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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2024

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from         to

 

Commission File Number 001-14027

 

Anika Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

04-3145961

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

 

32 Wiggins Avenue, Bedford, Massachusetts 01730

(Address of Principal Executive Offices) (Zip Code)

 

(781) 457-9000

(Registrant’s Telephone Number, Including Area Code)

 

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

ANIK

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐

Accelerated filer

Non-accelerated filer ☐

Smaller reporting company

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

As of October 28, 2024, there were 14,645,596 outstanding shares of Common Stock, par value $0.01 per share.

 

 

 

 

 

ANIKA THERAPEUTICS, INC.

TABLE OF CONTENTS

 

   

Page

Part I

Financial Information

3

Item 1.

Condensed Consolidated Financial Statements (unaudited):

3
 

Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023

3
 

Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023

4
 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2024 and 2023

5
 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023

7
 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

Part II

Other Information

27

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

29

Signatures

30

 

References in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” “our company,” and other similar references refer to Anika Therapeutics, Inc. and its subsidiaries unless the context otherwise indicates.

 

ANIKA, ANIKA THERAPEUTICS, CINGAL, HYAFF, HYALOFAST, HYVISC, INTEGRITY, MONOVISC, ORTHOVISC, PARCUS MEDICAL, and TACTOSET are our registered trademarks that appear in this Quarterly Report on Form 10-Q. For convenience, these trademarks appear in this Quarterly Report on Form 10-Q without ® and ™ symbols, but that practice does not mean that we will not assert, to the fullest extent under applicable law, our rights to the trademarks. This Quarterly Report on Form 10-Q also contains trademarks and trade names that are the property of other companies and may be licensed to us.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART I:

FINANCIAL INFORMATION

   

ITEM 1.

FINANCIAL STATEMENTS

 

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

 

   

September 30,

   

December 31,

 

ASSETS

 

2024

   

2023

 

Current assets:

               

Cash and cash equivalents

  $ 62,368     $ 72,867  

Accounts receivable, net

    28,357       35,961  

Inventories

    39,629       46,386  

Prepaid expenses and other current assets

    5,752       8,095  

Total current assets

    136,106       163,309  

Property and equipment, net

    44,572       46,198  

Right-of-use assets

    27,208       28,767  

Other long-term assets

    11,310       18,672  

Deferred tax assets

    1,472       1,489  

Intangible assets, net

    3,081       4,626  

Goodwill

    7,656       7,571  

Total assets

  $ 231,405     $ 270,632  
                 

LIABILITIES AND STOCKHOLDERS EQUITY

               
                 

Current liabilities:

               

Accounts payable

  $ 6,805     $ 9,860  

Accrued expenses and other current liabilities

    18,688       21,199  

Total current liabilities

    25,493       31,059  

Other long-term liabilities

    806       404  

Lease liabilities

    25,242       26,904  

Commitments and contingencies (Note 9)

           

Stockholders’ equity:

               

Preferred stock, $0.01 par value; 1,250 shares authorized, no shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

    -       -  

Common stock, $0.01 par value; 90,000 shares authorized, 15,087 issued and 14,694 outstanding and 14,848 issued and 14,660 outstanding at September 30, 2024 and December 31, 2023, respectively

    147       147  

Additional paid-in-capital

    91,886       90,009  

Accumulated other comprehensive loss

    (5,701

)

    (5,943

)

Retained earnings

    93,532       128,052  

Total stockholders’ equity

    179,864       212,265  

Total liabilities and stockholders’ equity

  $ 231,405     $ 270,632  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

3

 

 

 

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share data)

(unaudited)

 

   

For the Three Months Ended
September 30,

   

For the Nine Months Ended
September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Revenue

  $ 38,753     $ 41,465     $ 121,197     $ 123,691  

Cost of product revenue

    37,313       16,521       67,764       46,932  

Gross Profit

    1,440       24,944       53,433       76,759  
                                 

Operating expenses:

                               

Research & development

    7,244       7,791       22,806       25,105  

Selling, general & administrative

    19,112       24,827       60,445       75,512  

Long lived asset impairment

    3,101       -       3,101       -  

Total operating expenses

    29,457       32,618       86,352       100,617  

Loss from operations

    (28,017

)

    (7,674

)

    (32,919

)

    (23,858

)

Interest and other income, net

    406       635       1,593       1,735  

Loss before income taxes

    (27,611

)

    (7,039

)

    (31,326

)

    (22,123

)

Provision for (benefit from) income taxes

    2,307       (463 )     3,194       (2,456

)

Net loss

  $ (29,918

)

  $ (6,576 )   $ (34,520 )   $ (19,667

)

                                 

Net loss per share:

                               

Basic

  $ (2.03

)

  $ (0.45 )   $ (2.34 )   $ (1.34

)

Diluted

  $ (2.03

)

  $ (0.45 )   $ (2.34 )   $ (1.34

)

                                 

Weighted average common shares outstanding:

                               

Basic

    14,768       14,635       14,769       14,659  

Diluted

    14,768       14,635       14,769       14,659  
                                 

Net loss

  $ (29,918

)

  $ (6,576 )   $ (34,520 )   $ (19,667

)

Foreign currency translation adjustment

    715       (407

)

    242       (121

)

Comprehensive loss

  $ (29,203

)

  $ (6,983 )   $ (34,278 )   $ (19,788

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

 

 

 

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except per share data)

(unaudited)

 

   

Nine Months Ended September 30, 2024

 
   

Common Stock

           

Accumulated

         
   

Number of

   

$.01 Par

   

Additional
Paid

   

Retained

   

Other
Comprehensive

   

Total
Stockholders'

 
   

Shares

   

Value

   

in Capital

   

Earnings

   

Loss

   

Equity

 

Balance, January 1, 2024

    14,660     $ 147     $ 90,009     $ 128,052     $ (5,943

)

  $ 212,265  

Issuance of common stock for equity awards

    1       -       23       -       -       23  

Vesting of restricted stock units

    250       2       (2

)

    -       -       -  

Stock-based compensation expense

    -       -       3,430       -       -       3,430  

Retirement of common stock for minimum tax withholdings

    (90

)

    (1

)

    (2,295

)

    -       -       (2,296

)

Net loss

    -       -       -       (4,514

)

    -       (4,514

)

Other comprehensive loss

    -       -       -       -       (372 )     (372 )

Balance, March 31, 2024

    14,821     $ 148     $ 91,165     $ 123,538     $ (6,315

)

  $ 208,536  

Issuance of common stock for equity awards

    2       -       53       -       -       53  

Vesting of restricted stock units

    49       1       (1 )     -       -       -  

Issuance of ESPP shares

    24       -       411       -       -       411  

Stock-based compensation expense

    -       -       3,103       -       -       3,103  

Repurchase of common stock

    (53 )     (1

)

    (1,369

)

    -       -       (1,370

)

Retirement of common stock for minimum tax withholdings

    (4

)

    -       (206

)

    -       -       (206

)

Net loss

    -       -       -       (88 )     -       (88 )

Other comprehensive loss

    -       -       -       -       (101 )     (101 )

Balance, June 30, 2024

    14,839     $ 148     $ 93,156     $ 123,450     $ (6,416 )   $ 210,338  

Vesting of restricted stock units

    10       -       -       -       -       -  

Stock-based compensation expense

    -       -       2,718       -       -       2,718  

Repurchase of common stock

    (152 )     (1 )     (3,967 )     -       -       (3,968 )

Retirement of common stock for minimum tax withholdings

    (3 )     -       (21 )     -       -       (21 )

Net loss

    -       -       -       (29,918 )     -       (29,918 )

Other comprehensive income

    -       -       -       -       715       715  

Balance, September 30, 2024

    14,694     $ 147     $ 91,886     $ 93,532     $ (5,701 )   $ 179,864  

 

 

5

 

   

Nine Months Ended September 30, 2023

 
   

Common Stock

           

Accumulated

         
   

Number of

   

$.01 Par

   

Additional Paid

   

Retained

   

Other Comprehensive

   

Total Stockholders’

 
   

Shares

   

