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; |
|
| ● |
Utilizing HA-based technology and manufacturing expertise to provide new and differentiated solutions for the faster growing joint preservation and regenerative medicine markets; |
|
| ● |
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; |
|
| ● |
Robust network of stakeholders in our target markets that will allow us to identify evolving unmet patient treatment needs; |
|
| ● |
Prioritized investment in differentiated pipeline of regenerative solutions, bone preserving implants and sports medicine solutions; |
|
| ● |
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; |
|
| ● |
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 |
|
| ● |
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 | 7 | % |
25,105 | 20,433 | 4,672 | 23 | % |
||||||||||||||||||||||
| Selling, general & administrative |
24,827 | 21,276 | 3,551 | 17 | % |
75,512 | 61,745 | 13,767 | 22 | % |
||||||||||||||||||||||
| Total operating expenses |
32,618 | 28,577 | 4,041 | 14 | % |
100,617 | 82,178 | 18,439 | 22 | % |
||||||||||||||||||||||
| Loss from operations |
(7,674 | ) |
(5,798 | ) |
(1,876 | ) |
32 | % |
(23,858 | ) |
(12,733 | ) |
(11,125 | ) |
87 | % |
||||||||||||||||
| Interest and other income (expense), net |
635 | 436 | 199 | 46 | % |
1,735 | 378 | 1,357 | 359 | % | ||||||||||||||||||||||
| Loss before income taxes |
(7,039 | ) |
(5,362 | ) |
(1,677 | ) |
31 | % | (22,123 | ) |
(12,355 | ) |
(9,768 | ) |
79 | % |
||||||||||||||||
| Benefit from income taxes |
(463 | ) |
(1,187 | ) |
724 | (61 | )% |
(2,456 | ) |
(2,404 | ) |
(52 | ) |
2 | % |
|||||||||||||||||
| Net loss |
$ | (6,576 | ) |
$ | (4,175 | ) |
$ | (2,401 | ) |
58 | % | $ | (19,667 | ) |
$ | (9,951 | ) |
$ | (9,716 | ) |
98 | % |
||||||||||
Revenue
The following table presents revenue by product family for the three- and nine-month periods ended September 30, 2023 and 2022, respectively, as follows:
| Three Months Ended September 30, |
||||||||||||||||
| 2023 |
2022 |
$ Change |
% Change |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| OA Pain Management |
$ | 24,888 | $ | 24,476 | $ | 412 | 2 | % |
||||||||
| Joint Preservation and Restoration |
13,470 | 11,821 | 1,649 | 14 | % |
|||||||||||
| Non-Orthopedic |
3,107 | 3,967 | (860 | ) |
(22 | %) |
||||||||||
| $ | 41,465 | $ | 40,264 | $ | 1,201 | 3 | % |
|||||||||
| Nine Months Ended September 30, |
||||||||||||||||
| 2023 |
2022 |
$ Change |
% Change |
|||||||||||||
| (in thousands, except percentages) |
||||||||||||||||
| OA Pain Management |
$ | 76,855 | $ | 69,533 | $ | 7,322 | 11 | % |
||||||||
| Joint Preservation and Restoration |
39,583 | 36,055 | 3,528 | 10 | % |
|||||||||||
| Non-Orthopedic |
7,253 | 11,026 | (3,773 | ) |
(34 | %) |
||||||||||
| $ | 123,691 | $ | 116,614 | $ | 7,077 | 6 | % |
|||||||||
Revenue from our OA Pain Management product family increased 2% for the three months ended September 30, 2023, as compared to the same period in 2022, due to growing customer demand, offset by unfavorable strategic partner ordering patterns in the U.S. during the quarter. Revenue from our OA Pain Management product family increased 11% for the nine months ended September 30, 2023, as compared to the same period in 2022, due to growing customer demand and favorable strategic partner ordering patterns.
Revenue from our Joint Preservation and Restoration product family increased 14% and 10%, respectively, for the three- and nine-month periods ended September 30, 2023, as compared to the same period in 2022, due primarily to growing commercial adoption of our newest products and increased commercial focus with our key distributors.
Revenue from our Non-Orthopedic product family decreased 22% and 34%, respectively, for the three- and nine-month periods ended September 30, 2023, as compared to the same period in 2022, primarily due to unfavorable timing of distributor ordering patterns as well as due to end of life of certain legacy products.
Gross Profit and Margin
Gross profit for the three- and nine-month periods ended September 30, 2023 increased $2.1 million and $7.4 million, to $24.9 million and $76.8 million, respectively. Gross profit for the three- and nine-month periods ended September 30, 2022, was $22.8 million and $69.4 million, respectively. The increases in gross profit for the three- and nine-month periods ended September 30, 2023, as compared to the same period in 2022, primarily resulted from revenue growth, favorable product mix and lower inventory reserves in the period.
Gross margin for the three- and nine-month periods ended September 30, 2023 was 60% and 62%, respectively. Gross margin for the three- and nine-month periods ended September 30, 2022 was 57% and 60%, respectively. The increases in gross margin compared to the same periods of the prior year were due primarily to higher revenue, improved production volumes and lower inventory reserves.
Research and Development
Research and development expenses for the three- and nine-month periods ended September 30, 2023 were $7.8 million and $25.1 million, an increase of $0.5 million and $4.7 million respectively as compared to the same periods in 2022. The increase was primarily related to increased costs to comply with growing regulatory requirements globally as well as new product development associated with our research and development pipeline, primarily on Integrity Implant System, our FDA-cleared HA-based, arthroscopic patch system for rotator cuff repair, which we expect to launch in early 2024. This increase was offset somewhat by lower spending on clinical trials due to the completion of the Cingal phase III pivotal trial in late 2022.
