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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2024

 

 

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 001-14027

 

Anika Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

04-3145961

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

 

32 Wiggins Avenue, Bedford, Massachusetts 01730

(Address of Principal Executive Offices) (Zip Code)

 

(781) 457-9000

(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

Common Stock, par value $0.01 per share

ANIK

NASDAQ Global Select Market

 

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. Yes ☒ No ☐

 

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). Yes ☒ No ☐

 

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 ☐

Accelerated filer

Non-accelerated filer ☐

Smaller reporting

Emerging growth

     

company

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 No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

As of April 30, 2024, there were 14,828,456 outstanding shares of Common Stock, par value $0.01 per share.

 

 

 

 

ANIKA THERAPEUTICS, INC.

TABLE OF CONTENTS

 

   

Page

Part I

Financial Information

3

Item 1.

Condensed Consolidated Financial Statements (unaudited):

3

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

3

 

Condensed Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2024 and 2023

4

 

Condensed Consolidated Statements of Stockholders Equity for the three months ended March 31, 2024 and 2023

5

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

25

Part II

Other Information

25

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

Item 6.

Exhibits

27

Signatures

 

28

 

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, ARTHROSURFACE, 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 licensed to us.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART I:

FINANCIAL INFORMATION

   

ITEM 1.

FINANCIAL STATEMENTS

 

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

 

   

March 31,

   

December 31,

 

ASSETS

 

2024

   

2023

 

Current assets:

               

Cash and cash equivalents

  $ 68,629     $ 72,867  

Accounts receivable, net

    32,077       35,961  

Inventories, net

    49,408       46,386  

Prepaid expenses and other current assets

    8,848       8,095  

Total current assets

    158,962       163,309  

Property and equipment, net

    46,057       46,198  

Right-of-use assets

    28,181       28,767  

Other long-term assets

    17,571       18,672  

Deferred tax assets

    1,273       1,489  

Intangible assets, net

    4,297       4,626  

Goodwill

    7,403       7,571  

Total assets

  $ 263,744     $ 270,632  
                 

LIABILITIES AND STOCKHOLDERS EQUITY

               
                 

Current liabilities:

               

Accounts payable

  $ 10,022     $ 9,860  

Accrued expenses and other current liabilities

    18,438       21,199  

Total current liabilities

    28,460       31,059  

Other long-term liabilities

    404       404  

Lease liabilities

    26,344       26,904  

Commitments and contingencies (Note 9)

           

Stockholders’ equity:

               

Preferred stock, $0.01 par value; 1,250 shares authorized, no shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

    -       -  

Common stock, $0.01 par value; 90,000 shares authorized, 15,009 issued and 14,821 outstanding and 14,848 issued and 14,660 outstanding at March 31, 2024 and December 31, 2023, respectively

    148       147  

Additional paid-in-capital

    91,165       90,009  

Accumulated other comprehensive loss

    (6,315

)

    (5,943

)

Retained earnings

    123,538       128,052  

Total stockholders’ equity

    208,536       212,265  

Total liabilities and stockholders’ equity

  $ 263,744     $ 270,632  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

3

 

 

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share data)

(unaudited)

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

Revenue

  $ 40,523     $ 37,924  

Cost of revenue

    15,895       15,081  

Gross Profit

    24,628       22,843  
                 

Operating expenses:

               

Research and development

    8,164       8,400  

Selling, general and administrative

    21,527       26,996  

Total operating expenses

    29,691       35,396  

Loss from operations

    (5,063

)

    (12,553

)

Interest and other income (expense), net

    592       539  

Loss before income taxes

    (4,471

)

    (12,014

)

Provision for (benefit from) income taxes

    43       (1,664 )

Net loss

  $ (4,514

)

  $ (10,350 )
                 

Net loss per share:

               

Basic

  $ (0.31

)

  $ (0.71 )

Diluted

  $ (0.31

)

  $ (0.71 )
                 

Weighted average common shares outstanding:

               

Basic

    14,698       14,653  

Diluted

    14,698       14,653  
                 

Net loss

  $ (4,514

)

  $ (10,350 )

Foreign currency translation adjustment

    (372 )     272  

Comprehensive loss

  $ (4,886

)

  $ (10,078 )

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

 

 

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except per share data)

(unaudited)

 

   

Three Months Ended March 31, 2024

 
   

Common Stock

           

