial and Appeal Board, which in agreement with our belief had previously found every challenge claim of one of the patents unpatentable. The commission issued a limited exclusion order and keys and desist orders, which took effect on July 7.

6:35 We can no longer import or sell the current Autolet XL lamp in The United States, and we are restricted from selling Ameluz for use with the Autolet XL. Three things you should understand about the scope of this. First, this affects the XL lamp. It does not in any way affect the original BF Autolet lamp, which represents substantial majority of our installed lamp base. Physicians using those lamps are unaffected and Ameluz sales to accounts with the BF RhodoLED lamp continue normally. Second, we have a remediation plan designed to allow selling a modified version of our XL lamp that is outside the scope of both Sun Pharmaceutical patents.

7:26 We recorded approximately 500,000 in the first quarter as our best estimate of the remediation cost and that estimate has not changed. Because the substantial majority of our installed land base is unaffected and we expect to get approval for providing a modified version of the Ordolet XL that is outside the patent space, we expect the exclusion order to affect the timing of orders rather than total demand. Third and finally, we are not finished contesting this. We retain the right to appeal the commission's determination to the Federal Circuit. I will not speculate on how those proceedings will resolve or when. What I will tell you is that while pursuing every avenue available to us, our commercial plan does not depend on winning any of them.

8:21 Our commercial success will be because of our continued dedication to doctors and patients as well as investment in developing ameluzone PDT to be used in more indications. Now let me turn to the clinical pipeline, because it is the clearest picture of how this company will grow in 2027 and beyond. First, superficial basal cell carcinoma. The FDA accepted filing of our supplemental new drug application for Ameluz PDT for the treatment of superficial basal cell carcinoma with a PDUFA date target date of 09/28/2026. If approved, Ameluz will be the first PDT in The United States approved for the treatment of cancerous skin tumors and we expect a full launch in Q1 of twenty twenty seven with initial outreach to customers during Q4 of twenty twenty six.

9:22 That launch would go directly into our existing installed base of BF RhodoLED lamps and our existing dermatology call points. The commercial infrastructure is already in place. Second, actinic keratosis on the extremities, neck and trunk. Earlier this year, we announced positive and statistically significant top line Phase III results with the study meeting its primary endpoint. These data support our plan to file a supplemental NDA around the end of the third quarter of twenty twenty six to expand the Ameluz label beyond a case on the face and scalp to a treatment field of up to two forty square centimeters.

10:11 We anticipate FDA approval in Q3 twenty twenty seven. With approximately fifty eight million American adults having at least one AK lesion extending treatment to the extremities, neck and trunk and the larger area, meaningfully expands the addressable use of every lamp already in the field. Third, moderate to severe acne and beyond. Our Phase 2b study showed a fifty eight percent reduction in inflammatory lesions with Ameluz compared to thirty seven percent with vehicle and eighty six percent of patients said they would choose PDT treatment again. We are currently in the process of prioritizing and designing our next phase of clinical development, aiming at expanding the addressable market for our products and acne will be an important part of this discussion.

11:08 We'll keep you updated as these plans will evolve. Taken together, SBCC expected to launch in the first quarter of twenty twenty seven relevant AK label extensions anticipated in Q3 twenty twenty seven and an acne program advancing towards the Phase three, each of these growth revenue through the same installed ramp and customer base and the same sales force we have already built and paid for. That is the growth model for 2027 and beyond. More approved users flowing through infrastructure that is already in place. I would now like to turn the call over to George Jones, our Chief Commercial Officer. George?

11:57 Thank you, Herman, and good morning, everyone. We delivered product revenues of $12,000,000 in the second quarter, an increase of approximately 33% year over year. The increase was driven by approximately 30% growth in Ameluz unit volume together with the price increase we implemented in the fourth quarter of twenty twenty five. Looking at unit volume, in the second quarter of twenty twenty six, we sold 33,300 tubes of Ameluz. This is compared to approximately 25,300 tubes in the second quarter of twenty twenty five. Volume growth in the quarter included the impact of order timing from certain customers in anticipation of the ITC related supply restrictions Herman described.

