Anika Therapeutics Inc.

Good afternoon, ladies and gentlemen, and welcome to ANACA's third quarter 2021 earnings conference call. Today's conference is being recorded. I will now turn the call over to Mark Namaroff, Executive Director of Investor Relations and Corporate Communications. Please proceed.

Thank you. Good evening, everyone. Thank you for joining us for ANACA's third quarter conference call and webcast. Our Q3 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 are the 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 and Chief Financial Officer and Treasurer. Please take a moment to 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 in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainty, and 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 forward-looking statements presented today. Please also see our SEC filings and our most recent 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 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 non-GAAP 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. The 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 third quarter press release. And now I'll turn the call over to our President and CEO, Dr. Cheryl Blanchard.

Thanks, Mark. Good evening, everyone, and thanks for joining us. Please turn to slide three. Let me start by expressing my hope that everyone has been able to stay safe during these disruptive times and that we continue to prioritize the health and safety of our employees. I'll plan to review some highlights from the quarter and then Mike will go into the financial details and review the outlook for the remainder of 2021. I'm pleased to report another solid quarter with revenue up 25% over Q3 last year. primarily due to some COVID recovery and related timing of orders in our joint pain business. Our joint pain management business was up by 42% as last year the Q3 orders were the first to be impacted by COVID and this year on J&J MyTech order timing. While there's lumpiness on a quarterly basis, the full year for this part of our business is coming in just as we expected as end market injection volumes have largely stabilized. OrthoVisc and MonoVisc combined remain the number one HA-Visco supplements in the US. Joint preservation and restoration revenue was lower by 4% over last year due to larger than expected COVID headwinds driven by the Delta variant causing rolling shutdowns at various sites of care. As a result, elective surgery volumes were lower than expected in the quarter. And even as the Delta spike begins to wane, we're seeing and expect to continue to see Healthcare worker shortages constrain surgery volumes in line with broader market reports. As a reminder, Q3 of last year was where we saw a significant recovery from the first wave of COVID in our joint preservation and restoration business. Unfortunately, this year, we also saw industry events either dramatically scaled back or canceled and lack of access to surgical centers and hospitals that has had an ongoing impact on our ability to engage surgeons with our now fully integrated product portfolio. Another set of COVID challenges that we continue to carefully manage through are the supply chain issues that most industries are facing. Despite these challenges, we remain confident that we will deliver above market revenue growth in our joint preservation and restoration segment for 2021. Adjusted gross margins for the quarter came in at 66% in line with our targets for the year Translating to positive adjusted EBITDA and positive operating cash flow. And we ended the quarter with $90 million of cash on the balance sheet. Our third quarter was highlighted with progress against our key milestones that we described during our investor day in June. During the quarter, we fully launched our wrist motion total wrist arthroplasty system, a key advancement expanding our portfolio beyond our existing hemi-wrist implant product. Our new product restores the natural wrist motion for arthritis patients and provides a motion-preserving solution, eliminating the need for joint fusion. The launch of this product at the American Society for Surgery of the Hand, or the ASSH annual meeting in September, received a lot of positive interest and attention from the hand and wrist surgical community. Also during the quarter, we received an additional 510 clearance for Tactuset, our hyaluronic acid-based bone void filler, expanding its capability beyond treating insufficiency fractures to be used for the augmentation of hardware and supportive bone fragments during surgical procedures. This additional indication will expand Tactuset's addressable market, further cementing our strategy in the ASC-based sports medicine business by allowing surgeons to use Tactuset as an adjunct to suture anchor fixation when performing soft tissue repairs. These surgeries include rotator cuff repairs, were anchoring sutures into fragile or low quality bone can lead to inferior mechanical fixation and clinical outcomes. Once injected, Tacticet hardens and mimics the properties of normal trabecular bone initially and then remodels into healthy bone over time. The use of Tacticet in this new indication has been shown to increase the pullout strength of a suture anchor by twofold, providing for a secure suture anchor fixation construct. This indication was launched in October and not only expands our addressable market, but it also allows us to define a new