Anika Therapeutics Inc.

Good evening, ladies and gentlemen, and welcome to ANACA's fourth quarter and year-end earnings conference call. As a reminder, today's call is being recorded. I will now turn the call over to Mark Namaroff, Vice President, Investor Relations, ESG, and Corporate Communications. Please proceed.

Thank you, Sarah. Good evening, everyone, and thank you for joining us for ANACA's fourth quarter and year-end conference call webcast. Our fourth quarter 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, Chief Financial Officer, and Treasurer. Please take a moment and 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 most recent SEC filings for more information about risk factors that could affect our performance. In addition, during the call, we may refer to several 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. We believe that non-GAAP financial measures provide an additional way of viewing aspects of our operational performance, but when considered with GAAP financial results, and the reconciliation of gap measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-gap financial results to the most comparable gap measurements are available at the end of the available presentation slide deck and in our fourth quarter and year-end 2021 press release. Lastly, Please note that we have changed the descriptions of two of our three product family categories to better describe those products and the markets we serve. Our joint pain management category is now being referred to as osteoarthritis or OA pain management, and our other category is now referred to as non-orthopedic. There are no changes to the products within each of those categories. the description of joint preservation and restoration remains unchanged. And now, I'd like to turn the call over to our president and CEO, Dr. Cheryl Blanchard. Cheryl?

Thanks, Mark. Good evening, everyone, and thanks for joining us. If you could turn to slide three, I'll plan to review some highlights from the fourth quarter and the full year, and then Mike will go into the financial details and review our outlook for 2022. 2021 was a significant step forward for Anika on our journey to expand our presence in the $8 billion joint preservation market. With hard work and focus on our strategic imperatives, we had a successful year on all fronts and made significant progress on our operational transformation to establish the foundation for our multi-year growth strategy, despite the 2021 COVID curveballs. Our industry has certainly been experiencing volatile times especially those companies and sectors that serve elective procedures. With COVID bringing a set of dynamics, including clinical procedure disruptions with state and regional elective surgery shutdowns, staffing shortages, and patients testing positive before a scheduled surgery, and company disruptions, including supply chain issues and employees contracting COVID, are being quarantined due to close contact with others who did. Differentially for ANACA, Gaining access to new customers and facilities through new product approval committees and contracting also remain unpredictable due to COVID. Clearly, this was a tough year, and the ebb and flow of COVID is still with us. That said, Anika has been managing through this uncertainty well and staying true to our transformation strategy with a stable business and a strong balance sheet. We remain focused on the large and growing addressable market in front of us. leveraging our core strengths and joint preservation to drive accelerated revenue and profitability in the years to come. We entered the year with a few key objectives. To execute on our commercial strategy, to add the people, processes, and systems we needed to scale the business, and to achieve our key new product development milestones, all while continuing to manage the business through the unpredictability of COVID. Despite the challenges throughout the year, we ended 2021 with revenue growth of 10% in the fourth quarter, 13% for the year, exceeding previous expectations. While heavily impacted by the Delta variant in the fourth quarter, our full-year growth was strong and driven by our joint preservation and restoration business, which was 23% higher than 2020, demonstrating significant growth in the high-opportunity spaces where we've been making investments in commercial execution and new product launches. I'll speak more to that in a minute. OA pain management ended the year up 8% as both our US and international VSCO businesses demonstrated growth compared with the COVID-impacted results in 2020. This year, we continue to expect to see a leveling of the playing field around pricing and reimbursement practices in the US with our VSCO business. Our non-orthopedic revenues posted 20% growth in 2021 compared with 2020, mainly due to non-recurring last-time buys for certain legacy products and order timing. We do not expect this level of revenue in the non-orthopedic category in 2022, which Mike will describe in more detail in his section. 