UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
|
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices) (Zip Code)
(
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of Each Class |
Trading Symbol |
Name of Each Exchange on Which Registered |
|
|
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer ☐ |
|
Non-accelerated filer ☐ |
Smaller reporting company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 28, 2024, there were
ANIKA THERAPEUTICS, INC.
TABLE OF CONTENTS
References in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” “our company,” and other similar references refer to Anika Therapeutics, Inc. and its subsidiaries unless the context otherwise indicates.
ANIKA, ANIKA THERAPEUTICS, CINGAL, HYAFF, HYALOFAST, HYVISC, INTEGRITY, MONOVISC, ORTHOVISC, PARCUS MEDICAL, and TACTOSET are our registered trademarks that appear in this Quarterly Report on Form 10-Q. For convenience, these trademarks appear in this Quarterly Report on Form 10-Q without ® and ™ symbols, but that practice does not mean that we will not assert, to the fullest extent under applicable law, our rights to the trademarks. This Quarterly Report on Form 10-Q also contains trademarks and trade names that are the property of other companies and may be licensed to us.
|
PART I: |
|
|
ITEM 1. |
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
|
September 30, |
December 31, |
|||||||
|
ASSETS |
2024 |
2023 |
||||||
|
Current assets: |
||||||||
|
Cash and cash equivalents |
$ | $ | ||||||
|
Accounts receivable, net |
||||||||
|
Inventories |
||||||||
|
Prepaid expenses and other current assets |
||||||||
|
Total current assets |
||||||||
|
Property and equipment, net |
||||||||
|
Right-of-use assets |
||||||||
|
Other long-term assets |
||||||||
|
Deferred tax assets |
||||||||
|
Intangible assets, net |
||||||||
|
Goodwill |
||||||||
|
Total assets |
$ | $ | ||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
|
Current liabilities: |
||||||||
|
Accounts payable |
$ | $ | ||||||
|
Accrued expenses and other current liabilities |
||||||||
|
Total current liabilities |
||||||||
|
Other long-term liabilities |
||||||||
|
Lease liabilities |
||||||||
|
Commitments and contingencies (Note 9) |
|
|
||||||
|
Stockholders’ equity: |
||||||||
|
Preferred stock, $ |
||||||||
|
Common stock, $ |
||||||||
|
Additional paid-in-capital |
||||||||
|
Accumulated other comprehensive loss |
( |
) |
( |
) |
||||
|
Retained earnings |
||||||||
|
Total stockholders’ equity |
||||||||
|
Total liabilities and stockholders’ equity |
$ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share data)
(unaudited)
|
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Revenue |
$ | $ | $ | $ | ||||||||||||
|
Cost of product revenue |
||||||||||||||||
|
Gross Profit |
||||||||||||||||
|
Operating expenses: |
||||||||||||||||
|
Research & development |
||||||||||||||||
|
Selling, general & administrative |
||||||||||||||||
|
Long lived asset impairment |
||||||||||||||||
|
Total operating expenses |
||||||||||||||||
|
Loss from operations |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
|
Interest and other income, net |
||||||||||||||||
|
Loss before income taxes |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
|
Provision for (benefit from) income taxes |
( |
) | ( |
) |
||||||||||||
|
Net loss |
$ | ( |
) |
$ | ( |
) | $ | ( |
) | $ | ( |
) |
||||
|
Net loss per share: |
||||||||||||||||
|
Basic |
$ | ( |
) |
$ | ( |
) | $ | ( |
) | $ | ( |
) |
||||
|
Diluted |
$ | ( |
) |
$ | ( |
) | $ | ( |
) | $ | ( |
) |
||||
|
Weighted average common shares outstanding: |
||||||||||||||||
|
Basic |
||||||||||||||||
|
Diluted |
||||||||||||||||
|
Net loss |
$ | ( |
) |
$ | ( |
) | $ | ( |
) | $ | ( |
) |
||||
|
Foreign currency translation adjustment |
( |
) |
( |
) |
||||||||||||
|
Comprehensive loss |
$ | ( |
) |
$ | ( |
) | $ | ( |
) | $ | ( |
) |
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except per share data)
(unaudited)
|
Nine Months Ended September 30, 2024 |
||||||||||||||||||||||||
|
Common Stock |
Accumulated |
|||||||||||||||||||||||
|
Number of |
$.01 Par |
Additional |
Retained |
Other |
Total |
|||||||||||||||||||
|
Shares |
Value |
in Capital |
Earnings |
Loss |
Equity |
|||||||||||||||||||
|
Balance, January 1, 2024 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||
|
Issuance of common stock for equity awards |
