Anika Therapeutics Inc.

Good day, everyone, and welcome to ANACA's second quarter 2021 earnings conference call. As a reminder, this call is being recorded. I would now like to turn the call over to Mr. Mark Nemiroff, Executive Director of Investor Relations and Corporate Communications. Please go ahead, sir.

Thank you. Good evening, everyone. Welcome to ANACA's second quarter conference call and webcast. Our Q2 earnings press release was issued after the close of the market today and is available on our Investor Relations website, located at www.anneka.com as our supplementary PowerPoint slides that will be used for the discussion today. With me on the call today are 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 Anneka's second quarter 2021 financial results with key business highlights as well as discuss our outlook for 2021. Please take a moment and open up 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 Securities 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 see our SEC filings and our most recent forms 10-K and 10-Q for more information about risk factors that could affect our performance. In addition, during the call today, we may refer to a number of adjusted or non-GAAP financial measures. which includes adjusted gross margin, adjusted EBITDA, adjusted net income, and adjusted earnings per share, which are used in addition to results presented in accordance with GAAP financial measures. We believe that the non-GAAP financial measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial results and the reconciliation of GAAP measures, they provide an 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 available presentation slides and in our second 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. Please turn to slide three. We are now halfway through what is shaping up to be a successful, transformative year for Anika, even in light of the challenges we've all faced during the pandemic. It's starting to feel like things can begin to return to a more normal dynamic, even as COVID continues to throw us all some curveballs. As COVID restrictions began to ease during the quarter, our sales and marketing teams continued to ramp up efforts to promote Anika's growing product portfolio and brand at trade shows and conferences. Our teams have also been engaging surgeons directly as we have increased in-person training on the safe and effective use of our products. We're seeing the first signs that this is paying off as surgeons who were previously unaware of Annika's focus on joint preservation now see that our portfolio provides meaningful solutions for them to treat their patients so they can return to active living. I view this direct engagement as a tremendous opportunity as we communicate the new and transforming Annika's story and describe our value proposition in the early intervention orthopedic continuum of care. We are, however, remaining cautious with respect to COVID, especially with the spike of the Delta variant and its rolling impact on the healthcare systems in the US and around the world. Just this week, it's being reported that certain US hospital systems are shutting down elective procedures temporarily. Even with this in mind, We're confident that we can deliver on our 2021 targets of double digit revenue growth with positive adjusted EBITDA and positive operating cash flows. We also feel very good with where we are in our multi-year strategy and are pleased with our performance this quarter, even though we're still early in this journey. Let me start by reviewing some highlights from the quarter and then Mike will go into the financial details and review our 2021 outlook. The quarter ended with revenue up 24% over Q2 last year. Some of the growth was due to the favorable comparison to the second quarter last year when COVID was at its worst and greatly impacted our joint preservation and restoration business. We're now seeing surgical and injection procedure volumes at around 85% on average of pre-COVID levels and we expect to see strong growth into the second half of the year. Joint preservation and restoration showed strong recovery with revenue up 79% over last year, despite COVID market access headwinds. And we continue to make progress in our transformation, focusing on commercial integration and product launch execution. Our joint pain management business was up 9% on recovery from COVID, noting that the full initial impact of COVID last year was not in Q2, but due to customer ordering patterns extended into the second half of last year. With the recovery year to date, we believe our joint pay management business has largely stabilized and we are raising our revenue outlook for this year as Mike will discuss with you in his section. The profitability equation for Anika remains attractive with adjusted gross margins of 70% in the quarter at or above our targets for the year, translating to positive adjusted EBITDA and positive operating cash flow and we ended the quarter with over $97 million of cash on the balance sheet. As we described in June during our investor day, Anika's double digit revenue growth along with healthy profitability will set us apart from our peers and provide tremendous opportunity for shareholder value creation. The second quarter was also marked by some significant milestones for the business. At the end of the quarter, we initiated the limited market launch of our risk