Earnings call transcript: Anika Therapeutics Q2 2025 sees stock tumble despite revenue beat

Anika Therapeutics reported its Q2 2025 earnings, revealing a revenue of $28.2 million, slightly surpassing expectations. However, the company posted an earnings per share (EPS) of -$0.13, missing the forecast of -$0.08. The market reacted negatively, with Anika’s stock dropping 23.21% in pre-market trading to $10.5, as investors expressed concerns over the earnings miss despite a slight revenue beat. According to InvestingPro data, while the company has not been profitable over the last twelve months, analysts expect a return to profitability this year with a forecasted EPS of $0.44.

Key Takeaways

• Anika’s Q2 2025 revenue exceeded expectations by $700,000 but still represented an 8% year-over-year decline.
• EPS fell short of forecasts by 62.5%, contributing to a significant drop in stock price.
• The regenerative solutions segment showed robust growth, up 41% year-over-year.
• Operating expenses were reduced by 17%, reflecting cost management efforts.
• The company’s gross margin decreased by 16 percentage points to 51%.

Company Performance

Anika Therapeutics experienced mixed results in Q2 2025. While revenue surpassed expectations, it still represented an 8% decline compared to the same quarter last year. The regenerative solutions segment was a bright spot, growing by 41%, but this was offset by declines in other areas. The company maintained its leadership in the U.S. market for MONOVISC and ORTHOVISC, despite facing pricing pressures in the orthopedic pain management market.

Financial Highlights

• Revenue: $28.2 million, down 8% year-over-year
• Earnings per share: -$0.13, missing the -$0.08 forecast
• Gross margin: 51%, down 16 percentage points from last year
• Operating expenses: Reduced by 17%
• Adjusted EBITDA: Negative $200,000

Earnings vs. Forecast

Anika’s Q2 2025 EPS of -$0.13 fell short of the forecasted -$0.08, resulting in a 62.5% negative surprise. This miss was significant compared to previous quarters, where the company had managed to either meet or narrowly miss expectations. Revenue, however, came in at $28.2 million, slightly above the forecast of $28.15 million, providing a modest positive surprise of 0.25%.

Market Reaction

Following the earnings release, Anika’s stock fell sharply by 23.21% in pre-market trading, reaching $10.5. This decline reflects investor disappointment with the earnings miss, despite the revenue beat. The stock’s performance is now closer to its 52-week low of $8.55, highlighting the market’s cautious sentiment. InvestingPro analysis suggests the stock is currently undervalued, with additional metrics and insights available to subscribers. The company maintains a strong balance sheet with more cash than debt and a healthy current ratio of 5.73, indicating solid short-term liquidity.

Outlook & Guidance

Anika maintained its 2025 adjusted EBITDA guidance of between -3% and +3%. The company expects commercial channel growth of 10-20% in the coming years and projects $3 million in HYALOFAST revenue by 2027. The full market release for HYALOFAST is anticipated in 2028. With a market capitalization of approximately $125 million and an Altman Z-Score of 3.89 indicating financial stability, InvestingPro subscribers can access 8 additional key insights and a comprehensive Pro Research Report, helping investors make more informed decisions about this emerging healthcare player.

Executive Commentary

Dr. Cheryl Blanchard, CEO, emphasized the company’s strategic focus, stating, "Integrity continues to outperform expectations." She also expressed confidence in the company’s data strength and outlined a clear path forward for the CINGAL NDA submission.

Risks and Challenges

• Continued pricing pressures in the orthopedic pain management market could impact margins.
• The company’s gross margin has declined significantly, posing a challenge for profitability.
• Market volatility and investor sentiment remain concerns given the recent stock price drop.
• Regulatory hurdles and clinical trial complexities, particularly with HYALOFAST, could delay product launches.
• The broader economic environment and potential supply chain disruptions may affect operations.

Q&A

During the earnings call, analysts inquired about the complexities of the HYALOFAST trial and the company’s investment strategy in its regenerative portfolio. Executives addressed gross margin expectations and explored potential capacity expansions, providing insights into the company’s future plans.

