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What changed in Biofrontera Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Biofrontera Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+455 added−224 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-13)

Top changes in Biofrontera Inc.'s 2023 10-K

455 paragraphs added · 224 removed · 164 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeA summary of our understanding of the Licensor’s clinical trials is below: Clinical Phase Product Indication Pre-clinical I II III Status Ameluz ® Superficial basal cell carcinoma ● Clinical Study Report (CSR) expected Q2 – 2024 Ameluz ® Actinic keratosis ● Safety study with 3 tubes of Ameluz ® ; CSR expected Q3 – 2023 Ameluz ® Moderate to severe acne ● CSR expected Q2 – 2024 Ameluz ® Actinic keratosis ● Trunk & extremities with 1-3 tubes First patient dosed 01/23; CSR expected Q1 - 2025 Ameluz ® Actinic keratosis ● Combination daylight + conventional PDT, plan to start enrollment in 2023 Ameluz ® Squamous cell carcinoma in situ ● Plan to start enrollment in 2024 In late October 2021, the new, larger RhodoLED ® XL was approved by the FDA in combination with Ameluz ® for the treatment of mild and moderate actinic keratoses on the face and scalp, which corresponds to the current approval of Ameluz ® .
Biggest changeA summary of our understanding of the Licensor’s clinical trials is below: Clinical Phase Product Indication Pre-clinical I II III Status Ameluz ® Superficial basal cell carcinoma ● Last-patient-in treatment phase in August 2023; Last-patient-out of treatment phase expected in March 2024; Clinical Study Report (CSR) expected Q4 – 2024 Ameluz ® Actinic keratosis ● Phase I safety study applying 3 tubes of Ameluz® to an expanded treatment area of 60 cm²; completed and submitted to FDA Ameluz ® Moderate to severe acne ● Phase II is recruiting; CSR expected in Q3 2025 Ameluz ® Actinic keratosis ● Trunk & extremities applying 1-3 tubes of Ameluz®; First patient dosed in Jan 2023; CSR expected in Q1-2026 Ameluz ® Actinic keratosis ● Combination daylight and conventional PDT, plan to start enrollment in 2025 Ameluz ® Squamous cell carcinoma in situ ● Plan to start enrollment in 2026 In late October 2021, the new, larger RhodoLED ® XL was approved by the FDA in combination with Ameluz ® for the treatment of mild and moderate actinic keratoses on the face and scalp, which corresponds to the current approval of Ameluz ® .
Violations of this law are punishable by up to five years in prison, and can also result in criminal fines, civil monetary penalties, administrative penalties and exclusion from participation in federal health care programs. 11 Additionally, the intent standard under the Anti-Kickback Statute was amended by the Affordable Care Act to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
Violations of this law are punishable by up to five years in prison, and can also result in criminal fines, civil monetary penalties, administrative penalties and exclusion from participation in federal health care programs. 13 Additionally, the intent standard under the Anti-Kickback Statute was amended by the Affordable Care Act to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
We are currently selling Xepi ® for this indication in the United States under an exclusive license and supply agreement, as amended (“Xepi LSA”), with Ferrer that was assumed by Biofrontera on March 25, 2019 through our acquisition of Cutanea. Impetigo is a common and highly contagious bacterial skin infection caused by bacteria.
We are currently selling Xepi ® for this indication in the United States under an exclusive license and supply agreement, as amended (“Xepi LSA”), with Ferrer that was assumed by Biofrontera on March 25, 2019 through our acquisition of Cutanea (the “Cutanea Acquisition”). Impetigo is a common and highly contagious bacterial skin infection caused by bacteria.
We make available, free of charge, on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such with, or furnish it to, the SEC. 12
We make available, free of charge, on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such with, or furnish it to, the SEC. 14
In addition, the FDA may order a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; and ● post-approval restrictions or conditions, including requirements to conduct post-market surveillance studies to establish additional safety or efficacy data. 10 The FDA has broad post-market and regulatory enforcement powers.
In addition, the FDA may order a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; and ● post-approval restrictions or conditions, including requirements to conduct post-market surveillance studies to establish additional safety or efficacy data. 12 The FDA has broad post-market and regulatory enforcement powers.
In addition, under the Ameluz LSA, the Ameluz Licensor agrees to sell us the RhodoLED ® lamp series at cost plus a low double digit handling fee. There are no milestone or royalty obligations associated with this agreement. Any changes to pricing of supply of Ameluz ® or RhodoLED ® lamps would require agreement by both contract parties.
In addition, under the Ameluz LSA, the Ameluz Licensor agrees to sell us the RhodoLED ® lamp series at cost plus a low double digit handling fee. There are no milestones or royalty obligations associated with this agreement. Any changes to the pricing of supply of Ameluz ® or RhodoLED ® lamps would require agreement by both contract parties.
We are leveraging medical affairs, advisory boards, and key opinion leaders in order to educate the market on the use and benefits of Ameluz ® PDT. 1 Fuchs & Marmur, Dermatol Surg. 2007 Sep; 33(9):1099-101 2 Werner RN, Stockfleth E, Connolly SM, et al.
We are leveraging medical affairs, advisory boards, reimbursement resources, and key opinion leaders in order to educate the market on the use and benefits of Ameluz ® PDT. 1 Fuchs & Marmur, Dermatol Surg. 2007 Sep; 33(9):1099-101 2 Werner RN, Stockfleth E, Connolly SM, et al.
Topicals, medications which patients apply to the lesion multiple times per day for up to several weeks, constitutes approximately 12% of the market. PDT is approximately 2% of the market. The total market size is estimated to be roughly $4 billion for the three therapy types.
Topicals, medications which patients apply to the lesion multiple times per day for up to several weeks, constitute approximately 12% of the market. PDT is approximately 2% of the market. The total market size is estimated to be roughly $4 billion for the three therapy types.
AKs are premalignant lesions of the skin that can potentially develop into skin cancer (squamous cell carcinoma) if left untreated. 1 International treatment guidelines list photodynamic therapy as the “gold standard” for treating AK, especially multiple AKs and the surrounding photodamaged skin. 2 We are currently selling Ameluz ® for this indication in the U.S. under an exclusive license and supply agreement (“Ameluz LSA”) between Biofrontera, Inc. and the Ameluz Licensors.
AKs are premalignant lesions of the skin that can potentially develop into skin cancer (squamous cell carcinoma) if left untreated. 1 International treatment guidelines list PDT as the “gold standard” for treating AK, especially multiple AKs and the surrounding photodamaged skin. 2 We are currently selling Ameluz ® for this indication in the U.S. under an exclusive license and supply agreement (as amended the “Ameluz LSA”) between Biofrontera, Inc. and the Ameluz Licensors.
During this process, energy from the light activates the photosensitizer. In photodynamic therapy, the activated photosensitizer transfers energy to oxygen molecules found in cells, converting the oxygen into a highly reactive oxygen species (“ROS”), which destroys or alters the sensitized cells. Photodynamic therapy can be a highly selective treatment that targets specific cells while minimizing damage to normal surrounding tissues.
During this process, energy from the light activates the photosensitizer. In PDT, the activated photosensitizer transfers energy to oxygen molecules found in cells, converting the oxygen into a highly reactive oxygen species (“ROS”), which destroys or alters the sensitized cells. PDT can be a highly selective treatment that targets specific cells while minimizing damage to normal surrounding tissues.
It also can allow for multiple courses of therapy. Hence the mode of action of photodynamic therapy requires destruction of the altered cells, temporary local skin reactions and inflammation of the treated area might be expected.
It also can allow for multiple courses of therapy. Hence the mode of action of PDT requires destruction of the altered cells, temporary local skin reactions and inflammation of the treated area might be expected.
In general, photodynamic therapy is a two-step process: ● the first step is the application of a drug known as a “photosensitizer,” or a pre-cursor of this type of drug, which tends to accumulate in cancerous cells; and ● the second step is activation of the photosensitizer by controlled exposure to a selective light source in the presence of oxygen.
In general, PDT is a two-step process: ● the first step is the application of a drug known as a “photosensitizer,” or a pre-cursor of this type of drug, which tends to accumulate in cancerous cells; and ● the second step is activation of the photosensitizer by controlled exposure to a selective light source in the presence of oxygen.
If we pursue this option, the Ameluz Licensor must use its best efforts to assist with the transferring of these manufacturing contracts without delay and at its own cost. No transfer price will be paid to the Ameluz Licensor thereafter for products or lamps that are manufactured by third parties. Ferrer Internacional S.A.
If we pursue this option, the Ameluz Licensor must use its best efforts to assist with the transferring of these manufacturing contracts without delay and at its own cost. No transfer price will be paid to the Ameluz Licensor thereafter for products or lamps that are manufactured by third parties.
Our primary competitor in the PDT space is Levulan ® and the associated light, Blu-U ® . Our goal is to continue expansion in the current PDT market share and focus on converting cryotherapy treatments of more than 14 lesions as a field therapy such as Ameluz ® PDT could be more effective.
Our primary competitor in the PDT space is Levulan ® and the associated light, Blu-U ® . Our goal is to continue expansion in the current PDT market share and focus on converting cryotherapy treatments of more than 14 lesions as a field therapy such as Ameluz ® PDT could be more effective and lead to better patient outcomes.
Furthermore, while Ferrer is approval holder for Xepi ® , the administration of the NDA is managed by Biofrontera Bioscience. We are fully dependent on our collaboration with Ferrer for our supply of Xepi ® from their sole supplier.
Furthermore, while Ferrer is approval holder for Xepi ® , the administration of the NDA is managed by Biofrontera Bioscience, a related party. We are fully dependent on our collaboration with Ferrer for our supply of Xepi ® from their sole supplier.
This targeted market is about 11% or $440 million of the total AK market. 6 Ameluz ® PDT is competitive in the market.
This targeted market is about 11% or $500 million of the total AK market. 6 Ameluz ® PDT is competitive in the market.
Under the Ameluz LSA, we hold the exclusive license to sell Ameluz ® and the RhodoLED ® lamp series comprising the RhodoLED ® and the new, more advanced RhodoLED ® XL (when available) in the United States for all indications currently approved by the FDA as well as all future FDA-approved indications identified under the Ameluz LSA.
Under the Ameluz LSA, we hold the exclusive license to sell Ameluz ® and the RhodoLED ® lamp series comprising the RhodoLED ® and the new, more advanced RhodoLED ® XL (available in the second quarter of 2024) in the United States for all indications currently approved by the FDA as well as all future FDA-approved indications identified under the Ameluz LSA.
The key elements of our strategy include the following: ● expand our sales in the United States of Ameluz ® in combination with the BF-RhodoLED ® lamp series for the treatment of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz ® to be standard of care in the United States by growing our dedicated sales and marketing infrastructure in the United States; 4 ● expand sales of Xepi ® for treatment of impetigo by improving the market positioning of the licensed product; ● leverage the potential for future approvals and label extensions of our licensed portfolio products that are in the pipeline for the U.S. market through our license and supply agreements with the Licensors; and ● opportunistically add complementary products or services to our portfolio by acquiring or licensing IP to further leverage our commercial infrastructure and customer relationships.
The key elements of our strategy include the following: ● expand our sales in the United States of Ameluz ® in combination with the BF-RhodoLED ® lamp series for the treatment of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz ® to be standard of care in the United States by focusing on acquisition of new customers and growth of the therapy in our current customer base; 4 ● expand sales of Xepi ® for treatment of impetigo by improving the market positioning of the licensed product; ● leverage the potential for future approvals and label extensions of our licensed portfolio products that are in the pipeline for the U.S. market through our license and supply agreements with the Licensors; and ● opportunistically add complementary products or services to our portfolio by acquiring or licensing IP to further leverage our commercial infrastructure and customer relationships.
The Ameluz ® PDT therapy is highly effective with patients experiencing up to 91% clearance after one or two treatments 3 with limited or no scaring.
The Ameluz ® PDT therapy is highly effective with patients - efficacy is up to 91% clearance after one or two treatments 3 with limited or no scarring.
Biofrontera Pharma is considered the responsible manufacturer for Ameluz ® by the FDA. Biofrontera Pharma currently manufactures through a single unaffiliated contract manufacturer in Switzerland, Glaropharm AG, and has recently signed an agreement with a second unaffiliated contract manufacturer located in Germany, Pharbil Waltrop GmbH, to ensure stability of the supply chain.
Biofrontera Pharma currently manufactures through a single unaffiliated contract manufacturer in Switzerland, Glaropharm AG, and has recently signed an agreement with a second unaffiliated contract manufacturer located in Germany, Pharbil Waltrop GmbH, to ensure stability of the supply chain.
Actinic keratoses typically appear on sun-exposed areas, such as the face, bald scalp, arms or the back of the hands, and are often elevated, flaky, and rough in texture, and appear on the skin as hyperpigmented spots. AKs are typically treated with cryotherapy, topicals, or PDT and these treatments can be used in combination.
AKs typically appear on sun-exposed areas, such as the face, bald scalp, arms or the back of the hands, and are often elevated, flaky, and rough in texture, and appear on the skin as hyperpigmented spots. AKs are typically treated with cryotherapy, topicals, or PDT.
Under the terms of the Ameluz LSA, we were granted an exclusive, non-transferable license to use Biofrontera Pharma and Biofrontera Bioscience technology to use, import, export, distribute, market, offer for sale and sell Ameluz ® and the RhodoLED ® lamp series for its approved indications within the United States and certain of its territories and agreed to purchase a minimum number of units according to an agreed schedule.
Commercial Partners and Agreements Ameluz ® and RhodoLED ® Lamp Series License Service Agreement Under the terms of the Ameluz LSA, we are granted an exclusive, non-transferable license to use Biofrontera Pharma and Biofrontera Bioscience technology to use, import, export, distribute, market, offer for sale and sell Ameluz ® and the RhodoLED ® lamp series for its approved indications within the United States and certain of its territories.
The new PDT-lamp enables the illumination of larger areas, thus allowing the simultaneous treatment of several actinic keratoses distant from each other. The BF-RhodoLED ® model will continue to be offered in the U.S. market. Principal suppliers Our source for the Ameluz ® and the RhodoLED ® lamp series is our Licensor, Biofrontera Pharma.
