Partners Spring 2026 investor conference. My name is Ben Shamsian, Vice President at Lytham Partners. And today, Hermann Luebbert, CEO of Biofrontera, and Fred Leffler, CFO, will be taking us through a brief slide presentation. Biofrontera trades under BFRI on the NASDAQ. Let's get started. Hermann and Fred, welcome. I will now turn the floor over to you for your presentation.
Good. Thank you. Thank you, Ben, and hello, everybody. Biofrontera is a company that has a product on the market in dermatology. We treat, currently actinic keratosis, which is a precancerous disease, with a combination product consisting of a drug and a light that activates the drug. The revenue that we are currently making with that drug is close to $42 million in 2025, and that's growing year-over-year. Next slide.
One major event that we had last year was that we acquired all patents, the NDA, and the IND for our product. Before that, we were actually licensing it, and now we own it, together with all the manufacturing rights for AMELUZ and the lamps. Now we pay a royalty of 12% to our former parent company, which once we make more than $65 million annually, will increase to 15%.
The consequence of that is that our gross margin has increased from 50% - 80% in Q1 2026. This is the revenue development over the years. Our first year was 2017, then we were hit badly by COVID, which is quite obviously in the graph here. Since then, we are constantly growing, and we also continued growing in Q1 2026. Next one. This is how the product works. The drug, called AMELUZ, is applied to the skin. It's a topical drug. It has to absorb into the skin, and then after a certain incubation time, it's activated by red light, and for that, we have two lamps on the market, a smaller one and then a larger red light lamps.
Upon activation of the drug, the targeted cells are destroyed selectively because the drug is actually metabolized in certain cells, including tumor cells, and those cells are then destroyed. Next one. Our current indication for the drug is actinic keratosis, which, as I mentioned before, is a precancerous disease which may progress to squamous cell carcinoma, and that's why it has to be treated. It's a disease that many people have. About 50% of all the Caucasian people above 60 years of age have at least one actinic keratosis, and it's a sun-induced disease. Here we see one patient with a couple of big AK lesions, and the right picture is six weeks after one treatment. Next one.
In this disease, we have very high clearance rates. 94% of the lesions were 100% cleared in our phase III trials. 91% of the patients were 100% cleared of all their actinic keratosis. One year later, still 63% of the patients were still 100% cleared. That shows two things. One is, once a patient has actinic keratosis, it's a disease for life. These patients have to be treated over and over. The other thing it shows is that with 63%, this is a very high clearance rates after one year compared to any other treatment that's out there. Next slide.
The market, the actinic keratosis market is one of the biggest dermatology markets. The total addressable market is about $4 billion. These patients are mostly treated in the U.S. with cryotherapy. If we look at this graph, about 9% of the patients are treated with more than 14 lesions with cryo in one session. That is something which we think shouldn't happen.
A patient who has that many lesions that need to be treated should be treated in what's called a field-directed treatment. The entire area should be treated. AMELUZ specifically has the approval by the FDA for field-directed treatment. We believe that this blue sector, which is about 9% of the market, plus then the existing PDT market, which is currently in the range of $120 million with two products there, ours and one competitor. We are looking at something like a $500 million primary target market, which can then be extended to anything within the $4 billion. Next slide.
What's compelling about AMELUZ PDT is that it's a treatment that is applied in the doctor's office. Because of that, it's sold by us as a buy and bill product. We sell directly to the doctor. The doctor buys AMELUZ from us. Our list price is $381. Once the doctor applies the drug to the patient, he can actually charge the insurance company of the patient two codes. One is the J code for AMELUZ, J7345, which then reimburses the $381. The other one is a procedural code, a so-called CPT code, that's the amount of money the doctor gets for the work, for the application of the drug, illumination of the patient.
There are three CPT codes for photodynamic therapy, particularly the largest one is following the label of AMELUZ. It's with debridement and then done by a qualified healthcare professional. That can be a physician assistant, a nurse practitioner, or a doctor. Medicare pays an average of $267 for that code. That's what the doctor actually makes to do the procedure.
