Anika Therapeutics, Inc.

Previous wording

As we look towards the future, our business is positioned to capture value within our target market of OA Pain Management and Regenerative Solutions product portfolios. We believe our success will be driven by our:

Current wording

As we look forward to the future, our business is positioned to capture value within our target market of OA Pain Management and Regenerative Solutions product portfolios. We believe our success will be driven by our:

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, next-generation, 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 over 35 countries. In 2022, we completed a third Phase III clinical trial for Cingal, which achieved its primary endpoint. Cingal is currently not approved for commercial use in the United States. We have been actively engaging with the U.S. Food and Drug Administration (“FDA”) on next steps for U.S. regulatory approval. We acquired the Aristospan New Drug Application (“NDA”) regulatory approval in the United States in September 2024 to assist with our Cingal regulatory filing with the FDA.

Current 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, next-generation, 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 53 countries. In 2022, we completed a third Phase III clinical trial for Cingal, which achieved its primary endpoint. Cingal is currently not approved for commercial use in the United States. We have been actively engaging with the U.S. Food and Drug Administration (“FDA”) on next steps for U.S. regulatory approval.

Previous wording

During the year ended December 31, 2024, we changed our classification of revenue. We previously disclosed revenue in three categories: OA Pain Management, Joint Preservation and Restoration and Non-Orthopedic. As a result of a change in strategic focus announced by us in 2024, revenue classification was delineated to provide the investment community a clear view to our value drivers. Revenue has been split between the Commercial Channel and the Original Equipment Manufacturer (“OEM”) Channel. In the Commercial Channel, we have full responsibility for sales, marketing, and pricing of products through our commercial leaders, direct sales representatives, and independent distributors. Revenue from our Regenerative Solutions and international OA Pain Management businesses is included in the Commercial Channel. In the OEM Channel, we are responsible for development and manufacturing of products sold to our OEM partners governed by long-term agreements, but we do not control sales, marketing, or pricing with end users. Revenue from our U.S. OA Pain Management business and the Non-Orthopedic business is now included in the OEM Channel. All other revenue is reported in the Commercial Channel.

Current wording

We classify our revenue between the Original Equipment Manufacturer (“OEM”) Channel and the Commercial Channel. In the OEM Channel, we are responsible for development and manufacturing of products sold to our OEM partners governed by long-term agreements, but we do not control sales, marketing, or pricing with end users. In the Commercial Channel, we have full responsibility for sales, marketing, and pricing of products through our commercial leaders, direct sales representatives, and independent distributors. Revenue from our Regenerative Solutions and international OA Pain Management businesses is included in the Commercial Channel.

Previous wording

For the year ended December 31, 2023, the loss from operations was $0.8 million, compared to income from operations of $3.7 million for the prior year. The $2.8 million decrease in income from operations was due higher operating expenses.

Current wording

For the year ended December 31, 2025, the loss from continuing operations was $10.0 million, compared to a loss from continuing operations of $8.8 million for the prior year. The $1.2 million decrease in the loss from continuing operations was due to lower revenues, primarily from J&J MedTech offset somewhat by lower operating expenses, primarily related to lower SG&A expenses.

Previous wording

The provision for income taxes was $6.6 million for the year ended December 31, 2023, resulting in an effective tax rate of 209.0%. The provision from income taxes was $2.1 million for the year ended December 31, 2022, resulting in an effective tax rate of 49.1%. The increase in our effective rate for the year ended December 31, 2023 as compared to the year ended December 31, 2022 is primarily due to a higher valuation allowance being recorded on U.S. deferred tax assets in 2023.

Current wording

The provision for income taxes was $0.7 million for the year ended December 31, 2025, resulting in an effective tax rate of (7.1%). The provision from income taxes was $6.1 million for the year ended December 31, 2024, resulting in an effective tax rate of (219.4%). The decrease in our effective rate for the year ended December 31, 2025 as compared to the year ended December 31, 2024 is primarily due to the fact that we did not incur current income taxes in the United States during the year ended December 31, 2025.

