Biofrontera Inc. (BFRI) is a U.S.-based biopharmaceutical company specializing in the development and commercialization of photodynamic therapy (PDT) and topical antibiotics for the treatment of dermatological conditions. The company's licensed products, Ameluz and Xepi, have been making significant strides in the market, positioning Biofrontera as a leader in the industry.
Company History and Challenges
Biofrontera's history dates back to 2015 when the company was founded as a U.S.-based biopharmaceutical company focused on commercializing a portfolio of pharmaceutical products for the treatment of dermatological conditions. The company's initial focus was on photodynamic therapy (PDT) and topical antibiotics. Biofrontera obtained an exclusive license to market and sell Ameluz in the United States under a license and supply agreement with Biofrontera Pharma and Biofrontera Bioscience, which are related parties as wholly owned subsidiaries of Biofrontera AG. In 2019, Biofrontera acquired Cutanea Life Sciences, Inc. and assumed Cutanea's exclusive license and supply agreement with Ferrer Internacional S.A. for the product Xepi, a topical non-fluorinated quinolone antibiotic cream used to treat impetigo. However, Biofrontera has faced various challenges, including delays in delivery of its RhodoLED lamps due to supply chain issues and a voluntary recall of certain lots of Ameluz products by the Ameluz licensor in 2023. Additionally, the company has been involved in legal proceedings, including a complaint filed by DUSA Pharmaceuticals, Inc., Sun Pharmaceutical Industries, Inc. and Sun Pharmaceutical Industries LTD alleging improper promotion of Ameluz.
Financials
The company's financial performance has shown some volatility in recent years, with net losses in 2021 and 2022 of $37.7 million and $0.6 million, respectively. For the fiscal year 2023, Biofrontera reported revenue of $34.07 million and a net loss of $20.13 million. The company's operating cash flow and free cash flow for 2023 were both negative at $24.90 million.
In the most recent quarter (Q3 2024), Biofrontera reported revenue of $9.01 million, representing a 1.5% increase compared to Q3 2023. The net loss for the quarter was $5.67 million, with operating cash flow of -$1.21 million and free cash flow of -$1.16 million. It's worth noting that the decrease in Ameluz sales volume was impacted by delayed shipments of 4,640 units at the end of September 2024 due to Hurricane Milton. All delayed shipments were delivered in October.
For the first nine months of 2024, Biofrontera reported net product revenues of $24.74 million, an increase of 5.6% compared to the same period in 2023. This increase was mainly driven by a $1.10 million increase in the average sale price of Ameluz, as well as a $0.60 million increase in device sales due to the launch of the RhodoLED XL Lamp in June 2024, partially offset by a $0.50 million decrease in Ameluz sales volume.
The company has made significant strides in reducing its operating expenses, with a 14% decrease in selling, general, and administrative (SG&A) expenses in the first nine months of 2024 compared to the same period in 2023. This decrease was primarily due to a $1.70 million reduction in legal costs, a $1.30 million decrease in non-personnel sales and marketing expenses, and a $0.60 million decrease in general business administration and personnel expenses.
Research and development expenses for the first nine months of 2024 increased by $1.30 million compared to the same period in 2023, attributable to Biofrontera's assumption of all clinical trial activities for Ameluz in the United States effective June 1, 2024.
Liquidity
In terms of liquidity, Biofrontera had $2.9 million in cash and cash equivalents as of September 30, 2024, compared to $1.3 million as of December 31, 2023. The company has also managed to reduce its inventory levels to be more in line with industry standards, with inventory of $6.5 million at the end of the third quarter of 2024.
Biofrontera's debt-to-equity ratio is 0, indicating that the company has no long-term debt. The current ratio stands at 1.53, while the quick ratio is 0.94. It's important to note that the company terminated its $6.5 million line of credit with MidCap Business Credit LLC in January 2024.
Despite these improvements, Biofrontera's management has determined that substantial doubt exists about its ability to continue as a going concern for at least twelve months from the issuance date of the financial statements, due to its losses and projected cash needs. The company is actively pursuing various strategies to improve its liquidity and profitability, including expanding the commercialization of Ameluz, controlling expenses, and realizing the benefits of the reduced cost of inventory under the Second AR Ameluz LSA.
