Anika Therapeutics, Inc. Q3 FY2024 earnings call

• Strategic review led to sale of Arthrosurface ($10M estimated) and plan to divest Parcus Medical; workforce reduced from ~325 to ~225.
• Integrity saw over 40% sequential growth in surgeries in Q3, with over 20% of surgeons new to Anika; plans for clinical studies for international expansion.
• Filed first module of Hyalofast's PMA, on track for 2026 launch; first module was GMP, with preclinical module to be filed early 2025 and clinical module later 2025.
• Made progress with Cingal by acquiring Aristospan NDA, addressing FDA hurdles; received positive feedback on clinical data.
• Starting Q4, revenue will be classified into commercial (Anika controls sales/marketing) and OEM (Anika handles development/manufacturing) channels.

In the third quarter, total revenue was $38.8 million, down $2.7M from Q3 2023. OA Pain Management revenue decreased 2% to $24.4M, with U.S. sales impacted by JNJ MedTech but international sales up 7%. Joint Preservation and Restoration revenue fell 11% to $12M, but Regenerative Solutions (including Integrity) grew 17% Y/Y. Non-orthopedic revenue declined 24% to $2.4M. For 2024, commercial channel revenue is expected to grow 14%-19% ($36.1M in 2023), driven by Integrity and international OA pain. OEM channel revenue is expected to decline 8%-10% in 2024, including JNJ MedTech.

• 2024 commercial channel revenue growth 14%-19%, OEM channel decline 8%-10%.
• 2025-2027: Double-digit revenue growth in commercial channel (12%-18% in 2025, 20%-30% in 2026-2027); OEM channel decline 12%-18% in 2025, stabilizing later.
• 2024 adjusted EBITDA $16M-$18M; 2025+ adjusted EBITDA margins in low double digits, excluding Parcus/Arthrosurface impacts.

• Unmet commercial synergies and higher costs with Arthrosurface and Parcus acquisitions.
• Competitive, price-sensitive market impacting U.S. OA pain sales through JNJ MedTech.
• Regulatory uncertainties in product approvals for Hyalofast, Cingal, and Integrity clinical studies.

Q: How is non-orthopedic revenue categorized going forward?

A: Non-orthopedic revenue is part of the OEM channel, similar to JNJ relationship.

Q: Can you provide guidance on 2025 gross margins?

A: Wait until separation of Arthrosurface/Parcus is complete; EBITDA guidance should help infer margins.

Q: When do investments in the sales force for the commercial channel start?

A: Investments are ongoing, with focus on direct sales reps as new products (e.g., Integrity configurations, Hyalofast) launch.

Q: What are the primary products in the commercial channel?

A: Primary products include OUS Monovisc, Orthovisc, Cingal, Hyalofast, and U.S. regenerative products (Integrity, future launches).

Q: Will the company be cash flow neutral?

A: Expect relatively neutral cash flow for full year, though updated guidance not provided yet.

Q: What was the total cost of Arthrosurface acquisition?

A: Total cost was around $77 million.

Q: What's the margin outlook for the JNJ U.S. OA business?

A: OA Pain Management business has strong 20%+ EBITDA margins, remaining cash generative.

Q: What about the Parcus Medical asset sale?

A: Process just begun, details to be shared as it progresses.

Q: How much has headcount been reduced?

A: Global headcount reduced from ~325 to ~225, including Arthrosurface, Parcus, and additional reductions.