Selling, General and Administrative
Selling, general and administrative expenses for the three- and nine-month periods ended September 30, 2023 were $24.8 million and $75.5 million representing an increase of $3.6 million and $13.8 million, respectively, as compared to the same periods in 2022. This increase for the three-months ended September 30, 2023 was primarily the result of charges totaling $4.5 million during the quarter associated with the discontinuation of a software development project. This increase for the nine-months ended September 30, 2023 was primarily due to $13.0 million of non-recurring costs incurred during 2023 related to the Parcus Medical unitholder arbitration settlement, shareholder activism, discontinuation of a software development project and other non-recurring corporate costs. The growth in SG&A expenses also was due to commissions on increased sales.
Income Taxes
The Company recorded an income tax benefit of $0.5 million and $2.5 million for the three- and nine-month periods ended September 30, 2023, resulting in effective tax rates of 6.6% and 11.1%, respectively. The income tax benefit was $1.2 million and $2.4 million for the three- and nine-month periods ended September 30, 2022, resulting in effective tax rates of 22.1% and 19.5%, respectively.
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 $1.1 million for the three-months ended September 30, 2023. The change in the effective tax rate for the nine-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 $2.3 million for the nine-months ended September 30, 2023, partially offset by a discrete charge of $0.7 million related to non-deductible stock compensation during the nine-months ended September 30, 2022.
Net Loss
For the three- and nine-month periods ended September 30, 2023, net loss was $6.6 million and $19.7 million, or $0.45 per diluted share and $0.29 per diluted share, respectfully, compared to net loss of $4.2 million and $10.0 million, or $0.29 per diluted share and $0.68 per diluted share, for the same periods in prior year. The increase in net loss and diluted loss per share for the nine-months ended September 30, 2023 was primarily due to the non-recurring expenses related to the Parcus Medical arbitration settlement, shareholder activism, discontinuation of a software development project and other non-recurring corporate costs.
Non-GAAP Financial Measures
We present certain information with respect to adjusted gross profit and adjusted gross margin, adjusted Earnings Before Interest, Tax, Depreciation and Amortization, or EBITDA, adjusted net income (loss), adjusted diluted earnings per share or adjusted EPS, which are financial measures not based on any standardized methodology prescribed by accounting principles generally accepted in the United States, or U.S. GAAP, and is not necessarily comparable to similarly titled measures presented by other companies.
We have presented adjusted gross profit and adjusted gross margin, adjusted EBITDA, adjusted net income (loss), adjusted EPS, because they are key measures used by our management and board of directors to understand and evaluate our operating performance and to develop operational goals for managing our business. We believe these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. In particular, we believe that the exclusion of these items in calculating these measures can provide a useful tool for period-to-period comparisons of our core operating performance. Accordingly, we believe that these measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by our management in their financial and operational decision-making.
Adjusted Gross Profit and Adjusted Gross Margin
We define adjusted gross profit as our gross profit excluding amortization of certain acquired intangible assets, the impact of inventory fair-value step up associated with our recent acquisitions and certain product rationalization charges. The amortized assets contribute to revenue generation, and the amortization of such assets will likely continue in future periods until such assets are fully amortized. These assets include the fair value of certain identified assets acquired in acquisitions, including developed technology and acquired tradenames. We define adjusted gross margin as adjusted gross profit divided by total revenue.
The following is a reconciliation of GAAP gross profit to Non-GAAP adjusted gross profit for the three- and nine-month periods ended September 30, 2023 and 2022, respectively:
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Gross profit |
$ | 24,944 | $ | 22,779 | $ | 76,759 | $ | 69,445 | ||||||||
| Product rationalization related charges |
748 | 2,636 | 748 | 2,636 | ||||||||||||
| Acquisition related intangible asset amortization |
1,561 | 1,562 | 4,684 | 4,686 | ||||||||||||
| Adjusted gross profit |
$ | 27,253 | $ | 26,977 | $ | 82,191 | $ | 76,767 | ||||||||
| Adjusted gross margin |
66 | % |
67 | % |
66 | % |
66 | % |
||||||||
Adjusted gross profit for the three- and nine-month periods ended September 30, 2023 increased $0.3 million and $5.4 million to $27.3 million and $82.2 million, respectively, representing adjusted gross margin of 66% and 66%, respectively. Adjusted gross profit for the three- and nine-month periods ended September 30, 2022 was $27.0 million and $76.8 million, respectively, or adjusted gross margin of 67% and 66%, respectively. Adjusted gross margin for the three- and nine-month periods ended September 30, 2023 were largely in line with the same periods in 2022, as the benefit of revenue growth, favorable product mix and improved production volumes in 2023 were offset by higher material and manufacturing overhead costs.
Adjusted EBITDA
We present information below with respect to adjusted EBITDA, which we define as our net income (loss) excluding interest and other expense, net, income tax benefit, depreciation and amortization, stock-based compensation, and acquisition-related expenses.
