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Item 1. Business

2023-03-13 compared with 2022-04-11 · 314 added, 1038 removed, 154 unchanged (90% of the section changed)

We are a U.S.-based biopharmaceutical company specializing

in the commercialization of pharmaceutical products for the treatment of dermatological conditions, in particular, diseases caused primarily

by exposure to sunlight that result in sun damage to the skin.

Our licensed products primarily focus on the treatment of actinic

keratoses, which are skin lesions that can sometimes lead to skin cancer.

We also market a topical antibiotic for treatment of impetigo,

a bacterial skin infection.

Our principal licensed product is Ameluz ® ,

which is a prescription drug approved for use in combination with the Ameluz Licensor’s Food and Drug Administration (“FDA”)

approved medical device, the RhodoLED ® lamp series, for photodynamic therapy, or PDT (when used together, “Ameluz®

PDT”) in the United States for the lesion-directed and field-directed treatment of actinic keratoses of mild-to-moderate

severity on the face and scalp.

We are currently selling Ameluz ® for this indication in the U.S.

exclusive amended and restated license and supply agreement, as amended (“ Ameluz

LSA”), dated as of June 16, 2021, by and among us and the Ameluz Licensor.

See “ Business — Commercial Partners and Agreements—Biofrontera Pharma and Biofrontera Bioscience ”

in this Form 10-K for more information.

Under the Ameluz LSA, we hold the exclusive license to

sell Ameluz ® and the RhodoLED ® lamp series comprising the BF-RhodoLED ® and the new, more

advanced RhodoLED ® XL 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.

We have the authority under the Ameluz LSA in certain circumstances to take over

clinical development, regulatory work and manufacturing from the Ameluz Licensor, with respect to the FDA applications and clinical studies

identified in the Ameluz LSA, if they are unable or unwilling to perform these functions appropriately.

However, the Ameluz Licensor

does not have any obligation under the Ameluz LSA, to perform or finance clinical trials to promote new indications beyond those

identified in the Ameluz LSA.

As further described below, under the Ameluz LSA, further extensions of the approved indications

for Ameluz ® photodynamic therapy in the United States are anticipated.

Our second prescription drug licensed product in

our portfolio is Xepi ® (ozenoxacin cream, 1%), a topical non-fluorinated quinolone that inhibits bacterial growth.

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 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.

On March 25, 2019,

we acquired Cutanea from Maruho Co., Ltd.

In November 2018, Cutanea launched Xepi ® , a prescription cream for the treatment

The acquisition of Cutanea in March 2019 enabled us to market an FDA-approved drug that has already been introduced in the

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, –– we believe that Xepi ®

has the potential to be another innovative product with a large market potential in our portfolio.

“ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates —Intangible

Assets and Impairment Assessment ” in this Form 10-K.

a licensee, we rely on our licensors to conduct clinical trials in order to pursue extensions to the current product indications approved

Currently, the Ameluz Licensor has submitted applications to the FDA for the following indications with respect to our flagship

licensed product Ameluz ® and the RhodoLED ® lamp series.

These studies are all being pursued as part of

the Investigational New Drug Application that the Ameluz Licensor submitted to the FDA in 2017 for the development of Ameluz ® /BF-RhodoLED ®

lamp to treat superficial basal cell carcinoma.

in combination with RhodoLED ® XL (1)

Keratosis on face and scalp (2)

study using 3 tubes of Ameluz ® ;

IRB approval obtained;

protocol registered with the FDA;

patient recruitment started

in December 2021

in combination with RhodoLED ®

basal cell carcinoma (3)

protocol assessment by the FDA prior to study start, patient recruitment is ongoing, last patient in expected by end of 2022

in combination with RhodoLED ® XL

to severe acne

approval obtained;

study protocol registered with FDA in October 2021;

patient recruitment started in December 2021

BF-RhodoLED ®

lamp was approved in 2016.

FDA did not request any further clinical trials for RhodoLED ® XL lamp, which was subsequently

approved in October 2021.

II and Phase III trials not required for label change.

Phase I and Phase II trials not required, because Ameluz ® is an approved drug.

have the authority under the Ameluz LSA with respect to each of the indications described in the table above (as well as certain other

clinical studies identified in the Corrected Amendment to 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 Ameluz Licensor may choose, but has no obligation under the Ameluz LSA, to seek FDA approval with respect to additional indications.

The pursuit of any additional indications beyond those identified in the Ameluz LSA would need to be separately negotiated between

us and the Ameluz Licensor.

current development pipeline is intended to expand commercialization in the United States of Ameluz ® , as a combination

product with the RhodoLED ® lamp series, by means of marketing additional indications for our licensed products.

LSA entitles us to an exclusive license in the United States of the products covered under the Ameluz LSA which includes any future indications

that the Biofrontera Group may pursue with the FDA.

We currently do not have the ability to conduct any

clinical trials, nor do we exercise any control over the progress of clinical trials for our licensed products.

Under the Ameluz

LSA and the Xepi LSA, our Licensors control clinical development for the applicable licensed product.

With respect to each of the FDA

applications and clinical studies identified in the Ameluz LSA and under certain circumstances, for example, if the Ameluz Licensor fails

to pursue mutually beneficial clinical development, we may choose to organize and finance trials and subtract the cost from the transfer

price of future shipments.

are unaware of any immediate or near-term plans of Ferrer for a U.S.-market focused development pipeline.

principal objective is to increase the sales of our licensed products.

The key elements of our strategy include the following:

our sales in the United States of Ameluz ® in combination with the RhodoLED ® lamp series for the treatment

of minimally to moderately thick actinic keratoses of the face and scalp and positioning Ameluz ® to be a leading

photodynamic therapy product in the United States by growing our dedicated sales and marketing infrastructure in the United States;

expanding our sales of Xepi ® for treatment of impetigo

by improving the market positioning of the licensed product;

the potential for future approvals and label extensions of our licensed portfolio products that are in the pipeline for the U.S.

market through the LSAs with the Licensors.

strategic objectives also include further expansion of our product and business portfolio through various methods to pursue selective

strategic investment and acquisition opportunities to expand and support our business growth.

Product Portfolio

and the RhodoLED ® Lamp Series

principal marketed licensed product is Ameluz ® .

Ameluz ® is used in combination with the RhodoLED ®

lamp or the new and more advanced RhodoLED XL, each an FDA approved medical device, in photodynamic therapy to selectively

remove actinic keratosis, a chronic, pre-cancerous skin condition with the potential of progression to invasive skin cancer.

are currently selling Ameluz ® in the United States on an exclusive basis through the Ameluz LSA.

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.

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.

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.

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.

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,

have a wide and diverse customer base with no single customer dominating our revenues.

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.

principal objective is to improve patient outcomes by increasing the sales of our licensed products.

The key elements of our strategy

include the following:

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;

sales of Xepi ® for treatment of impetigo by improving the market positioning of the licensed product;

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;

opportunistically add complementary products or services to our portfolio by acquiring or licensing IP to further leverage our

commercial infrastructure and customer relationships.

executing these four strategic objectives, we will fuel company growth, deepen our trusted relationships in the dermatology community,

and above all, help patients live healthier, more fulfilling lives.

and RhodoLED ® Lamp Series

principal licensed product is Ameluz ® , which is a prescription drug approved for use in combination with the RhodoLED ®

lamp series, for PDT (when used together, “Ameluz ® PDT”).

In the United States, the PDT treatment is

used for the lesion-directed and field-directed treatment of actinic keratoses (“AK”) of mild-to-moderate severity on the

face and scalp.

AKs are premalignant lesions of the skin that can potentially develop into skin cancer (squamous cell carcinoma) if left

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

under an exclusive license and supply agreement (“Ameluz LSA”) between Biofrontera, Inc.

and the Ameluz Licensors.

are superficial potentially pre-cancerous skin lesions caused by chronic sun exposure that may, if left untreated, develop into a form

of potentially life-threatening skin cancer called squamous cell carcinoma.

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.

general, photodynamic therapy is a two-step process:

3 unchanged sentences

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.

Ameluz ® is a photosensitizer which is activated by the red

light generated by our RhodoLED ® lamps to create the reactive oxygen species that will cause necrosis or apoptosis of the

targeted cells.

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.

therapy can be a highly selective treatment that targets specific cells while minimizing damage to normal surrounding tissues.

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.

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.

In the Ameluz Licensor’s

Phase III trials, the resulting redness and/or inflammation resolved within 1 to 4 days in most cases;

in some cases, however, it persisted

for 1 to 2 weeks or even longer.

Topical application of a photosensitizer nevertheless should be combined with informing the patients

to avoid direct sunlight and/or to wear protective clothing and sunscreen for some days after the treatment.

Patients’ indoor

activities are generally unrestricted except that they are told to avoid bright lights.

The degree of selectivity and period of skin

photosensitivity varies among different photosensitizers and is also related to the drug dose given.