Previous wording

We present certain information with respect to adjusted gross profit and adjusted gross margin, adjusted Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”), adjusted net income, adjusted diluted earnings per share or adjusted Earnings Per Share (“EPS”), which are financial measures not based on any standardized methodology prescribed by accounting principles generally accepted in the United States (“GAAP”), and is not necessarily comparable to similarly titled measures presented by other companies.

Current wording

We present certain information with respect to adjusted Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”), adjusted net income, adjusted diluted earnings per share or adjusted Earnings Per Share (“EPS”), which are financial measures not based on any standardized methodology prescribed by accounting principles generally accepted in the United States (“GAAP”), and is not necessarily comparable to similarly titled measures presented by other companies.

Previous wording

We have presented adjusted gross profit and adjusted gross margin, adjusted EBITDA, adjusted net income, adjusted EPS, because they are key measures used by our management and board of directors to understand and evaluate our operating performance and to develop operational goals for managing our business. We believe these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. We believe that the exclusion of these items in calculating these measures can provide a useful tool for period-to-period comparisons of our core operating performance. Accordingly, we believe that these measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by our management in their financial and operational decision-making.

Current wording

We have presented adjusted EBITDA, adjusted net income, adjusted EPS, because they are key measures used by our management and board of directors to understand and evaluate our operating performance and to develop operational goals for managing our business. We believe these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. We believe that the exclusion of these items in calculating these measures can provide a useful tool for period-to-period comparisons of our core operating performance. Accordingly, we believe that these measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by our management in their financial and operational decision-making.

Previous wording

Adjusted EBITDA for year ended December 31, 2024 was $15.5 million, a decrease of $8.2 million as compared to 2023. The decrease in adjusted EBITDA was primarily due to lower adjusted gross profit and higher research and development spending in 2024 on product development and clinical activity, primarily with Integrity, Hyalofast and Cingal.

Current wording

Adjusted EBITDA for year ended December 31, 2025 was $5.3 million, a decrease of $10.2 million as compared to 2024. The decrease in adjusted EBITDA was primarily due to lower revenues, primarily related to J&J MedTech and lower gross profit due to higher inventory reserves and manufacturing costs.

Previous wording

We present information below with respect to adjusted net loss and adjusted EPS from continuing operations. We define adjusted net loss from continuing operations as our net loss from continuing operations excluding amortization and depreciation of acquired assets, the impact of inventory fair-value step up on cost of revenue, changes in the fair value of contingent consideration, as well as certain impairment charges, including impairment related to IPR&D assets and non-cash product rationalization charges, each on a tax effected basis. Acquisition-related expenses are those that we would not have incurred except as a direct result of acquisition transactions. The amortized assets contribute to revenue generation and the amortization of such assets will recur in future periods until such assets are fully amortized. These assets include the estimated fair value of certain identified assets acquired in acquisitions, including in-process research and development (“IPR&D”), developed technology, customer relationships and acquired trade names. We define adjusted EPS from continuing operations as U.S. GAAP diluted earnings per share from continuing operations excluding the above adjustments to net loss from continuing operations used in calculating adjusted net loss from continuing operations, each on a per share and tax effected basis.

Current wording

We present information below with respect to adjusted net loss and adjusted EPS from continuing operations. We define adjusted net loss from continuing operations as our net loss from continuing operations excluding amortization and depreciation of acquired assets, changes in the fair value of contingent consideration, as well as certain impairment charges, including impairment related to IPR&D assets and non-cash product rationalization charges, each on a tax effected basis. Acquisition-related expenses are those that we would not have incurred except as a direct result of acquisition transactions. The amortized assets contribute to revenue generation and the amortization of such assets will recur in future periods until such assets are fully amortized. These assets include the estimated fair value of certain identified assets acquired in acquisitions, including in-process research and development (“IPR&D”), developed technology, customer relationships and acquired trade names. We define adjusted EPS from continuing operations as U.S. GAAP diluted earnings per share from continuing operations excluding the above adjustments to net loss from continuing operations used in calculating adjusted net loss from continuing operations, each on a per share and tax effected basis.

