Biofrontera AG
Q4 2020 Earnings Call Transcript

Published: 13 Apr 2021

[Operator:]

Dear ladies and gentlemen, welcome to the conference call of Biofrontera AG. At our customer's request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. May I now hand you over to Pamela Keck, Head of Investor Relations, who will lead you through this conference. Please go ahead.

[Pamela Keck:]

Thank you. Good morning, good afternoon and welcome to Biofrontera's earnings conference call for the financial year 2020. Yesterday, we issued a press release summarizing the financial results for the 12 months ended December 31, 2020. We encourage everyone to read the press release as well as the annual report both of which are available on our website at www.biofrontera.com.

[Hermann Lübbert:]

Yes, thank you, Pamela, and thank you very much, ladies and gentlemen, for taking the time to participate in today's call. With me today is Ludwig Lutter, our CFO. In our press release, a few weeks ago, we briefly introduced him and welcomed him to our ranks. Now during today’s conference call, he will take the opportunity to introduce himself to you in person and explain the key financials of the past supporting period in more detail. I would like to start with a summary of last year's business development, providing you with an update on our sales performance as well as an update on the development on the clinical side. A challenging year lies behind us all. The impact of the global pandemic on society, politics and the world economy was immense. And as such, also had a significant impact on Biofrontera's business performance. We were able to respond promptly and flexibly to the crisis at our various corporate offices by implementing a series of effective countermeasures. Protecting the health of our employees and business partners was our top priority. We immediately initiated cost saving measures and due to the down payment from the Japanese company, Maruho, relating to the Ameluz license agreement for East Asia and Oceania, as well as the 40-plus convertible bond in August, we were able to successfully mitigate the negative effects and secure the liquidity of the company. During 2020, we experienced a slight decline in revenues of about 3% compared to the previous year, although the actual decline in revenues from product sales was significantly higher at 22%. Despite the pandemic, we were able to further expand our market share of PDT prescriptions in our domestic German markets to 62% compared to 57% in 2019.

[Ludwig Lutter:]

Thank you, Hermann, and thank you all for joining us here today in this call. I would like to now give you an overview of the financial results of last year and an outlook for 2021. Given that this is my first conference call as CFO at Biofrontera, I would like to briefly introduce myself before we move on to the business part. As you probably already know, I've been Chief Financial Officer of Biofrontera since March 1 of this year, which is just under 6 weeks. Before that, after completing my studies in the U.S., I was CFO at brillen.de, HRS, Astaro , which was acquired by SOPHOS and also two publicly listed companies, Intershop Communications AG and Poet Holdings, Inc. The latter, like Biofrontera, was listed in Germany as well as in the U.S. So my capital market experience therefore spans both sides of the Atlantic, which I will also be bringing to Biofrontera.

[Hermann Lübbert:]

