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
Anika Therapeutics, Inc.
(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 | 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 26, 2023, 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, ARTHROSURFACE, CINGAL, HYAFF, 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.
| FINANCIAL INFORMATION |
|
| FINANCIAL STATEMENTS |
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
| September 30, | December 31, | |||||||
| ASSETS | 2023 | 2022 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| 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 | ||||||||
| Deferred tax liability | ||||||||
| Lease liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value; shares authorized, shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | - | |||||||
| Common stock, $ par value; shares authorized, issued and outstanding and shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| 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 September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Revenue |
$ | $ | $ | $ | ||||||||||||
| Cost of revenue |
||||||||||||||||
| Gross Profit |
||||||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
||||||||||||||||
| Selling, general and administrative |
||||||||||||||||
| Total operating expenses |
||||||||||||||||
| Loss from operations |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
| Interest and other income, net |
||||||||||||||||
| Loss before income taxes |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
| 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, 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 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||
| Nine Months Ended September 30, 2022 |
||||||||||||||||||||||||
| Common Stock |
Accumulated |
|||||||||||||||||||||||
| Number of |
$.01 Par |
Additional Paid |
Retained |
Other Comprehensive |
Total Stockholders' |
|||||||||||||||||||
| Shares |
Value |
in Capital |
Earnings |
Loss |
Equity |
|||||||||||||||||||
| Balance, January 1, 2022 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||
| 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, 2022 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||
| Vesting of restricted stock units |
( |
) |
||||||||||||||||||||||
| Issuance of ESPP shares |
||||||||||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
| Net loss |
- | ( |
) |
( |
) |
|||||||||||||||||||
| Other comprehensive loss |
- | ( |
) |
( |
) |
|||||||||||||||||||
| Balance, June 30, 2022 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||
| Vesting of restricted stock units |
||||||||||||||||||||||||
| Stock-based compensation expense |
- | |||||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
| Net loss |
- | ( |
) |
( |
) |
|||||||||||||||||||
| Other comprehensive loss |
- | ( |
) |
( |
) |
|||||||||||||||||||
| Balance, September 30, 2022 |
$ | $ | $ | $ | ( |
) |
$ | |||||||||||||||||
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, | ||||||||
| 2023 | 2022 | |||||||
| 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 |
||||||||
| Stock-based compensation expense |
||||||||
| Deferred income taxes |
( |
) | ( |
) | ||||
| Provision for credit losses |
||||||||
| Provision for inventory |
||||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable, net |
( |
) | ( |
) | ||||
| 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 (used in) provided by operating activities |
( |
) | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| 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 |
||||||||
| Payments made on finance leases |
( |
) | ||||||
| Contingent consideration payout |
( |
) | ||||||
| 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: |
||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities |
$ | |||||||
| 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.
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 solutions provider focused on sports medicine and soft tissue repair, 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 space with higher market potential, added new revenue streams, increased and accelerated 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, 2022 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, 2022. The results of operations for the three-month and nine-month periods ended September 30, 2023 are not indicative of the results to be expected for the year ending December 31, 2023.
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, 2023 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.
| 3. |
Accounts Receivable, net |
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, |
|||||||
| 2023 |
2022 |
|||||||
| 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, |
||||||||
| 2023 |
2022 |
|||||||
| 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, 2023 or 2022.