||||||||||||||||||||||||
|
Vesting of restricted stock units |
( |
) |
||||||||||||||||||||||
|
Stock-based compensation expense |
- | |||||||||||||||||||||||
|
Retirement of common stock for minimum tax withholdings |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||||||||||
|
Net loss |
- | ( |
) |
( |
) |
|||||||||||||||||||
|
Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Balance, March 31, 2024 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||
|
Issuance of common stock for equity awards |
||||||||||||||||||||||||
|
Vesting of restricted stock units |
( |
) | ||||||||||||||||||||||
|
Issuance of ESPP shares |
||||||||||||||||||||||||
|
Stock-based compensation expense |
- | |||||||||||||||||||||||
|
Repurchase of common stock |
( |
) | ( |
) |
( |
) |
( |
) |
||||||||||||||||
|
Retirement of common stock for minimum tax withholdings |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
|
Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Balance, June 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
|
Vesting of restricted stock units |
||||||||||||||||||||||||
|
Stock-based compensation expense |
- | |||||||||||||||||||||||
|
Repurchase of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
|
Retirement of common stock for minimum tax withholdings |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
|
Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Other comprehensive income |
- | |||||||||||||||||||||||
|
Balance, September 30, 2024 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
|
Nine Months Ended September 30, 2023 |
||||||||||||||||||||||||
|
Common Stock |
Accumulated |
|||||||||||||||||||||||
|
Number of |
$.01 Par |
Additional Paid |
Retained |
Other Comprehensive |
Total Stockholders’ |
|||||||||||||||||||
|
Shares |
Value |
in Capital |
Earnings |
Loss |
Equity |
|||||||||||||||||||
|
Balance, January 1, 2023 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||
|
Issuance of common stock for equity awards |
||||||||||||||||||||||||
|
Vesting of restricted stock units |
( |
) |
||||||||||||||||||||||
|
Stock-based compensation expense |
- | |||||||||||||||||||||||
|
Retirement of common stock for minimum tax withholdings |
( |
) |
( |
) | ( |
) | ( |
) | ||||||||||||||||
|
Net loss |
- | ( |
) |
( |
) |
|||||||||||||||||||
|
Other comprehensive income |
- | |||||||||||||||||||||||
|
Balance, March 31, 2023 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||
|
Issuance of common stock for equity awards |
||||||||||||||||||||||||
|
Vesting of restricted stock units |
( |
) |
||||||||||||||||||||||
|
Issuance of ESPP shares |
||||||||||||||||||||||||
|
Stock-based compensation expense |
- | |||||||||||||||||||||||
|
Repurchase of common stock |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
|
Retirement of common stock for minimum tax withholdings |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
|
Net loss |
- | ( |
) |
( |
) |
|||||||||||||||||||
|
Other comprehensive income |
- | |||||||||||||||||||||||
|
Balance, June 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
|
Vesting of restricted stock units |
||||||||||||||||||||||||
|
Stock-based compensation expense |
- | |||||||||||||||||||||||
|
Repurchase of common stock |
( |
) | ( |
) | ||||||||||||||||||||
|
Retirement of common stock for minimum tax withholdings |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
|
Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
|
Balance, September 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
|
Nine Months Ended September 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Cash flows from operating activities: |
||||||||
|
Net loss |
$ | ( |
) |
$ | ( |
) |
||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
|
Depreciation |
||||||||
|
Amortization of acquisition related intangible assets |
||||||||
|
Non-cash operating lease cost |
||||||||
|
Loss on disposal of property and equipment |
||||||||
|
Impairment of long-lived assets |
||||||||
|
Stock-based compensation expense |
||||||||
|
Deferred income taxes |
( |
) | ||||||
|
Provision for credit losses |
||||||||
|
Provision for inventory |
||||||||
|
Changes in operating assets and liabilities: |
||||||||
|
Accounts receivable |
( |
) | ||||||
|
Inventories |
( |
) |
( |
) |
||||
|
Prepaid expenses, other current and long-term assets |
||||||||
|