Adjusted EBITDA is not prepared in accordance with U.S. GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net (loss) income, which is the nearest U.S. GAAP equivalent. Some of these limitations are:
| ● |
adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA; |
|
| ● |
we exclude stock-based compensation expense from adjusted EBITDA although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position; |
| ● |
we exclude acquisition related expenses, including, amortization and depreciation of acquired assets in recent acquisitions, and the impact of inventory fair-value step up on cost of revenue; |
|
| ● |
we exclude certain other non-recurring expenses, such as the arbitration settlement with Parcus Medical, costs associated with shareholder activism and discontinuation of a software development project; |
|
| ● |
the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results; |
The following is a reconciliation of GAAP Net loss to Non-GAAP Adjusted EBITDA for the three- and nine-month periods ended September 30, 2023 and 2022, respectively:
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Net loss |
$ | (6,576 | ) |
$ | (4,175 | ) |
$ | (19,667 | ) |
$ | (9,951 | ) |
||||
| Interest and other expense, net |
(635 | ) |
(436 | ) |
(1,735 | ) |
(378 | ) |
||||||||
| Benefit from income taxes |
(463 | ) |
(1,187 | ) |
(2,456 | ) |
(2,404 | ) |
||||||||
| Depreciation and amortization |
1,755 | 1,549 | 5,282 | 4,980 | ||||||||||||
| Share-based compensation |
3,561 | 3,876 | 11,428 | 10,502 | ||||||||||||
| Product rationalization |
748 | 2,636 | 748 | 2,636 | ||||||||||||
| Arbitration settlement |
- | - | 3,250 | - | ||||||||||||
| Acquisition related intangible asset amortization |
1,787 | 1,787 | 5,361 | 5,361 | ||||||||||||
| Discontinuation of software development project |
4,473 | - | 4,473 | - | ||||||||||||
| Costs of shareholder activism |
- | - | 3,033 | - | ||||||||||||
| Adjusted EBITDA |
$ | 4,650 | $ | 4,050 | $ | 9,717 | $ | 10,746 | ||||||||
Adjusted EBITDA in the three-month period ended September 30, 2023 increased $0.6 million as compared with the same period in 2022. The increase in adjusted EBITDA for the period was primarily due to overall business growth.
Adjusted EBITDA for the nine-month period ended September 30, 2023, decreased $1.0 million as compared with the same period in 2022. The decrease in adjusted EBITDA for the period was due to $2.2 million of certain non-recurring corporate costs incurred during the first half of 2023 offset in part by overall business growth.
Adjusted Net (Loss) Income and Adjusted EPS
We present information below with respect to adjusted net (loss) income and adjusted EPS. We define adjusted net (loss) income as our net (loss) income excluding amortization and depreciation of acquired assets, the impact of inventory fair-value step up on cost of revenue and changes in the fair value of contingent consideration, on a tax effected basis. The amortized assets contribute to revenue generation, and the amortization of such assets will recur in future periods until such assets are fully amortized. These assets include the estimated fair value of certain identified assets acquired in acquisitions, including in-process research and development, developed technology, customer relationships and acquired tradenames. We define adjusted EPS as U.S. GAAP diluted earnings per share excluding the above adjustments to net (loss) income used in calculating adjusted net (loss) income, each on a per share and tax effected basis.
The following is a reconciliation of GAAP Net Loss to Non-GAAP Adjusted net (loss) income to net (loss) income for the three- and nine-month periods ended September 30, 2023 and 2022, respectively:
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Net loss |
$ | (6,576 | ) |
$ | (4,175 | ) |
$ | (19,667 | ) |
$ | (9,951 | ) |
||||
| Product rationalization, tax effected |
699 | 2,056 | 665 | 1,947 | ||||||||||||
| Arbitration settlement, tax effected |
- | - | 2,889 | - | ||||||||||||
| Acquisition related intangible asset amortization, tax effected |
1,669 | 1,394 | 4,767 | 3,960 | ||||||||||||
| Discontinuation of software development project, tax effected |
4,179 | - | 3,976 | - | ||||||||||||
| Costs of shareholder activism, tax effected |
- | - | 2,696 | - | ||||||||||||
| Adjusted net loss |
$ | (29 | ) |
$ | (725 | ) |
$ | (4,674 | ) |
$ | (4,044 | ) |
||||
The following is a reconciliation of GAAP Diluted loss per share (EPS) to Non-GAAP Adjusted diluted earnings (loss) per share EPS for the three- and nine-month periods ended September 30, 2023 and 2022, respectively:
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Diluted loss per share (EPS) |
$ | (0.45 | ) |
$ | (0.29 | ) |
$ | (1.34 | ) |
$ | (0.68 | ) |
||||
| Product rationalization, tax effected |
0.05 | 0.14 | 0.05 | 0.13 | ||||||||||||
| Arbitration settlement, tax effected |
- | - | 0.20 | - | ||||||||||||
| Acquisition related intangible asset amortization, tax effected |
0.11 | 0.10 | 0.32 | 0.27 | ||||||||||||
| Discontinuation of software development project, tax effected |
0.29 | - | 0.27 | - | ||||||||||||
| Cost of shareholder activism, tax effected |
- | - | 0.18 | - | ||||||||||||
| Adjusted diluted earnings (loss) per share (EPS) |
$ | 0.00 | $ | (0.05 | ) |
$ | (0.32 | ) |
$ | (0.28 | ) |
|||||
Adjusted net loss and adjusted diluted earnings (loss) per share in the three-month period ended September 30, 2023 decreased $0.7 million and $0.05, respectively, as compared with the same period in 2022. The decrease in adjusted net loss for the period was primarily due to overall business growth.
Adjusted net loss and adjusted diluted income (loss) per share in the nine-month period ended September 30, 2023, increased $0.7 million or $0.04, as compared with the same period in 2022. The increase in adjusted net loss for the period was due to certain non-recurring corporate costs incurred during the first half of 2023 offset by overall business growth.
Liquidity and Capital Resources
We require cash to fund our operating activities and to make capital expenditures and other investments in the business. We expect that our requirements for cash to fund these uses will increase as our operations expand. We believe that our operating cash flows, cash currently on our condensed consolidated balance sheet and availability under our credit facility will be sufficient to allow us to continue to invest in our existing business, to manage our capital structure on a short and long-term basis, and to meet our anticipated operating cash needs. Cash and cash equivalents aggregated $70.7 million and $86.3 million, and working capital totaled $128.7 million and $141.6 million, at September 30, 2023 and December 31, 2022, respectively.
On November 12, 2021, we entered into a Third Amendment to Credit Agreement with Bank of America N.A. as administrative agent, which amended our existing revolving line of credit agreement dated October 24, 2017 which provides up to $75.0 million in the form of a senior revolving line of credit. Subject to certain conditions, we may request up to an additional $75.0 million for a maximum aggregate commitment of $150.0 million. As of September 30, 2023, and December 31, 2022, there were no outstanding borrowings, and we are in compliance with the terms of the credit facility.