12:44 The timing of this is good because customers tend to move through Amluz faster when they have inventory on the shelf and it sets us up for a strong fourth quarter. Importantly, since the substantial majority of our installed lamp base is unaffected by the exclusion order, we do not expect this shift to impact our full year 2026 revenue goals. Turning to the RotoLED lamp placements. In Q2 twenty twenty six, we placed 21 lamps, including 16 XL lamps and five RotoLED lamps. This increased our installed base to approximately eight zero one lamps across approximately seven forty physician offices. Turning to sales execution.

13:30 We are seeing a significant traction across all aspects of our business. During the first half of twenty twenty six, our order count was up 18.6% versus the first half of twenty twenty five, and the average tubes per order was up 10%. We have also been tracking our largest customers that made large purchase prior to the price increase in Q4 of twenty twenty five. Over 81% of those customers placed additional orders during the first half of twenty twenty six. And for those that did reorder, their Ameluz volume was up 41%. This is important because it indicates our sales efforts are working and our customers are increasing their Ameluz PDT throughput within their practice.

14:20 I also want to highlight our new account growth. In the first half of twenty twenty six, we added 66 new accounts versus 69 new accounts during the first half of twenty twenty five. This slight dip is likely due to the focus on current XL customers in May and June prior to the ITC orders coming effective. Lastly, I want to follow-up on our last call and draw attention to our inside sales efforts. Those efforts have continued to bear fruit, generating approximately ten seventy tubes of Amluz from white space and smaller accounts, as well as another nine twenty tubes from covering vacant territories in the first half of twenty twenty six.

15:08 The first half of twenty twenty six has given me great optimism regarding our commercial strategy and the way our team has delivered. This enhanced execution plus our clinical programs, including the near term SBCC approval and launch, the upcoming label expansion filing for AKs on the extremities, neck and trunk and the advancement of our acne program give us multiple paths and great opportunities for continued growth. With that, I'll turn the call over to Fred Loeffler, our Chief Financial Officer. Fred? Thank you, George, and good morning, everyone. I'll walk through our results for the second quarter and first half of the year ended 06/30/2026.

15:57 All comparisons are to the same prior period unless otherwise noted. A full reconciliation of GAAP to non GAAP measures is included in the press release issued earlier today and available on our website. With that, revenues for the second quarter were $12,000,000 compared to $9,000,000 in the second quarter of twenty twenty five. That is an increase of 32.9%. As George described, unit volume grew approximately 30% with the balance of the growth coming from the price increase that was completed in fourth quarter of twenty twenty five. For the first half of the year, revenues were $22,100,000 up 25.4% from $17,600,000 in 2025.

16:46 Cost of revenue for the quarter was $2,400,000 compared to $2,600,000 producing gross profit of 9,600,000 percent compared to approximately 71% in the prior year quarter. That's an expansion of roughly nine twenty basis points. For the first half, gross margin was also 80% against a gross profit margin of 67% in the first half of twenty twenty five. The improvement was driven principally by the transition from the prior transfer pricing agreements to a cost structure comprising of Ameluz direct cost plus a 12% earn out on net revenue.

17:30 That structure is contractual and durable and we will see it continue. Selling, general and administrative expenses for the quarter were $9,700,000 compared to $10,600,000 in 2025.

17:58 That we took over following the strategic transaction. I would note that the litigation related legal spend is tied to the pace of active matters and can vary quarter to quarter. For the first half, SG and A was $20,700,000 compared to $19,300,000 an increase of $1,400,000 This was driven primarily by investment, lower turnover in the commercial organization and the new manufacturing and regulatory functions I just mentioned. And it was partially offset by lower litigation related legal fees. Research and development expenses were $400,000 for the quarter compared to $900,000 in 2025 and $1,300,000 for the first half of twenty twenty six compared to

18:54 two point one million dollars for the first half of twenty twenty five, reflecting the current vintage of clinical trials reaching substantial completion. As Hermann pointed out, we are planning additional clinical developments for the coming years, aiming to expand the reach of our products, but depending on available funds.

19:16 Net loss for the quarter was $600,000 or $05 per share compared to a net loss of $5,300,000 or $0.57 per share in 2025. For the first half, net loss was $5,400,000 or $0.44 per share compared to $9,500,000 or $1.05 per share. Adjusted EBITDA for the quarter was negative $200,000 compared with negative $5,100,000 in the prior year quarter, an improvement of approximately $5,000,000 and an adjusted EBITDA margin of negative 1.4% against negative 56.9% in 2025. For the first half, adjusted EBITDA was negative $3,700,000 compared with negative $9,500,000 last year, and adjusted EBITDA margin of negative 16.9% versus negative 54%.

