What changed in this filing

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Item 1. Business

2024-03-15 compared with 2023-03-13 · 356 added, 194 removed, 274 unchanged (67% of the section changed)

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,

conditions with a focus on photodynamic therapy (“PDT”) and topical antibiotics with PDT contribution to the largest amount

of our business.

The Company’s licensed products are used for the treatment of actinic keratoses, which are pre-cancerous skin

lesions, as well as impetigo, a bacterial skin infection.

In May 2023, we began research and development (“R&D”)

activities to support PDT growth and will continue to opportunistically invest in these activities going forward.

program currently aims to improve the capabilities of our BF-RhodoLED® lamps to better fulfill the needs of dermatologists.

is to improve the effectiveness of our commercial team by allowing sales representatives to carry approved devices with them allowing

for easier product demonstrations and evaluations.

Effective June 1, 2024, we will take control of

all clinical trials relating to Ameluz ® in the US, allowing for more effective cost management and direct oversight

of trial efficiency.

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, 2023, Biofrontera AG held 26.4% of the outstanding shares of our common

With our national commercial team, we generate revenue by selling our licensed products directly to dermatology offices and groups.

of December 31, 2023, the company had 85 employees, of which 83 were full-time employees and two were part-time employees.

Approximately

57% are focused on marketing and sales activities.

Our commercial team covers the continental United States, and our headquarters

is in Woburn, MA.

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

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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.

For the year ended December 31, 2023, no customer represented more than 10% of

net revenues.

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

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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;

of care in the United States by focusing on acquisition of new customers and growth of the therapy in our current customer base;

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.

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,

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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.

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 untreated.

1 International treatment guidelines list PDT as the

“gold standard” for treating AK, especially multiple AKs and the surrounding photodamaged skin.

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

under an exclusive license and supply agreement (as amended

the “Ameluz LSA”) between Biofrontera, Inc.

and the Ameluz Licensors.

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

Actinic keratoses typically appear on sun-exposed areas,

AKs typically appear on sun-exposed areas,

such as the face, bald scalp, arms or the back of the hands, and are often elevated, flaky, and rough in texture, and appear on the skin

as hyperpigmented spots.

AKs are typically treated with cryotherapy, topicals, or PDT and these treatments can be used in combination.

general, photodynamic therapy is a two-step process:

AKs are typically treated with cryotherapy, topicals, or PDT.

These treatments can be used in combination,

which is the number one indication for those 45 years of age and older.

general, PDT is a two-step process:

first step is the application of a drug known as a “photosensitizer,” or a pre-cursor of this type of drug, which tends

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this process, energy from the light activates the photosensitizer.

In photodynamic therapy, the activated photosensitizer transfers

In PDT, the activated photosensitizer transfers

energy to oxygen molecules found in cells, converting the oxygen into a highly reactive oxygen species (“ROS”), which

destroys or alters the sensitized cells.

Photodynamic therapy can be a highly selective treatment that targets specific cells while

PDT can be a highly selective treatment that targets specific cells while

minimizing damage to normal surrounding tissues.

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Hence the mode of action of

photodynamic therapy requires destruction of the altered cells, temporary local skin reactions and inflammation of the treated area

PDT 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 Ameluz ® PDT therapy is highly effective with patients - efficacy is up to 91% clearance after

one or two treatments 3 with limited or no scarring.

The therapy also may provide protection from potentially fatal

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and competitive landscape

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.

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.

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.

Topicals, medications which patients apply to the lesion multiple times per day for up to several weeks,

constitute approximately 12% of the market.

PDT is approximately 2% of the market.

The total market size is estimated to be roughly

$4 billion for the three therapy types.

Our primary competitor in the PDT space is Levulan ® and the associated light,

goal is to continue expansion in the current PDT market share and focus on converting cryotherapy treatments of more than 14 lesions

as a field therapy such as Ameluz ® PDT could be more effective and lead to better patient outcomes.

