February 21, 2019
BEDFORD, Mass.–(BUSINESS WIRE)–Anika Therapeutics, Inc. (NASDAQ: ANIK), a global, integrated orthopedic and regenerative medicines company specializing in therapeutics based on its proprietary hyaluronic acid (“HA”) technology, today reported financial results for the fourth quarter and full year ended December 31, 2018, and provided an update on its business progress in the periods.
“Anika continued to deliver strong earnings and cash flow in the fourth quarter, entering 2019 well-positioned to further build on the foundation that will drive the Company’s next phase of growth,” said Joseph Darling, President and Chief Executive Officer of Anika Therapeutics. “During the quarter, MONOVISC and CINGAL end user demand remained strong. We also successfully expanded the reach of our orthobiologics business in Europe, Asia, Africa and South America with the addition of eight new international distributors during the year. We were pleased to resume global production and distribution of HYALOFAST, HYALOGRAFT-C and HYALOMATRIX, and look forward to benefitting from our full complement of products in 2019. We believe 2019 will be a transformational year for Anika and we will continue to take advantage of the multiple levers available to advance our long-term goal of returning to annual double-digit revenue growth. We are focused on solid execution and increasing efficiency and productivity, as we address our challenges and continue to expand our commercial reach, advance our pipeline and drive value for our shareholders.”
Fourth Quarter and Full Year Financial Results
- Total revenue for the fourth quarter of 2018 was $27.0 million, compared to $29.4 million for the fourth quarter of 2017. Total revenue for the full year of 2018 was $105.6 million, compared to $113.4 million for the full year of 2017. The decrease in revenue for the quarter and full year of 2018 was due primarily to the impact from the voluntary recall and lower U.S. viscosupplement pricing. 2017 results also included the achievement of $5.0 million of milestone revenue as a result of MONOVISC reaching $100 million in U.S. end-user sales within a consecutive 12-month period.
- Global Viscosupplement revenue increased slightly for the full year of 2018. Global MONOVISC and CINGAL revenue increased 14% for the full year of 2018, providing evidence of strong favor toward the Company’s innovative treatments.
- Total operating expenses for the fourth quarter of 2018 were $17.2 million, compared to $19.7 million for the fourth quarter of 2017. The year-over-year decrease in total operating expenses for the fourth quarter of 2018 was due primarily to lower cost of product revenue. Total operating expenses for the full year of 2018 were $83.8 million, compared to $67.7 million for the full year of 2017. The increase in total operating expenses for the full year of 2018 was due primarily to a one-time charge of $8.4 million in the first quarter, which consisted mainly of non-cash stock-based compensation expense associated with the retirement of Anika’s former Chief Executive Officer, approximately $2.0 million of non-recurring CINGAL U.S. pre-launch market research activities in the first half of 2018, and increased personnel and professional service costs.
- Net income for the fourth quarter of 2018 was $7.7 million, or $0.54 per diluted share, compared to $8.1 million, or $0.53 per diluted share, for the fourth quarter of 2017. Net income for the full year of 2018 was $18.7 million, or $1.27 per diluted share, compared to $31.8 million, or $2.11 per diluted share, for the full year of 2017. The decline in net income for the full year of 2018 was due primarily to the decrease in total revenue and increase in operating expenses previously discussed.
- Cash, cash equivalents and investments were $159.0 million as of December 31, 2018, compared to $149.0 million as of September 30, 2018. Cash provided by operating activities was $10.0 million for the fourth quarter of 2018 and approximately $35.0 million for the full year of 2018.
Recent Business Highlights
- Resumed global distribution of HYALOFAST, HYALOGRAFT-C and HYALOMATRIX in the fourth quarter after a voluntary, non-safety related recall in the second quarter of 2018.
- Expanded the international commercial reach of the orthobiologics business in Europe, Asia, Africa and South America with the addition of eight new international distributors.
- Completed a product prototype of the Company’s Rotator Cuff repair therapy as planned.
- On-track to complete a 5-year strategic plan in the first half of 2019.
- Continued evaluation of potential partnership opportunities for the Company’s product pipeline, which is an important element of its 5-year strategic plan.
CINGAL FDA Update
Anika recently met with the U.S. Food and Drug Administration (FDA) to discuss the totality of available CINGAL data, including information from the 17-02 extension study and real world evidence from physicians in Canada and Europe, to gain additional guidance on the pathway for CINGAL approval in the U.S. Based on that meeting, it has become clear that Anika will need to conduct another Phase III clinical trial before it can obtain approval for CINGAL in the U.S. The Company plans to continue to work with the FDA and pursue the most expeditious path to FDA approval for CINGAL. The Company will provide updates on its progress on this initiative at appropriate intervals moving forward.
Full Year 2019 Corporate Outlook
For the full year of 2019, the Company expects total revenue to be approximately 3% to 6% below the prior year level due primarily to continued pricing pressures on its U.S. viscosupplement business. Licensing, milestone and contract revenue is expected to be flat for the year. Total operating expenses are anticipated to be in the high $70 million to $80 million range. Adjusted EBITDA is expected to be in the low $30 million range, which is based on anticipated U.S. GAAP net income in the mid-teen to around $20 million range. Capital expenditures are expected to be between $5 million and $8 million. In 2019, the Company plans to continue advancing key ongoing initiatives, including:
- Complete and begin implementation of Anika’s 5-year strategic plan.
- Transform from a pure distributor model business by establishing a hybrid commercial model in the U.S., with the goal to launch the Company’s first HA-based, surgically-delivered regenerative therapy for bone repair procedures in the second half of 2019.
- International expansion of Orthopedics and Dermal product portfolios.
- Develop and finalize a regulatory strategy for CINGAL in the U.S.
- Pursue strategic acquisitions and partnerships to augment organic growth.
The Company is stating its expectations regarding, and will report, its 2019 financial results with respect to Adjusted EBITDA, which is a non-GAAP financial measure and should not be considered an alternative to net income or other measurements under generally accepted accounting principles (GAAP). The Company believes that Adjusted EBITDA provides additional useful information to investors in their assessment of its operating performance as it is a metric used by management to evaluate the Company’s performance. Adjusted EBITDA is not calculated identically by all companies, and therefore the Company’s measurements of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
Adjusted EBITDA is defined by the Company as GAAP net income excluding depreciation and amortization, interest and other income (expense), income taxes, and share-based compensation expense. The Company is not providing a quantitative reconciliation of projected Adjusted EBITDA to the corresponding GAAP information because the GAAP measures that the Company excludes from its projected Adjusted EBITDA are not available without unreasonable effort on a forward-looking basis due to their unpredictability, high variability, complexity, and low visibility. These excluded GAAP measures include interest and other income, income taxes, and other charges. Because these charges may vary materially, they will have an unpredictable, and potentially significant, impact on our future GAAP results.
Conference Call Information
Anika’s management will hold a conference call and webcast to discuss its financial results and business highlights today, Thursday, February 21 at 5:00 pm ET. The conference call can be accessed by dialing 1-855-468-0611 (toll-free domestic) or 1-484-756-4332 (international). A live audio webcast will be available in the “Investor Relations“ section of Anika’s website, www.anikatherapeutics.com. An accompanying slide presentation may also be accessed via the Anika website. A replay of the webcast will be available on Anika’s website approximately two hours after the completion of the event.