Unless activated by light, photosensitizers

have no direct photodynamic therapy effects.

The RhodoLED ® PDT-lamp series uses

LEDs emitting red light at a wavelength of approximately 635 nm specifically designed for photodynamic therapy to activate

the photosensitizer.

The red light emitted by the RhodoLED ® lamp series is outside the infrared range, reducing the likelihood

for discomfort from warming.

Other light wavelengths can also activate the photosensitizer, but red light is known for penetrating

the skin deepest.

The RhodoLED ® lamp series is assembled at the Ameluz Licensor’s corporate headquarters

in Leverkusen, Germany.

Supply of the lamp is regulated via our Ameluz LSA.

As such, Biofrontera Pharma is considered the responsible

manufacturer of the RhodoLED ® lamp series by the FDA.

believe the BF-RhodoLED ® lamp combines a controlled and consistent emission of light at the required wavelength with simplicity

of design, user-friendliness and energy efficiency.

The BF-RhodoLED ® lamp contains a fan used to blow air over the treated

skin surface and power settings for the fan.

The lamp is approved in the United States by the FDA as a combination product for use in

treatment of actinic keratosis with Ameluz ® .

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 ® .

The new PDT-lamp enables the illumination of larger areas, thus allowing the simultaneous treatment of several actinic keratoses

distant from each other.

The treatment parameters of the new RhodoLED ® XL, such as light dose, illumination time and wavelength

of light are identical to the predecessor model BF-RhodoLED ® .

In order to meet the FDA’s strict requirements for

the manufacture of a class III medical device, production of the new lamp has, similar to the older model, been established at the Ameluz

Licensor’s headquarters in Leverkusen.

The BF-RhodoLED ® model will continue to be offered in the US market.

of Approved Indications and Active Applications

Following the centralized European regulatory approval

by the European Commission for Ameluz ® (“love the light”) 78 mg/g Gel for the treatment of actinic keratoses

of mild-to-moderate severity on the face and scalp in December 2011, the Ameluz Licensor received approval from the FDA in

the United States in May 2016.

Under the approval, Ameluz ® is to be marketed 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.

Thus, in the United States, Ameluz ® is to be used in combination with exposure to light

using the BF-RhodoLED ® lamp.

Through our Ameluz LSA, we launched the commercialization of Ameluz ® and the

BF-RhodoLED ® lamp for the treatment actinic keratosis in the United States in October 2016.

For the Ameluz Licensor’s

medical device products BF-RhodoLED ® and RhodoLED ® XL, three priority patent applications have been filed.

The first one was submitted by the Ameluz Licensor as a PCT application to the EPO on June 5, 2019.

The corresponding national

phase in the U.S.

was initiated by the Ameluz Licensor on November 17, 2020.

The international application was published on December

Two more applications were submitted by the Ameluz Licensor to the United States Patent and Trademark Office (“USPTO”),

one on October 15, 2020, and the other one on March 29, 2021.

All three applications aim at protecting both hardware and software in

the Biofrontera Group’s PDT-lamps and thus could, once granted, also protect Ameluz ® itself in the United States,

due to the specifics of the FDA’s combination approval.

international patent application entitled “Photodynamic therapy comprising two light exposures at different wavelengths”

was filed by Biofrontera Bioscience on August 23, 2018, which describes a combined PDT (photodynamic therapy) modality.

The invention

relates to the application of a composition comprising a photosensitizer followed by two consecutive exposures of the treatment area

to light, firstly natural daylight and secondly light of a wavelength corresponding to the absorption of the photosensitizer.

This application

has been nationalized in seven countries including the United States and regionalized as a European patent application.

December 2, 2021, Biofrontera AG announced that the USPTO had issued a Notice of Allowance for the U.S.

patent application number 17/234,490,

titled “Illumination for Photodynamic Therapy,” that covers an innovative, pain-reducing illumination protocol for photodynamic

Subsequently, the patent was granted in February 2022.

December 8, 2021, Biofrontera AG announced that the USPTO has issued a Notice of Allowance for Biofrontera Pharma GmbH’s U.S.

number 17/215,785 (‘785 patent), titled “Illumination device for photodynamic therapy, method for treating a skin disease

and method for operating an illumination device,” which protects a number of innovations relating to the RhodoLED XL ®

Subsequently, the patent was granted in January 2022.

keratoses are superficial potentially pre-cancerous skin lesions caused by chronic sun exposure that may, if left untreated, develop

into a form of potentially life-threatening skin cancer called squamous cell carcinoma.

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.

to The Skin Cancer Foundation, actinic keratosis affects approximately 58 million people in the United States, and, if left untreated,

up to 5-10 percent of actinic keratoses lesions develop into squamous cell carcinomas every year.

average, this transformation into squamous cell carcinoma occurs within two years of formation of the initial actinic keratosis lesion.

“Actinic Keratosis Overview – A Common Precancer.” The Skin Cancer Foundation, March 31, 2022,

www.skincancer.org/skin-cancer-information/actinic-keratosis

cell carcinoma is an uncontrolled growth of abnormal cells arising in the squamous cells, which reside in the skin’s upper layer

(the epidermis).

Squamous cell carcinomas often appear as scaly red patches, open sores, elevated growths with a central depression,

and they may crust or bleed.

They can become disfiguring and sometimes deadly if allowed to grow.

According to The Skin Cancer

Foundation, squamous cell carcinoma has been the second most common form of skin cancer, but its incidence has been rapidly increasing.

According to The Skin Cancer Foundation, more than one million cases of squamous cell carcinoma are diagnosed each year in the United

States, and it has been estimated that as many as 15,000 people die from the disease each year in the United States.

Incidence of the

disease has increased by 200% in the past three decades in the United States and it has recently matched the incidence of basal cell

carcinoma in the Medicare fee-for-service population, which had been the most common form of human cancers.

keratosis typically develops on areas of chronic sun exposed skin.

The necessity to treat actinic keratosis arises from the inherent

risk of progression to invasive skin cancer, the chronic character of the disease and the potentiated risk for patients with multiple

actinic keratoses.

The American Academy of Dermatology

recommends treating actinic keratosis to reduce your risk of developing skin cancer 2 .

This is in agreement

with recommendations made by the European Academy of Dermatology and Venereology, who also highlight the additional treatment of the

surrounding photodamaged skin in case multiple lesions are present.

International treatment guidelines list photodynamic therapy as the

“gold standard” for treating actinic keratosis, especially multiple actinic keratoses and the surrounding photodamaged skin 3 .

Overview for Treatment of Actinic Keratosis

keratosis is a disease that is most frequent in the Caucasian, light-skinned population.

Only a fraction of these patients is currently

being treated.

Actinic keratoses are treated using a wide range of methods.

The traditional methods of treating actinic keratoses are:

or the deep freezing of skin;

topical prescription products;

Personnel (HCP) – applied medication combined with light therapy (photodynamic therapy).

any one of these treatment options can be effective, each has specific limitations and side effects.

is non-selective;

this means it cannot target specific tissues and affects all tissues in the area of application.

Cryotherapy can be

painful at the site of freezing and can cause blistering and loss of skin pigmentation, leaving temporary or permanent white spots.

addition, there is no standardized treatment protocol with Cryotherapy, thus, the results are not uniform and can depend on the skill

or technique of the healthcare provider treating the patient.

curettage is generally most useful for one or a few individual lesions, but not for a large number of lesions, and it leaves permanent

prescription products such as 5-fluorouracil cream requires twice-a-day application by the patient for approximately 2 to 4 weeks, resulting

in inflammation, redness and erosion or rawness of the skin.

Following the treatment, up to several weeks of healing may be required.

Imiquimod or diclofenac, other topical prescription products, require extended applications of cream, lasting up to 3 or 4 months, during

which the skin is often very red and inflamed.

Tirbanibulin is a recent FDA-approved topical (12/2020) with shorter treatment and less

irritation, yet lower disease clearance rates.

With all topical products, even those with a relatively short course of treatment, patient

compliance remains an issue, as many patients discontinue treatment once the skin irritation begins.

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.

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 therapy also may provide protection from potentially fatal

progress of mild or invisible AKs.

and competitive landscape

The United States

is the largest market for our flagship product Ameluz ® in combination with the RhodoLED ® lamp series.

According to The Skin Cancer Foundation, actinic keratosis (“AK”) affects approximately 58 million people

in the United States.

4 In 2021, an estimated 13.2 million treatments for actinic keratosis were performed.

the United States, the most common treatment for actinic keratosis remains cryotherapy, with approximately 11.4 million procedures performed

in 2021 and an 86.4% market share.

Topical drugs for the treatment of AK took a market share of about 11.8% in the reporting year, followed

by PDT drugs at 1.8%.

Simple curettage is generally not used to treat actinic keratosis in the United States.

The 2021 AK market

has grown 4% over 2020 .