The classification of the Company’s cash equivalents within the fair value hierarchy was as follows:
| September 30, |
Active |
Significant |
Significant |
Amortized |
||||||||||||||||
| 2023 |
(Level 1) |
(Level 2) |
(Level 3) |
Cost |
||||||||||||||||
| Cash equivalents: |
||||||||||||||||||||
| Money Market Funds |
$ | $ | $ | $ | $ | |||||||||||||||
| December 31, |
Active |
Significant |
Significant |
Amortized |
||||||||||||||||
| 2022 |
(Level 1) |
(Level 2) |
(Level 3) |
Cost |
||||||||||||||||
| Cash equivalents: |
||||||||||||||||||||
| Money Market Funds |
$ | $ | $ | $ | $ | |||||||||||||||
| 5. | Inventories |
Inventories consist of the following:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
| Inventories | $ | $ | ||||||
| Other long-term assets | ||||||||
| Total | $ | $ | ||||||
Inventories are stated net of inventory reserves of approximately $
| 6. |
Intangible Assets, net |
Intangible assets, net as of September 30, 2023 and December 31, 2022 consisted of the following:
| December 31, |
||||||||||||||||||||||||
| Nine Months Ended September 30, 2023 |
2022 |
|||||||||||||||||||||||
| Less: |
||||||||||||||||||||||||
| Accumulated |
Weighted |
|||||||||||||||||||||||
| Currency |
Less: |
Average |
||||||||||||||||||||||
| Gross |
Translation |
Accumulated |
Net Book |
Net Book |
Useful |
|||||||||||||||||||
| Value |
Adjustment |
Amortization |
Value |
Value |
Life |
|||||||||||||||||||
| Developed technology |
$ | $ | ( |
) |
$ | ( |
) |
$ | $ | |||||||||||||||
| IPR&D |
( |
) |
Indefinite |
|||||||||||||||||||||
| Customer relationships |
( |
) |
||||||||||||||||||||||
| Distributor relationships |
( |
) |
( |
) |
||||||||||||||||||||
| Patents |
( |
) |
( |
) |
||||||||||||||||||||
| Tradenames |
( |
) |
||||||||||||||||||||||
| Total |
$ | $ | ( |
) |
$ | ( |
) |
$ | $ | |||||||||||||||
The aggregate amortization expense related to intangible assets was $
| 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, 2023 were as follows:
| Nine Months Ended |
||||
| 2023 |
||||
| Balance, beginning of period |
$ | |||
| Effect of foreign currency adjustments |
( |
) |
||
| Balance, ending of period |
$ | |||
| 8. |
Accrued Expenses |
Accrued expenses consist of the following:
| September 30, |
December 31, |
|||||||
| 2023 |
2022 |
|||||||
| Compensation and related expenses |
$ | $ | ||||||
| Professional fees |
||||||||
| Operating lease liability - current |
||||||||
| Discontinuation of software implementation project |
||||||||
| Income taxes payable |
||||||||
| Clinical trial costs |
||||||||
| 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 is immaterial. The Company had
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.
On October 21, 2021, the Company received notice that the former unitholders of Parcus Medical had filed an arbitration request regarding the earnout provisions of up to $
| 10. | Revenue and Geographic Information |
Revenue by product family is as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| OA Pain Management | $ | $ | $ | $ | ||||||||||||
| Joint Preservation and Restoration | ||||||||||||||||
| Non-Orthopedic | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Effective January 1, 2023, the Company beganto report revenue from product sales to veterinary customers within the Non-Orthopedic product family whereas such revenue had been previously reported within the OA Pain Management product family. Revenue from product sales to veterinary customers amounted to $
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
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, | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| Percentage of | Percentage of | |||||||||||||||
| Revenue | Revenue | Revenue | Revenue | |||||||||||||
| Geographic Location: | ||||||||||||||||
| United States | $ | % | $ | % | ||||||||||||
| Europe | % | % | ||||||||||||||
| Other | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2023 | 2022 | |||||||||||||||
| 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. The Inducement Plan reserves
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 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| 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, 2022 | $ | |||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( | ) | $ | $ | ||||||||||||
| Forfeited and canceled | ( | ) | $ | |||||||||||||
| Outstanding as of September 30, 2023 | $ | $ | ||||||||||||||
| Vested, September 30, 2023 | $ | $ | ||||||||||||||
| Vested or expected to vest, September 30, 2023 | $ | $ | ||||||||||||||
The aggregate intrinsic value of options exercised for the nine-month period ended September 30, 2023 was immaterial. The Company granted
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 ended September 30, 2023 and 2022, along with the weighted-average grant-date fair values, were as follows:
| Nine Months Ended | |||||||||||||||||||||
| September 30, | |||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||
| Risk free interest rate | % | - | % | % | - | % | |||||||||||||||
| Expected volatility | % | - | % | % | - | % | |||||||||||||||
| Expected life (years) | |||||||||||||||||||||
| Expected dividend yield | % | % | |||||||||||||||||||
| Fair value per option | $ | $ | |||||||||||||||||||
As of September 30, 2023, 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, 2023 was as follows:
| Weighted | ||||||||
| Number of | Average | |||||||
| Shares | Fair Value | |||||||
| Outstanding as of December 31, 2022 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited and cancelled | ( | ) | $ | |||||
| Outstanding as of September 30, 2023 | $ | |||||||
The weighted-average grant-date fair value per share of RSUs granted was $
Performance Stock Units
PSU activity for the nine-months ended September 30, 2023 was as follows:
| Number of Shares | Weighted Average Fair Value | |||||||
| Outstanding as of December 31, 2022 | $ | |||||||
| Forfeited and cancelled | ( | ) | $ | |||||
| Outstanding as of September 30, 2023 | $ | |||||||
The total fair value of PSUs vested was $
| 12. | Income Taxes |
The Company recorded an income tax benefit of $
The change in the effective tax rate for the three-months ended September 30, 2023, as compared to the same period in 2022, is primarily due to the valuation allowance recorded against domestic deferred tax assets 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. At December 31, 2022, the Company determined that its domestic deferred tax assets were realizable based upon future reversals of existing taxable temporary differences. The Company expects to incur an operating loss for 2023. As a result, the Company anticipates that deferred tax assets originating during the year ended December 31, 2023 will exceed the availability of reversing taxable temporary differences. Due to significant negative evidence, including the Company’s current and 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- and nine-month periods ended September 30, 2023 includes an adjustment for the valuation allowance required against the U.S deferred tax assets. As of September 30, 2023, 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 in the Company’s foreign jurisdictions.