The new PDT-lamp enables the illumination of larger areas, thus allowing the simultaneous treatment of several actinic keratoses distant from each other. The smaller BF-RhodoLED ® model will continue to be offered in the U.S. market.
Ameluz ® PDT is covered by code number 96574 which has an average reimbursement of $286.00 per light treatment and has to be performed by a qualified healthcare professional. Public information regarding CPT reimbursement is available at https://www.cms.gov/medicare/physician-fee-schedule/search?Y=0&T=4&HT=0&CT=3&H1=96574&M=5.
Ameluz ® PDT is covered by code number 96574 which has an average reimbursement of $273.00 per light treatment and has to be performed by a qualified healthcare professional. Public information regarding CPT reimbursement is available at https://www.cms.gov/medicare/physician-fee-schedule/search?Y=0&T=4&HT=0&CT=3&H1=96574&M=5. Our licensors’ R&D programs We are a sales organization with focus on commercializing our portfolio of licensed products that are already FDA-approved.
Biofrontera Inc. includes its wholly owned subsidiary Bio-FRI GmbH, a limited liability company organized under the laws of Germany. Our subsidiary, Bio-FRI was formed on February 9, 2022, as a German presence to facilitate our relationship with the Ameluz Licensor.
Our subsidiary, Bio-FRI was formed on February 9, 2022, as a German presence to facilitate our relationship with the Ameluz Licensor. Company Overview We were formed in March 2015 as Biofrontera Inc., a Delaware corporation, and a wholly owned subsidiary of Biofrontera AG, a stock corporation organized under the laws of Germany.
As of December 31, 2022, Biofrontera AG held 30% of the outstanding shares of our common stock. With our national commercial team, we generate revenue by selling our licensed products directly to dermatology offices and groups.
On November 2, 2021, we consummated our initial public offering and subsequently we ceased to be deemed a company controlled by Biofrontera AG. As of December 31, 2023, Biofrontera AG held 26.4% of the outstanding shares of our common stock. With our national commercial team, we generate revenue by selling our licensed products directly to dermatology offices and groups.
Employees As of December 31, 2022, the company had 81 employees all of which were full-time employees and approximately 57% are focused on marketing and sales activities. Our commercial team covers the continental United States, and our headquarters is in Woburn, MA. Significant customers We have a wide and diverse customer base with no single customer dominating our revenues.
Employees As of December 31, 2023, the company had 85 employees, of which 83 were full-time employees and two were part-time employees. Approximately 57% are focused on marketing and sales activities. Our commercial team covers the continental United States, and our headquarters is in Woburn, MA.
Item 1. Business Overview We are a U.S.-based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy (“PDT”) and topical antibiotics. The Company’s licensed products are used for the treatment of actinic keratoses, which are pre-cancerous skin lesions, as well as impetigo, a bacterial skin infection.
Item 1. Business Overview We are a U.S.-based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy (“PDT”) and topical antibiotics with PDT contribution to the largest amount of our business.
Our licensors’ research and development programs Currently, there are no clinical trials being conducted for Xepi ® , and we are unaware of any immediate or near-term plans of Ferrer for a U.S.-market focused development pipeline.
Sales to the specialty pharmacies are recognized net of sales deductions, which include expected returns, discounts and incentives such as payments made under patient assistance programs. Our licensors’ R&D programs Currently, there are no clinical trials being conducted for Xepi ® , and we are unaware of any immediate or near-term plans of Ferrer for a U.S.-market focused development pipeline.
Although recent developments with respect to the third-party manufacturer that was providing our supply of Xepi ® have impacted the timing of sales expansion and improved market positioning, Ferrer is in the process of qualifying a new third-party manufacturer in North America. The expectation is that this process will be completed by early 2024.
There has been limited revenue during the current reporting periods and issues with the third-party manufacturer that was providing our supply of Xepi ® impacting the timing of sales expansion and improved market positioning. However, Ferrer is in the process of qualifying a new third-party manufacturer in North America.
Our licensors’ research and development programs We are a sales organization with focus on commercializing our portfolio of licensed products that are already FDA-approved. Research and development efforts for label extensions in order to optimize the market positioning of the products are the responsibility of the respective licensor and are governed by the respective LSAs.
R&D efforts for label extensions in order to optimize the market positioning of the products are the responsibility of the respective licensor and are governed by the respective LSAs.
Once the new third-party manufacturer is qualified, we expect the supply of Xepi ® will meet future needs. Xepi ® , is distributed through specialty pharmacies and generally covered by most commercial payers without pre-approval or similar requirements. Our contracts with third-party payers/pharmacy benefit managers (“PBMs”) generally require us to provide rebates based on utilization by the patients they cover.
The expectation is that this process will be completed in the second half of 2024. Once the new third-party manufacturer is qualified, we expect the supply of Xepi ® will enable us to market and increase demand. Xepi ® is distributed through specialty pharmacies and generally covered by most commercial payers without pre-approval or similar requirements.
Xepi ® is protected by four patents in the United States held by Ferrer. The primary patent protecting the active ingredient in Xepi ® expires in November 2023.
Additionally, a new patent regarding an Ameluz formulation without propylene glycol filed at USPTO in 2023, if granted, extends protection to 2043. Xepi ® is protected by four patents in the United States held by Ferrer. The primary patent protecting the active ingredient in Xepi ® expired in November 2023.
At December 31, 2022, no customer represented more than 10% of the net accounts receivable balance. For the year ended December 31, 2022, no customer represented more than 10% of net revenues. Our Strategy Our principal objective is to improve patient outcomes by increasing the sales of our licensed products.
Our Strategy Our principal objective is to improve patient outcomes by increasing the sales of our licensed products.
Compliance with these laws and regulations may be costly and may require significant technical expertise and capital investment to ensure compliance. FDA Regulation for Medical Devices After a device is placed on the market, regardless of its classification or premarket pathway, numerous regulatory requirements apply.
Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our product label extensions or products under development. 11 FDA Regulation for Medical Devices After a device is placed on the market, regardless of its classification or premarket pathway, numerous regulatory requirements apply.
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Company Overview We were formed in March 2015 as Biofrontera Inc., a Delaware corporation, and a wholly owned subsidiary of Biofrontera AG, a stock corporation organized under the laws of Germany. On November 2, 2021, we consummated our initial public offering and subsequently we ceased to be deemed a company controlled by Biofrontera AG.
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The Company’s licensed products are used for the treatment of actinic keratoses, which are pre-cancerous skin lesions, as well as impetigo, a bacterial skin infection. In May 2023, we began research and development (“R&D”) activities to support PDT growth and will continue to opportunistically invest in these activities going forward.
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Sales to the specialty pharmacies are recognized net of sales deductions, which include expected returns, discounts and incentives such as payments made under patient assistance programs.
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Our R&D program currently aims to improve the capabilities of our BF-RhodoLED® lamps to better fulfill the needs of dermatologists. Our goal is to improve the effectiveness of our commercial team by allowing sales representatives to carry approved devices with them allowing for easier product demonstrations and evaluations.
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Commercial Partners and Agreements Ameluz ® and RhodoLED ® Lamp Series License Service Agreement On June 16, 2021, we entered into the Ameluz LSA with Biofrontera Pharma and Biofrontera Bioscience.
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Effective June 1, 2024, we will take control of all clinical trials relating to Ameluz ® in the US, allowing for more effective cost management and direct oversight of trial efficiency. Biofrontera Inc. includes its wholly owned subsidiary Bio-FRI GmbH, a limited liability company organized under the laws of Germany.
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On October 8, 2021, we entered into an amendment to the Ameluz LSA under which the price we pay per unit will be based upon our sales history, although the minimum number of units to purchase per year remains unchanged.
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Significant customers We have a wide and diverse customer base with no single customer dominating our revenues. At December 31, 2023, no customer represented more than 10% of the net accounts receivable balance. For the year ended December 31, 2023, no customer represented more than 10% of net revenues.
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The amendment to the Ameluz LSA that became effective on October 8, 2021, also shifted the costs of clinical development for FDA-approved indications that are not currently being sought by the Ameluz Licensor, as described below.
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These treatments can be used in combination, which is the number one indication for those 45 years of age and older.
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The Ameluz LSA will remain in effect until June 2036, at which time the Ameluz LSA may automatically renew depending on Biofrontera’s achievement of certain revenue goals. Both parties may terminate the agreement early for a material breach after a 60-day cure period.
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On February 19, 2024, the Ameluz LSA was amended with the Second Amended and Restated License and Supply Agreement (the “Second A&R Ameluz LSA”), effective February 13.
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The Second A&R Ameluz LSA amends and restates the Ameluz LSA, originally dated as of October 1, 2016, between the Company and Amulez Licensor, which was subsequently amended on July 1, 2019, June 16, 2021, October 8, 2021, December 5, 2023, and January 26, 2024.
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Among other things, the Second A&R Ameluz LSA reduces the transfer price of Ameluz ® from 50% to 25% for all purchases in 2024 and 2025.
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Starting on January 1, 2026, until 2032 there will be stepwise increases in the transfer price from 25% to 35% for sales related to actinic keratosis and, if approved by the FDA, basal cell carcinoma and squamous cell carcinoma. The transfer price for sales related to acne, another indication currently in development, will remain at 25% indefinitely.
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The transfer price covers the cost of goods, royalties on sales, and services including all regulatory efforts, agency fees, pharmacovigilance, and patent administration. Effective June 1, 2024, the Company will take control of all clinical trials relating to Ameluz ® in the US, allowing for more effective cost management and direct oversight of trial efficiency.
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The reduced Ameluz LSA transfer price will allow the Company to finance such R&D activities and continue our commercial growth trajectory.
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Additionally, our licensor has been granted a patent for a pain-reduced PDT procedure that combines daylight and conventional PDT and, if the respective Phase III trial leads to inclusion of the procedure into the Ameluz ® label, may provide further patent protection beyond 2040.
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Furthermore, the FDA recently approved a new formulation of Ameluz ® that lacks propylene glycol and reduces the accumulation of certain contaminants over time. The new formulation will be implemented in all US productions of Ameluz ® starting in 2024. A corresponding patent application has been filed with the U.S.
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Patent and Trademark Office, or USPTO, which, if granted, will extend protection of Ameluz ® to 2043. Principal suppliers Our source for the Ameluz ® and the RhodoLED ® lamp series is our Licensor, Biofrontera Pharma. Biofrontera Pharma is considered the responsible manufacturer for Ameluz ® by the FDA.
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Our contracts with third-party payers/pharmacy benefit managers (“PBMs”) generally require us to provide rebates based on utilization by the patients they cover.
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The price we pay per unit will be based upon our sales history. The Ameluz LSA will remain in effect for fifteen years and automatically renew for a period of five years, in perpetuity as long as certain minimum revenues are achieved. See Note 23. Commitments and Contingencies .
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On February 19, 2024, we entered into the Second A&R Ameluz LSA, which is discussed above in the section entitled “ Ameluz ® and RhodoLED ® Lamp Series - Our licensors’ R&D programs .
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Effective June 1, 2024, the Company will take control of all clinical trials with Ameluz ® in the US, allowing for more effective cost management and direct oversight of trial efficiency. The reduced transfer price in the Second A&R Ameluz LSA will allow the Company to finance such R&D activities and continue our commercial growth trajectory. Ferrer Internacional S.A.
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Compliance with these laws and regulations may be costly and may require significant technical expertise and capital investment to ensure compliance. U.S. Drug Development and Review Drug Development Process General Information about the Drug Approval Process and Post-Marketing Requirements The U.S. system of new drug and biologics approval is a rigorous process.
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The following general comments about the drug approval process are relevant to the development activities undertaken by our Licensors. Investigational New Drug Application (“IND”): After certain pre-clinical studies are completed, an IND application is submitted to the FDA to request the ability to begin human testing of the drug or biologic.
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An IND becomes effective thirty days after the FDA receives the application (unless the FDA notifies the sponsor of a clinical hold), or upon prior notification by the FDA. Phase 1 Clinical Trials: These trials typically involve small numbers of healthy volunteers or patients and usually define a drug candidate’s safety profile, including the safe dosage range.
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Phase 2 Clinical Trials: In Phase 2 clinical trials, controlled studies of human patients with the targeted disease are conducted to assess the drug’s effectiveness.
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These studies are designed primarily to determine the appropriate dose levels, dose schedules and route(s) of administration, and to evaluate the effectiveness of the drug or biologic on humans, as well as to determine if there are any side effects on humans to expand the safety profile following Phase 1.
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These clinical trials, and Phase 3 trials discussed below, are designed to evaluate the product’s overall benefit-risk profile, and to provide information for physician labeling. Phase 3 Clinical Trials: This Phase usually involves a larger number of patients with the targeted disease.
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Investigators (typically physicians) monitor the patients to determine the drug candidate’s efficacy and to observe and report any adverse reactions that may result from long-term use of the drug on a large, more widespread, patient population. During the Phase 3 clinical trials, typically the drug candidate is compared to either a placebo or a standard treatment for the target disease.
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NDA or Biologics License Application (“BLA”): After completion of all three clinical trial Phases, if the data indicates that the drug is safe and effective, an NDA or BLA is filed with the FDA requesting FDA approval to market the new drug as a treatment for the target disease.
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Risk Evaluation and Mitigation Strategy Authority under the Food and Drug Administration Amendments Act (“FDAAA”): The FDAAA also gave the FDA authority to require the implementation of a Risk Evaluation and Mitigation Strategy (“REMS”) for a product when necessary to minimize known and preventable safety risks associated with the product.
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The FDA may require the submission of a REMS before a product is approved, or after approval based on “new safety information,” including new analysis of existing safety information.
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A REMS may include a medication guide, patient package insert, a plan for communication with healthcare providers, or other elements as the FDA deems are necessary to assure safe use of the product, which could include imposing certain restrictions on distribution or use of a product.
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A REMS must include a timetable for submission of assessments of the strategy at specified time intervals. Failure to comply with a REMS, including the submission of a required assessment, may result in substantial civil or criminal penalties.
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Other Issues Related to Product Safety: Adverse events that are reported after marketing approval also can result in additional limitations being placed on a product’s use and, potentially, withdrawal of the product from the market.
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In addition, under the FDAAA, the FDA has authority to mandate labeling changes to products at any point in a product’s life cycle based on new safety information derived from clinical trials, post-approval studies, peer-reviewed medical literature, or post-market risk identification and analysis systems data.