Accumulated

         
                   

Additional

           

Other

   

Total

 
   

Number of

   

$.01 Par

   

Paid

   

Retained

   

Comprehensive

   

Stockholders'

 
   

Shares

   

Value

   

in Capital

   

Earnings

   

Loss

   

Equity

 

Balance, January 1, 2024

    14,660     $ 147     $ 90,009     $ 128,052     $ (5,943

)

  $ 212,265  

Issuance of common stock for equity awards

    1       -       23       -       -       23  

Vesting of restricted stock units

    250       2       (2

)

    -       -       -  

Stock-based compensation expense

    -       -       3,430       -       -       3,430  

Retirement of common stock for minimum tax withholdings

    (90

)

    (1

)

    (2,295

)

    -       -       (2,296

)

Net loss

    -       -       -       (4,514

)

    -       (4,514

)

Other comprehensive loss

    -       -       -       -       (372 )     (372 )

Balance, March 31, 2024

    14,821     $ 148     $ 91,165     $ 123,538     $ (6,315

)

  $ 208,536  

 

   

Three Months Ended March 31, 2023

 
   

Common Stock

           

Accumulated

         
                   

Additional

           

Other

   

Total

 
   

Number of

   

$.01 Par

   

Paid

   

Retained

   

Comprehensive

   

Stockholders'

 
   

Shares

   

Value

   

in Capital

   

Earnings

   

Loss

   

Equity

 

Balance, January 1, 2023

    14,625     $ 146     $ 81,141     $ 210,719     $ (6,443

)

  $ 285,563  

Issuance of common stock for equity awards

    1       -       7       -       -       7  

Vesting of restricted stock units

    177       2       (2

)

    -       -       -  

Stock-based compensation expense

    -       -       3,717       -       -       3,717  

Retirement of common stock for minimum tax withholdings

    (62

)

    (1 )     (1,620 )     -       -       (1,621 )

Net loss

    -       -       -       (10,350

)

    -       (10,350

)

Other comprehensive income

    -       -       -       -       272       272  

Balance, March 31, 2023

    14,741     $ 147     $ 83,243     $ 200,369     $ (6,171

)

  $ 277,588  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5

 

 

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

Cash flows from operating activities:

               

Net loss

  $ (4,514

)

  $ (10,350

)

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciations

    1,734       1,605  

Amortization of acquisition related intangible assets

    329       1,946  

Non-cash operating lease cost

    565       542  

Stock-based compensation expense

    3,590       3,717  

Deferred income taxes

    193       (2,373 )

Provision for credit losses

    93       24  

Provision for inventory

    2,063       629  

Changes in operating assets and liabilities:

               

Accounts receivable

    3,624       4,057  

Inventories

    (4,090

)

    (3,063

)

Prepaid expenses, other current and long-term assets

    (548 )     (462 )

Accounts payable

    401       (713 )

Operating lease liabilities

    (546

)

    (523 )

Accrued expenses, other current and long-term liabilities

    (3,110

)

    665  

Income taxes

    90       681  

Net cash used in operating activities

    (126

)

    (3,618 )
                 

Cash flows from investing activities:

               

Purchases of property and equipment

    (1,808

)

    (1,389

)

Net cash used in investing activities

    (1,808

)

    (1,389

)

                 

Cash flows from financing activities:

               

Cash paid for tax withheld on vested restricted stock awards

    (2,296

)

    (1,620

)

Proceeds from exercises of equity awards

    23       7  

Net cash used in financing activities

    (2,273 )     (1,613 )
                 

Exchange rate impact on cash

    (31

)

    30  
                 

Decrease in cash and cash equivalents

    (4,238

)

    (6,590

)

Cash and cash equivalents at beginning of period

    72,867       86,327  

Cash and cash equivalents at end of period

  $ 68,629     $ 79,737  

Supplemental disclosure of cash flow information:

               

Non-cash investing activities:

               

Purchases of property and equipment included in accounts payable and accrued expenses

  $ 622     $ 729  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6

 

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.

 

In early 2020, the Company expanded its overall technology platform through its strategic acquisitions of Parcus Medical, LLC (“Parcus Medical”), a sports medicine implant and instrumentation company, and Arthrosurface, Inc. (“Arthrosurface”), a company specializing in less invasive, bone preserving partial and total joint replacement solutions. These acquisitions broadened the Company's product portfolio, developed over its 30 years of expertise in hyaluronic acid technology, into joint preservation and restoration, added higher-growth revenue streams, increased its commercial capabilities, diversified its revenue base, and expanded its product pipeline and research and development expertise.

