Mass. Biotech Receives FDA Approval
Research Report

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Disclosures for Roth MKM, Biofrontera Inc., October 7, 2024

Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Disclosures: Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has received compensation for investment banking services from Biofrontera, Inc.. ROTH makes a market in shares of Biofrontera, Inc. and as such, buys and sells from customers on a principal basis.

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Roth MKM analyst Dr. Jonathan Aschoff, in a research report published on October 7, 2024, maintained a Buy rating on Biofrontera Inc. (BFRI:NASDAQ) with a price target of US$16.00. The report follows the FDA's approval of Biofrontera's supplemental Biologics License Application (sBLA) to expand the use of Ameluz for treating larger surface areas of actinic keratosis (AK) on the face and scalp.

Aschoff highlighted the significance of this approval, stating, "After BFRI demonstrated the safety of using up to three tubes of Ameluz per actinic keratosis (AK) treatment, the FDA approved BFRI's sBLA to expand the treatment's utility to treating larger surface areas at one time on the face and scalp, which should improve Ameluz sales."

The analyst emphasized the competitive advantage this provides, noting, "The more liberal Ameluz approval also helps BFRI better compete against the competing Levulan Kerastick photodynamic therapy, given that the Kerastick procedure covers a greater surface area per treatment than the original BF-RhodoLED lamp used with one Ameluz tube."

Regarding Biofrontera's strategic positioning, Aschoff stated, "The supplemental approval also dovetails nicely with the larger treatment lamp that BFRI launched in 2Q24, the RhodoLED XL lamp, which can illuminate a surface area of 667cm2 (23cm x 29cm), versus 96 cm2 (6cm x 16cm) for the original BF-RhodoLED lamp."

The report highlighted ongoing clinical trials for Ameluz in other indications, including superficial basal cell carcinoma, moderate-to-severe acne, and peripheral AK, with data expected between late 2024 and the second half of 2025.

Aschoff's valuation methodology for Biofrontera is based on a Discounted Cash Flow (DCF) analysis. He explained, "Our 12-month price target of US$16 is based on a DCF analysis using a 10% discount rate that is applied to all cash flows and the terminal value, which is based on a 5x multiple of our projected 2031 operating income of US$57 million."

The analyst added, "We arrive at this valuation by projecting future U.S. revenue from Ameluz in treating AK. Our initial valuation excludes potential commercial upside from any potential future programs, given BFRI's clear focus on its two currently approved drugs, and therefore commercial success from other programs would serve as potential upside to our valuation."

Aschoff also outlined several risk factors, including clinical, regulatory, financing, and competitive risks, as well as high stock price volatility common among small-cap biotechnology companies.

In conclusion, Roth MKM's maintenance of a Buy rating and US$16 price target reflects a positive outlook on Biofrontera Inc.'s potential in the dermatological treatment market, particularly with the expanded approval for Ameluz. The share price at the time of the report of US$0.96 represents a potential return of approximately 1,567% to the analyst's target price, highlighting the significant upside potential if the company's commercial and clinical development plans prove successful.