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Clinical trials may experience delays or fail to demonstrate the safety and efficacy, which could prevent or significantly delay obtaining regulatory approval. 10 Clinical trials require the investment of substantial financial and personnel resources.
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The commencement and completion of clinical trials may be delayed by various factors, including scheduling conflicts with participating clinicians and clinical institutions, difficulties in identifying and enrolling patients who meet trial eligibility criteria, failure of patients to complete the clinical trial, delays in accumulating the required number of clinical events for data analysis, delay or failure to obtain the required approval to conduct a clinical trial at a prospective site, and shortages of available drug supply.
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Moreover, the outcome of a clinical trial is often uncertain. There may be numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent regulatory approval. In addition, the results of early-stage clinical trials do not necessarily predict the results of later-stage clinical trials.
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Later-stage clinical trials may fail to demonstrate that a drug product is safe and effective despite having progressed through initial clinical testing. Clinical trial data results are susceptible to varying interpretations, and such data may not be sufficient to support approval by the FDA.
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The ability to commence and complete clinical trials may be delayed by many factors that are beyond our licensors control, including: ● delays obtaining regulatory approval to commence a trial; ● delays in reaching agreement on acceptable terms with contract research organizations (“CROs”) and clinical trial sites; ● delays in obtaining institutional review board (“IRB”), approval at each site; ● slower than anticipated patient enrollment or an inability to recruit and enroll patients to participate in clinical trials for various reasons; ● inability to retain patients who have initiated a clinical trial; ● lack of funding to start or continue the clinical trial, including as a result of unforeseen costs due to enrollment delays, requirements to conduct additional trials and studies; ● negative or inconclusive results; ● deficiencies in the conduct of the clinical trial, including failure to conduct the clinical trial in accordance with regulatory requirements, good clinical practice, or clinical protocols; ● deficiencies in the clinical trial operations or trial sites resulting in the imposition of a clinical hold; or ● adverse medical events or side effects experienced by patients during the clinical trials as a result of or resulting from the clinical trial treatments; Delays can also occur if a clinical trial is suspended or terminated by the IRBs of the clinical trial sites in which such trials are being conducted, or by the FDA or other regulatory authorities.
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Such authorities may impose a suspension or termination of the clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, or failure to demonstrate a benefit from using a drug.
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Post-Approval Requirements for Approved Drugs Any of our licensed drug products that require FDA approvals are subject to continuing regulation by the FDA, including, among other things, record-keeping requirements, reporting of adverse experiences with the product, providing the FDA with updated safety and efficacy information, product sampling and distribution requirements, and complying with FDA promotion and advertising requirements, which include, among other requirements, standards for direct-to-consumer advertising, restrictions on promoting drugs for uses or in patient populations that are not described in the drug’s approved labeling (known as “off-label use”), limitations on industry sponsored scientific and educational activities, and requirements for promotional activities involving the internet.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price. ● We have incurred, and will continue to incur, increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices. ● As a result of becoming a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock. ● We are an emerging growth company and smaller reporting company we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies or smaller reporting companies will make our common stock less attractive to investors. 14 Risks Related to Our Securities and the Ownership of Our Common Stock ● As of December 31, 2022, Biofrontera AG beneficially owns 30.0% of our outstanding shares of common stock and will be able to exert significant control over matters subject to stockholder approval and its interests may conflict with ours or other stockholders in the future. ● Future sales and issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause the stock price of our common stock to decline. ● If we fail to regain compliance with applicable listing standards, our common stock and/or our publicly-traded warrants could be delisted from Nasdaq. ● Our stockholder rights plan, or “poison pill,” includes terms and conditions which could discourage a takeover or other transaction that stockholders may consider favorable. ● Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock. ● Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Biggest changeIf we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and stock price. ● We have incurred, and will continue to incur, increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices. ● As a result of becoming a public company, we are obligated to develop and maintain proper and effective internal controls over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock. ● We are an emerging growth company and smaller reporting company we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies or smaller reporting companies will make our common stock less attractive to investors. 17 Risks Related to Our Securities and the Ownership of Our Common Stock ● Provisions of our outstanding warrants could discourage an acquisition of us by a third party. ● Our share price may be volatile, and you may be unable to sell your shares and/or warrants at or above the offering price. ● If we fail to regain compliance with applicable listing standards, our common stock and/or our publicly-traded warrants could be delisted from Nasdaq. ● Future sales of our common stock in the public market could cause our share price to fall. ● If the Preferred Warrants are not exercised, we will not receive up to $8 million in aggregate gross proceeds from the exercise of the Warrants which could have a material adverse effect on our financial condition. ● Warrants are exercisable for our common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. ● If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline. ● Our quarterly operating results may fluctuate significantly. ● Future sales and issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause the stock price of our common stock to decline. ● We have never paid dividends on our common stock and we do not intend to pay dividends for the foreseeable future.
Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.
Although we have the authority under the Ameluz LSA with respect to the indications that the Ameluz Licensor is currently pursuing with the FDA (as well as certain other clinical studies identified in the Ameluz LSA) in certain circumstances to take over clinical development, regulatory work and manufacturing from the Ameluz Licensor if they are unable or unwilling to perform these functions appropriately, the sourcing and manufacture of our licensed products as well as the regulatory approvals and clinical trials related to our licensed products are currently controlled, and will likely continue to be controlled for the foreseeable future, by our existing and future collaborators.
Although we have the authority under the Ameluz LSA with respect to the indications that the Ameluz Licensor is currently pursuing with the FDA (as well as certain other clinical studies identified in the Ameluz LSA) in certain circumstances to take over clinical development, regulatory work and manufacturing from the Ameluz Licensor if they are unable or unwilling to perform these functions appropriately, the sourcing and manufacture of our licensed products as well as the regulatory approvals and clinical trials related to our licensed products are currently controlled, and will likely continue to be controlled for the foreseeable future, by our existing and future collaborators.
Hermann Lübbert, our Executive Chairman and Fred Leffler, our Chief Financial Officer. The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations.
Hermann Lübbert, our Chief Executive Officer and Chairman and Fred Leffler, our Chief Financial Officer. The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements could potentially harm our business, prospects, financial condition or results of operations.
Disputes may arise between us and any of our Licensors regarding intellectual property subject to such agreements, including: ● the scope of rights granted under the agreement and other interpretation-related issues; ● whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the agreement; ● our right to sublicense patent and other rights to third parties; ● our diligence obligations with respect to the use of the licensed intellectual property, and what activities satisfy those diligence obligations; ● the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our Licensors and us, should any such joint creation occur; ● our right to transfer or assign the license; and ● the effects of termination. 15 These, or other disputes over intellectual property that we have licensed may prevent or impair our ability to maintain our current arrangements on acceptable terms or may impair the value of the arrangement to us.
Disputes may arise between us and any of our Licensors regarding intellectual property subject to such agreements, including: ● the scope of rights granted under the agreement and other interpretation-related issues; ● whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the agreement; ● our right to sublicense patent and other rights to third parties; ● our diligence obligations with respect to the use of the licensed intellectual property, and what activities satisfy those diligence obligations; ● the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our Licensors and us, should any such joint creation occur; ● our right to transfer or assign the license; and ● the effects of termination. 18 These, or other disputes over intellectual property that we have licensed may prevent or impair our ability to maintain our current arrangements on acceptable terms or may impair the value of the arrangement to us.
The FDA and other U.S. governmental agencies regulate numerous elements of our and our Licensors’ business, including: ● product design and development; ● pre-clinical and clinical testing and trials; ● product safety; ● establishment registration and product listing; ● distribution; ● labeling, manufacturing and storage; ● pre-market clearance or approval; ● advertising and promotion; ● marketing, manufacturing, sales and distribution; ● relationships and communications with health care providers; ● adverse event reporting; ● market exclusivity; ● servicing and post-market surveillance; and ● recalls and field safety corrective actions. 29 We are working to commercialize a new lamp, the “RhodoLED ® XL,” which was approved by the FDA on October 21, 2021 and allows use of Ameluz ® on more distant Actinic Keratosis lesions.
The FDA and other U.S. governmental agencies regulate numerous elements of our and our Licensors’ business, including: ● product design and development; ● pre-clinical and clinical testing and trials; ● product safety; ● establishment registration and product listing; ● distribution; ● labeling, manufacturing and storage; ● pre-market clearance or approval; ● advertising and promotion; ● marketing, manufacturing, sales and distribution; ● relationships and communications with health care providers; ● adverse event reporting; ● market exclusivity; ● servicing and post-market surveillance; and ● recalls and field safety corrective actions. 31 We are working to commercialize a new lamp, the “RhodoLED ® XL,” which was approved by the FDA on October 21, 2021 and allows use of Ameluz ® on more distant Actinic Keratosis lesions.
If we fail to comply with our obligations in the agreements under which we license rights from such third parties, or if the license agreements are terminated for other reasons, we could lose license rights that are important to our business. ● Certain important patents for our licensed product Ameluz ® expired in 2019.
If we fail to comply with our obligations in the agreements under which we license rights from such parties, or if the license agreements are terminated for other reasons, we could lose license rights that are important to our business. ● Certain important patents for our licensed product Ameluz ® expired in 2019.
These changes may require us to find alternative bases for the compliant transfer of personal data outside the EEA and we are monitoring developments in this area. 31 The GDPR is directly applicable in each EU Member State, however, it provides that EU Member States may introduce further conditions, including limitations which could limit our ability to collect, use and share personal data (including health and medical information), or could cause our compliance costs to increase, ultimately having an adverse impact on our business.
These changes may require us to find alternative bases for the compliant transfer of personal data outside the EEA and we are monitoring developments in this area. 33 The GDPR is directly applicable in each EU Member State, however, it provides that EU Member States may introduce further conditions, including limitations which could limit our ability to collect, use and share personal data (including health and medical information), or could cause our compliance costs to increase, ultimately having an adverse impact on our business.
Our Licensors will also be required to report certain adverse reactions and production problems, if any, to the FDA and other similar regulatory authorities and to comply with certain requirements concerning advertising and promotion for our licensed products and potential products. 34 If a regulatory authority discovers previously unknown problems with a product, such as adverse events of unanticipated or unacceptable severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, it may impose restrictions on that product, including requiring withdrawal of the product from the market.
Our Licensors will also be required to report certain adverse reactions and production problems, if any, to the FDA and other similar regulatory authorities and to comply with certain requirements concerning advertising and promotion for our licensed products and potential products. 36 If a regulatory authority discovers previously unknown problems with a product, such as adverse events of unanticipated or unacceptable severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, it may impose restrictions on that product, including requiring withdrawal of the product from the market.
Our lack of control over some of these functions could adversely affect our ability to implement our strategy for the commercialization of our licensed products. 22 We do not own or operate manufacturing facilities for clinical or commercial manufacture of any of our licensed products.
Our lack of control over some of these functions could adversely affect our ability to implement our strategy for the commercialization of our licensed products. We do not own or operate manufacturing facilities for clinical or commercial manufacture of any of our licensed products.
This will require us to be cognizant going forward of the time from invention to filing of a patent application. 18 In addition to the protection afforded by patents, our Licensors may rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our product discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents.
This will require us to be cognizant going forward of the time from invention to filing of a patent application. 21 In addition to the protection afforded by patents, our Licensors may rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our product discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents.
Therefore, changes in exchange rates between these foreign currencies, the dollar and the euro will affect our selling, general and administrative, related party, and the recorded levels of assets and liabilities held in a foreign currency and could result in exchange losses in any given reporting period. 21 Given the volatility of exchange rates, we can give no assurance that we will be able to effectively manage our currency transaction risks or that any volatility in currency exchange rates will not have an adverse effect on our results of operations.
Therefore, changes in exchange rates between these foreign currencies, the dollar and the euro will affect our selling, general and administrative, related party, and the recorded levels of assets and liabilities held in a foreign currency and could result in exchange losses in any given reporting period. 24 Given the volatility of exchange rates, we can give no assurance that we will be able to effectively manage our currency transaction risks or that any volatility in currency exchange rates will not have an adverse effect on our results of operations.
Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, financial condition and operating results. 30 As a result of our current IT infrastructure and German-based subsidiary, we are subject to governmental regulation and other legal obligations in the EU and European Economic Area, or EEA, related to privacy, data protection and data security and, as a result of our sales in California, the California Consumer Privacy Act (CCPA).
Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, financial condition and operating results. 32 As a result of our current IT infrastructure and German-based subsidiary, we are subject to governmental regulation and other legal obligations in the EU and European Economic Area, or EEA, related to privacy, data protection and data security and, as a result of our sales in California, the California Consumer Privacy Act (CCPA).
Additionally, if we are unable to generate revenues from our product sales, our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased. 27 Even if our Licensors obtain regulatory approvals for our licensed products, or approvals extending their indications, they may not gain market acceptance or become widely accepted among hospitals, physicians, health care payors, patients and others in the medical community.
Additionally, if we are unable to generate revenues from our product sales, our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased. 29 Even if our Licensors obtain regulatory approvals for our licensed products, or approvals extending their indications, they may not gain market acceptance or become widely accepted among hospitals, physicians, health care payors, patients and others in the medical community.
We are a party to license agreements with Biofrontera Pharma and Biofrontera Bioscience (for Ameluz ® and the RhodoLED ® lamp series) and with Ferrer (for Xepi ® ) and expect to enter into additional licenses in the future.
We are a party to license agreements with Biofrontera Pharma, GmbH and Biofrontera Bioscience, GmbH (for Ameluz ® and the RhodoLED ® lamp series) and with Ferrer (for Xepi ® ) and expect to enter into additional licenses in the future.
We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States or the EU. 20 Furthermore, because of the substantial amount of discovery that could be required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
We may not be able to prevent misappropriation of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in the United States or the EU. 23 Furthermore, because of the substantial amount of discovery that could be required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
If we or our Licensors are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize our licensed products may be impaired or delayed, which could in turn significantly harm our business. 19 Parties making claims against us or our Licensors may seek and obtain injunctive or other equitable relief, which could effectively block our ability to sell our licensed products and to further commercialize our licensed products.
If we or our Licensors are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize our licensed products may be impaired or delayed, which could in turn significantly harm our business. 22 Parties making claims against us or our Licensors may seek and obtain injunctive or other equitable relief, which could effectively block our ability to sell our licensed products and to further commercialize our licensed products.