 

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 or 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-month period ended March 31, 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 March 31, 2024 was its President and Chief Executive Officer. Based on the criteria established by Accounting Standards Codification 280, Segment Reporting, the Company has one operating and reportable segment.

 

7

 

 

 

 

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 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

 
   

March 31,

   

December 31,

 
   

2024

   

2023

 

Accounts Receivable

  $ 33,735     $ 37,580  

Less: Allowance for credit losses

    1,658       1,619  

Net balance, end of period

  $ 32,077     $ 35,961  

 

A summary of activity in the allowance for credit losses is as follows:

 

   

As of March 31,

 
   

2024

   

2023

 

Balance, beginning of the period

  $ 1,619     $ 1,608  

Amounts provided

    185       102  

Amounts recovered

    (92

)

    (78

)

Amounts written off

    (45

)

    (106

)

Translation adjustments

    (9 )     11  

Balance, end of period

  $ 1,658     $ 1,537  

 

8

 

 

 

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 three-month periods ended March 31, 2024 and 2023, respectively.

 

The classification of the Company’s cash equivalents within the fair value hierarchy was as follows:

 

   

March 31,

   

Active
Markets
for Identical
Assets

   

Significant
Other
Observable
Inputs

   

Significant
Unobservable
Inputs

   

Amortized

 
   

2024

   

(Level 1)

   

(Level 2)

   

(Level 3)

   

Cost

 

Cash equivalents:

                                       

Money Market Funds

  $ 52,177     $ 52,177     $ -     $ -     $ 52,177  

 

   

December 31,

   

Active
Markets
for Identical
Assets

   

Significant
Other
Observable
Inputs

   

Significant
Unobservable
Inputs

   

Amortized

 
   

2023

   

(Level 1)

   

(Level 2)

   

(Level 3)

   

Cost

 

Cash equivalents:

                                       

Money Market Funds

  $ 55,485     $ 55,485     $ -     $ -     $ 55,485  

 

 

5. 

Inventories

 

Inventories consist of the following:

 

   

March 31,

   

December 31,

 
   

2024

   

2023

 

Raw materials

  $ 16,264     $ 15,507  

Work-in-process

    17,264       17,002  

Finished goods

    33,048       32,084  

Total

  $ 66,576     $ 64,593  
                 
                 

Inventories

  $ 49,408     $ 46,386  

Other long-term assets

    17,168       18,207  

Total

  $ 66,576     $ 64,593  

 

Inventories are stated net of inventory reserves of approximately $13.6 million and $11.7 million, as of March 31, 2024 and December 31, 2023, respectively.

 

9

 

 

 

6.

Intangible Assets

 

Intangible assets as of March 31, 2024 and December 31, 2023 consisted of the following:

 

                                   

December 31,

         
           

Three Months Ended March 31 , 2024

   

2023

         
           

Less:

                                 
           

Accumulated

                           

Weighted

 
           

Currency

   

Less:

   

Net

           

Average

 
   

Gross

   

Translation

   

Accumulated

   

Book

   

Net Book

   

Useful

 
   

Value

   

Adjustment

   

Amortization

   

Value

   

Value

   

Life

 

Developed technology

  $ 33,061     $ (1,608

)

  $ (29,653 )   $ 1,800     $ 1,973       15  

IPR&D

    2,656       (1,006

)

    -       1,650       1,650    

Indefinite

 

Customer relationships

    3,887       -       (3,542 )     345       360       10  

Distributor relationships

    4,700       (415

)

    (4,285 )     -       -       5  

Patents

    1,000       (189

)

    (740 )     71       83       16  

Tradenames

    4,641       -       (4,210 )     431       560       5  

Total

  $ 49,945     $ (3,218

)

 

$

(42,430 )   $ 4,297     $ 4,626       13  

 

The aggregate amortization expense related to intangible assets was $0.3 million and $1.9 million for the three-month periods ended March 31, 2024 and 2023, respectively.