Full transcript - Anika Therapeutics Inc (ANIK) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to Anika’s Second Quarter Earnings Conference Call. I will now turn the call over to Matt Hall, Director, Corporate Development and Investor Relations. Please proceed.

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: Thank you. Good morning, and thank you

Matt Hall, Director of Corporate Development and Investor Relations, Anika Therapeutics: for joining us for Anika’s second quarter ’20 twenty five conference call and webcast. I’m Matt Hall, Anika’s Director of Corporate Development and Investor Relations. Our earnings press release was issued earlier this morning and is available on our Investor Relations website located at www.anika.com, as are the supplementary PowerPoint slides that will

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: be used for discussion today.

Matt Hall, Director of Corporate Development and Investor Relations, Anika Therapeutics: With me on the call are Doctor. Cheryl Blanchard, President and Chief Executive Officer, and Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, will present our second quarter twenty twenty five financial results and business highlights. Please take a moment and open the slide presentation and refer to slide number two. Before we begin, please understand that certain statements made during the call today constitute forward looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties.

The company’s actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance. In addition, during the call, we may refer to several adjusted or non GAAP financial measures, which may include adjusted EBITDA, adjusted net income from continuing operations, and adjusted earnings per share from continuing operations, which are used in addition to results presented in accordance with GAAP financial measures. We believe that non GAAP measures provide an additional way of viewing aspects of our operations and performance.

But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our second quarter twenty twenty five press release. And now I’d like to turn the call over to our President and CEO, Doctor. Cheryl Blanchard. Cheryl?

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: Thanks, Matt. Good morning, everyone, and thank you for joining us today to discuss Anika’s second quarter twenty twenty five results. Please turn to Slide three. This has been a meaningful quarter for Anika, including a significant clinical update on HYALOFAST. I’ll begin today’s remarks with that important development.

But before I dive in, I want to note that our quarterly performance was in line with expectations, and we remain on track to deliver our full year 2025 guidance. I’ll return to our financial results after walking through the HYALOFAST clinical update. Earlier today, we shared an important announcement on the top line results from our U. S. Pivotal Phase III HYALOFAST clinical trial.

This study, which enrolled its first patient in 2015, is a randomized controlled trial comparing HYALOFAST in combination with autologous bone marrow aspirate concentrate, also called BMAK, to an active comparator as the control arm, a surgical technique called microfracture in the treatment of articular cartilage defects. Superiority between the groups was to be determined with two pre specified co primary endpoints, percent change from baseline to two years in both Coos pain and IKDC function. While HYALOFAST demonstrated consistent improvements in treated patients across all measures of pain and function relative to microfracture, we’re disappointed the study missed on achieving statistical significance on its pre specified co primary endpoints under the original statistical framework. Given the consistently demonstrated improvements over microfracture in this trial and the efficacy of HYALOFAST demonstrated in numerous independent studies outside The U. S, we believe these results reflect limitations in the study context rather than the performance of HYALOFAST itself.

Importantly, we remain highly encouraged by the totality of evidence supporting the product, which I will discuss. As a reminder, HYALOFAST has successfully treated more than 35,000 patients in over 35 countries since its launch in 2009 outside The US. Let me take a moment to dive into more detail on the study results. The trial required randomization to microfracture, which was considered the standard of care when the study was initiated. Microfracture served as the active comparator.

However, over the ten years of trial enrollment, its broad use by surgeons declined significantly and it is no longer regarded as the standard of care for cartilage lesions in most countries, including The US. The study was likely impacted by both a higher subject dropout rate in the microfracture arm and missed visits during COVID, both resulting in missing data. This missing data resulted in a reduced evaluable sample size and complicated the statistical analysis. In accordance with FDA guidelines, Anika statistically imputed missing data, which did not treat withdrawals from the microfracture arm as treatment failures. To be clear, HYALOFAST demonstrated improvements over microfracture, but the study did not achieve statistical significance in the co primary endpoints.

