Biofrontera: Takeover Battle In Sight?

About: Biofrontera AG (BFRA), BFFTF
by: End On Equity

Biofrontera is a hot dermatological biopharmaceutical company.

The company is not profitable and cash flow negative, but shows a strong revenue growth (46% increase in revenues in Q1 2019).

Currently, there are public acquisition offers/intentions from Mahuro and Zours/Deutsche Balaton – both are already now the main Biofrontera shareholders.

The open question is: Are there more or increased offers to come?

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Biofrontera (BFRA; OTC:BFFTF) has recently published 46% increased revenues to EUR 6.8 million in Q1 2019 compared to EUR 4.7 million in Q1 2018 and a net cash position of EUR 21.8 million. The loss per share (in EUR) was reduced from -0.08 to -0.06 (Source: BIOFRONTERA Q1 2019 FINANCIAL RESULTS). The company is still growing fast. The main driver for growth is Ameluz in the US market after the FDA approval in 2016 (see Biofrontera Announces FDA Approval of Ameluz and Corporate presentation) and the recent approval for up-scaling of the batch size for this product (see Biofrontera receives FDA approval for upscaling). The analysts from SMC Research expect the company to be profitable by 2020 (Source: SMC Research report (German only)).

Valuation and Net Cash Position

The EV/EBITDA is -18.78 and Forward PE (2020) is 1,629.55 (Source: Seeking Alpha). The P/S ratio is 15.7 (Source: own calculation). The company claims strong revenue growth, "doubling of revenue year-over-year for the past 3 years".

The company reported EUR 21.1 million in cash and cash equivalents in Q1 2019. The company guidance for FY 2019 is "annual sales of around EUR 35-40 million and a result from operating activities of EUR -7 to -9 million." This could mean that no further financing round might be necessary if the company can deliver the guided result (for 2019) and becomes profitable in 2020.

Public Acquisition Intentions

However, while this growth story might be an interesting investment case on its own. In the case of Biofrontera, it is more like the context of the real story: Takeover fantasy.

The company currently has 2 main shareholders: Maruho (20.64%) and Wilhelm Zours/Deutsche Balaton AG Group (20.02%) (see Shareholder structure for registered shares). Both companies are interested in acquiring an increased stake in the company. Zours already published their intention to buy shares in 2018 (see Offer Biofrontera (Germany only)). The share price was around 6 EUR at that time. Now (as of 5/31/2019), Zours/Deutsche Balaton has published again the intention to buy shares (see also Balaton Offer 2019 (German only)). The offer is to buy up to 500,000 shares for EUR 7.20.

At the same time, there is still a public offer from Maruho to buy shares at the same price (EUR 7.20). This is an amended and increased offer. Maruho published on 04/15/2019 the offer to buy shares @EUR 6.60. On 05/27/2019, the offer was amended and increased by EUR .60 per share. As of 06/03/2019, 9 am, the amended offer from Maruho has been accepted for a total of 249,594 Biofrontera shares (0.56%) only. The public offer from Mahuro is valid until 06/27/2019 (see Voluntary Public Acquisition Offer (Partial Offer)).

It can be speculated that either Maruho or Zours/Deutsche Balaton (or both) may increase their offer. Currently, the share price has climbed to about EUR 7.50. The analysts from SMC Research estimate a fair value of EUR 9.00 for Biofrontera.

Downside Risk

Obviously, there are several risks inherent to this investment. The company is still not profitable. A significant risk could be that the marketing of the products may become more expensive than anticipated and the prescriptions could fall short of expectations. Additional financing rounds would dilute the share. However, until 6/27/2019, the downside is kind of limited to EUR 7.20 due to the public offer from Maruho.


Hence, Biofrontera could be an interesting buy opportunity with an underlying growth story and an interesting short-term perspective for rising share prices. By the way, another trigger might be that the company is also presenting at the JMP Securities Life Sciences Conference on June 19-20, 2019 in New York.

Disclosure: I am/we are long BFFTF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.