Anika Therapeutics Inc

Previous wording

Our OA Pain Management product family consists of Monovisc and Orthovisc, our injectable, HA-based, OA Pain Management offerings that are indicated to provide pain relief from osteoarthritis conditions; and Cingal, our novel, single-injection OA Pain Management product consisting of our proprietary cross-linked HA material combined with a fast-acting steroid. Cingal is our next generation fast-acting, long-lasting, non-opioid, clinically proven osteoarthritis pain product which is designed to provide both short- and long-term pain relief through at least six months. It is currently sold outside the United States in approximately 40 countries. In 2022, we completed a third Phase III clinical trial for Cingal, which achieved its primary endpoint. Cingal is not currently approved for commercial use in the United States. We have been actively engaging with the U.S. Food and Drug Administration, or the FDA, on next steps for U.S. regulatory approval.

Current wording

Our OA Pain Management product family consists of Monovisc and Orthovisc, our injectable, HA, OA Pain Management offerings that are indicated to provide pain relief from osteoarthritis conditions; and Cingal, our novel, next generation, single-injection OA Pain Management product consisting of our proprietary cross-linked HA material combined with a steroid. Cingal is our next generation fast-acting, long-lasting, non-opioid, clinically proven osteoarthritis pain product which is designed to provide both short- and long-term pain relief through at least six months. It is currently sold outside the United States in approximately 40 countries. In 2022, we completed a third Phase III clinical trial for Cingal, which achieved its primary endpoint. Cingal is not currently approved for commercial use in the United States. We have been actively engaging with the U.S. Food and Drug Administration, or the FDA, on next steps for U.S. regulatory approval.

Previous wording

Our Joint Preservation and Restoration product family consists of: (a) our portfolio of orthopedic regenerative solutions products utilizing HA, including Integrity, our new arthroscopic regenerative patch system for rotator cuff repair and other tendon procedures, Tactoset products and Hyalofast, a HA-based biodegradable support used for cartilage regeneration currently available outside the United States in over 30 countries; (b) our line of sports medicine solutions used to repair and reconstruct damaged ligaments and tendons due to sports injuries, trauma and disease; and (c) our Arthrosurface portfolio of bone preserving joint technologies, including partial joint replacement, joint* *resurfacing, and minimally invasive and bone sparing implants, designed to treat upper and lower extremity orthopedic conditions caused by trauma, injury and arthritic disease.

Current wording

Our Joint Preservation and Restoration product family consists of: (a) our portfolio of orthopedic regenerative solutions products utilizing HA, including Integrity, our new hyaluronic acid-based scaffold for rotator cuff and other tendon repairs, Tactoset, our HA-enhanced injectable bone substitute, and Hyalofast, our HA, biodegradable scaffold used for cartilage regeneration currently available outside the United States in over 35 countries; (b) our line of sports medicine solutions used to repair and reconstruct damaged ligaments and tendons due to sports injuries, trauma and disease; and (c) our Arthrosurface portfolio of bone preserving joint technologies, including partial joint replacement, joint* *resurfacing, and minimally invasive and bone sparing implants, designed to treat upper and lower extremity orthopedic conditions caused by trauma, injury and arthritic disease.

Previous wording

Our Non-Orthopedic product family consists of legacy HA-based products that are marketed principally for non-orthopedic applications, including our anti-adhesion barrier product, advanced wound care products, our ear, nose and throat products, and our ophthalmic products. Our Non-Orthopedic product family also includes Hyvisc, our high molecular weight injectable HA veterinary product approved for the treatment of joint dysfunction in horses due to non-infectious synovitis associated with equine OA.

Current wording

Our Non-Orthopedic product family consists of legacy HA products that are marketed principally for non-orthopedic applications, including our anti-adhesion barrier product, advanced wound care products, our ear, nose and throat products, and our ophthalmic products. Our Non-Orthopedic product family also includes Hyvisc, our high molecular weight injectable HA veterinary product approved for the treatment of joint dysfunction in horses due to non-infectious synovitis associated with equine OA.

Previous wording

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Current wording

Three and Six Months Ended June 30, 2024 Compared to Three and Six Months Ended June 30, 2023

Previous wording

The following table presents revenue by product family for the three-month period ended March 31, 2024 and 2023 as follows:

Current wording

The following table presents revenue by product family for the three and six-month periods ended June 30, 2024 and 2023:

Previous wording

Revenue from our OA Pain Management product family increased 7% for the three-month period ended March 31, 2024, as compared to the same period in 2023, due primarily to favorable strategic partner ordering patterns and sales growth on increasing customer demand as strategic partner and distributor ordering patterns can vary significantly on a quarterly basis.

