Anika Therapeutics Inc.

Good evening, ladies and gentlemen, and welcome to ANACA's second quarter 2023 earnings conference call. If you have a question during the question and answer session, please press star one. I will now turn the call over to Mark Namroff, Vice President, Investor Relations, ESG, and Corporate Communications. Please go ahead.

Thank you. Good afternoon, everyone. Thank you for joining us for 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. 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 measures 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 presentation slide deck in our second quarter 2023 press release. And now I'll turn the call over to our president and CEO, Dr. Cheryl Blenzer. Cheryl?

Thanks, Mark. Good afternoon, everyone, and thanks for joining us. Please turn to slide three. I'm very pleased to say that Anika delivered strong second quarter results with 12% overall revenue growth driven by our OA Pay Management business with strong gross margins and improved bottom line performance. Looking at the core parts of the business, which excludes non-orthopedic, we grew 16%, which is an outstanding result as our products continue to gain traction in the markets we serve. Our OAP management business was stronger than anticipated with 22% revenue growth, led by accelerating monoviz growth globally, strong single growth outside the U.S., and favorable product order timing from J&J MiTech in the U.S. Now, halfway through the year, based on the very good results to date, we're raising our outlook for this product family for 2023, as Michael described shortly. Our OA pain management products have the best clinical performance of any on the market. We're pleased to see J&J's robust results as they continue to further expand our number one market share position in the U.S. OA pain management market and the strong performance of our international team with Syngal, together with Monavisc and OrthoVisc, posting double-digit growth in the quarter. Syngal is truly becoming the next generation non-opioid OA pain product of choice, in over 35 markets outside the U.S. and we're looking forward to U.S. market approval. On that topic, our interactions with the FDA regarding bringing Syngal to the U.S. have been progressing since last fall when we successfully met the primary endpoint of our latest phase three pivotal trial. We are pleased to have had a type C meeting with the FDA in the second quarter as we actively engage with them toward U.S. approval. With respect to our ongoing processes to source and secure development and commercial partners for single in the US and select Asian markets, I'm pleased with the initial interest as we engage with multiple parties. The substantial clinical and commercial de-risking has been well received and we'll update you as we have developments to share. Our joint preservation and restoration portfolio continues to strengthen and our newest products drove continued growth in the second quarter though slower than we originally expected, as some of our distributors experienced the recent industry dynamic of pent-up demand, causing a greater focus on large joints. We are actively determining where the strengths and opportunities are within our U.S. hybrid channel and taking action accordingly to meet our growth objectives. I'm pleased to report that our newest joint preservation product, the RevoMotion Reverse Shoulder Arthroplasty System, which has been in limited release since earlier this year, is seeing growing momentum as we continue to receive very positive clinical feedback. In fact, relative to our original plan, we've increased the number of surgeons in the limited launch and are accelerating the full market launch of REBA Motion to September in conjunction with the Orthopedic Summit for Evolving Technologies, or OSAT, annual meeting in Boston. We've initiated a full slate of training opportunities both for our sales force and surgeons, and the full release of RevoMotion will contribute to the acceleration of our joint preservation business in the second half of this year. I'm also happy to report that we signed an agreement with Materialize, the market leader in 3D planning solutions, to offer a customized software solution called AIM, or ANACA Implant Management, that will be used for both our total and reverse shoulder systems. AIM will be available by the end of the year, and we're excited to provide this new capability to our customers, enabling them to better treat their patients with our innovative products. On the regenerative front in cartilage repair, as we announced in May, we are thrilled to have now completed enrollment of the HyloFast Phase III clinical trial, putting us in a position to begin a modular PMA submission next year and concluding in 2025. The modular submission process the FDA has granted us for Hyalafast allows us to accelerate the PMA filing process by engaging the FDA as they review each module. Lastly, we're very pleased with our progress in developing our HA-based regenerative rotator cuff patch system, which we have named Integrity. We call it Integrity because of the inherent structural integrity of our HA-based scaffold compared to the current first-generation collagen patches on the market. Additionally, the hyaluronic acid scaffold supports healing through improved cell infiltration, tissue remodeling, and tendon thickening. And as critical as the implant is, the instrumentation, fixation, and delivery of