Importantly, we did achieve statistical significance on several key secondary endpoints and other measures, including COOS sports and recreation function, COOS quality of life and total COOS, all of which have served as the basis for FDA approval of the other cartilage repair products available in The US. In addition, because Anika has sold HYALOFAST outside The US for over fifteen years, we have a significant amount of clinical data from a number of independent international clinical studies, including a paper published last year with positive fifteen year outcomes. We believe the totality of the data, including hitting significance on endpoints used for prior FDA approvals, statistically significant responder analyses and multiple independent international studies strongly supports the clinical value of HiloFast as a single stage off the shelf cartilage repair solution. This is especially compelling when compared to the current U. S.

Standard of care that requires two separate surgical procedures. Based on these results, we plan to submit the third and final PMA module on our original schedule in the second half of this year after data analysis has been completed. Once the data analysis is complete, we will provide further disclosure of the data. The submission will include post hoc analyses and additional endpoints that achieved statistical significance in this study that have previously been accepted by the FDA and other approvals, in addition to the robust international data. We remain confident in the strength of our data and look forward to working closely with the agency as they review our application through the breakthrough devices program.

In anticipation of upcoming discussions with the FDA, we are extending our commercial timeline to 2027 to ensure adequate time for a thorough review and dialogue around package. HYALOFAST continues to represent a significant opportunity for Anika to expand our leadership in regenerative solutions and deliver meaningful innovation to patients suffering from cartilage lesions. Turning to CINGAL, I’m pleased to announce that we made meaningful progress during the quarter, advancing the final steps toward NDA filing and remaining on track to initiate the bioequivalence study by year end. As a reminder, this bioequivalence study and the toxicity studies initiated earlier this year address the final requirements before submission. We plan to provide an update on the CINGAL program timing after we start the bioequivalence study.

Next, I’d like to provide an update on INTEGGRITY. I’m pleased to share that INTEGGRITY has already exceeded its full year 2024 performance and is currently on track to more than double in 2025, ahead of original expectations. And Integrity led the 41% growth in regenerative solutions revenue this quarter. This exceptional growth reflects our early positive clinical data, strong market momentum and increasing adoption across a broader base of surgeons. What’s particularly encouraging is that surgeons are not only using Integrity more frequently, but also expanding its application across a wider range of tendon repair procedures.

While the shoulder remains the primary driver of The U. S. Augmentation market, we see meaningful traction in other anatomies, including the hip, knee and ankle, which together represent over $40,000,000 in addressable market opportunity. In other news around Integrity momentum, during the quarter, we received five ten clearance for two new Integrity shapes and sizes that are planned to launch in a limited release by year end. These two new SKUs are designed to support repairs in both insertional and mid substance Achilles tendons, patellar tendon, quadriceps tendon and gluteus medius tendon to name a few.

The revenue contributions of these new shapes and sizes will be modest in the second half of this year as we continue to ramp up production and training activities. However, we expect them to positively impact future commercial sales for this critical product. This expansion further strengthens our ability to penetrate this addressable market and reinforces Integrity’s position as a versatile and scalable regenerative platform. Let me now walk you through the high level financial results for the quarter. I am pleased to report that we delivered financial results in line with expectations as we overcame difficult manufacturing yield challenges at the start of the quarter.

I’m proud of the work that our teams have done to overcome these challenges despite the financial impact that it had in the quarter. Revenue in the quarter was down 8%. However, we continue to demonstrate strength in our commercial channel led by our regenerative solutions offerings, which were up 41%. Our OEM channel, although lower year over year, was in line with our expectations as J and J works to stabilize this important profitable channel for our business. In light of the near term revenue pressure, we have taken proactive steps to reset our operating expense profile, driving a 17% reduction in total operating expenses year over year.

Adjusted EBITDA was roughly flat for the quarter, while we continue to invest in our most promising commercial opportunities. Lastly, I will mention that we have successfully completed the Materials Transition Services activities with respect to the divestitures of both Parkis and Arthrosurface and are now fully focused on our strategy, leveraging our proprietary hyaluronic acid technologies. With that, I’ll now turn the call over to Steve for a detailed review of our financial results.

