Biofrontera Inc.

Welcome to the BioConterra Inc. fourth quarter and full year 2025 financial results and business update conference call. At this time, all participants are in 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 Ben Shamsian with Litham Partners Investor Relations. Please go ahead.

Thank you. Good morning and welcome to Bayer Frontera's fourth quarter and full year 2025 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 BioFrontier'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. All risks and uncertainties are detailed in and are qualified by the cautionary statements contained in BioFrontier's press releases and SAC filings, including the company's annual report on Form 10-K for the year ended 12-31-2025. Also, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast. BioFrontier 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 also available on the company's website at biofrontera-us.com under the investor relations section. Please note management will be referencing adjusted EBITDA and non-GAAP financial measure defined as net income or loss excluding interest income and expenses, income taxes, depreciation and amortization, and certain other non-recurring or non-cash items including changes in fair value of warrant liabilities, stock-based compensation, gain on sale of assets, health for sale, and expense issuance costs. With that said, I would now like to turn the call over to Herman Lubert, CEO, Chairman, and Founder of BioFrantera. Herman?

Yeah, thank you, Ben. And thank you to everyone joining us this morning. Fiscal year 2025 was a transformational year for BioFrontera. I'm proud to say that we delivered record annual revenues of $41.7 million, representing about 12% growth over the prior year, capped by a record fourth quarter in which we generated revenues of $17.1 million, the highest quarterly revenue in our company's history. representing approximately 36% year-over-year growth. These results demonstrate the strength of our commercial execution and the growing adoption of amylose PDT across the dermatology community. As a consequence of the amendment in the contractual relationship with our former parent company, BioFrontera AG, which I'll explain in a few minutes, Q4 2025 was highly profitable for BioFrontera Inc., with an adjusted EBITDA of $4.9 million and an additional capital gain of $700K from the CSEPI investment divestment, resulting in a net income of $5.6 million. Let me take a moment to summarize what we accomplished in 2025 which resulted in this profitable fourth quarter and sets the stage for an exciting 2026 and beyond. In October 2025, we closed a new asset purchase agreement with our former parent company, BioFrontera AG. The financial consequences were active already as of June 2025. This transaction is one of the most significant milestones in our history. We acquired all U.S. rights, approvals, and patents for Amelus and Rodolat, including the new drug application, the investigational new drug application, all manufacturing rights and contracts, and all intellectual property. In December 2025, the FDA formally transferred the NDA and IND to us, giving BioFrontera Inc. full regulatory control in the United States. We also completed the transfer of 11 US patents, 10 US patent applications, and 19 international filings and registered designs. The financial implications of these transactions are significant. The new royalty or earn-out structure is 12% when annual US MLS net sales are at or below $65 million, and 15% in years where they exceed that threshold. This replaces a transfer pricing model that previously ranged anywhere from 25% to 35% of revenue. This change has already begun to improve our gross margin profile, leading to the highly profitable Q4, and Fred will provide more detail on the impact in a few moments. To support the AG transaction and our continued growth, we secured $11 million in funding through a private placement of Series C preferred stock led by Rosalind Advisors and Ake Capital Management. These self-care-focused institutional investors share our conviction in the long-term value of the Amalus platform. We also completed the sale of our Xeppy antibiotic cream licensed to Peltos Therapeutics for initial proceeds of $3 million, with the potential for up to an additional $7 million in milestone payments. These transactions, combined with our strong fourth quarter revenue performance, gives us the resources and financial flexibility we need to execute on our plan. We made remarkable clinical progress across multiple forms in 2025, and that momentum has carried into early 2026. First, in superficial basal cell carcinoma, or SBCC, we submitted a supplemental new drug application to the FDA in November 2025. based on strong phase III data from our 187-patient randomized double-blind placebo-controlled study. Complete histological clearance was seen in 76% of these tumors with amylose PDT compared to 19% with placebo. Complete clinical clearance was achieved in 83% of the lesions compared to 21% with placebo. I am pleased to report that the FDA has accepted this filing, and we have a PDUFA target action date of September 28, 2026. If approved, Amiluz would be the first PDT drug approved to treat a tumor in the United States, representing an additional commercial opportunity. Second, inactivity keratosis on the extremities neck and trunk. The last patient completed the treatment phase in the third quarter of 2025, and the database was locked in January 2026. I'm very pleased to report that in February 2026, we announced positive phase three results. The study met its primary endpoint. Combined with the completed phase one pharmacokinetics study, We anticipate filing a supplemental NDA in Q3 of 2026 to expand the labor for amyloose to treat AK beyond the face and scalp on a treatment field of up to 240 square centimeters. With approximately 58 million American adults having at least one actinic keratosis lesion, treating extensive fields on the extremities, neck, and trunk represents a very large addressable market for our installed base of Rotolab lamps. Third, in moderate to severe acne vulgaris. The treatment phase completed in Q3 2025, and the database was locked in January 2026. Last week, we announced positive phase two results. The three-hour incubation protocol demonstrated a 58% reduction in inflammatory lesions with Amalus compared to 37% with VehicleJet. PDT patient satisfaction was very high, with 86% of patients stating they would choose PDT treatment again. Based on this data, we plan to discuss the design of a future Phase III program with the FDA in the third quarter of 2026. Acne vulgaris is a chronic condition affecting millions of adults and adolescents, and we believe Hermeluz PDT has the potential to offer a differentiated treatment option for the moderate to severe form of the disease. Our patent portfolio was significantly strengthened in 2025. we received approval for the new improved formulation of amylose, which removed the potentially allergenic propylene glycol, extending patent protection through December 2043. And just recently, we had positive news in our patent dispute with Sun Pharma. The US Patent Trial and Appeal Board issued a final written decision finding all claims of Sun Pharma's patent unpatentable that we had challenged. This decision is a positive outcome in defending our market position, though we note Sun Pharma may seek further review. I would now like to turn the call over to George Jones, our Chief Commercial Officer, to provide a more detailed update on our commercial execution. George?