Summary of Cash Flows (in thousands):
| Nine Months Ended September 30, |
||||||||
| 2023 |
2022 |
|||||||
| Cash provided by (used in) |
||||||||
| Operating activities |
$ | (5,426 | ) |
$ | 3,928 | |||
| Investing activities |
(3,587 | ) |
(4,957 | ) |
||||
| Financing activities |
(6,666 | ) |
(5,519 | ) |
||||
| Effect of exchange rate changes on cash |
3 | (61 | ) |
|||||
| Net decrease in cash and cash equivalents |
$ | (15,676 | ) |
$ | (6,609 | ) |
||
The following changes contributed to the net change in cash and cash equivalents in the nine-month period ended September 30, 2023 as compared to the same period in 2022.
Operating Activities
Cash used in operating activities was $5.4 million for the nine-month period ended September 30, 2023, as compared to cash provided by operating activities of $3.9 million for the same period in 2022. The increase in cash used in operating activities in 2023 was primarily due payment of $8.5 million in non-recurring costs incurred during the first half of 2023 related to the Parcus Medical unitholder arbitration settlement, shareholder activism and other non-recurring corporate costs.
For the foreseeable future, we expect to continue to invest in research and development as well as our commercial and operational infrastructure to support our growth strategy. These costs will be funded with a combination of cash on hand and cash expected to be generated from future operations.
Investing Activities
Cash used in investing activities was $3.6 million for the nine-month period ended September 30, 2023, as compared to $5.0 million for the same period in 2022. The change was primarily due to a decrease in capital expenditures related to software development that occurred in 2022.
Financing Activities
Cash used in financing activities was $6.7 million for the nine-month period ended September 30, 2023, as compared $5.5 million for the same period in 2022. The increase in cash used in financing activities was primarily attributable to the repurchase of common stock for $5.0 million during the three-months ended June 30, 2023.
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We believe that our accounting policies for revenue recognition, accounts receivable and allowance for credit losses, goodwill, acquired in-process research and development, inventory and contingencies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. There have been no significant changes to the above critical accounting policies or in the underlying accounting assumptions and estimates used in such policies from those disclosed in our annual consolidated financial statements and accompanying notes included in our 2022 Form 10-K for the year ended December 31, 2022. We monitor our estimates on an ongoing basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.
Recent Accounting Pronouncements
A discussion of Recent Accounting Pronouncements is included in our 2022 Form 10-K for the fiscal year ended December 31, 2022 and is updated in the Notes to the condensed consolidated financial statements included in this report.
Contractual Obligations and Other Commercial Commitments
Our contractual obligations and other commercial commitments are summarized in the section captioned “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations and Other Commercial Commitments” in our 2022 Form 10-K for the year ended December 31, 2022. There were no material changes to our contractual obligations reported in our 2022 Form 10-K during the nine months ended September 30, 2023. For additional discussion, see Note 9 to the condensed consolidated financial statements included in this report.
To the extent that funds generated from our operations, together with our existing capital resources, are insufficient to meet future requirements, we will be required to obtain additional funds through equity or debt financings, strategic alliances with corporate partners and others, or through other sources. No assurance can be given that any additional financing will be made available to us or will be available on acceptable terms should such a need arise.
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Our market risks and the ways we manage them are summarized in the section captioned “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes in the first nine months of 2023 to our market risks or to our management of such risks.
| CONTROLS AND PROCEDURES |
(a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based upon that evaluation, the chief executive officer and chief financial officer have concluded as of September 30, 2023 that our disclosure controls and procedures were not effective because of the material weaknesses in our internal control over financial reporting that were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).
(b) Changes in internal controls over financial reporting.
There were no material changes in our internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
We are in the process of remediating the material weaknesses in our internal control over financial reporting as noted in Part II, Item 9A of the 2022 Form 10-K. We have undertaken a number of measures designed to directly address, or contribute to, the remediation of our material weaknesses and the enhancement of our internal control over financial reporting including establishment of additional review procedures and monitoring activities at a centralized level in order to verify that process level controls are present and functioning as designed. In addition, we have begun training finance personnel on internal control over financial reporting, the importance of monitoring control activities, and fraud risk assessment. The material weaknesses will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
| OTHER INFORMATION |
|
| LEGAL PROCEEDINGS |
For a discussion of material pending legal proceedings, please read Note 9, Commitments and Contingencies, to our condensed consolidated financial statements included in Part I, Item I, “Financial Statements (Unaudited),” of this Quarterly Report on Form 10-Q, which is incorporated into this item by reference.
| RISK FACTORS |
There have been no material changes to the risk factors described in the section captioned “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, as amended and supplemented by the information in “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2023 and June 30, 2023. In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section captioned “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022 and in “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2023, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report on Form 10-K and such subsequently filed Quarterly Report on Form 10-Q are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may have a material adverse effect on our business, financial condition, and/or operating results.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Issuer Purchases of Equity Securities
Under our equity compensation plans, and subject to the specific approval of the Compensation Committee of our Board of Directors, grantees have the option of electing to satisfy tax withholding obligations at the time of vesting or exercise by allowing us to withhold shares of stock otherwise issuable to the grantee. During the three-month period ended September 30, 2023, there were no shares withheld to satisfy grantee tax withholding obligations on restricted stock award vesting events.