Current wording

Revenue from our OA Pain Management product family decreased 9% and 2% for the three- and six-month periods ended June 30, 2024, as compared to the same period in 2023, due primarily to unfavorable timing of strategic partner orders as distributor ordering patterns can vary significantly on a quarterly basis.

Previous wording

Revenue from our Joint Preservation and Restoration product family increased 3% for the three-month period ended March 31, 2024, as compared to the same period in 2023, primarily due to growing commercial adoption of our newest products, which offset lower sales of certain legacy products.

Current wording

Revenue from our Joint Preservation and Restoration product family increased 7% and 5% for the three- and six-month periods ended June 30, 2024, as compared to the same period in 2023, primarily due to growing commercial adoption of our newest products, which offset lower sales of certain legacy sports medicine products.

Previous wording

Revenue from our Non-Orthopedic product family increased 29% for the three-month ended March 31, 2024, as compared to the same period in 2023, primarily due to favorable timing of distributor ordering patterns with our Hyvisc veterinary product.

Current wording

Revenue from our Non-Orthopedic product family decreased 26% and 2% for the three- and six-month periods ended June 30, 2024, as compared to the same period in 2023, primarily due to unfavorable timing of distributor ordering patterns as well as due to the end of life of certain legacy non-orthopedic products.

Previous wording

Gross profit for the three-month period ended March 31, 2024 increased $1.8 million to $24.6 million, representing a 61% gross margin for the period as compared to 60% in the prior year. The increase in gross profit for the three-month period ended March 31, 2024, as compared to the same period in 2023, primarily resulted from increased revenue. Gross margin for the three-month period ended March 31, 2024 increased compared to the same period of prior year due primarily to lower acquisition related amortization expenses on intangible assets, offset by higher inventory reserves.

Current wording

Gross profit for the three-month period ended June 30, 2024 decreased $1.6 million and increased $0.2 million for the six-month period ended June 30, 2024 to $27.4 million and $52.0 million, respectively. Gross profit for the three- and six-month periods ended June 30, 2023 was $29.0 million and $51.8 million, respectively. The decrease in gross profit for the three-month period ended June 30, 2024 was primarily related to lower revenue related to the timing of OA Pain Management revenues. The increase in gross profit for the six-month period ended June 30, 2024 was due primarily to lower acquisition related amortization expenses on intangible assets, offset by higher inventory reserves.

Previous wording

Research and development expenses for the three-month period ended March 31, 2024 were $8.2 million, a decrease of $0.2 million as compared to the same period in 2023. The decrease was primarily related to lower product development and regulatory costs.

Current wording

Research and development expenses for the three- and six-month periods ended June 30, 2024 were $7.4 million and $15.6 million, respectively. Research and development expenses for the three- and six-month periods ended June 30, 2023 were $8.9 million and $17.3 million, respectively. The decrease was primarily related to lower product development and regulatory costs in current year.

Previous wording

The income tax expense was immaterial for the three-month period ended March 31, 2024, resulting in an effective tax rate of (1.0%). The benefit from income taxes was $1.7 million for the three-month period ended March 31, 2023, resulting in an effective tax rate of 13.9%. The net change in the effective tax rate for the three-month period ended March 31, 2024, as compared to the same period in 2023, was primarily due to a full valuation allowance being recorded against domestic deferred tax assets at March 31, 2024.

Current wording

Income tax expense was $0.8 million and $0.9 million for the three- and six-month periods ended June 30, 2024, resulting in effective tax rates of 111.6% and (23.9%), respectively. The income tax benefit was $0.3 million and $2.0 million for the three- and six-month periods ended June 30, 2023, resulting in an effective tax rate of 10.7% and 13.2%, respectively. The net change in the effective tax rate for the three- and six-month periods ended June 30, 2024, as compared to the same periods in 2023, was primarily due to the impact of the valuation allowance in the U.S. in both the current and prior periods and the impact of recording of $0.6 million of discrete items during the three-month period ended June 30, 2024. The Company’s effective tax rate for the three- and six-month periods ended June 30, 2024 was primarily driven by the full valuation on the Company's deferred tax assets in the US and the projected taxable income for the Company, and resulting current tax payable, for the three- and six-month periods ended June 30, 2024.

