Anika Therapeutics
Oct 29, 2014

Anika Therapeutics Reports Third-Quarter 2014 Financial Results

Third-Quarter Total Revenue Grows 24% to $22.1 Million

Earnings per Share Increase to $0.40 from $0.33

BEDFORD, Mass.--(BUSINESS WIRE)-- Anika Therapeutics, Inc. (Nasdaq: ANIK), a leader in products for tissue protection, healing and repair, based on hyaluronic acid (HA) technology, today reported financial results for the quarter ended September 30, 2014.

Management Commentary

"Anika continued to deliver strong financial results this quarter, driven by growing demand for our key viscosupplementation products, Orthovisc® and Monovisc®, as well as our business performance improvement initiatives," said Charles H. Sherwood, Ph.D., President and Chief Executive Officer. "Total revenue increased by 24% and product revenue grew by 29% as compared to the third quarter last year."

"We made solid progress this quarter on our strategy to increase Anika's share of the global viscosupplementation market. Growth in U.S. sales of our flagship multi-injection product, Orthovisc, continued to outpace overall market growth. Our single-injection product, Monovisc, has been steadily gaining domestic market share since its U.S. commercial launch in the second quarter of 2014. Monovisc continues to be very well received by the orthopedic physician community and by patients. The improvements we expect as a result of reimbursement and access to formularies for Monovisc should strengthen our U.S. single-injection market position in the quarters ahead."

"On the research and development front, we further advanced our product pipeline strategy for Cingal® and Hyalofast™. Patient follow-up activities for the Cingal phase III clinical trial were completed in September, and we quickly moved to lock the database and begin final data analysis. During the quarter, we also received encouraging feedback from the FDA related to our proposed investigational device protocol for Hyalofast, which we submitted in June 2014. Planning activities are currently underway for a Hyalofast clinical trial to commence in the second half of 2015."

"Looking ahead to the fourth quarter, we expect continued growth in viscosupplementation patient demand in our U.S. market, and we expect our product revenue to grow faster than the market growth rate. At the same time, revenue for the fourth quarter is expected to fall short of our internal expectations due to partner ordering patterns and weaker than expected international sales. The potential assignment of a unique J-Code for Monovisc from CMS and its related milestone payment, does however, provide revenue upside. Longer term, given the robust demand for our products, as well as the improved efficiencies in our business and our strong product pipeline, Anika is well-positioned for continued revenue growth and profitability," Sherwood concluded.

Revenue

Anika's total revenue for the third quarter of 2014 was $22.1 million, compared with $17.8 million in the third quarter of 2013. Product revenue was $22.0 million, compared with $17.0 million in the third quarter last year. The increases in total revenue and product revenue versus the prior-year period were largely driven by higher domestic and international viscosupplementation product sales.

Product Gross Margin and Operating Expenses

Product gross margin for the third quarter of 2014 improved to 74%, increasing from 68% in the third quarter of 2013. This improvement was driven by a more favorable product mix and increased royalties from the Company's U.S. viscosupplementation products, as well as efficiency gains and cost reductions. Total operating expenses for the third quarter of 2014 were $11.8 million, compared with $10.0 million during the same period a year earlier. Third-quarter research and development expenses were $2.0 million, compared with $1.6 million in the third quarter of 2013. Selling, general and administrative expenses were up 27% from the third quarter of 2013, primarily reflecting increased personnel-related expenses, higher external professional fees and increased corporate governance costs.

Operating and Net Income

Operating income for the third quarter of 2014 was $10.3 million, compared with $7.8 million in the same period in 2013. Net income for the third quarter was $6.2 million, or $0.40 per diluted share, compared with $5.0 million, or $0.33 per diluted share, in the third quarter last year. Operating income, net income and earnings per share were higher year-over-year primarily due to increased product revenue and product gross profit.

Cash and Cash Equivalents

Anika's cash and investments at September 30, 2014 increased to $91.8 million, up from $63.3 million at December 31, 2013. This $28 million increase was driven primarily by higher income from operations, milestone payments earned by the Company, and stock options exercised during the period.

Conference Call Information

Anika will hold a conference call to discuss its financial results, business highlights and financial outlook tomorrow, Thursday, October 30 at 9:00 a.m. ET. In addition, the Company will answer questions concerning business and financial developments and trends, and other business and financial matters affecting the Company, some of the responses to which may contain information that has not been previously disclosed.

To listen to the conference call, dial 855-468-0611 (international callers dial 484-756-4332). In addition, the call will be available through a live audio webcast in the "Investor Relations" section of Anika's website, www.anikatherapeutics.com. An accompanying slide presentation also may be accessed via the Anika Therapeutics website. The call will be archived and accessible on the same website shortly after its conclusion.