Value

   

in Capital

   

Earnings

   

Loss

   

Equity

 

Balance, January 1, 2023

    14,625     $ 146     $ 81,141     $ 210,719     $ (6,443

)

  $ 285,563  

Issuance of common stock for equity awards 

    1       -       7       -       -       7  

Vesting of restricted stock units

    177       2       (2

)

    -       -       -  

Stock-based compensation expense

    -       -       3,717       -       -       3,717  

Retirement of common stock for minimum tax withholdings

    (62

)

    (1 )     (1,620 )     -       -       (1,621 )

Net loss

    -       -       -       (10,350

)

    -       (10,350

)

Other comprehensive income

    -       -       -       -       272       272  

Balance, March 31, 2023

    14,741     $ 147     $ 83,243     $ 200,369     $ (6,171

)

  $ 277,588  

Issuance of common stock for equity awards

    1       -       30       -       -       30  

Vesting of restricted stock units

    70       1       (1

)

    -       -       -  

Issuance of ESPP shares

    20       -       456       -       -       456  

Stock-based compensation expense

    -       -       4,150       -       -       4,150  

Repurchase of common stock

    (159 )     (1 )     (5,049 )     -       -       (5,050 )

Retirement of common stock for minimum tax withholdings

    (16 )     -       (432 )     -       -       (432 )

Net loss

    -       -       -       (2,741

)

    -       (2,741

)

Other comprehensive income

    -       -       -       -       14       14  

Balance, June 30, 2023

    14,657     $ 147     $ 82,397     $ 197,628     $ (6,157 )   $ 274,015  

Vesting of restricted stock units

    12       -       -       -       -       -  

Stock-based compensation expense

    -       -       3,561       -       -       3,561  

Repurchase of common stock

    (29 )     (1 )     1       -       -       -  

Retirement of common stock for minimum tax withholdings

    (3 )     -       (107 )     -       -       (107 )

Net loss

    -       -       -       (6,576 )     -       (6,576 )

Other comprehensive loss

    -       -       -       -       (407 )     (407 )

Balance, September 30, 2023

    14,637     $ 146     $ 85,852     $ 191,052     $ (6,564 )   $ 270,486  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6

 

 

 

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

   

Nine Months Ended September 30,

 
   

2024

   

2023

 

Cash flows from operating activities:

               

Net loss

  $ (34,520

)

  $ (19,667

)

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation

    5,324       4,806  

Amortization of acquisition related intangible assets

    985       5,837  

Non-cash operating lease cost

    1,561       1,633  

Loss on disposal of property and equipment

    97       1,852  

Impairment of long-lived assets

    3,101       -  

Stock-based compensation expense

    10,875       11,428  

Deferred income taxes

    26       (4,484 )

Provision for credit losses

    1,023       74  

Provision for inventory

    26,078       2,607  

Changes in operating assets and liabilities:

               

Accounts receivable

    6,638       (201 )

Inventories

    (11,815

)

    (8,257

)

Prepaid expenses, other current and long-term assets

    504       818  

Accounts payable

    (2,385

)

    (1,319 )

Operating lease liabilities

    (1,505

)

    (1,575 )

Accrued expenses, other current and long-term liabilities

    (2,734

)

    914  

Income taxes

    568       108  

Net cash provided by (used in) operating activities

    3,821       (5,426 )
                 

Cash flows from investing activities:

               

Purchases of property and equipment

    (6,427

)

    (3,587

)

Acquisition of intangible assets

    (600 )     -  

Net cash used in investing activities

    (7,027

)

    (3,587

)

                 

Cash flows from financing activities:

               

Proceeds from employee stock purchase program

    411       456  

Cash paid for tax withheld on vested restricted stock awards

    (2,523

)

    (2,159

)

Proceeds from exercises of equity awards

    76       37  

Repurchases of common stock

    (5,339

)

    (5,000 )

Net cash used in financing activities

    (7,375

)

    (6,666

)

                 

Exchange rate impact on cash

    82       3  
                 

Decrease in cash and cash equivalents

    (10,499

)

    (15,676

)

Cash and cash equivalents at beginning of period

    72,867       86,327  

Cash and cash equivalents at end of period

  $ 62,368     $ 70,651  

Supplemental disclosure of cash flow information:

               

Non-cash investing activities:

               

Purchases of property and equipment included in accounts payable and accrued expenses

  $ 118     $ 749  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

7

 

 

Anika Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except share and per share amounts or as otherwise noted)

(unaudited)

 

 

1.

Nature of Business

 

Anika Therapeutics, Inc. (the “Company”) is a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care, including in the areas of osteoarthritis (“OA”) pain management, regenerative solutions, sports medicine and Arthrosurface joint solutions. The Company has over 30 years of expertise in hyaluronic acid (“HA”) technology.

 

In early 2020, the Company expanded its overall technology platform through its acquisitions of Parcus Medical, LLC (“Parcus Medical”), a sports medicine implant and instrumentation company, and Arthrosurface Incorporated (“Arthrosurface”), a company specializing in less invasive, bone preserving partial and total joint replacement solutions.

 

On October 31, 2024, the Company sold its equity interests in Arthrosurface (Note 15) and the Company announced its intention to divest of the Parcus Medical business. These decisions were a result of a strategic review to focus on the Company’s core HA technology and regenerative solutions products to maximize shareholder value.

 

The Company is subject to risks common to companies in the life sciences industry including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, commercialization of existing and new products, and compliance with U.S. Food and Drug Administration (“FDA”) and foreign regulations and approval requirements, as well as the ability to grow the Company’s business through appropriate commercial strategies.

 

 

2.

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The financial statements include the accounts of Anika Therapeutics, Inc. and its subsidiaries. Inter-company transactions and balances have been eliminated. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to SEC rules and regulations relating to interim financial statements. The December 31, 2023 balances reported herein were derived from the audited consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the condensed consolidated financial statements.

 

The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s annual financial statements filed with its Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the three and nine-month periods ended September 30, 2024 are not indicative of the results to be expected for the year ending December 31, 2024.

 

Segment Information

 

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker as of September 30, 2024 was its President and Chief Executive Officer. Based on the criteria established by Accounting Standards Codification 280, Segment Reporting, the Company has one operating and reportable segment.

 

8

 

 

Recent Accounting Pronouncements

 

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the new guidance will enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows for the entity. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is evaluating the impact of ASU 2023-07 on its consolidated financial statements and related disclosures.

 

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation and must also disaggregate income taxes paid. ASU 2023-09 is effective for fiscal years and interim periods beginning after December 15, 2024. The Company is evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.

 

 

3.

Accounts Receivable

 

The Company estimates an allowance for credit losses with its accounts receivable resulting from the inability of its customers to make required payments, which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations. In determining the adequacy of the allowance, management specifically analyzes individual accounts receivable, historical bad debts, customer concentrations, customer creditworthiness, current and reasonable and supportable forecasts of future economic conditions, accounts receivable aging trends, and changes in the Company’s customer payment terms.

 

The components of the Company’s accounts receivable are as follows:

 

   

As of

   

As of

 
   

September 30,

   

December 31,

 
   

2024

   

2023

 

Accounts receivable

  $ 30,927     $ 37,580  

Less: Allowance for credit losses

    2,570       1,619  

Net balance, end of period

  $ 28,357     $ 35,961  

 

A summary of activity in the allowance for credit losses is as follows:

 

   

As of September 30,

 
   

2024

   

2023

 

Balance, beginning of the period

  $ 1,619     $ 1,608  

Amounts provided

    1,284       353  

Amounts recovered

    (261

)

    (279

)

Amounts written off

    (78

)

    (101

)

Translation adjustments

    6       (7

)

Balance, end of period

  $ 2,570     $ 1,574  

 

9

 

 

 

4.

Fair Value Measurements

 

The Company has certain cash equivalents in money market funds that are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets. For cash, accounts receivables, accounts payable, and accrued interest, the carrying amounts approximate fair value, because of the short maturity of these instruments, and therefore fair value information is not included in the table below. There were no transfers between fair value levels during the nine-month periods ended September 30, 2024 and 2023, respectively.