“Guidelines of care for the management of actinic keratosis.” Journal of the American Academy of Dermatology, April

2, 2021, https://www.jaad.org/article/S0190-9622(21)00502-8/fulltext

AK currently affects approximately 58 million Americans

which lead to roughly 13 million treatments annually.

5 Cryotherapy is the traditional and most common form of treatment but

may not be as effective and may leave scarring;

cryotherapy is estimated to be approximately 86% of the market.

Topicals, medications

which patients apply to the lesion multiple times per day for up to several weeks, constitutes approximately 12% of the market.

approximately 2% of the market.

The total market size is estimated to be roughly $4 billion for the three therapy types.

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.

This targeted market is about 11% or $440 million of the total AK market.

Ameluz ® PDT is competitive in the market.

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.

Fuchs & Marmur, Dermatol Surg.

33(9):1099-101

Werner RN, Stockfleth E, Connolly SM, et al.

4 unchanged sentences

doi:10.1111/jdv.13180

Keratosis Overview – A Common Precancer.” The Skin Cancer Foundation, March 31, 2022, www.skincancer.org/skin-cancer-information/actinic-keratosis

chart below displays the relative percentages of these actinic keratosis treatments:

overall market, or total number of AK treatments, declined in 2020 due to the coronavirus pandemic.

In the United States, we saw a cumulative

12.2% decline from 2019 levels.

Rising infection rates and the associated official recommendation by the American Academy of Dermatology

to provide patients with remote diagnosis and treatment whenever possible led to significantly declining patient numbers and widespread,

albeit temporary, closures of physicians’ offices.

In 2021, the total AK market grew by 4%.

The PDT market grew at the same

rate as the AK market;

however, Ameluz ® grew at 9%.

The market share within the PDT drug segment for Ameluz ®

was 25.6%, compared to approximately 24.5% in the previous year.

Biofrontera was able to improve our market position versus

the competing PDT drug despite the lingering effects of the pandemic on dermatology patient office visits.

chart below shows the relative percentages of the PDT market share:

goal is to continue to improve the market positioning of Ameluz ® to become the leading PDT drug for the treatment of AK

in the United States.

In addition, we see the opportunity to expand the PDT market as a therapy for the treatment of actinic keratosis

as the first option compared to cryotherapy, especially in patients with more than 15 lesions.

We believe dermatologists have favored

cryotherapy to treat actinic keratosis because of a favorable reimbursement regime;

however, we believe that there is treatment guideline

pressure towards field-directed therapy (as opposed to single lesion therapy), which may also help support sales of photodynamic therapy

primary competing PDT drug in the United States is Levulan ® , which has been approved for the treatment of minimally to

moderately thick actinic keratoses of the face or scalp in combination with PDT with a blue light source since 1999.

was the only FDA-approved product on the U.S.

market for the PDT treatment of actinic keratosis (in accordance with the applicable

prescribing information) until our company launched Ameluz ® in the United States in October 2016 (Galderma sold Metvix ®

market only for a short period and withdrew the product in 2013).

addition, in August 2017, the Ameluz Licensor agreed with the FDA on the requirements for the potential approval of its application to

extend Ameluz ® PDT for the treatment of superficial basal cell carcinoma in the United States.

Licensors’ Research and Development Programs—Current Clinical Trials for Ameluz ® for the U.S.

If the Ameluz Licensor obtains FDA approval for such label extension, we expect that Ameluz ® would be at that

time the only drug in the United States approved for the indication of treatment of superficial basal cell carcinoma with

Under the Ameluz LSA, we would have the exclusive license to market Ameluz ® PDT in the United States for such indication.

expect that our ability to compete in the PDT-market will be based upon such factors as:

efficacy from treatment with Ameluz ® photodynamic therapy;

recurrence rates from treatment with Ameluz ® photodynamic therapy;

ease of administration of our formulation for photodynamic therapy;

ability of our drug to provide both lesion-and field-directed treatment;

cost of our drug and the type and cost of our photodynamic therapy light device;

number of required doses;

cosmetic outcome and improvement of skin impairment;

continued efforts to develop further indications.

on the above market and competitive analysis, we believe there is substantial market potential and room for growth in the U.S.

believe that this data provides the best information available to us relating to the present market for actinic keratosis treatments

in the United States.

We also base our business planning activities on these data.

described in the section “— Commercial Partners and Agreements — Ferrer Internacional S.A.

”, the acquisition

of Cutanea Life Sciences, Inc.

in March 2019 has enabled Biofrontera Inc.

to market an FDA-approved drug that had been recently introduced

Xepi ® (ozenoxacin cream, 1%) is a topical prescription medicine approved for the treatment of impetigo,

a common skin infection caused by bacteria (Staphylococcus aureus or Streptococcus pyogenes).

Xepi ® acts by blocking the

action of two enzymes essential for bacterial DNA replication:

DNA-gyrase and topoisomerase IV.

Because of this dual mechanism of action,

Xepi ® is believed to show a low tendency to induce resistant bacteria.

Currently, no antibiotic resistance against Xepi ®

It has been specifically approved by the FDA also for the treatment of antibiotic-resistant bacteria Staphylococcus aureus

or Streptococcus pyogenes.

The approved indication is the topical treatment of impetigo due to Staphylococcus aureus or Streptococcus

pyogenes in adult and pediatric patients 2 months of age and older.

For full prescribing information for Ameluz, please see https://bit.ly/AmeluzPI

Reinhold et al.

DOI 10.1111/bjd.

www.skincancer.org/skin-cancer-information/actinic-keratosis

Market data accessible from CMS and IQVIA, 2020

Sales, marketing and distribution

We are currently selling our portfolio of licensed

products in the United States through the use of our own commercial organization.

We have a single sales force who markets all our licensed

products across the dermatology space.

We launched the commercialization of Ameluz ® in combination with the RhodoLED ®

lamp for the treatment of actinic keratosis in the United States in October 2016.

Ameluz ® PDT is an in-office procedure.

Ameluz ® is distributed as a “buy-and-bill” drug that is purchased by the dermatologist, rather than distribution

through pharmacies.

Our customers will purchase our device and Ameluz ® which will be held in inventory.

When a dermatologist

uses our product in a treatment, a payor will be billed, and the provider will be paid for both the product and light treatment.

are well established PDT CPT Codes.

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.

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’ research and development

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.

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.

summary of our understanding of the Licensor’s clinical trials is below:

basal cell carcinoma

Study Report (CSR) expected Q2 – 2024

study with 3 tubes of Ameluz ® ;

CSR expected Q3 – 2023

to severe acne

expected Q2 – 2024

& extremities with 1-3 tubes First patient dosed 01/23;

CSR expected Q1 - 2025

daylight + conventional PDT, plan to start enrollment in 2023

cell carcinoma in situ

to start enrollment in 2024

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 ® .

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.

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.

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.

Our Licensor is responsible

for all raw materials, product, and shipment of products to our third-party logistics partner (“3PL”), Cardinal Health for

warehousing and distribution.

We centralize our customer sales support and back-office functions through our headquarters in Woburn,

Massachusetts.

We intend to continue our development of our sales and marketing infrastructure to effectively target the broad range

of dermatologic prescribers.

To further our development, we plan to expand our headcount, increase our investment in market research

and brand development, further develop our distribution capabilities and explore broader payer relationships and

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.

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.

is a common and highly contagious bacterial skin infection caused by bacteria.

The bacteria that can cause impetigo include Group

A beta-hemolytic streptococcus and Staphylococcus aureus.

It occurs most frequently in children 2 to 5 years old, but people of any age

can be affected.

The bacteria that can cause impetigo include Group A

beta-hemolytic streptococcus and Staphylococcus aureus.

It occurs most frequently in children 2 to 5 years old, but people of any

age can be affected and even more than once.

Impetigo causes red sores that most often appear on the face, neck, arms, and legs.

These sores can turn into blisters

that open and form a yellowish crust.

Transmission of the disease is by direct contact and poor hygiene can increase the spread.

can get impetigo, and they can get it more than once.

Although impetigo is a year-round disease, it occurs most often during the warm

weather months.

5 There are more than 3 million cases of impetigo in the United States every year.

These sores can turn into blisters that open and form a yellowish crust.

Transmission of the disease is by direct contact and poor

hygiene can increase the spread.

Although impetigo is a year-round disease, it occurs most often during the warm weather

complications of impetigo 8 can include:

1 unchanged sentence

which is more common with ecthyma

caused by beta-hemolytic strep bacteria can cause:

Impetigo caused by beta-hemolytic strep bacteria can cause:

damage (poststreptococcal glomerulonephritis)

1 unchanged sentence

impetigo rarely leads to serious complications, effective treatment with drugs like Xepi ® can shorten how long impetigo

How to Treat Impetigo and Control This

Common Skin Infection | FDA

CLS link to Johns Hopkins Impetigo | Johns Hopkins Medicine

decisions should consider resistance pattern of Staphylococcus aureus as antibiotic ineffectiveness resulting from bacterial resistance

makes infections more difficult to control, worsens prognosis, and increases healthcare costs.