Yes. Thank you, Ludwig. Now before we turn to the to the questions, I would like to comment briefly on the status of the various lawsuits. Two such lawsuit is ongoing, and unfortunately we were not able to reach an agreement, so the next step will be to enter into the actual trial of the case in front of a jury. The court has already set a preliminary date for this jury trial, which is scheduled to begin at the end of November 2021. However, this may be further delayed. We take the clear position that these lawsuits are without merit, and intend to do defend ourselves vigorously. Of course, this does not guarantee that we will be successful in doing so. However, DUSA's request for an injunction to stop our sales activities has already been largely rejected by the court, with the court merely stating that Biofrontera may not use any documents or information derived from documents that originated from do so. Contrary to German conventions, legal costs in the U.S are generally not borne by the losing side. So that Biofrontera must continue to expect substantial legal costs in the coming year, which will not be reimbursed to the company even if the outcome of the trial is positive for Biofrontera. On the other hand, we dropped our own lawsuit against DUSA last year, as the accused business practices were largely discontinued by DUSA, following an investigation of the Department of Justice and the legal costs incurred would therefore not -- therefore have been disappropriate to the added value. The ruling of the Cologne Higher Regional Court regarding the action for annulment filed by the Balaton group against the resolutions of the 2017 Annual General Meeting was set aside by the Federal Court of Justice and referred back to the Cologne Higher Regional Court for a new hearing and decision. The decision on the action for annulment against resolutions of the 2019 Annual General Meeting is still pending. Our lawsuit against the Balaton group and Mr. Zours in New York is currently suspended due to the mediation process between the two parties. The ruling of the Cologne Higher Regional Court regarding the action for annulment filed by the Balaton group -- second in the mediation process with the Deutsche Balaton group, we asked the U.S court by mutual agreement for further extension until the end of August 2021, which was granted. Moving the Annual General Meeting to August is already a result of these discussions. The pandemic, but also the uncertainty surrounding our shareholder structure, did not do our share price any good. Despite the successfully completed significantly oversubscribed capital measures, the share price has not yet been able to discover sustainably. However, we would like to solicit our confidence that we have strategically positioned Biofrontera in the best possible way to generate sustainable growth. The pandemic has certainly hit us hard on the sell side in the USA, so that we have not yet achieved the planned sales goals and thus also the financial independence of Biofrontera. However, we have not abandoned the path to this goal, but have merely had to slow down the pace so that we remain fully convinced both of our products and of the sales activities that aim to tap the enormous potential. We expect a significant recovery of the general economic situation in the course of this year and subsequently want to continue our steep growth from 2016 to 2019 in a seamless manner. Finally, we would like to express our sincere thanks to our employees, our supervisory board and our shareholders for their commitment, their support and their loyalty to the company. I would now like to open the line for questions. Thank you.

[Operator:]

Thank you. We will now begin the question-and-answer session. And we’ve received the first question. It is from Bruce Jackson of The Benchmark Company. The line is now open. Please go ahead.

[Bruce Jackson:]

Hello, and thank you for taking my question. I'd like to start with the United States marketing strategy. Originally, the idea was to go out and capture more share within the photodynamic therapy market and then try to make some inroads against cryotherapy Is that still the general idea?

[Hermann Lübbert:]

I mean, there's two ways to grow the business are certainly not exclusive, and to an extent, they are both followed up at the same time. However, the major focus, as you indicated, on getting additional market share within the PDT sector and then growing the PDT sector into the larger AK space.

[Bruce Jackson:]

So basically, go after the low-hanging fruit and then continue to expand within cryotherapy?

[Hermann Lübbert:]

Exactly.

[Bruce Jackson:]

And then a follow-up question, if I may. The approval for the use of three tubes in a label, when do you expect to get the FDA labeling? And then after that, do you have to go back to the payers to get the clinical policies updated?

[Hermann Lübbert:]

Yes, we hope to get the FDA labeling in the course of this year. And then with the changed prescribing information, we will have -- in principle, we will have to go back to the payers. However, while the FDA process is ongoing, we do plan to initiate discussions with the payers basically in parallel to the FDA process.

[Bruce Jackson:]

Okay, great. Thank you very much for taking my questions.

[Hermann Lübbert:]

Thank you, Bruce.

[Operator:]

Thank you. The next question is from Thomas Flaten of Lake Street Capital Markets. Your line is now open. Please go ahead.

[Thomas Flaten:]

Great. Thank you for taking the questions. Just wondered if you could qualitatively and perhaps even quantitatively explain what are the factors that would drive the guidance towards the lower end versus the higher end, obviously, an easing of the pandemic, but more specifically, what are some of the factors you're looking for? And is there a timing associated with that? I know you said second-half, but I just wonder if you could give us some more color on that - on the guidance range.

