Anika Therapeutics Inc.

Good evening, ladies and gentlemen, and welcome to Annika's fourth quarter and full year 2020 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, I will now turn the call over to Mark Nameroff, Executive Director of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Charisse. Good evening, everyone. And thank you for joining us for Anika's fourth quarter and year-end conference call and webcast. Our Q4 and year-end earnings press release was issued after the close of the market today and is available on our investor relations website located at www.annika.com, as well as the supplementary PowerPoint slides that will be used for the discussion today. So with me on the call today is Dr. Cheryl Blanchard, President and Chief Executive Officer, and Mike Levitz, Executive Vice President, Chief Financial Officer, and Treasurer. During today's call, Cheryl and Mike will review Anika's fourth quarter and year-end 2020 financial results with key business highlights, as well as discuss our view of 2021. And then we'll have time for questions. Please take a moment to open the slide presentation and refer to slide number two. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined by the Security Exchange Act of 1934. These statements are based on our current beliefs and expectations, including statements with respect to the impact of the COVID pandemic on ANACA and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance, or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our SEC filings and our most recent Form 10-K and 10-Q for more information about risk factors that could affect our performance. In addition, during the call, we may refer to a number of adjusted or non-GAAP financial measures which are used in addition to results presented in accordance with GAAP or generally accepted accounting principles. We believe that non-GAAP measures provide an additional way of viewing aspects of our operation and performance. But when considered with GAAP financial measures and the reconciliation of GAAP, they provided even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slides and on our fourth quarter press release. And now I'd like to turn the call over to our president and CEO, Dr. Cheryl Blanchard. Cheryl?

Thanks, Mark, and good evening, everyone. 2020 was a critical year in Anika's transformation from largely a single technology and customer company into a global joint preservation company that creates and delivers truly meaningful advancements in early intervention orthopedic care. Starting with the late 2019 launch of our innovative polyuronic acid or HA-based regenerative solution, Tactuset, which is a differentiated product designed to treat insufficiency fractures that is gaining real momentum, Followed in early 2020 with the acquisitions of Arthur Surface and Parkis within days of one another and the tremendous work integrating our business in 2020 through COVID, Annika is positioned to become a leader in high opportunity spaces within orthopedics, including osteoarthritis pain management, regenerative solutions, soft tissue repair, and bone preserving joint technologies. We're still in the midst of this transformation and are very excited about our future plans for value creation for all of our stakeholders. Let's dive into the quarter and 2020 highlights. Please turn to slide three. We successfully navigated the year through COVID, ending with revenue in the quarter up 10% compared with 2019, driven by our joint preservation and restoration business following the acquisitions of Arthur Surface and Parkes Medical that closed in Q1 of 2020. We saw continued momentum in joint preservation and restoration through our commercial efforts and delivered sequential growth as well, despite further COVID headwinds from the post-holiday COVID surge that attenuated elective procedures in late Q4. We see strong demand for our joint preservation products and believe we have a right to win as orthopedic surgeons view our minimally invasive and regenerative portfolios favorably, particularly in the ambulatory surgical center setting. Our joint payment management business had lower revenue for the quarter as a result of COVID dynamics impacting J&J MyTax ordering patterns in the second half of 2020, as we've stated in our last couple of earnings calls, as well as the impact in the fourth quarter of the post-holiday COVID increase on in-office injection procedures. We see this business stabilizing into 2021. On the bottom line, we delivered positive adjusted EBITDA and positive operating cash flow as we continue to invest in the businesses we acquired last year. We continue to make investments in integrating and implementing back office systems and commercial operations and infrastructure to structure the business for efficient scaling over the coming years. We also see greater potential for growth of the sports medicine, soft tissue repair, and bone preserving joint technologies businesses and we plan to continue to invest in them throughout this year. I'm pleased to say that we are debt-free as we were able to pay down the remaining $25 million outstanding under