 

As of March 31, 2024 scheduled amortization of intangible assets for the next five years is as follows:

 

Remainder of 2024

  $ 1,008  

2025

    274  

2026

    160  

2027

    160  

2028

    160  

Thereafter

    886  

Total

  $ 2,648  

 

 

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 three-months ended March 31, 2024 were as follows:

 

   

Three Months Ended
March 31,

 
   

2024

 

Balance, beginning of period

  $ 7,571  

Effect of foreign currency adjustments

    (168 )

Balance, ending of period

  $ 7,403  

 

 

8.

Accrued Expenses and Other Current Liabilities

 

Accrued expenses and other current liabilities consist of the following:

 

   

March 31,

   

December 31,

 
   

2024

   

2023

 

Compensation and related expenses

  $ 8,595     $ 11,828  

Professional fees

    3,434       3,240  

Operating lease liability – current

    2,129       2,133  

Discontinuation of software development project

    1,904       1,904  

Income taxes payable

    1,490       1,240  

Clinical trial costs

    249       460  

Share based compensation

    160       -  

Other

    477       394  

Total

  $ 18,438     $ 21,199  

 

 

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 is immaterial. The Company had no accrued warranties as of March 31, 2024 or December 31, 2023 and has no history of claims paid.

 

10

 

 

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 March 31,

 
   

2024

   

2023

 

OA Pain Management

  $ 24,318     $ 22,633  

Joint Preservation and Restoration

    13,841       13,453  

Non-Orthopedic

    2,364       1,838  
Total   $ 40,523     $ 37,924  

 

Revenue from the Company’s sole significant customer, DePuy Synthes Mitek Sports Medicine, part of the Johnson & Johnson Medical Companies, as a percentage of the Company’s total revenue was 42% and 43% for the three months ended March 31, 2024 and 2023, respectively.

 

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 March 31,

 
   

2024

   

2023

 
           

Percentage of

           

Percentage of

 
   

Revenue

   

Revenue

   

Revenue

   

Revenue

 

Geographic Location:

                               

United States

  $ 29,236       72

%

  $ 27,288       72

%

Europe

    5,969       15

%

    5,662       15

%

Other

    5,318       13

%

    4,974       13

%

Total

  $ 40,523       100

%

  $ 37,924       100

%

 

 

11

 

 

 

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 435,000 shares from 4,850,000 shares to 5,285,000 shares. The 2017 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock awards, performance restricted stock units (“PSUs”), restricted stock units (“RSUs”), total shareholder return options (“TSRs”) and performance options that may be settled in cash, stock, or other property. In accordance with the 2017 Plan approved by the Company’s stockholders, including the amendments thereto, each share award other than stock options or SARs will reduce the number of total shares available for grant by two shares. Subject to adjustment for specified types of changes in the Company’s capitalization, no more than 4.6 million shares of common stock may be issued under the 2017 Plan. There were 0.7 million shares available for future grant at March 31, 2024 under the 2017 Plan.

 

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. On December 22, 2023, the Company’s board of directors approved an amendment to the Inducement Plan increasing the number of shares by 125,000 shares from 125,000 to 250,000 shares. The Inducement Plan reserves 250,000 shares of common stock for issuance pursuant to equity-based awards granted under the Inducement Plan. Such awards may be granted only to an individual who was not previously the Company’s employee or director with the Company. The Inducement Plan provides for the grant of awards under terms substantially similar to the 2017 Plan (as amended). There were 0.1 million shares available for future grant at March 31, 2024 under the Inducement Plan.

 

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 three years with a maximum contractual term of ten 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 (in thousands):

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 
                 

Cost of revenue

 

$

127

   

$

184

 

Research and development

   

531

     

517

 

Selling, general and administrative

   

2,932

     

3,016

 

Total stock-based compensation expense

 

$

3,590

   

$

3,717

 

 

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 110% of the market price of the Company’s common stock on the date of grant. Options generally vest in equal annual installments over a period of three years and expire 10 years after the date of grant. The grant-date fair value of options is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.