Following is a summary of stock repurchases for the three-month period ended September 30, 2023 (in thousands, except share and per share data):
| Period |
Total Number of |
Average |
Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs |
|||||||||
| July 1 to 31, 2023 |
29,046 | $ | 26.59 | $ | 20,000 | |||||||
| August 1 to 31, 2023 |
0 | $ | - | $ | 15,000 | |||||||
| September 1 to 30, 2023 |
0 | $ | - | $ | 15,000 | |||||||
| Total |
29,046 | |||||||||||
| (1) |
In April 2023, we agreed to establish a share repurchase program for an aggregate purchase price of $20.0 million. Of the $20.0 million, the first $5.0 million is to be effected through an accelerated stock repurchase program, the second $5.0 million is to be purchased in the open market and the remaining $10.0 million is to be purchased in the open market subject to positive cash flow. 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 $5.0 million of shares of its common stock. During the second quarter of 2023, 158,983 shares were delivered to us, constituting the initial delivery of shares and representing 80% of the then estimated total number of shares expected to be repurchased under the ASR Agreement. In July 2023, the Company received the remaining 29,046 additional shares at a final settlement price based on the average purchase price of $26.59 per share. |
| ITEM 5. | OTHER INFORMATION. |
Rule 10b5-1 Trading Plans
During the fiscal quarter ended September 30, 2023,
| EXHIBITS |
| Exhibit No. |
Description |
| (31) |
Rule 13a-14(a)/15d-14(a) Certifications |
| (32) |
Section 1350 Certifications |
| (101) |
XBRL |
| *101 |
The following materials from Anika Therapeutics, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 as filed with the SEC on November 2, 2023, formatted in Inline XBRL (eXtensible Business Reporting Language), as follows: |
| i. |
Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 (unaudited) |
|
| ii. |
Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2023 and September 30, 2022 (unaudited) |
|
| iii. |
Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2023 and September 30, 2022 (unaudited) |
|
| iv. |
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and September 30, 2022 (unaudited) |
|
| v. |
Notes to Condensed Consolidated Financial Statements (unaudited) |
| 104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| * |
Filed herewith. |
| ** |
Furnished herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ANIKA THERAPEUTICS, INC. |
|||
| (Registrant) |
|||
| Date: November 2, 2023 |
By: |
/s/ MICHAEL LEVITZ |
|
| Michael Levitz |
|||
| Executive Vice President, Chief Financial Officer and Treasurer |
|||
| (Authorized Officer and Principal Financial Officer) |
|||
EXHIBIT 31.1
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Cheryl Blanchard, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2023 of Anika Therapeutics, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: November 2, 2023 | /s/ CHERYL BLANCHARD |
| Cheryl R. Blanchard, Ph.D. | |
| President and Chief Executive Officer | |
| (Principal Executive Officer) |
EXHIBIT 31.2
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael Levitz, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2023 of Anika Therapeutics, Inc.; |
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
4. |
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
d. |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
|
5. |
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
|
|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
| Date: November 2, 2023 | /s/ MICHAEL LEVITZ |
| Michael Levitz | |
| Executive Vice President, Chief Financial Officer and Treasurer | |
| (Principal Financial Officer) |
EXHIBIT 32.1
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
The undersigned officers of Anika Therapeutics, Inc. (the “Company”) hereby certify to their knowledge and in their respective capacities that the Company’s Quarterly Report on Form 10-Q to which this certification is attached (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: November 2, 2023 | |
| /s/ CHERYL BLANCHARD | |
| Cheryl R. Blanchard, Ph.D. | |
| President and Chief Executive Officer | |
| (Principal Executive Officer) | |
| /s/ MICHAEL LEVITZ | |
| Michael Levitz | |
| Executive Vice President, Chief Financial Officer and Treasurer | |
| (Principal Financial Officer) |
This certification shall not be deemed “filed” for any purpose, nor shall it be deemed to be incorporated by reference into any filing, under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares shares in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Preferred stock, shares authorized (in shares) | 1,250 | 1,250 |
| Preferred stock, shares issued (in shares) | 0 | 0 |
| Preferred stock, shares outstanding (in shares) | 0 | 0 |
| Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized (in shares) | 90,000 | 90,000 |
| Common stock, shares issued (in shares) | 14,825 | 14,625 |
| Common stock, shares outstanding (in shares) | 14,637 | 14,625 |
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenue | $ 41,465 | $ 40,264 | $ 123,691 | $ 116,614 |
| Cost of revenue | 16,521 | 17,485 | 46,932 | 47,169 |
| Gross Profit | 24,944 | 22,779 | 76,759 | 69,445 |
| Operating expenses: | ||||
| Research and development | 7,791 | 7,301 | 25,105 | 20,433 |
| Selling, general and administrative | 24,827 | 21,276 | 75,512 | 61,745 |
| Total operating expenses | 32,618 | 28,577 | 100,617 | 82,178 |
| Loss from operations | (7,674) | (5,798) | (23,858) | (12,733) |
| Interest and other income, net | 635 | 436 | 1,735 | 378 |
| Loss before income taxes | (7,039) | (5,362) | (22,123) | (12,355) |
| Benefit from income taxes | (463) | (1,187) | (2,456) | (2,404) |
| Net income (loss) | $ (6,576) | $ (4,175) | $ (19,667) | $ (9,951) |
| Net loss per share: | ||||
| Basic (in dollars per share) | $ (0.45) | $ (0.29) | $ (1.34) | $ (0.68) |
| Diluted (in dollars per share) | $ (0.45) | $ (0.29) | $ (1.34) | $ (0.68) |
| Weighted average common shares outstanding: | ||||
| Basic (in shares) | 14,635 | 14,603 | 14,659 | 14,542 |
| Diluted (in shares) | 14,635 | 14,603 | 14,659 | 14,542 |
| Net income (loss) | $ (6,576) | $ (4,175) | $ (19,667) | $ (9,951) |
| Foreign currency translation adjustment | (407) | (851) | (121) | (1,779) |
| Comprehensive loss | $ (6,983) | $ (5,026) | $ (19,788) | $ (11,730) |
Note 1 - Nature of Business |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 | |||
| Notes to Financial Statements | |||
| Nature of Operations [Text Block] |
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. |
Note 2 - Basis of Presentation |
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| Business Description and Basis of Presentation [Text Block] |
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.