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: Thank you, Cheryl. Before we dive into the financial results, I want to begin with an update on the production challenges we encountered earlier this quarter. Since April, our teams have successfully resolved the lower production yields and restored output to historic levels. While we experienced reduced shipments in April and May, I want to emphasize that this did not result in any delayed deliveries to patients. Toward the end of the quarter, we were modestly behind on certain international OA pain shipments, which impacted commercial revenue slightly.

However, we expect to fully recover and deliver product for these purchase orders in the third quarter. I’m proud of the cross functional collaboration that enabled us to resolve this issue within the quarter, and we’ve implemented new procedures to help ensure that this disrupt type of disruption does not recur. With that, I’ll now provide financial updates on the quarter. Please refer to slide four of the presentation. In the second quarter, Anika generated $28,200,000 in total revenue, an 8% decline compared to the same period in 2024.

Revenue in our commercial channel, which includes our globally distributed, highly differentiated products, was flat year over year at $11,900,000 However, within this channel, regenerative solutions delivered standout performance, growing 41% year over year, driven by continued momentum in the Integrity Implant System. Importantly, Integrity has now achieved sequential growth for five consecutive quarters, and as of June, we’ve already exceeded full year 2024 revenue for the product, on track to more than double in 2025. This underscores the strength of the platform and the growing demand we are seeing in the market. Offsetting this growth was a 10% decline in international OA pain sales, primarily due to approximately $900,000 in unfilled orders stemming from previously mentioned lower yields, as well as a difficult year over year comparison due to the timing of shipments in Q2 twenty twenty four. Absent the lower yields, we would have expected international OA pain to be flat and the commercial channel to be up approximately 8%.

With yields now fully restored, our teams are working diligently to fulfill backlog distributor orders and expect to recover these orders in the third quarter. Revenue in the OEM channel, which includes our domestic OA pain and non orthopedic products sold under long term agreements, declined 13% in the second quarter to $16,300,000 This performance was in line with our expectations, reflecting continued pressure on demand and pricing for OrthoVisc, as well as lower pricing for MONOVisc, offset partially by higher end user volume. MONOVISC pricing was stronger this quarter due to the timing of contractually obligated payer rebates from J and J, which, as with others in this market, can vary significantly from quarter to quarter. We anticipate a pricing decline in Q3, followed by a modest rebound in the fourth quarter, with no change to our full year pricing outlook. While we do not directly control this channel, we remain actively engaged with our partner to drive for greater price stability and market expansion.

Despite ongoing headwinds, MONOVISC and ORTHOVISC continue to lead The U. S. Market and remain profitable contributors to our business. The remainder of our OEM business, our non orthopedic sales, grew in the quarter due to the timing of customer orders. Second quarter gross margin was 51%, down 16 percentage points from the same period last year.

The primary driver was a one time $3,000,000 charge related to the lower yields of Monobisk and CINGAL in April and May. This charge, largely noncash, represents the full extent of the lower yields and falls within the previously communicated range for the full year impact. Excluding this onetime item, gross margin would have been above 60% for the quarter. In addition, gross margins were impacted by a $3,000,000 year over year decline in MONOVISC and ORTHOVISC sales to J and J, primarily driven by lower pricing that impacts both transfer units and royalties and directly reduces gross profit. With the lower yields now resolved, we expect gross margins to improve in the second half of the year to the 58% to 59% range, as we communicated on our first quarter call.

That said, the combination of reduced high margin J and J revenue and the first half manufacturing challenges will result in a lower overall gross margin for 2025. These dynamics were anticipated and are already reflected in our full year guidance. Turning to operating expenses. Total second quarter OpEx was 18,500,000 down $3,800,000 or 17% compared to the same period last year. Selling, general and administrative expenses declined 22%, while research and development expenses were down 6%.