[Hermann Lübbert:]

Yes. I mean, it's quite obvious that the lower end of the guidance is close to last year and the higher end is close to 2019 prior to the pandemic. So it's clearly our hope that in the course of the year, we'll be able to get back to where we were before the entire pandemic started and then continue the growth from there in a similar way that we grew in earlier years. And now the driving factors really the way in which, first of all, the immunization and vaccination program in the U.S., most importantly in the U.S. for us continues, and this develops quite positively as we all know. And then as a consequence of that, how fast the society goes back to be much more open again, similar to it was before we ever had the pandemic. And particularly, the second part is a little bit of an unknown because there are many psychological factors included in that to which extent, for instance, people who are vaccinated feel safe. So, I think all the data suggests that they should feel safe, but that doesn't necessarily mean that they do. And so we have some unknowns here that could delay the society from getting back to normal by a certain time. And this time, of course, can have quite some influence on our sales in the course of the year. It won't have any influence in the long-term development of the company, but particularly this year, it could shift sales towards the higher or towards the lower end of the forecast.

[Thomas Flaten:]

Okay. I appreciate that. Thank you. And then with respect to March, you mentioned in your release last week as well as on the call today that there was a significant uptick in March, particularly in the second-half. I was wondering if that was -- so was that just sales that came not as a surprise, but were those sales associated with increased rep access? Or were you hearing anything qualitatively from the sales reps about physicians driving more patients? And I'm just curious if you could provide some color around what the factors were that drove March, the way that successfully came through?

[Hermann Lübbert:]

I think March -- the growth in March is already an indication of the society opening up. When we look at the sales in March, they are certainly better than they were last year as we published by compared to last year, a 46% growth, but they were not as good as in 2019. So there is still room for growth.

[Thomas Flaten:]

Got it. And what are you hearing from your sales reps with respect to access? Have they started getting back into offices more than they might have been at the beginning of the year?

[Hermann Lübbert:]

Absolutely, yes. We see an opening of the offices again, not back to 100%. But compared to January and February and certainly last year, we do already see an improvement.

[Thomas Flaten:]

Great. I appreciate you taking the questions. Thank you.

[Hermann Lübbert:]

Thank you.

[Operator:]

Thank you. We've received a follow-up question of Bruce Jackson. Your line is now open. Please go ahead.

[Bruce Jackson:]

Hi. Thank you for the follow-up question. I wanted to talk about Xepi briefly, which is a very well differentiated drug. But the first time that it came on to the market, there were some issues with the way that the reimbursement was structured. So in the course of the upcoming relaunch, have you made any changes to the reimbursement structure to make sure that the drug is readily available?

[Hermann Lübbert:]

Yes, we -- first of all, we have achieved agreements with basically all the larger private payers in the U.S system, such that about half the U.S population now gets unrestricted access to Xepi. Unrestricted means there isn't any kind of pre-approval process and it's the necessity to try other drugs first. However, there is still -- there can be still a co-payment by the patients. And to alleviate that we have introduced the copay card such that the financial burden on the patient is, I think not very high. So the patients pay in the end $35. So I think that's acceptable -- will be acceptable to most patients. And first of all, the reimbursement by the private payers plus and the copay card that should allow Xepi to actually grow. The problem that we see with Xepi and this is the result of other market research study that we did about it is that the awareness of Xepi within the medical community is still very low, which is good news, actually because it's something that we can work on and it's much better than have the result being that there is any problems that doctor see with a drug. And just the lack of awareness, that's probably the best thing that a marketing group can actually get as a starting point.

[Bruce Jackson:]

All right. That's helpful. Thank you. And then just one last question, not to belabor the point on the market recovery. But when do you think you might return to the 2019 sales levels?

[Hermann Lübbert:]

We do certainly hope that -- until the middle of the year, the major impact of the pandemic is over and that the second half of the year, we'll be back to where we were.

[Bruce Jackson:]

All right. Thank you very much.

[Hermann Lübbert:]

Thank you.

[Operator:]

Thank you. As there are no further questions, I would like to hand back to you.

[Pamela Keck:]

Thank you everyone for joining today's call, and enjoy the rest of your day.

[Ludwig Lutter:]

Yes.

[Hermann Lübbert:]

Yes. Thank you all very much for taking the time.

[Ludwig Lutter:]

And talk to you next time.

[Pamela Keck:]

Bye.

[Ludwig Lutter:]

Thanks, everybody.

[Operator:]

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.