On October 20, 2025, Biofrontera Inc., a biopharmaceutical company listed on Nasdaq under the ticker symbol BFRI, closed a strategic transaction with its former German parent company, Biofrontera AG, through which it substantially modified the structure under which it had been operating in the United States.
The transaction involved the acquisition of rights to Ameluz and RhodoLED and the replacement of the previous Transfer Price contractual arrangement with a sales-linked earn-out structure. Beyond the contractual change, the case is particularly relevant from a Transfer Pricing perspective because it demonstrates how a restructuring that alters assets, functions, risks, and compensation mechanisms can have significant effects on an entity’s profitability.
The Intercompany Model Prior to the Restructuring
Under the Second Amended and Restated Ameluz License and Supply Agreement, in effect since February 2024, Biofrontera Inc. purchased its main product, Ameluz, from Biofrontera Pharma GmbH.
The contractual price, expressly defined as the “Transfer Price,” was equal to 25% of the anticipated net sales price per unit for purchases made through 2025, with staggered increases scheduled for certain subsequent periods.
The compensation covered not only the supply of the product but also various components associated with the business relationship, including royalties and certain regulatory and administrative services.
From a Transfer Pricing perspective, this model determined how profitability was economically allocated among the entities involved.
The Restructuring: From Transfer Price to an Earnout
On June 30, 2025, Biofrontera Inc. entered into an agreement to acquire the U.S. rights related to Ameluz and RhodoLED. The transaction was formally closed on October 20, 2025, through an Asset Purchase Agreement and an Earnout Agreement.
As a result, Biofrontera Inc. acquired rights to the portfolio in the United States and assumed greater responsibilities related to its operation, including aspects related to manufacturing, regulation, quality, and pharmacovigilance.
In exchange, a monthly earn-out was established equal to 12% of Ameluz’s U.S. net sales in fiscal years in which such sales do not exceed USD 65 million, and 15% when they exceed that threshold, subject to the conditions and term established in the contract.
Documents filed with the SEC indicate that this structure replaced the previous Transfer Price contractual model.
However, from a technical perspective, this does not mean that Transfer Pricing analysis is eliminated. What matters is evaluating how the new distribution of functions, assets, and risks alters the economically appropriate remuneration between the parties.
The Impact on Profitability
The effects of the new model can be seen in subsequent financial results.
In the second quarter of 2026, Biofrontera reported a Gross Margin of nearly 80%, compared to approximately 71% in the same period the previous year, representing an improvement of approximately 920 basis points.
According to the company itself, this increase was primarily due to the transition from the previous structure to one based on the direct cost of Ameluz plus the corresponding earn-out on net revenue.
The result demonstrates how a change in the operating model and the method of remuneration can significantly alter the profitability reported by an entity.
However, from a Transfer Pricing perspective, the analysis should not be limited to comparing percentages before and after the transaction. It is necessary to determine whether the new level of profitability is consistent with the functions performed, the assets used, and the risks effectively controlled and assumed by each entity.
What Does This Case Teach Us About Transfer Pricing?
The Biofrontera case is directly related to the principles outlined in Chapter IX of the OECD Guidelines, which is dedicated to the transfer pricing aspects of corporate restructurings.
When a restructuring involves the transfer of assets, rights, functions, or risks between related parties, two central issues arise.
On the one hand, it must be assessed whether compensation is warranted for what was transferred during the restructuring.
On the other hand, it must be determined what the appropriate remuneration will be for the entities involved once the new operating model is implemented.
Therefore, a contractual amendment cannot be analyzed in isolation. The tax authority may examine whether the resulting structure adequately reflects the economic reality of the transaction and whether the resulting profitability is aligned with value creation.
The increase of approximately 920 basis points in Biofrontera’s Gross Margin is, in this regard, a public and quantifiable example of why corporate restructurings receive special attention from a Transfer Pricing perspective.
Restructurings among related parties can significantly alter the way functions, assets, risks, and benefits are distributed within a corporate group.
The Biofrontera case demonstrates that shifting from a supply and licensing model to a structure based on the acquisition of rights and an earn-out can have significant economic consequences. Precisely for this reason, it is essential that these transactions be properly documented and supported by a technical analysis that justifies both the transfer carried out and the subsequent compensation.
At TPC Group, we support our clients in corporate restructuring processes involving related parties, evaluating changes in functions, assets, and risks, as well as the appropriate compensation before and after the restructuring. Our goal is to ensure that the new Transfer Pricing model is technically sound and reflects the economic reality of the transactions.
Source:
Chapter IX: OECD