Anika Therapeutics Inc.

Good evening, ladies and gentlemen, and welcome to ANACA Therapeutics' second quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require operator assistance, please press the star, then the zero key. As a reminder, this call may be recorded. Up and now, I'd like to turn the call over to Sylvia Chung, Chief Financial Officer. Please go ahead.

Thank you, Catherine. Good evening, everyone, and thank you for joining our second quarter 2019 earnings call. With me on the call today is Anika's president and chief executive officer, Joseph Darling. During today's call, Joe and I will review our second 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 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 complete understanding of our results and is consistent with how management views our financial performance. A reconciliation of these non-GAAP financial results to the most comparable GAAP measures, calculated and presented in accordance with GAAP, is available in the Investors Relations section of our website. I will now turn the call over to our CEO, Joseph Darling.

Thank you, Sylvia, and good evening, everyone. Welcome to our second quarter 2019 earnings call. In the second quarter, we continued to transform Ianica into a global commercial company positioned to deliver innovative products across the continuum of orthopedic and regenerative medicine therapies. We also generated strong earnings and cash flow in the quarter. We are realizing the benefits from our international commercial expansion initiatives as evidenced by 28% growth in our international fiscal supplement revenue year over year. As a result of our strong year-to-date performance, we are raising our revenue in adjusted EBITDA guidance for the full year of 2019. Sylvia will discuss our updated outlook in detail following my remarks. Please turn to slide number three. Before we discuss the quarter and our other ongoing initiatives, I'd like to start with an important update on Singal. After extensive clinical, regulatory, commercial, and business analytics, along with discussions, we have decided to move forward in our efforts to bring this innovative treatment to the U.S. market. Initially, we will conduct a pilot study using a newly designed clinical trial protocol which we will discuss with the FDA in the coming months. We believe that this approach best balances time, cost, and risk. We intend to use this pilot program to confirm our trial design, increase our probability of success in a Phase III trial, and generate data that ultimately will be needed to support FDA approval. In the analysis we conducted to reach these decisions, one of our most important considerations was the real-world evidence demonstrated by the continued strong performance and growth of Syngov in Canada and across Europe. International revenue from Syngov increased 125% year over year in the second quarter. This success, with over 100,000 procedures since launch, Together with the overwhelmingly positive feedback we continue to receive from patients and physicians has further reinforced our confidence in Singhal's clinical value as a safe and efficacious non-opioid solution to provide fast and durable relief. Additionally, we recently conducted new primary market research with over 140 U.S. treating physicians. The results underscore the clinical need, the patient benefit, and the market opportunity for this innovative treatment in the U.S. The survey outcome indicated that Syngal is among the most likely treatments to be described out of a multiple new products evaluated in the research. All these factors have increased our confidence in Syngal's U.S. market opportunity, which we estimate to be approximately $1 billion. The pilot study is expected to enroll approximately 240 patients across 15 sites, primarily in the U.S., randomized to receive either Syngal, the steroid-triamcinolone hexacetinide, or saline placebo. We expect the study to start in the first half of 2020 and take approximately one year to complete. While the pilot study will delay the potential launch of Syngal, We believe it will improve the probability of success by confirming our belief that the new study design, including modified patient and site selection criteria, will produce the pain-related outcomes the FDA is seeking for a successful NDA submission. We intend to explore with the FDA whether an adaptive trial design can be used so that a successful outcome in the pilot study may be leveraged to streamline a larger Phase III trial. Throughout this process, we also intend to explore potential collaboration opportunities on terms that would be beneficial to ANACA and its shareholders that could enable us to share development costs with a strategic partner. Please turn to slide number four. In addition to the single pilot study, ANACA has a robust product pipeline spanning beyond osteoarthritis pain management to tissue repair and regeneration and Cartilage Restoration, which we continued to actively advance in the second quarter, while also strengthening our executive leadership and commercial teams. As I have discussed on previous calls, our company and growth prospects are driven by our focus on people, products and ultimately on enhancing our financial and operational performance. During the second quarter, we continued 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. In particular, recently, we were pleased to announce that we continue to advance our U.S. hybrid commercial strategy and onboard three highly skilled regional sales directors under the leadership of our Vice President of U.S. Sales. These sales directors have extensive and relevant industry and product knowledge and will provide feed on the street to help build pre-market awareness for the upcoming launch for bone repair therapy. Additionally, they will support other orthopedic therapies currently in development, which will also be launched in the U.S., utilizing