Previous wording

Adjusted net income from continuing operations in 2024 was $2.4 million, a decrease of $10.9 million as compared to 2023. The decrease in adjusted net income from continuing operations and adjusted diluted income from continuing operations per share for the period was primarily due to higher manufacturing expenses and research and development costs during the year.

Current wording

Adjusted net income from continuing operations in 2025 was $1.6 million, a decrease of $0.8 million as compared to 2024. The decrease in adjusted net income from continuing operations and adjusted diluted income from continuing operations per share for the period was primarily due to lower revenues and higher manufacturing expenses during the year.

Previous wording

Revenue from our OEM Channel product family decreased 8% for the year ended December 31, 2024, as compared to prior year, due to lower J&J MedTech revenue, mostly related to Orthovisc and the discontinuation of certain non-orthopedic products.

Current wording

Revenue from our OEM Channel product family decreased 8% for the year ended December 31, 2024, as compared to prior year, due to lower J&J MedTech revenue, primarily due to lower volumes resulting in a decrease of $4.3 million and lower pricing contributing to a $1.6 million decrease and the discontinuation of certain non-orthopedic products resulting in a decrease of $1.1 million.

Previous wording

Revenue from our Commercial Channel product family increased 17% for the year ended December 31, 2024, as compared to prior year, due to an international sales growth on all our main OA Pain Management products (Monovisc, Cingal and Orthovisc). We also launched a full market release of Integrity in the U.S. in 2024.

Current wording

Revenue from our Commercial Channel product family increased 17% for the year ended December 31, 2024, as compared to prior year, due to an international sales growth on all our main OA Pain Management products (Monovisc, Cingal and Orthovisc). This sales growth for international OA Pain Management products was primarily related to increased product demand of $4.3 million and minimal change on pricing with international customers. We also launched a full market release of Integrity in the U.S. in 2024 which contributed to a $1.7 million increase in regenerative product sales during the year ended December 31, 2024.

Previous wording

Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2024 were $55.6 million, a decrease of $4.4 million, or 7%, as compared to the prior year. The decrease in SG&A expenses for the year ended December 31, 2023 was primarily due to lower headcount and reduced shareholder activism costs.

Current wording

Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2024 were $55.6 million, a decrease of $4.4 million, or 7%, as compared to the prior year. The decrease in SG&A expenses from the prior year was primarily due to reduced shareholder activism costs of $0.8 million, lower stock-based compensation of $0.8 million, and $1.2 million in other non-recurring costs incurred in 2023 with the remainder attributed to lower headcount.

Previous wording

We have historically derived the majority of our revenue from a small number of customers, most of whom resell our products to end-users and are significantly larger companies than us. For the year ended December 31, 2024, J&J MedTech accounted for 57% of revenue, as compared to 62% in prior year. While we believe that our expanded commercial infrastructure has been and will continue to diversify our revenue base, we expect to continue to be dependent on a small number of large customers, especially J&J MedTech, for a sizeable portion of our revenues in the near-term future. The failure of these customers to purchase our products in the amounts they historically have or in amounts that we expect could materially impact our business. We also have Notes Receivable that we have recorded as consideration related to the divestiture of the Arthrosurface asset group in which repayment will be dependent upon the cash flows from the Arthrosurface asset group.

Current wording

We have historically derived most of our revenue from a small number of customers, most of whom resell our products to end-users and are significantly larger companies than us. For the year ended December 31, 2025, J&J MedTech accounted for 50% of revenue, as compared to 57% in prior year. While we believe that our expanded commercial infrastructure has been and will continue to diversify our revenue base, we expect to continue to be dependent on a small number of large customers, especially J&J MedTech, for a sizeable portion of our revenues in the near-term future. The failure of these customers to purchase our products in the amounts they historically have or in amounts that we expect could materially impact our business. We also have Notes Receivable that we have recorded as consideration related to the divestiture of the Arthrosurface asset group in which repayment will be dependent upon the cash receipts that we receive from Arthrosurface.

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 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, cash equivalents, and investments aggregated $55.6 million and $68.7 million, and working capital totaled $90.3 million and $132.3 million, at December 31, 2024 and 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, particularly for our expansion of manufacturing capacity. We 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 aggregated $57.5 million and $55.6 million, and working capital totaled $80.2 million and $90.3 million, at December 31, 2025 and 2024, respectively.