The $3,000,000 reduction in SG and A was primarily driven by a one time non recurring $1,600,000 expense in 2024 and $1,400,000 in headcount related cost savings actions. As we’ve pivoted the strategic focus of the company, we continue to streamline and optimize our organizational structure to align with our future direction. These actions reflect our commitment to disciplined cost management and to mitigating the impact of revenue pressures, while continuing to invest in areas that support long term growth. Adjusted EBITDA from continuing operations was negative $200,000 in the second quarter, a decline of 4,900,000 compared to the same period in 2024. The decrease was primarily driven by the one time scrap costs for our recent manufacturing challenges, in addition to lower high margin revenue from J and J, partially offset by the meaningful reductions in operating expenses.

Without the one time scrap costs, the company would have generated positive EBITDA in the quarter. Now turning to cash and liquidity. In the second quarter, we used $200,000 in operating cash flow, an improvement compared to the $1,100,000 of cash used in the same period last year. This was driven by stronger working capital management and disciplined cost controls in response to revenue pressures. We invested $1,400,000 in capital expenditures during the quarter, down $2,000,000 year over year due to timing.

These investments are focused on expanding capacity at our Massachusetts manufacturing facility to support anticipated volume growth across Monovisc, CINGAL, Integrity and Hialifast. This will position us well to meet future demand and scale efficiently. We ended the second quarter with $53,000,000 in cash and no debt. Now on slide five, I’ll review our full year financial outlook for 2025. We are maintaining our 2025 full year guidance.

For the full year, we continue to expect our commercial channel to generate between 47,000,000 and $49,500,000 in revenue, representing 12% to 18% growth in 2025. Our OEM channel remains on track to deliver between $62,000,000 and $65,000,000 a range of 16% to 20% decline versus 2024. At the midpoint of down 18%, this range is reflective of higher volumes, but lower pricing for J and J. As a reminder, J and J has full control of sales, marketing and pricing activities for these products in The United States, and Anika receives transfer unit revenue and royalties based on J and J’s end user pricing. Now turning to profitability.

We are maintaining our 2025 adjusted EBITDA guidance range of negative 3% to positive 3%. As a reminder, this range is reflective of three primary impacts, all of which we shared at the end of the first quarter. First, the impacts from lower manufacturing yields and scrap from MONOVISC and CINGAL experienced in the 2025. Second, lower pricing from J and J for MONOVISC and ORTHOVISC. And lastly, the 2025 costs associated with the CINGAL bioequivalence study required for our NDA filing.

As a result of the HYALOFAST clinical trial outcomes, we are revising our long term revenue guidance for the commercial channel to reflect a possible extension of the FDA review process. While we still plan to file the PMA in the 2025, we are now modeling for a twelve month delay in launch timing. As a result, we are updating our commercial channel growth outlook to 10% to 20% in both 2026 and 2027, compared to our prior range of 20% to 30% growth. We currently anticipate a $3,000,000 revenue contribution from HYALOFAST in 2027, with full market release in 2028. These revised projections reflect growth from our already approved products, particularly Integrity, and continued strength in our international OA pain portfolio, both of which have demonstrated strong momentum.

Despite this adjustment, our liquidity remains strong with no need to raise capital, and we remain confident in our ability to execute on our long term strategy. With that, I will now turn the call back over to Cheryl.

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: Thanks, Steve. In closing, we remain confident in the key value drivers of our business. Integrity continues to outperform expectations, and we anticipate double digit organic growth in our commercial channel, consistent with our 2025 guidance. We have a clear path forward to complete the CINGAL NDA submission. And while the HYALOFAST trial did not meet its primary endpoints, we believe the totality of the data supports a viable path to FDA approval.

I want to sincerely thank the entire Anika team for their continued dedication to delivering innovative solutions that improve the lives of patients around the world. And with that, we’ll open up the line for questions. Operator, please proceed.

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number one on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the number two.

Your first question comes from Anderson Shock with B. Riley Securities. Please go ahead.

