Anika Therapeutics Inc.

Good evening, ladies and gentlemen, and welcome to Anika Therapeutics' first quarter 2019 earnings conference call. At this time, our participants are in a listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time. If anyone should require operator assistance, please press star on the zero key on your touchtone telephone. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Sylvia Chung, Chief Financial Officer. Please go ahead.

Thank you, Chris. Good evening, everyone, and thank you for joining our first quarter 2019 earnings call. With me on the call today is ANACA's president and chief executive officer, Joseph Darling. During today's call, Joe and I will review our first quarter 2019 financial results and key business highlights, which were summarized in our earnings release issued today. A copy of the earnings release is available in the investor relations section of our website, at anikatherapeutics.com. In addition, a slide presentation is posted on our website in the Investor Relations section under the Events and Presentations tab. We invite you to take a moment to open a file and follow the presentation along with us. Please turn to slide number two. Before we begin, please remember that certain statements made during this conference call constitute forward-looking statements. as defined in the Securities and Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance, or achievements. Please see our SEC filings for more information about factors that could affect our results. Certain financial measures we will discuss on this call are non-GAAP financial measures. We believe that providing these measures helps investors gain a more helpful and complete understanding of our financial performance. A reconciliation of these non-GAAP financial results to the most comparable GAAP measure calculated and presented in accordance with GAAP is available in the investor relations section of our website. Please turn to slide number three as I now turn the call over to our CEO, Joseph Darling.