 

The classification of the Company’s cash equivalents within the fair value hierarchy was as follows:

 

   

September 30,

   

Active
Markets
for Identical
Assets

   

Significant
Other
Observable
Inputs

   

Significant
Unobservable
Inputs

   

Amortized

 
   

2024

   

(Level 1)

   

(Level 2)

   

(Level 3)

   

Cost

 

Cash equivalents:

                                       

Money Market Funds

  $ 45,538     $ 45,538     $ -     $ -     $ 45,538  

 

   

December 31,

   

Active
Markets
for Identical
Assets

   

Significant
Other
Observable
Inputs

   

Significant
Unobservable
Inputs

   

Amortized

 
   

2023

   

(Level 1)

   

(Level 2)

   

(Level 3)

   

Cost

 

Cash equivalents:

                                       

Money Market Funds

  $ 55,485     $ 55,485     $ -     $ -     $ 55,485  

 

 

5. 

Inventories

 

Inventories consist of the following:

 

   

September 30,

   

December 31,

 
   

2024

   

2023

 

Raw materials

  $ 16,401     $ 15,507  

Work-in-process

    16,423       17,002  

Finished goods

    17,528       32,084  

Total

  $ 50,352     $ 64,593  
                 
                 

Inventories

  $ 39,629     $ 46,386  

Other long-term assets

    10,723       18,207  

Total

  $ 50,352     $ 64,593  

 

Inventories are stated net of inventory reserves of approximately $6.5 million and $11.7 million, as of September 30, 2024 and December 31, 2023, respectively. As described in more detail in Note 15, the Company sold its Arthrosurface business on October 31, 2024. As a result of this transaction, the Company adjusted the carrying value of the inventories related to the Arthrosurface business to the net realizable value. Accordingly, the company recorded a write-down of inventories of $22.7 million which was charged to Cost of Goods Sold during the three-month and nine-month periods ended September 30, 2024.

 

10

 

 

 

6.

Acquired Intangible Assets, Net

 

Intangible assets as of September 30, 2024 and December 31, 2023 consisted of the following:

 

                                                   

December 31,

         
            Nine Months ended September 30, 2024    

2023

         
   

Gross Value

   

Plus: Additions

   

Less: Accumulated Currency Translation Adjustment

   

Less: Current Period Impairment Charge

   

Less: Accumulated Amortization

   

Net Book Value

   

Net Book Value

   

Weighted Average Useful Life

 

Developed technology

  $ 33,061     $ 600    

$

(1,608 )  

$

(718 )   $ (29,997 )   $ 1,338     $ 1,973     $ 15  

In-process research & development

    2,656       -       (1,006 )     -       -       1,650       1,650    

Indefinite

 

Customer relationships

    3,887       -       -       (316 )     (3,571 )     -       360       10  

Distributor Relationships

    4,700       -       (415 )     -       (4,285 )     -       -       5  

Patents

    1,000       -       (189 )     -       (764 )     47       83       16  

Tradenames

    4,641       -       -       (126 )     (4,469 )     46       560       5  

Total

  $ 49,945     $ 600    

$

(3,218 )  

$

(1,160 )   $ (43,086 )   $ 3,081     $ 4,626       12  

 

The aggregate amortization expense related to intangible assets was $0.3 million and $1.9 million for the three-month periods ended September 30, 2024 and 2023, respectively and $1.0 million and $5.8 million for the nine-month periods ended September 30, 2024 and 2023, respectively. During the three-month period ended September 30, 2024, the Company acquired $0.6 million new drug application (“NDA”) that has regulatory approval in the U.S. that it has recorded as developed technology. The Company also recorded a $1.2 million charge to intangible assets related to its Arthrosurface asset group during the three-month period ended September 30, 2024 due to the Company not expecting to recover the value of the intangible asset from the expected net proceeds related to the sale of the Arthrosurface business (see Note 15).

 

As of September 30, 2024 scheduled amortization of intangible assets is as follows:

 

Remainder of 2024

  $ 252  

2025

    347  

2026

    232  

2027

    182  

2028

    32  

Thereafter

    386  

Total

  $ 1,431  

 

 

7.

Goodwill

 

The Company assesses goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment.

 

11

 

Changes in the carrying value of goodwill for the nine-months ended September 30, 2024 were as follows:

 

   

Nine Months Ended
September 30,

 
   

2024

 

Balance, beginning of period

  $ 7,571  

Effect of foreign currency adjustments

    85  

Balance, ending of period

  $ 7,656  

 

 

 

8.

Accrued Expenses and Other Current Liabilities

 

Accrued expenses and other current liabilities consist of the following:

 

   

September 30,

   

December 31,

 
   

2024

   

2023

 

Compensation and related expenses

  $ 10,500     $ 11,828  

Professional fees

    3,449       3,240  

Operating lease liability – current

    2,292       2,133  

Stock-based compensation

    1,624       -  

Clinical trial costs

    363       460  

Income taxes payable

    82       1,240  

Discontinuation of software development project

    -       1,904  

Other

    378       394  

Total

  $ 18,688     $ 21,199  

 

12

 

 

 

9.

Commitments and Contingencies

 

In certain of its contracts, the Company warrants to its customers that the products it manufactures conform to the product specifications as in effect at the time of delivery of the specific product. The Company may also warrant that the products it manufactures do not infringe, violate, or breach any U.S. or international patent or intellectual property right, trade secret, or other proprietary information of any third party. On occasion, the Company contractually indemnifies its customers against any and all losses arising out of, or in any way connected with, any claim or claims of breach of its warranties or any actual or alleged defect in any product caused by the negligent acts or omissions of the Company. The Company maintains a products liability insurance policy that limits its exposure to these risks. Based on the Company’s historical activity, in combination with its liability insurance coverage, the Company believes the estimated fair value of these indemnification agreements are immaterial. The Company had no accrued warranties as of September 30, 2024 or December 31, 2023 and has no history of claims paid.

 

The Company is also involved from time-to-time in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material adverse effect on its financial position, results of operations, or cash flow.

 

 

10.

Revenue and Geographic Information

 

Revenue by product family is as follows:

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 
                                 

OA Pain Management

  $ 24,428     $ 24,888     $ 75,404     $ 76,855  

Joint Preservation and Restoration

    11,950       13,470       39,345       39,583  

Non-Orthopedic

    2,375       3,107       6,448       7,253  
    $ 38,753     $ 41,465     $ 121,197     $ 123,691  

 

Revenue from the Company’s sole significant US customer, J&J Medtech (previously known as DePuy Synthes Mitek Sports Medicine), part of the Johnson & Johnson Medical Companies, as a percentage of the Company’s total revenue was 45% and 44% for the three-months ended September 30, 2024 and 2023, respectively, and 43% and 45% for the nine-months ended September 30, 2024 and 2023, respectively.

 

Total revenue by geographic location based on the location of the customer in total and as a percentage of total revenue were as follows:

 

   

Three Months Ended September 30,

 
   

2024

   

2023

 
           

Percentage of

           

Percentage of

 
   

Revenue

   

Revenue

   

Revenue

   

Revenue

 

Geographic Location:

                               

United States

  $ 27,699       71

%

  $ 30,831       74

%

Europe

    5,688       15

%

    5,420       13

%

Other

    5,366       14

%

    5,214       13

%

Total

  $ 38,753       100

%

  $ 41,465       100

%

 

   

Nine Months Ended September 30,

 
   

2024

   

2023

 
           

Percentage of

           

Percentage of

 
   

Revenue

   

Revenue

   

Revenue

   

Revenue

 

Geographic Location:

                               

United States

  $ 85,923       71

%

  $ 90,986       74

%

Europe

    18,264       15

%

    16,757       13

%

Other

    17,010       14

%

    15,948       13

%

Total

  $ 121,197       100

%

  $ 123,691       100

%

 

13

 

 

 

11.