Increasing resistance to known antibiotics

is a serious concern for doctors.

The World Health Organization has declared antimicrobial resistance as one of the top 10 global public

health threats facing humanity.

The cost of resistance to our economy and health system is significant.

In a 2009 study titled “Hospital

and Societal Costs of Antimicrobial Resistant Infections in a Chicago Teaching Hospital:

Implications for Antibiotic Stewardship,”

13.5% of patients had antimicrobial resistance resulting in a 6.5% attributable mortality rate and a per patient incremental cost of

$100,000 per resistant infection.

If impetigo spreads to a community, it may also trigger the spread of resistant strains, such as MRSA,

with poor prognoses for patients over time.

According to the FDA, 90% of MRSA community acquired infections present as skin and soft

tissues infections, whereby patients infected with MRSA are 64% more likely to have complications than those infected with the non-resistant

In the US 78% of bacterial skin and soft tissue infections are due to MRSA.

and competitive landscape

market for topical antibiotics is driven by generics with mupirocin being the top choice of topical antibiotics across all specialties.

2021, over 13 million prescriptions were written for mupirocin for a range of conditions.

According to prescription data from IQVIA,

dermatologists account for approximately 12% of the annual topical antibiotic prescriptions written or about 1.4 million prescriptions.

chart below displays the utilization of mupirocin by specialty in 2021:

the above market analysis, we believe there is a considerable growth potential for Xepi ® .

are more than 3 million cases of impetigo in the United States every year.

5 The market for topical antibiotics is driven by

generics with mupirocin being the top choice of topical antibiotics across all specialties.

In 2021, over 13 million prescriptions were

written for mupirocin for a range of conditions.

According to prescription data from IQVIA, dermatologists account for approximately

12% of the annual topical antibiotic prescriptions written or about 1.4 million prescriptions.

Xepi ® is a prescription

product that is filled by specialty pharmacies nationwide and orders to these specialty pharmacies are fulfilled by our 3PL, Cardinal

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.

licensors’ research and development programs

are a sales organization with focus on commercializing our portfolio of licensed products that are already FDA-approved.

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.

Currently, there are no clinical trials being conducted for Xepi ® .

in the future, we may conduct our own clinical trials to better the market positioning of Ameluz and increase our revenue potential.

Any clinical trials we conduct for indications that are sought as part of the current clinical trials described below in “ Current

Clinical Trials for Ameluz ® for the U.S.

Market ” would require the approval of and close collaboration with

the Biofrontera Group.

Antimicrobial resistance (who.int);

Hospital and Societal Costs of Antimicrobial-Resistant Infections in a Chicago Teaching

Implications for Antibiotic Stewardship | Clinical Infectious Diseases | Oxford Academic (oup.com).

Clinical Trials for Ameluz ® for the U.S.

III study for the treatment of superficial basal cell carcinoma (sBCC)

August 2017, the Ameluz Licensor agreed with the FDA on the requirements necessary to obtain approval for our application of Ameluz ®

PDT for the treatment of superficial basal cell carcinoma in the U.S.

Under the Ameluz Licensor’s agreed plan with the FDA,

the application could be based on a single additional Phase III placebo-controlled pivotal trial to be conducted in the U.S., in which

Ameluz ® PDT will be compared to placebo PDT.

The Ameluz Licensor will be required to present as primary clinical

endpoint a combined read-out of clinical and histological clearance.

In December 2017, the Ameluz Licensor submitted an investigational

new drug application with the FDA for the proposed Phase III study protocol to evaluate Ameluz ® PDT for the treatment

of superficial basal cell carcinoma, and the FDA performed a special protocol assessment.

the discussion with the FDA, the Ameluz Licensor initiated a study with the primary objective of comparing the efficacy of Ameluz ®

PDT with PDT using just the vehicle that is used to deliver the active ingredient in Ameluz ® , in combination with

BF-RhodoLED ® illumination, in the treatment of superficial basal cell carcinoma.

A randomized, double blind, vehicle-controlled

multicenter Phase III study is being performed by the Ameluz Licensor to evaluate the safety and efficacy of Ameluz ® in

combination with the BF-RhodoLED ® lamp.

Secondary objectives include the evaluation of the safety and secondary efficacy

parameters (including stratification according to lesion size, location, patient age and sex) related to Ameluz ® in combination

with the BF-RhodoLED ® lamp, also including clinical clearance of additional treated lesions on the same patients.

double-blind clinical observation period for each patient will be up to 7 months (up to four weeks screening and pre-randomization period,

and three or six months double blind part of the study) followed by a 5-year follow-up period after the start of the last PDT cycle.

The recruitment phase started in the third quarter of 2018.

Due to the study protocol mandated by the FDA, the recruitment process

has taken and will likely take a considerable amount of time.

As of now over 73% of the patients have been recruited.

total of 18 clinical sites are currently participating in the study.

I safety study evaluating PDT with three tubes of Ameluz ®

December 2021, the Ameluz Licensor commenced patient enrollment for its Phase I safety study to evaluate the safety and tolerability

of PDT for the treatment of mild-to-severe AK on the face and scalp using three tubes of Ameluz ® together with the new

RhodoLED ® XL lamp.

The non-randomized, open-label, multicenter study evaluates the safety and tolerability of Ameluz ®

in the treatment of AK located on the face and scalp with PDT together with the new RhodoLED ® XL lamp.

includes 100 patients with mild to severe AK.

Each patient will receive the content of three tubes of Ameluz ® for a field-directed

treatment of AK.

A total of eight clinical sites are participating in the study.

Phase I study follows a maximal-usage pharmacokinetics (“PK”) clinical study that was completed in October 2020 and

the results were submitted to the FDA in early 2021.

objective of the study was to evaluate the safety of patients after applying three tubes of Ameluz ® to the skin by investigating

the amount of active ingredient that enters the blood stream.

Further parameters related to the safety of patients undergoing such treatment

were also investigated.

The FDA acknowledged the results of the PK study.

However, the regulatory agency subsequently requested another

safety study focusing on transient adverse events before amending the product information, which currently limits use to one tube of

Ameluz ® per treatment.

II study for the treatment of moderate to severe acne

December 2021, the Ameluz Licensor started patient recruitment for the phase IIb study evaluating the safety and efficacy of Ameluz ®

in combination with the PDT-lamp BF-RhodoLED for the treatment of moderate to severe acne with Ameluz ® -PDT.

multicenter, randomized, double blind phase II study with four arms uses conventional Ameluz®-PDT and includes 126 adult patients

suffering from moderate to severe acne, who will be treated with Ameluz®-PDT or placebo.

Efficacy and safety of Ameluz®-PDT will

be tested with respect to incubation periods of one and three hours compared to placebo.

The primary endpoint of the study is the absolute

change in the number of inflammatory lesions and an improvement in symptoms.

To ensure collection of highly consistent data across all

participating sites, the study will combine clinical assessments performed by the physicians conducting the study with a cutting-edge,

FDA-approved, artificial intelligence analysis platform that will provide a lesion count along with a severity assessment.

seven sites are participating in the study.

marketing and distribution

are currently selling our portfolio of licensed products in the United States through the use of our own commercial organization.

have a single sales force who markets all our licensed products across the dermatology space.

launched the commercialization of Ameluz ® in combination with the RhodoLED ® lamp for the treatment of actinic

keratosis in the United States in October 2016.

Prior to launch, and with the help of a consulting firm specializing in market access,

we analyzed the reimbursement mechanisms for photodynamic therapy in the U.S.

healthcare system.

Ameluz ® is distributed

as a “buy-and-bill” drug that is purchased by the dermatologist, rather than distribution through pharmacies.

on our experience, we concluded that we could most effectively market our products by using our own sales force, which we train to sell

our drug Ameluz ® (in combination with the RhodoLED ® lamp series) and Xepi ® .

During 2016, we hired 26 employees for our U.S.

marketing and sales efforts, and we launched the commercialization of Ameluz ®

and RhodoLED ® lamp for actinic keratosis in the U.S.

in October 2016.

then, we have continued to build our organization in the United States, added the FDA-approved prescription drug Xepi ®

to our portfolio in March 2019 and, as of December 31, 2019, we had over 70 employees in our salesforce and field based supporting functions

in the medical and reimbursement field.

However, due to measures and regulations implemented by governments worldwide in an attempt to

control the COVID-19 pandemic, and the reduced demand for our products that this caused, we had to reduce our U.S.

workforce in March

2020 and implemented a mandatory furlough program, under which all employees were required to take temporary periods of unpaid time off.

As of December 31, 2020, we had 56 employees.

We have since re-filled the key positions for our U.S.

operations with qualified and experienced

As of December 31, 2021, we have 69 employees of which 35 are sales positions including management.

We are considering

additional expansion of our sales and office staff as we expand our commercial footprint.

centralize our customer sales support and back-office functions through our headquarters in Woburn, Massachusetts.