Previous wording

For the foreseeable future, we expect to continue to invest in research and development for new products and clinical trials related to our HA-based technology to support our growth strategy. These costs will be funded with a combination of cash on hand and cash expected to be generated from future operations.

Current wording

For the foreseeable future, we expect to continue to invest in research and development for new products and clinical trials related to our HA-based technology to support our growth strategy, particularly on Cingal and Integrity. These costs will be funded with a combination of cash on hand and cash expected to be generated from future operations.

Previous wording

Cash used in investing activities was $8.3 million, $5.4 million and $7.5 million for 2024, 2023 and 2022, respectively. The change was primarily due to an increase in capital expenditures in 2024 to support the expansion of manufacturing capacity at our Bedford facility and a purchase of developed technology for $0.6 million.

Current wording

Cash used in investing activities was $0.4 million, $8.3 million and $5.4 million for 2025, 2024 and 2023, respectively. The decrease in cash used in investing activities was primarily related to proceeds received from the sales of Arthrosurface and Parcus Medical offset by an increase in capital expenditures in 2025 to support the expansion of manufacturing capacity at our Bedford facility.

Previous wording

Cash used in financing activities was $12.7 million, $6.3 million and $4.9 million for 2024, 2023 and 2022, respectively. The change in 2024 was primarily due to $10.9 million used to fund the stock repurchase program we started in May 2024.

Current wording

Cash used in financing activities was $10.6 million, $12.7 million and $6.3 million for 2025, 2024 and 2023, respectively. The decrease in cash used in financing activities was primarily due a reduction in stock repurchases as we incurred $9.5 million in 2025 versus $10.9 million on the stock repurchase program we started in May 2024. We also had lower payments in cash withheld for taxes related the vesting of restricted stock awards.

Previous wording

For commercial partnership sales, we sell our products directly to these partners, who perform most of the downstream sales and marketing activities to customers and end-users. These arrangements may include the grant of certain licenses, performance of development services, and the supply of product. Our largest such customer, J&J MedTech, represented 57% of total revenues for the year ended December 31, 2024. We recognize revenue from product sales when the customer obtains control of our product, which typically occurs upon shipment to the customer. Commercial partnership agreements may also include sales-based royalties and milestones. As we considered the license to be the predominant item to which the royalties relate for these agreements, sales-based royalties and milestones are only recognized when the later of the underlying sale occurs or the performance obligation to which some or all of the sales-based royalty has been satisfied (or partially satisfied). This is generally in the same period that our licensees complete their product sales in their territory, for which we are contractually entitled to a percentage-based royalty. We record royalty revenues based on estimated net sales of licensed products as reported to us by our commercial partners. The differences between actual and estimated royalty revenues have not been material and are typically adjusted in the following quarter when the actual amounts are known. Revenue from sales-based royalties is included in revenues in our consolidated statement of operations.

Current wording

For commercial partnership sales, we sell our products directly to these partners, who perform most of the downstream sales and marketing activities to customers and end users. These arrangements may include the grant of certain licenses, performance of development services, and the supply of products. We recognize revenue from product sales when the customer obtains control of our product, which typically occurs upon shipment to the customer. Commercial partnership agreements may also include sales-based royalties and milestones. Sales-based royalties and milestones are only recognized when the latter of the underlying sale occurs or the performance obligation to which some or all of the sales-based royalties have been satisfied (or partially satisfied). This is generally in the same period that our commercial partners complete their product sales in their territory, for which we are contractually entitled to a percentage-based royalty. We record royalty revenues based on estimated net sales of licensed products as reported to us by our commercial partners. The differences between actual and estimated royalty revenues have not been material and are typically adjusted in the following quarter when the actual amounts are known. Revenue from sales-based royalties is included in revenues in our consolidated statement of operations.

Previous wording

For sales to hospitals and ambulatory service centers, which generally pairs in-house sales representatives with local or regional distributors, the inventory is generally consigned so that products are available when needed for surgical procedures. No revenue is recognized upon the placement of inventory into consignment, as we retain the ability to control the inventory. Revenue is recognized typically as of the date of surgical implantation of the product.