Certain states also mandate the tracking and require reporting of gifts, compensation, and other remuneration paid by us to physicians and other health care providers. 28 In September 2010, OIG issued a Special Advisory Bulletin to notify drug manufacturers that OIG intended to pursue enforcement actions against drug manufacturers that failed to submit timely average manufacturer price, or AMP, and average sales price, or ASP, information.
Certain states also mandate the tracking and require reporting of gifts, compensation, and other remuneration paid by us to physicians and other health care providers. 30 In September 2010, OIG issued a Special Advisory Bulletin to notify drug manufacturers that OIG intended to pursue enforcement actions against drug manufacturers that failed to submit timely average manufacturer price, or AMP, and average sales price, or ASP, information.
We cannot assure you that the Biofrontera Group will develop any new lamps (beyond the BF-RhodoLED ® XL lamp which was approved by the FDA on October 21, 2021) or obtain any such new approval. 16 The Ameluz Licensor currently depends on a single unaffiliated contract manufacturer to manufacture Ameluz ® and has contracted with a second unaffiliated contract manufacturer to begin producing Ameluz ® .
We cannot assure you that the Biofrontera Group will develop any new lamps (beyond the BF-RhodoLED ® XL lamp which was approved by the FDA on October 21, 2021) or obtain any such new approval. 19 The Ameluz Licensor currently depends on a single unaffiliated contract manufacturer to manufacture Ameluz ® and has contracted with a second unaffiliated contract manufacturer to begin producing Ameluz ® .
For the medical device products we license, our Licensors are required to comply with the FDA’s Quality System Regulation, or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our medical device products. 17 Our Licensors’ facilities or our Licensors’ contract facilities, as applicable, have been inspected by the FDA for cGMP compliance.
For the medical device products we license, our Licensors are required to comply with the FDA’s Quality System Regulation, or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our medical device products. 20 Our Licensors’ facilities or our Licensors’ contract facilities, as applicable, have been inspected by the FDA for cGMP compliance.
If we are unable to achieve profitability over time or to obtain additional equity or debt financing in such a scenario, this would have a material adverse effect on our financial condition. 35 If we fail to obtain additional financing, we may be unable to pursue our plans for strategic growth, including completing the commercialization of Xepi ® and other products we may license.
If we are unable to achieve profitability over time or to obtain additional equity or debt financing in such a scenario, this would have a material adverse effect on our financial condition. 37 If we fail to obtain additional financing, we may be unable to pursue our plans for strategic growth, including completing the commercialization of Xepi ® and other products we may license.
Some of these characteristics may be more appealing to high quality candidates than what we can offer. If we are unable to continue to attract and retain high quality personnel, our ability to commercialize our licensed products will be limited. 32 Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
Some of these characteristics may be more appealing to high quality candidates than what we can offer. If we are unable to continue to attract and retain high quality personnel, our ability to commercialize our licensed products will be limited. 34 Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to: ● the effects of competing technological and market developments; ● the cost and timing of completion of commercial-scale manufacturing activities; ● the cost of establishing or maintaining sales, marketing and distribution capabilities for Ameluz ® photodynamic therapy or other licensed products or potential products in the United States; and ● the impact of COVID-19 on our licensor’s clinical trials, the timing of regulatory approvals obtained by our Licensors, demand for our licensed products, our ability to market and sell our licensed products and other matters.
Our future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to: ● the effects of competing technological and market developments; ● the cost and timing of completion of commercial-scale manufacturing activities; ● the cost of establishing or maintaining sales, marketing and distribution capabilities for Ameluz ® PDT or other licensed products or potential products in the United States; and ● the impact of COVID-19 on our licensor’s clinical trials, the timing of regulatory approvals obtained by our Licensors, demand for our licensed products, our ability to market and sell our licensed products and other matters.
Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. 26 Our competitors may succeed in developing, acquiring or licensing products that are more effective or less costly than our licensed products and product candidates.
Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. 28 Our competitors may succeed in developing, acquiring or licensing products that are more effective or less costly than our licensed products and product candidates.
In the event we are not successful in expanding our marketing and sales infrastructure, we may not be able to successfully grow the market our licensed products, which would limit our revenue growth. The U.S. market size for Ameluz ® for the treatment of actinic keratosis may be smaller than we have estimated.
In the event we are not successful in maintaining our marketing and sales infrastructure, we may not be able to successfully grow the market of our licensed products, which would limit our revenue growth. The U.S. market size for Ameluz ® for the treatment of actinic keratosis may be smaller than we have estimated.
Any denial or reduction in reimbursement from Medicare or other programs or governments may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability. 25 To date, we have a relatively short history of sales of our licensed products in the United States.
Any denial or reduction in reimbursement from Medicare or other programs or governments may result in a similar denial or reduction in payments from private payors, which may adversely affect our future profitability. 27 To date, we have a relatively short history of sales of our licensed products in the United States.
The effect of Inflation Reduction Act of 2022 on our business and the pharmaceutical industry in general is not yet known. 24 Following the passage of the Inflation Reduction Act of 2022, President Biden signed The Executive Order on Lowering Prescription Drug Costs for Americans, effective October 14, 2022.
The effect of the Inflation Reduction Act of 2022 on our business and the pharmaceutical industry in general is not yet known. 26 Following the passage of the Inflation Reduction Act of 2022, President Biden signed The Executive Order on Lowering Prescription Drug Costs for Americans, effective October 14, 2022.
Although the Ameluz Licensor has received marketing approval in the United States for Ameluz ® for lesion- and field-directed treatment of actinic keratosis in combination with photodynamic therapy using the BF-RhodoLED ® lamp series, there remains a significant risk that we will fail to generate sufficient revenue or otherwise successfully commercialize the product in the United States.
Although the Ameluz Licensor has received marketing approval in the United States for Ameluz ® for lesion- and field-directed treatment of actinic keratosis in combination with PDT using the BF-RhodoLED ® lamp series, there remains a significant risk that we will fail to generate sufficient revenue or otherwise successfully commercialize the product in the United States.
In May 2016, the Biofrontera Group (which included Biofrontera prior to our initial public offering) received approval from the FDA to market in the United States Ameluz ® in combination with photodynamic therapy using the BF-RhodoLED ® lamp for lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp.
In May 2016, the Biofrontera Group (which included Biofrontera prior to our initial public offering) received approval from the FDA to market in the United States Ameluz ® in combination with PDT using the BF-RhodoLED ® lamp for lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp.
In May 2016, Biofrontera Bioscience received approval from the FDA to market in the United States. Ameluz ® in combination with photodynamic therapy using the BF-RhodoLED ® lamp for lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp.
In May 2016, Biofrontera Bioscience received approval from the FDA to market in the United States. Ameluz ® in combination with PDT using the BF-RhodoLED ® lamp for lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate severity on the face and scalp.
In the long term, we anticipate increasing our sales and marketing expense as we attempt to exploit the regulatory approvals to market Ameluz ® in the United States for the photodynamic therapy treatment of actinic keratoses of mild-to-moderate severity on the face and scalp.
In the long term, we anticipate increasing our sales and marketing expense as we attempt to exploit the regulatory approvals to market Ameluz ® in the United States for the PDT treatment of actinic keratoses of mild-to-moderate severity on the face and scalp.
We may be competing with companies that currently have extensive and well-funded marketing and sales operations. Our business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cyber-security.
We may be competing with companies that currently have extensive and well-funded marketing and sales operations. Our business and operations would suffer in the event of system failures or cyber-attacks.
See “—Risks Related to Our Securities and Ownership of Our Common Stock— As of December 31, 2022, Biofrontera AG beneficially owns 30.0% of our stock after the completion of the initial public offering and will be able to exert significant control over matters subject to stockholder approval, and its interests may conflict with ours or other stockholders’ in the future” for more information on the risks related to Biofrontera AG’s beneficial ownership of the Company’s common stock. 23 Insurance coverage and medical expense reimbursement may be limited or unavailable in certain market segments for our licensed products, which could make it difficult for us to sell our licensed products.
See “—Risks Related to Our Securities and Ownership of Our Common Stock— As of December 31, 2023, Biofrontera AG beneficially owns 26.4% of our stock after the completion of the initial public offering and will be able to exert significant control over matters subject to stockholder approval, and its interests may conflict with ours or other stockholders’ in the future” for more information on the risks related to Biofrontera AG’s beneficial ownership of the Company’s common stock. 25 Insurance coverage and medical expense reimbursement may be limited or unavailable in certain market segments for our licensed products, which could make it difficult for us to sell our licensed products.
Some of these material risks include: Risks Related to the License and Supply Agreements and our Licensed Products ● Currently, our sole source of revenue is from sales of products we license from other companies.
Some of these material risks include: Risks Related to the License and Supply Agreements and our Licensed Products ● Currently, our sole source of revenue is from sales of products we license from other companies, including a related party.
Because the Ameluz Licensor received approval from the FDA to market in the United States Ameluz ® in combination with photodynamic therapy using the BF-RhodoLED ® lamp, any new lamp we may license would require new approval from the FDA.
Because the Ameluz Licensor received approval from the FDA to market in the United States Ameluz ® in combination with PDT using the BF-RhodoLED ® lamp, any new lamp we may license would require new approval from the FDA.
As of December 31, 2022, we had 81 employees. In the longer term, as our development and commercialization plans and strategies develop, and as we continue operating as a public company, we expect to need additional managerial, operational, sales, marketing, financial and other personnel.
As of December 31, 2023, we had 85 employees. In the longer term, as our development and commercialization plans and strategies develop, and as we continue operating as a public company, we expect to need additional managerial, operational, sales, marketing, financial and other personnel.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our licensed products and product candidates could be delayed. 33 If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our licensed products.
To the extent that any disruption or cyberrelated incident were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our licensed products and product candidates could be delayed. 35 If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our licensed products.
Our existing license agreements impose, and we expect that future license agreements will impose, on us various development, regulatory diligence obligations, payment of milestones or royalties and other obligations. If we fail to comply with our obligations under our license agreements, or we are subject to a bankruptcy or insolvency, the licensor may have the right to terminate the license.
Our existing license agreements impose, and we expect that future license agreements will impose, on us various development, regulatory diligence obligations, payment of milestones or royalties and other obligations. If we fail to comply with our obligations under our license agreements, the licensor may have the right to terminate the license.
We believe with the funds available from these transactions and availability under a working capital line of credit, that we will have sufficient funds to support the operating, investing, and financing activities of the Company through at least twelve months from the date of the issuance of this Form 10-K.
We believe that the funds available from these transactions and under our working capital line of credit, we will have sufficient funds to support the operating, investing, and financing activities of the Company through at least twelve months from the date of this Form 10-K.
We are fully dependent on our collaboration with the Ameluz Licensor for our supply of Ameluz ® and RhodoLED ® lamps and future development of the Ameluz ® product line, on our collaboration with Ferrer for our supply of Xepi ® and future development of Xepi ® and may depend on the Ameluz Licensor, Ferrer or additional third parties for the supply, development and commercialization of future licensed products or product candidates.
Risks Related to Our Business and Strategy We are fully dependent on our collaboration with the Ameluz Licensor for our supply of Ameluz ® and RhodoLED ® lamps and future development of the Ameluz ® product line, on our collaboration with Ferrer for our supply of Xepi ® and future development of Xepi ® and may depend on the Ameluz Licensor, Ferrer or additional third parties for the supply, development and commercialization of future licensed products or product candidates.
Our ability to compete in the highly competitive pharmaceutical industry depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel with specialized scientific and technical skills. We are highly dependent on our management, scientific, medical and operations personnel, including Erica Monaco, our Chief Executive Officer, Prof. Dr.
Our ability to compete in the highly competitive pharmaceutical industry depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel with specialized scientific and technical skills. We are highly dependent on our management, scientific, medical and operations personnel, including Prof. Dr.
Most of our competitors have substantially greater financial, technical and other resources, such as larger research and development staffs and experienced marketing and manufacturing organizations and well-established sales forces.
Most of our competitors have substantially greater financial, technical and other resources, such as larger R&D staffs and experienced marketing and manufacturing organizations and well-established sales forces.
We cannot rule out the possibility that we may engage in additional equity or debt financing in the future, which could dilute the voting rights of stockholders and the value of their shares.
We will likely engage in additional equity or debt financing in the future, which could dilute the voting rights of stockholders and the value of their shares.
If we become liable for more than our agreed share of the aggregate settlement amount, either of these events could have a material adverse effect on our business, prospects, financial condition and/or results of operations. As of December 31, 2022, the Company has a receivable of $6.4 million due from Biofrontera AG for its share of the settlement amount.
If we become liable for more than our agreed share of the aggregate settlement amount, either of these events could have a material adverse effect on our business, prospects, financial condition and/or results of operations.
If the Ameluz Licensor fails to maintain its relationships with these manufacturers or if both of these manufacturers are unable to produce product for the Ameluz Licensor, our business could be materially harmed. ● If our Licensors or our Licensors’ manufacturing partners, as applicable, fail to manufacture Ameluz ® , RhodoLED ® lamps, Xepi ® or other marketed products in sufficient quantities and at acceptable quality and cost levels, or to fully comply with current good manufacturing practice, or cGMP, or other applicable manufacturing regulations, we may face a bar to, or delays in, the commercialization of the products under license to us or we will be unable to meet market demand, and lose potential revenues. ● The Biofrontera Group has been involved in lawsuits to defend or enforce patents related to our licensed products and they or another licensor may become involved in similar suits in the future, which could be expensive, time-consuming and unsuccessful. 13 Risks Related to Our Business and Strategy ● The COVID-19 global pandemic still affects our business and presents new challenges. ● Insurance coverage and medical expense reimbursement may be limited or unavailable in certain market segments for our licensed products, which could make it difficult for us to sell our licensed products. ● We are fully dependent on our collaboration with the Ameluz Licensor for our supply of Ameluz ® and RhodoLED ® lamps and future development of the Ameluz ® product line, on our collaboration with Ferrer for our supply of Xepi ® and future development of Xepi ® and may depend on the Ameluz Licensor, Ferrer or additional third parties for the supply, development and commercialization of future licensed products or product candidates.
