Woburn, Mass.-based Biofrontera Inc. (BFRI) is a biopharmaceutical company that develops and sells dermatological products in the United States. It is the U.S. subsidiary of German biopharmaceutical company Biofrontera AG.
BFRI recently made its stock market debut through an initial public offering of 3.60 million units, each comprising one common stock and one stock warrant, at $5 per unit, raising $18 million in gross proceeds.
The stock began trading on the Nasdaq Stock Exchange on October 29. Shares of BFRI opened at $4.09 on its first trading day, 18.2% below its initial price target. The stock has since declined 1.8% in price.
Here is what could shape BFRI’s performance in the near term:
Unique Product Portfolio
BFRI’s principal prescription drug Ameluz has been approved by the U.S. Food & Drug Administration to treat lesion-directed and field-directed actinic keratosis. The company holds an exclusive license to sell the drug in the United States. It expects Ameluz to become a leading photodynamic therapy product in the country.
Its second prescription drug, Xepi, is also FDA approved for use in adults and children above two years of age. BFRI holds an exclusive license and supply agreement to sell Xepi in the United States commercially. The company expects this drug to become a commercial success.
BFRI’s sole source of revenue is the sale of prescription drugs and products licensed from other companies. If the company fails to meet the terms and conditions of such agreements, it stands to lose its licensing rights, resulting in loss of revenue. Also, certain vital patents for its primary drug Ameluz expired in 2019, paving the way for competitors to develop equivalent drugs. If this happens, BFRI might be forced to reduce Ameluz’s market price to retain its market share, thereby adversely impacting its profit margins.
The COVID-19 pandemic has negatively impacted BFRI’s sales and operations over the past year and a half. With increasing numbers of people canceling elective skin treatments amid a global public health crisis, BFRI’s revenues and profit margins declined substantially last year.
BFRI’s total revenues fell 28% year-over-year to $18.85 million in its fiscal year 2020 (ended December 31, 2020). This can be attributed to a 28.1% decline in product revenues. Its loss from operations amounted to $9.61 million. And its net loss worsened slightly from its year-ago value to $10.99 million, while its loss per share came in at $479.48.
POWR Ratings Reflect Uncertainty
BFRI has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
BFRI has an F Momentum grade and a Sentiment grade of C. Shares of BFRI have declined 45.2% in price over the past five days and 1.8% since its stock market debut, in sync with its Momentum grade. While analysts expect the company’s revenues to improve 70.3% next year, BFRI’s EPS is expected to remain negative in 2022, justifying its Sentiment grade.
Of the 196 stocks in the F-rated Medical – Pharmaceuticals industry, BFRI is ranked #102.
In addition to the grades I have highlighted, one can view BFRI ratings for Growth, Stability, Value, and Quality here.
BFRI’s unique product portfolio makes it well-positioned to become a leader in the dermatology segment. As the company’s revenues are generated through licensing agreements, its research and development costs are low, giving it a unique edge over its peers. However, amid the rapid spread of the COVID-19 omicron variant that is threatening to strain the healthcare industry, and the company’s expired licensing agreements, BFRI’s profit margins are expected to remain negative until at least next year. Thus, we think investors should wait until BFRI reports positive operating profits before investing in the stock.
How Does Biofrontera Inc. (BFRI) Stack Up Against its Peers?
While BFRI has a C rating in our proprietary rating system, one might want to consider taking a look at its industry peers, Johnson & Johnson (JNJ), Novartis AG (NVS), and Zoetis Inc. (ZTS), which have an A (Strong Buy) rating.
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BFRI shares fell $0.09 (-2.08%) in premarket trading Thursday. Year-to-date, BFRI has declined -9.30%, versus a 21.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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