Market Overview

Anika Reports Second Quarter 2018 Financial Results

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Solid Top and Bottom Line Performance with 8% Product Revenue Growth
and $0.68 Diluted EPS

New Leadership Added to Optimize Commercial Reach and Operating
Efficiency

Multiple Initiatives Ongoing to Gain U.S. Regulatory Approval of
CINGAL

Anika
Therapeutics, Inc.
(NASDAQ:ANIK), a global, integrated orthopedic
and regenerative medicines company specializing in therapeutics based on
its proprietary hyaluronic
acid ("HA") technology
, today reported financial results for the
second quarter ended June 30, 2018, along with business progress in the
period.

"Anika's strategic initiatives in the second quarter were focused on
opportunities to accelerate revenue growth in 2019 and beyond," said
Joseph Darling, President and Chief Executive Officer of Anika
Therapeutics. "We strengthened our senior leadership team, increased our
focus on strategic M&A, and began executing on multiple strategies to
gain U.S. regulatory approval of CINGAL. Bringing CINGAL to U.S.
patients and physicians remains one of Anika's top strategic priorities.
We are committed to both maximizing our current business opportunities
and pursuing new growth initiatives to create near- and long-term value
for shareholders."

Second Quarter Financial Results

  • Product revenue increased 8% year-over-year in the second quarter of
    2018, due primarily to higher MONOVISC revenue in the U.S. Global
    MONOVISC revenue increased 26% year-over-year in the second quarter of
    2018.
  • U.S. Viscosupplementation revenue increased $2.3 million
    year-over-year for the second quarter of 2018. International
    Viscosupplementation revenue decreased $0.7 million year-over-year for
    the second quarter of 2018, due primarily to the timing of orders.
    Domestically, ORTHOVISC and MONOVISC maintained the number one
    position in the combined multi- and single-injection segments in the
    second quarter of 2018.
  • Total revenue for the second quarter of 2018 was $30.5 million,
    compared to $33.5 million for the second quarter of 2017. The
    year-over-year decline was due to the achievement of $5.0 million of
    milestone revenue in the second quarter of 2017, as a result of
    MONOVISC reaching $100 million in U.S. end-user sales within a
    consecutive 12-month period.
  • Total operating expenses for the second quarter of 2018 were $19.3
    million, compared to $15.7 million for the second quarter of 2017. The
    increase in total operating expenses was due primarily to product
    revenue growth, increased personnel costs, and expanded worldwide
    commercial initiatives.
  • Net income for the second quarter of 2018 was $10.1 million, or $0.68
    per diluted share, compared to $11.4 million, or $0.76 per diluted
    share, for the second quarter of 2017. The decline in net income was
    due primarily to the increase in operating expenses previously
    discussed.

Recent Business Highlights

  • Announced that initial top-line results for the CINGAL 16-02 clinical
    trial, an active-comparator Phase III study conducted to support U.S.
    approval, did not reach statistical significance, although it did
    maintain the durability of strong pain relief throughout the 26 weeks,
    consistently demonstrating the long-term benefits of CINGAL. The
    magnitude of pain reduction demonstrated incremental improvement
    compared to the previous CINGAL Phase III study, and the duration of
    patient improvement after CINGAL injection was maintained near peak
    levels throughout the 26-week study. Anika has engaged external
    regulatory and legal experts to assist in the strategic approach for
    seeking CINGAL approval in the U.S. market. Anika remains fully
    committed to working closely with regulators to gain U.S. approval of
    CINGAL.
  • Strengthened the senior leadership management team with the newly
    created position of Vice President of International Sales based in
    Europe to maximize sales impact and optimize the Company's commercial
    reach in our foreign markets.
  • Added a new Vice President of Operations to senior leadership team to
    focus on operation efficiency and margin improvements.
  • Redirected internal efforts of Chief Technology and Strategy Officer
    with spear-heading the assessment of strategic M&A opportunities.
  • Completed the Company's $30 million accelerated share repurchase
    program in July, under which Anika repurchased approximately 800,000
    shares of its outstanding common stock.