If the Ameluz Licensor fails to maintain its relationships with these manufacturers or if both of these manufacturers are unable to produce product for the Ameluz Licensor, our business could be materially harmed. ● If our Licensors or our Licensors’ manufacturing partners, as applicable, fail to manufacture Ameluz ® , RhodoLED ® lamps, Xepi ® or other marketed products in sufficient quantities and at acceptable quality and cost levels, or to fully comply with current good manufacturing practice, or cGMP, or other applicable manufacturing regulations, we may face a bar to, or delays in, the commercialization of the products under license to us or we will be unable to meet market demand, and lose potential revenues. ● If our Licensors’ efforts to protect the proprietary nature of their intellectual property related to our licensed products are not adequate, we may not be able to compete effectively in our market. ● Third party claims of intellectual property infringement may affect our ability to sell our licensed products and may also prevent or delay our Licensors’ product discovery and development efforts ● The Biofrontera Group has been involved in lawsuits to defend or enforce patents related to our licensed products and they or another licensor may become involved in similar suits in the future, which could be expensive, time-consuming and unsuccessful. ● The trade secrets of our Licensors are difficult to protect. ● Our subsidiary and certain third-party employees and our licensed patents are subject to foreign laws. ● Our international dealings with our Licensors may pose currency risks, which may adversely affect our operating results and net income. 15 Risks Related to Our Business and Strategy ● We are fully dependent on our collaboration with the Ameluz Licensor for our supply of Ameluz ® and RhodoLED ® lamps and future development of the Ameluz ® product line, on our collaboration with Ferrer for our supply of Xepi ® and future development of Xepi ® and may depend on the Ameluz Licensor, Ferrer or additional third parties for the supply, development and commercialization of future licensed products or product candidates.
Despite the implementation of security measures, our internal computer systems and those of our current and future contract and research organizations, or CROs, and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.
Despite the implementation of security measures, our internal computer systems and those of our current and future contract and research organizations, or CROs, licensors, and other contractors and consultants are vulnerable to damage from breaches of information systems, attempts to access information, including customer and company information, malicious code, theft, misuse, loss, release, or destruction of data (including confidential customer information), account takeovers, unavailability of service, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.
While we have not experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations.
While we have not experienced any such material system failure or cyber-related incident, if such an event were to occur and cause interruptions in our operations, it could (i) materially disrupt our development programs.
Our lack of control over some of these functions could adversely affect our ability to implement our strategy for the commercialization of our licensed products. ● Healthcare legislative changes may have a material adverse effect on our business and results of operations. ● We face significant competition from other pharmaceutical and medical device companies and our operating results will suffer if we fail to compete effectively.
Our lack of control over some of these functions could adversely affect our ability to implement our strategy for the commercialization of our licensed products. ● Insurance coverage and medical expense reimbursement may be limited or unavailable in certain market segments for our licensed products, which could make it difficult for us to sell our licensed products. ● Healthcare legislative changes may have a material adverse effect on our business and results of operations. ● To date, we have a relatively short history of sales of our licensed products in the United States. ● Competing products and future emerging products may erode sales of our licensed products. ● We face significant competition from other pharmaceutical and medical device companies and our operating results will suffer if we fail to compete effectively.
Risks Related to Our Financial Position and Capital Requirements ● We have a history of operating losses and anticipate that we will continue to incur operating losses in the future and may never sustain profitability. ● If we fail to obtain additional financing, we may be unable to pursue our plans for strategic growth, including completing the commercialization of Xepi ® and other products we may license. ● Our existing and any future indebtedness could adversely affect our ability to operate our business. ● The valuation of our equity investments is subject to volatility.
Risks Related to Our Financial Position and Capital Requirements ● There is substantial doubt about our ability to continue as a “going concern.” ● Failure to achieve the conditions relating to the additional $7.2 million of proceeds to be provided under the equity financing agreement entered into on February 19, 2024 could adversely affect our financial condition and liquidity over the next twelve months ● We have a history of operating losses and anticipate that we will continue to incur operating losses in the future and may never sustain profitability. ● If we fail to obtain additional financing, we may be unable to pursue our plans for strategic growth, including completing the commercialization of Xepi ® and other products we may license. ● Our existing and any future indebtedness could adversely affect our ability to operate our business.
We also must compete with existing treatments, such as simple curettage and cryotherapy, which do not involve the use of a drug but have gained significant market acceptance. ● The U.S. market size for Ameluz ® for the treatment of actinic keratosis may be smaller than we have estimated. ● If our Licensors face allegations of noncompliance with the law and encounter sanctions, their reputation, revenues and liquidity may suffer, and our licensed products could be subject to restrictions or withdrawal from the market. ● Even if our Licensors obtain regulatory approvals for our licensed products and product candidates, or approvals extending their indications, they may not gain market acceptance among hospitals, physicians, health care payors, patients and others in the medical community. ● A recall of our licensed drug or medical device products, or the discovery of serious safety issues with our licensed drug or medical device products, could have a significant negative impact on us. ● Our licensed medical device product, the RhodoLED ® lamp, is subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer. ● We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may be unable to successfully implement our business strategy. ● Our business and operations would suffer in the event of system failures, cyber-attacks or a deficiency in our cyber-security.
We also must compete with existing treatments, such as simple curettage and cryotherapy, which do not involve the use of a drug but have gained significant market acceptance. ● If we are unable to maintain effective marketing and sales capabilities or enter into agreements with third parties to market and sell our licensed products, we may be unable to generate revenue growth. ● The U.S. market size for Ameluz ® for the treatment of actinic keratosis may be smaller than we have estimated. ● If our Licensors face allegations of noncompliance with the law and encounter sanctions, their reputation, revenues and liquidity may suffer, and our licensed products could be subject to restrictions or withdrawal from the market. ● Even if our Licensors obtain regulatory approvals for our licensed products and product candidates, or approvals extending their indications, they may not gain market acceptance among hospitals, physicians, health care payors, patients and others in the medical community. ● With respect to our licensed products, we may be subject to healthcare laws, regulation and enforcement.
Item 1A. Risk Factors Summary of Material Risk Factors Our business, results of operations and financial condition and the industry in which we operate are subject to various risks.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. Summary of Material Risk Factors Our business, results of operations and financial condition and the industry in which we operate are subject to various risks.
We must establish a larger market for our licensed products and build that market through marketing campaigns to increase awareness of, and confidence by doctors in, our licensed products.
We must establish a larger market for our licensed products and build that market through marketing campaigns to increase awareness of, and confidence by doctors in, our licensed products. If we are unable to expand our current customer base and obtain market acceptance of our licensed products, our operations could be disrupted and our business may be materially adversely affected.
Risks Related to Our Financial Position and Capital Requirements We have a history of operating losses and anticipate that we will continue to incur operating losses in the future and may never sustain profitability. We have incurred losses in each year since inception.
We have a history of operating losses and anticipate that we will continue to incur operating losses in the future and may never sustain profitability. We have incurred losses in each year since inception. Our net loss for the fiscal years ended December 31, 2023 and December 31, 2022 was $20.1 million and $0.6 million, respectively.
Our net loss for the fiscal years ended December 31, 2022 and December 31, 2021 was $0.6 million and $37.7 million, respectively. As of December 31, 2022, we had an accumulated deficit of $79.5 million. Our ability to become profitable depends on our ability to further commercialize our principal licensed product Ameluz ® .
As of December 31, 2023, we had an accumulated deficit of $99.7 million. Our ability to become profitable depends on our ability to further commercialize our principal licensed product Ameluz ® and to further commercialize and obtain a larger market share for Xepi.
See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key factors affecting our performance —Supply Chain ” in this Form 10-K.
See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key factors affecting our performance —Supply Chain ” in this Form 10-K. Our efforts to commercialize a new lamp (the “RhodoLED ® XL”) that was approved by the FDA on October 21, 2021 have been delayed due to supply chain matters.
If we are unable to expand our current customer base and obtain market acceptance of our licensed products, our operations could be disrupted and our business may be materially adversely affected. Even if we achieve profitability, we may not be able to sustain or increase profitability. Competing products and future emerging products may erode sales of our licensed products.
Even if we achieve profitability, we may not be able to sustain or increase profitability. Competing products and future emerging products may erode sales of our licensed products. Reimbursement issues affect the economic competitiveness of our licensed products as compared to other therapies.
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Risks Related to the License and Supply Agreements and Our Licensed Products Currently, our sole source of revenue is from sales of products we license from other companies.
Added
Item 1A. Risk Factors Investing in our common stock involves a high degree of risk.
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In March 2018, DUSA Pharmaceuticals, Inc., or DUSA, brought a lawsuit against Biofrontera AG and its subsidiaries, including us, before the District Court of Massachusetts (18-cv-10568-RGS) alleging patent infringement and other claims related to sales practices.
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You should carefully consider the risks described below, as well as the other information in this Form 10-K, including our financial statements and the related notes and the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock.
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On November 29, 2021, before the trial began, we entered into a confidential settlement and release agreement with the respect to the DUSA Litigation with DUSA.
Added
The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment.
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See “ Commitments and Contingencies—Legal proceedings ” in Note 24 to the audited financial statements as of and for the years ended December 31, 2022 and 2021 as included in this Form 10-K While Biofrontera AG has agreed to pay a portion of the settlement, we remain jointly and severally liable to DUSA for the full settlement amount, meaning that in the event Biofrontera AG does not pay all or a portion of the amount it owes under the Agreement, DUSA could compel us to pay Biofrontera AG’s share.
Added
Our failure to comply with those laws could have a material adverse effect on our results of operations and financial condition. ● A recall of our licensed drug or medical device products, or the discovery of serious safety issues with our licensed drug or medical device products, could have a significant negative impact on us. ● Our licensed medical device product, the RhodoLED ® lamp, is subject to extensive governmental regulation, and failure to comply with applicable requirements could cause our business to suffer. ● As a result of our current IT infrastructure and German-based subsidiary, we are subject to governmental regulation and other legal obligations in the EU and European Economic Area, or EEA, related to privacy, data protection and data security and, as a result of our sales in California, the California Consumer Privacy Act (CCPA).
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Risks Related to Our Business and Strategy The COVID-19 global pandemic still affects our business and presents new challenges. Since the beginning of 2020, COVID-19 has become a global pandemic. As a result of the measures implemented by governments around the world, our business operations have been directly affected.
Added
Our actual or perceived failure to comply with such obligations could harm our business. ● We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may be unable to successfully implement our business strategy. ● Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements. ● We will need to grow the size of our organization and we may experience difficulties in managing this growth. 16 ● Our business and operations would suffer in the event of system failures or, cyber-attacks. ● If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our licensed products. ● Failure to comply with the U.S.
Removed
In particular, we experienced a significant decline in demand for our licensed products as a result of different priorities for medical treatments emerging, thereby causing a delay of actinic keratosis treatment for most patients. Our revenue was directly affected by the global COVID-19 pandemic starting in mid-March of 2020.
Added
Foreign Corrupt Practices Act or other applicable anti-corruption legislation could result in fines, criminal penalties and an adverse effect on our business. ● Our licensed products will be subject to ongoing regulatory requirements and we may face future development, manufacturing and regulatory difficulties. ● Generic manufacturers may launch products at risk of patent infringement. ● The results of our R&D efforts are uncertain and there can be no assurance they will enhance the commercial success of our products.
Removed
From that point on, rising infection rates and the resulting American Academy of Dermatology’s official recommendation to care for patients through remote diagnosis and treatment (telehealth) led to significantly declining patient numbers and widespread, albeit temporary, physician practice closures.
Added
Consequently, any gains from an investment in our common stock will likely depend on whether the price ● Our stockholder rights plan, or “poison pill,” includes terms and conditions which could discourage a takeover or other transaction that stockholders may consider favorable. ● Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock. ● Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees. ● Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us for our common stock increases. ● Many of the warrants to purchase shares of our common stock are accounted for as a warrant liability and recorded at fair value with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock Risks Related to the License and Supply Agreements and Our Licensed Products Currently, our sole source of revenue is from sales of products we license from other companies.
Removed
As COVID-19 vaccines started to roll-out to the general public in March 2021, we experienced an increase in patients willing to undergo treatment for actinic keratosis. In the fourth quarter of 2021 continuing through 2022, we again saw a seasonally strong increase in sales, indicating a revenue recovery from the global COVID-19 pandemic.
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We have currently placed an order and issued a PO for 300 units and manufacturing has commenced on the units. While we anticipate that we will be able to commercialize the RhodoLED ® XL in or around the second quarter of 2024, slower than anticipated shipments or other delays are possible.
Removed
We are optimistic that our business will continue to thrive throughout 2023 as a result of the COVID-19 PHE sunsetting on May 11, 2023.
Added
On November 29, 2021, the Company entered into a settlement and release agreement with respect to a lawsuit filed March 23, 2018 in the United States District Court for the District of Massachusetts in which we were alleged to have infringed on certain patents and misappropriated certain trade secrets.
Removed
However, the ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, including the effectiveness of vaccination and booster vaccination campaigns, among others.
Added
In the settlement, the Company and Biofrontera AG together agreed to make an aggregate payment of $22.5 million and engage a forensic expert to destroy data at issue in the litigation to settle the claims in the litigation.
Removed
Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will continue to be affected. We remain focused on maintaining a strong balance sheet, liquidity and financial flexibility and continue to monitor developments as we deal with the disruptions and uncertainties from a business and financial perspective relating to COVID-19 and variants thereof.
Added
As of December 31, 2023, we have recorded a legal settlement liability in the amount of $0.4 million for the remaining payments due under the settlement agreement for the cost of the forensic expert and a related receivable from related party of $2.8 million for the remaining legal settlement costs to be reimbursed in accordance with the Settlement Allocation Agreement, which provided that the settlement payments, including the cost of the forensic expert, would first be made by the Company and then reimbursed by Biofrontera AG for its share.
Removed
We expect this to continue to be even more challenging in the near term as a result of current measures and regulations implemented by governments worldwide in an attempt to control the COVID-19 pandemic, which may lead to declining demand in some of our markets in the foreseeable future for our licensed products as different priorities for medical treatments emerge, thereby causing a delay of actinic keratosis treatment for most patients.
