Anika Therapeutics Inc.

Good evening, ladies and gentlemen, and welcome to ANACA Therapeutics' third quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I will now turn the call over to Sylvia Chung, Chief Financial Officer. Please proceed.

Thank you, Andrew. Good evening, everyone, and thank you for joining us. With me on the call today is ANICA's president and chief executive officer, Joseph Darling. During today's call, Joe and I will review our third 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 on the investor relations section of our website at anicatherapeutics.com. In addition, a slide presentation is posted on our website in the Investors Relations section under the Events and Presentations tab. We invite you to take a moment now 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, and achievements. Please also 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 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 measurement calculated and presented in accordance with U.S. GAAP is available in the Investor Relations section of our website. I will now turn the call over to our CEO, Joseph Darling.

Thank you, Sylvia, and good evening, everyone. Thank you all for joining us for our third quarter 2019 earnings call. We are very pleased with the company's performance in the third quarter, which reflects the progress we continue to make in executing our five-year strategic plan to transform Anika into a global commercial company positioned to deliver innovative products across the continuum of orthopedic and regenerative medicine therapies. as a testament to our team's strong execution in the quarter. We successfully delivered double-digit revenue and earnings growth on the strength of growing global demand, ANACA's expanding commercial platform, and continued fiscal discipline. For the third quarter, total revenue increased 11%, net income increased 21%, and adjusted EBITDA grew 32% year over year as we continued to leverage are growing global platform of innovative therapies and strong demand for our products both in the U.S. and internationally. We successfully completed the internal build-out of our U.S. hybrid commercial model and the soft launch of our first product under that model, Tactile Set. Given our strong third quarter performance, we are raising our revenue and earnings guidance for the full year of 2019 which Sylvia will discuss in more detail during her financial update and commentary. Needless to say, execution is a team effort, and I am very proud of the continued focus and collaboration I saw from our talented employees across the growing ANACA organization. Please turn to slide number three. As we discussed at our Analyst and Investor Day last month, This pivotal time represents the dawn of a new day for Anika. Our vision is to become the global leader in joint preservation and restoration with innovative technologies that exceed our customers' expectations. Through our five-year strategic plan, we are actively working to expand our portfolio beyond our primary historical focus on osteoarthritis pain management into regenerative therapies for joint preservation and restoration. We think this is a natural evolution given our strong foundation, our established footprint in the U.S. and abroad, and our proven expertise in product development, clinical and regulatory affairs, manufacturing, and commercialization. This expanded therapeutic continuum across multiple fields represents an approximate $8 billion combined global market opportunity, and we have products on the market and in the pipeline that serve both. It's important to note that the two target commercial segments are divided by and driven through two distinct channels. An office-based call point for injectable pain management therapies and an operating room call point for our new orthopedic surgical and regenerative therapies. As many of you know, our legacy commercial partnerships have historically focused on the office-based call point exclusively. but going forward, we plan to activate the second important channel with our new hybrid commercial structure and direct sales team squarely focused on the operating room. Through our efforts, we are confident that we can become an important partner providing value technologies to the surgical theater. Please turn to slide number four. As we continue to pursue a leadership position in joint preservation and restoration, our growth strategy is driven by our focus on what I call the three P's, people, products, and performance. First, we want to ensure that we have the right skill sets and the right talent to drive the organization toward operational excellence. Second, we are focused on developing and delivering innovative technologies and expanding our product offerings across the joint preservation and restoration continuum of care. And finally, we are committed to leveraging the hybrid commercial model and driving operational efficiencies throughout our business to drive margin expansion. Please turn to slide number five. Let's start with the first P, people. We are committed to building our talent base for innovation and continue to enhance our team's knowledge and expertise to make sure that we have the strongest team in place to support our transformation and future growth. During the third quarter, we appointed James LaRocque 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. We also recently appointed Mira Leiwant to the newly created position of Vice President of Regulatory Affairs, Quality and Clinical Affairs. Mira will oversee our global regulatory strategy, regulatory submissions and interactions with U.S. and international governmental health authorities, as well as our quality and clinical teams and new processes. We believe Mira's role will become increasingly important as we accelerate the pace of product development, regulatory submissions and ultimately product launches coming in the coming years. Please turn to slide number six. We are very pleased to have completed the internal build-out of our hybrid commercial sales force in the U.S. during the third quarter. We have successfully onboarded four highly skilled regional sales directors to manage the domestic northeast, west, southeast, and central territories, all