Anderson Shock, Analyst, B. Riley Securities: Hey, good morning. Thank you for taking our questions and congrats on the strong quarter. So your gross margin guidance of 58% to 59% implies gross margins returning to about 62% to 63% in the back half of the year. I guess, what will drive this sequential improvement?

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: Yeah, I appreciate the question, Anderson. I appreciate the opportunity to clarify. My commentary is specifically 58% to 59% in the second half of the year for the overall margin to be slightly below that on the aggregate for the full year, given the first half dynamics. And I think what gives us that confidence is the fact that a lot of the charges that stemmed from the beginning of this quarter are very much so one time in nature. And when I look at the performance of the business, excluding that, the business performed well in the quarter.

I think one thing that we, you know, are very aware of is the fact that the gross margins for the second quarter, excluding that one time impact, are above 60, and the second half will be slightly below that. A lot of that is driven by the timing or excuse me, the pricing dynamic for J and J on Monovisc and OrthoVisc that we expect in the second half of the year.

Anderson Shock, Analyst, B. Riley Securities: Okay, got it. And then do you have any progress to report on additional OEM partnerships to diversify your OEM revenue away from J and J?

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: Yes. In terms of kind of additional opportunities in the OEM channel, I don’t have anything to report today. That is a topic that we continue to assess. And we have talked about the fact that CINGAL will most likely fit into that OEM channel. And as we make continued progress, really making meaningful progress here this year in getting closer to an NDA filing, that’s certainly a topic that will become probably more visible as we move into the future.

Anderson Shock, Analyst, B. Riley Securities: Okay, got it. And then, I guess, Integrity has demonstrated some really impressive growth in shoulder. How should we think about the expanded market opportunity with the new configurations for foot and ankle and also knee and hip?

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: Yeah, thanks for the question. What we’ve seen with integrity is even with the current sizes that we sell, that the surgeons are so excited about the benefits and features that integrity provides them, especially on kind of the enhanced regenerative capacity and the strength at time zero, even when it’s wet. That in a lot of those other applications that I talked about today, where there’s a real need for additional strength and suture retention strength, they’ve started using existing integrity in those applications, but it wasn’t really fit to purpose from a size and aspect ratio perspective. So they’re excited to start using these new shapes and sizes in those other applications. So I think while we’ve already been serving that additional kind of $40,000,000 addressable market opportunity, we think these new shapes and sizes that are more purpose fit and designed specifically for those anatomic locations will give us an increased opportunity going forward.

And as I mentioned, kind of having a more material impact on our commercial revenue into next year. This year is really around a limited release and getting our feet under us from a manufacturing and training and education and marketing perspective. But we’re excited to get those products out there this year and we have a group of surgeons that are ready to go.

Anderson Shock, Analyst, B. Riley Securities: Okay, got it. Thank you. Then I guess on HaloFast, given the missed primary endpoints, guess what gives you the confidence that the FDA could approve based on secondary endpoints in the international data?

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: Yeah, it’s a great question. So this product falls under the breakthrough device designation and FDA has encouraged us to file all of our data. The study was really primarily impacted by missing data from the complexities of randomizing to that microfracture arm and the change in medical practice that occurred over the time of the trial. And frankly, missed data that occurred during COVID, which the FDA actually put guidance out around because a number of trials were impacted by that dynamic over that time period. So FDA has encouraged us to submit our full data package, including the secondary endpoints that we did hit statistical significance on.

Those secondary endpoints are what got used for other products that are currently approved in The United States. And we have a very complete data package and robust data package of independent studies that were performed from our over fifteen years of clinical experience outside The United States.

Anderson Shock, Analyst, B. Riley Securities: Okay, got it. Thank you for taking our questions.

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: Absolutely, thank you.

Conference Operator: Thank you. The next question comes from Jim Sidoti with Sidoti and Company. Please go ahead.

Jim Sidoti, Analyst, Sidoti and Company: Hi. Good morning. Thanks for taking the questions. With regard to gross margin, how should we think about gross margin going forward as the commercial channel becomes a bigger piece of the revenue pie?