Added
The $2.8 million receivable is presented net of accounts payable, related party on the balance sheet.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we may be involved in legal proceedings arising in the ordinary course of our business. Information regarding our material legal proceedings is included in Note 24, Commitments and Contingencies , to the consolidated financial statements in Item 8 of this Form 10-K, which is incorporated herein by reference.
Biggest changeItem 3. Legal Proceedings From time to time, we may be involved in legal proceedings arising in the ordinary course of our business. Information regarding our material legal proceedings is included in Note 23, Commitments and Contingencies , to the consolidated financial statements in Item 8 of this Form 10-K, which is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities There were no repurchases made by us, or on our behalf, of shares of our common stock during the year ended December 31, 2022. 45 Use of Proceeds Use of Proceeds from our Initial Public Offering On October 28, 2021, our registration statement on Form S-1 (File No. 333-257722) relating to the initial public offering (“IPO”) of our common stock became effective.
Biggest changeIssuer Purchases of Equity Securities There were no repurchases made by us, or on our behalf, of shares of our common stock during the year ended December 31, 2023. Item 6. [Reserved]
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the NASDAQ Capital Market, under the symbol “ BFRI ,” and our warrants are traded on the NASDAQ Capital Market, under the symbol “ BFRIW .” Holders As of December 31, 2022, there were three holders of record of our common stock.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the NASDAQ Capital Market, under the symbol “ BFRI ,” and our warrants are traded on the NASDAQ Capital Market, under the symbol “ BFRIW .” Holders As of December 31, 2023, there were two holders of record of our common stock.
Removed
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this Item 5 regarding securities authorized for issuance under our equity compensation plan is contained under the caption “Securities Authorized for Issuance Under Equity Compensation Plan” in Item 12 of this Form 10-K, which information under such caption is incorporated herein by reference.
Removed
As of December 31, 2022, we have used all of the proceeds received from our IPO for working capital and general corporate purposes.
Removed
There was no material change in the planned use of proceeds from the IPO of our common stock from that described in the Prospectus filed with SEC pursuant to rule 424b(4) under the Securities Act on November 1, 2021. Item 6. [Reserved]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Comparison of the Years Ended December 31, 2022 and December 31, 2021 The following table summarizes our results of operations for the years ended December 31, 2022 and December 31, 2021: For the Year Ended December 31, ( in thousands) 2022 2021 Change %Change Product revenues, net $ 28,541 $ 24,043 $ 4,498 18.7 % Related party revenues 133 57 76 132.5 % Revenues, net 28,674 $ 24,100 4,574 19.0 % Operating expenses: Cost of revenues, related party 14,618 12,222 2,396 19.6 % Cost of revenues, other 567 520 47 9.1 % Selling, general and administrative 35,137 36,512 (1,375 ) -3.8 % Selling, general and administrative, related party 733 697 36 5.1 % Restructuring costs - 752 (752 ) -100.0 % Change in fair value of contingent consideration (3,800 ) (1,402 ) (2,398 ) 171.0 % Total operating expenses 47,255 49,301 (2,046 ) -4.1 % Loss from operations (18,581 ) (25,201 ) 6,620 -26.3 % Change in fair value of warrant liabilities 16,388 (12,801 ) 29,189 -228.0 % Change in fair value of investments 1,747 - 1,747 n/a Interest expense, net (195 ) (344 ) 149 -43.3 % Other income, net 33 689 (656 ) -95.2 % Loss before income taxes (608 ) (37,657 ) 37,049 -98.4 % Income tax expenses 32 56 (24 ) -42.9 % Net loss $ (640 ) $ (37,713 ) $ 37,073 -98.3 % 51 Revenues, net Our net revenue was $28.7 million and $24.1 million 2022 and 2021, respectively, an increase of $4.6 million, or 19.0%.
Biggest changeResults of Operations Comparison of the Years Ended December 31, 2023 and December 31, 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and December 31, 2022: For the Year Ended December 31, ( in thousands) 2023 2022 Change % Change Product revenues, net $ 34,005 $ 28,541 $ 5,464 19.1 % Related party revenues 66 133 (67 ) -50.4 % Revenues, net 34,071 28,674 5,397 18.8 % Operating expenses: Cost of revenues, related party 16,789 14,618 2,171 14.9 % Cost of revenues, other 655 567 88 15.5 % Selling, general and administrative 38,975 35,137 3,838 10.9 % Selling, general and administrative, related party 152 733 (581 ) -79.3 % Research and development 77 - 77 N/A Change in fair value of contingent consideration 100 (3,800 ) 3,900 -102.6 % Total operating expenses 56,748 47,255 9,493 20.1 % Loss from operations (22,677 ) (18,581 ) (4,096 ) 22.0 % Change in fair value of warrant liabilities 6,456 19,017 (12,561 ) -66.1 % Warrant inducement expense (1,045 ) (2,629 ) 1,584 -60.3 % Excess of warrant fair value over offering proceeds (2,272 ) - (2,272 ) N/A Change in fair value of investment, related party (7,421 ) 1,747 (9,168 ) -524.8 % Gain on legal settlement 7,385 - 7,385 N/A Interest expense, net (468 ) (195 ) (273 ) -140.0 % Other income, net (75 ) 33 (108 ) -327.3 % Loss before income taxes (20,117 ) (608 ) (19,509 ) -3208.7 % Income tax expenses 14 32 (18 ) -56.3 % Net loss $ (20,131 ) $ (640 ) $ (19,491 ) -3045.5 % 52 Revenues, net Net product revenue for 2023 increased $5.5 million, or 19.1% compared to 2022.
Accordingly, changes in assumptions described above, could have a material impact on the amount of contingent consideration expense we record in any given period. 57 Intangible Assets and Impairment Assessment The Company regularly reviews the carrying amount of its long-lived assets to determine whether indicators of impairment may exist, which warrant adjustments to carrying values or estimated useful lives.
Accordingly, changes in assumptions described above, could have a material impact on the amount of contingent consideration expense we record in any given period. Intangible Assets and Impairment Assessment The Company regularly reviews the carrying amount of its long-lived assets to determine whether indicators of impairment may exist, which warrant adjustments to carrying values or estimated useful lives.
Due to the subjective assumptions and a variety of award types, we believe that the exclusion of share-based compensation expense, which is typically non-cash, allows for more meaningful comparisons of our operating results to peer companies. Share-based compensation expense can vary significantly based on the timing, size and nature of awards granted.
Due to the subjective assumptions and a variety of award types, we believe that the exclusion of share-based compensation expense, which is non-cash, allows for more meaningful comparisons of our operating results to peer companies. Share-based compensation expense can vary significantly based on the timing, size and nature of awards granted.
Since the determination of future cash flows is an estimate of future performance, future impairments may arise in the event that future cash flows do not meet expectations. We perform an impairment assessment in accordance with FASB ASC Topic 360-10-S99, Impairment or Disposal of Long-Lived Assets .
Since the determination of future cash flows is an estimate of future performance, future impairments may arise in the event that future cash flows do not meet expectations. 58 We perform an impairment assessment in accordance with FASB ASC Topic 360-10-S99, Impairment or Disposal of Long-Lived Assets .
The fair value of such contingent consideration was determined to be $6.5 million on the acquisition date of March 25, 2019 and is re-measured at each reporting date until the contingency is resolved.
The fair value of such contingent consideration was determined to be $6.5 million on the acquisition date of March 25, 2019 and was re-measured at each reporting date until the contingency was resolved.
Changes in the fair value of our contingent consideration obligations can result from changes to one or multiple inputs, including forecasted product profit amounts, metric risk premium and discount rates consistent with the level of risk of achievement as further discussed in Note 4, Fair Value Measurements to the audited financial statements as of and for the years ended December 31, 2022 and 2021 as included in this Form 10-K.
Changes in the fair value of our contingent consideration obligations can result from changes to one or multiple inputs, including forecasted product profit amounts, metric risk premium and discount rates consistent with the level of risk of achievement as further discussed in Note 4, Fair Value Measurements to the audited financial statements as of and for the years ended December 31, 2023 and 2022 as included in this Form 10-K.
Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Change in fair value of contingent consideration: Pursuant to the Share Purchase Agreement, the profits from the sale of Cutanea products will be shared equally between Maruho and Biofrontera until 2030.
Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Change in fair value of contingent consideration: Pursuant to the Share Purchase Agreement, the profits from the sale of Cutanea products were to be shared equally between Maruho and Biofrontera until 2030.
Net Income to Adjusted EBITDA Reconciliation for years ended December 31, 2022 and 2021 We define adjusted EBITDA as net income or loss before interest income and expense, income taxes, depreciation and amortization, and other non-operating items from our statements of operations as well as certain other items considered outside the normal course of our operations specifically described below.
Net Income to Adjusted EBITDA Reconciliation for years ended December 31, 2023 and 2022 We define adjusted EBITDA as net income or loss before interest income and expense, income taxes, depreciation and amortization, and other non-operating items from our statements of operations as well as certain other items considered outside the normal course of our operations specifically described below.
We are a U.S.-based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy (PDT) and topical antibiotics. The Company’s licensed products are used for the treatment of actinic keratoses, which are pre-cancerous skin lesions, as well as impetigo, a bacterial skin infection.
We are a U.S.-based biopharmaceutical company commercializing a portfolio of pharmaceutical products for the treatment of dermatological conditions with a focus on photodynamic therapy (“PDT”) and topical antibiotics. The Company’s licensed products are used for the treatment of actinic keratoses, which are pre-cancerous skin lesions, as well as impetigo, a bacterial skin infection.
Non-cash items include stock-based compensation of $1.9 million, non-cash interest expense of $0.4 million, and depreciation and amortization in the aggregate of $1.2 million, netted against a change in fair value of investment of warrant liabilities of $16.4 million, change in fair value of contingent consideration of $3.8 million, and change in fair value of equity securities of $1.7 million.
Non-cash items include stock-based compensation of $1.9 million, non-cash interest expense of $0.4 million, and depreciation and amortization in the aggregate of $1.2 million, netted against a change in fair value of investment of warrant liabilities of $19.0 million, change in fair value of contingent consideration of $3.8 million, and change in fair value of equity securities of $1.7 million.
Forward-looking statements are not guaranties of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond our control. Actual results may differ materially from the expectations contained in the forward-looking statements.
Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond our control. Actual results may differ materially from the expectations contained in the forward-looking statements.
As a result of this amendment, the purchase price we pay the Ameluz Licensor for Ameluz ® will be determined in the following manner: ● fifty percent of the anticipated net price per unit until we generate $30 million in revenue from sales of the products we license from the Ameluz Licensor during a given Commercial Year (as defined in the Ameluz LSA); ● forty percent of the anticipated net price per unit for all revenues we generate between $30 million and $50 million from sales of the products we license from the Ameluz Licensor; and ● thirty percent of the anticipated net price per unit for all revenues we generate above $50 million from sales of the products we license from the Ameluz Licensor.
The purchase price we pay the Ameluz Licensor for Ameluz ® will be determined in the following manner: ● fifty percent of the anticipated net price per unit until we generate $30 million in revenue from sales of the products we license from the Ameluz Licensor during a given Commercial Year (as defined in the Ameluz LSA); ● forty percent of the anticipated net price per unit for all revenues we generate between $30 million and $50 million from sales of the products we license from the Ameluz Licensor; and ● thirty percent of the anticipated net price per unit for all revenues we generate above $50 million from sales of the products we license from the Ameluz Licensor.
We currently have statements of work in place regarding IT, regulatory affairs, medical affairs, pharmacovigilance, and Investor Relations services, and are continuously assessing the other services historically provided to us by Biofrontera AG to determine 1) if they will be needed, and 2) whether they can or should be obtained from other third-party providers.
We currently have statements of work in place regarding information technology, regulatory affairs, medical affairs, pharmacovigilance, and investor relations services, and are continuously assessing the other services historically provided to us by Biofrontera AG to determine 1) if they will be needed, and 2) whether they can or should be obtained from other third-party providers.
The Services Agreement enables us to continue relying on Biofrontera AG and its subsidiaries for various services it has historically provided to us, including IT and pharmacovigilance support for as long as we deem necessary.
The 2021 Services Agreement enables us to continue relying on Biofrontera AG and its subsidiaries for various services it has historically provided to us, including regulatory and pharmacovigilance support for as long as we deem necessary.
Change in fair value of warrant liabilities: The Warrants issued in conjunction with our private placement offerings were accounted for as liabilities in accordance with ASC 815-40. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the consolidated statement of operations.
Change in fair value of warrant liabilities: The Warrants issued in conjunction with our private placement offerings and registered public offering were accounted for as liabilities in accordance with ASC 815-40. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the consolidated statement of operations.
Fair Value – Warrant Liability The Warrants issued in conjunction with our private placement offerings were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying consolidated balance sheet.
Fair Value – Warrant Liability The Warrants issued in conjunction with our private placement offerings including warrants issued to induce conversion were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying consolidated balance sheet.
Change in Fair Value of Investment in Equity Securities Our investments are comprised of equity securities, which are initially recorded at cost, plus transaction costs, and subsequently measured at fair value, based on quoted market prices, with the gains and losses reported in the Company’s consolidated statement of operations.
Change in Fair Value of Investment, Related Party Our investments are comprised of equity securities in shares of Biofrontera AG, which are initially recorded at cost, plus transaction costs, and subsequently measured at fair value, based on quoted market prices, with the gains and losses reported in the Company’s consolidated statement of operations.
Related Party Revenues We also generate insignificant related party revenue in connection with an agreement with Biofrontera Bioscience to provide BF-RhodoLED ® lamps, associated services for the clinical trials performed by Biofrontera Bioscience and accounting services provided to Biofrontera AG.
Related Party Revenues We also generate insignificant related party revenue in connection with an agreement with Biofrontera Bioscience GmbH to provide BF-RhodoLED ® lamps and associated services for the clinical trials performed by Biofrontera Bioscience GmbH.
Investing Activities During the year ended December 31, 2022, investing activities used $5.2 million, primarily resulting from the purchase of shares of Biofrontera AG (See Note 4. Fair Value Measurements and Note 6.
Investing Activities During the year ended December 31, 2023, investing activities provided $0.6 million, primarily resulting from the sale of shares of Biofrontera AG. During the year ended December 31, 2022, investing activities used $5.2 million, primarily resulting from the purchase of shares of Biofrontera AG (See Note 4. Fair Value Measurements and Note 6.