Thank you, Sylvia, and good evening, everyone. Welcome to our first quarter of 2019 earnings call. I am very pleased to announce that we are off to a strong start in 2019. In the first quarter of 2019, we made progress in transforming Anika into a global commercial company positioned to deliver on a consistent and successful series of innovative product launches across the continuum of Orthopedic and Regenerative Medicine Therapies. We achieved double-digit revenue growth year-over-year in all product lines, including in both our U.S. and international VSCO supplement businesses, and we generated strong earnings and cash flow in the quarter. Additionally, as part of our commitment to return value to shareholders, the ANACA Board of Directors has approved a $50 million share repurchase program to illustrate our belief in the future of our business and to underscore our commitment to returning value to our shareholders. Before we dive into the details for the quarter, I'd actually like to highlight three things that I hope you'll take away from this call. First, we have taken significant steps over the last year to transform Anika into a global commercial company and position the company to accelerate growth and shareholder value creation in the coming years. Second, we are focused on delivering on the many organic and external growth opportunities for ANACA. We have actively redeployed resources and added world-class talent as we leverage our strong market position to execute our growth objectives. Third, a refreshed board of directors recognizes our progress towards delivering on these opportunities and are confident in our transformation strategy and our continued strong cash generation abilities as evidenced by the $50 million share repurchase program we announced today. As I have discussed on previous calls, our company and future growth are powered by our focus on our people, our products and our performance. Our first quarter results and recent accomplishments are a testament to our commitment to these three areas. please turn to slide number four. Let me begin with the recent additions to our executive leadership team and global commercial teams as we continue to identify and recruit the right people to drive our transformation. It is very exciting to see the caliber of professionals joining ANACA at all levels of the organization, who understand our vision and share our enthusiasm for the growth opportunities available to ANACA. We continue to enhance the depth of talent in our organization whose energy, experience, and intellect will not only differentiate us, but also serve as the key foundation from which we will execute on our strategy to drive sustained growth and enhance shareholder value. In particular, we are pleased to announce that we appointed Dr. Robert Richard to the position of Vice President of Research and Development. Bob is an R&D veteran whose extensive orthopedic and regenerative medicine experience will help us accelerate our deep product pipeline while leveraging the broad utility of our innovative technology platform to propel us forward. Second, we announced this week that we appointed Steve Goldie to the position of Vice President of U.S. Sales. He will oversee the development and deployment of our hybrid commercial organization. His deep understanding of the orthopedic surgery and sports medicine markets will be invaluable as we build our U.S. hybrid commercial model, launching our surgical-based orthopedic products, and further strengthening our U.S. commercial infrastructure. Third, we continue to strengthen our international commercial infrastructure under the leadership of our Vice President of International Sales. We are increasing our focus on the international markets through direct interaction with all key stakeholders to drive international growth. Please turn to slide number five. I'd now like to provide an update on Syngal. We received formal meeting minutes from the FDA regarding the clinical and regulatory pathway for Syngal approval in the US. As previously disclosed, we will need to conduct another phase three trial in order to gain approval in the US. We are currently evaluating and discussing with the FDA the most expeditious pathway to an approval in the US market. We are also assessing the total cost associated with that pathway, including the clinical investment, as well as considering the dynamic landscape in the competitive marketplace when the product would be launched. We are evaluating multiple factors, such as the evolving US fiscal supplement market, competitive landscape, pricing, and the potential for the trial design to be considerably larger and more expensive than our last trial. We will be disciplined as we evaluate the potential options for Singall in the U.S. compared to other strategic options in investments in other areas where we have or can obtain commercially viable assets in the near term. While current demand for this innovative product in Canada and Europe remains healthy and Singall has proven to be a safe and efficacious Non-opioid solution that provides fast and durable relief, we are committed to deploying our capital to the most value creating opportunities. We intend to complete this full assessment by the time we report our second quarter financial results and we will update you again at that time. Please turn to slide number six. Shifting to our near term pipeline, we expect our surgically delivered bone repair and Rotator cuff therapies to be the first two products launched under our hybrid commercial model in the US. We remain on track to launch our first surgically delivered regenerative therapy for bone repair procedures under our US-based hybrid commercial model in the second half of this year. We recently showcased this therapy at the American Academy of Orthopedic Surgeons annual meeting, which is the largest gathering of orthopedic surgeons from around the world. We conducted in-depth market research meetings with 15 surgeons. The reception to the product was encouraging, and the input from these influential physicians was both positive and constructive as we formulate our launch plans. Building relationships with and gaining clinical insights from thought leaders is critical to the success of our hybrid commercial model and adoption of our treatments. In the first quarter, we also completed key preclinical work for our rotator cuff repair therapy, and we will be focused on the development of surgical instrumentation for the remainder of 2019. Both of these therapies possess notable differentiating elements from the current standards of care and are treatment segments that represent large and attractive near-term U.S. growth opportunities for ANACA. We estimate the bone repair market to be 250 to 300 million, and the rotator cuff repair market is estimated at 150 to 200 million. Turning now to HylaFAST on slide number seven, please. We continue to take steps to accelerate enrollment in the ongoing phase three trial required for U.S. approval. We have now initiated 37 sites and are looking to further accelerate the study through the inclusion of new sites outside of the U.S. We also recently held an educational symposium on HyloFast at the Asia Pacific Orthopedic Association Sports Meeting, demonstrating the ease of use and clinical benefits of the procedure to the orthopedic surgeons. HyloFast represents another significant U.S. market opportunity, which we conservatively estimated to be greater than half a billion dollars annually. We will continue to explore and execute strategies to accelerate the HylaFAST trial, including stepping up on the ground enrollment practices and assessing potential trial adjustments while maintaining the power of the trial to drive approval. Please turn now to slide number eight. Our US-based hybrid commercial model will pair a small in-house team of highly skilled business development specialists with a strategic partner and or regional distribution partnerships. This model will provide the most optionality in the ability to scale and flex as we launch products across multiple categories. We are continuing to evaluate a number of potential commercial partners with established orthopedic surgical sales forces that would fit with our organization. We also intend to structure any new partnership contracts to provide more favorable economics and greater control over market access, sales and marketing, Minimum annual growth objectives and pricing than our previous commercial partnerships have had historically. We also plan to continue with our existing distribution model for all of our current US and OUS franchises and expect the development of our international commercial team to drive similar benefits as well as a greater ability to hold our commercial partners accountable for their performance. While our strategic focus has historically been centered on our strong VSCO supplement portfolio. We believe that our future lies, to a growing degree, in regenerative medicine and other areas leveraging the broad utility of our high-F technology platform. With over 4 million sports-related injuries a year, the cartilage repair market represents a substantial growth opportunity in the U.S. We are well positioned to meet the significant need in the global regenerative medicine market through innovation as well as through potential synergistic acquisitions. Our goal is to become a market leader in orthopedic and regenerative medicine with a product portfolio spanning a full continuum of care. Lastly, we expect to complete the development of our five-year strategic plan in the third quarter of this year which will guide our continued transformation. We look forward to sharing the details with you in the third quarter during our 2019 Analyst and Infestor Day this fall. We are pleased with our first quarter results and the progress we are collectively making across our organization as we evolve into a global commercial company and gain greater visibility and control of our future. I'll now turn the call over to Sylvia to review our first quarter results. Sylvia.