Key Developments and Product Highlights
One of the key highlights for Biofrontera in 2024 was the FDA's approval of the company's Supplemental New Drug Application to increase the maximum approved dosage of Ameluz from one to three tubes per treatment. This approval allows healthcare professionals greater flexibility in addressing larger or multiple treatment areas for patients undergoing PDT for AK on the face and scalp, leading to greater convenience for both healthcare providers and their patients. The company plans to actively promote this new FDA approval starting next week, as reimbursement issues have now been resolved.
Another significant development for the company was the launch of its RhodoLED XL lamp in June 2024. This lamp offers an alternative for doctors who wish to treat larger skin regions with Ameluz PDT. The company has seen strong demand for the new lamp, with 105 new lamps installed in the first three quarters of 2024, slightly higher than the 101 lamps installed in the same period of 2023.
Effective June 1, 2024, Biofrontera assumed control of all clinical trials relating to Ameluz in the United States, allowing for more effective cost management and direct oversight of trial efficiency. The company's research and development (R&D) program is focused on label expansion for Ameluz as well as supporting PDT growth by improving the capabilities of its RhodoLED Lamps to better fulfill the needs of dermatologists.
Clinical Trial Progress
Biofrontera has also made progress in its clinical trial pipeline, with a Phase 3 study of Ameluz-PDT in the treatment of superficial basal cell carcinoma (sBCC) showing highly significant results. The primary and secondary endpoints of the study were all highly statistically significant (p<0.0001), correlating with data seen in Europe where sBCC is already incorporated in the Summary of Product Characteristics.
The company has several ongoing clinical trials, including for the use of Ameluz in the treatment of moderate-to-severe acne and superficial basal cell carcinoma.
Product Portfolio
Biofrontera's principal licensed product is Ameluz, a prescription drug approved for use in combination with PDT for the lesion-directed and field-directed treatment of actinic keratoses (AKs) of mild-to-moderate severity on the face and scalp in the United States. AKs are precancerous skin lesions that can potentially develop into skin cancer if left untreated. Biofrontera is currently selling Ameluz for this indication in the U.S. under an exclusive license and supply agreement, the Second Amended and Restated License and Supply Agreement, effective as of February 13, 2024, with Biofrontera Pharma GmbH and Biofrontera Bioscience GmbH (the "Ameluz Licensor").
The company's second licensed product, Xepi, has faced some challenges due to third-party manufacturing delays that have hampered the commercialization of the product. In the third quarter of 2024, the company reached the decision to divest its Xepi product line and determined that it met the held-for-sale accounting criteria. The company has entered into a letter of intent and expects to complete the sale within the next six to twelve months.
Strategic Focus and Future Outlook
Despite the challenges, Biofrontera has remained focused on expanding the commercialization of Ameluz in the United States while decreasing discretionary expenses. The company has also actively pursued additional capital through the issuance of equity securities and the sale of assets.
In terms of guidance, Biofrontera expects revenue growth in 2024 to be in the mid- to high-teens, similar to prior years. The company anticipates reaching cash flow breakeven towards the end of 2025 into 2026. For the fourth quarter of 2024, Biofrontera expects a very strong quarter, traditionally their strongest, even with the 5% price increase implemented on October 1st. This is because factors like more doctors performing photodynamic therapy (PDT) in the winter and potential tax reasons typically drive higher Q4 orders.
It's worth noting that Biofrontera Inc. only sells its products in the United States, which is its primary market focus.
Overall, Biofrontera's focus on innovation, cost control, and strategic initiatives has positioned the company for potential future success in the dermatology market. The global photodynamic therapy market is expected to grow at a CAGR of 8.2% from 2023 to 2030, driven by the increasing prevalence of skin cancer and the rising adoption of minimally invasive treatments. This favorable industry trend could provide tailwinds for Biofrontera's growth strategy.
Investors will be closely watching the company's ability to execute on its growth plans and achieve profitability in the coming years, particularly given the current concerns about its ability to continue as a going concern. The success of Ameluz, the potential divestiture of Xepi, and the company's ongoing clinical trials will be key factors in determining Biofrontera's future performance and market position.