market where one doesn't currently exist. Additional indications for the use of Tacticet continue to evolve and we see this as a game-changing regenerative solution with a number of applications in the joint preservation space. Despite the growing concern over the spread of the Delta variant during the summer, the AAOS Annual Meeting was held in San Diego in August. The American Academy of Orthopedic Surgeons is the preeminent industry meeting for orthopedists and it was the first industry event that ANACA was able to attend as a fully integrated company and to really showcase our new story to the surgeon community. Even though surgeon attendance was 80% lower than in prior years, feedback from surgeons who were there was very positive, reinforcing our portfolio strategy in joint preservation as procedures are transitioning more to the ASC. a trend that is only accelerating with COVID dynamics, especially in the strategic areas where we're focused along that early intervention continuum of care. On the talent front, we've continued to strengthen both our leadership team and board of directors with experienced leaders in the joint preservation space with the addition of two industry veterans. I'm happy to welcome Ann Nunes to the ANICA leadership team as our vice president of operations. Ann comes to Annika from Smith and Nephew where she held senior operational supply chain and transformation roles. Ann brings over 20 years of orthopedic and biotech operational experience and will focus her attention on optimizing Annika's global operations, driving improvements in supply chain management, and ensuring cost targets are met. In addition, Monday we announced that our board of directors appointed Cheryl Connolly as an independent director. Cheryl comes with over 35 years of experience in orthopedics and healthcare, with 25 of those years spent at Zimmer, where she was last group president, Americas and Global Brand Management, and chief marketing officer, focusing on global brand management, marketing, sales, product development, and operations. I've known Cheryl for many years, and she brings in-depth commercial and operational experience to the board to help guide our strategy. Both Ann and Cheryl are great additions to the ANICA team, and I'm thrilled they've decided to join us as we continue on our transformational journey. Over the last couple of quarters, I've been discussing our investment in people, processes, and systems as we position ANICA for growth. During the third quarter, we made significant progress on this front, not only with adding new talent, some of which I just described, but also with systems as we rolled out our global ERP system, SAP, across all ANACA businesses including the Parkas and Arthur Surface entities. This will give us the tools necessary to drive operational efficiency and synergy in support of our growth strategy. 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 provide an update to our product development pipeline on slide four. As I described earlier, we fully launched our total risk platform as scheduled in September and it's now available for sale nationally. Tacticet continues to see great momentum in the U.S. and our expansion plans for Tacticet continue with our recent launch and we're planning an additional 510 filing in 2022. We continue to make progress on our rotator cuff system with the initiation of the preclinical animal study. This system is a core part of our ASC strategy and we're excited with our progress on this project. Clinical study enrollment for both our single stage cartilage repair product Hyalafast and our second generation OA pain solution Syngal continues. Despite clinical trial enrollment challenges related to COVID, I am very pleased to report that enrollment in the Syngal pilot is on track to be completed in November. We'll continue to provide clinical trial updates as enrollment progresses as we remain focused on bringing these two exciting products into the U.S. market. Please turn now to slide five. I'd like to put into context where we are with respect to our strategy and highlight that we're still in the early innings and navigating through COVID dynamics to position ourselves to succeed well considering the disruption being created. The remainder of 2021 and into 2022 is still part of what we call the transformation phase as we continue to invest in the business to drive scale and grow and focus on the 2021 new product launches with training on their safe and effective use as COVID lifts and we can again become more customer facing. In the second half of 2022 and in 2023, we expect to have additional new product launches targeting the ASC call point and additional system implementations to drive commercial excellence. We're making tremendous progress here and I've already described setting us up for the next phase of growth as we move into 2023 and 24. in the 23-24 timeframe is where we expect to see the real impact of our R&D pipeline with additional 510K product launches and revenue growth accelerating. Also through 2024, we'll continue to invest in Hylafast and Singhal with ongoing clinical development to bring them to the market in the United States. As I've said before, 2024 is not the end game and is truly just the beginning for Anika as we drive accelerated growth and profitability. Now I'll turn the call over to Mike for a review of our Q3 financials, and then I'll wrap things up. Mike?