Accounts payable |
( |
) |
( |
) | ||||
|
Operating lease liabilities |
( |
) |
( |
) | ||||
|
Accrued expenses, other current and long-term liabilities |
( |
) |
||||||
|
Income taxes |
||||||||
|
Net cash provided by (used in) operating activities |
( |
) | ||||||
|
Cash flows from investing activities: |
||||||||
|
Purchases of property and equipment |
( |
) |
( |
) |
||||
|
Acquisition of intangible assets |
( |
) | ||||||
|
Net cash used in investing activities |
( |
) |
( |
) |
||||
|
Cash flows from financing activities: |
||||||||
|
Proceeds from employee stock purchase program |
||||||||
|
Cash paid for tax withheld on vested restricted stock awards |
( |
) |
( |
) |
||||
|
Proceeds from exercises of equity awards |
||||||||
|
Repurchases of common stock |
( |
) |
( |
) | ||||
|
Net cash used in financing activities |
( |
) |
( |
) |
||||
|
Exchange rate impact on cash |
||||||||
|
Decrease in cash and cash equivalents |
( |
) |
( |
) |
||||
|
Cash and cash equivalents at beginning of period |
||||||||
|
Cash and cash equivalents at end of period |
$ | $ | ||||||
|
Supplemental disclosure of cash flow information: |
||||||||
|
Non-cash investing activities: |
||||||||
|
Purchases of property and equipment included in accounts payable and accrued expenses |
$ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Anika Therapeutics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(amounts in thousands, except share and per share amounts or as otherwise noted)
(unaudited)
|
1. |
Nature of Business |
Anika Therapeutics, Inc. (the “Company”) is a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care, including in the areas of osteoarthritis (“OA”) pain management, regenerative solutions, sports medicine and Arthrosurface joint solutions. The Company has over 30 years of expertise in hyaluronic acid (“HA”) technology.
In early 2020, the Company expanded its overall technology platform through its acquisitions of Parcus Medical, LLC (“Parcus Medical”), a sports medicine implant and instrumentation company, and Arthrosurface Incorporated (“Arthrosurface”), a company specializing in less invasive, bone preserving partial and total joint replacement solutions.
On October 31, 2024, the Company sold its equity interests in Arthrosurface (Note 15) and the Company announced its intention to divest of the Parcus Medical business. These decisions were a result of a strategic review to focus on the Company’s core HA technology and regenerative solutions products to maximize shareholder value.
The Company is subject to risks common to companies in the life sciences industry including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, commercialization of existing and new products, and compliance with U.S. Food and Drug Administration (“FDA”) and foreign regulations and approval requirements, as well as the ability to grow the Company’s business through appropriate commercial strategies.
|
2. |
Basis of Presentation |
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The financial statements include the accounts of Anika Therapeutics, Inc. and its subsidiaries. Inter-company transactions and balances have been eliminated. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to SEC rules and regulations relating to interim financial statements. The December 31, 2023 balances reported herein were derived from the audited consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the condensed consolidated financial statements.
The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s annual financial statements filed with its Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the three and nine-month periods ended September 30, 2024 are not indicative of the results to be expected for the year ending December 31, 2024.
Segment Information
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker as of September 30, 2024 was its President and Chief Executive Officer. Based on the criteria established by Accounting Standards Codification 280, Segment Reporting, the Company has operating and reportable segment.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the new guidance will enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows for the entity. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is evaluating the impact of ASU 2023-07 on its consolidated financial statements and related disclosures.