(“Cutanea”). 47 Our principal objective is to increase the sales of our licensed products in the United States.
Our principal objective is to increase the sales of our licensed products in the United States.
We devote a substantial portion of our cash resources to the commercialization of our licensed products, Ameluz ® and the BF-RhodoLED ® lamp series. We have financed our operating and capital expenditures through cash proceeds generated from our product sales and proceeds received in equity financings.
We devote a substantial portion of our cash resources to the commercialization of our licensed products, Ameluz ® and the BF-RhodoLED ® lamp series. We have financed our operating and capital expenditures through cash proceeds generated from our product sales, our line of credit, short term debt and proceeds received in equity financings.
The key elements of our strategy include the following: ● e xpanding our sales in the United States of Ameluz ® in combination with the BF-RhodoLED ® lamp for the treatment of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz ® to be the standard of care in the United States by growing our dedicated sales and marketing infrastructure in the United States; ● expanding sales of Xepi ® for treatment of impetigo by improving the market positioning of the licensed product; ● leveraging the potential for future approvals and label extensions of our portfolio products that are in the pipeline for the U.S. market through the LSAs with our Licensors; and ● o pportunistically adding complementary products or services to our portfolio by acquiring or licensing IP to further leverage our commercial infrastructure and customer relationships.
The key elements of our strategy include the following: ● expanding our sales in the United States of Ameluz ® in combination with the BF-RhodoLED ® lamp for the treatment of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz ® to be the standard of care in the United States by growing our dedicated sales and marketing infrastructure in the United States; ● leveraging the potential for future approvals and label extensions of our portfolio products that are in the pipeline for the U.S. market through the LSAs with our Licensors; and ● opportunistically adding complementary products or services to our portfolio by acquiring or licensing IP to further leverage our commercial infrastructure and customer relationships.
Cost of Revenues, Other Cost of revenues, other, is comprised of purchase costs of our licensed product, Xepi ® , third-party logistics and distribution costs including packaging, freight, transportation, shipping and handling costs, inventory adjustment due to expiring Xepi ® products, as well as sales-based Xepi ® royalties.
Cost of Revenues, Other Cost of revenues, other, is comprised of purchase costs of our licensed product, Xepi ® , third-party logistics and distribution costs including packaging, freight, transportation, shipping and handling costs, and inventory adjustment due to expiring Xepi ® products.
As of the date of notification, future undiscounted cash flows were estimated over the expected remaining useful life using revenue and operating expense growth rates.
As of the date of notification in 2022 and the Release in 2023, future undiscounted cash flows were estimated over the expected remaining useful life using revenue and operating expense growth rates.
Also, the expected cash flows were based on the assumption that sales levels would grow considerably for the first two years after resolution of the manufacturing delays as a result of expanding the sales force and marketing efforts related to the asset group.
The expected cash flows were based on the assumption that sales levels would grow considerably after resolution of the manufacturing delays as a result of expanding the sales force and marketing efforts related to relaunching the asset group.
(the “Company”) includes its wholly owned subsidiary Bio-FRI GmbH (“Bio-FRI” or “subsidiary”). Our subsidiary, Bio-FRI was formed on February 9, 2022, as a German presence to facilitate our relationship with our Ameluz Licensor.
(the “Company” or “Biofrontera”) includes its wholly owned subsidiary Bio-FRI GmbH (“Bio-FRI” or “subsidiary”). Our subsidiary, Bio-FRI was formed on February 9, 2022, as a German presence to facilitate our relationship with Biofrontera Pharma GmbH and Biofrontera Bioscience GmbH, our Ameluz Licensor and related parties.
The fair value of the contingent consideration was determined to be $6.5 million on the acquisition date and is re-measured at each reporting date. We exclude the impact of the change in fair value of contingent consideration as this is non-cash.
The fair value of the contingent consideration was determined to be $6.5 million on the acquisition date and was re-measured at each reporting date. We exclude the impact of the change in fair value of contingent consideration as this is non-cash. Further, we were relieved of our obligations relating to the contingent consideration under the Release.
We exclude the impact of the change in fair value of warrant liabilities as this is non-cash. Change in fair value of investment in equity securities: T he Company accounts for its investments in equity securities in accordance with ASC 321, Investments — Equity Securities (“ASC 321”).
We exclude the impact of the variance between the warrant fair value and the proceeds as this is non-cash. Change in fair value of investment, related party: The Company accounts for its investment, related party in accordance with ASC 321, Investments — Equity Securities (“ASC 321”).
An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows.
An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount and if the carrying value is also determined to be greater than its fair value.
Interest Expense, net Interest expense, net, primarily consists of amortization of the contract asset related to the start-up cost financing from Maruho under the Share Purchase and Transfer Agreement dated March 25, 2019 (as amended, the “Share Purchase Agreement”) offset by interest income of 6% per annum for each day that any reimbursement is past due related to the Amended Settlement Allocation Agreement with Biofrontera AG , and immaterial amounts of interest income earned on our financing of customer purchases of BF-RhodoLED ® lamps.
Interest Expense, net Interest expense, net, primarily consists of amortization of the contract asset related to the start-up cost financing from Maruho under the Share Purchase Agreement, as well as interest on our debt instruments, offset by interest income of 6% per annum for each day that any reimbursement is past due related to the Amended Settlement Allocation Agreement with Biofrontera AG, and immaterial amounts of interest income earned on our financing of customer purchases of BF-RhodoLED ® lamps. 51 Other Income, net Other income, net primarily includes (i) gain on return of leased assets, and (ii) gain (loss) on foreign currency transactions.
While we believe these assumptions were reasonable, the level of future sales may vary significantly from the levels assumed. Also, the timeframe over which activity levels grow is highly uncertain. Potential events that could affect our assumptions are affected by factors such as those described in “ Risks Related to Our Business and Strategy ”.
Also, the timeframe over which activity levels grow is highly uncertain. Potential events that could affect our assumptions are affected by factors such as those described in “ Risks Related to Our Business and Strategy ”.
Cost of Revenues, Related Party Cost of revenues, related party, is comprised of purchase costs of our licensed products, Ameluz ® and BF-RhodoLED ® lamps from Biofrontera Pharma GmbH and insignificant inventory adjustments due to scrapped, expiring and excess products.
Cost of Revenues, Related Party Cost of revenues, related party, is comprised of purchase costs of our licensed products, Ameluz ® and BF-RhodoLED ® lamps from Biofrontera Pharma GmbH and insignificant inventory adjustments due to scrapped, expiring and excess products. 49 Under the Ameluz LSA the price we pay per unit will be based upon our sales history.
For the investments held in foreign currencies, the change in fair value attributable to changes in foreign exchange rates is included in gains and losses in the consolidated statement of operations. We exclude the impact of the change in fair value of investments as this is non-cash. Legal settlement expenses : To measure operating performance, we exclude legal settlement expenses.
For the investments held in foreign currencies, the change in fair value attributable to changes in foreign exchange rates is included in gains and losses in the consolidated statement of operations.
Contingent consideration is reported at the estimated fair values based on the probability-adjusted present value of the consideration expected to be paid, using significant inputs and estimates.
We considered a number of factors, including information provided by an outside valuation advisor in performing the valuation. Contingent consideration is reported at the estimated fair values based on the probability-adjusted present value of the consideration expected to be paid, using significant inputs and estimates.
We use adjusted EBITDA to measure our performance from period to period and to compare our results to those of our competitors.
Adjusted EBITDA margin is adjusted EBITDA for a particular period expressed as a percentage of revenues for that period. We use adjusted EBITDA to measure our performance from period to period and to compare our results to those of our competitors.
A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liability which could also result in material non-cash gain or loss being reported in our consolidated statement of operations. 58 Recently issued accounting pronouncements A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2, Summary of Significant Accounting Policies—Recently Issued Accounting Pronouncements Not Yet Effective .
A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liability which could also result in material non-cash gain or loss being reported in our consolidated statement of operations.
Restructuring costs primarily relate to Aktipak ® discontinuation, personnel costs related to the termination of all Cutanea employees, and the winding down of Cutanea’s operations. 50 Change in Fair Value of Contingent Consideration In connection with the Cutanea acquisition, we recorded contingent consideration related to the estimated profits from the sale of Cutanea products to be shared equally with Maruho.
Change in Fair Value of Contingent Consideration In connection with the Cutanea acquisition, we recorded contingent consideration related to the estimated profits from the sale of Cutanea products to be shared equally with Maruho.
In October 2022, upon receiving notification of further third-party manufacturing delays that impacted the timing of sales expansion and improved market positioning of the Xepi ® product, we deemed it necessary to assess the recoverability of our Xepi ® asset group.
In October 2022, upon receiving notification of further third-party manufacturing delays that impacted the timing of sales expansion and improved market positioning of the Xepi ® product, and again in December 2023, when we implemented a marketing hold in response to continued manufacturing delays experienced by our Licensor and also entered the Release, relieving us of obligations that had previously reduced the carrying value of the asset group, we deemed it necessary to assess the recoverability of our Xepi ® asset group.
Our principal licensed product is Ameluz ® , which is a prescription drug approved for use in combination with the BF-RhodoLED ® lamp series, for photodynamic therapy, or PDT (when used together, “Ameluz ® PDT”).
The reduced LSA transfer price will allow the Company to finance such R&D activities and continue our commercial growth trajectory. Our principal licensed product is Ameluz ® , which is a prescription drug approved for use in combination with the BF-RhodoLED ® lamp series, for PDT, or PDT (when used together, “Ameluz ® PDT”).
Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period.
These fair value measurements represent Level 3 measurements as they are based on significant inputs not observable in the market. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition date and for each subsequent period.
Change in Fair Value of Warrant Liabilities The change in fair value of warrant liabilities was a decrease of $29.2 million and an increase of $12.8 million for 2022 and 2021, respectively. The change was driven by changes in the underlying value of the common stock.
Change in Fair Value of Warrant Liabilities The change in fair value of warrant liabilities was a decrease of $12.6 million from 2022, driven primarily by changes in the underlying value of the Company’s common stock. Warrant Inducement Expense The warrant inducement expense was $1.0 million and $2.6 million for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2022, we had cash and cash equivalents of $17.2 million, compared to $24.5 million as of December 31, 2021. Since we commenced operations in 2015, we have generated significant losses. For the years ended December 31, 2022 and 2021, we incurred net losses of $0.6 million and $37.7 million, respectively .
Liquidity and Capital Resources Since we commenced operations in 2015, we have generated significant losses and have incurred net cash outflows from operations of $24.9 million and $16.2 million for the years ended December 31, 2023 and 2022, respectively. The Company had an accumulated deficit as of December 31, 2023 of $99.7 million.
Each reporting period thereafter, we revalue the remaining obligations and record increases or decreases in their fair value as an adjustment to contingent consideration expense in our statements of operations. We considered a number of factors, including information provided by an outside valuation advisor in performing the valuation.
Contingent Consideration We record contingent consideration resulting from a business combination at its fair value on the acquisition date. Each reporting period thereafter and until settlement, we revalue the remaining obligations and record increases or decreases in their fair value as an adjustment to operating expense in our statements of operations.
Other Income, net Other income, net primarily includes (i) gain on sale of leased assets, and (ii) gain (loss) on foreign currency transactions. Income Taxes As a result of the net losses we have incurred in each fiscal year since inception, we have recorded no provision for federal income taxes during such periods.
Income Taxes As a result of the net losses we have incurred in each fiscal year since inception, we have recorded no provision for federal income taxes during such periods. Income tax expense incurred relates to state income taxes.
After the assessment we performed, we determined that, on an undiscounted basis, expected cash flows exceeded the carrying amount of the asset group. For additional information on our impairment assessment, refer Note 12 , “Intangible Assets, Net ”, to our financial statements included in this Form 10-K.
For additional information on our impairment assessment, refer Note 12 , “Intangible Assets, Net ”, to our financial statements included in this Form 10-K.
Our second prescription drug licensed product in our portfolio is Xepi ® (ozenoxacin cream, 1%), a topical non-fluorinated quinolone that inhibits bacterial growth. Currently, no antibiotic resistance against Xepi ® is known and it has been specifically approved by the FDA for the treatment of impetigo, a common skin infection, due to Staphylococcus aureus or Streptococcus pyogenes.
Currently, no antibiotic resistance against Xepi ® is known and it has been specifically approved by the FDA for the treatment of impetigo, a common skin infection, due to Staphylococcus aureus or Streptococcus pyogenes. It is approved for use in the United States in adults and children 2 months and older.
We do not expect to incur this type of expense on a recurring basis and believe the exclusion of these costs allows management and the users of the financial statements to better understand our financial results. 53 Adjusted EBITDA margin is adjusted EBITDA for a particular period expressed as a percentage of revenues for that period.
Expensed issuance costs: To measure operating performance, we exclude the portion of issuance costs allocated to our warrant liabilities. We do not expect to incur this type of expense on a recurring basis and believe the exclusion of these costs allows management and the users of the financial statements to better understand our financial results.
The below table presents a reconciliation from net loss to Adjusted EBITDA for the years ended December 31, 2022 and 2021: Years ended December 31, 2022 2021 Net loss $ (640 ) $ (37,713 ) Interest expense, net 195 344 Income tax expenses 32 56 Depreciation and amortization 519 540 EBITDA 106 (36,773 ) Change in fair value of contingent consideration (3,800 ) (1,402 ) Change in fair value of warrant liabilities (16,388 ) 12,801 Change in fair value of investments (1,747 ) - Legal settlement expenses 870 11,250 Stock based compensation 1,852 129 Expensed issuance costs 1,045 1,383 Adjusted EBITDA $ (18,062 ) $ (12,612 ) Adjusted EBITDA margin -63.0 % -52.3 % Adjusted EBITDA Adjusted EBITDA decreased from ($12.7) million for the year ended December 31, 2021 to ($18.1) million for the year ended December 31, 2022.