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Note 3 - Accounts Receivable |
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| Accounts and Nontrade Receivable [Text Block] |
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:
A summary of activity in the allowance for credit losses is as follows:
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Note 4 - Fair Value Measurements |
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| Fair Value Disclosures [Text Block] |
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:
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Note 5 - Inventories |
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| Inventory Disclosure [Text Block] |
Inventories consist of the following:
Inventories are stated net of inventory reserves of approximately $11.5 million and $9.9 million, as of September 30, 2023 and December 31, 2022, respectively.
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Note 6 - Intangible Assets |
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| Goodwill and Intangible Assets Disclosure [Text Block] |
Intangible assets, net as of September 30, 2023 and December 31, 2022 consisted of the following:
The aggregate amortization expense related to intangible assets was $1.9 million for each of the three-month periods ended September 30, 2023 and 2022, respectively, and $5.8 million for each of the nine-month periods ended September 30, 2023 and 2022, respectively. |
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Note 7 - Goodwill |
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| Goodwill Disclosure [Text Block] |
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:
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Note 8 - Accrued Expenses |
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| Accounts Payable and Accrued Liabilities Disclosure [Text Block] |
Accrued expenses consist of the following:
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Note 9 - Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Text Block] |
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 no accrued warranties as of September 30, 2023 or December 31, 2022 and has no history of claims paid.
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 $60 million, of which the Company paid $4.3 million, as agreed to in the Parcus Medical Merger Agreement. On April 24, 2023, the Company and the former unitholders of Parcus Medical entered into a settlement agreement to end the arbitration case. The Company recorded a charge to the statement of operations and a liability of $3.3 million at March 31, 2023 which was paid to the former unitholders of Parcus Medical in April 2023 in connection with the settlement agreement. |
Note 10 - Revenue and Geographic Information |
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| Revenue from Contract with Customer [Text Block] |
Revenue by product family is as follows:
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 $1.6 million and $1.2 million for the three months ended September 30, 2023 and 2022, respectively, and $3.2 million and $4.6 million for the nine months ended September 30, 2023 and 2022, respectively, and are included within the Non-Orthopedic product family for all periods presented. Accordingly, revenue from product sales to veterinary customers in the prior period have been reclassified to conform to the current period presentation.
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 44% and 45% for the three months ended September 30, 2023 and 2022, respectively, and 45% and 43% for the nine months ended September 30, 2023 and 2022, respectively.
Total revenue by geographic location based on the location of the customer in total and as a percentage of total revenue were as follows:
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Note 11 - Equity Incentive Plan |
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| Share-Based Payment Arrangement [Text Block] |
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 435,000 shares from 4,850,000 shares to 5,285,000 shares. The 2017 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock awards, performance restricted stock units (“PSUs”), restricted stock units (“RSUs”), total shareholder return options (“TSRs”) and performance options that may be settled in cash, stock, or other property. In accordance with the 2017 Plan approved by the Company’s stockholders, including the amendments thereto, each share award other than stock options or SARs will reduce the number of total shares available for grant by shares. Subject to adjustment for specified types of changes in the Company’s capitalization, no more than 5,285,000 shares of common stock may be issued under the 2017 Plan. There were 1.0 million shares available for future grant at September 30, 2023 under the 2017 Plan.
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 125,000 shares of common stock for issuance pursuant to equity-based awards granted under the Inducement Plan. Such awards may be granted only to an individual who was not previously the Company’s employee or director with the Company. The Inducement Plan provides for the grant of awards under terms substantially similar to the 2017 Plan (as amended). There were 5,908 shares available for future grant at September 30, 2023 under the Inducement Plan.
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):
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 110% of the market price of the Company’s common stock on the date of grant. Options generally vest in equal annual installments over a period of years and expire years after the date of grant. The grant-date fair value of options is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.
The following summarizes the activity under the Company’s stock option plans:
The aggregate intrinsic value of options exercised for the nine-month period ended September 30, 2023 was immaterial. The Company granted 402,403 stock options during the nine-month period ended September 30, 2023.
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:
As of September 30, 2023, there was $7.2 million of unrecognized compensation cost related to unvested stock options. This expense is expected to be recognized over a weighted average period of 1.9 years.
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:
The weighted-average grant-date fair value per share of RSUs granted was $26.66 and $25.14 for the nine-month periods ended September 30, 2023 and 2022, respectively. The total fair value of RSUs vested was $6.8 million and $5.8 million for the nine-month periods ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there was $14.4 million of unrecognized compensation cost related to time-based RSUs, which was expected to be recognized over a weighted-average period of 1.9 years.
Performance Stock Units
PSU activity for the nine-months ended September 30, 2023 was as follows:
The total fair value of PSUs vested was $0 and $0.6 million for the nine-month periods ended September 30, 2023 and 2022, respectively. As of September 30, 2023, there are no outstanding PSUs.
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Note 12 - Income Taxes |
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The Company recorded an income tax benefit of $0.5 million and $2.5 million for the three- and nine-month periods ended September 30, 2023, resulting in effective tax rates of 6.6% and 11.1%, respectively. The income tax benefit was $1.2 million and $2.4 million for the three- and nine-month periods ended September 30, 2022, resulting in effective tax rates of 22.1% and 19.5%, respectively.
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 $1.1 million for the three-months ended September 30, 2023. The change in the effective tax rate for the nine-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 $2.3 million for the nine-months ended September 30, 2023, partially offset by a discrete charge of $0.7 million related to non-deductible stock compensation during the nine-months ended September 30, 2022.