Equity Incentive Plan

 

Equity Incentive Plan

 

The Anika Therapeutics, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”) was approved by the Company’s stockholders on June 13, 2017 and subsequently amended on June 18, 2019, June 16, 2020, June 16, 2021, June 8, 2022 and June 14, 2023. On June 14, 2023, the Company’s stockholders approved an amendment to the 2017 Plan increasing the number of shares by 435,000 shares from 4,850,000 shares to 5,285,000 shares. The 2017 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock awards, performance restricted stock units (“PSUs”), restricted stock units (“RSUs”), total shareholder return options (“TSRs”) and performance options that may be settled in cash, stock, or other property. In accordance with the 2017 Plan approved by the Company’s stockholders, including the amendments thereto, each share award other than stock options or SARs will reduce the number of total shares available for grant by two shares. Subject to adjustment for specified types of changes in the Company’s capitalization, no more than 4.6 million shares of common stock may be issued under the 2017 Plan. There were 0.7 million shares available for future grant at September 30, 2024 under the 2017 Plan.

 

The Anika Therapeutics, Inc. 2021 Inducement Plan (the “Inducement Plan”) was adopted by the Company’s board of directors on November 4, 2021 and subsequently amended on December 22, 2023 and May 2, 2024. On May 2, 2024, the Company’s board of directors approved an amendment to the Inducement Plan increasing the number of shares by 100,000 shares. The Inducement Plan reserves 350,000 shares of common stock for issuance pursuant to equity-based awards granted under the Inducement Plan. Such awards may be granted only to an individual who was not previously the Company’s employee or director with the Company. The Inducement Plan provides for the grant of awards under terms substantially similar to the 2017 Plan (as amended). There were 0.1 million shares available for future grant at September 30, 2024 under the Inducement Plan.

 

The Company may satisfy the awards upon exercise, or upon fulfillment of the vesting requirements for other equity-based awards, with either newly issued shares or shares reacquired by the Company. Stock-based awards are granted with an exercise price equal to or greater than the market price of the Company’s stock on the date of grant. Awards contain service conditions or service and performance conditions, and they generally become exercisable ratably over three years with a maximum contractual term of ten years.

 

The Company presents the expenses related to stock-based compensation awards in the same expense line items as cash compensation paid to each of its employees as follows:

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Cost of revenue

  $ 92     $ 181     $ 391     $ 532  

Research & development

    485       304       1,587       1,474  

Selling, general & administrative

    2,817       3,076       8,897       9,422  

Total stock-based compensation expense

  $ 3,394     $ 3,561     $ 10,875     $ 11,428  

 

Stock Options

 

Stock options are granted to purchase common shares at prices that are equal to the fair market value of the shares on the date the options are granted or, in the case of premium options, are granted with an exercise price at 110% of the market price of the Company’s common stock on the date of grant. Options generally vest in equal annual installments over a period of three years and expire 10 years after the date of grant. The grant-date fair value of options is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.

 

14

 

 

The following summarizes the activity under the Company’s stock option plans:

 

                   

Weighted

         
                   

Average

         
           

Weighted

   

Remaining

   

Aggregate

 
           

Average

   

Contractual

   

Intrinsic

 
   

Number of

   

Exercise

   

Term

   

Value

 
   

Options

   

Price

   

(in years)

   

(in thousands)

 

Outstanding as of December 31, 2023

    1,812,729     $ 33.42             $ 127  

Granted

    541,100     $ 28.13                  

Exercised

    (3,556

)

  $ 21.96             $ 14  

Forfeited and canceled

    (127,008

)

  $ 37.50             $ 30  

Outstanding as of September 30, 2024

    2,223,265     $ 31.92       7.5     $ 248  

Vested, September 30, 2024

    1,276,640     $ 34.57       6.5     $ 102  

Vested or expected to vest, September 30, 2024

    2,223,265     $ 31.92       7.5     $ 248  

 

The Company uses the Black-Scholes pricing model to determine the fair value of options granted. The calculation of the fair value of stock options is affected by the stock price on the grant date, the expected volatility of the Company’s common stock over the expected term of the award, the expected life of the award, the risk-free interest rate and the dividend yield.

 

The assumptions used in the Black-Scholes pricing model for options granted during the nine months September 30, 2024 and 2023, along with the weighted-average grant-date fair values, were as follows:

 

   

Nine Months Ended

 
   

September 30,

 
   

2024

   

2023

 

Risk free interest rate

    3.6% - 4.6

%

    3.5% - 4.4 %

Expected volatility

    44.5% - 48.2

%

    48.2% - 49.4 %

Expected life (years)

    4.5       4.5  

Expected dividend yield

    0.0 %     0.0 %

Fair value per option

  $ 10.53     $ 11.46  

 

As of September 30, 2024, there was $7.4 million of unrecognized compensation cost related to unvested stock options. This expense is expected to be recognized over a weighted average period of 2.0 years.

 

Restricted Stock Units

 

RSUs generally vest in equal annual installments over a three-year period. The grant-date fair value of RSUs is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company determines the fair value of RSUs based on the closing price of its common stock on the date of grant.

 

RSU activity for the nine-month period ended September 30, 2024 was as follows:

 

           

Weighted

 
   

Number of

   

Average

 
   

Shares

   

Fair Value

 

Outstanding as of December 31, 2023

    771,358     $ 27.19  

Granted

    491,541     $ 26.62  

Vested

    (308,634

)

  $ 27.73  

Forfeited and cancelled

    (74,874

)

  $ 26.43  

Outstanding as of September 30, 2024

    879,391     $ 26.74  

 

15

 

 

The weighted-average grant-date fair value per share of RSUs granted was $26.62 and $26.66 for the nine-month periods ended September 30, 2024 and 2023, respectively. The total fair value of RSUs vested was $9.6 million and $6.8 million for the nine-month periods ended September 30, 2024 and 2023, respectively. As of September 30, 2024, there was $7.1 million of unrecognized compensation cost related to time-based RSUs that are expected to settle in shares, which was expected to be recognized over a weighted-average period of 1.3 years.

 

The Company’s annual grant of RSU awards in March 2024 can be settled at vesting in cash or shares at the Company’s election. The Company has recorded these RSUs as a liability due to the expectation that the Company will settle the vesting of the March 2024 RSU awards in cash due to a potential shortage of shares in the 2017 Plan at the time of vesting. As a result, these RSUs will be subject to change in value at the time of each reporting period. As of September 30, 2024, the Company had 381,029 shares outstanding in which a liability of $1.6 million was recorded in Accrued Expenses and Other Liabilities. There was $7.7 million of unrecognized compensation cost for these RSUs recorded as a liability which was expected to vest over a weighted-average period of 2.4 years.

 

 

12.

Income Taxes

 

The income tax expense was $2.3 million and $3.2 million for the three- and nine-month periods ended September 30, 2024, resulting in effective tax rates of (8.4%) and (10.2%), respectively. The income tax benefit was $0.5 million and $2.5 million for the three- and nine-month periods ended September 30, 2023, resulting in an effective tax rate of 6.6% and 11.1%, respectively.

 

The net change in the effective tax rate for the three- and nine-month periods ended September 30, 2024, as compared to the same periods in 2023, was primarily due to the impact of the valuation allowance in the US in both the current and prior periods and the impact of recording of $1.5 million of discrete items during the nine-month period ended September 30, 2024.  The Company’s effective tax rate for the three-month and nine-month periods ended September 30, 2024 was primarily driven by the full valuation on the Company's deferred tax assets in the US and the projected taxable income for the Company resulting in expected current tax expense in 2024.

 

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. The Company has incurred operating losses in recent years. As a result, the Company anticipates that deferred tax assets originating during the year ended December 31, 2024 will exceed the availability of reversing taxable temporary differences. Due to significant negative evidence, including the Company’s prior year operating losses, the Company concluded its anticipated net deferred tax assets in the U.S. are not more likely than not to be realizable. Accordingly, the estimated annual effective tax rate used to compute the income tax provision for the nine-month period ended September 30, 2024 includes an adjustment for the valuation allowance required against the U.S. deferred tax assets. As of September 30, 2024, the Company continues to believe its foreign deferred tax assets are realizable based upon future reversals of existing taxable temporary differences and projected future taxable income.