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation and must also disaggregate income taxes paid. ASU 2023-09 is effective for fiscal years and interim periods beginning after December 15, 2024. The Company is evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.
|
3. |
Accounts Receivable |
The Company estimates an allowance for credit losses with its accounts receivable resulting from the inability of its customers to make required payments, which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations. In determining the adequacy of the allowance, management specifically analyzes individual accounts receivable, historical bad debts, customer concentrations, customer creditworthiness, current and reasonable and supportable forecasts of future economic conditions, accounts receivable aging trends, and changes in the Company’s customer payment terms.
The components of the Company’s accounts receivable are as follows:
|
As of |
As of |
|||||||
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Accounts receivable |
$ | $ | ||||||
|
Less: Allowance for credit losses |
||||||||
|
Net balance, end of period |
$ | $ | ||||||
A summary of activity in the allowance for credit losses is as follows:
|
As of September 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Balance, beginning of the period |
$ | $ | ||||||
|
Amounts provided |
||||||||
|
Amounts recovered |
( |
) |
( |
) |
||||
|
Amounts written off |
( |
) |
( |
) |
||||
|
Translation adjustments |
( |
) |
||||||
|
Balance, end of period |
$ | $ | ||||||
|
4. |
Fair Value Measurements |
The Company has certain cash equivalents in money market funds that are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets. For cash, accounts receivables, accounts payable, and accrued interest, the carrying amounts approximate fair value, because of the short maturity of these instruments, and therefore fair value information is not included in the table below. There were no transfers between fair value levels during the nine-month periods ended September 30, 2024 and 2023, respectively.
The classification of the Company’s cash equivalents within the fair value hierarchy was as follows:
|
September 30, |
Active |
Significant |
Significant |
Amortized |
||||||||||||||||
|
2024 |
(Level 1) |
(Level 2) |
(Level 3) |
Cost |
||||||||||||||||
|
Cash equivalents: |
||||||||||||||||||||
|
Money Market Funds |
$ | $ | $ | $ | $ | |||||||||||||||
|
December 31, |
Active |
Significant |
Significant |
Amortized |
||||||||||||||||
|
2023 |
(Level 1) |
(Level 2) |
(Level 3) |
Cost |
||||||||||||||||
|
Cash equivalents: |
||||||||||||||||||||
|
Money Market Funds |
$ | $ | $ | $ | $ | |||||||||||||||
|
5. |
Inventories |
Inventories consist of the following:
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Raw materials |
$ | $ | ||||||
|
Work-in-process |
||||||||
|
Finished goods |
||||||||
|
Total |
$ | $ | ||||||
|
Inventories |
$ | $ | ||||||
|
Other long-term assets |
||||||||
|
Total |
$ | $ | ||||||
Inventories are stated net of inventory reserves of approximately $
|
6. |
Acquired Intangible Assets, Net |
Intangible assets as of September 30, 2024 and December 31, 2023 consisted of the following:
|
December 31, |
||||||||||||||||||||||||||||||||
| Nine Months ended September 30, 2024 |
2023 |
|||||||||||||||||||||||||||||||
|
Gross Value |
Plus: Additions |
Less: Accumulated Currency Translation Adjustment |
Less: Current Period Impairment Charge |
Less: Accumulated Amortization |
Net Book Value |
Net Book Value |
Weighted Average Useful Life |
|||||||||||||||||||||||||
|
Developed technology |
$ | $ |
$ |
( |
) |
$ |
( |
) | $ | ( |
) | $ | $ | $ | ||||||||||||||||||
|
In-process research & development |
- | ( |
) | - |
Indefinite |
|||||||||||||||||||||||||||
|
Customer relationships |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Distributor Relationships |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Patents |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Tradenames |
( |
) | ( |
) | ||||||||||||||||||||||||||||
|
Total |
$ | $ |
$ |
( |
) |
$ |
( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||
The aggregate amortization expense related to intangible assets was $
As of September 30, 2024 scheduled amortization of intangible assets is as follows:
|
Remainder of 2024 |
$ | |||
|
2025 |
||||
|
2026 |
||||
|
2027 |
||||
|
2028 |
||||
|
Thereafter |
||||
|
Total |
$ |
|
7. |
Goodwill |
The Company assesses goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment.