About Anika Therapeutics, Inc.

Headquartered in Bedford, Mass., Anika Therapeutics, Inc. develops, manufactures and commercializes therapeutic products for tissue protection, healing, and repair. These products are based on hyaluronic acid (HA), a naturally occurring, biocompatible polymer found throughout the body. Anika's products range from orthopedic/joint health solutions led by Orthovisc® and Monovisc®, treatments for osteoarthritis of the knee; to surgical aids in the anti-adhesion and ophthalmic fields. The Company also offers aesthetic dermal fillers for the correction of facial wrinkles. Anika's Italian subsidiary, Anika Therapeutics S.r.l., provides complementary HA products in orthopedic/joint health and anti-adhesion, as well as therapeutics in areas such as advanced wound treatment and ear, nose and throat care. Its regenerative technology advances Anika's vision to offer therapeutic products and medical solutions that go beyond pain relief to protect and restore damaged tissue.

The statements made in 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 (i) the Company and its partner's ability to successfully complete their plan to commercialize Monovisc in the U.S., including our ability to obtain a unique CMS reimbursement J-Code for Monovisc; (ii) our ability to capitalize on the strengths of our viscosupplementation portfolio; (iii) our ongoing initiatives to improve performance across the business; (iv) our efforts and ability to strengthen and expand our international orthobiologics distribution network; (v) the Company's plans to continue to drive efficiencies in operations and manufacturing; (vi) the prospects for the Company's product pipeline, including viscosupplementation and regenerative product development; (vii) bringing Cingal® and HyalofastTM to market; (viii) our ability to successfully execute our plans and achieve growth targets; (ix) the Company's revenue expectations and projections for the fourth quarter of 2014; (x) our expectations for future growth and profitability improvement in the quarters ahead; and (xi) timing of commencement or completion of clinical trials, as well as the Company's expectations regarding product revenue growth rates as compared to the market. 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 (i) the Company's ability to successfully commence and/or complete clinical trials of its products on a timely basis or at all, obtain pre-clinical or clinical data to support domestic and international pre-market approval applications or 510(k) applications, or timely file and receive FDA or other regulatory approvals or clearances of its products, or 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; (ii) the Company's research and product development efforts and their relative success, including whether the Company has any meaningful sales of any new products resulting from such efforts; (iii) the cost effectiveness and efficiency of our clinical studies, manufacturing operations and production planning; (iv) 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; (v) future determinations by the Company to allocate resources to products and in directions not presently contemplated; (vi) the Company's ability to successfully complete its commercialization plan for Monovisc in the U.S.; (vii) the Company's ability to provide an adequate and timely supply of its products to its customers; (viii) our ability to continue to successfully manage Anika Therapeutics S.r.l.'s business; and (ix) the Company's ability to achieve its growth targets. Certain other factors that might cause the Company's actual results to differ materially from those in the forward-looking statements include those set forth under the headings "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, as well as those described in the Company's other press releases and SEC filings.

 
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
    Three Months Ended September 30,     Nine Months Ended September 30,
2014     2013 2014     2013
Product revenue $ 21,975,312 $ 17,023,346 $ 57,593,873 $ 51,585,242
Licensing, milestone and contract revenue   80,111     731,092     24,746,497     2,244,584  
Total revenue 22,055,423 17,754,438 82,340,370 53,829,826
 
Operating expenses:
Cost of product revenue 5,724,800 5,377,568 15,418,732 16,530,070
Research & development 1,999,867 1,618,012 6,160,740 5,029,974
Selling, general & administrative 4,044,538 3,188,669 11,401,399 10,536,462
Restructuring credits   -     (196,084 )   -     (442,869 )
Total operating expenses   11,769,205     9,988,165     32,980,871     31,653,637  
Income from operations 10,286,218 7,766,273 49,359,499 22,176,189
Interest income (expense), net   9,937     (32,816 )   16,339     (108,755 )
Income before income taxes 10,296,155 7,733,457 49,375,838 22,067,434
Provision for income taxes   4,125,355     2,776,199     18,872,435     8,147,282  
Net income $ 6,170,800   $ 4,957,258   $ 30,503,403   $ 13,920,152  
 
Basic net income per share:
Net income $ 0.42 $ 0.36 $ 2.09 $ 1.03
Basic weighted average common shares outstanding 14,758,781 13,682,449 14,626,933 13,534,334
Diluted net income per share:
Net income $ 0.40 $ 0.33 $ 1.97 $ 0.95
Diluted weighted average common shares outstanding 15,434,875 14,958,965 15,469,237 14,673,879
 