2021 was a productive continuation of our transformation strategy and allowed us to execute on some key areas associated with our product portfolio expansion and commercial execution. On that note, I'm pleased to report that just after our last call in November, we completed enrollment of the Singall pilot study that will provide us with data by this fall. Also in Q4, we launched our formal ESG initiative through the completion of an in-depth materiality assessment, which will be used to prioritize key environmental, social, and governance issues that are the most critical to our stakeholders. This is the first step in our multi-year ESG journey as ANACA evolves with a focus on human capital, sustainability, and governance best practices. In October, we launched Tacticet for augmentation, expanding its capability beyond treating insufficiency fractures to now also be used for the augmentation of hardware and support of bone fragments. This new indication is a true innovation that addresses a real unmet need in sports medicine today by allowing surgeons to use Tactuset as an adjunct to suture anchor fixation when performing soft tissue repairs. Surgeons are excited about Tactuset in this new adjunctive indication because it's been shown to increase the pull-out strength of a suture anchor by twofold, providing for secure fixation for surgeries that include rotator cuff repairs. When repairing a tendon in what is often poor quality bone, A strong biomechanical construct can help avoid a revision surgery and give the surgeon confidence in their results. This syndication not only expands our addressable market, but it also allows us to define and build a new market where one doesn't currently exist, further cementing our strategy in the ASC-based sports medicine business. In fact, Tactuset continues to see significant revenue growth in the U.S. in the insufficiency fracture indication launched in 2019. In early fall, we fully launched our wrist motion total wrist arthroplasty system, a key advancement, expanding our portfolio beyond our existing hemi-wrist implant product and further adding to our hand and wrist product portfolio. As a reminder, this new product restores natural wrist motion, often called dart-throwers motion, with improved biomechanics for arthritis patients and provides a motion-preserving solution, eliminating the need for joint fusion. We're ramping up medical education and training on the safe and effective use of this product and are seeing great interest from the hand and wrist surgeons, and we're gaining traction as we continue the rollout. Lastly, on 2021 product development progress, in the third quarter, we also received 510K clearance for a reverse shoulder system, which is providing the basis for the continued expansion of our total shoulder portfolio as we develop solutions focused on the ASC delivery environment. Tap-to-set, wrist motion, and the continued focus on the shoulder in the ASC are all core to building out Annika's early intervention, minimally invasive, and motion-preserving brand and value proposition. Our excitement for this transformation remains as we continue to build the joint preservation portfolio with our key growth catalysts, including sports medicine soft tissue repair, our proprietary hyaluronic acid-based regenerative portfolio, and bone-preserving joint solutions. During the year, we also continue to strengthen our leadership team and our board of directors with experienced leaders in the joint preservation and early intervention orthopedic space. Kevin Stone joined ANICA early in the year as vice president and general manager of sports medicine. He brings over 30 years of innovation, R&D, and manufacturing experience from Zimmer Biomat. Ann Nunes joins the ANICA leadership team in Q4 as our vice president of operations with over 20 years of orthopedic and biotech senior operational and transformational leadership experience, most recently with Smith & Nephew. In addition, Cheryl Connolly joined ANICA's Board of Directors with over 35 years of experience in orthopedics and healthcare. In January, we appointed Lisa Funicello as VP of Human Resources. Lisa was most recently a vice president at Presenius and joins ANICA with extensive leadership experience in human resources from both medtech and biotech. The addition of these four senior leaders and industry veterans further enhances the strong team we've brought together and bring significant experience to ANACA with people who know how to roll up their sleeves and execute on the implementation of our transformation and growth strategy. In addition to our leadership teams, we continue to build out our operational effectiveness through the rollout of our global ERP system, SAP, across all ANACA businesses, including the Parcus and Arthur Surface entities in the third quarter. SAP gives us many of the tools needed to drive operational efficiency and effectiveness in support of our growth strategy and allows us to continue to scale the business. Please turn to slide four, where I'd now like to provide an update on our new product development pipeline as we continue to invest in new products and innovative technologies that make Annika the right choice for the surgical center. As discussed during the year, we made significant progress on our new product development roadmap. We're seeing great traction with our risk motion total risk system that we launched in the third quarter. In the fourth quarter, we launched the new indication for Tactuset, further expanding our proprietary HA-based regenerative franchise. Tactuset is not only a meaningful and growing product, but is also an expanding franchise, proving to provide significant clinical benefit across the joint preservation space. As such, we continue to see additional joint preservation indications for the use of Tactuset that motivates further R&D investment. Those indications are now in development with the start of a preclinical study this quarter and another one in the planning phase to start this year. We're also further expanding our shoulder offering with new products for soft tissue fixation, bone preserving implants, and rotator cuff repair. The current shoulder products in development are scheduled for 510K submissions this year. As you may remember from our 2021 Investor Day, we highlighted high opportunity spaces within the shoulder market, already our