 

 

 

 

12

 

 

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

    1,812,729     $ 33.42             $ 127  

Granted

    426,925     $ 27.93                  

Exercised

    (1,089

)

  $ 21.77             $ 4  

Forfeited and canceled

    (26,128

)

  $ 29.99             $ 22  

Outstanding as of March 31, 2024

    2,212,437     $ 32.41       7.8     $ 316  

Vested, March 31, 2024

    1,305,902     $ 35.24       6.8     $ 38  

Vested or expected to vest, March 31, 2024

    2,212,437     $ 32.41       7.8     $ 316  

 

The aggregate intrinsic value of options exercised for the three-month period ended March 31, 2024 was immaterial. The Company granted 426,925 stock options during the three-month ended March 31, 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 three months ended March 31, 2024 and 2023, along with the weighted-average grant-date fair values, were as follows:

 

   

Three Months Ended

 
   

March 31,

 
   

2024

   

2023

 

Risk free interest rate

    3.9

%

    -       4.3

%

    3.5

%

    -       4.3

%

Expected volatility

    46.8

%

    -       48.2

%

    48.7

%

    -       49.4

%

Expected life (years)

            4.5                       4.5          

Expected dividend yield

            0.0 %             0.0 %

Fair value per option

          $ 10.48                     $ 11.71          

 

As of March 31, 2024, there was $9.0 million of unrecognized compensation cost related to unvested stock options. This expense is expected to be recognized over a weighted average period of 2.2 years.

 

Restricted Stock Units

 

RSUs generally vest in equal annual installments over a three-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 three-month period ended March 31, 2024 was as follows:

 

           

Weighted

 
   

Number of

   

Average

 
   

Shares

   

Fair Value

 

Outstanding as of December 31, 2023

    771,358     $ 27.19  

Granted

    405,917     $ 25.44  

Vested

    (249,716

)

  $ 27.82  

Forfeited and cancelled

    (28,611

)

  $ 27.00  

Outstanding as of March 31, 2024

    898,948     $ 26.89  

 

 

13

 

 

The weighted-average grant-date fair value per share of RSUs granted was $25.44 and $26.91 for the three-month periods ended March 31, 2024 and 2023, respectively. The total fair value of RSUs vested was $7.7 million and $5.7 million for the three-month periods ended March 31, 2024 and 2023, respectively.  As of March 31, 2024, there was $8.9 million of unrecognized compensation cost related to time-based RSUs, which was expected to be recognized over a weighted-average period of 1.6 years.

 

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 March 31, 2024, the Company had 405,917 shares outstanding in which a liability of $0.2 million was recorded in Accrued Expenses and Other Liabilities.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

12.

Income Taxes

 

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 income tax benefit 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.

 

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 three-month period ended March 31, 2024 includes an adjustment for the valuation allowance required against the U.S deferred tax assets. As of March 31, 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.

 

 

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-month periods ended March 31, 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 2.2 million shares and 1.9 million shares were outstanding for the three-month periods ended March 31, 2024 and 2023, respectively. Restricted stock units totaling 0.9 million were outstanding for each of the three-month periods ended March 31, 2024 and 2023. These securities were not included in the computation of diluted EPS because the awards’ impact on EPS would have been anti-dilutive.

 

 

 

15

 

 

 

ITEM 2.

MANAGEMENTS 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 companys 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 or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

 

Management Overview

 

We are a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care. Based on our collaborations with clinicians to understand what they need most to treat their patients, we develop minimally invasive products that restore active living for people around the world. We are committed to leading in high opportunity spaces within orthopedics, including OA pain management, regenerative solutions, sports medicine and Arthrosurface joint solutions.

 

We have over thirty years of global expertise developing, manufacturing and commercializing products on our hyaluronic acid, or HA, technology platform. HA is a naturally occurring polymer found throughout the body that is vital for proper joint health and tissue function. Our proprietary technologies for modifying the HA molecule allow product properties to be tailored specifically to multiple uses, including enabling longer residence time to support OA pain management and creating a solid form of HA called Hyaff, which is a platform utilized in our regenerative solutions portfolio.

 

In early 2020, we expanded our overall technology platform, product portfolio, and significantly expanded our commercial infrastructure, especially in the United States, through our strategic acquisitions of Parcus Medical, LLC, or Parcus Medical, a sports medicine and instrumentation solutions provider, and Arthrosurface, Inc, or Arthrosurface, a company specializing in bone preserving partial and total joint replacement solutions. These acquisitions augmented our HA-based OA pain management and regenerative products with a broad suite of products and capabilities focused on early intervention joint preservation primarily in upper and lower extremities such as shoulder, foot/ankle, knee and hand/wrist.

