Biofrontera (NASDAQ:BFRI) is working to clear up skin lesions that can appear after a lifetime of Sun and fun. Since BFRI stock went public in late October at $5 a piece, shares are up more than 36%.
With revenue up 45%, anticipation surrounding third-quarter earnings helped fuel the rise. So did a favorable patent ruling on its BF-Rhodo-LED XL lamp.
The lamp focuses infrared light on the skin and works with a creme called Ameluz to treat actinic keratosis. These are rough, scaly patches that frequently appear on the face after years of Sun exposure. Biofrontera also offers a creme called Xepi for Impetigo, a common skin condition among young children.
Why Biofrontera Stands Out
Biofrontera believes the combination of Ameluz and the BF-Rhodo-LED XL lamp, when used by trained dermatologists, can bring both medical and financial returns.
Actinic keratosis treatments cost $11,000 back in 2015. It is a common dermatological diagnosis for patients 45 and older. The PhotoDynamic Therapy (PDT) system Biofrontera is selling costs up to $4,000 per treatment.
This isn’t just about ego. The lesions can turn into skin cancer, and dermatologists often do biopsies of them. Other treatments include freezing, scraping and using lasers, which can leave some scars. The Biofrontera offering is being sold as gentler to the skin and less intrusive for the patient.
The Fundamentals of BFRI Stock
Biofrontera had sales of $14.9 million for the first three quarters of 2021, up 45% from 2020. Even with its run-up, the market capitalization is still just $77.6 million. You’re paying less than three times sales for BFRI stock.
To speed growth along, Biofrontera recently sold $15 million in stock and warrants, priced at $5.25 per share. That’s serious dilution. But shares opened Dec. 13 at more than $6, a jump of 25% from where they were trading early on December 10.
The shares are being pushed by Roth Capital with a $20 per share price target. The company has just 14.5 million shares outstanding, according to Yahoo! Finance, but trading has been active.
The action may stem from Roth’s belief that Biofrontera’s PDT therapy will work against a common form of skin cancer. That would speed sales of the lamp and creme to dermatologists.
The action may also be a short squeeze. There were 3.06 million shares being held short at the end of November, nearly 90% of the shares in the float.
BFRI Stock Has Its Limits
Before the latest run-up, David Moadel called the $20 per share prediction “ambitious but possible.” The stock is clearly volatile. Shares had fallen as low as $2.50 in early November.
The short squeeze sent shares as high as $10.40 before they fell to $4. The new action, sending the stock above $6, would seem to justify Moadel’s optimism.
In terms of competition in its market, Biofrontera is facing Sun Pharma, a large generic drug company based in India. Sun Pharma’s Dusa Pharmaceuticals has a patent covering actinic keratosis treatment.
The Ameluz creme from Biofrontera has the same active ingredient as Sun Pharma’s Levulan. Biofrontera was in court this year seeking to have its competitor’s patent cancelled, calling it “a common off-label use” of an existing drug. Dusa, on the other hand, claimed its rival had stolen trade secrets. The case was settled at the end of November, with Biofrontera paying Sun $2.25 million.
BFRI stock’s future depends on dermatologists using its PDT treatment and getting a full price for it. That depends on the company’s ability to sell the creme and lamp as a complete solution with a more attractive result. That’s possible, but just remember it’s speculative.
On the date of publication, Dana Blankenhorn held no positions, long or short, in any company mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn?has been a financial journalist since 1978. His latest book is?Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at?@danablankenhorn.