Thank you, Herman, and good morning, everybody. I'm pleased to walk you through our commercial progress for 2025. As Herman noted, we delivered record revenues in the fourth quarter and achieved approximately 11% annual revenue growth. That revenue growth was driven by approximately $4.1 million in organic volume growth. What I want to emphasize today is the underlying quality of that growth and the executional improvements that powered it. First, looking at Amalu's unit volume growth. Amalu's unit volumes for full year 2025 increased meaningfully. Fourth quarter unit volumes were particularly strong at approximately 49,840 tubes, bringing the full year unit volume to approximately 121,000 tubes. This represents approximately 10% volume growth over 2024. These unit growth milestones underscore the effectiveness of the executional changes we implemented in 2025, which I'll discuss later in this section. Looking at roto-LED lamp placements, during 2025, we placed approximately 85 BF roto-LED lamps within our dermatology practices, including approximately 70 of the newer XL models. As of December 31st, 2025, our installed base stands at approximately 745 lamps across approximately 686 dermatology offices nationwide. Looking at our commercial execution, our revamped commercial strategy centered on the refined customer segmentation, more focused and data-driven targeting approach, and increased accountability delivered tangible results in 2025. We saw a significant increase in sales call activity during the year, and importantly, increased in-person activity, which we know to drive the highest impact with our customers. Looking a little deeper into the business, our 2025 churn rate, which is a measure of lost business from accounts that have purchased from us in the past year, was the lowest since 2021. On top of this, we're able to open over 150 new accounts and gain significant volume of amylose tubes through these new accounts. Additionally, we launched an inside sales pilot in Q4 to cover vacant territories, white space, as well as smaller accounts that were harder for our in-person sales team to reach. Based on the success of this pilot, we're planning for a full rollout of inside sales in 2026. Overall, I'm very encouraged by what I've seen in my first six months at BioFrontera. I'm impressed by the talent, the drive of the team, and excited by the overall trajectory of the business. The growing installed LAMP base, expanding customer adoption, continued commercial strategy refinement, and the potential for near-term label expansions in SBCC, AK of the trunk, and extremities give us important multiple vectors for continued growth in 2026 and beyond. I look forward to updating on our progress in current quarters. With that, I'll turn the call over to Fred Leffler, our Chief Financial Officer, to walk through the financial results. Fred?

