• Total Revenue: $38.8 million, down $2.7 million from Q3 2023.
• OA Pain Management Revenue: $24.4 million, decreased by 2%.
• International OA Pain Sales Growth: 7% increase, with year-to-date growth of 14%.
• Joint Preservation and Restoration Revenue: $12 million, decreased by 11%.
• Regenerative Solutions Growth: 17% year-over-year increase.
• Non-Orthopedic Revenue: $2.4 million, declined by 24%.
• Gross Margin: 4%, down from 60% last year, adjusted gross margin at 65%.
• Operating Expenses: $29.4 million, including $4 million in impairment charges.
• Net Loss: $29.9 million, compared to a net loss of $6.6 million in the prior year.
• Adjusted Net Loss: $3.8 million, down from adjusted net income of $3.3 million.
• Adjusted EBITDA: $5.4 million, up $700,000 from the prior year.
• Operating Cash Flow: $5 million, down from $6.5 million last year.
• Cash and No Debt: Ended the quarter with $62.4 million in cash.
• 2024 Commercial Channel Revenue Growth Guidance: 14 to 19% increase.
• 2024 OEM Channel Revenue Decline Guidance: 8 to 10% decrease.
• 2025 Commercial Channel Revenue Growth Guidance: 12 to 18% increase.
• 2025 OEM Channel Revenue Decline Guidance: 12 to 18% decrease.
• 2024 Adjusted EBITDA Guidance: Between $16 and $18 million.

• Warning! GuruFocus has detected 4 Warning Signs with ANIK.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Anika Therapeutics Inc (NASDAQ:ANIK) announced a strategic shift focusing on its differentiated HA-based products, targeting a $4 billion market in OA pain management and regenerative solutions.
• The company successfully launched Integrity, an HA-based scaffold for tendon repairs, achieving over 40% sequential growth in surgeries and attracting new customers.
• Anika Therapeutics Inc (NASDAQ:ANIK) filed the first module of the PMA for HiloFast, a regenerative cartilage repair solution, with plans to launch in the US by 2026.
• The company made significant progress with Cingal, acquiring the Aristospan NDA, which addresses FDA hurdles and advances the product towards US market entry.
• Anika Therapeutics Inc (NASDAQ:ANIK) expects double-digit revenue growth in its commercial channel, driven by international sales and the strength of its regenerative solutions portfolio.

Negative Points

• Anika Therapeutics Inc (NASDAQ:ANIK) reported a decline in total revenue for the third quarter, primarily due to lower sales from its J&J MedTech partner and softness in certain business segments.
• The company announced a reduction in global headcount from approximately 325 to about 225, reflecting restructuring efforts and divestitures.
• Anika Therapeutics Inc (NASDAQ:ANIK) recorded a significant net loss for the quarter, impacted by lower revenue and impairment charges related to the sale of Arthrosurface.
• The OEM channel is expected to see a revenue decline due to competitive pressures and pricing challenges in the US OA pain management market.
• The company faces ongoing challenges in stabilizing sales and increasing market access for its products sold through J&J, impacting near-term revenue forecasts.

Q & A Highlights

Q: Will the non-orthopedic revenue be part of the commercial channel going forward? A: No, it will be part of the OEM channel, similar to our J&J relationship. The non-orthopedic and J&J will be the primary elements of the OEM channel. - Steve Griffin, Executive Vice President, Chief Financial Officer, Treasurer

Q: Can you provide guidance on gross margins for 2025? A: It's a bit early to provide that guidance as we need to separate out the Arthur Surface and Parkus Medical operations. However, the provided EBITA documents should help you get there. - Steve Griffin, Executive Vice President, Chief Financial Officer, Treasurer

Q: Are you planning to continue investments in the sales force for the commercial channel? A: Yes, we will continue to make investments, focusing on direct sales reps. As we build new products, we will also build the direct sales profile of the commercial channel, which is incorporated in future guidance. - Cheryl Blanchard, President, Chief Executive Officer

Q: What are the primary products in the commercial channel? A: The primary products include Singal International products, Hilo Fast, and Integrity. In the US, it will include the entire regenerative channel, such as Tactus Set and Integrity, along with future product launches. - Cheryl Blanchard, President, Chief Executive Officer

Q: Can you provide the revenue associated with the divested Arthur Surface business? A: The revenue is approximately $25 million annually. - Steve Griffin, Executive Vice President, Chief Financial Officer, Treasurer

Q: What was the total cost of the Arthur Surface acquisition, including earnouts? A: The total cost was around $77 million. - Steve Griffin, Executive Vice President, Chief Financial Officer, Treasurer

Q: Can you provide a sense of the EBITA margins for the J&J US OA business? A: While we can't break out that one customer, the OA pain business, including Monovisc and Orthovisc, has strong 20%+ margins and is highly cash generative. - Steve Griffin, Executive Vice President, Chief Financial Officer, Treasurer

Q: What is the expected outcome for the Parkus Medical asset sale? A: We are just beginning the process and will share more information when available. - Steve Griffin, Executive Vice President, Chief Financial Officer, Treasurer

Q: Does the global headcount reduction from 325 to 225 include Arthur Surface and Parkus Medical? A: Yes, it includes reductions from Arthur Surface, Parkus Medical, and some additional reductions. - Cheryl Blanchard, President, Chief Executive Officer

For the complete transcript of the earnings call, please refer to the full earnings call transcript.