Anika Therapeutics Inc.

Greetings, and welcome to ANACA's fourth quarter and year-end 2022 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Namaroff, Vice President, Investor Relations, ESG, and Corporate Communications. Thank you. You may begin.

Thank you very much. And thank you. Good afternoon, everyone. Thank you for joining us for Anika's fourth quarter and year-end conference call and webcast. Our Q4 earnings press release was issued after the close of the market today and is available on our investor relations website located at anika.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 of 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 in the Securities 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, 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 financial measures. 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, the reconciliation of GAAP measures, they provide an even more complete understanding of our business. The reconciliation of adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our fourth quarter year end 2022 press release. And now I'd like to turn the call over to our president and CEO, Dr. Cheryl Blanchard. Cheryl?

Thanks, Mark. Good afternoon, everyone, and thanks for joining us. Please turn to slide three. I want to start today's call with a high-level overview of where we are and why we're so excited about the value creation potential of our business. Over the last three years, we have expanded our addressable market from $1 billion to $8 billion plus. We've attracted leading industry talent, and we've developed and are now introducing into the market differentiated solutions in the largest and fastest growing segments of orthopedics. As we enter this next phase of execution with a strong balance sheet, an expanded portfolio, and an energized team, we are very excited about the path ahead. And just this last year alone, we made a number of strategic investments, and our teams continued to execute well. X-Twist, our new cornerstone product in sports medicine, just moved into full market release at the beginning of this year. We've initiated the limited market release of our RevoMotion reverse shoulder arthroplasty system. We completed significant development and filed multiple 510Ks the FDA for our hyaluronic acid-based regenerative rotator cuff patch system. We have nearly completed enrollment for the hyaluronic acid cartilage repair phase three pivotal trial, and we are in the process of engaging with the FDA on Syngal, our next generation OA pain therapy, following the exciting news last quarter that we met the endpoints of our phase three clinical trial. 2023 is an inflection point for ANACA, as we build towards our accelerated growth targets over the coming years. Now let me get into more specifics. As you can see on slide four, we delivered strong financial performance with revenue up 11% for the fourth quarter and 6% for the full year, even with sustained supply chain headwinds through the year. Anika continues to be a leader in the hyaluronic acid-based OA pain management market, with Monovisc and OrthoVisc in the U.S. and internationally. Also, outside the U.S., we continue to be excited by the growth of Syngal, our next generation non-opioid single injection product to treat both short and long-term OA pain. Through our long-term partnership with J&J MyTech for OrthoVisc and MonoVisc in the U.S., we have strengthened our number one market share position in the U.S. visco-supplement market. Syngal is a tremendous opportunity for Annika. We have successfully commercialized Syngal in more than 35 countries outside the United States, where more and more clinicians and their osteoarthritis patients are realizing the benefits of this next-generation OA pain product. Given its international commercial success and our recently reported exciting Phase III clinical data, we're continuing to advance Syngal towards FDA approval in the U.S. We expect our joint preservation business will accelerate its growth as we move through 2023 based on the strength of our recent product launches. While we're still in the early stages, we are receiving great feedback from surgeons about the differentiated benefits of Anika's products. TactiSat, our rapidly growing regenerative solutions product that we launched in 2019, continues to capture market share with revenue up 28% for the full year Given the success of this platform, we're targeting further tac-to-set expansion, which we'll discuss in more detail shortly. Following the successful limited launch of xTwist late in the third quarter of last year, we moved into full release early in 2023. We're thrilled to be positioned to meet demand now that we are past the initial xTwist supply chain challenges that constrained its growth during its limited launch last year. Surgeon feedback continues to be positive as they highlight the confidence they have in using it in a variety of sports medicine applications. We've also received great feedback on the surgical versatility that X-Twist has given them across procedures in the shoulder, foot and ankle, and other extremities, and that our design facilitates soft tissue repairs that other systems are unable to accommodate. In addition, we recently commenced the limited market release of our new RevoMotion reverse shoulder system, with the first surgeries performed in early 2023. RevoMotion significantly expands our shoulder arthroplasty portfolio, and early feedback from the limited release surgeons has been fantastic. As I'll discuss further on the next slide, this product launch marks our entrance into the rapidly growing $800 million U.S. reverse shoulder market segment. the largest and fastest growing segment of the shoulder replacement market. I'm also pleased to report that Hyalafast has been designated as a breakthrough device by the FDA, allowing for prioritized interaction and review to enable patients faster access to new therapies. As a reminder, Hyalafast is our highly differentiated, off-the-shelf cartilage repair product that only requires a single surgery and is bone-preserving. We are now approaching full enrollment in our HyloFast Pivotal Phase 3 clinical trial, having enrolled 199 of 200 subjects, and we remain on track to file a PMA for HyloFast with the FDA in 2025. Finally, we made tremendous progress in our global medical education program in 2022, conducting in-person training for more than 450 surgeons in the U.S. alone, in addition to other training activities at orthopedic meetings. Our medical education programs are enhancing technical and procedural confidence for our surgeons as they integrate our products into their practice and return their patients to active living. Let's turn to slide five where I'd like to expand a bit on our recent launch of the RevoMotion reverse shoulder system. RevoMotion is a highly differentiated and innovative reverse shoulder system specifically designed for the ASC and enhanced OR efficiency. On the implant side, RevoMotion offers the industry's smallest diameter threaded glenoid base plate, which enhances intraoperative flexibility. It also provides patient personalization with bone-preserving glenoid and humeral designs that match the native anatomy, similar to other implant designs in our Arthur Surface portfolio. Some of the most exciting features of this system are on the instrument side. With a streamlined two-instrument tray design, The consolidated instrumentation is both