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: Yeah, we haven’t given long term guidance as to where to expect gross margins into the future. But I would say the we have noted that the commercial channel is at a lower gross margin at its current state because of the fact that it includes our international products being sold, and those are generally at a lower price point. I would say, Jim, so in the future, I would expect it to be in and around the range that I’ve shared for the second half. And then there’s sort of two things that are affecting it. One is the growth in the commercial channel, which could be an element that would depress that gross margin over time.

But also the growth in our newest products tend to be at a higher margin, so we’d expect to see that hopefully offset where we’d expect to see the declines from the international growth. So overall, in and around the range for the second half of this year.

Jim Sidoti, Analyst, Sidoti and Company: Okay, but it sounds like as Integrity and hopefully Halifax get into the market that those would be accretive to gross margin.

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: That is correct.

Jim Sidoti, Analyst, Sidoti and Company: Okay. And with regards to CINGAL, you talked about the distribution a little bit. Could you sign a distribution deal prior to release of the product? Or are you going to wait for FDA approval to announce something?

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: Yeah, I’ll tell you on that topic. My focus is in driving as much shareholder value as I can with that incredible product that has very exciting clinical data and a real opportunity in The US market as a next generation osteoarthritis pain product. So the decision around timing for that is really going to be driven around the best way to drive value. The good news is that we are making real progress with the FDA. We’ve got processes ongoing to overcome the final two filing issues and look forward once we begin that bioequivalent study to giving a full update on the timeline of that program.

Jim Sidoti, Analyst, Sidoti and Company: All right. All right. And the last one for me, cash. You don’t give specific guidance on cash flow, but can we assume you’re probably at, in terms of cash on hand, that this is probably a low point for you that at this point, you should start seeing cash on hand start to increase going forward?

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: We haven’t given specifics on a cash balance forecast. I think what we have given some guidance around is that we expect to improvements in operating cash flow. I think, we’ve demonstrated some pretty good controls here as we’ve come through the disposition of two businesses. Jim, the only thing that would cause us to have a lower cash balance would be associated with CapEx investments. So obviously, we’ve been making some strategic investments into our Massachusetts facility here, and that would likely cause us to have a little bit of a lower cash balance into the future.

But, you know, we expect to hopefully offset some of that with some of the growth in operating cash flow.

Jim Sidoti, Analyst, Sidoti and Company: So with regard to capacity, do you think by the end of the year you’ll have sufficient capacity to meet demand for Integrity, Singal, Halifax over the next several years?

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: I think it’s going to be a continued investment that we’re making into our facility. So it’s something we’ll be doing over a period of time. I think the level of CapEx that we forecasted for this year, I think is appropriate for us to be able to meet the ramp for next year. But we’ll be continuing to upgrade equipment, especially in preparation for CINGAL, as volumes for both MONOVISC and CINGAL continue to grow and our crosslink products are a little bit more complicated to make and require more investment.

Jim Sidoti, Analyst, Sidoti and Company: Okay. Alright. Thank you.

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: Of course. Thank you.

Conference Operator: Thanks, Jim. Thank you. The next question comes from Michael Petusky with Barrington Research. Please go ahead.

Anderson Shock, Analyst, B. Riley Securities: Hey, good morning. So, I guess, Cheryl, is there any more detail you can give around sort of the reduced sample size, higher dropout? I think there was maybe 200 patients initially targeted in HYALOFAST trial. I’m just curious, I mean, how many patients did you actually have full data on?

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: Yeah, thanks for the question, Mike. I will tell you that yes, so first of all, you’re right. The study design had us enroll 200 patients. And the dropout occurred differentially in the microfracture arm because of the fact that microfracture really the clinical practice changed. Patients dropped out both before surgery, like before they even got the microfracture surgery, and during the course of the trial, like not coming back for appointments sort of as they progress through the trial.