Net income $ 6,170,800 $ 4,957,258 $ 30,503,403 $ 13,920,152
Other comprehensive income (loss)
Unrealized gain on securities, net of tax 431 - 431 -
Foreign currency translation adjustment   (1,679,968 )   916,474     (1,896,823 )   507,119  
Total other comprehensive income (loss)   (1,679,537 )   916,474     (1,896,392 )   507,119  
Comprehensive income $ 4,491,263   $ 5,873,732   $ 28,607,011   $ 14,427,271  
 
 
Anika Therapeutics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
    September 30,     December 31,
2014 2013
ASSETS
Current assets:
Cash and investments $ 91,771,794 $ 63,333,160
Accounts receivable, net of reserves of $546,455 and $593,023 at September 30, 2014 and December 31, 2013, respectively 20,170,095 18,736,845
Inventories 13,582,456 10,996,785
Prepaid and deferred income taxes 2,002,616 659,040
Prepaid expenses and other   1,128,693     865,957  
Total current assets 128,655,654 94,591,787
Property and equipment, at cost 53,379,965 52,413,423
Less: accumulated depreciation   (21,343,322 )   (19,474,712 )
32,036,643 32,938,711
Long-term deposits and other 69,054 69,080
Intangible assets, net 16,033,944 18,998,409
Goodwill   8,702,295     9,443,894  
Total assets $ 185,497,590   $ 156,041,881  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,167,545 $ 2,793,911
Accrued expenses 5,253,693 5,537,881
Deferred revenue 12,885 180,433
Income taxes payable   -     770,276  
Total current liabilities   6,434,123     9,282,501  
Other long-term liabilities 948,858 1,133,544
Long-term deferred revenue 56,573 2,054,941
Deferred tax liability 8,353,531 7,936,864
Commitments and contingencies
Stockholders' equity:

Preferred stock, $.01 par value; 1,250,000 shares authorized, no shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively

- -

Common stock, $.01 par value; 30,000,000 shares authorized, 14,800,453 and 14,289,308 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively

148,004 142,893
Additional paid-in-capital 76,064,383 70,606,031
Accumulated other comprehensive loss (3,595,487 ) (1,699,095 )
Retained earnings   97,087,605     66,584,202  
Total stockholders' equity   169,704,505     135,634,031  
Total liabilities and stockholders' equity $ 185,497,590   $ 156,041,881  
 

 
Anika Therapeutics, Inc. and Subsidiaries
Supplemental Financial Data
Revenue by Product Line and Product Gross Margin
(unaudited)
           
Three Months Ended September 30,
2014

 

2013

% Change
Orthobiologics $ 18,899,873 $ 12,830,566 47 %
Dermal 401,355 267,766 50 %
Surgical 1,452,946 1,136,248 28 %
Ophthalmic 366,138 1,425,609 (74 %)
Veterinary   855,000     1,363,157   (37 %)
Total Product Revenue $ 21,975,312   $ 17,023,346   29 %
 
Product gross profit $ 16,250,512 $ 11,645,778
Product gross margin 74 % 68 %
 
 
Nine Months Ended September 30,
2014

 

2013

% Change
Orthobiologics $ 48,750,277 $ 40,620,339 20 %
Dermal 938,966 1,066,409 (12 %)
Surgical 4,581,496 3,955,134 16 %
Ophthalmic 938,134 2,818,407 (67 %)
Veterinary   2,385,000     3,124,953   (24 %)
Total Product Revenue $ 57,593,873   $ 51,585,242   12 %
 
Product gross profit $ 42,175,141 $ 35,055,172
Product gross margin 73 % 68 %
 
           
Anika Therapeutics, Inc. and Subsidiaries
Supplemental Financial Data
Total Revenue by Geographic Region
(unaudited)
 
Three Months Ended September 30,
2014 2013 % Change
United States $ 18,455,167 $ 14,485,821 27 %
Europe 1,784,414 1,656,656 8 %
Other   1,815,842   1,611,961 13 %
Total $ 22,055,423 $ 17,754,438 24 %
 
 
Nine Months Ended September 30,
2014 2013 % Change
United States $ 72,935,722 $ 42,251,336 73 %
Europe 5,274,071 5,226,619 1 %
Other   4,130,577   6,351,871 (35 %)
Total $ 82,340,370 $ 53,829,826 53 %
 

Anika Therapeutics, Inc.
Charles H. Sherwood, Ph.D., 781-457-9000
President and CEO
or
Sylvia Cheung, 781-457-9000
CFO

Source: Anika Therapeutics, Inc.

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