Full Year 2018 Revised Corporate Outlook
Based on currently
available information, the Company revised its guidance for the full
year of 2018. Anika currently does not expect licensing, milestone and
contract revenue of $5.0 million in 2018. The Company continues to
anticipate product revenue to be flat for the full year of 2018. The
Company continues to expect that it will resume the shipment of products
that were the subject of the previously-disclosed voluntary recall by
the end of this year. Total operating expenses are now expected to be in
the low $90 million range for the full year of 2018, adjusted for the
reduction of CINGAL pre-launch marketing expenses.

Conference Call Information
Anika's management will hold a
conference call and webcast to discuss its financial results and
business highlights tomorrow, Thursday, July 26 at 9:00 am ET. The
conference call can be accessed by dialing 1-855-468-0611 (toll-free
domestic) or 1-484-756-4332 (international). A live audio webcast will
be available in the "Investor
Relations
" section of Anika's website, www.anikatherapeutics.com.
An accompanying slide presentation may also be accessed via the Anika
website. A replay of the webcast will be available on Anika's website
approximately two hours after the completion of the event.

About Anika Therapeutics, Inc.
Anika
Therapeutics, Inc.
(NASDAQ:ANIK) is a global, integrated orthopedic
and regenerative medicines company based in Bedford, Massachusetts.
Anika is committed to improving the lives of patients with degenerative
orthopedic diseases and traumatic conditions with clinically meaningful
therapies along the continuum of care, from palliative pain management
to regenerative tissue repair. The Company has over two decades of
global expertise developing, manufacturing, and commercializing more
than 20 products based on its proprietary hyaluronic
acid (HA) technology
. Anika's orthopedic medicine portfolio includes ORTHOVISC®,
MONOVISC®,
and CINGAL®,
which alleviate pain and restore joint function by replenishing depleted
HA, and HYALOFAST,
a solid HA-based scaffold to aid cartilage repair and regeneration. For
more information about Anika, please visit www.anikatherapeutics.com.

Forward-Looking Statements
The statements made in the
section captioned "Full Year 2018 Revised Corporate Outlook" of this
press release, which are not statements of historical fact, are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements include, but are not
limited to, those relating to the Company's 2018 revenue and total
operating expense expectations and to the Company's timeline to resume
shipping of products that were the subject of the previously-disclosed
voluntary recall. These statements are based upon the current beliefs
and expectations of the Company's management and are subject to
significant risks, uncertainties, and other factors. The Company's
actual results could differ materially from any anticipated future
results, performance, or achievements described in the forward-looking
statements as a result of a number of factors including, but not limited
to, (i) the Company's ability to successfully commence and/or complete
clinical trials of its products on a timely basis or at all; (ii) the
Company's ability to obtain pre-clinical or clinical data to support
domestic and international pre-market approval applications, 510(k)
applications, or new drug applications, or to timely file and receive
FDA or other regulatory approvals or clearances of its products; (iii)
that such approvals will not be obtained in a timely manner or without
the need for additional clinical trials, other testing or regulatory
submissions, as applicable; (iv) the Company's research and product
development efforts and their relative success, including whether we
have any meaningful sales of any new products resulting from such
efforts; (v) the cost effectiveness and efficiency of the Company's
clinical studies, manufacturing operations, and production planning;
(vi) the strength of the economies in which the Company operates or will
be operating, as well as the political stability of any of those
geographic areas; (vii) future determinations by the Company to allocate
resources to products and in directions not presently contemplated;
(viii) the Company's ability to successfully commercialize its products,
in the U.S. and abroad; (ix) the Company's ability to provide an
adequate and timely supply of its products to its customers; and (x) the
Company's ability to achieve its growth targets. Additional factors and
risks are described in the Company's periodic reports filed with the
Securities and Exchange Commission, and they are available on the SEC's
website at
www.sec.gov.
Forward-looking statements are made based on information available to
the Company on the date of this press release, and the Company assumes
no obligation to update the information contained in this press release.