the integrity patch are just as important. And we believe we've nailed the designs in conjunction with our surgeon developer team. The instrumentation, delivery system, and fixation methods will all contribute to a seamless, efficient, and elegant rotator cuff augmentation system. Integrity is a key value driver for ANACA, allowing us to serve the fast-growing regenerative rotator cuff repair market with an innovative solution tailored for ease of use by surgeons. Let me now move into the pipeline and clinical updates. If you'd please turn to slide four. Over the past three years, we've been investing with purpose to establish Anika as a global leader addressing unmet needs in early intervention orthopedics, leveraging our core expertise in hyaluronic acid and portfolio across OA pain management, regenerative, sports medicine, and arthrosurface joint solutions. Our pipeline is expanding Anika's near to medium-term market opportunity by over $3 billion with a cadence of exciting, differentiated product launches in high-opportunity spaces. We've updated a number of key items on this pipeline slide, now reflecting more substantial opportunities in the OA pain management and regenerative spaces. First, the previous longer-term opportunities with Singhal and Hylafast have advanced to become more short- to medium-term, now with line-of-sight to U.S. regulatory filings for both products. We expect the next generation OA pain market, served by Syngal, adds an additional $1 billion to our already billion-dollar market opportunity served by Monovisc and Orthovisc, and Syngal is perfectly positioned to win. We're also very excited about our off-the-shelf cartilage repair product, Hylafast, and we now estimate this U.S. addressable market to be over a billion dollars. Hylafast is a key value driver for Annika, that now has a well-defined pathway to the U.S. market by 2026, with the pivotal Phase III study fully enrolled, the FDA designating HyloFast as a breakthrough device, and with a modular PMA filing approach. As excited as we are about Syngal and HyloFast, we also believe our new Integrity HA patch system is a game changer. allowing surgeons to use an HA-based woven matrix to support healing for rotator cuff tears in this over $150 million market. Given the attractive market for regenerative patches, with valuations averaging $250 million for recent M&A transactions for first-generation collagen technologies, we believe this arthroscopic system has expansion opportunities beyond the shoulder and will also be a key driver for growth. With all the necessary 510Ks now filed and two of the three already cleared, we expect to have the product ready for launch in 2024. The histology data we are seeing through 26 weeks is quite compelling compared to the market-leading collagen patch, and I can't wait to share more about this upcoming product and launch. On Tacticet, we filed our final 510K on a higher contrast version, which will enhance visualization under fluoroscopy. an important characteristic for some surgeons in certain applications. Also, we have an exciting update that will support our build of the augmentation market. The first clinical study on using Cactuset to augment suture anchors was presented at the AOSSM meeting last month by Dr. Misty Suri, who is with Ochsner Health in New Orleans. Dr. Suri reported two key findings in a study that followed 240 patients over 12 months. First, the use of Tactuset to augment suture anchors in rotator cuff repair procedures resulted in a statistically significant decrease in the incidence of suture anchor pullout compared to the same surgeries performed without Tactuset. Second, the study demonstrated a statistically significant reduction in pain scores in the series using Tactuset. These data, to be published in a peer-reviewed journal, represent clear evidence of the benefits of Tactuset augmenting suture anchors in rotator cuff repairs and highlight the significant market potential for Tactuset. As the clinical evidence for augmentation in rotator cuff repairs continues to build, we expect the momentum and adoption to increase as well, which is a clear win for both surgeons and their patients. Our new X to a suture anchor system in sports medicine is gaining early traction in the market and following our Q1 full market release of the peak version, with ongoing very positive surgeon feedback. As we continue to expand our commercial presence and reach with this key product, we are also developing follow-on products, including a biocomposite version that we expect to launch next year. Lastly, our new RevoMotion reverse shoulder arthroplasty system, competing in the fast-growing, now $1 billion U.S. reverse shoulder market, has had a successful limited market release, and we've expanded the surgeon base beyond what we originally planned. As I noted earlier, based on these strong results in the limited release, we are accelerating our full market release to occur in September. Together, from Singhal to Riva Motion, we have assembled a tremendous portfolio that opens up a $3 billion market opportunity with solutions that truly solve unmet needs across early intervention orthopedics. all in line with our mission of restoring active living around the world. This progress positions ANACA better than ever to deliver meaningful value for our stakeholders. Now I'd like to turn the call over to Mike to review the second quarter results and guidance for the remainder of the year. Mike?