We use Cardinal Health

as our third-party logistics partner for warehousing and distribution.

To mitigate risk of business interruption, product is stored and

shipped from two warehouses, either La Verne, Tennessee or Reno, Nevada, depending on geographical ship-to locations.

We intend to continue

our development of our sales and marketing infrastructure to effectively target the broad range of dermatologic prescribers.

our development, we plan to expand our headcount, increase our investment in market research and brand development, further develop our

distribution capabilities and explore broader payer relationships and coverage.

December 31, 2021, no customer represented more than 10% of the net accounts receivable balance.

For the year ended December 31, 2021,

no customer represented more than ten percent of net revenues.

do not own any patents or trademarks.

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, marketing and distribution

We are currently selling our portfolio of licensed products in the United States through the use of our own commercial

organization.

We have a single sales force who markets all our licensed products across the dermatology space.

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.

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.

that Xepi ® has the potential to be another innovative product with a large market potential.

7 How to Treat Impetigo and Control This Common Skin Infection | FDA

8 From CLS link to Johns Hopkins Impetigo

| Johns Hopkins Medicine

do not own any material patents or trademarks.

We license the rights and trademarks related to the products we sell.

See “— Commercial

Partners and Agreements ” for more information regarding the terms of our license agreements for Ameluz ® and

patent family that protected the technology relating to the combination of a nanoemulsion with 5-aminolevulinic acid, the

active ingredient in Ameluz ® , against copying by competitors expired on November 12, 2019.

This patent family included

6,559,183, which, prior to its expiration, served as a material, significant and possibly the only barrier to entry into

market by generic versions of Ameluz ® .

Although the process of developing generic topical dermatological products

presents specific challenges that may deter potential generic competitors, Patent No.

6,559,183 no longer prevents generic versions of

Ameluz ® from entering the U.S.

market and competing with Ameluz ® .

Other patents have therefore been filed

by Biofrontera Pharma and Biofrontera Bioscience, and two granted, to further protect the combination of Ameluz ®

and RhodoLED ® .

and the RhodoLED ® lamp series are approved by the FDA as a combination product, such that the label requires the

use of both products together.

In our opinion, this requirement would also hold true for any generic manufacturer, who would have to

develop and market their own combination product consisting of a generic version of Ameluz ® and a generic version of the

RhodoLED ® lamp series.

December 2021, Biofrontera Pharma received two notices of allowance from the USPTO.

The formal patents referenced below have subsequently

been granted at the beginning of 2022.

first patent grant refers to the patent application “Illumination for Photodynamic Therapy” (US17/234,490), an innovative,

pain-reducing illumination protocol for photodynamic therapy (PDT).

The patent application claims a method for photodynamic therapy in

which a dynamic and innovative illumination protocol is implemented.

This protocol consists of changing illumination intensities combined

in a predefined order with interruptions of the illumination to specifically modulate and reduce pain perception for the patient.

implementation of the patented invention to Biofrontera’s medical devices merely requires the installation of a software, it can

potentially be rolled-out to both BF-RhodoLED ® and RhodoLED ® XL.

second patent grant refers to the patent application “Illumination device for photodynamic therapy, method for treating a skin

disease and method for operating an illumination device” (US 17/215,785), which protects a number of innovations in the recently

FDA-approved RhodoLED ® XL lamp.

The patent application describes specific features of the LED arrays of the five panels

constituting the lamp head of the RhodoLED ® XL.

The patent further describes the implementation of a distance sensor in

each panel that improves positioning of the device:

The sensors are connected to visual feedback mechanisms that support the operator

in properly positioning all five panels at the recommended treatment distance.

This increases standardization of the illumination and

should contribute to patient safety, while improving handling of the lamp for the treating physician.

The FDA has acknowledged the

relevance of this patent on the lamp also for Ameluz® by allowing its inclusion in the Orange Book as a patent protecting Ameluz®.

order to protect the recently FDA-approved RhodoLED® XL red-light lamp against imitations, a design application for certain key design

aspects of the lamp was also filed as a continuation-in-part application of the previously mentioned patent on October 19, 2021.

international patent application “Photodynamic therapy comprising two light exposures at different wavelengths” was filed

with the EPO on August 23, 2018.

Entry into the regional/national phases was initiated for the EU, USA, Japan, Australia, China, Hong

Kong, New Zealand and Singapore, and examination requests were made in each case.

Ameluz ® Licensor furthermore holds

a patent family (which is licensed to us for commercialization in the United States through the Ameluz LSA) protecting the technology

relating to nanoemulsions.

This patent has been issued to Biofrontera Bioscience in several other jurisdictions, including Australia,

Belarus, Canada, Chile, China, Hong Kong, Israel, Japan, Mexico, New Zealand, Russia, South Africa, Singapore, Ukraine, and with the

European Patent Office (validated in Germany, Spain, the United Kingdom, Switzerland, Liechtenstein, France, and Italy).

The anticipated

expiration date of these international patents is December 21, 2027.

Ameluz ® is dependent on the nanoemulsion technology

described in this patent.

A corresponding U.S.

patent application has been filed by Biofrontera Bioscience but is still pending.

guarantee that this U.S.

patent will be issued or, if issued, will adequately protect us against copying by competitors.

is protected by four patents in the United States held by Ferrer, the details of which

are shown below:

Ozenoxacin Molecule - Drug Substance Patent

Drug product, Treatment of impetigo due to Staphylococcus aureus or Streptococcus pyogenes

Treatment of impetigo due to Staphylococcus aureus or Streptococcus pyogenes

A method of treating nasopharynx infections in asymptomatic nasal carriers

The Licensor has patent protection on its nanoemulsion technology in the United States until 2028

and three new patent family applications on the BF-RhodoLED ® lamps and general PDT

illumination procedures, two of which are already granted and one is listed in the Orange Book, that could jointly extend protection

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.

However, there are treatment specific patents for the treatment of impetigo due to Staphylococcus aureus

or Streptococcus pyogenes and a method of treating nasopharynx infections in asymptomatic nasal carriers expiring in 2032 and 2029, respectively.

Partners and Agreements

Pharma and Biofrontera Bioscience

On June 16, 2021, we entered into the Ameluz LSA

with Biofrontera Pharma and Biofrontera Bioscience.

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.

the terms of the Ameluz LSA as entered into on June 16, 2021, we agree to purchase from the Ameluz Licensor a minimum number of

units of Ameluz ® per year according to an agreed schedule at fifty percent of our anticipated net price per unit for Ameluz ® .

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.

As a result of this amendment, the purchase price

we pay the Ameluz Licensor for Ameluz ® will be determined in the following manner:

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);

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;

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.

and RhodoLED ® Lamp Series License Service Agreement

June 16, 2021, we entered into the Ameluz LSA with Biofrontera Pharma and Biofrontera Bioscience.

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.

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.

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.

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.

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.

Ameluz LSA will remain in effect until June 2036, at which time the Ameluz LSA may automatically renew depending on Biofrontera’s

1 unchanged sentence

Both parties may terminate the agreement early for a material breach after a 60-day cure period.

Ameluz LSA also provides that we will indemnify the Ameluz Licensor, subject to certain conditions, for any claims related to

a breach of our representations and covenants under the agreement or any other gross negligent, willful or intentionally wrongful act,

error or omission on our part.

Under the terms of the agreement, the Ameluz Licensor will indemnify us, subject to certain conditions,

against claims related to the licensed products.

the Ameluz LSA, the Ameluz Licensor is responsible for obtaining and maintaining the rights to all FDA approvals (and any required

maintenance thereafter) needed for the Ameluz Licensor to manufacture Ameluz ® and/or the RhodoLED ®

lamp series and/or for Biofrontera to sell Ameluz ® and/or the RhodoLED ® lamp series in the United States.

Likewise, the Ameluz Licensor is responsible to maintain a pharmacovigilance database and to respond appropriately to all relevant

queries of any regulatory authority pertaining to pharmacovigilance (Biofrontera is required to provide reasonable support relating to

any regulatory issues relating to pharmacovigilance and/or product recalls).

Furthermore, the Ameluz Licensor will in agreement

with Biofrontera perform and finance clinical trials to promote the Ameluz ® market positioning in the U.S.

for indications that are identified in the amendment signed on October 8, 2021, including the clinical studies described in “— Our

Licensors’ Research and Development Programs—Current Clinical Trials for Ameluz ® for the U.S.

With respect to the indications currently pursued by the Ameluz Licensor, we have the authority under the Ameluz

LSA, in certain circumstances, to take over clinical development from the Ameluz Licensor, if they are unable or unwilling to

perform these functions appropriately and subtract the cost from the transfer price of future shipments.

The Ameluz Licensor does not

have any obligation under the Ameluz LSA, as amended, to perform or finance clinical trials to promote indications that might be pursued

in the future.

