Biofrontera signals enhanced operating leverage as U.S. independence and new patent reshape outlook

Earnings Call Insights: Biofrontera Inc. (BFRI) Q2 2025

MANAGEMENT VIEW

* CEO Hermann Luebbert highlighted a "record breaking" performance in the first half of 2025, driven by a shift in customer segmentation strategy, data-driven sales support, and prioritizing emotional intelligence in sales hiring. Luebbert stated, "For the first time, we sold more than 50,000 tubes of Ameluz in the first half of the year. We transformed our customer segmentation, focused our strategy and used more extensive data analysis to support our sales team effectively."
* Luebbert emphasized the structural transformation from a dependency on Biofrontera AG to full U.S. market independence, with all rights and obligations for Ameluz and the RhodoLED lamp series transferred to Biofrontera Inc. He noted, "The agreement includes the transfer of all rights and obligations for the U.S. market for Ameluz and the RhodoLED lamp series to Biofrontera Inc."
* The company completed enrollment in a Phase III study for Ameluz's use in actinic keratosis on the trunk, neck, and extremities, with plans to submit results to the FDA for label expansion. Luebbert explained, "Once the results become available, we plan to submit them to the FDA to expand our label and allow doctors to treat AK on the entire body."
* Luebbert also mentioned the completion of a Phase III trial for superficial basal cell carcinoma and a Phase II trial for moderate to severe acne, both expected to support future label expansions.
* CFO Eugene Frederick Leffler reported, "Total revenues for the second quarter of 2025 were $9.0 million compared with $7.8 million for the second quarter of 2024. This increase was driven by both a 5% higher unit sale price and 9.5% increases in the sales volume of Ameluz in the second quarter of 2025."

OUTLOOK

* Management expects the shift to a royalty model—12% of sales for Ameluz below $65 million and 15% above—will "dramatically decrease our cost of sales further, but also significantly delay the time of the payments" (Luebbert).
* The inclusion of Ameluz in CMS's MUE files now officially allows reimbursement for up to three tubes per treatment, which management expects will support broader usage.
* Expanded patent protection for Ameluz until December 2043 was achieved earlier this year, improving the long-term commercial prospects.
* Luebbert stated, "We are also very encouraged about the potential for Ameluz to be effective -- an effective treatment for acne vulgaris."
* The FDA submission for superficial basal cell carcinoma is being prepared, with timing set for the second half of 2025.

FINANCIAL RESULTS

* Leffler reported, "Total operating expenses were $14.1 million for the second quarter of 2025 compared with $12.9 million for the second quarter of 2024."
* Cost of revenues decreased by $1.7 million, or about 42%, due to the transition to a royalty model and direct clinical trial responsibility.
* Selling, general and administrative expenses increased to $10.5 million, primarily from a $3.4 million rise in legal costs associated with patent claims, partially offset by $0.5 million in personnel savings and a $0.3 million decrease in other expenses.
* The net loss for the second quarter was $5.3 million, attributed to noncash fluctuations in warrant fair value.
* Adjusted EBITDA for Q2 was negative $5.1 million, reflecting higher SG&A costs offset by lower cost of goods sold.
* Cash and cash equivalents as of June 30, 2025, were $7.2 million, up from $6.0 million at year-end 2024.

Q&A

* Jonathan Matthew Aschoff, ROTH Capital Partners, asked about lamp placements, to which Leffler confirmed "We placed 18 XLs in 2025" in Q2 and "40 XL lamps in the first half of '25" (Luebbert). Aschoff also inquired about upcoming data releases; Leffler and Luebbert confirmed both acne and peripheral AK data are expected in Q4 2025.
* Aschoff asked if SG&A spend in Q2 is indicative of future quarters. Leffler responded, "I would not make that conclusion as we had -- we definitely had a spike in legal spend during Q2 with our patent claim defense."
* Bruce David Jackson, The Benchmark Company, asked about gross margin trajectory following the new agreement with Biofrontera AG. Leffler stated, "Our cost of goods sold, and therefore, our gross profit should increase quite substantially as a result of this most recent transaction. We'll pay the 12% royalty ... versus the 25% to 35% that Hermann mentioned."
* Jackson also asked about legal expense duration. Leffler said, "The legal expenses, as I said, spiked in Q2. And so that should come down and be -- and our SG&A run rate should be much more in line with historical amounts Q3 and Q4."
* Jackson requested an update on the FDA submission for superficial basal cell carcinoma. Luebbert replied, "The FDA submission is currently being prepared ... which will come sometime in the second half of this year."

SENTIMENT ANALYSIS

* Analysts focused on lamp placements, legal expense predictability, and upcoming data releases, with a neutral to slightly positive tone as they probed for sustainability and clarity on cost structure.
* Management maintained a confident and optimistic tone in prepared remarks, with Luebbert describing results as "record breaking" and repeatedly noting strategic advances. In Q&A, management remained forthright but acknowledged legal costs as a temporary spike and deferred specifics on some metrics, signaling transparency but caution regarding volatility.
* Compared to the previous quarter, both analysts and management displayed increased optimism, with management more assertive about the benefits of the restructuring and analysts focusing more on operational leverage and near-term catalysts.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter featured a major structural change as Biofrontera Inc. separated U.S. operations from Biofrontera AG, shifting from a transfer price to a royalty model, expected to reduce cost of goods and improve gross margins.
* Analysts in Q2 focused on lamp placements by type and timing of clinical data, while Q1 focused on sales force attrition and the impact of transfer pricing on margins.
* SG&A expenses saw a notable spike due to legal costs in Q2, while Q1 saw a reduction in personnel and marketing expenses.
* Management’s tone in Q2 was more confident and forward-looking, highlighting expanded patent protection and multiple late-stage clinical programs, compared to Q1’s emphasis on operational efficiency and cost control.

RISKS AND CONCERNS

* Management acknowledged heightened legal expenses tied to patent claims as a significant temporary cost, with expectations for normalization in the second half of the year.
* Analysts questioned the predictability of SG&A expenses and the sustainability of margin improvements, reflecting concerns about volatility and execution risk.
* There was discussion of the need to fully complete the operational transition from Biofrontera AG, which involves complex manufacturing and regulatory steps, though management stated "the financial consequences are already in place."

FINAL TAKEAWAY

Biofrontera Inc. management highlighted a transformative quarter marked by operational independence in the U.S. market, a shift to a lower-cost royalty model, and record product sales. With the completion of key Phase III and II clinical trials supporting future label expansions and extended patent protection for Ameluz, management emphasized that these developments position the company for improved profitability and longer-term growth, while noting a temporary spike in legal costs but an expectation of normalization in the coming quarters.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/bfri/earnings/transcripts]

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