Changes in the carrying value of goodwill for the nine-months ended September 30, 2024 were as follows:
|
Nine Months Ended |
||||
|
2024 |
||||
|
Balance, beginning of period |
$ | |||
|
Effect of foreign currency adjustments |
||||
|
Balance, ending of period |
$ | |||
|
8. |
Accrued Expenses and Other Current Liabilities |
Accrued expenses and other current liabilities consist of the following:
|
September 30, |
December 31, |
|||||||
|
2024 |
2023 |
|||||||
|
Compensation and related expenses |
$ | $ | ||||||
|
Professional fees |
||||||||
|
|
||||||||
|
Stock-based compensation |
||||||||
|
Clinical trial costs |
||||||||
|
Income taxes payable |
||||||||
|
Discontinuation of software development project |
||||||||
|
Other |
||||||||
|
Total |
$ | $ | ||||||
|
9. |
Commitments and Contingencies |
In certain of its contracts, the Company warrants to its customers that the products it manufactures conform to the product specifications as in effect at the time of delivery of the specific product. The Company may also warrant that the products it manufactures do not infringe, violate, or breach any U.S. or international patent or intellectual property right, trade secret, or other proprietary information of any third party. On occasion, the Company contractually indemnifies its customers against any and all losses arising out of, or in any way connected with, any claim or claims of breach of its warranties or any actual or alleged defect in any product caused by the negligent acts or omissions of the Company. The Company maintains a products liability insurance policy that limits its exposure to these risks. Based on the Company’s historical activity, in combination with its liability insurance coverage, the Company believes the estimated fair value of these indemnification agreements are immaterial. The Company had accrued warranties as of September 30, 2024 or December 31, 2023 and has no history of claims paid.
The Company is also involved from time-to-time in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material adverse effect on its financial position, results of operations, or cash flow.
|
10. |
Revenue and Geographic Information |
Revenue by product family is as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
OA Pain Management |
$ | $ | $ | $ | ||||||||||||
|
Joint Preservation and Restoration |
||||||||||||||||
|
Non-Orthopedic |
||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Revenue from the Company’s sole significant US customer, J&J Medtech (previously known as DePuy Synthes Mitek Sports Medicine), part of the Johnson & Johnson Medical Companies, as a percentage of the Company’s total revenue was
Total revenue by geographic location based on the location of the customer in total and as a percentage of total revenue were as follows:
|
Three Months Ended September 30, |
||||||||||||||||
|
2024 |
2023 |
|||||||||||||||
|
Percentage of |
Percentage of |
|||||||||||||||
|
Revenue |
Revenue |
Revenue |
Revenue |
|||||||||||||
|
Geographic Location: |
||||||||||||||||
|
United States |
$ |
% |
$ |
% |
||||||||||||
|
Europe |
% |
% |
||||||||||||||
|
Other |
% |
% |
||||||||||||||
|
Total |
$ |
% |
$ |
% |
||||||||||||
|
Nine Months Ended September 30, |
||||||||||||||||
|
2024 |
2023 |
|||||||||||||||
|
Percentage of |
Percentage of |
|||||||||||||||
|
Revenue |
Revenue |
Revenue |
Revenue |
|||||||||||||
|
Geographic Location: |
||||||||||||||||
|
United States |
$ |
% |
$ |
% |
||||||||||||
|
Europe |
% |
% |
||||||||||||||
|
Other |
% |
% |
||||||||||||||
|
Total |
$ |
% |
$ |
% |
||||||||||||
|
11. |
Equity Incentive Plan |
Equity Incentive Plan
The Anika Therapeutics, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”) was approved by the Company’s stockholders on June 13, 2017 and subsequently amended on June 18, 2019, June 16, 2020, June 16, 2021, June 8, 2022 and June 14, 2023. On June 14, 2023, the Company’s stockholders approved an amendment to the 2017 Plan increasing the number of shares by
The Anika Therapeutics, Inc. 2021 Inducement Plan (the “Inducement Plan”) was adopted by the Company’s board of directors on November 4, 2021 and subsequently amended on December 22, 2023 and May 2, 2024. On May 2, 2024, the Company’s board of directors approved an amendment to the Inducement Plan increasing the number of shares by
The Company may satisfy the awards upon exercise, or upon fulfillment of the vesting requirements for other equity-based awards, with either newly issued shares or shares reacquired by the Company. Stock-based awards are granted with an exercise price equal to or greater than the market price of the Company’s stock on the date of grant. Awards contain service conditions or service and performance conditions, and they generally become exercisable ratably over years with a maximum contractual term of years.