our line of credit and end the quarter with $98 million of cash and investments. Mike will take you through the details of the financial shortly. It's clear that COVID had a significant impact to our business, like so many other orthopedic companies and businesses that serve elective procedures in general. The post-holiday surge in COVID cases during the latter half of the fourth quarter was especially challenging to our joint preservation and restoration business as elected procedures were delayed. But there are signs that things are beginning to improve. Note that we are still seeing softness into the first quarter of 2021 due to COVID and the recent winter storms that most significantly impacted the southern states like Texas. In the fourth quarter, elected surgical procedures, in our estimates, we're approaching pre-COVID levels, and we expect that we should see a return to pre-COVID procedure levels in the second half of the year, if the predictions with the vaccine rollout continue to hold true. We also estimate that clinic capacity for elective injection procedures was between 70 to 85%. Now turn to slide four for our full year review. We were able to accomplish so much during such a challenging year. Following the unexpected passing of Anika's former CEO, Joe Darling, in January of 2020, we successfully navigated the business through one of the worst pandemics in our collective history with minimal operational disruption. At the same time, we acquired and then integrated two new businesses and strengthened our management team while delivering 14% revenue growth for the year. I'd like to spend a few minutes reviewing how these accomplishments inform our new strategy. The acquisitions of Arthur Surface and Parkis in Q1 of 2020 enabled ANACA to enter the faster growing spaces of joint preservation and restoration, including sports medicine and bone preserving joint technologies, which in combination with ANACA's synergistic regenerative solutions expanded our global market opportunity to over $8 billion. Our focus will now encompass four areas in the early orthopedic continuum of care, osteoarthritis pain management, regenerative solutions, soft tissue repair, and bone-preserving joint technologies. We have made substantial progress with integrating the business into one ANACA. The next phase of integration in 2021 will focus on systems integration and implementation that will facilitate scaling the business over the coming years. As part of the acquisitions, we also integrated our global commercial channels, which include a large network of dedicated distributors focused on our targeted surgical call points. This hybrid commercial model and the expansion of our market presence beyond our partnership with J&J MyTech will allow Anika to achieve its growth goals. We strengthened our senior management team and our board of directors with a combined nine new additions adding tremendous experience and leadership from some of the world's top orthopedic and medtech companies. For example, Mike has 18 years of financial leadership at medtech companies such as Hologic and most recently Insulet that have executed successful transformational growth stories. Our GC comes to us from medical device and drug delivery firms, including Insulet and Medtronic. Our three-season commercial leaders come to us with experience from leading orthopedic companies, including Biomet, Zimmer Biomet, and Smith and Nephew in sports medicine and extremities leadership roles with a focus on delivering innovation and commercial excellence and building out successful sales and marketing teams. Annika's head of R&D was a co-founder of and led Arthur Surface and has over 30 years of experience in orthopedic product development focused on sports medicine, extremities, and developing truly innovative, minimally invasive solutions. Our two new board members, bring significant healthcare experience from Beckton Dickinson and Integral Life Sciences. As you can see, in 2020, we've been focused on building out a top-notch team that has the right experience, knowledge, and energy to execute our transformational growth strategy. During the year, as we discussed during our Q3 call, we launched seven new joint preservation products, mainly for the sports medicine and extremities markets, further expanding our portfolio in these spaces. These products include several new suture anchor solutions for rotator cuff repair, knotless syndesmosis repair solutions for the ankle, a device to treat arthritis of the CMC joint in the hand, as well as ligament retention devices for ACL reconstruction. Our total arthroplasty system for the wrist, called Wrist Motion, received 510K clearance in Q4, and we are planning for an initial release of this product in the second half of 2021. Its unique design is intended to preserve as much natural wrist joint motion as possible, and ideally has the potential to begin to shift surgeon treatments away from wrist fusion, thus expanding the wrist implant market. Lastly, I'd like to stress that many companies of our size would have struggled to complete even a portion of this list. And at the same