motion total risk implant with Dr. Arnold Peter Weiss of University Orthopedics in Rhode Island, successfully completing the first surgery on June 30th. As a reminder, the total wrist system was cleared by the FDA last October and is a modular joint preservation system that replaces both the radial and carpal sides of the wrist joint to preserve more natural motion and to mimic native patient anatomy. Wrist arthritis can be incredibly debilitating and painful, and restoring pain-free motion is at the core of who we are. Considering that most wrist arthritis is still treated with fusion, meaning patients have very limited wrist motion post-operatively, we think they deserve better with a differentiated motion-preserving solution. We're excited about the early interest in this product as we march towards full market launch in September. We also received 510 clearance for a reverse shoulder system during the quarter. This foundational clearance sets the stage for the development and expansion of our shoulder implant portfolio in the future, and is a first step for ANACA towards entering the large and fast-growing reverse shoulder market. As a result of achieving this regulatory milestone, subsequent to quarter end, we paid an earn out of $10 million in accordance with the Arthur Surface Acquisition Agreement. After the close of the quarter, we attended in person the first major trade event of the year at the combined meeting of the American Orthopedic Society for Sports Medicine and Arthroscopy Association of North America in Nashville. I was personally thrilled to be able to attend, to be at our booth and to see surgeons engaged in our product specific training. The conference and trade show were well attended and enabled ANACA to begin increasing its awareness and presence within the orthopedic surgeon community, highlighting our expanded product portfolio in sports medicine as well as regenerative and bone preserving joint solutions. I've also recently been able to meet with a number of surgeons and I'm seeing in person their excitement around the ANICA story and how important our focus on joint preservation and addressing unmet needs with meaningful solutions is for them and their patients. The next industry conference at the end of the summer is AAOS, the American Academy of Orthopedic Surgeons, which will be a great coming out party opportunity for ANICA assuming COVID Dynamics don't further delay the conferences happened in 2020. Some of our plans include surgeon training, as well as key product highlights and promotional events around core brands such as Tactuset, Anova Motion plus Inlay Glenoid, our stemless anatomic shoulder implant. Before I turn the call over to Mike to review our financials for the quarter, I'd like to take a few more minutes to review our product development progress on slide four. As I described earlier, we took the first steps in launching our total risk platform with the first surgery performed in June and full market launch on track for September of this year. Tacticet, our HA enhanced regenerative solution to treat insufficiency fractures, is doing very well with growing demand in the U.S. Surgeons are truly seeing its advantages, including better handling characteristics, flowability, and set time. Our expansion plans for Tacticet are on track for an additional 510k later this year. We continue enrollment in clinical studies for both our single stage cartilage repair product, Hyalafast, and our second generation OA pain solution, Syngal. We'll provide clinical trial updates as enrollment progresses as we remain focused on bringing these two exciting products into the US market. Please turn now to slide five. As I described during our investor day in June, were in the early innings of Anika's multi-year strategy. We see 2021 taking us through the transformation phase, integrating the two acquisitions of Arthur Surface and Parkis, putting in place a strong commercial team, and making the investments in systems, people, and processes that are going to allow our commercial team to scale and drive growth. As we move into 2022 and 2023, we'll continue to strengthen our commercial capabilities and launch new products that are focused on joint preservation and the ambulatory surgery center call point and will continue to expand into additional geographic areas. We will also, in this time period and through 2024, continue our clinical trials and investing in Hyalofast and Syngal to bring them to market in the United States. I would add that by no means is 2024 the end game and is truly just the beginning for ANACA as we drive accelerated growth and profitability through the expansion of the existing product portfolio. So on slide six, you can see why we remain very excited about the future and we remain confident that we have the right talent and technology to drive shareholder value. Anika will be a company that is two times larger on the top line by 2024 with strong gross margins and profitability. We're keenly focused on our strategy with an $8 billion market opportunity number one position in the U.S. VSCO supplement market with J&J MyTech as our U.S. marketing partner, strong commercial organization for our joint preservation and restoration business, and a robust pipeline of innovative products to help people around the world restore active living. Now I'll turn the call over to Mike to review the details of the quarter. Mike?