Ameluz LSA also provides that we will indemnify the Ameluz Licensor, subject to certain conditions, for any claims related to a breach

of our representations and covenants under the agreement or any other gross negligent, willful or intentionally wrongful act, error or

omission on our part.

Under the terms of the agreement, the Ameluz Licensor will indemnify us, subject to certain conditions, against

claims related to the licensed products.

the Ameluz LSA, the Ameluz Licensor is responsible for obtaining and maintaining the rights to all FDA approvals (and any required maintenance

thereafter) needed for the Ameluz Licensor to manufacture Ameluz ® and/or the RhodoLED ® lamp series and/or

for Biofrontera to sell Ameluz ® and/or the RhodoLED ® lamp series in the United States.

Likewise, the Ameluz

Licensor is responsible to maintain a pharmacovigilance database and to respond appropriately to all relevant queries of any regulatory

authority pertaining to pharmacovigilance (Biofrontera is required to provide reasonable support relating to any regulatory issues relating

to pharmacovigilance and/or product recalls).

Furthermore, the Ameluz Licensor will, in agreement with Biofrontera, perform and finance

clinical trials to promote the Ameluz ® market positioning in the U.S.

market for indications that are identified in the

amendment signed on October 8, 2021, including the clinical studies.

With respect to the indications currently pursued by the Ameluz

Licensor, we have the authority under the Ameluz LSA, in certain circumstances, to take over clinical development from the Ameluz Licensor,

if they are unable or unwilling to perform these functions appropriately and subtract the cost from the transfer price of future shipments.

The pursuit of any additional indications would need to be separately negotiated between us and the Ameluz Licensor.

10 unchanged sentences

in the same business area).

Under the Ameluz LSA, if product or lamps are

not delivered in conformance with certain specifications of this Agreement and the Quality Assurance Agreement, and the Ameluz Licensor

does not remedy its failure, then we will have the right to organize manufacturing on our own, and step into contracts with the Ameluz

Licensor’s manufacturers, such that we will replace the Ameluz Licensor as a party to these contracts.

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

No transfer price will be paid to the Ameluz Licensor thereafter for products or lamps that are manufactured by third parties.

the Ameluz LSA, if product or lamps are not delivered in conformance with certain specifications of this Agreement and the Quality Assurance

Agreement, and the Ameluz Licensor does not remedy its failure, then we will have the right to organize manufacturing on our own, and

step into contracts with the Ameluz Licensor’s manufacturers, such that we will replace the Ameluz Licensor as a party to these

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.

Internacional S.A.

March 25, 2019, we assumed the rights, duties and obligations of Cutanea Life Sciences, Inc.

under the Xepi LSA as part of the acquisition

March 25, 2019, we assumed the rights, duties and obligations of Cutanea under the Xepi LSA as part of the acquisition

Under the terms of the Xepi LSA, we have been granted an exclusive, royalty-bearing license in the United States and certain

10 unchanged sentences

within the agreement.

terms of the Xepi LSA also provide for us to purchase Xepi ® from Ferrer and pay royalties at a high single digit percentage

based on net sales.

terms of the Xepi LSA also provide for us to purchase Xepi ® from Ferrer and pay royalties at a high single digit

percentage based on net sales.

Royalties are paid quarterly when the related sales occur.

There are no other performance obligations required for

royalties to be incurred.

Furthermore, while Ferrer is approval holder for Xepi ® , the administration of the NDA managed

by Biofrontera Bioscience.

We are fully dependent on our collaboration with Ferrer for our supply of Xepi ® from their

sole supplier.

The Xepi LSA will continue

for the longer of (a) 12 years following the first commercial sale of Xepi ® or (b) 12 years from the date of latest product

to launch under the Xepi LSA, concluding in 2030.

However, the Xepi LSA will automatically terminate concurrently with the termination

of Ferrer’s license with Toyama Chemical Co., Ltd., also in 2030.

Ferrer covenants under the agreement to make commercially reasonable

efforts to extend its license agreement with Toyama.

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,

There are no other performance obligations

required for royalties to be incurred.

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.

Xepi LSA will continue for the longer of (a) 12 years following the first commercial sale of Xepi ® or (b) 12 years from

the date of latest product to launch under the Xepi LSA, concluding in 2030.

However, the Xepi LSA will automatically terminate concurrently

with the termination of Ferrer’s license with Toyama Chemical Co., Ltd., also in 2030.

Ferrer covenants under the agreement to

make commercially reasonable efforts to extend its license agreement with Toyama.

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,

we believe that Xepi ® has the potential to be another innovative product with a large market potential in our portfolio.

See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting

Estimates —Intangible Assets and Impairment

Assessment ” in this Form 10-K.

See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates

—Intangible Assets and Impairment Assessment ” in this Form 10-K.

the Xepi LSA, Biofrontera is required to obtain and maintain all “Marketing Authorizations and Regulatory Approvals” in Ferrer’s

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in the United States.

Biofrontera must also participate in a “Joint Steering Committee,” which is intended, in

part, to ensure (among other things) that Biofrontera uses commercially reasonable efforts to market and sell Xepi ®

in the United States.

Biofrontera must also participate in a “Joint Steering Committee,” which is intended, in part,

to ensure (among other things) that Biofrontera uses commercially reasonable efforts to market and sell Xepi ® in the United

This joint steering committee is required to meet at least once per year, unless agreed otherwise by the parties.

headquarters are located in Woburn, Massachusetts, where we lease approximately 16,128 square feet under a lease agreement that

has an initial term expiring in September 2025.

Biofrontera’s

success is directly linked to the commitment, engagement, and performance of its employees.

It is important that we not only attract

and retain the best and brightest diverse talent but also ensure they remain engaged and can thrive in an environment that is committed

to helping them grow, succeed and contribute directly to achieving our purpose.

Biofrontera embraces diversity and equal opportunity

in a serious way.

We are committed to building a team that represents a variety of backgrounds, perspectives, and skills.

The more inclusive

we are, the better our work will be.

of December 31, 2021, we had a total of 69 full-time employees, 35 of whom are primarily engaged in field sales activities.

consider the intellectual capital of our employees to be an essential driver of our business and key to future prospects.

and retain a high-quality, experienced workforce, we offer a competitive mix of compensation and insurance benefits for our employees,

as well as participation in equity programs.

We offer a wide range of health insurance benefits packages that are customizable to suit

the individual needs of each member of our workforce, which is an important factor in our recruitment efforts.

We are committed to helping

our colleagues reach their full potential by rewarding both their performance and leadership skills and by providing opportunities for

growth and development.

employees are eligible to participate in our medical, prescription, dental, vision, Flexible Spending Account and life insurance and

disability plans.

We also offer employees an annual bonus plan and a 401(k)-retirement plan with a company match.

None of our employees

are represented by a labor union.

We consider our employee relations to be good.

and Industry Regulation

authorities in the United States, at the federal, state and local level, extensively regulate, among other things, the research, development,

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jurisdictions and could result in harm to our reputation and business.

Compliance with these laws and regulations may be costly and

may require significant technical expertise and capital investment to ensure compliance.

Drug Development and Review

Development Process

Information about the Drug Approval Process and Post-Marketing Requirements

system of new drug and biologics approval is a rigorous process.

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.

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.

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.

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.

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.

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.

3 Clinical Trials:

This Phase usually involves a larger number of patients with the targeted disease.

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.

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.

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.

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.

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.

A REMS must include a timetable for submission of assessments of the strategy at specified time

Failure to comply with a REMS, including the submission of a required assessment, may result in substantial civil or criminal

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.

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.

trials may experience delays or fail to demonstrate the safety and efficacy, which could prevent or significantly delay obtaining regulatory

trials require the investment of substantial financial and personnel resources.

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.

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

In addition, the results of early-stage clinical trials do not necessarily predict the results of later-stage clinical trials.

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.

The ability to commence and complete clinical trials may be delayed by many factors that are beyond our licensors

control, including:

obtaining regulatory approval to commence a trial;

in reaching agreement on acceptable terms with contract research organizations (“CROs”) and clinical trial

in obtaining institutional review board (“IRB”), approval at each site;

than anticipated patient enrollment or an inability to recruit and enroll patients to participate in clinical trials for various

to retain patients who have initiated a clinical trial;

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;

or inconclusive results;

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;

in the clinical trial operations or trial sites resulting in the imposition of a clinical hold;

medical events or side effects experienced by patients during the clinical trials as a result of or resulting from the clinical trial

can also occur if a clinical trial is suspended or terminated the IRBs of the clinical trial sites in which such trials are being conducted,

or by the FDA or other regulatory authorities.

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.

Post-Approval

Requirements for Approved Drugs

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.

Although physicians may prescribe legally

available drugs for off-label uses, manufacturers may not market or promote such off-label uses.

addition, quality control and manufacturing procedures must continue to conform to applicable manufacturing requirements after

We are relying exclusively on our licensors’ or their manufacturing partner’s facilities for the production of

clinical and commercial quantities of our products in accordance with Current Good Manufacturing Practices (“cGMP”)

cGMP regulations require among other things, quality control and quality assurance as well as the corresponding

maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP.