 

16

 

 

As we look forward, our business is positioned to capture value within our target market of joint preservation. We believe our future success will be driven by our:

 

 

Over 30 years of experience in HA-based regenerative solutions and early intervention orthopedics combined with seasoned leadership with a strong financial foundation for future investment in meaningful solutions for our customers and their patients;

     
 

Utilizing HA-based technology and manufacturing expertise to provide new and differentiated solutions in next generation OA Pain Management and regenerative solutions markets;

     
 

Introducing key HA-based products into the US market upon FDA approval/clearance, such as Cingal, Hyalofast and Integrity, our arthroscopic patch system for rotator cuff repair;

     
 

Robust network of stakeholders in our target markets to identify evolving unmet patient treatment needs;

     
 

Global commercial expertise, which we will leverage to drive growth across our product portfolio, including continued international expansion;

     
 

Opportunity to pursue strategic inorganic growth opportunities, including potential partnerships and smaller acquisitions and technology licensing, and leveraging our strong financial foundation and operational capabilities; and

     
 

Energized and experienced team focused on strong values, talent, and culture.

 

Products

 

OA Pain Management

 

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.

 

17

 

 

Joint Preservation and Restoration

 

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.

 

Non-Orthopedic

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

 

Results of Operations

 

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

 

   

Three Months Ended March 31,

 
   

2024

   

2023

   

$ Change

   

% Change

 
   

(in thousands, except percentages)

 

Revenue

  $ 40,523     $ 37,924     $ 2,599       7 %

Cost of revenue

    15,895       15,081       814       5 %

Gross profit

    24,628       22,843       1,785       8 %

Gross margin

    61 %     60 %                

Operating expenses:

                               

Research and development

    8,164       8,400       (236 )     (3 %)

Selling, general and administrative

    21,527       26,996       (5,469 )     (20 %)

Total operating expenses

    29,691       35,396       (5,705 )     (16 %)

Loss from operations

    (5,063 )     (12,553 )     7,490       (60 %)

Interest and other income (expense), net

    592       539       53       10 %

Loss before income taxes

    (4,471 )     (12,014 )     7,543       (63 %)

Provision for (benefit from) for income taxes

    43       (1,664 )     1,707       (103 %)

Net loss

  $ (4,514 )   $ (10,350 )   $ 5,836       (56 %)

 

Revenue

 

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

 

   

Three Months Ended March 31,

 
   

2024

   

2023

   

$ Change

   

% Change

 
   

(in thousands, except percentages)

 

OA Pain Management

  $ 24,318     $ 22,633     $ 1,685       7 %

Joint Preservation and Restoration

    13,841       13,453       388       3 %

Non-Orthopedic

    2,364       1,838       526       29 %
    $ 40,523     $ 37,924     $ 2,599       7 %

 

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.

 

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.

 

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.

 

 

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Gross Profit and Margin

 

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.

 

Research and Development

 

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.

 

Selling, General and Administrative

 

Selling, general and administrative expenses for the three-month period ended March 31, 2024 were $21.5 million, a decrease of $5.5 million, as compared to the same period in 2023. This decrease for the three-month period ended March 31, 2024 was primarily due to $5.0 million of costs incurred during the same quarter last year related to the Parcus Medical unitholder arbitration settlement and other non-recurring corporate costs.

 

Income Taxes

 

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.

 

Net Loss

 

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.

 

Non-GAAP Financial Measures

 

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

 

20

 

 

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. In particular, 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.

 

Adjusted Gross Profit and Adjusted Gross Margin

 

We define adjusted gross profit as our gross profit excluding amortization of certain acquired intangible assets, the impact of inventory fair-value step up associated with our recent acquisitions and certain product rationalization charges. The amortized assets contribute to revenue generation, and the amortization of such assets will likely continue in future periods until such assets are fully amortized. These assets include the fair value of certain identified assets acquired in acquisitions, including developed technology and acquired tradenames. We define adjusted gross margin as adjusted gross profit divided by total revenue.

 

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:

 

   

Three-Month Periods Ended March 31,

 
   

2024

   

2023

 

Gross profit

  $ 24,628     $ 22,843  

Product rationalization charges

    472       -  

Acquisition related intangible asset amortization

    157       1,562  

Adjusted gross profit

  $ 25,257     $ 24,405  

Adjusted gross margin

    62 %     64 %

 

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.

 

Adjusted EBITDA

 

We present information below with respect to adjusted EBITDA, which we define as our net income (loss) excluding interest and other expense, net, income tax benefit, depreciation and amortization, stock-based compensation, and acquisition-related expenses.