 

The Company files income tax returns in the United States on a federal basis, in certain U.S. states, and in certain foreign jurisdictions. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate, which varies by jurisdiction. In September 2024, the Company was notified by the Italian tax authorities that it had selected the Company’s tax returns for its Italian subsidiary for 2021 for examination and remains under review.

 

 

13.

Earnings Per Share (EPS)

 

Basic EPS is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic EPS. Diluted EPS is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding share-based awards using the treasury stock method. Due to the Company’s loss position, the share-based payment awards are anti-dilutive.

 

The Company had a net loss during the three and nine-month periods ended September 30, 2024 and 2023, respectively, and therefore all potential common shares would have been anti-dilutive and accordingly were excluded from the computation of diluted EPS. Stock options of 2.2 million shares and 1.8 million shares were outstanding at September 30, 2024 and 2023, respectively. Restricted stock units totaling 0.9 million and 0.8 million were outstanding at September 30, 2024 and 2023, respectively. These securities were not included in the computation of diluted EPS because the awards’ impact on EPS would have been anti-dilutive.

 

 

14.

Share Repurchase

 

In May 2024, the Company agreed to implement a share repurchase program for an aggregate purchase price of $40.0 million to occur as follows: (i) first $15.0 million was effected through a Rule 10b5-1 Plan initiated prior to June 1, 2024 and to be effective through June 30, 2025, and (ii) the remaining amount to be purchased in the open market through June 2026.  In the event of positive “free cash flow” as defined in the Cooperation Agreement dated May 28, 2024, with Caligan Partners LP, Caligan Partners Master Fund LP and David Johnson, for the period from July 1, 2024 through June 30, 2025, the amount under the share repurchase program shall be increased by 50% of such positive amount and in no event would we be required to make any purchases in the event that the Company’s cash would be less than $45.0 million after taking into account the share repurchase and reasonably anticipated capital expenditures and restructuring costs. This new authorization replaces our share repurchase program previously announced in April 2023.

 

16

 

On May 28, 2024, the Company entered into a share repurchase agreement under a Rule 10b5-1 with Bank of America. As of September 30, 2024, the Company had repurchased 205,404 shares at an average cost of $25.99 per share for a total cost of $5.3 million.

 

 

15.

Subsequent Event

 

On October 31, 2024 (the “Closing Date”), the Company completed the sale of all of the outstanding equity interests (the “Transaction”) of Arthrosurface Incorporated, a Delaware corporation and former wholly-owned subsidiary of the Company (“Arthrosurface”), which held the Company’s Arthrosurface business, to Phoenix Brio, Incorporated, a Delaware corporation (“Buyer”), pursuant to the terms and conditions of a Share Purchase Agreement, dated as of the Closing Date (the “Purchase Agreement”), by and among the Company, Arthrosurface and Buyer (the “Transaction”).

 

As consideration for the Transaction, at the closing Buyer delivered to the Company a ten-year non-interest bearing promissory note in the principal amount of $7.0 million. Under the terms of the Purchase Agreement, the Company is also eligible to receive: (i) for each calendar quarter, an amount equal to a percentage of the net sales (the “Revenue Payments”) for the sale of certain commercial and pipeline products during the period commencing on the Closing Date and ending on the earlier of the fifth (5th) anniversary of the Closing Date or the date on which the Buy-Out Payment (as defined below) is paid to the Company; and (ii) a percentage of the gross proceeds with respect to the sale of certain commercial and pipeline products in a bona-fide arm’s length transaction with a third party that is not an affiliate of Buyer or the Company occurring within the first twenty four (24) months following the Closing Date. The Buyer can also elect to make a payment in an amount equal to the greater of (A) $14.0 million or (B) ten (10) times the Revenue Payments ((A) and (B) together, the “Buy-Out Payment”) paid to the Company during the last full calendar year prior to the consummation of a change of control transaction or Buyer’s written notice to the Company that it is electing to make the Buy-Out Payment. Pursuant to the Purchase Agreement, the aggregate consideration is subject to customary post-closing adjustments.

 

As a result of the Transaction, the Company tested the assets associated with the Arthrosurface business to determine if the carrying value of the assets at September 30, 2024 were fully recoverable. Given that the expected proceeds from the sale of the Arthrosurface business is expected to be less than the carrying value of its net assets, the Company recorded asset impairment charges totaling $27.4 million during the three-month period ended September 30, 2024 related to a write-down of its accounts receivable, inventories, property and equipment and intangible assets related to the Arthrosurface business.

 

 

 

 

 

 

 

17

 

 

ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion in conjunction with our financial statements and related notes appearing elsewhere in this report and our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2023, or our 2023 Form 10-K. In addition to historical information, this report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 concerning our business, consolidated financial condition, and results of operations. The Securities and Exchange Commission, or the SEC, encourages companies to disclose forward-looking statements so that investors can better understand a companys future prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as "will," "likely," "may," "believe," "expect," "anticipate," "intend," "seek," "designed," "develop," "would," "future," "can," "could," and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans, and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements regarding expected future operating results, expectations regarding the timing and receipt of regulatory results, anticipated levels of capital expenditures, and expectations of the effect on our financial condition of claims, litigation, and governmental and regulatory proceedings.

 

Please also refer to “Item 1A. Risk Factors” of our 2023 Form 10-K for important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

 

Management Overview

 

We are a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care. Based on our collaborations with clinicians to understand what they need most to treat their patients, we develop minimally invasive products that restore active living for people around the world. We are committed to leading in high opportunity spaces within orthopedics, including OA pain management, regenerative solutions, sports medicine and Arthrosurface joint solutions.

 

We have over thirty years of global expertise developing, manufacturing and commercializing products on our hyaluronic acid, or HA, technology platform. HA is a naturally occurring polymer found throughout the body that is vital for proper joint health and tissue function. Our proprietary technologies for modifying the HA molecule allow product properties to be tailored specifically to multiple uses, including enabling longer residence time to support OA pain management and creating a solid form of HA called Hyaff, which is a platform utilized in our regenerative solutions portfolio.

 

In early 2020, we expanded our overall technology platform, product portfolio, and significantly expanded our commercial infrastructure, especially in the United States, through our acquisitions of Parcus Medical, LLC, or Parcus Medical, a sports medicine and instrumentation solutions provider, and Arthrosurface, Inc, or Arthrosurface, a company specializing in bone preserving partial and total joint replacement solutions. These acquisitions augmented our HA-based OA pain management and regenerative products with a broad suite of products and capabilities focused on early intervention joint preservation primarily in upper and lower extremities such as shoulder, foot/ankle, knee and hand/wrist.

 

 

18

 

As we look forward, our business is positioned to capture value within our target market of joint preservation. We believe our future success will be driven by our:

 

 

Over 30 years of experience in HA and HA-based regenerative solutions and early intervention orthopedics combined with seasoned leadership with a strong financial foundation for future investment in meaningful solutions for our customers and their patients;

 

 

Utilizing proprietary HA technology and manufacturing expertise to provide new and differentiated solutions in next generation OA Pain Management (eg. Cingal) and regenerative (eg. Integrity Implant System and Hyalofast) markets;

 

 

Introducing key HA products into the US market upon FDA approval/clearance, such as Cingal, Hyalofast and Integrity, our arthroscopic patch system for rotator cuff and other tendon repairs, and additional products in development that leverage our proprietary Hyaff regenerative platform;

 

 

Robust network of stakeholders in our target markets to identify evolving unmet patient treatment needs;

 

 

Global commercial expertise, which we will leverage to drive growth across our product portfolio, including continued international expansion;

 

 

Opportunity to pursue strategic inorganic growth opportunities, including potential partnerships and smaller acquisitions and technology licensing, and leveraging our strong financial foundation and operational capabilities; and

 

 

Energized and experienced team focused on strong values, talent, and culture.