Previous wording

For the three-month period ended March 31, 2024, net loss was $4.5 million, or $0.31 per diluted share, compared to net loss of $10.4 million, or $0.71 per diluted share, for the same period in prior year. The decrease in net loss and diluted net loss per share was primarily due to higher revenues in 2024 and the non-recurring expenses related to the Parcus Medical arbitration settlement and other non-recurring corporate costs that occurred in the prior year.

Current wording

For the three- and six-month periods ended June 30, 2024, net loss was $0.1 million and $4.6 million, or $0.01 loss per diluted share and $0.31 loss per diluted share, respectively, compared to a net loss of $2.7 million and $13.1 million, or $0.19 loss per diluted share and $0.89 loss per diluted share, for the same periods in the prior year. The decrease in net loss and diluted net loss per share was primarily due to lower operating expenses from lower headcount and non-recurring costs related to the Parcus Medical arbitration settlement and shareholder activism costs.

Previous wording

The following is a reconciliation of adjusted gross profit and gross margin, both non-GAAP metrics, to gross profit, the most directly comparable GAAP financial measure for the three-month periods ended March 31, 2024 and 2023, respectively:

Current wording

The following is a reconciliation of adjusted gross profit and gross margin, both non-GAAP metrics, to gross profit, the most directly comparable GAAP financial measure for the three and six-month periods ended June 30, 2024 and 2023, respectively:

Previous wording

Adjusted gross profit for the three-month period ended March 31, 2024 increased $0.9 million to $25.3 million representing adjusted gross margin of 62%. Adjusted gross profit for the three-month period ended March 31, 2023 was $24.4 million, or adjusted gross margin of 64%. There was a decrease in adjusted gross margin for the three-month period ended March 31, 2024 as compared to 2023, due to the impact of production inefficiencies and higher inventory reserves in 2024.

Current wording

Adjusted gross profit for the three- and six-month periods ended June 30, 2024 decreased $3.0 million and $2.1 million to $27.5 million and $52.8 million, respectively, representing adjusted gross margin of 66% and 64%, respectively. Adjusted gross profit for the three- and six-month periods ended June 30, 2023 was $30.5 million and $54.9 million, respectively, or adjusted gross margin of 69% and 67%, respectively. The decrease in adjusted gross margin for the three- and six-month periods ended June 30, 2024 as compared to 2023 was due to lower revenue largely due to the timing of OA Pain Management revenues and higher proportion of international revenues which have lower margins.

Previous wording

The following is a reconciliation of adjusted EBITDA, a non-GAAP metric, to net loss, the most directly comparable GAAP financial measure, for the three-month periods ended March 31, 2024 and 2023, respectively:

Current wording

The following is a reconciliation of adjusted EBITDA, a non-GAAP metric, to net loss, the most directly comparable GAAP financial measure, for the three and six-month periods ended June 30, 2024 and 2023, respectively:

Previous wording

Adjusted EBITDA in the three-month period ended March 31, 2024 increased $3.7 million as compared with the same period in 2023. The increase in adjusted EBITDA for the period was primarily due to an increase in revenues as well as lower spending following the successful launch of key products and addressing new regulatory requirements in the European Union in 2023.

Current wording

Adjusted EBITDA in the six-month period ended June 30, 2024, increased $3.7 million as compared with the same period in 2023. The increase in adjusted EBITDA for the period was due to lower operating expenses, growth in new product sales, offset partially by lower OA Pain Management revenue in the US.

Previous wording

The following is a reconciliation of adjusted net loss, a non-GAAP metric, to net income (loss), the most directly comparable GAAP financial measure, for the three-month periods ended March 31, 2024 and 2023, respectively:

Current wording

The following is a reconciliation of adjusted net loss, a non-GAAP metric, to net income (loss), the most directly comparable GAAP financial measure, for the three and six-month periods ended June 30, 2024 and 2023, respectively:

Previous wording

The following is a reconciliation of adjusted diluted EPS, a non-GAAP metric, to diluted EPS, the most directly comparable GAAP financial measure, for the three-month periods ended March 31, 2024 and 2023, respectively:

Current wording

The following is a reconciliation of adjusted diluted EPS, a non-GAAP metric, to diluted EPS, the most directly comparable GAAP financial measure, for the three and six-month periods ended June 30, 2024 and 2023, respectively:

Previous wording

Adjusted net income and adjusted diluted earnings per share in the three-month period ended March 31, 2024 increased $3.4 million and $0.23, respectively, as compared with the same period in 2023. The increase for the period was primarily due to higher revenues and lower spending following the successful launch of key products and addressing new regulatory requirements in the European Union in 2023.

