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Biofrontera Inc. (NASDAQ:BFRI): Significant Cost Savings and Financing Provide Path to Profitability
Published on September 24, 2024 | Ticker: BFRI

Biofrontera Inc. (NASDAQ:BFRI), a U.S.-based biopharmaceutical company, has reported its financial results for the first quarter of 2024, showcasing both challenges and promising developments that position the company for future growth and profitability.

Financials

Revenue and Earnings

For the first quarter of 2024, Biofrontera reported total revenues of $7.9 million, a decrease of 9.3% compared to the same period in 2023. This decline was primarily driven by the impact of the Change Healthcare cybersecurity attack, which caused reimbursement delays and reduced orders from customers in the short term. However, the company has reported year-to-date revenue growth of more than 5% as of April 30, 2024, compared to the same period last year, indicating a recovery in sales.

The company's net loss for the first quarter of 2024 was $10.4 million, or $2.88 per share, compared to a net loss of $7.5 million, or $5.60 per share, in the first quarter of 2023. The increase in net loss was primarily driven by a $4.5 million change in the fair value of warrant liabilities, which is a non-cash item.

Adjusted EBITDA, a non-GAAP financial measure, was negative $4.6 million for the first quarter of 2024, compared to negative $4.1 million in the same period of 2023. The decrease in adjusted EBITDA was due to the lower revenues in the first quarter of 2024.

Liquidity and Financing

As of March 31, 2024, Biofrontera had cash and cash equivalents of $3.8 million. However, the company received an additional $8 million in May 2024 from the exercise of warrants, strengthening its financial position.

In February 2024, Biofrontera raised $8 million, net of financing expenses, through a private placement of preferred stock and warrants. The company also entered into the Second Amended and Restated License and Supply Agreement (Second A&R Ameluz LSA) with the Ameluz Licensor, which significantly reduced the company's cost of inventory for its primary product, Ameluz.

Business Overview

Biofrontera's principal licensed product is Ameluz®, a prescription drug approved for use in combination with the BF-RhodoLED® lamp series for photodynamic therapy (PDT) in the treatment of actinic keratoses (AKs) on the face and scalp. The company is also marketing Xepi®, a topical antibiotic for the treatment of impetigo.

Outlook

The company's strategy is focused on expanding the sales of Ameluz® in the United States, leveraging the potential for future approvals and label extensions of its portfolio products, and opportunistically adding complementary products or services to its portfolio.

Recent Developments

The most significant development in the first quarter was the renegotiation of the Ameluz LSA with the Ameluz Licensor. Effective February 13, 2024, the Transfer Price for Ameluz® was reduced from 50% to 25% for all purchases through 2025, with gradual increases to 35% by 2032. This transformational event is expected to significantly improve Biofrontera's profitability in the near term.

Additionally, the company will be taking over all U.S. clinical trials for Ameluz® and BF-RhodoLED® effective June 1, 2024, allowing for more effective cost management and direct oversight of trial efficiency.

Biofrontera also expects to begin selling the RhodoLED XL, a larger five-panel lamp, towards the end of the second quarter of 2024. This new product is expected to further support the growth of the company's Ameluz® business.

Risks and Challenges

Biofrontera faces several risks and challenges, including its reliance on sales of licensed products as its sole source of revenue, the success of its competitors in developing generic topical dermatological products, the ability of its Licensors to maintain relationships with contract manufacturers, and the availability of insurance coverage and medical expense reimbursement for its licensed products.

The company also faces the impact of legislative and regulatory changes, as well as competition from other pharmaceutical and medical device companies and existing treatments, such as simple curettage and cryotherapy.

Conclusion

Biofrontera's first quarter of 2024 was marked by both challenges and promising developments. The renegotiation of the Ameluz LSA and the recent financing provide a path to profitability, while the company continues to focus on expanding the sales of its licensed products and opportunistically adding complementary offerings to its portfolio. With a strong pipeline of clinical trials and new product launches, Biofrontera is well-positioned to navigate the industry's complexities and deliver value to its shareholders.

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