Thank you, George, and good morning, everyone. I'll walk through our financial results for the fourth quarter and full year ended December 31st, 2025. All comparisons are to the prior year period unless otherwise noted. A full reconciliation of our GAAP to non-GAAP measures is included in the press release we issued earlier today and is available on our website. Starting with fourth quarter 2025 results, revenues for the fourth quarter of 2025 were approximately $17.1 million compared with $12.6 million in the fourth quarter of 2024. This is an increase of approximately 36%. This was the highest quarterly revenue in our company's history and was driven by the strong AMALU sales execution and pricing adjustment that we introduced in December of 2025. Our related party cost of goods sold, or COGS, decreased 45% year over year. This was driven by the transition from the transfer pricing model under our prior license and supply agreement to the significantly lower earn-out structure that came with the strategic transaction with BioFrontier AG that Herman talked about a few moments ago. Under the new arrangement, the cost of revenues per unit declined steadily to about 15% compared with a range of 25 to 35% under the prior agreement. As a result, our gross profit on sales improved significantly going from about 58% to 82% in the fourth quarter of 2025, which is a great result and outcome of all the hard work that everyone at Biophantara put into this transaction. Total operating expenses for the fourth quarter of 2025 were $12.5 million, compared with $14.3 million in the fourth quarter of 2024, with COGS excluded costs about, with COGS excluded, costs were about $9.4 million in both years. Selling general and administrative expenses, SG&A, increased $0.3 million or approximately 4% to $4.8 million in the fourth quarter of 2025. This was mainly driven by legal costs. Research and development Expenses were the same for the fourth quarter, year over year, at $0.8 million. This investment directly supported the clinical programs Herman discussed a moment ago, including the work to complete the Phase III AK extremities trial and the Phase II acne trial. Operating income for the fourth quarter of 2025 was $4.6 million, a $6.3 million improvement from a net loss of $1.7 million in the fourth quarter of 2024. Net income for the fourth quarter of 2025 was $5.6 million, a $7 million improvement from a net loss of $1.4 million in 2024. This improvement was driven by the higher revenues the materially lower cost of revenues resulting from the strategic transaction, which were partially offset by higher legal and R&D expenses. During our Turning to our non-GAAP measure, adjusted EBITDA for the fourth quarter of 2025 was $4.9 million compared with negative $1.4 million in 2024. This is an improvement of $6.3 million. Our adjusted EBITDA margin improved to positive 29% from negative 11% in the prior year, reflecting the stronger sales, the favorable impact of higher gross profit, and improved operating cost management. As a reminder, adjusted EBITDA excludes interest taxes, depreciation, amortization, changes in the fair value of warrant liabilities, stock-based compensation, gain on sale of assets, and expense insurance issuance costs. A full reconciliation can be found in our press release or on our website. Now turning to full year 2025 results. Total GAAP net revenues for the year 2025 were $41.7 million compared with $37.3 million for the full year of 2024, an increase of approximately 12%. This increase was primarily driven by $4.1 million in organic amylose growth associated with the volume. Our related party cost of goods sold decreased decreased by $7.7 million or 43% to $10.1 million from $17.9 million in 2024. Again, this was driven by the transition from our former transfer pricing model under the prior license and supply agreement to the significantly lower earn out structure that came with the strategic transaction that took place in 2025. Under the new agreement arrangement, Beginning in July 2025, the cost of revenue per revenue unit declined steadily to about 15% compared to a range of approximately or of 25 to 30% under the prior agreement. Additionally, $2.0 million of purchase price accruals under the prior agreement were forgiven in connection with the closing. These reductions were offset by 2.2 million in earn out payments under the new agreements. As a result, our gross profit on product sales improved significantly, going from about 50% to 74% for the full year of 2025. We expect the full benefit of the new cost structure to be realized on an annualized basis in 2026, as the new 12% rate applied only to about 45% of the AMALU's sales volume in 2025. In the long run, we expect our gross profit margin to range between 80 and 85%. Total operating expenses for 2025 were $53.1 million compared with $54.5 million in 2024, a decrease of $1.5 million or about 3%. Within this, sales general and administrative expenses increased $4.0 million or approximately 12% to $38.4 million. The increase was driven by a $6.0 million increase in legal expenses related to patent claims partially offset by a $1.1 million reduction in direct sales personnel expense from a lower headcount, $0.5 million in savings from lower sales support activity levels, a $300,000 million decrease in intangible asset amortization, and a $200,000 decrease in bad debt expense. Research and development expense increased 1.6 million to 3.7 million in 2025, reflecting our responsibility for all U.S. clinical trials for the full year, which only started in June 2024. This investment directly supported the clinical programs Herman discussed, including wrapping up all of the clinical trials mentioned earlier. Our operating loss for the full year 2025 was $11.3 million, a significant improvement from a net loss of $17.2 million in 2024, a reduction of approximately 34%. Our net loss for the year 2025 was 10.5 million, a significant improvement from that loss of 17.8 million in 2024, a reduction of approximately 41%. This improvement was driven by higher revenues, materially lower costs from the strategic transaction, a decrease in interest expense partially offset by higher legal and R&D expenses. Turning to our non-GAAP measure adjusted EBITDA for the full year of 2025, it was negative $10.6 million compared to negative $15.3 million in 2024, an improvement of $4.7 million or 31%. Our adjusted EBITDA margin improved to negative 25.4% from negative 40.9% in the prior year, reflecting the favorable impact of higher gross profit and improved operational cost management. As a reminder, adjusted EBITDA excludes interest tax and depreciation, amortization, changes in fair value of warrant liabilities, stock-based comp, gain on sale of assets, and expense issuance costs. And I'll refer you to our press release or website for more details. Finally, looking at our balance sheet and liquidity, as of December 31st, 2025, we had cash and cash equivalents of $6. point four million dollars compared with five point nine million at December 31st of 2024. During 2025, we received $11.0 million in gross proceeds from the private placement of Series C preferred stock, $3.0 million from the initial closing of the Zepi divestiture, and we generated $41.7 million in product revenue. Cash used in operating activities for the full year was $13.4 million, reflecting our net loss as well as changes in working capital. With the completion of the strategic transaction, we now have greater control over the supply chain, shorter lead times for our products, and improved inventory management. These operational improvements, combined with the significantly lower cost structure under the new earn-out agreement, are expected to reduce our cash consumption as we advance towards our goal of cash flow break-even. As we have discussed in our filings, the support of our institutional investors, Roslyn Inviters and AIGH Capital, have been instrumental in positioning us to execute the strategic transaction and invest in our clinical pipeline. We are grateful for their confidence and commitment. With that overview of our business and financial results, we are ready to take questions from our covering analysts. Operator?