Current wording

Adjusted net income and adjusted diluted earnings per share in the six-month period ended June 30, 2024 increased $4.1 million and $0.27, respectively, as compared with the same period in 2023. The increase for the period was primarily due to lower operating expenses in 2024 partially offset by lower revenues on timing of strategic ordering patterns with higher margin OA Pain Management customers.

Previous wording

We require cash to fund our operating activities and to make capital expenditures and other investments in the business. We expect that our requirements for cash to fund these uses will increase as our operations expand. We continue to generate cash from operating activities and believe that our operating cash flows, cash currently on our condensed consolidated balance sheet and availability under our credit facility will be sufficient to allow us to continue to invest in our existing business, to manage our capital structure on a short and long-term basis, and to meet our anticipated operating cash needs. Cash and cash equivalents aggregated $68.6 million and $72.9 million, and working capital totaled $130.5 million and $132.2 million, at March 31, 2024 and December 31, 2023, respectively.

Current wording

We require cash to fund our operating activities and to make capital expenditures and other investments in the business. We expect that our requirements for cash to fund these uses will increase as our operations expand. We continue to generate cash from operating activities and believe that our operating cash flows, cash currently on our balance sheet and availability under our credit facility will be sufficient to allow us to continue to invest in our existing business, to manage our capital structure on a short and long-term basis, and to meet our anticipated operating cash needs. Cash and cash equivalents were $62.8 million and $72.9 million, and working capital totaled $128.9 million and $132.2 million, at June 30, 2024 and December 31, 2023, respectively.

Previous wording

The following changes contributed to the net change in cash and cash equivalents in the three-month period ended March 31, 2024 as compared to the same period in 2023.

Current wording

The following changes contributed to the net change in cash and cash equivalents in the six-month period ended June 30, 2024 as compared to the same period in 2023.

Previous wording

Cash used in operating activities was $0.1 million for the three-month period ended March 31, 2024, as compared to cash used in operating activities of $3.6 million for the same period in 2023. The decrease in cash used in operating activities in 2024 was primarily due to a lower net loss during the period.

Current wording

Cash used in operating activities was $1.2 million for the six-month period ended June 30, 2024, as compared to cash used in operating activities of $11.9 million for the same period in 2023. The decrease in cash used in operating activities for the six-months ended June 30, 2024, compared to the same period in prior year, was primarily due to a lower net loss during the six-month period ended June 30, 2024 and higher non-recurring costs in 2023 for the Parcus Medical arbitration settlement and shareholder activism costs.

Previous wording

Cash used in investing activities was $1.8 million for the three-month period ended March 31, 2024, as compared to cash used in investing activities of $1.4 million for the same period in 2023. The change was primarily due to an increase in capital expenditures to support manufacturing operations at our Bedford facility.

Current wording

Cash used in investing activities was $5.2 million for the six-month period ended June 30, 2024, as compared to cash used in investing activities of $2.8 million for the same period in 2023. The change was primarily due to an increase in capital expenditures in 2024 to support the expansion of manufacturing capacity at our Bedford facility.

Previous wording

Cash used in financing activities was $2.3 million for the three-month period ended March 31, 2024, as compared to cash used in financing activities of $1.6 million for the same period in 2023. In both periods, the cash used in financing activities was primarily attributable to utilization of cash for employee tax withholding in exchange for shares surrendered by equity award holders.

Current wording

Cash used in financing activities was $3.4 million for the six-month period ended June 30, 2024, as compared to cash used in financing activities of $6.6 million for the same period in 2023. In both periods, the cash used in financing activities was primarily attributable to utilization of cash for share repurchases and employee tax withholding in exchange for shares surrendered by equity award holders.

Previous wording

Our contractual obligations and other commercial commitments are summarized in the section captioned “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations and Other Commercial Commitments” in our 2023 Form 10-K for the year ended December 31, 2023. There were no material changes to our contractual obligations reported in our 2023 Form 10-K during the three months ended March 31, 2024. For additional discussion, see Note 9 to the condensed consolidated financial statements included in this report.

Current wording

Our contractual obligations and other commercial commitments are summarized in the section captioned “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations and Other Commercial Commitments” in our 2023 Form 10-K for the year ended December 31, 2023. There were no material changes to our contractual obligations reported in our 2023 Form 10-K during the six months ended June 30, 2024. For additional discussion, see Note 9 to the condensed consolidated financial statements included in this report.