Biofrontera Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Dollar amounts below are in millions unless otherwise noted. The company commercializes licensed dermatology products, primarily Ameluz for actinic keratoses, alongside Xepi for impetigo and RhodoLED lamps.
Key financial results
| Metric | Q1 2023 | Q1 2022 / comparator |
|---|---|---|
| Total revenue | $8.73 | $9.75 |
| Operating loss | $(5.49) | $(3.11) |
| Net income (loss) | $(7.48) | $5.56 |
| Basic and diluted EPS | $(0.28) | $0.33 basic; $0.32 diluted |
| Cash used in operating activities | $(3.69) | $(2.11) |
| Adjusted EBITDA (non-GAAP) | $(3.99) | $(2.44) |
| Adjusted EBITDA margin | (45.7%) | (25.0%) |
Product revenue was $8.72 million, down $1.02 million (10.5%); related-party revenue was $18,000. Cost of revenue totaled $4.60 million, implying an approximate gross margin of 47.3%, compared with approximately 47.2% in Q1 2022, calculated from reported revenue and cost of revenue. SG&A increased 28.7% to $9.80 million, including higher personnel and legal costs. The company reported a $2.94 million noncash loss from marking its Biofrontera AG investment to market, partly offset by a $1.03 million noncash gain from warrant-liability remeasurement. These items contributed to the shift from prior-year net income to a loss.
Financial position and liquidity
- At March 31, cash and cash equivalents were $13.51 million, down from $17.21 million at year-end; cash, cash equivalents and restricted cash totaled $13.71 million. The company held $7.60 million of Biofrontera AG equity securities.
- Total current assets were $37.22 million and current liabilities $20.45 million. Total liabilities were $25.21 million; stockholders’ equity was $16.75 million.
- Acquisition contract liabilities, net, totaled $9.23 million, including $7.30 million of Maruho start-up financing scheduled for repayment by year-end 2023 and contingent consideration. The filing reports no financing cash flows in Q1.
- Operating cash outflow increased to $3.69 million. The accumulated deficit was $87.0 million.
- After quarter-end, the company entered a revolving credit agreement with MidCap for up to $6.5 million, subject to a borrowing base and availability block. The facility matures May 8, 2026, is secured by substantially all company assets, and bears a floating rate plus 4.00%. The filing does not state that any advances had been drawn.
Changes, outlook and material risks
- Management attributed lower revenue primarily to customer purchasing ahead of an Ameluz price increase in Q1 2022; there was no comparable price increase in 2023. Ameluz sales are seasonal, historically stronger in the first and fourth quarters.
- Management expects continued operating losses as it invests in sales, marketing, medical affairs, systems and personnel. It states existing cash, expected proceeds from selling its Biofrontera AG investment and the revolving facility are expected to fund operations for at least 12 months from issuance of the financial statements. The company also expects it will need additional equity or debt financing for longer-term growth. No quantified revenue or earnings guidance is provided.
- The filing identifies substantial doubt about the company’s ability to continue as a going concern, which management says is mitigated by its plans and forecasts. If financing or expected investment-sale proceeds are unavailable or lower than anticipated, it may cut discretionary spending or defer hiring.
- Xepi supply had been affected by manufacturing delays; the company expected further shipment delays for 8–12 months, while noting Ameluz generates most revenue. Reliance on licensors and their manufacturers, product competition, reimbursement, and financing needs are key risks.
- The company is withholding repayment of Maruho start-up financing while pursuing ICC arbitration over alleged undisclosed manufacturing issues; the outcome may affect repayment obligations and potential damages. It also shares eligible Cutanea product profits with Maruho through 2030. Potential Xepi milestone payments to Ferrer are $2 million and $4 million at specified annual sales thresholds; none had been paid.
- A $6.1 million legal-settlement liability remained, with a $3.7 million related-party receivable from Biofrontera AG. The company remains jointly and severally liable for the settlement and could be exposed if Biofrontera AG does not reimburse its share.
- An April 2023 settlement with Biofrontera AG provided for board changes and a related-party transactions committee. The filing also reports effective disclosure controls as of March 31, 2023.
Most important facts for investors to verify
- Actual Ameluz sales trends, seasonality, and whether the Q1 decline was primarily a prior-year customer buy-in effect.
- Cash burn, realizable proceeds and timing from the Biofrontera AG investment sale, and actual availability and use of the MidCap facility.
- Maruho arbitration outcome, repayment timing for the $7.3 million financing, and any contingent profit-sharing payments.
- Collection of the $3.7 million Biofrontera AG settlement reimbursement and the company’s remaining exposure to the legal settlement.
- Xepi supply recovery and sales against Ferrer milestone thresholds; also monitor the company’s financing needs and progress toward reducing operating losses.