Biofrontera Inc.

Good morning, and welcome to the BioFrontera, Inc. First Quarter 2022 Financial Results 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, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Tirth Patel with LHA Investor Relations. Please go ahead, sir.

Good morning, and welcome to Biofrontera Inc.' 's first quarter 2022 financial results conference call. Please note that certain information discussed during today's call is covered under the safe harbor provisions of the Private Securities Litigation Reform 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 in by these forward-looking statements due to risks and uncertainty associated with the company's business. All risks and uncertainties are detailed in and are qualified by the cautionary statements contained in BioFrontera's 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 today, May 13, 2022. 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. Our friend Tara 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 this morning's press release. 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, legal settlement expense, and certain other non-recurring or non-cash items. With that, I would like to turn the call over to Herman Loubert, Executive Chairman of BioFrontera, Inc.

Thank you, Tov. and welcome everyone to BioFrontera Inc's first quarter 2022 financial results conference call. Joining me today is Erika Monaco, our Chief Executive Officer. In a moment, Erika will review the business, our strategy, and our recent financial results. But first, I would like to say a few words. I'm very proud of the hard work by the entire BioFrontera team to generate such strong first quarter financial results following a foundational year that included our successful IPO. I interpret these results as confirmation of the data-driven approach to providing guidance and direction to our sales force we have initiated about one year ago. It's clear that BioFrontera has significant market opportunity ahead of us, and I'm confident in this team's ability to capture it. We are focused, we are thoughtful, and we are driven. Adoption of photodynamic therapy is growing, as are the clinical successes among BioFrontera-sponsored and investigator-initiated studies with our products. Establishing our position as the leader in PDT and expanding the Amalus label to deliver innovative solutions for patients are the key mechanisms to unlock the drug's potential. We look forward to providing clinical updates on the three ongoing trials by our licensed partner as they become available. With that, I'll turn the call over to Erica.