This targeted market

is about 11% or $500 million of the total AK market.

6 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.

We are leveraging

medical affairs, advisory boards, reimbursement resources, and key opinion leaders in order to educate the market on the use and benefits

of Ameluz ® PDT.

Fuchs & Marmur, Dermatol Surg.

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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.

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.

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.

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.

There are well established PDT CPT Codes.

Ameluz ® PDT is covered

by code number 96574 which has an average reimbursement of $273.00 per light treatment and has to be performed by a qualified healthcare

professional.

Public information regarding CPT reimbursement is available at https://www.cms.gov/medicare/physician-fee-schedule/search?Y=0&T=4&HT=0&CT=3&H1=96574&M=5.

licensors’ R&D programs

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

R&D efforts for label extensions in order to optimize the market positioning of the products are the responsibility of the respective

licensor and are governed by the respective LSAs.

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.

the RhodoLED ® and the new, more advanced RhodoLED ® XL (available in the second quarter of 2024) in the United States for all

indications currently approved by the FDA as well as all future FDA-approved indications identified under the Ameluz LSA.

On February 19, 2024, the Ameluz LSA was amended with

the Second Amended and Restated License and Supply Agreement (the “Second A&R Ameluz LSA”), effective February 13.

The Second A&R Ameluz LSA amends and restates the Ameluz LSA, originally dated as of October 1, 2016, between

the Company and Amulez Licensor, which was subsequently amended on July 1, 2019, June 16, 2021, October 8, 2021, December 5, 2023, and

January 26, 2024.

Among other things, the Second A&R Ameluz LSA reduces the

transfer price of Ameluz ® from 50% to 25% for all purchases in 2024 and 2025.

Starting on January 1, 2026, until 2032 there

will be stepwise increases in the transfer price from 25% to 35% for sales related to actinic keratosis and, if approved by the FDA, basal

cell carcinoma and squamous cell carcinoma.

The transfer price for sales related to acne, another indication currently in development,

will remain at 25% indefinitely.

The transfer price covers the cost of goods, royalties on sales, and services including all regulatory

efforts, agency fees, pharmacovigilance, and patent administration.

Effective June 1, 2024, the Company will take control of all clinical trials relating to

Ameluz ® in the US, allowing for more effective cost management and direct oversight of trial efficiency.

Ameluz LSA transfer price will allow the Company to finance such R&D activities and continue our commercial growth

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

Last-patient-in

treatment phase in August 2023;

Last-patient-out of treatment phase expected in March 2024;

Clinical Study Report (CSR) expected

I safety study applying 3 tubes of Ameluz® to an expanded treatment area of 60 cm²;

completed and submitted to FDA

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

II is recruiting;

CSR expected in Q3 2025

& extremities applying 1-3 tubes of Ameluz®;

First patient dosed in Jan 2023;

CSR expected in Q1-2026

daylight and conventional PDT, plan to start enrollment in 2025

cell carcinoma in situ

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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.

the treatment of mild and moderate actinic keratoses on the face and scalp, which corresponds to the current approval of

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

several actinic keratoses distant from each other.

The smaller BF-RhodoLED ® model will continue to be offered in the

Additionally, our licensor has been granted a patent for a pain-reduced PDT

procedure that combines daylight and conventional PDT and, if the respective Phase III trial leads to inclusion of the procedure

into the Ameluz ® label, may provide further patent protection beyond 2040.

Furthermore, the FDA recently approved a new formulation of Ameluz ® that lacks propylene glycol and reduces the

accumulation of certain contaminants over time.

The new formulation will be implemented in all US productions of

Ameluz ® starting in 2024.

A corresponding patent application has been filed with the U.S.

and Trademark Office, or USPTO, which, if granted, will extend protection of Ameluz ® to 2043.

source for the Ameluz ® and the RhodoLED ® lamp series is our Licensor, Biofrontera Pharma.