our hybrid commercial model. We also continue to focus on our international sales performance under the leadership of our Vice President of International Sales. Here today, we have added three new international distribution partners to our global sales network and are aggressively expanding the international reach of our product portfolio. In the near term, we are on track to finalize the number of agreements and product registrations in a multitude of countries within Europe, Asia, and South America. We are actively increasing our focus on driving international growth through active and improved interactions with all key stakeholders across the more than 65 countries where we have a presence. Additionally, we appointed James LaRope to the newly created position of Executive Vice President of Business Development and Strategic Planning. Jim is a 30-year industry veteran who will oversee our global business development function and advance our efforts to identify and evaluate potential acquisitions, partnerships, alliances, and licensing opportunities to expand our commercial portfolio and global footprint. Please turn to slide number five. ANACA is at an inflection point in its evolution. We are confident in our ability to take greater control of our future with our U.S. hybrid commercial model. As I noted previously, we expect that this hybrid commercial approach will yield significant benefits for ANACA as compared to a full direct commercialization model. This approach will enable us to benefit from more rapid market penetration, allow us to drive stronger revenue growth, and increased profitability without the significant investment usually associated with building a large sales force internally. We believe this model will provide the most optionality in the ability to scale as we launch products across multiple categories. We will also benefit from greater visibility, control and predictability of product demand, volume and fulfillment. The upcoming launch of our first surgically delivered therapy for bone repair procedures in the US in the third quarter of 2019 will be our first product launch under this hybrid commercial model. Our recently hired regional sales directors are actively preparing for the soft launch in the third quarter. As we move to full-scale commercial launch, we initially intend to utilize our sales directors and leverage regional and local distribution partners to drive rapid market uptake. In parallel, we will continue to evaluate potential commercial partners with established US orthopedic sales forces for this therapy. Please turn to slide number six. I am very pleased to announce that we recently began showcasing the bone repair product at industry conferences including at the recent American Orthopedic Society for Sports Medicine held here in Boston and the International Society of Arthroscopy, Knee Surgery, and Orthopedic Sports Medicine meetings held in Cancun, Mexico. To continue building relationships with leading physicians and gain clinical insights as we prepare for its commercial launch. We are very encouraged by the positive feedback and constructive input. We received from these influential thought leaders and look forward to building on this momentum as we approach the launch. We expect our rotator cuff repair therapy will be the second product launched in the U.S. under our hybrid commercial model. Product development is progressing as planned and in the second quarter we continued prototype refinement work following the completion of a pilot animal study in the first quarter. In the second half of the year, we will focus on the surgical instrumentation design for the rotator cuff therapy. Of note, we recently reviewed this therapy at multiple industry meetings and we conducted in-depth interviews with surgeons to gain insights on the design and optimization of the product and instrumentation. Both the bone repair and Rotator Cuff Repair Categories represent large and attractive near-term U.S. growth opportunities for anti-cuff. We estimate the bone repair market to be $250 to $300 million and the rotator cuff market to be $150 to $200 million. Please turn to slide seven. During the quarter, We worked with the FDA to amend the protocol for the HyloFast Phase 3 trial in order to accelerate enrollment and enhance our probability of success. Through the protocol amendment, we expanded the number of sites from 40 to 60 and are currently adding new sites outside the US and Europe, which has the potential to accelerate the pace of enrollment. We also received approval to augment the inclusion criteria to target our optimal patient population. Additionally, we recently held an educational symposium for orthopedic surgeons on HyloFast at the International Cartilage Regeneration and Joint Preservation Society focus meeting. We continue to see a very high level of enthusiasm among physicians and patients for this innovative regenerative treatment. Hylafast represents another significant U.S. market opportunity, which we conservatively estimate to be more than half a billion dollars. We believe that our future increasingly lies in regenerative medicine and other areas where we can leverage the broad utility of our proprietary solid HA or high-end technology platform. We also know that the important steps that we are taking now will help pave the way for new product lines, increase control over the commercial management of those products, and enhance value for our position users, patients, and key shareholders. There are a number of valuable opportunities ahead, and we look forward to sharing the details of our five-year strategic plan at our Analyst and Investor Day on September 18th here in Boston. We are very pleased with our second quarter results and the progress we are collectively making across our organization as we evolve into a global commercial company. I'll now turn the call over to Sylvia to review our second quarter results. Sylvia.