 

On October 31, 2024 (the “Closing Date”), we completed the sale of all of the outstanding equity interests (the “Transaction”) of Arthrosurface Incorporated, a Delaware corporation and former wholly-owned subsidiary of the Company (“Arthrosurface”), which held our Arthrosurface business, to Phoenix Brio, Incorporated, a Delaware corporation (“Buyer”), pursuant to the terms and conditions of a Share Purchase Agreement, dated as of the Closing Date (the “Purchase Agreement”), by and amongst us, Arthrosurface and Buyer (the “Transaction”).

 

As consideration for the Transaction, at the closing Buyer delivered to us a ten-year non-interest bearing promissory note in the principal amount of $7.0 million. Under the terms of the Purchase Agreement, we are also eligible to receive: (i) for each calendar quarter, an amount equal to a percentage of the net sales (the “Revenue Payments”) for the sale of certain commercial and pipeline products during the period commencing on the Closing Date and ending on the earlier of the fifth (5th) anniversary of the Closing Date or the date on which the Buy-Out Payment (as defined below) is paid to us; and (ii) a percentage of the gross proceeds with respect to the sale of certain commercial and pipeline products in a bona-fide arm’s length transaction with a third party that is not an affiliate of Buyer or us occurring within the first twenty four (24) months following the Closing Date. The Buyer can also elect to make a payment in an amount equal to the greater of (A) $14.0 milllion or (B) ten (10) times the Revenue Payments ((A) and (B) together, the “Buy-Out Payment”) paid to us during the last full calendar year prior to the consummation of a change of control transaction or Buyer’s written notice to us that it is electing to make the Buy-Out Payment. Pursuant to the Purchase Agreement, the aggregate consideration is subject to customary post-closing adjustments.

 

We also announced on October 31, 2024 our intention to divest of the Parcus Medical business. These decisions were a result of a strategic review to focus on our core HA technology and our regenerative solutions products to maximize shareholder value.

 

Products

 

OA Pain Management

 

Our OA Pain Management product family consists of Monovisc and Orthovisc, our injectable, HA, OA Pain Management offerings that are indicated to provide pain relief from osteoarthritis conditions; and Cingal, our novel, next generation, single-injection OA Pain Management product consisting of our proprietary cross-linked HA material combined with a steroid. Cingal is our next generation fast-acting, long-lasting, non-opioid, clinically proven osteoarthritis pain product which is designed to provide both short- and long-term pain relief through at least six months. It is currently sold outside the United States in approximately 40 countries. In 2022, we completed a third Phase III clinical trial for Cingal, which achieved its primary endpoint. Cingal is not currently approved for commercial use in the United States. We have been actively engaging with the U.S. Food and Drug Administration, or the FDA, on next steps for U.S. regulatory approval. We acquired the Aristospan NDA regulatory approval in the U.S. in September 2024 to assist with our Cingal regulatory filing with the FDA.

 

 

19

 

Joint Preservation and Restoration

 

Our Joint Preservation and Restoration product family consists of: (a) our portfolio of orthopedic regenerative solutions products utilizing HA, including Integrity, our new hyaluronic acid-based scaffold for rotator cuff and other tendon repairs, Tactoset, our HA-enhanced injectable bone substitute, and Hyalofast, our HA, biodegradable scaffold used for cartilage regeneration currently available outside the United States in over 35 countries; (b) our line of sports medicine solutions used to repair and reconstruct damaged ligaments and tendons due to sports injuries, trauma and disease; and (c) our Arthrosurface portfolio of bone preserving joint technologies, including partial joint replacement, joint resurfacing, and minimally invasive and bone sparing implants, designed to treat upper and lower extremity orthopedic conditions caused by trauma, injury and arthritic disease.

 

Non-Orthopedic

 

Our Non-Orthopedic product family consists of legacy HA products that are marketed principally for non-orthopedic applications, including our anti-adhesion barrier product, advanced wound care products, our ear, nose and throat products, and our ophthalmic products. Our Non-Orthopedic product family also includes Hyvisc, our high molecular weight injectable HA veterinary product approved for the treatment of joint dysfunction in horses due to non-infectious synovitis associated with equine OA.

 

Results of Operations

 

Three and Nine Months Ended September 30, 2024 Compared to Three and Nine Months Ended September 30, 2023

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

$ Change

   

% Change

   

2024

   

2023

   

$ Change

   

% Change

 
   

(in thousands, except percentages)

           

(in thousands, except percentages)

         

Revenue

  $ 38,753     $ 41,465     $ (2,712 )     (7 %)   $ 121,197     $ 123,691     $ (2,494 )     (2 %)

Cost of revenue

    37,313       16,521       20,792       126 %     67,764       46,932       20,832       44 %

Gross Profit

    1,440       24,944       (23,504 )     (94 %)     53,433       76,759       (23,326 )     (30 %)

Gross Margin

    4 %     60 %                     44 %     62 %                

Operating expenses:

                                                               

Research & development

    7,244       7,791       (547 )     (7 %)     22,806       25,105       (2,299 )     (9 %)

Selling, general & administrative

    19,112       24,827       (5,715 )     (23 %)     60,445       75,512       (15,067 )     (20 %)

Long lived asset impairment

    3,101       -       3,101       100 %     3,101       -       3,101       100 %

Total operating expenses

    29,457       32,618       (3,161 )     (10 %)     86,352       100,617       (14,265 )     (14 %)

Income (loss) from operations

    (28,017 )     (7,674 )     (20,343 )     265 %     (32,919 )     (23,858 )     (9,061 )     38 %

Interest and other income, net

    406       635       (229 )     (36 %)     1,593       1,735       (142 )     (8 %)

Income (loss) before income taxes

    (27,611 )     (7,039 )     (20,572 )     292 %     (31,326 )     (22,123 )     (9,203 )     42 %

Provision for (benefit from) income taxes

    2,307       (463 )     2,770       (598 %)     3,194       (2,456 )     5,650       (230 %)

Net loss

  $ (29,918 )   $ (6,576 )   $ (23,342 )     355 %   $ (34,520 )   $ (19,667 )   $ (14,853 )     76 %

 

 

 

 

 

 

 

20

 

 

Revenue

 

The following table presents revenue by product family for the three and nine-month periods ended September 30, 2024 and 2023:

 

   

Three Months Ended September 30,

 
   

2024

   

2023

   

$ Change

   

% Change

 
   

(in thousands, except percentages)

 

OA Pain Management

  $ 24,428     $ 24,888     $ (460 )     (2 %)

Joint Preservation and Restoration

    11,950       13,470       (1,520 )     (11 %)

Non-Orthopedic

    2,375       3,107       (732 )     (24 %)
    $ 38,753     $ 41,465     $ (2,712 )     (7 %)

 

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

$ Change

   

% Change

 
   

(in thousands, except percentages)

 

OA Pain Management

  $ 75,404     $ 76,855     $ (1,451 )     (2 %)

Joint Preservation and Restoration

    39,345       39,583       (238 )     (1 %)

Non-Orthopedic

    6,448       7,253       (805 )     (11 %)
    $ 121,197     $ 123,691     $ (2,494 )     (2 %)

 

Revenue from our OA Pain Management product family decreased 2% for each of the three- and nine-month periods ended September 30, 2024, as compared to the same periods in 2023, due primarily to unfavorable timing of strategic partner orders as distributor ordering patterns can vary significantly on a quarterly basis.

 

Revenue from our Joint Preservation and Restoration product family decreased 11% and 1% for the three- and nine-month periods ended September 30, 2024, respectively, as compared to the same periods in 2023, primarily due to lower sales of certain legacy Arthrosurface and sports medicine products, offset somewhat from growing commercial adoption of our newest products, particularly Integrity.

 

Revenue from our Non-Orthopedic product family decreased 24% and 11% for the three- and nine-month periods ended September 30, 2024, as compared to the same periods in 2023, primarily due to unfavorable timing of distributor ordering patterns as well as due to the end of life of certain legacy non-orthopedic products.