 

Adjusted EBITDA is not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net (loss) income, which is the nearest GAAP equivalent. Some of these limitations are:

 

 

adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA;

     
 

we exclude share-based compensation expense from adjusted EBITDA although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position;

 

21

 

 

 

we exclude acquisition related expenses, including, amortization and depreciation of acquired assets in recent acquisitions, and the impact of inventory fair-value step up on cost of revenue;

     
 

the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results;

 

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:

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 
   

(in thousands)

 

Net loss

  $ (4,514 )   $ (10,350 )

Interest and other (income) expense, net

    (592 )     (539 )

Provision for (benefit from) income taxes

    43       (1,664 )

Depreciation and amortization

    1,866       1,764  

Share-based compensation

    3,590       3,717  

Arbitration settlement

    -       3,250  

Product rationalization charges

    472       -  

Acquisition related intangible asset amortization

    197       1,787  

Severance costs

    839       -  

Costs of shareholder activism

    601       831  

Adjusted EBITDA

  $ 2,502     $ (1,204 )

 

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.

 

Adjusted Net Income (Loss) and Adjusted EPS

 

We present information below with respect to adjusted net (loss) income and adjusted EPS. We define adjusted net (loss) income as our net (loss) income excluding amortization and depreciation of acquired assets, share-based compensation, and other non-recurring items, such as product rationalization charges, severance costs and costs of shareholder activism. We define adjusted EPS as GAAP diluted earnings per share excluding the above adjustments to net (loss) income used in calculating adjusted net (loss) income, each on a per share and tax effected basis.

 

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:

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 
   

(in thousands)

 

Net loss

  $ (4,514 )   $ (10,350 )

Product rationalization charges, tax effected

    477       -  

Arbitration settlement, tax effected

    -       2,776  

Share-based compensation, tax effected

    3,624       3,175  

Acquisition related intangible asset amortization, tax effected

    199       1,526  

Severance costs, tax effected

    847       -  

Costs of shareholder activism, tax effected

    607       710  

Adjusted net income (loss)

  $ 1,240     $ (2,163 )

 

22

 

 

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:

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

Diluted loss per share

  $ (0.31 )   $ (0.71 )

Product rationalization charges, tax effected

    0.03       -  

Arbitration settlement, tax effected

    -       0.19  

Share-based compensation, tax effected

    0.25       0.22  

Acquisition related intangible asset amortization, tax effected

    0.02       0.11  

Severance costs, tax effected

    0.06       -  

Costs of shareholder activism, tax effected

    0.04       0.05  

Adjusted diluted earnings (loss) per share

  $ 0.09     $ (0.14 )

 

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.

 

Liquidity and Capital Resources

 

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.

 

On November 12, 2021, we entered into a Third Amendment to Credit Agreement with Bank of America N.A. as administrative agent, which amended our existing revolving line of credit agreement dated October 24, 2017 which provides up to $75.0 million in the form of a senior revolving line of credit. Subject to certain conditions, we may request up to an additional $75.0 million for a maximum aggregate commitment of $150.0 million. As of March 31, 2024, and December 31, 2023, there were no outstanding borrowings, and we are in compliance with the terms of the credit facility.

 

Summary of Cash Flows (in thousands):

 

   

Three Months Ended March 31,

 
   

2024

   

2023

 

Cash provided by (used in)

               

Operating activities

  $ (126 )   $ (3,618 )

Investing activities

    (1,808 )     (1,389 )

Financing activities

    (2,273 )     (1,613 )

Effect of exchange rate changes on cash

    (31 )     30  

Net decrease in cash and cash equivalents

  $ (4,238 )   $ (6,590 )

 

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.

 

Operating Activities

 

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.

 

23

 

 

Investing Activities

 

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.

 

Financing Activities

 

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.

 

Critical Accounting Policies and Estimates

 

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We believe that our accounting policies for revenue recognition, accounts receivable and allowance for credit losses, goodwill, acquired in-process research and development, inventory and contingencies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. There have been no significant changes to the above critical accounting policies or in the underlying accounting assumptions and estimates used in such policies from those disclosed in our annual consolidated financial statements and accompanying notes included in our 2023 Form 10-K for the year ended December 31, 2023. We monitor our estimates on an ongoing basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.