Drug manufacturers

and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with

the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and certain state agencies for

compliance with cGMP and other laws.

Accordingly, manufacturers must continue to expend time, money and effort in the area of

production and quality control to maintain cGMP compliance.

Discovery of problems with a product after approval may result in

restrictions on a product manufacturer or holder of an approved NDA, including, among other things, recall or withdrawal of the

product from the market.

In addition, changes to the manufacturing process are strictly regulated, and depending on the significance

of the change, may require prior FDA approval before being implemented and development of and submission of data to support the

Other types of changes to the approved product, such as adding new indications and additional labeling claims, are also

subject to further FDA review and approval, as well as, possibly, the development and submission of data to support the

FDA also may require post-approval, sometimes referred to as Phase 4, trials and surveillance to monitor the effects of an approved product

or place conditions on an approval that could restrict the distribution or use of the product.

Discovery of previously unknown problems

with a product or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity,

judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors,

and civil or criminal penalties, among others.

Newly discovered or developed safety or effectiveness data may require changes to a product’s

approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk

management measures, such as a risk evaluation and mitigation strategy.

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.

and Continuing FDA Regulation for Medical Devices

Compliance with these laws and regulations may be costly and may

require significant technical expertise and capital investment to ensure compliance.

Regulation for Medical Devices

a device is placed on the market, regardless of its classification or premarket pathway, numerous regulatory requirements apply.

include, but are not limited to:

establishment registration and device listings with the FDA;

System Regulation, or QSR, which requires manufacturers, including third party manufacturers and certain other parties, to follow

stringent design, testing, process control, documentation, corrective action/preventive action, complaint handling and other quality

assurance procedures, as applicable;

statutes and regulations, which prohibit the promotion of products for uncleared or unapproved, or off-label, uses and impose other

restrictions on labeling;

or approval of product modifications that could affect (or for 510(k) devices, significantly affect) safety or effectiveness or that

would constitute a change (or for 510(k) devices, a major change) in intended use;

device reporting regulations, which require that manufacturers report to the FDA if an event reasonably suggests that their device

may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a

death or serious injury if the malfunction of the same or a similar device of the manufacturer were to recur;

and removals reporting regulations, which require that manufacturers report to the FDA field corrections and product removals if

undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA, that may present a risk to health.

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;

post-approval

restrictions or conditions, including requirements to conduct post-market surveillance studies to establish additional safety or

efficacy data.

establishing establishment

registration and device listings with the FDA;

Quality System Regulation,

or QSR, which requires manufacturers, including third party manufacturers and certain other parties, to follow stringent design,

testing, process control, documentation, corrective action/preventive action, complaint handling and other quality assurance procedures,

as applicable;

labeling statutes and regulations,

which prohibit the promotion of products for uncleared or unapproved, or off-label uses and impose other restrictions on labeling;

clearance or approval of

product modifications that could affect (or for 510(k) devices, significantly affect) safety or effectiveness or that would constitute

a change (or for 510(k) devices, a major change) in intended use;

medical device reporting

regulations, which require that manufacturers report to the FDA if an event reasonably suggests that their device may have caused

or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious

injury if the malfunction of the same or a similar device of the manufacturer were to recur;

corrections and removals

reporting regulations, which require that manufacturers report to the FDA field corrections and product removals if undertaken to

reduce a risk to health posed by the device or to remedy a violation of the FDCA, that may present a risk to health.

the FDA may order a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences

post-approval restrictions

or conditions, including requirements to conduct post-market surveillance studies to establish additional safety or efficacy data.

FDA has broad post-market and regulatory enforcement powers.

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authorities, which may result in sanctions and related consequences including, but not limited to:

letters or warning letters;

injunctions, consent decrees and civil penalties;

detention or seizure of our products;

restrictions, partial suspension or total shutdown of production;

of or delay in granting our requests for 510(k) clearance or premarket approval of new products or modified products;

510(k) clearance or premarket approvals that are already granted;

to grant export approval for our products;

unanticipated

expenditures to address or defend such actions.

untitled letters or warning

fines, injunctions, consent

decrees and civil penalties;

recall, detention or seizure

of our products;

operating restrictions,

partial suspension or total shutdown of production;

refusal of or delay in

granting our requests for 510(k) clearance or premarket approval of new products or modified products;

withdrawing 510(k) clearance

or premarket approvals that are already granted;

refusal to grant export

approval for our products;

criminal prosecution;

unanticipated expenditures

to address or defend such actions.

Licensors are subject to announced and unannounced device inspections by FDA and other regulatory agencies overseeing the implementation

and adherence of applicable local, state and federal statutes and regulations.

March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or

collectively, the Affordable Care Act, was enacted, which includes measures that have or will significantly change the way health care

is financed by both governmental and private insurers.

Among the provisions of the Affordable Care Act of greatest importance to the

pharmaceutical industry are the following:

Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with

the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the

manufacturer’s outpatient drugs furnished to Medicaid patients.

Effective in 2010, the Affordable Care Act made several changes

to the Medicaid Drug Rebate Program, including increasing pharmaceutical manufacturers’ rebate liability by raising the minimum

basic Medicaid rebate on most branded prescription drugs and biologic agents from 15.1% of AMP to 23.1% of AMP and adding a new rebate

calculation for “line extensions” (i.e., new formulations, such as extended release formulations) of solid oral dosage

forms of branded products, as well as potentially impacting their rebate liability by modifying the statutory definition of AMP.

The Affordable Care Act also expanded the universe of Medicaid utilization subject to drug rebates by requiring pharmaceutical manufacturers

to pay rebates on Medicaid managed care utilization as of 2010.

Per a ruling by the U.S.

Supreme Court in 2012, states have the option

to expand their Medicaid programs which in turn expands the population eligible for Medicaid drug benefits.

CMS has proposed to expand

Medicaid rebate liability to the territories of the U.S.

In addition, the Affordable Care Act provides for the public availability

of retail survey prices and certain weighted average AMPs under the Medicaid program.

The implementation of this requirement by the

CMS may also provide for the public availability of pharmacy acquisition of cost data, which could negatively impact our sales.

order for a pharmaceutical product to receive federal reimbursement under the Medicare Part B and Medicaid programs or to be sold

directly to U.S.

government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug

pricing program.

The required 340B discount on a given product is calculated based on the AMP and Medicaid rebate amounts reported

by the manufacturer.

Effective in 2010, the Affordable Care Act expanded the types of entities eligible to receive discounted 340B

pricing, although, under the current state of the law, with the exception of children’s hospitals, these newly eligible entities

will not be eligible to receive discounted 340B pricing on orphan drugs when used for the orphan indication.

In July 2013, the Health

Resources and Services Administration (HRSA) issued a final rule allowing the newly eligible entities to access discounted orphan

drugs if used for non-orphan indications.

While the final rule was vacated by a federal court ruling, HRSA has stated it will continue

to allow discounts for orphan drugs when used for any indication other than for orphan indications.

In addition, as 340B drug pricing

is determined based on AMP and Medicaid rebate data, the revisions to the Medicaid rebate formula and AMP definition described above

could cause the required 340B discount to increase.

in 2011, the Affordable Care Act imposed an annual, nondeductible fee on any entity that manufactures or imports certain branded

prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare

programs, although this fee would not apply to sales of certain products approved exclusively for orphan indications.

Affordable Care Act required pharmaceutical manufacturers to track certain financial arrangements with physicians and teaching hospitals,

including any “transfer of value” made or distributed to such entities, as well as any ownership or investment interests

held by physicians and their immediate family members.

Manufacturers were required to begin tracking this information in 2013 and

to report this information to CMS by March 2014.

of 2010, a new Patient-Centered Outcomes Research Institute was established pursuant to the Affordable Care Act to oversee, identify

priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

The research conducted

by the Patient-Centered Outcomes Research Institute may affect the market for certain pharmaceutical products.

Affordable Care Act created the Independent Payment Advisory Board, IPAB, which, beginning in 2014, has authority to recommend certain

changes to the Medicare program to reduce expenditures by the program that could result in reduced payments for prescription drugs.

Under certain circumstances, these recommendations will become law unless Congress enacts legislation that will achieve the same

or greater Medicare cost savings.

IPAB recommendations are only required when Medicare spending exceeds a target growth rate established

by the Affordable Care Act.

Members of the IPAB have still not been appointed and Medicare cost growth is below the threshold that

would require IPAB recommendations.

Affordable Care Act established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service

delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

Funding has been allocated

to support the mission of the Center for Medicare and Medicaid Innovation from 2011 to 2019.

December 2018, the CMS published a new final rule permitting further collections and payments to and from certain Affordable Care

Act qualified health plans and health insurance issuers under the Affordable Care Act risk adjustment program in response to the

outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment.