Current wording

For sales to hospitals and ambulatory service centers, which generally pair in-house sales representatives with local or regional distributors, the inventory is generally consigned so that products are available when needed for surgical procedures. No revenue is recognized upon the placement of inventory into consignment, as we retain the ability to control the inventory. Revenue is recognized typically as of the date of surgical implantation of the product.

Previous wording

For distributor sales, we sell our products to our distributors, generally outside the United States, who subsequently resell the products to sub-distributors and health care providers, among others. We recognize revenue from product sales when the distributor obtains control of our product, which typically occurs upon shipment to the distributor, in return for agreed-upon, fixed-price consideration. Performance obligations are generally settled quickly after purchase order acceptance; therefore, the value of unsatisfied performance obligations at the end of any reporting period is generally insignificant. We sell to a diversified base of distributors and, therefore, we believe there is no material concentration of credit risk.

Current wording

For distributor sales, we sell our products to our distributors, generally outside the United States, who subsequently resell the products to sub-distributors and health care providers, among others. We recognize revenue from product sales when the distributor obtains control of our product, which typically occurs upon shipment to the distributor, in return for agreed-upon, fixed-price consideration. Performance obligations are generally settled quickly after purchase order acceptance. We have no performance obligations greater than one year; therefore, the value of unsatisfied performance obligations at the end of any reporting period is generally insignificant. We sell to a diversified base of distributors and, therefore, we believe there is no material concentration of credit risk.

Previous wording

Some of our distributor agreements have volume-based discounts with tiered pricing which are generally prospective in nature. These prospective discounts together with any free-of-charge sample units offered are evaluated as potential material rights. If the prospective discounts or free-of-charge sample units are considered material rights, these would be separate performance obligations and a portion of the sales transaction price is allocated to the material right. Revenue allocated to the material right is recognized when the additional goods are transferred to the customer or when the option expires. During 2024, the consideration allocated to material rights was not significant.

Current wording

Some of our distributor agreements have volume-based discounts with tiered pricing which are generally prospective in nature. These prospective discounts together with any free-of-charge sample units offered are evaluated as potential material rights. If the prospective discounts or free-of-charge sample units are considered material rights, these would be separate performance obligations, and a portion of the sales transaction price is allocated to the material right. Revenue allocated to the material rights are recognized when the additional goods are transferred to the customer or when the option expires. During 2025, the consideration allocated to material rights was not significant.

Previous wording

Generally, customer contracts contain Free on Board (“FOB”) or Ex-Works shipping point terms where the customer pays the shipping company directly for all shipping and handling costs. In those contracts in which we pay for the shipping and handling, the associated costs are generally recorded along with the product sale at the time of shipment in cost of revenue when control over the products has transferred to the customer. Value-add and other taxes we collected concurrently with revenue-producing activities are excluded from revenue. Our general product warranty does not extend beyond an assurance that the product or services delivered will be consistent with stated contractual specifications, which does not create a separate performance obligation. We recognize the incremental costs of obtaining contracts as an expense when incurred as the amortization period of the assets that we otherwise would have recognized is one year or less in accordance with the practical expedient in paragraph Code 340-40-25-4. These costs are included in selling, general and administrative expenses.

Current wording

Generally, customer contracts contain Free on Board (“FOB”) or Ex-Works shipping point terms where the customer pays the shipping company directly for all shipping and handling costs. In those contracts in which we pay for shipping and handling, the associated costs are generally recorded along with the product sale at the time of shipment in cost of revenue when control over the products has been transferred to the customer. Value-added and other taxes we collected concurrently with revenue-producing activities are excluded from revenue. Our general product warranty does not extend beyond an assurance that the product or services delivered will be consistent with stated contractual specifications, which does not create a separate performance obligation. We recognize the incremental costs of obtaining contracts as an expense when incurred as the amortization period of the assets that we otherwise would have recognized is one year or less in accordance with the practical expedient in paragraph Code 340-40-25-4. These costs are included in selling, general and administrative expenses.