 

Anika Therapeutics, Inc. and Subsidiaries

Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
       
For the Three Months Ended June 30,

For the Six Months Ended June 30,

2018 2017 2018 2017
Product revenue $ 30,542 $ 28,340 $ 51,800 $ 51,721

Licensing, milestone and contract revenue

  6     5,122     12   5,127
Total revenue 30,548 33,462 51,812 56,848
 
Operating expenses:
Cost of product revenue

8,152

6,315 15,996 12,398
Research and development

4,733

4,449 9,895 8,679
Selling, general and administrative   6,417     4,972     22,507   10,039
Total operating expenses   19,302     15,736     48,398   31,116
Income from operations 11,246 17,726 3,414 25,732
Interest and other income, net   290     16     385   74
Income before income taxes 11,536 17,742 3,799 25,806
Provision for income taxes   1,445     6,373     394   8,944
Net income $ 10,091   $ 11,369   $ 3,405 $ 16,862
 
Basic net income per share:
Net income $ 0.69 $ 0.78 $ 0.23 $ 1.16

Basic weighted average common shares outstanding

14,652 14,588 14,666 14,582
Diluted net income per share:
Net income $ 0.68 $ 0.76 $ 0.23 $ 1.12
Diluted weighted average common shares outstanding 14,915 15,044 15,045 15,046
 
 
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
 
June 30, December 31,
ASSETS 2018 2017
Current assets:
Cash and cash equivalents $ 126,047 $ 133,256
Investments 13,250 24,000
Accounts receivable

23,389

23,825
Inventories, net 24,060 22,035

Prepaid expenses and other current assets

  4,245     3,211  
Total current assets

190,991

206,327
Property and equipment, net 55,377 56,183
Other long-term assets 1,157 1,254
Intangible assets, net 9,876 10,635
Goodwill   8,013     8,218  
Total assets $

265,414

  $ 282,617  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $

5,074

$ 6,747
Accrued expenses and other current liabilities  

7,459

    6,326  
Total current liabilities  

12,533

    13,073  
Other long-term liabilities 882 660
Deferred tax liability 5,396 5,393
Commitments and contingencies
Stockholders' equity:

Preferred stock, $0.01 par value; 1,250 shares authorized, no
shares issued and outstanding at June 30, 2018 and December 31,
2017, respectively

- -
Common stock, $0.01 par value; 90,000 shares authorized, 14,584 and
14,688 shares issued and outstanding at June 30, 2018 and December
31, 2017, respectively
146 147
Additional paid-in-capital 48,656 68,617
Accumulated other comprehensive loss (5,115 ) (4,784 )
Retained earnings   202,916     199,511  
Total stockholders' equity   246,603     263,491  
Total liabilities and stockholders' equity $

265,414

  $ 282,617  
 

                 
Anika Therapeutics, Inc. and Subsidiaries
Supplemental Financial Data
 
 
Revenue by Product Line and Product Gross Margin
(in thousands, except percentages)
(unaudited)
 
For the Three Months Ended June 30, For the Six Months Ended June 30,
Product Line: 2018   % 2017   % 2018   % 2017   %
Orthobiologics $ 26,192 86% $ 24,468 86% $ 45,681 88% $ 44,695 86%
Surgical 1,263 4% 1,335 5% 2,509 5% 2,631 5%
Dermal 623 2% 453 2% 83 0% 878 2%

Other

  2,464   8%   2,084   7%   3,527   7%   3,517   7%
Product Revenue $ 30,542   100% $ 28,340   100% $ 51,800   100% $ 51,721   100%
 
Product Gross Profit $

22,390

$ 22,025 $

35,803

$ 39,323
Product Gross Margin 73% 78% 69% 76%
 
 
Product Revenue by Geographic Region
(in thousands, except percentages)
(unaudited)
 

For the Three Months Ended June 30,

For the Six Months Ended June 30,
2018   % 2017   % 2018   % 2017   %
Geographic Region:
United States $ 24,773 81% $ 22,331 79% $ 41,682 81% $ 41,261 80%
Europe 3,498 11% 4,060 14% 5,889 11% 6,889 13%
Other   2,271   8%   1,949   7%   4,229   8%   3,571   7%
Product Revenue $ 30,542   100% $ 28,340   100% $ 51,800   100% $ 51,721   100%

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