Effective January 1,

2019, the Bipartisan Budget Act of 2018, or the BBA, among other things, amended the Affordable Care Act, to close the coverage gap

in most Medicare drug plans, commonly referred to as the “donut hole”.

Effective January 1, 2020, the federal spending package permanently eliminated the Affordable Care Act-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax.

December 14, 2018, a Texas U.S.

District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because

the “individual mandate” was repealed by Congress as part of the Tax Cuts and Jobs Act of 2017.

Additionally, on December

18, 2019, the U.S.

Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional

and remanded the case back to the District Court to determine whether the remaining provisions of the Affordable Care Act are invalid

Supreme Court dismissed the latest challenge to the Affordable Care Act in June 2021.

It is unclear how this

decision, future decisions, subsequent appeals, and other efforts to repeal and replace the Affordable Care Act will impact the Affordable

and Reimbursement

and reimbursement for our products depend in part on government regulation.

In order to have our products covered by Medicaid, we must

offer discounts or rebates on purchases of pharmaceutical products under various federal and state programs.

We also must report specific

prices to government agencies.

The calculations necessary to determine the prices reported are complex and the failure to do so accurately

may expose us to enforcement measures.

of our licensed products will depend, in part, on the extent to which our licensed products will be covered by third party payors, such

as government health care programs, statutory health insurances, and commercial insurance and managed healthcare organizations.

third-party payors are increasingly reducing reimbursements for medical products and services and there is no guarantee that we will

be able to obtain reimbursement at all for any future products.

In addition, the U.S.

government (federal and state) has continued implementing

cost-containment programs, including price controls, competitive bidding program, restrictions on reimbursement and requirements for

substitution of generic products.

Adoption of price controls and cost-containment measures, and adoption of more restrictive policies

in jurisdictions with existing controls and measures, could further limit our net revenue and results.

Decreases in third party reimbursement

for our licensed product or product candidates or a decision by a third party payor to not cover our licensed product or product candidates

could reduce physician usage of our licensed products once approved and have a material adverse effect on our sales, results of operations

and financial condition.

the U.S., treatment of actinic keratosis with Ameluz ® in combination with the BF-RhodoLED ® lamp is eligible

to be reimbursed by the U.S.

federal government’s Medicare Program through Part B, which means that dermatologists purchase the

drug to treat a patient in their office in combination with the BF-RhodoLED ® lamp and the doctors can be reimbursed for

the cost of the drug after its use to treat a patient.

This differentiates Ameluz ® from drugs that are reimbursed through

federal government’s Medicare Program through Part D, which are distributed through pharmacies.

Medicare Part B drugs

are reimbursed under the ASP payment methodology.

ASP data is calculated based on a formula defined by federal statute and regulation

and is submitted to the CMS on a quarterly basis.

CMS uses the ASP data to determine the applicable reimbursement rates for Ameluz ®

under Part B.

The Medicare Part B ASP reimbursement for Ameluz ® may fall below the cost that some medical providers

pay for Ameluz ® .

Our prescription drug licensed product, 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.

and private payers routinely seek to manage utilization and control the costs of our products, and there is considerable public and government

scrutiny of pharmaceutical pricing.

Efforts by states and the federal government to regulate prices or payment for pharmaceutical products,

including proposed actions to facilitate drug importation, limit reimbursement to lower international reference prices, require deep

discounts, and require manufacturers to report and make public price increases and sometimes a written justification for the increase,

could adversely affect our business if implemented.

In the Fall of 2020, the Trump Administration finalized an importation pathway from

Canada and a payment model to tie Medicare Part B physician reimbursement to international prices, though ultimate implementation of

both is uncertain due to legal challenges.

In November 2020, the Trump Administration published an interim final rule to implement the

Most Favored Nation Model to lower Medicare Part B drug spending by tying reimbursement to the lowest price paid by certain other countries.

In December 2020, implementation of the rule was blocked by federal courts and the Biden administration is expected to withdraw opposition

to the injunctions.

We expect to see continued focus on regulating pricing resulting in additional legislation and regulation under the

newly elected Congress and the Biden Administration.

The American Rescue Plan Act of 2021 signed into law by President Biden on March

14, 2021 includes a provision that will eliminate the statutory cap on rebates drug manufacturers pay to Medicaid beginning in January

With the elimination of the cap, manufacturers may be required to compensate states in an amount greater than what the state Medicaid

programs pay for the drug.

In addition, U.S.

government action to reduce federal spending on entitlement programs including Medicare

and Medicaid may affect payment for our products or services associated with the provision of our products.

majority of states use preferred drug lists to manage access to pharmaceutical products under Medicaid, including some of our products.

For example, access to our products under the Medicaid and Medicare managed care programs typically is determined by the health plans

with which state Medicaid agencies and Medicare contract to provide services to beneficiaries.

States seek to control healthcare costs

related to Medicaid and other state healthcare programs, including the implementation of supplemental rebate agreements under the Medicaid

drug rebate program tied to patient outcomes.

In addition, we expect that consolidation and integration among pharmacy chains, wholesalers

and PBMs will increase pricing pressures in the industry.

and Abuse Laws

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the federal civil False Claims Act is a civil statute, False Claims Act violations may also implicate various federal criminal statutes.

majority of states also have statutes or regulations similar to these federal laws, which apply to items and services reimbursed under

Medicaid and other state programs, or, in several states, apply regardless of the payer.

In addition, some states have laws that require

pharmaceutical companies to adopt comprehensive compliance programs.

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.

Health and Human Services, Office of Inspector General (OIG) scrutiny on the sale of products through specialty pharmacies or through

physician practices by means of direct investigation or by issuance of unfavorable Opinion Letters which may curtail or hinder the sales

of our licensed products based on risk of enforcement upon ourselves or our buyers.

The OIG continues to make modifications

to existing Anti-Kickback Statute, or AKS, safe harbors which may increase liability and risk for our company as well as adversely impact

sales relationships.

On November 20, 2020 OIG issued the final rule for Safe Harbors under the Federal AKS.

This new final rule creates

additional safe harbors including ones pertaining to patient incentives.

OIG is able to modify safe harbors as well as regulatory compliance

requirements which could impact out business adversely.

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 AMP and ASP information.

The Medicaid Drug Rebate Program requires manufacturers to enter

into and have in effect a national rebate agreement with the Secretary of Health and Human Services in order for Medicaid payments to

be available for the manufacturer’s covered outpatient drugs.

Companies with such rebate agreements are required to submit certain

drug pricing information to CMS, including quarterly and monthly pricing data.

There has been an increased level of federal enforcement

against drug manufacturers that have failed to provide timely and accurate pricing information to the government.

Since September 2010,

OIG has settled 13 cases against drug manufacturers relating to drug price reporting issues, totaling approximately $18.5 million.

expect continued enforcement directed at companies that fail to make accurate and timely price reports.

If we were found not to make

the required pricing disclosures, we could incur significant expense and delay.

Privacy and Security Laws

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courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions.

were formed in March 2015 as Biofrontera Inc., a Delaware corporation, and a wholly owned subsidiary of Biofrontera AG, a company organized

under German law.

On November 2, 2021, we consummated our initial public offering of 3,600,000 units (each consisting of (i) one share

of our common stock and (ii) one warrant entitling the holder to purchase one share of our common stock at an exercise price of $5.00

per share) and 540,000 additional warrants not included in the units.

of December 31, 2021, Biofrontera AG held 46.8% of the outstanding shares of our common stock.

We entered into an Amended and Restated

Master Contract Services Agreement (the “Services Agreement”) which provides for the execution of statements of work

that will replace the applicable provisions of our previous intercompany services agreement dated January 1, 2016 (the “2016

Services Agreement”) by and among us, Biofrontera AG, Biofrontera Pharma and Biofrontera Bioscience, enabling us to continue

to use the Biofrontera Group’s IT resources as well as providing access to the Biofrontera Group’s resources with respect

to quality management, regulatory affairs and medical affairs.

If we deem that the Biofrontera Group should continue to provide these

services we will execute a statement of work under the Services Agreement with respect to such services.

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 are needed, and 2) whether they can

or should be obtained from other third-party providers.

management team includes Erica Monaco as Chief Executive Officer and Prof.

Lübbert as Executive Chairman.

Day-to-day operations

are overseen by Ms.

Monaco as our Chief Executive Officer, and Prof.

Lübbert’s service as Executive Chairman enables our

management team to benefit from his experience.

are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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These materials may be obtained electronically by accessing the SEC’s website at http://www.sec.gov .

We also maintain a website at https://www.biofrontera-us.com.

The Information on our website is not incorporated by reference into this Form 10-K and does not constitute a part of this Form 10-K.

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.

also maintain a website at https://www.biofrontera-us.com.

The Information on our website is not incorporated by reference into this

Form 10-K and does not constitute a part of this Form 10-K.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business