largest concentration of business in joint preservation, as a $1 billion market opportunity for Anika. And we're assembling a product portfolio uniquely suited for the ASC setting, which I'll discuss more in a minute. In addition to the shoulder products, we're developing foot and ankle implants, which are also slated for 510K submission in 2022. Clinical study enrollment for our single-stage cartilage repair product, Hyalafast, continues. Unfortunately, COVID continues to have an impact on our progress on that study, but we remain focused on getting it enrolled, given the excitement we see for this product in the over 30 countries where we sell it today. As I mentioned earlier, we completed enrollment of the Syngal pilot study despite challenges with COVID. As a reminder, the Syngal 1901 pilot trial enrolled 231 subjects who were randomized to receive either a single injection of Syngal, the steroid triamcinolone hexafedonide, or a saline placebo, and subjects will be followed through 26 weeks for pain and function. The last patient visit is scheduled to be completed in June of this year, and we expect to have data in the fall. Please turn to slide five. We've discussed that our transformational growth strategy has us focused on now an $8 billion TAM. I want to take a minute to remind everyone that within that TAM, we're focused on building out a number of high-opportunity spaces in the shoulder and foot and ankle. While Tactusat has been an exciting entry for ANICA in the regenerative solution space, with a U.S. market size of around 100 million-plus, The additional shoulder segments we're focused on, including the reverse shoulder, lateral row, and rotator cuff, add up to a billion-dollar market opportunity for Anika. Continued investments in differentiated product development targeted at the ASV and robust commercialization and commercial scale present even bigger, exciting growth prospects and allow us to confidently penetrate within that $8 billion TAM that we're targeting over the next few years. Please turn now to slide six. I'd like to put into context where we are with respect to our multi-year strategy. As we highlighted last quarter, we're still in the early innings and navigating through COVID dynamics. That said, the $8 billion market opportunity, our focus on high opportunity spaces within that market, the building strength of our product portfolio, and the tailwinds from the movement of the procedures to the ASC setting cause us to remain very excited about our multi-year strategic imperatives. In fact, even in these early days, we're seeing great traction across our portfolio of new product launches in sports medicine, regenerative solutions, and bone-preserving joint technologies. In 2022, we are building the foundation for accelerated growth by continuing to invest in the business to drive scale and focusing on new product launches with training on their safe and effective use as COVID lifts. I'll go into a bit more detail on 2022 in a minute. We expect to see the significant impact of our R&D pipeline with additional 510K product launches and revenue growth and profitability accelerating into 2023 to 2024 and beyond. Over the next few years, we'll continue to invest in Hylafast and Singhal with ongoing clinical development to bring them to the U.S. market. I would like to note that the multi-year COVID environment has had an impact on the timing of the financial objectives of our multi-year strategic imperatives. a topic Mike will discuss in more detail. As I've said before, 2024 is not the end game, and we are truly just at the beginning of realizing the opportunity for Anika as we drive accelerated growth and profitability. Before I turn it over to Mike, I'd like to dig in deeper on what guideposts you should keep your eyes on in 2022 as we execute on our strategy. Please turn to slide seven. 2022 is a year where we continue on our path toward delivering above-market, sustainable growth and profitability as we invest in and build our product portfolio to take advantage of the market shift to the ASC that was in ANACA's initial plans, but now further driven and accelerated by COVID. The four areas of focus for ANACA this year can be summarized as follows. First, we expect to continue our market leadership position in the HA-based OA Pay Management Market with monovisc and orthovisc generating the cash flow for further investment. Next, we're focused on establishing our commercial organization to provide our sports medicine soft tissue repair, bone preserving joint technologies, and regenerative products to the ASC. The ASC will require a specific value proposition to meet their needs and provide surgeons the access to our technology, and Annika is uniquely positioned to deliver on that value proposition. Third, We'll continue to advance our pipeline with new products in 2022, and we have several new 510 clearances for you to keep your eye on targeting tactic set expansion, multiple shoulder solutions and implants for the foot and ankle. Lastly, we'll report out on the single pilot trials in the fall. We've been very pleased with the success of this product in the 30 plus countries outside the United States where it's sold today and look forward to next steps in the process to ultimately bring it to the United States market. Let me wrap up by saying that 2022 will be an exciting and pivotal year for Anika, and we will make significant progress with the right products in our bag and commercial infrastructure to drive growth into the future. Now I'll turn the call over to Mike for a review of our fourth quarter and full year financial, along with our outlook for 2022, and then I'll wrap things up and we'll take questions. Mike?