Anika Therapeutics, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Commercial Channel Strength: Double-digit growth, with Integrity procedures up for six consecutive quarters in the US, and international OA Pain Management showing growth. Over 1 million Cingal injections sold since 2016.
• Hyalofast Update: Submitted third and final PMA module to FDA. Phase III FastTRACK study results showed clinically meaningful improvements in key secondary endpoints, with observed data analysis achieving significance for KOOS pain and responder analysis showing statistical significance in pain improvement.
• Cingal Progress: Completed first toxicity study, initiated patient screening for bioequivalent study, with ongoing NDA preparation for Cingal.
• Cost Structure: SG&A expenses down 12% year-over-year, total operating expenses down 3%, with focus on cost savings and strategic investments in growth areas like Integrity and Hyalofast.

Segment Performance

• OEM Channel: Revenue declined 20% in Q3 to $15.8 million, primarily due to pricing pressure on end-user sales. Monovisc had low double-digit unit growth but double-digit pricing decline. Year-to-date, Monovisc unit volume is up 11% while average price is down 17%.
• Commercial Channel: Grew 22% to $12 million. Regenerative Solutions (Integrity) grew 25% in the quarter, with Integrity procedures up for six consecutive quarters in the US. International OA Pain Management revenue grew 21% in Q3, and year-to-date is up 6%. Over 1 million Cingal injections have been sold since 2016.

Revenue contribution: OEM channel accounted for $15.8M (63% of total revenue in Q3), Commercial channel accounted for $12M (37% of total revenue in Q3).

Guidance

• Full year 2025 guidance: Commercial channel expected to generate $47 million to $49.5 million in revenue (12%-18% year-over-year growth). OEM channel expected to deliver $62 million to $65 million in revenue (16%-20% year-over-year decline).
• Adjusted EBITDA guidance range: Positive 3% to negative 3% for 2025.
• Share repurchase: Commencing a second $15 million share repurchase under a 10b5-1 program, expected to complete by June 2026.

Risks

• Pricing Pressure: OEM channel revenue affected by pricing pressure from J&J in the US OA Pain Management business.
• Production Disruptions: Earlier production disruptions impacting inventory reserves and gross profit, with ongoing efforts to resolve by year-end.
• Regulatory Uncertainties: Uncertainties related to Hyalofast and Cingal regulatory approvals, including potential impacts on timelines and market entry.

Question and Answer Q: About Integrity utilization and expansion, how is Anika approaching turning 300 surgeons into 600 and increasing cases?

A: Focus on getting new surgeons excited about the technology, training new and existing surgeons on safe and effective use, and launching additional SKUs for tendon applications, with the team working on both new surgeon acquisition and existing surgeon penetration.

Q: What is the timeline for Cingal bioequivalence and the second toxicity study?

A: The bioequivalence study is on track to start by the end of the year. The second toxicity study will be done in the first quarter, with a more fulsome timeline to NDA filing dependent on the bioequivalence study's progress.

Q: What are the capital deployment priorities?

A: First priority is internal investment in the regenerative solutions portfolio. Second is CapEx for manufacturing facility expansion to support product launches. Third is the share repurchase, with M&A not currently on the agenda.

Q: About production issues, is it a new issue?

A: It's a hangover from earlier production disruptions, with efforts to get back to normal PO fulfillment by year-end, having minimal impact on US-based customers but small impact on OUS customers.

Q: What is the outlook for gross margin?

A: Gross margin is expected to be between Q3 levels and higher in the fourth quarter, affected by product shipping and pricing dynamics with J&J.