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. |
Note 13 - Share Repurchase |
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In April 2023, the Company agreed to establish a share repurchase program for an aggregate purchase price of $20.0 million. Of the $20.0 million, the first $5.0 million would be effected through an accelerated stock repurchase program, the second $5.0 million is to be purchased in the open market and the remaining $10.0 million is to be purchased in the open market subject to positive cash flow.
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 $5.0 million of shares of its common stock. Pursuant to the terms of the ASR Agreement, the Company delivered $5.0 million in cash to Bank of America and received an initial delivery of 158,983 shares of the Company’s common stock on May 12, 2023 based on a closing market price of $25.16 and the applicable contractual discount. This was approximately 80% of the then estimated total number of shares expected to be repurchased under the ASR Agreement. The Company has recorded the shares being repurchased under the ASR agreement as an equity forward sales contact and the repurchase amount of $5.0 million plus excise taxes was included in additional paid-in capital in stockholders’ equity on the condensed consolidated balance sheet at June 30, 2023. Per the terms of the ASR Agreement, the final number of shares and average purchase price would be determined at the end of the applicable purchase period, which was completed in July 2023. Upon final settlement in July 2023, the Company received 29,046 additional shares at a final settlement price based on the average purchase price of $26.59 per share. |
Note 14- Earnings Per Share ("EPS") |
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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 1.8 million shares and 1.5 million shares were outstanding at September 30, 2023 and 2022, respectively. Restricted stock units and performance stock units totaling 0.8 million were outstanding at each of September 30, 2023 and 2022. These securities were not included in the computation of diluted EPS because the awards’ impact on EPS would have been anti-dilutive.
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Insider Trading Arrangements |
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Rule 10b5-1 Trading Plans
During the fiscal quarter ended September 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.
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Note 3 - Accounts Receivable (Tables) |
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Note 4 - Fair Value Measurements (Tables) |
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Note 5 - Inventories (Tables) |
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Note 6 - Intangible Assets (Tables) |
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Note 7 - Goodwill (Tables) |
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Note 8 - Accrued Expenses (Tables) |
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Note 10 - Revenue and Geographic Information (Tables) |
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Note 11 - Equity Incentive Plan (Tables) |
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| Share-Based Payment Arrangement, Option, Activity [Table Text Block] |
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| Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] |
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| Share-Based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block] |
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| Schedule of Nonvested Performance-Based Units Activity [Table Text Block] |
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Note 2 - Basis of Presentation (Details Textual) |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Number of Operating Segments | 1 |
Note 3 - Accounts Receivable - Allowance for Doubtful Accounts (Details) - USD ($) $ in Thousands |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 01, 2022 |
|
| Accounts Receivable | $ 36,256 | $ 36,235 | |
| Less: Allowance for credit losses | 1,574 | 1,608 | |
| Net balance, end of period | 34,682 | $ 34,627 | |
| Balance, beginning of the period | 1,608 | $ 1,442 | |
| Amounts provided | 353 | 448 | |
| Amounts recovered | (279) | (60) | |
| Amounts written off | (101) | (124) | |
| Translation adjustments | (7) | (140) | |
| Balance, end of period | $ 1,574 | $ 1,566 | |
Note 4 - Fair Value Measurements - Fair Value of Financial Instruments (Details) - Money Market Funds [Member] - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Estimate of Fair Value Measurement [Member] | ||
| Cash equivalents | $ 51,817 | $ 67,801 |
| Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member] | ||
| Cash equivalents | 51,817 | 67,801 |
| Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | ||
| Cash equivalents | 0 | 0 |
| Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member] | ||
| Cash equivalents | 0 | 0 |
| Reported Value Measurement [Member] | ||
| Cash equivalents | $ 51,817 | $ 67,801 |
Note 5 - Inventories (Details Textual) - USD ($) $ in Millions |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Inventory Valuation Reserves | $ 11.5 | $ 9.9 |
Note 5 - Inventories - Summary of Inventories (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Raw materials | $ 16,044 | $ 20,535 |
| Work-in-process | 17,508 | 10,648 |
| Finished goods | 28,556 | 25,306 |
| Total | 62,108 | 56,489 |
| Inventories | 43,724 | 39,765 |
| Other long-term assets | $ 18,384 | $ 16,724 |
Note 6 - Intangible Assets (Details Textual) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2023 |
|
| Amortization of Intangible Assets | $ 1.9 | $ 5.8 |
Note 7 - Goodwill - Changes in the Carrying Value of Goodwill (Details) $ in Thousands |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
| |
| Balance, beginning of period | $ 7,339 |
| Effect of foreign currency adjustments | (86) |
| Balance, ending of period | $ 7,253 |
Note 8 - Accrued Expenses - Summary of Accrued Expenses (Details) - USD ($) $ in Thousands |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Compensation and related expenses | $ 10,966 | $ 11,303 |