20:14 Now turning to the balance sheet and liquidity. As of 06/30/2026, we had cash and cash equivalents of $4,700,000 compared with $6,400,000 at 12/31/2025. Operating cash used in the first half of twenty twenty six was $1,700,000 down from $7,200,000 a year ago. That figure also includes a $3,700,000 one time paydown of related party payables that were connected to the strategic transaction that happened in the first quarter of twenty twenty six. Including that item, changes in working capital were a net source of cash for the period. We continue to make progress towards cash flow breakeven in '20 Total liabilities were $18,100,000 essentially unchanged from year end 2025.

21:10 Our only outstanding indebtedness is $4,600,000 of convertible notes net maturing in November 2027. We have no bank or term debt.

21:22 Total shareholders' equity was $6,000,000 compared with $10,500,000 at 12/31/2025. As we have disclosed in our filings, the company has included a going concern qualification in its financial statements. While we have demonstrated meaningful progress towards cash flow breakeven and believe we will achieve that this year, and this quarter is the clearest evidence of that progress, Our current capital resources require us to continue expanding our commercial operations, controlling and controlling expenses. We plan to address this through the continued growth of Ameluz revenue, the realization of the next milestone payment of $1,000,000 from the Zepi divestiture and if necessary, securing a working capital line of credit or similar facility when and if needed.

22:14 With that overview of our results, we are now ready to take questions from our covering analysts. I'll hand it back to you, operator. We will now begin the question and answer session from our covering analysts. Our first question comes from Bruce Jackson with Stonex. Please go ahead. Hi, thank you for taking my questions and congratulations on the quarter. I wanted to start off with the basal cell carcinoma launch. So it's the same call point and it works with the existing lamp.

23:13 Is there anything else that needs to be done in terms of like putting the reimbursement in place or getting the Salesforce trained? What

23:20 are the other additional steps that need to be done prior to launch? I'll take that one. First of all, thanks for the question. The great thing about the SBCC indication is that how perfectly it fits within our current call point and our current kind of strategic priorities. The actions that really need to be taken in place taken place to get ready for this launch are to finalize our marketing materials, pretty clear those with the FDA, and train our sales force and then finalize our reimbursement strategy as well. But outside of those, we are ready to go and begin selling this and begin talking about it when it's approved.

24:10 Okay. And then I wanted to follow-up with the IPC commentary. So I believe, so there are two patents involved here and you've successfully challenged one inter partis review.

24:26 Is it possible to get the other patent reviewed? So can you like basically get this whole thing tossed out? That's the first part of the question. And if not, can you tell us more about the remediation plan? And will this require a redesign of the lamp that would then have to go back through the FDA process?

24:53 Yes. I'll take that one. Thanks for asking this, Bruce. Well, first, to the process with the other patent. We cannot do this with the other patent. This other patent is basically identical to the first patent. And the answer would, in all likelihood, be the same. However, we can't attack that patent through the same mechanism because the current strategy of the Director of the Patent Office is not to allow that strategy for patents, which are already discussed in some kind of a court and like the ITC.

25:43 So for pure formalities, we cannot do that. However, we can appeal the decision of the ITC and that will be done for both patents. And at that point, we can bring the arguments for both patents together. Now whether that whether or not that is going to be successful is in the end

26:16 not as relevant because of the workaround strategy that we are implementing currently. And this workaround strategy is based on very minor changes in the lamp. If you look at patents in a space where there isn't really much new in one of these lamps. I mean, it's a five panel lamps and panels are connected by hinges. There were lamps like this out there everywhere. So there's probably a tire out left and right. There's a certain component of hinge that some claims they invented.

27:02 We obviously disagree, but the ITC has agreed with them. And we have to remove that component of the hinge to actually get beyond the space of those patents. So it's really a minor change that we're into the labs.

27:23 And then that minor change, does it have to go through the FDA? Yes, it has to go through the FDA in what's called a CB30 process. And we have applied for that and FDA has agreed that this is the process. And from the FDA point of view, we already got permission to sell that. Okay. And then one last follow-up. In terms of the product performance, is the thing Sorry that's going for interrupting. Sorry for interrupting, I should add for clarity that this is just the FDA perspective.