So it happened in both cases. In terms of the number of patients we have full data on, we have not reported out the details of our full data set yet because our analysis continues. And I mentioned in my prepared comments that as soon as we get the full data analysis completed, that we will provide additional disclosure on that. So more to come on kind of the full data set. We also though did have missing data, as I mentioned, because this trial was run smack through the middle of COVID.

FDA recognized that a lot of clinical trials were impacted by patients not being able to return for follow-up visits. And they actually put out guidance that is helpful to us on how to treat that. So while the study was primarily impacted really in our miss on statistical significance, I would highlight though, that HYALOFAST consistently demonstrated improvements over microfracture in both pain and function. It’s really a miss on statistical significance. And those are the topics that will continue to have ongoing dialogue with FDA.

But FDA has communicated to us to submit the full data package, including all of the analyses, including the additional endpoints that were used for prior approvals, and including all of our fulsome data set that we have from our number of independent studies performed outside The US from the over fifteen years of clinical experience internationally.

Anderson Shock, Analyst, B. Riley Securities: Cheryl, I’m just curious because I know the answer to this. Is it typical for the FDA to sort of say in a case where you’ve sort of missed the primary endpoints, but we really encourage you to submit the full data package? I mean, that just sort of template language that, hey, submit what you have and we’ll take a look? Or is there actually something to be encouraged about in terms of what they’ve said to you regarding that matter?

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: Yeah, I will just communicate to you that they have communicated to us to submit the full data package. They obviously understand that we have missing data. And again, we’re not completely done with our data analysis, which is why we haven’t put actual data out until that’s completed and QC’d, which we will do at the point in time that that’s done. But FDA did communicate to us that they wanted us to submit the full data package, including all of those elements that I described. And to keep in mind, this is a breakthrough device.

Anderson Shock, Analyst, B. Riley Securities: Right, okay. So moving on, Steve, I was curious, in terms of the I think it was something like an incremental $14,000,000 investment that you guys are making in the regenerative portfolio. Is that still holding? Or have you guys maybe shifted that at all given the HYALOFAST news or just generally, your desire to sort of maybe manage this business a little tighter? I’m just curious.

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: It’s a good question. The short answer is it is still on track as a $14,000,000 investment into the business. The news around HiloFast is, you know, it just got unblinded, so this is very new for us. But I would say that in terms of better cost discipline and thinking about where we can make strategic investments that are going to pay off for our long term business, we are constantly doing that, and that is something that we will consistently do. I’m not going to share anything necessarily here, but I would say that we consistently look at where we’re making investments to try and make sure that we’re delivering the most optimal outcome for shareholders.

Anderson Shock, Analyst, B. Riley Securities: Let me just follow-up. Is it possible that 14 and even like going forward, internal investment you plan to make in ’26, is it possible maybe that number is curbed at some point in the second half of this year.

Steve Griffin, Executive Vice President, Chief Financial Officer, and Chief Operating Officer, Anika Therapeutics: Yeah, it’s possible. I mean, I maybe we’ll share more in the future when we get to that point, but it’s possible.

Anderson Shock, Analyst, B. Riley Securities: Okay. All right. Great. And then just last question, I guess, Cheryl, probably bouncing back to you. Terms of integrity, occasionally, you guys have and I may have missed this, forgive me if I missed this, but you occasionally have shared either sort of surgeon adoption commentary or even surgery numbers.

I’m just curious if you have anything to share on that. And forgive me if you mentioned that and I just missed it. Thanks.

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: Yes, I didn’t give an update on surgery numbers because we were really more focused now on what we’re driving from a top line perspective and the fact that we’re on track to really double that business this year. I’m sure as we go forward, we’ll continue to provide those updates. But I think you can just kind of extrapolate that based on the fact that we’re really overachieving, we’re ahead of expectations, and we’re projecting to do a doubling of that business this year.

Anderson Shock, Analyst, B. Riley Securities: All right. Thank you so much.

Dr. Cheryl Blanchard, President and Chief Executive Officer, Anika Therapeutics: You’re welcome. Thank you, Mike.

Conference Operator: Thank you. There are no further questions at this time. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.