 

Recent Accounting Pronouncements

 

A discussion of Recent Accounting Pronouncements is included in our 2023 Form 10-K for the fiscal year ended December 31, 2023 and is updated in the Notes to the condensed consolidated financial statements included in this report.

 

Contractual Obligations and Other Commercial Commitments

 

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.

 

To the extent that funds generated from our operations, together with our existing capital resources, are insufficient to meet future requirements, we will be required to obtain additional funds through equity or debt financings, strategic alliances with corporate partners and others, or through other sources. No assurance can be given that any additional financing will be made available to us or will be available on acceptable terms should such a need arise.

 

24

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our market risks and the ways we manage them are summarized in the section captioned “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes in the first three months of 2024 to our market risks or to our management of such risks.

 

ITEM 4.

CONTROLS AND PROCEDURES

 

(a) Evaluation of disclosure controls and procedures.

 

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based upon that evaluation, the chief executive officer and chief financial officer have concluded as of March 31, 2024 that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. On an on-going basis, we review and document our disclosure controls and procedures, and our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

 

(b) Changes in internal controls over financial reporting.

 

There were no material changes in our internal control over financial reporting during the quarter ended March 31, 2024, that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

 

PART II:

OTHER INFORMATION

   

ITEM 1.

LEGAL PROCEEDINGS

 

We are 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, we do not expect the resolution of these occasional legal proceedings to have a material adverse effect on our financial position, results of operations, or cash flow. There have been no material changes to the information provided in the section captioned “Part I, Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

ITEM 1A.

RISK FACTORS

 

Except as set forth below, there have been no material changes to the risk factors described in the section captioned “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023. In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section captioned “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may have a material adverse effect on our business, financial condition, and/or operating results.

 

 

25

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Issuer Purchases of Equity Securities

 

In April 2023, we agreed to establish a share repurchase program for an aggregate purchase price of $20.0 million. The first $5.0 million was to be effected through an accelerated stock repurchase program, the second $5.0 million is to be purchased in the open market and the remaining $10.0 million is to be purchased in the open market subject to positive cash flow. On May 12, 2023, we entered into an accelerated share repurchase agreement with Bank of America, N.A. (“Bank of America”) pursuant to a Fixed Dollar Accelerated Share Repurchase Transaction (“ASR Agreement”) to purchase $5.0 million of shares of its common stock. During 2023, we repurchased 188,029 shares at an average purchase price of $26.59 per share.

 

Recent Sales of Unregistered Securities

 

None.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES.

 

Not applicable.

 

 

ITEM 5.

OTHER INFORMATION.

 

Rule 10b5-1 Trading Plans

 

During the fiscal quarter ended March 31, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.

 

 

 

 

26

 

 

 

ITEM 6.

EXHIBITS

 

Exhibit No.

Description

   

3.1

Certificate of Incorporation of Anika Therapeutics, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-14027) filed by the Registrant on June 6, 2018)

   

3.2

Bylaws of Anika Therapeutics, Inc., effective as of June 6, 2018 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K (File No. 001-14027) filed by the Registrant on June 6, 2018)

   

(31)

Rule 13a-14(a)/15d-14(a) Certifications

   

*31.1

Certification of Dr. Cheryl R. Blanchard, pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

   

*31.2

Certification of Michael Levitz, pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

   

(32)

Section 1350 Certifications

   

**32.1

Certification of Dr. Cheryl R. Blanchard, and Michael Levitz, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

   

(101)

XBRL

   

*101

The following materials from Anika Therapeutics, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 as filed with the SEC on May 8, 2024, formatted in Inline XBRL (eXtensible Business Reporting Language), as follows:

 

 

i.

Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023 (unaudited)

     
 

ii.

Condensed Consolidated Statements of Operations and Comprehensive Income for the Three Months Ended March 31, 2024 and March 31, 2023 (unaudited)

     
 

iii.

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and March 31, 2023 (unaudited)

     
 

iv.

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and March 31, 2023 (unaudited)

     
 

v.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

*

Filed herewith.

**

Furnished herewith.

 

 

27

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

ANIKA THERAPEUTICS, INC.

 
   

(Registrant)

 
       

Date: May 8, 2024

By:

/s/ MICHAEL LEVITZ

 
   

Michael Levitz

 
   

Executive Vice President, Chief Financial Officer and Treasurer

   

(Authorized Officer and Principal Financial Officer)

 

 

 

 

 

 

 

 

 

 

 

28