Thank you. We'll now begin the question and answer sessions. To ask a question, you may press star then one on your telephone keypad, and to remove yourself from queue, please press star then two. At this time, we'll pause for just a moment to assemble our roster. And today's first question comes from Bruce Jackson at the Benchmark Company. Please go ahead.

Hi, good morning, and thanks for taking my questions. I want to talk about the gross margin improvement that you're anticipating for 2026. The fourth quarter was quite strong. How do you think it plays out over the course of the year, and is it going to kind of drop and then ramp again, and where do you see it exiting 2026?

Yeah, nice to talk to you again, Bruce. So the gross profit margins we expect to be between – 80 and 85%. And that the reason for the bit of the range is because of the mix between analytics and device sales. But that that is started on on Jan one, and we expect to be within that range from Jan one and and throughout 2026.

And then, would you say you're going to be? How can I put this? Would you expect it to kind of like start at that 82% level and stay there, or do you think it's going to be variable over the course of the year?

I think it's going to start there, and like I said, it could fluctuate a little bit depending on the product mix in our revenue and cost of sales.

Okay. Okay. That's all I've got right now. Thank you.

Thank you. That concludes our question and answer session. I'd like to turn the conference back over to management for closing remarks.

Yeah, thank you. So if I summarize what we have said, then first we delivered record annual revenues and record first quarter revenues. demonstrating that our refined commercial strategy is working at the Amalus PDT platform continues to gain traction with dermatologists and their patients. Second, the completion of the strategic transaction with BioFrontera AG has fundamentally changed our business model. We now own and control all of our key US assets, intellectual property, regulatory approvals, manufacturing rights, And the new earn-out structure has materially improved our cost profile. The full annualized benefit of this new structure will flow through to our results in 2026. And third, our clinical pipeline is delivering results. We have a PDUFA date for superficial basal cell carcinoma in September 2026, positive phase III results for AK on the extremities, and encouraging phase II BH data to B data in acne. Looking further ahead, we have planned studies in squamous cell carcinoma in situ and reduced pain, PDT. BioFrontera is the only company in the United States running FDA-controlled clinical studies in PDT for dermatology, and our patent protection extends through to 2043. And finally, the combination of revenue growth lower cost of revenues based on our new contract, and disciplined expense management led to a strong profit in Q4. The first quarter, where the new cost of goods became fully effective, and we expect these to meaningfully improve our financial trajectory in 2026 as we continue to advance towards cash flow breakeven. I want to thank you. and 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 their fight against skin disease. Thank you all for your continued support. Have a wonderful day.

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