 

Gross Profit and Margin

 

Gross profit for the three-month period ended September 30, 2024 decreased by $23.5 million and decreased $23.3 million for the nine-month period ended September 30, 2024 to $1.4 million and $53.4 million, respectively. Gross profit for the three- and nine-month periods ended September 30, 2023 was $24.9 million and $76.8 million, respectively. The decrease in gross profit for the three-month and nine-month periods ended September 30, 2024 was due primarily to the write down of inventories and related raw material deposits with the Arthrosurface business in the amount of $23.4 million during the three-month period ended September 30, 2024.

 

Gross margin for the three- and nine-month periods ended September 30, 2024 was 4% and 44%, respectively.  Gross margin for the three- and nine-month period ended September 30, 2023 was 60% and 62%, respectively.  The increase in gross margin for the three- and nine-month periods ended September 30, 2024, as compared to the same periods in 2023 was primarily due to the write-down of Arthrosurface inventories.

 

Research and Development

 

Research and development expenses for the three- and nine-month periods ended September 30, 2024 were $7.2 million and $22.8 million, respectively. Research and development expenses for the three- and nine-month periods ended September 30, 2023 were $7.8 million and $25.1 million, respectively. The decrease for the three-month and nine-month periods ended September 30, 2024 was primarily related to lower product development and regulatory costs.

 

21

 

 

Selling, General and Administrative

 

Selling, general and administrative expenses for the three- and nine-month periods ended September 30, 2024 were $19.1 million and $60.4 million, respectively. Selling, general and administrative expenses for the three- and nine-month periods ended September 30, 2023 were $24.8 million and $75.5 million, respectively. This decrease for the three- and nine-month periods ended September 30, 2024 was primarily due to a $3.3 million payment on the Parcus Medical unitholder arbitration settlement in 2023, a $1.4 million benefit on the settlement of a contract obligation related to a discontinuation of a software project, cost savings as a result of recent headcount reductions taken in first quarter of 2024, and lower shareholder activism costs in 2024.

 

Impairment of Long-Lived Assets

 

We assess our long-lived assets for impairment under certain circumstances, such as when events or changes in circumstances indicate there may be impairment. On October 31, 2024, we sold our equity interest in Arthrosurface Incorporated. in which the expected consideration will be less than carrying value of the net assets of the Arthrosurface reporting unit at September 30, 2024. As a result, we performed an assessment of long-lived assets for impairment related to Arthrosurface reporting unit. The results of these impairment tests indicated that the estimated fair value of this reporting unit was less than its carrying value. Consequently, a non-cash impairment of long-lived assets charge of $3.1 million was recorded in the three-month period ended September 30, 2024. The decline in fair value was primarily due to expectation of lower cash flows related the Arthrosurface reporting unit.

 

Income Taxes

 

Income tax expense was $2.3 million and $3.2 million for the three- and nine-month periods ended September 30, 2024, resulting in effective tax rates of (8.4%) and (10.2%), respectively. The income tax benefit was $0.5 million and $2.5 million for the three- and nine-month periods ended September 30, 2023, resulting in an effective tax rate of 6.6% and 11.1%, respectively.  The net change in the effective tax rate for the three- and nine-month periods ended September 30, 2024, as compared to the same periods in 2023, was primarily due to the impact of the valuation allowance in the U.S. in both the current and prior periods and the impact of recording of $1.5 million of discrete items during the nine-month period ended September 30, 2024.  The Company’s effective tax rate for the three- and nine-month periods ended September 30, 2024 was primarily driven by the full valuation on the Company's deferred tax assets in the US and the projected taxable income for the Company, and resulting current tax payable, for the three- and nine-month periods ended September 30, 2024.

 

Net Loss

 

For the three- and nine-month periods ended September 30, 2024, net loss was $29.9 million and $34.5 million, or $2.03 loss per diluted share and $2.34 loss per diluted share, respectively, compared to a net loss of $6.6 million and $19.7 million, or $0.45 loss per diluted share and $1.34 loss per diluted share, for the same periods in the prior year. The decrease in net loss and diluted net loss per share was primarily due to impairment charges and write-down of assets related to the Arthrosurface business.

 

Non-GAAP Financial Measures

 

We present certain information with respect to adjusted gross profit and adjusted gross margin, adjusted Earnings Before Interest, Tax, Depreciation and Amortization, or EBITDA, adjusted net income, adjusted diluted earnings per share or adjusted EPS, which are financial measures not based on any standardized methodology prescribed by accounting principles generally accepted in the United States, or GAAP, and is not necessarily comparable to similarly titled measures presented by other companies.

 

We have presented adjusted gross profit and adjusted gross margin, adjusted EBITDA, adjusted net income, adjusted EPS, because they are key measures used by our management and board of directors to understand and evaluate our operating performance and to develop operational goals for managing our business. We believe these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. In particular, we believe that the exclusion of these items in calculating these measures can provide a useful tool for period-to-period comparisons of our core operating performance. Accordingly, we believe that these measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by our management in their financial and operational decision-making.

 

Adjusted Gross Profit and Adjusted Gross Margin

 

We define adjusted gross profit as our gross profit excluding amortization of certain acquired intangible assets, the impact of inventory fair-value step up associated with our recent acquisitions, certain writedowns of inventories to realizable value and certain product rationalization charges. The amortized assets contribute to revenue generation, and the amortization of such assets will likely continue in future periods until such assets are fully amortized. These assets include the fair value of certain identified assets acquired in acquisitions, including developed technology and acquired tradenames. We define adjusted gross margin as adjusted gross profit divided by total revenue.

 

22

 

The following is a reconciliation of adjusted gross profit and gross margin, both non-GAAP metrics, to gross profit, the most directly comparable GAAP financial measure for the three and nine-month periods ended September 30, 2024 and 2023, respectively:

 

   

For the Three Months Ended

September 30,

   

For the Nine Months Ended

September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Gross profit

  $ 1,440     $ 24,944     $ 53,433     $ 76,759  

Product rationalization charges

    -       748       472       748  

Writedown of inventories

    23,438       -       23,438       -  

Acquisition related intangible asset amortization

    153       1,561       464       4,684  

Adjusted gross profit

  $ 25,031     $ 27,253     $ 77,807     $ 82,191  
                                 

Adjusted gross margin

    65 %     66 %     64 %     66 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

Adjusted gross profit for the three- and nine-month periods ended September 30, 2024 decreased $2.3 million and $4.4 million to $25.0 million and $77.8 million, respectively, representing adjusted gross margin of 65% and 64%, respectively. Adjusted gross profit for the three- and nine-month periods ended September 30, 2023 was $27.3 million and $82.2 million, respectively, or adjusted gross margin of 66% and 66%, respectively. The decrease in adjusted gross margin for the three- and nine-month periods ended September 30, 2024 as compared to 2023 was due to lower revenue largely due to a higher proportion of international revenues which have lower margins.

 

Adjusted EBITDA

 

We present information below with respect to adjusted EBITDA, which we define as our net income (loss) excluding interest and other expense, net, income tax benefit, depreciation and amortization, stock-based compensation, and acquisition-related expenses.

 

Adjusted EBITDA is not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net (loss) income, which is the nearest GAAP equivalent. Some of these limitations are:

 

 

adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA;

 

 

we exclude share-based compensation expense from adjusted EBITDA although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position;

 

 

we exclude acquisition related expenses, including, amortization and depreciation of acquired assets in recent acquisitions, impairments or writedowns on acquired assets, and the impact of inventory fair-value step up on cost of revenue;

 

 

the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results;

 

The following is a reconciliation of adjusted EBITDA, a non-GAAP metric, to net loss, the most directly comparable GAAP financial measure, for the three and nine-month periods ended September 30, 2024 and 2023, respectively:

 

   

For the Three Months Ended

September 30,

   

For the Nine Months Ended

September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Net loss

  $ (29,918 )   $ (6,576 )   $ (34,520 )   $ (19,667 )

Interest and other income, net

    (406 )     (635 )     (1,593 )     (1,735 )

Provision for (benefit from) income taxes

    2,307       (463 )     3,194       (2,456 )

Depreciation and amortization

    2,045       1,755       5,800       5,282  

Share-based compensation

    3,394       3,561       10,875       11,428  

Arbitration settlement

    -       -       -       3,250  

Product rationalization charges

    -       748       472       748  

Acquisition related intangible asset amortization

    143       1,787       509       5,361  

Impairment/writedown of assets

    27,401       -       27,401       -  

Discontinuation of software development project

    -       4,473       (1,404 )     4,473  

Non-recurring professional fees

    465       -       465       -  

Severance costs

    -       -       839       -  

Costs of shareholder activism

    -       -       2,185       3,033  

Adjusted EBITDA

  $ 5,431     $ 4,650     $ 14,223     $ 9,717  

 

Adjusted EBITDA in the three-month period ended September 30, 2024 increased $0.7 million as compared with the same period in 2023. Adjusted EBITDA for the period was primarily driven by lower operating expenses offset by the reduced volume of higher margin US OA Pain Management revenue.