| Professional fees | 3,227 | 3,145 |
| Discontinuation of software implementation project | 1,904 | 0 |
| Income taxes payable | 819 | 810 |
| Clinical trial costs | 330 | 999 |
| Other | 513 | 510 |
| Total | 19,813 | 18,840 |
| Accrued Expenses and Other Current Liabilities [Member] | ||
| Operating lease liability - current | $ 2,054 | $ 2,073 |
Note 9 - Commitments and Contingencies (Details Textual) - USD ($) $ in Thousands |
Oct. 21, 2021 |
Sep. 30, 2023 |
Mar. 31, 2023 |
Dec. 31, 2022 |
|---|---|---|---|---|
| Standard and Extended Product Warranty Accrual, Ending Balance | $ 0 | $ 0 | ||
| Parcus Medical Arbitration [Member] | ||||
| Loss Contingency, Damages Sought, Value | $ 60,000 | |||
| Parcus Medical Arbitration [Member] | Pending Litigation [Member] | ||||
| Payments for Legal Settlements | $ 4,300 | |||
| Loss Contingency Accrual | $ 3,300 |
Note 10 - Revenue and Geographic Information (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenue from Contract with Customer, Excluding Assessed Tax | $ 41,465 | $ 40,264 | $ 123,691 | $ 116,614 |
| OA Pain Management [member] | ||||
| Revenue from Contract with Customer, Excluding Assessed Tax | 24,888 | 24,476 | 76,855 | 69,533 |
| Veterinary [Member] | OA Pain Management [member] | ||||
| Revenue from Contract with Customer, Excluding Assessed Tax | $ 1,600 | $ 1,200 | $ 3,200 | $ 4,600 |
| DePuy Synthes Mitek Sports Medicine [Member] | Revenue Benchmark [Member] | Customer Concentration Risk [Member] | ||||
| Concentration Risk, Percentage | 44.00% | 45.00% | 45.00% | 43.00% |
Note 10 - Revenue and Geographic Information - Revenues (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenue | $ 41,465 | $ 40,264 | $ 123,691 | $ 116,614 |
| OA Pain Management [member] | ||||
| Revenue | 24,888 | 24,476 | 76,855 | 69,533 |
| Joint Preservation and Restoration [Member] | ||||
| Revenue | 13,470 | 11,821 | 39,583 | 36,055 |
| Non-Orthopedic [Member] | ||||
| Revenue | $ 3,107 | $ 3,967 | $ 7,253 | $ 11,026 |
Note 10 - Revenue and Geographic Information - Total Revenue by Geographic Location (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Revenue | $ 41,465 | $ 40,264 | $ 123,691 | $ 116,614 |
| Percentage of Revenue | 100.00% | 100.00% | 100.00% | 100.00% |
| UNITED STATES | ||||
| Revenue | $ 30,831 | $ 31,093 | $ 90,986 | $ 87,552 |
| Percentage of Revenue | 74.00% | 77.00% | 74.00% | 75.00% |
| Europe [Member] | ||||
| Revenue | $ 5,420 | $ 4,885 | $ 16,757 | $ 15,973 |
| Percentage of Revenue | 13.00% | 12.00% | 13.00% | 14.00% |
| Other Location [Member] | ||||
| Revenue | $ 5,214 | $ 4,286 | $ 15,948 | $ 13,089 |
| Percentage of Revenue | 13.00% | 11.00% | 13.00% | 11.00% |
Note 11 - Equity Incentive Plan - Total Stock-based Compensation Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Stock-based compensation expense | $ 3,561 | $ 3,876 | $ 11,428 | $ 10,502 |
| Cost of Sales [Member] | ||||
| Stock-based compensation expense | 181 | 242 | 532 | 645 |
| Research and Development Expense [Member] | ||||
| Stock-based compensation expense | 304 | 397 | 1,474 | 1,267 |
| Selling, General and Administrative Expenses [Member] | ||||
| Stock-based compensation expense | $ 3,076 | $ 3,237 | $ 9,422 | $ 8,590 |
Note 11 - Equity Incentive Plan - Assumptions Used to Estimate Fair Value of Stock Options and Stock Appreciation Rights (Details) - $ / shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Expected life (years) (Year) | 4 years 6 months | 4 years 6 months |
| Expected dividend yield | 0.00% | 0.00% |
| Fair value per option (in dollars per share) | $ 0.1146 | $ 0.1126 |
| Minimum [Member] | ||
| Risk free interest rate | 3.50% | 1.30% |
| Expected volatility | 48.20% | 53.80% |
| Maximum [Member] | ||
| Risk free interest rate | 4.40% | 3.00% |
| Expected volatility | 49.40% | 55.50% |
Note 11 - Equity Incentive Plan - Restricted Stock Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Outstanding, shares (in shares) | 675,405 | |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ 28.4 | |
| Granted (in shares) | 442,762 | |
| Granted, weighted average grant date fair value (in dollars per share) | $ 26.66 | $ 25.14 |
| Vested, shares (in shares) | (259,134) | |
| Vested, weighted average grant date fair value (in dollars per share) | $ 29.29 | |
| Forfeited and cancelled, shares (in shares) | (84,870) | |
| Forfeited and cancelled, weighted average grant date fair value (in dollars per share) | $ 27.11 | |
| Outstanding, shares (in shares) | 774,163 | |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ 27.25 | |
Note 11 - Equity Incentive Plan - Performance Stock Units (Details) - Performance Shares [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
shares
| |
| Outstanding, shares (in shares) | shares | 117,897 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 34.98 |
| Forfeited and cancelled, shares (in shares) | shares | (117,897) |
| Forfeited and cancelled, weighted average grant date fair value (in dollars per share) | $ / shares | $ 34.98 |
| Outstanding, shares (in shares) | shares | 0 |
| Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares | $ 0 |
Note 12 - Income Taxes (Details Textual) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Income Tax Expense (Benefit) | $ (463) | $ (1,187) | $ (2,456) | $ (2,404) |
| Effective Income Tax Rate Reconciliation, Percent | 6.60% | 22.10% | 11.10% | 19.50% |
| Effective Income Tax Rate Reconciliation, Nondeductible Expense, Share-Based Payment Arrangement, Amount | $ 700 | |||
| Domestic Tax Authority [Member] | Change in Effective Tax Rate Due to Discrete Non-deductible Stock Compensation Charge [Member] | ||||
| Effective Income Tax Rate Reconciliation, Nondeductible Expense, Share-Based Payment Arrangement, Amount | $ 1,100 | |||
| Deferred Tax Assets, Valuation Allowance | $ 2,300 | $ 2,300 | ||
Note 14- Earnings Per Share ("EPS") (Details Textual) - shares shares in Millions |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Share-Based Payment Arrangement, Option [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 1.8 | 1.5 |
| Restricted Stock Units and Performance Stock Units [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares) | 0.8 | 0.8 |
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