time, we delivered our products to our customers and their patients with the continued high level of quality they expect, allowing us to exit the year with strong financial footing for 2021. Before I hand the call over to Meg to review the financial details, I'd like to walk you through our strategic direction and how we see the business performing over the coming years. Please turn to slide five. We've set a course and are focused on achieving our stated goal from our 2019 investor day of doubling the revenue of the company by 2024 with double-digit adjusted EBITDA growth. How are we going to do this? Our market opportunity today is eight times larger than it was one year ago. We now have an $8 billion global market opportunity beyond the legacy Anika osteoarthritis pain management business, including regenerative solutions, soft tissue repair, and bone preserving joint technologies. These joint preservation solutions position us well in the faster growing areas of sports medicine and extremities compared with the more traditional total joint replacement orthopedic markets. We'll continue to leverage our strength with OrthoVisc and MonoVisc, remaining as the number one combined choice for osteoarthritis pain management in the U.S. with our marketing partner, J&J MyTech. Our worldwide commercial organization is now established to deliver our innovative, minimally invasive surgical solutions to clinicians so their patients can resume active living faster. And we'll continue to invest in developing meaningful products, including new products using our differentiated HA-based regenerative platform, further leveraging our commercial organization. Please refer to slide six. We've already touched on the over $1 billion market opportunity in osteoarthritis pain management, continuing to sell our market-leading OrthoVisc and MonoVisc HA injectables through J&J MyTech in the United States and through global distributors outside the United States. In addition, we remain excited about the new opportunities with our next-generation combination steroid plus visco-supplement injectable, Syngal, and our HA-based regenerative solution for cartilage repair, Hylafast, both currently being sold outside the United States. We initiated enrollment in our pilot study for Syngal toward U.S. FDA approval and resumed enrollment in our clinical trial for Hylafast U.S. approval. Enrollment in both of these studies is proceeding, but has been slowed due to COVID. As we are currently projecting them, COVID has pushed these U.S. launch timelines past 2024. That said, I would like to point out that even though we currently sell both Syngal and Hylafast outside the United States in over 30 countries, incremental revenue following approval for Syngal and Hylafast in the U.S. is not currently in our model or necessary to support achievement of our stated 2024 goals of doubling the revenue of the company. We will continue to provide updates on these clinical studies during our upcoming calls and during our investor day we're planning for late spring. We view both of these products as tremendous upside after 2024, as we believe we're just getting started in driving value creation over the long term. In the more than $1 billion regenerative solutions market, Our current product portfolio includes our single-stage HA-based cartilage repair solution, Hylafast, and our HA-based solution to treat insufficiency fractures, Tactuset, which was released in late 2019. Tactuset is showing real traction by offering advantages over currently available treatments and is highly competitive in the insufficiency fracture treatment space. Leveraging our HA technology to develop new products for rotator cuffs and other soft tissue repair represents another example of how ANICA plans to bring together its expertise in HA with new regenerative surgical products. The intersection and synergy of HA and our joint preservation products will be a key catalyst for growth for ANICA over the coming years. The over $2 billion soft tissue repair market in sports medicine represents a fast-growing opportunity, as I previously mentioned. We have a growing portfolio of products for soft tissue fixation, including suture anchors and instrumentation for rotator cuff repair and kits to treat upper and lower extremities. Lastly, the over $4 billion bone-preserving joint solution space addresses areas of unmet need where the osteoarthritic disease process has further progressed and an implant is needed. These specialized implants treat progressive arthritis in multiple joints, including the shoulder, hand, wrist and elbow, and the foot and ankle. This technology includes partial joint and joint resurfacing implants that are minimally invasive and bone-sparing and is intended to allow patients with further OA progression the ability to live actively. This year, in this category, we're excited to be launching our wrist motion product with additional products in development. Now I'd like to turn the call over to Mike to review the financials for the quarter and the year and talk about how we're seeing 2021, and then I'll provide some closing comments. Mike?