Thank you, Herman, and good morning, everyone. I'm pleased to be speaking with you today to discuss our strong start to 2022. and our plans for the rest of the year. As a reminder, BioFrontera commercializes pharmaceutical products and medical devices to treat dermatological conditions. Our flagship product is Ameluz for the treatment of actinic keratosis, or AKs, which are skin lesions caused by excessive exposure to sunlight that can lead to skin cancer. We also market Zepi, a topical antibiotic, for the treatment of impetigo, which is a bacterial skin infection. Before providing an update on our business, I'll first review our financial results. For the first quarter of 2022, total revenues were $9.8 million versus $4.7 million a year ago, representing an increase of $5 million, or 106%. This increase consists of $4.6 million in higher AMLU's volume and $0.4 million from price. Total operating expenses were $12.9 million, up from $8.3 million last year. Cost of revenues increased 100% to $5.2 million, primarily due to higher sales of amolus. Selling general and administrative expenses were $7.7 million, up $2.8 million, primarily due to higher legal expenses, business insurance, commissions expense, and personnel expense due to resumed hiring. Net income for the first quarter of 2022 was $5.6 million and includes an $8.7 million decrease in the fair value of our warrant liabilities. This compares with the net loss for the first quarter of 2021 of $3.5 million. Adjusted EBITDA was negative $3 million for the first quarter of 2022 compared with a negative $2.8 million for the first quarter of 2021. Adjusted EBITDA margin improved to negative 30.3% from negative 59.3% a year ago. I refer you to the table in the news release we issued earlier this morning for our reconciliation of GAAP to non-GAAP financial measures. As of March 31, 2022, Bayer Frontera had cash and cash equivalents of $22.4 million. We believe our cash position is sufficient to fund operations for at least the next 12 months. But as a growing company, we intend to be opportunistic regarding potential financing activities. This includes routinely positioning ourselves to leverage opportunities to strengthen our strategic position, to scale our business more quickly, to mitigate business risk, and to pursue new growth opportunities. To provide some further metrics on our results, March 2022 was our strongest sales month on record, and Q1 was our second highest quarter on record. Given this business momentum, along with renewed visibility into our markets, we are maintaining our previously announced guidance for 2022. We expect total revenues to increase by at least 30% compared with 2021, including the typical seasonal strength in the first and fourth quarters. As I mentioned during our last conference call, a price increase for AMLUs that went into effect April 1st contributed to some advanced buy-in, yet we did not see as significant of an impact as in previous years when the January 1st price increase affected Q4. Therefore, we did not anticipate this most recent increase to have much impact on sales development for the rest of the year. Beyond seasonality and some advanced buy-in, the other strategic drivers of our Q1 revenue where improved sales direction and tactical execution stemming from the field-focused approach, coupled with strengthening brand recognition, and Amaluz's share of voice among dermatologists through additional promotional efforts. I'm proud of the execution by our commercial team this past quarter. In 2021, we increased our market share within the PDT segment to approximately 26%. And this year, we expect to gain further share within the segment and versus cryotherapy and topical treatment options. A key focus of our commercial strategy is enhancing the market positioning of amlose as the leading PDT drug for treating actinic keratosis. Our strategy targets market expansion through deeper penetration in our sales territories and high-value accounts through our existing sales footprint, with additional support from our dedicated inside sales support and key account teams, respectively. In 2022, we are actively optimizing our sales team and are already seeing gains among our current customers. We created a dedicated key accounts team to leverage the evolving dermatology landscape. This team expands our market access support capabilities, enabling BioFrontera to be a dedicated partner for a wide range of specialized dermatology clinics, from institutional accounts to regional organizations. This team also allows us to build customized support resources that expand the access for innovative solutions to treat disease and meet patient needs. Our data-driven sales team are supported by a new inside sales model that boosts existing customer revenue and provides additional on-demand resources. This allows our existing sales force to continue to create more impactful customer relationships, while our inside support can expand reach and frequency to some of our newer and smaller accounts. Our 2022 commercial strategy is further supported by strengthening medical affairs and establishing ourselves as a trusted partner. Educating the industry on the importance of field therapy and the high efficacy of our product will support our efforts to expand utilization of PDT, especially among patients with more than 15 AK lesions when reimbursement for cryotherapy is capped. We believe dermatologists have favored cryotherapy to date because of reimbursement, but recent shifts in reimbursement of cryotherapy and treatment guideline pressure towards field-directed therapy, as opposed to single-lesion therapy, should both support sales of PDT treatments. Beginning next year, we will be expanding our sales organization with more reps in the field to further leverage the strategies, teams, and initiatives we are putting in place this year. Our efforts align with our company values of commitment, quality, and customer focus. Recently, Herman, members of our team, and I participated in several medical and industry conferences. During Q1, we started attending our first in-person events since the COVID-19 pandemic hit and are once again interacting face-to-face with colleagues, dermatologists, investors, and other stakeholders. In January, we attended the Winter Clinical Dermatology Conference and Maui Derm, both held in Hawaii, where we hosted an expert advisory board meeting with nine dermatologists to gain insight and guidance on key clinical and scientific messaging that addresses unmet needs. as well as approaches to the best communication of critical data findings. In March, BioFrontera had a strong presence at the 2022 American Academy of Dermatology Annual Meeting, the largest and most prestigious dermatology conference. At the AAD, the team connected with practitioners and industry thought leaders as part of our continued effort to build BioFrontera's brand awareness and trust within the community. BioFrontera is fully committed to advancing treatment options and patient care, and we have pledged support to many significant dermatology societies and foundations. We recognize May as Skin Cancer Awareness Month through our support of education-focused initiatives. Yesterday, we attended the Skin Cancer Foundation's Champions for Change Gala 2022 in New York, with proceeds from the fundraiser supporting life-saving educational campaigns, community programs, and research initiatives. This week, members of the BioFrontier team are at the Music City Symposium for Cosmetic Advances in Laser Education in Nashville, hosting a booth showcasing our AK treatments. We're looking forward to highlighting our new, larger RotoLED XL PDT lamp at the symposium tomorrow in a live demonstration. The RotoLED XL, which was approved in combination with Ameluz for the treatment of mild to severe AK on the face and scalp, allows for the illumination of a larger skin area, thereby enabling simultaneous treatment of AK lesions that are distant from one another. Furthermore, we recently announced our patent on the Roto-Led XL is now listed in the U.S. FDA publication commonly known as the Orange Book. This listing provides AMALU's PDT with protection against generic competition through October 2040, and it further strengthens our competitive positioning. We remain on track with our plans to launch the XL by the end of the year. Additionally, our licensors phase three study evaluating amylose PDT in combination with the BF-ROTO lead lamp for the treatment of superficial basal cell carcinoma is approximately 75% enrolled. We look forward to providing additional updates as this trial reaches new milestones. As we continue on our strategic path in 2022, we see growing brand value as a key metric of our medical affairs initiative. and we will continue to take advantage of opportunities to present our company and products and host demonstrations, roundtables, and other educational sessions. We have made tremendous progress in executing a thoughtful, thorough commercial strategy that addresses the changing landscape of dermatology, as well as in strengthening our brand through industry education and awareness initiatives. We look forward to a productive 2022 advancing our therapies within dermatology and working towards the commercial launch of our RotoLED XL. So with that overview, I would like to conclude our business update. Erica Gates, our Principal Accounting Officer, will now be joining the call for our Q&A portion. Thank you again for taking the time to participate on this conference call. Operator, we are now ready to take questions. Thank you.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. This will conclude our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, and thank you all again for joining us today. I trust we've shared our enthusiasm for the future of our product portfolio and our roadmap for continued success. We look forward to speaking with you all again when we report our second quarter results. In the meantime, have a nice day. Thank you.

Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.