The Company presents the expenses related to stock-based compensation awards in the same expense line items as cash compensation paid to each of its employees as follows:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Cost of revenue |
$ | $ | $ | $ | ||||||||||||
|
Research & development |
||||||||||||||||
|
Selling, general & administrative |
||||||||||||||||
|
Total stock-based compensation expense |
$ | $ | $ | $ | ||||||||||||
Stock Options
Stock options are granted to purchase common shares at prices that are equal to the fair market value of the shares on the date the options are granted or, in the case of premium options, are granted with an exercise price at
The following summarizes the activity under the Company’s stock option plans:
|
Weighted |
||||||||||||||||
|
Average |
||||||||||||||||
|
Weighted |
Remaining |
Aggregate |
||||||||||||||
|
Average |
Contractual |
Intrinsic |
||||||||||||||
|
Number of |
Exercise |
Term |
Value |
|||||||||||||
|
Options |
Price |
(in years) |
(in thousands) |
|||||||||||||
|
Outstanding as of December 31, 2023 |
$ | $ | ||||||||||||||
|
Granted |
$ | |||||||||||||||
|
Exercised |
( |
) |
$ | $ | ||||||||||||
|
Forfeited and canceled |
( |
) |
$ | $ | ||||||||||||
|
Outstanding as of September 30, 2024 |
$ | $ | ||||||||||||||
|
Vested, September 30, 2024 |
$ | $ | ||||||||||||||
|
Vested or expected to vest, September 30, 2024 |
$ | $ | ||||||||||||||
The Company uses the Black-Scholes pricing model to determine the fair value of options granted. The calculation of the fair value of stock options is affected by the stock price on the grant date, the expected volatility of the Company’s common stock over the expected term of the award, the expected life of the award, the risk-free interest rate and the dividend yield.
The assumptions used in the Black-Scholes pricing model for options granted during the nine months September 30, 2024 and 2023, along with the weighted-average grant-date fair values, were as follows:
|
Nine Months Ended |
||||||||
|
September 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Risk free interest rate |
% |
% | ||||||
|
Expected volatility |
% |
% | ||||||
|
Expected life (years) |
||||||||
|
Expected dividend yield |
% | % | ||||||
|
Fair value per option |
$ | $ | ||||||
As of September 30, 2024, there was $
Restricted Stock Units
RSUs generally vest in equal annual installments over a -year period. The grant-date fair value of RSUs is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company determines the fair value of RSUs based on the closing price of its common stock on the date of grant.