The below table presents a reconciliation from net loss to Adjusted EBITDA for the years ended December 31, 2023 and 2022: Years ended December 31, 2023 2022 Net loss $ (20,131 ) $ (640 ) Interest expense, net 468 195 Income tax expenses 14 32 Depreciation and amortization 504 519 EBITDA (19,145 ) 106 Gain on legal settlement (7,385 ) - Change in fair value of contingent consideration 100 (3,800 ) Change in fair value of warrant liabilities (6,456 ) (19,017 ) Warrant inducement expense 1,045 2,629 Excess of warrant fair value over offering proceeds 2,272 - Change in fair value of investment, related party 7,421 (1,747 ) Legal settlement expenses 1,225 870 Stock based compensation 1,045 1,852 Expensed issuance costs 422 1,045 Adjusted EBITDA $ (19,456 ) $ (18,062 ) Adjusted EBITDA margin -57.1 % -63.0 % Adjusted EBITDA Adjusted EBITDA decreased from ($18.1) million for the year ended December 31, 2022 to ($19.5) million for the year ended December 31, 2023.
Operating Expenses Cost of Revenues, Related Party Cost of revenues, related party was $14.6 million and $12.2 million for 2022 and 2021, respectively, an increase of $2.4 million, or 19.6%. The increase was primarily driven by the increase in Ameluz ® product revenue. Cost of Ameluz ® is directly correlated to the selling price under the Ameluz LSA.
Operating Expenses Cost of Revenues, Related Party Cost of revenues, related party increased $2.2 million, or 14.9% compared to 2022. The increase was primarily driven by the increase in Ameluz ® product revenue.
They are continuously reviewed but may vary from the actual values. Our significant accounting policies are described in more detail in Note 2 – Summary of Significant Accounting Policies , to our consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data ,” of this Form 10-K.
They are continuously reviewed but may vary from the actual values. Our significant accounting policies are described in more detail in Note 2 – Summary of Significant Accounting Policies , to our consolidated financial statements. Critical Accounting Estimates We believe that the following are the most critical estimates which required significant judgments in the preparation of our financial statements.
Selling, General and Administrative Expenses, Related Party Selling, general and administrative expenses, related party, primarily relate to the services provided by our significant stockholder, Biofrontera AG, for accounting consolidation, IT support, and pharmacovigilance. These expenses were charged to us based on costs incurred plus 6% in accordance with the 2016 Services Agreement.
Selling, General and Administrative Expenses, Related Party Selling, general and administrative expenses, related party, relate to the services provided by our significant stockholder, Biofrontera AG, primarily for regulatory support and pharmacovigilance.
Accordingly, we are focused on licensed product sales expansion to drive revenue growth and improve operating efficiencies, including effective resource utilization, information technology leverage, and overhead cost management. 48 Key factors affecting our performance As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period.
Accordingly, we are focused on licensed product sales expansion to drive revenue growth and improve operating efficiencies, including effective resource utilization, information technology leverage, and overhead cost management.
International treatment guidelines list photodynamic therapy as the “gold standard” for treating AK, especially multiple AK and the surrounding photodamaged skin. 3 We are currently selling Ameluz ® for this indication in the U.S. under the Ameluz LSA.
International treatment guidelines list PDT as the “gold standard” for treating AK, especially multiple AKs and the surrounding photodamaged skin. 1 We are currently selling Ameluz ® for this indication in the U.S. under the Ameluz LSA. Our second prescription drug licensed product in our portfolio is Xepi ® (ozenoxacin cream, 1%), a topical non-fluorinated quinolone that inhibits bacterial growth.
Revenue from the sales of our BF-RhodoLED ® lamp and Xepi ® are relatively insignificant compared with revenues generated through our sales of Ameluz ® .
Revenues from product sales are recorded net of discounts, rebates and other incentives, including trade discounts and allowances, product returns, government rebates, and other incentives such as patient co-pay assistance. Revenue from the sales of our BF-RhodoLED ® lamp and Xepi ® are relatively insignificant compared with revenues generated through our sales of Ameluz ® .
The change in fair value of contingent consideration is driven by the estimated profit share the Company is required to pay under the Share Purchase Agreement. During 2022, the estimated profit share was reduced in response to supply chain delays experienced by the supplier.
The change in contingent consideration was driven by the estimated profit share the Company is required to pay under the Share Purchase Agreement. There weren’t any material changes in 2023.
While we expect to continue being flexible in our spending over the next twelve months, we do not consider there to be a need to significantly revise our operations currently. 55 Cash Flows The following table summarizes our cash provided by and (used in) operating, investing and financing activities: For the Year Ended December 31, (in thousands) 2022 2021 Net cash used in operating activities $ (16,199 ) $ (26,715 ) Net cash used in investing activities (5,156 ) (11 ) Net cash provided by financing activities 14,021 43,191 Net increase in cash and restricted cash $ (7,334 ) $ 16,465 Operating Activities During the year ended December 31, 2022, operating activities used $16.2 million of cash, primarily resulting from our net loss of $0.6 million, adjusted for the add back of non-cash income of $18.3 million and offset by net cash provided by changes in our operating assets and liabilities of $2.7 million .
Cash Flows The following table summarizes our cash provided by and (used in) operating, investing and financing activities: For the Year Ended December 31, (in thousands) 2023 2022 Net cash used in operating activities $ (24,895 ) $ (16,199 ) Net cash provided by (used in) investing activities 619 (5,156 ) Net cash provided by financing activities 8,411 14,021 Net increase (decrease) in cash and restricted cash $ (15,865 ) $ (7,334 ) 56 Operating Activities During the year ended December 31, 2023, operating activities used $24.9 million of cash, primarily resulting from our net loss of $20.1 million, adjusted for the add back of non-cash income of $0.4 million and offset by net cash used by changes in our operating assets and liabilities of $4.4 million.
Set forth below is a brief discussion of the key factors impacting our results of operations. Seasonality Because traditional photodynamic therapy treatments using a lamp are performed more frequently during the winter, our revenue is subject to some seasonality and has historically been higher during the first and fourth quarters than during the second and third quarters.
J Eur Acad Dermatol Venereol. 2015;29(11):2069-2079. doi:10.1111/jdv.13180. 48 Seasonality Because traditional PDT treatments using a lamp are performed more frequently during the winter, our revenue is subject to some seasonality and has historically been higher during the first and fourth quarters than during the second and third quarters.
It is approved for use in the United States in adults and children 2 months and older. We are currently selling Xepi ® for this indication in the United States under an exclusive license and supply agreement, as amended (“Xepi LSA”), with Ferrer that was assumed by Biofrontera on March 25, 2019 through our acquisition of Cutanea Life Sciences, Inc.
Our exclusive license and supply agreement, as amended (“Xepi LSA”), with Ferrer Internacional S.A. (“Ferrer”) that was assumed by Biofrontera on March 25, 2019 through our acquisition of Cutanea Life Sciences, Inc. (“Cutanea”) enables us to market and sell this product in the United Sates.
The increase was primarily driven by: (i) higher volume of Ameluz ® orders, which resulted in an increase in Ameluz ® revenue of $3.7 million, and (ii) an increase in the price of Ameluz ® , which further increased Ameluz ® revenue by $0.6 million.
The increase was primarily driven by the expansion of our salesforce in 2023, which resulted in a higher volume of Ameluz ® orders and, therefore, an increase in Ameluz ® revenue of $5.2 million. The remaining increase was attributed to an increase in the price of Ameluz ® .
Restructuring costs were $0.8 million for the twelve months ended December 31, 2021, all of which related to facility exit costs. Change in Fair Value of Contingent Consideration The change in fair value of contingent consideration was a decrease of $3.8 million and a decrease of $1.4 million for 2022 and 2021, respectively.
The exchange pursuant to the Release resulted in a gain of $7.4 million, recorded in December 2023. Change in Fair Value of Contingent Consideration The change in fair value of contingent consideration was an increase of $0.1 million and a decrease of $3.8 million for 2023 and 2022, respectively.
During the year ended December 31, 2022, we received proceeds of $9.4 million from the issuance of common stock and warrants in private placement, net of issuance costs, and $4.6 million from the exercise of common stock warrants (See Note 19. Stockholders’ Equity ).
The Company’s primary sources of liquidity are its cash collected from the sales of its products, and cash flows from financing transactions. During the year ended December 31, 2023, we received proceeds of $4.1 million from the issuance of common stock and warrants, net of issuance costs (See Note 18. Stockholders’ Equity ).
See Part I, Item 1A, “Risk Factors” of this Form 10-K for list of factors that may cause such differences. We do not undertake to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law. 46 Overview Biofrontera Inc.
Any forward-looking statements made by us or on our behalf speak only as of the date they are made. We do not undertake to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law. 47 Overview Biofrontera Inc.
Despite these delays, our total revenues will not be significantly impacted since the majority of our revenues are from sales of Ameluz ® .
Despite these historic and possible future delays, we expect total revenues will not be significantly impacted (i.e., we experience less growth than expected vs. declining sales) since the majority of our revenues are from sales of Ameluz ® and we have RhodeLED lamps on hand and on order.
The decrease was primarily driven by an increase in Selling, general, and administrative expenses (excluding legal settlement expenses) due to increased headcount and compliance costs.
The decrease was primarily driven by an increase in selling, general, and administrative expenses (excluding legal settlement expenses) (“SG&A expenses”) due to increased headcount. Our Adjusted EBITDA margin increased from (63.0%) for the year ended December 31, 2022 to (57.1%) for the year ended December 31, 2023, as the increase in revenue outpaced the decline in our Adjusted EBITDA.
For the investments held in foreign currencies, the change in fair value attributable to changes in foreign exchange rates is included in gains and losses in the consolidated statement of operations. The Company may sell its equity securities in response to changes in interest rates, risk/reward characteristics, liquidity needs or other factors.
For the investments held in foreign currencies, the change in fair value attributable to changes in foreign exchange rates is included in gains and losses in the consolidated statement of operations. Under the Release, the Company agreed to transfer 5,451,016 shares of Biofrontera AG to Maruho in exchange for the release of our obligations relating to the Cutanea acquisition.
Financing activities during year ended December 31, 2022 consisted of proceeds of $9.4 million from the issuance of common stock and warrants in private placement, net of issuance costs, and $4.6 million from the exercise of common stock warrants .
During the year ended December 31, 2022, net cash provided by financing activities was $14.0 million which consisted of proceeds of $9.4 million from the issuance of common stock and warrants in private placement, net of issuance costs, and $4.6 million from the exercise of common stock warrants. 57 Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with generally accepted accounting principles of the United States, or GAAP.
We continue to monitor the impacts of the supply chain on our business and are focused on ensuring the stability of the supply chains for Ameluz ® and BF-RhodoLED ® . 49 Components of Our Results of Operations Product Revenue, net We generate product revenues through the third-party sales of our licensed products Ameluz ® , BF-RhodoLED ® lamps and Xepi ® covered by our exclusive LSAs with our Licensors as described in the section “ Business — Commercial Partners and Agreements.” Revenues from product sales are recorded net of discounts, rebates and other incentives, including trade discounts and allowances, product returns, government rebates, and other incentives such as patient co-pay assistance.
Components of Our Results of Operations Product Revenue, net We generate product revenues through the third-party sales of our licensed products Ameluz ® , BF-RhodoLED ® lamps and to a much lesser extent Xepi ® covered by our exclusive LSAs with our Licensors .
We also expect to incur additional expenses to add and improve operational, financial and information systems and personnel, including personnel to support our product commercialization efforts. In addition, we expect to incur costs to continue to comply with corporate governance, regulatory reporting and other requirements applicable to us as a public company in the U.S.
In addition, we expect to continue to incur significant costs to comply with corporate governance, internal controls and similar requirements applicable to us as a public company in the U.S. Also, on February 20, 2024, the Company entered into the 2024 LSA with Biofrontera AG which will significantly reduce our cost of inventory in the future.
Financing activities during year ended December 31, 2021 consisted of proceeds from the issuance of common stock upon an initial public offering of $14.9 million, issuance of common stock in private placement of $15.0 million, and the exercise of warrants of $13.2 million .
Investment, related party within our consolidated financial statements ) Financing Activities During the year ended December 31, 2023, net cash provided by financing activities was $8.4 million which consisted of net proceeds received from our loan and line of credit of $3.9 million and net proceeds of $4.5 million from the issuance of common stock and warrants in a public offering.
The change in 2022 was also driven by the modification and exercise of the 2021 Purchase Warrant. 52 Change in fair value of investments in equity securities The change in fair value of investments in equity securities of $1.7 million was driven by changes in the quoted market price of the common stock.
The 2022 inducement expense was driven by changes in fair value due to the repricing of the 2021 Purchase Warrant, pursuant to the Inducement Letter.
Removed
COVID-19 Since the beginning of 2020, COVID-19 has become a global pandemic. As a result of the measures implemented by governments around the world, our business operations have been directly affected.
Added
See Part I, Item 1A, “Risk Factors” of this Form 10-K for a discussion of the factors that could cause such differences.
Removed
In particular, we experienced a significant decline in demand for our licensed products as a result of different priorities for medical treatments emerging, thereby causing a delay of actinic keratosis treatment for most patients. Our revenue was directly affected by the global COVID-19 pandemic starting in mid-March of 2020.
Added
However, other factors besides those listed in Part I, Item 1A, “Risk Factors” or otherwise discussed in this Annual Report also could adversely affect our results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties.
Removed
From that point on, rising infection rates and the resulting American Academy of Dermatology’s official recommendation to care for patients through remote diagnosis and treatment (telehealth) led to significantly declining patient numbers and widespread, albeit temporary, physician practice closures.
Added
In May 2023, we began research and development (“R&D”) activities to support PDT growth and will continue to opportunistically invest in these activities going forward. Our R&D program currently aims to improve the capabilities of our BF-RhodoLED® lamps to better fulfill the needs of dermatologists.
Removed
As COVID-19 vaccines started to roll-out to the general public in March 2021, we experienced an increase in patients willing to undergo treatment for actinic keratosis.
Added
Our goal is to improve the effectiveness of our commercial team by allowing sales representatives to carry approved devices with them allowing for easier product demonstrations and evaluations.
Removed
In the fourth quarter of 2021 continuing through 2022, we again saw a seasonally strong increase in sales, indicating a revenue recovery from the global COVID-19 pandemic, despite some residual effects such as reduced capacity or staffing shortages at physicians’ offices.
Added
On February 19, 2024, we entered into the Second Amended and Restated License and Supply Agreement with the Ameluz Licensor under which, with immediate effect, the transfer price of Ameluz ® will be reduced from 50% to 25% for all purchases in 2024 and 2025.

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