If we compare this to the 14 lesions of cryo, these are capped at $162. The doctor can actually, by choosing PDT, can make an extra $100 and at the same time, provide, at least we believe, the better treatment to his patients. Next slide. The product is protected by significant intellectual property. What we can do, since it's a combination product, we can protect the drug with a patent, we can protect the lamp with a patent, and we can protect the procedure with patents. We have patents on all three of these components. The longest-lasting patent is a patent on the formulation of AMELUZ, and that goes until 2043. Next slide.
These are the clinical trials that we do. We are convinced that there is much more room available for PDT and much more users available for PDT. What we show here is a comparison of the U.S. label of AMELUZ and the EU label of AMELUZ, and then the label of the one competing drug that exists in the U.S. What all of them have in common is they are approved for conventional PDT, conventional meaning using a lamp, for actinic keratosis on the face and scalp.
The U.S. competitor also has the approval to use PDT for AK on the upper extremities, and that is something which we currently don't have. It's a big issue that we have in the market that holds us back. We have completed a phase III trial to do this or to get that approval, and this is currently being prepared for FDA submission, which is planned for September.
On top of this, we are looking at new diseases, and one of them is basal cell carcinoma, which is something that exists for AMELUZ in the EU, doesn't exist for our competitor. This is currently evaluated by the FDA, and we have a PDUFA date of September 28 in this year. We also just finished a phase II study on moderate to severe acne. We will prepare for an FDA meeting in the second half of the year to discuss the phase III program on moderate to severe acne, which is a totally different and very large application for PDT.
Next slide. This is how we drive the growth. We optimize the PDT, improve the sales force productivity. We have hired a new chief commercial officer, our current growth, which we had in Q1 of about 17%, goes back to improved sales force productivity. In the next two years, we will have developmental milestones like the approval of BCC, like hopefully the approval of AK on the entire rest of the body, later on acne. We are working heavily towards building the market and growing the product. Next slide. Good.
Thank you, Hermann. I just wanted to touch on a couple of financial metrics. As Hermann mentioned, A few moments ago, we've seen continued growth since our COVID trough in 2021, and are expecting to grow at least double digits this year. Our year-over-year revenue for Q1 grew by 17.4%, from $8.6 million - $10.1 million in 2026. Again, we're seeing the gross margins increase to where we expect them to be. As an example, in Q1 of 2025, our gross margins were about 62%, and they are now 80% in Q1 of 2026. Depending on the mix and discounts and some things like that, we expect them to stay in this 80%-85% range.
Adjusted EBITDA, a non-GAAP measure that we take a look at and take out some various non-cash or one-off items, you can see all of that on our website and in our 10-Q, is another measure we look at. That has been steadily decreasing over the past several years. This year, we expect that to be generally break even or at least be cash flow break even in 2026. We improved by $0.8 million since Q1 2025, from $4.4 million - $3.6 million. Now, briefly touching on our cap table. As of this March, we had 11.9, about 12 million shares outstanding. Our capital structure does have several series of convertible preferred shares. There's nothing very special about these. They just can convert to common at the investors', at the holders' wish. We look at those generally as common.
We also have a convertible note that if it was converted, it would be about 6 million shares. When we look at common, everything as fully converted, there are about 52 million shares, and using the share price as of yesterday, our total market cap as of converted was about $42.2 million. As of March 31st, we had about $6.3 million cash on hand, and our long-term convertible note was $4.7 million. Quick overview of our team, which we won't dive into, but you can look at in the materials. With that, Ben, I'll hand it over to you.
Right. Well, thank you, Hermann and Fred, and thank you to everyone for watching. If you have any questions or would like to schedule a meeting with Biofrontera, please send me an email at shamsian@lythampartners.com. S-H-A-M-S-I-A-N at lythampartners.com. If you'd like to learn more about Lytham Partners, you can visit our website at lythampartners.com or follow us on LinkedIn to stay connected about future events. We hope you enjoy the rest of the conference, and have a great day.