ASC and hospital-friendly, limiting sterile reprocessing volume and reducing relative costs for our customers. In fact, most competitive systems require between four to six trays of instruments, which presents a major burden to hospital efficiency and makes those systems difficult to use in the ASC setting. We've received great feedback following first surgeries, with surgeons commenting that RevaMotion is much more bone-conserving and that the system is very efficient. Most importantly, patients are doing well in their early post-op visits, and surgeons are extremely pleased with the post-op x-rays. We look forward to building on this momentum ahead of a full launch, which we are targeting toward the end of this year. Now I'd like to spend a few minutes reviewing our new product development pipeline. As you can see on slide six, ANACA has been incredibly productive with our NPD work, with now several successful product launches beginning in 2021, including the Total Risk Motion, Cactus Set Augmentation, X-Twist, and most recently, RevaMotion. These new product introductions are key to our growth strategy in achieving our multi-year targets. By launching these innovative new products across categories and procedures, We are continuing to expand our market opportunity and enhance the value that ANACA brings to both the ASC and hospital settings. In our regenerative solutions portfolio, we remain focused on advancing our TactiSET platform. We have multiple 510Ks in process, which will expand indications and allow us to further build on the commercial success we've had since launching this in late 2019. We believe that with the continued expansion of the TactiSET franchise, we can increase the addressable market to well beyond $100 million by creating a new market for hardware augmentation. Following the full market release of X-Twist, Anika is positioned to address the needs of surgeons performing high-volume sports medicine procedures, such as rotator cuff repairs and ankle stabilizations. With a $600 million-plus U.S. market opportunity, X-Twist is a cornerstone addition to the Anika sports medicine portfolio. and we believe it has the potential to become a true platform technology as we look to leverage its design in future products. We're also pleased to announce that we will be launching a hyaluronic acid-based regenerative patch system next year that will further strengthen our growing and differentiated shoulder portfolio. It is initially designed for the shoulder to provide augmentation to the tendon to support healing for rotator cuff tears. Annika's patch is not only mechanically stronger, but our preclinical data shows that the regenerative capacity is improved compared with the first-generation collagen patches on the market. Along with our arthroscopic delivery and fixation methods, the system promises to truly be a game-changer. We completed multiple 510K submissions at the end of 2022 and will share additional details about the product once the system has been cleared and we're gearing up for first surgeries. Given the attractive market for regenerative patches, we believe this system has expansion opportunities beyond the shoulder and will be a key driver for growth. Finally, we have two important longer-term opportunities with Hylafast and Syngal that will further augment and reinforce ANACA's growth once they are approved and available for the U.S. market. We're making great progress advancing Hylafast and are excited about its significant U.S. market potential which will enable us to reach an addressable market that we have conservatively sized to be at least $350 million. Due to its differentiation, we also believe that Hylafast has significant market-expanding potential, given that it is a single-stage, off-the-shelf solution. We look forward to advancing Hylafast through the FDA. We're also continuing to advance Syngal toward U.S. commercialization. In the third quarter, we announced that it successfully demonstrated superiority over steroid alone for pain reduction at 26 weeks. Singal is a true next-generation non-opioid OA pain product, and given its strong international performance and clinical data, we believe it could potentially double our total addressable market in the OA pain space and become a key revenue engine for ANICA for years to come. As we look ahead, we will continue to engage with the FDA regarding next steps for U.S. regulatory approval. In parallel, we are exploring the potential to advance Singal through commercial partnerships in U.S. and select Asian markets. As a reminder, ANACA controls full global rights for Singal, and we intend to proceed thoughtfully as we evaluate our options to commercialize Singal to best serve osteoarthritis patients around the world and drive shareholder value. We will continue to provide updates over the coming quarters as we make progress on this important strategic asset. Similar to last quarter, I want to use slide seven briefly as an opportunity to reflect on how far our business has come as we continue to expand into large and growing markets that represent high opportunity spaces within orthopedics. Over the past three years, we have expanded ANACA's market opportunity from $1 billion to more than $8 billion today. In addition to advancing Singhal through clinical development, we have grown and evolved our portfolio, actively investing in higher growth yet highly complementary areas to build a comprehensive joint preservation portfolio in regenerative solutions, sports medicine, and arthrosurface joint solutions. Moving to slide eight, we are targeting the largest and fastest growing segments of the joint preservation market by focusing on the shoulder, particularly across the continuum of rotator cuff disease, representing a $2 billion U.S. market opportunity. Our portfolio, using Annika's unique and proprietary technologies, includes recent product launches that specifically address the shoulder continuum. First, looking to the upper right-hand corner of the slide, we believe Xtwist has the potential to become a true platform technology as we look to leverage its design in future products. Then, continuing clockwise, on the regenerative side, we offer Tactuset to augment hardware, specifically with suture anchors when surgeons encounter poor bone quality, to provide a differentiated solution to achieve a strong repair. And now that we are in more rotator cuff procedures, we have the opportunity to cross-sell Tactuset augmentation with X-Twist. In the pipeline is our regenerative rotator cuff patch system, providing a strong foundation in regeneration alongside Tactuset. And finally, adding RevoMotion enables access to the full joint replacement market in the shoulder with a focus on a differentiated and bone-sparing design. This means our portfolio will now address the full spectrum of shoulder arthroplasty needs for surgeons in the hospital and ASC settings. Now that we have this major product category filled, the opportunity to drive our Arthur Surface Joint Solutions products, specifically OvaMotion, our total shoulder, is dramatically enhanced. We expect that Xtwist and RevaMotion will be significant growth drivers, positioning Anika to deliver double-digit growth in joint preservation and restoration in 2023, which will be augmented further by our regenerative patch system in 2024. I'll now turn it over to Mike for a review of our fourth quarter and year-end results and 2023 outlook. Mike?