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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

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 coverage.

second prescription drug licensed product in our portfolio is Xepi ® (ozenoxacin cream, 1%), a topical non-fluorinated

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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.

that was assumed by Biofrontera on March 25, 2019 through our acquisition of Cutanea (the “Cutanea Acquisition”).

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 and even more than once.

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.

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

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 months.

complications of impetigo 8 can include:

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which is more common with ecthyma

Impetigo caused by beta-hemolytic strep bacteria can cause:

caused by beta-hemolytic strep bacteria can cause:

damage (poststreptococcal glomerulonephritis)

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such as payments made under patient assistance programs.

licensors’ research and development programs

licensors’ R&D programs

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.

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.

has been limited revenue during the current reporting periods and issues with the third-party manufacturer that was providing our

supply of Xepi ® impacting the timing of sales expansion and improved market positioning.

However, Ferrer is in

the process of qualifying a new third-party manufacturer in North America.

The expectation is that this process will be completed in

the second half of 2024.

Once the new third-party manufacturer is qualified, we expect the supply of Xepi ® will enable us to market and increase demand.

Xepi ® is distributed through specialty pharmacies and generally covered by most commercial payers

without pre-approval or similar requirements.

Our contracts with third-party payers/pharmacy benefit managers (“PBMs”)

generally require us to provide rebates based on utilization by the patients they cover.

We believe that Xepi ® has

the potential to be another innovative product with a large market potential.

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

8 From CLS link to Johns Hopkins Impetigo

| Johns Hopkins Medicine

From CLS link to Johns Hopkins Impetigo | Johns Hopkins Medicine

do not own any material patents or trademarks.

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use of both products together.

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

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 until 2040.

Additionally, a new patent regarding

an Ameluz formulation without propylene glycol filed at USPTO in 2023, if granted, extends protection to 2043.

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.

expired in November 2023.

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

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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.

the terms of the Ameluz LSA, we are granted an exclusive, non-transferable license to use Biofrontera Pharma and Biofrontera

Bioscience technology to use, import, export, distribute, market, offer for sale and sell Ameluz ® and the

RhodoLED ® lamp series for its approved indications within the United States and certain of its territories.

The price we pay per unit will be based upon our sales history.

LSA will remain in effect for fifteen years and automatically renew for a period of five years, in perpetuity as long as certain minimum

revenues are achieved.

Commitments and Contingencies .

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

achievement of certain revenue goals.

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

There are no milestones or royalty obligations associated with this agreement.

Any changes to the pricing

of supply of Ameluz ® or RhodoLED ® lamps would require agreement by both contract parties.

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

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are manufactured by third parties.

On February 19, 2024, we entered into the Second

A&R Ameluz LSA, which is discussed above in the section entitled “ Ameluz ® and RhodoLED ® Lamp

Series - Our licensors’ R&D programs .

Effective June 1, 2024, the Company will take

control of all clinical trials with Ameluz ® in the US, allowing for more effective cost management and direct

oversight of trial efficiency.

The reduced transfer price in the Second A&R Ameluz LSA will allow the Company to finance such

R&D activities and continue our commercial growth trajectory.

Internacional S.A.

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

of its territories, including the right to sublicense under certain conditions, to develop, make, have made, use, register, market, promote,

sell, have sold, offer for sale and import Xepi ® .

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

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

including the right to sublicense under certain conditions, to develop, make, have made, use, register, market, promote, sell, have sold,

offer for sale and import Xepi ® .

the Xepi LSA, we are obligated to make payments to Ferrer upon the occurrence of certain milestones.

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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 is managed by Biofrontera Bioscience.

We are fully dependent on our collaboration with Ferrer for our supply of

Xepi ® from their sole supplier.

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, a related party.

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

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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.

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

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 intervals.

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

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 sites;

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 by 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 approval.

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”) regulations.

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.

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 change.

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 change.

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.

Regulation for Medical Devices

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include, but are not limited to:

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.

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.

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:

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.

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.

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

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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