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. | Share Repurchase |
In April 2023, the Company agreed to establish a share repurchase program for an aggregate purchase price of $
On May 12, 2023, the Company 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 $
| 14. | 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, 2023 and 2022, 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
| 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, 2022, or our 2022 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 the effect of COVID-19 and related impacts on our business, operations, and financial results, 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 2022 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 osteoarthritis, or OA, pain management, regenerative solutions, sports medicine and Arthrosurface joint solutions.
We have over thirty years of global expertise developing, manufacturing and commercializing products with 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 and in multiple forms, 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 have ignited the transformation of our company by augmenting 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.
As we look forward, our business is positioned to capture value within our target markets in joint preservation. We believe our future success will be driven by our:
| ● |
Decades of experience in HA-based regenerative solutions and early intervention orthopedics combined under new seasoned leadership with a strong financial foundation for future investment in meaningful solutions for our customers and their patients; |
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| ● |
Utilizing HA-based technology and manufacturing expertise to provide new and differentiated solutions for the faster growing joint preservation and regenerative medicine markets; |
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| ● |
Introducing key HA-based products into the U.S. market upon FDA approval/clearance, such as Cingal, Hyalofast and Integrity, our HA-based, arthroscopic patch system for rotator cuff repair; |
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| ● |
Robust network of stakeholders in our target markets that will allow us to identify evolving unmet patient treatment needs; |
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| ● |
Prioritized investment in differentiated pipeline of regenerative solutions, bone preserving implants and sports medicine solutions; |
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| ● |
Global commercial expertise, which we will leverage to drive growth across our product portfolio, including an intentional site of care focus in ambulatory surgery centers in the United States and continued international expansion; |
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| ● |
Pursuit of strategic inorganic growth opportunities, including potential partnerships and smaller acquisitions and technology licensing, by leveraging our strong financial foundation and operational capabilities; and |
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| ● |
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 single- and multi-injection, HA-based, high molecular weight viscosupplement 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 over 35 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.
Joint Preservation and Restoration
Our Joint Preservation and Restoration product family consists of: (a) our portfolio of orthopedic regenerative solutions products utilizing HA, including Tactoset, an HA-enhanced injectable bone repair therapy, Hyalofast, a HA-based biodegradable support used for cartilage regeneration currently available outside the United States in over 30 countries, and the planned release in 2024 of the Integrity Implant System, our FDA-cleared HA-based arthroscopic regenerative patch system for rotator cuff repair; (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. Hyvisc was previously reported in the OA Pain Management product family but was reclassified to the Non-Orthopedic product family at the beginning of 2023.
Results of Operations
Three and Nine Months Ended September 30, 2023 Compared to Three and Nine Months Ended September 30, 2022
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
| 2023 |
2022 |
$ Change |
% Change |
2023 |
2022 |
$ Change |
% Change |
|||||||||||||||||||||||||
| (in thousands, except percentages) |
(in thousands, except percentages) |
|||||||||||||||||||||||||||||||
| Revenue |
$ | 41,465 | $ | 40,264 | $ | 1,201 | 3 | % |
$ | 123,691 | $ | 116,614 | $ | 7,077 | 6 | % |
||||||||||||||||
| Cost of revenue |
16,521 | 17,485 | (964 | ) |
(6 | %) |
46,932 | 47,169 | (237 | ) |
(1 | %) |
||||||||||||||||||||
| Gross Profit |
24,944 | 22,779 | 2,165 | 10 | % |
76,759 | 69,445 | 7,314 | 11 | % |
||||||||||||||||||||||
| Gross Margin |
60 | % |
57 | % |
62 | % |
60 | % |
||||||||||||||||||||||||
| Operating expenses: |
||||||||||||||||||||||||||||||||
| Research & development |
7,791 | 7,301 | 490 | |||||||||||||||||||||||||||||