under the leadership of our Vice President of U.S. Sales, Steve Golding. These sales directors have extensive experience industry experience and product knowledge and will support the launch of other joint preservation and restoration therapies currently in development. In addition, we commenced the build out of a network of independent local and regional distributor agents and are in the process of adding additional partners throughout the U.S. As I have noted on prior earnings calls, our hybrid commercial model will provide Anika with a direct line of sight to the market and more favorable economic results, and we are confident in our ability to take greater control of our future with this new commercial strategy. Please turn to slide number seven. Turning now to the second P, products. In September, we commenced the soft launch of Tacoset in the U.S., As a reminder, Taktoset is a surgically delivered therapy for bone repair procedures, and the first therapy launched under a hybrid commercial model. The first surgical procedure of Taktoset was successfully completed in August, and we continue to receive positive feedback from the physician community regarding the therapy's ease of use and procedural efficiency. As we've discussed previously, we have showcased Tacticet at multiple medical conferences during the quarter, and we remain on track to execute the full-scale commercial launch at the 2019 Orthopedic Summit and Evolving Techniques Conference, or as we call it, OSEC, which is being held in Las Vegas this December. As we previously have stated, We estimate the bone repair market to be $350 to $400 million annually, with approximately 900,000 people eligible for treatment for bone voids and other bone defects of the knee. TactoSET represents an attractive near-term U.S. growth opportunity for ANACA. Our near-term goals for this program are crystal clear. Number one, complete the full-scale launch at OSEP in December. Number two, onboard five additional distributor agents with the goal of being in 10 surgical centers by the end of this year. We plan to grow to 40 distributor agents by the end of 2020. These initiatives, once again, are led by our Vice President of U.S. Sales and are important building blocks for revenue growth in 2020 and market penetration thereafter. I would now ask you to please turn to slide number eight We expect our rotator cuff therapy will be the second product launched in the U.S. under our hybrid commercial model, and product development is currently progressing as planned. As we have previously noted, we believe this unique therapy is highly complementary to Anika's growing regenerative therapy portfolio, and we estimate that the U.S. market opportunity for rotator cuff repair is $150 to $200 million annually. In the third quarter, we continued to refine the prototype and began surgical instrumentation design for this therapy, led by our Vice President of R&D. We anticipate that we will complete the instrument design in the first half of 2020 and plan to submit a 510 application to the FDA in late 2020 to the early 2021 timeframe. Please turn to slide number nine. Singhal continues to perform very well in Canada and across Europe. International revenue from Singhal increased 35% year-over-year in the third quarter and 40% year-to-date. The continued growth of Singhal this quarter has further reinforced our confidence in our decision to advance Singhal towards regulatory approval in the U.S. market. As we discussed last quarter, we are currently working to initiate a pilot study to confirm our trial design, increase our probability of success in a phase three trial, and generate data that ultimately will be needed to support FDA approval. We remain on track to commence the SYNGALP pilot study in the first half of 2020, and we are in the process of finalizing the newly designed pilot clinical trial protocol. The pilot study is expected to enroll approximately 240 patients across 30 sites in the U.S., randomized to receive either SynGolf, the steroid triamcinolone hexacetinide, or saline placebo. As a reminder, there are three different key differentiators in this revised protocol compared to the prior Phase III 1602 study. The first is the inclusion of a placebo arm. The second is the addition of a much larger TH arm, triacetylhexacetinide, meaning the steroid arm. And the third is the modification of the patient enrollment selection criteria to target the ideal patient profile. We believe these elements will enable us to generate the data needed in a subsequent Phase III trial. We continue to expect that the pilot study will take approximately one year to complete. Despite the delay in time to market, we remain confident in SingDol's U.S. market opportunity, which we have estimated to be approximately $1 billion. Turning now to slide number 10, we are focused on accelerating the pace of enrollment in the ongoing HyloFast Phase III trial for U.S. approval. During the quarter, We continue to implement the changes following the protocol amendment approved last quarter and are currently in the process of adding eight new sites outside the US and Europe. Patient enrollment is currently in the 60 percentile range and we expect to complete enrollment by the end of 2020. Additionally, we look forward to benefiting from the leadership of Mira Leiwant, our new Vice President of Regulatory Affairs, Quality and Clinical Affairs as we continue to advance the trial. We recently held an educational symposia for orthopedic surgeons on Hylofasc at the 2019 World Congress of the International Cartilage Regeneration and Joint Preservation Society held in Vancouver, Canada. Over 80 surgeons participated in the symposia. We continue to see a very high level of enthusiasm among physicians and patients for this innovative regenerative therapy. HyloFast represents another significant U.S. market opportunity, which we conservatively estimate to be more than half a billion dollars. We are very pleased with our third quarter business results and the continued progress we are collectively making across our organization as we execute our growth strategy. I will now turn the call back over to Sylvia to review our third quarter financial results in greater detail. Sylvia.