RSU activity for the nine-month period ended September 30, 2024 was as follows:
|
Weighted |
||||||||
|
Number of |
Average |
|||||||
|
Shares |
Fair Value |
|||||||
|
Outstanding as of December 31, 2023 |
$ | |||||||
|
Granted |
$ | |||||||
|
Vested |
( |
) |
$ | |||||
|
Forfeited and cancelled |
( |
) |
$ | |||||
|
Outstanding as of September 30, 2024 |
$ | |||||||
The weighted-average grant-date fair value per share of RSUs granted was $
The Company’s annual grant of RSU awards in March 2024 can be settled at vesting in cash or shares at the Company’s election. The Company has recorded these RSUs as a liability due to the expectation that the Company will settle the vesting of the March 2024 RSU awards in cash due to a potential shortage of shares in the 2017 Plan at the time of vesting. As a result, these RSUs will be subject to change in value at the time of each reporting period. As of September 30, 2024, the Company had
|
12. |
Income Taxes |
The income tax expense was $
The net change in the effective tax rate for the three- and nine-month periods ended September 30, 2024, as compared to the same periods in 2023, was primarily due to the impact of the valuation allowance in the US in both the current and prior periods and the impact of recording of $
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. The Company has incurred operating losses in recent years. As a result, the Company anticipates that deferred tax assets originating during the year ended December 31, 2024 will exceed the availability of reversing taxable temporary differences. Due to significant negative evidence, including the Company’s prior year operating losses, the Company concluded its anticipated net deferred tax assets in the U.S. are not more likely than not to be realizable. Accordingly, the estimated annual effective tax rate used to compute the income tax provision for the nine-month period ended September 30, 2024 includes an adjustment for the valuation allowance required against the U.S. deferred tax assets. As of September 30, 2024, the Company continues to believe its foreign deferred tax assets are realizable based upon future reversals of existing taxable temporary differences and projected future taxable income.
The Company files income tax returns in the United States on a federal basis, in certain U.S. states, and in certain foreign jurisdictions. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate, which varies by jurisdiction. In September 2024, the Company was notified by the Italian tax authorities that it had selected the Company’s tax returns for its Italian subsidiary for
|
13. |
Earnings Per Share (“EPS”) |
Basic EPS is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic EPS. Diluted EPS is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding share-based awards using the treasury stock method. Due to the Company’s loss position, the share-based payment awards are anti-dilutive.
The Company had a net loss during the three and nine-month periods ended September 30, 2024 and 2023, respectively, and therefore all potential common shares would have been anti-dilutive and accordingly were excluded from the computation of diluted EPS. Stock options of
|
14. |
Share Repurchase |
In May 2024, the Company agreed to implement a share repurchase program for an aggregate purchase price of $
On May 28, 2024, the Company entered into a share repurchase agreement under a Rule 10b5-1 with Bank of America. As of September 30, 2024, the Company had repurchased
|
15. |
Subsequent Event |
On October 31, 2024 (the “Closing Date”), the Company completed the sale of all of the outstanding equity interests (the “Transaction”) of Arthrosurface Incorporated, a Delaware corporation and former wholly-owned subsidiary of the Company (“Arthrosurface”), which held the Company’s Arthrosurface business, to Phoenix Brio, Incorporated, a Delaware corporation (“Buyer”), pursuant to the terms and conditions of a Share Purchase Agreement, dated as of the Closing Date (the “Purchase Agreement”), by and among the Company, Arthrosurface and Buyer (the “Transaction”).
As consideration for the Transaction, at the closing Buyer delivered to the Company a -year non-interest bearing promissory note in the principal amount of $
As a result of the Transaction, the Company tested the assets associated with the Arthrosurface business to determine if the carrying value of the assets at September 30, 2024 were fully recoverable. Given that the expected proceeds from the sale of the Arthrosurface business is expected to be less than the carrying value of its net assets, the Company recorded asset impairment charges totaling $
|
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
You should read the following discussion in conjunction with our financial statements and related notes appearing elsewhere in this report and our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2023, or our 2023 Form 10-K. In addition to historical information, this report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 concerning our business, consolidated financial condition, and results of operations. The Securities and Exchange Commission, or the SEC, encourages companies to disclose forward-looking statements so that investors can better understand a company’s future prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as "will," "likely," "may," "believe," "expect," "anticipate," "intend," "seek," "designed," "develop," "would," "future," "can," "could," and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans, and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements regarding expected future operating results, expectations regarding the timing and receipt of regulatory results, anticipated levels of capital expenditures, and expectations of the effect on our financial condition of claims, litigation, and governmental and regulatory proceedings.
Please also refer to “Item 1A. Risk Factors” of our 2023 Form 10-K for important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written