28:10 And now the border control has to agree that this will also take us outside of the space of the ITC ruling. And that is what we are currently waiting for. So we could in principle tell from the FDA perspective, but in practice, we cannot because we have to wait for that other step. Okay. And then, last question for me. This feature change in the XL, will the customer notice any appreciable difference in performance? No. For the time being, the land will still continue to be used exactly in the same way in which it is approved currently by the FDA.

28:59 Okay, great. That's it for me. Thank you. Our next question comes from Jonathan Aschoff with ROTH Capital Partners. Please go ahead. Thanks. Hey, guys, it sounds like you have two forty three XL lamps out there out of 101 total. Is that accurate? I'm sorry, out of eight zero one total. Is that accurate? Yes, that sounds about right. Okay. So do any docs have both lamps and therefore they can order all the amylose they want and use it however they want? I mean, would they care? So the customers that have an XL place, an XL loan in place, we can we no longer are selling them Ameluz for use with that infringing device.

29:56 The people that bought Ameluz prior to the order going to effect, we are not encouraging them to use Ameluz with the infringing device, but they own the Ameluz and they own the device. Okay. I mean, what is someone out there policing this to scare these guys? Could you repeat the question? You cut out there. I'd say is someone out there policing this to scare these people into not using inventory? It is not their obligation. So it's not it's the obligation of Biofrontera in situation to not sell Ameluz after the order went to effect for use for the infringing device, but Ameluz that they own and a lamp that they own are they're free to use it as they see fit. So there's Okay. They're they're they're no obligation not to use it. The offices that own it.

30:53 And then in the future, you're not going to give them a newly designed lamp? Like, you're going to swap it out for free. You're going to sell it to them outright, yes? So the people that own as Herman mentioned, we're working on developing a non infringing device. And the plan is once that non infringing device is approved by the FDA, which Herman mentioned is complete, and then also passes Musser with the border control, border protection. The plan will be to work with those offices to replace their, current lamp with a non fringing device. Okay. So I guess I'm trying to understand with two forty three million out of eight zero one million being lamps for which you can't sell Ameluz, how does that maintain your annual sort of revenue expectations?

31:53 It used to be guidance, now it's kind of just kind of an unwritten expectation. Like how is that possible? So we had we were able to use the period from when the order was issued to when it went to effect to sell into those customers. And so many of our customers who had an XL were able to buy in multiple months of inventory to be able to work to be able to continue to use Ameluz while we are working on creating a non infringing device that Herman mentioned. We also have other strategies to ensure that patients are taken care of within these offices. Okay. So they will use Ameluz with the infringing device for as long as they can, like I was alluding to earlier, which is what I would hope and expect.

32:52 Correct? Yes. We cannot and will not encourage future use of the infringing device, but Ameluz that they purchased before the order went into effect can be used with the XLamp, yes. Yes, as would I do. All right. Thank you very much, guys. This concludes our question and answer session. I would like to turn the call back over to management for any closing remarks. Yes. Thank you, operator, and thank you to everyone who joined us today. Let me leave you with three takeaways. First, the second quarter demonstrates the full impact of our transformed business model. Revenue is up 33%, gross margin is approximately 80% and adjusted EBITDA within €200,000 of breakeven in a traditionally weak quarter.

33:51 Second, our growth beyond 2036 is visible and concrete. We have a PDUFA date for superficial basal cell carcinoma on September 28 and expect the full launch in the first quarter of twenty twenty seven, which if approved would make Ameluz the first PDT in The United States approved for the treatment of cancerous tumors. We are filing a supplemental NDA on the end of this quarter to expand the AK label to the extremities, neck and trunk and two forty square centimeters. Each of these label expansions flows through the installed LAM base and sales force we have already built. And third, we are managing our two constraints, a cash position that requires discipline and an ITC matter that affects one of our LAMs, which we are remediating and actively contesting.

34:49 Neither changes the trajectory of this business nor our dedication to our customers to their patients or their patients, and in fact, continues to make Biofrontera more resilient. I want to thank our entire team for their dedication and hard work. I also want to thank our shareholders, the healthcare professionals who use our products and most importantly, the patients whose lives we are helping to improve in the fight against skin cancers. Thank you all for your continued support. Have a wonderful day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.