 

Adjusted EBITDA in the nine-month period ended September 30, 2024, increased $4.5 million as compared with the same period in 2023. The increase in adjusted EBITDA for the period was due to lower operating expenses, growth in new product sales, offset partially by lower OA Pain Management revenue in the US.

 

Adjusted Net Income (Loss) and Adjusted EPS

 

We present information below with respect to adjusted net (loss) income and adjusted EPS. We define adjusted net (loss) income as our net (loss) income excluding amortization and depreciation of acquired assets, share-based compensation, and other non-recurring items, such as product rationalization charges, severance costs and costs of shareholder activism. We define adjusted EPS as GAAP diluted earnings per share excluding the above adjustments to net (loss) income used in calculating adjusted net (loss) income, each on a per share and tax effected basis.

 

24

 

 

The following is a reconciliation of adjusted net loss, a non-GAAP metric, to net income (loss), the most directly comparable GAAP financial measure, for the three and nine-month periods ended September 30, 2024 and 2023, respectively:

 

   

For the Three Months Ended
September 30,

   

For the Nine Months Ended
September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Net loss

  $ (29,918 )   $ (6,576 )   $ (34,520 )   $ (19,667 )

Product rationalization, tax effected

    -       699       392       665  

Arbitration settlement, tax effected

    -       -       -       2,889  

Share based compensation, tax effected

    2,820       3,327       9,037       10,159  

Acquisition related intangible asset amortization, tax effected

    119       1,669       423       4,767  

Impairment/writedown of assets, tax effected

    22,770       -       22,770       -  

Discontinuation of software development project, tax effected

    -       4,179       (1,167 )     3,976  

Non-recurring professional fees, tax effected

    386       -       386       -  

Severance costs, tax effected

    -       -       697       -  

Costs of shareholder activism, tax effected

    -       -       1,816       2,696  

Adjusted net (loss) income

  $ (3,823 )   $ 3,298     $ (166 )   $ 5,485  

 

The following is a reconciliation of adjusted diluted EPS, a non-GAAP metric, to diluted EPS, the most directly comparable GAAP financial measure, for the three and nine-month periods ended September 30, 2024 and 2023, respectively:

 

   

For the Three Months Ended
September 30,

   

For the Nine Months Ended
September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Diluted (loss) earnings per share (EPS)

  $ (2.03 )   $ (0.45 )   $ (2.34 )   $ (1.34 )

Product rationalization, tax effected

    -       0.05       0.03       0.05  

Arbitration settlement, tax effected

    -       -       -       0.20  

Share based compensation, tax effected

    0.19       0.23       0.61       0.69  

Acquisition related intangible asset amortization; tax effected

    0.01       0.11       0.03       0.32  

Impairment/writedown of assets, tax effected

    1.55       -       1.55       -  

Discontinuation of software development project, tax effected

    -       0.29       (0.08 )     0.27  

Non-recurring professional fees, tax effected

    0.03       -       0.02       -  

Severance costs, tax effected

    -       -       0.05       -  

Cost of shareholder activism, tax effected

    -       -       0.12       0.18  

Adjusted diluted earnings per share (EPS)

  $ (0.25 )   $ 0.23     $ (0.01 )   $ 0.37  

 

Adjusted net income and adjusted diluted earnings per share in the three-month period ended September 30, 2024 decreased $7.1 million and $0.48, respectively, as compared with the same period in 2023. The decrease for the period was primarily due to lower revenues due to timing of strategic ordering patterns with OA Pain Management customers that have higher margins.

 

Adjusted net income and adjusted diluted earnings per share in the nine-month period ended September 30, 2024 decreased $5.7 million and $0.38, respectively, as compared with the same period in 2023. The increase for the period was primarily due to lower operating expenses in 2024 partially offset by lower revenues on timing of strategic ordering patterns with higher margin OA Pain Management customers.

 

Liquidity and Capital Resources

 

We require cash to fund our operating activities and to make capital expenditures and other investments in the business. We expect that our requirements for cash to fund these uses will increase as our operations expand. We continue to generate cash from operating activities and believe that our operating cash flows, cash currently on our balance sheet and availability under our credit facility will be sufficient to allow us to continue to invest in our existing business, to manage our capital structure on a short and long-term basis, and to meet our anticipated operating cash needs. Cash and cash equivalents were $62.4 million and $72.9 million, and working capital totaled $110.6 million and $132.2 million, at September 30, 2024 and December 31, 2023, respectively.

 

On November 12, 2021, we entered into a Third Amendment to Credit Agreement with Bank of America N.A. as administrative agent, which amended our existing revolving line of credit agreement dated October 24, 2017 which provides up to $75.0 million in the form of a senior revolving line of credit. Subject to certain conditions, we may request up to an additional $75.0 million for a maximum aggregate commitment of $150.0 million. As of September 30, 2024, and December 31, 2023, there were no outstanding borrowings, and we are in compliance with the terms of the credit facility.

 

25

 

 

Summary of Cash Flows (in thousands):

 

   

Nine Months Ended September 30,

 
   

2024

   

2023

 

Cash (used in) provided by

               

Operating activities

  $ 3,821     $ (5,426 )

Investing activities

    (7,027 )     (3,587 )

Financing activities

    (7,375 )     (6,666 )

Effect of exchange rate changes on cash

    82       3  

Net decrease in cash and cash equivalents

  $ (10,499 )   $ (15,676 )

 

The following changes contributed to the net change in cash and cash equivalents in the nine-month period ended September 30, 2024 as compared to the same period in 2023.

 

Operating Activities

 

Cash provided by operating activities was $3.8 million for the nine-month period ended September 30, 2024, as compared to cash used in operating activities of $5.4 million for the same period in 2023. The increase in cash provided by operating activities for the nine-months ended September 30, 2024, compared to the same period in prior year, was primarily due to a lower net loss during the nine-month period ended September 30, 2024 and higher non-recurring costs in 2023 for the Parcus Medical arbitration settlement and shareholder activism expenses.

 

Investing Activities

 

Cash used in investing activities was $7.0 million for the nine-month period ended September 30, 2024, as compared to cash used in investing activities of $3.6 million for the same period in 2023. The change was primarily due to an increase in capital expenditures in 2024 to support the expansion of manufacturing capacity at our Bedford facility and a purchase of developed technology for $0.6 million.

 

Financing Activities

 

Cash used in financing activities was $7.4 million for the nine-month period ended September 30, 2024, as compared to cash used in financing activities of $6.7 million for the same period in 2023. In both periods, the cash used in financing activities was primarily attributable to utilization of cash for share repurchases and employee tax withholding in exchange for shares surrendered by equity award holders. We paid $5.3 million and $5.0 million in share repurchases for the nine-month periods ended September 2024 and 2023, respectively.

 

Critical Accounting Policies and Estimates

 

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We believe that our accounting policies for revenue recognition, accounts receivable and allowance for credit losses, goodwill, acquired in-process research and development, inventory and contingencies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. There have been no significant changes to the above critical accounting policies or in the underlying accounting assumptions and estimates used in such policies from those disclosed in our annual consolidated financial statements and accompanying notes included in our 2023 Form 10-K for the year ended December 31, 2023. We monitor our estimates on an ongoing basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.

 

Recent Accounting Pronouncements

 

A discussion of Recent Accounting Pronouncements is included in our 2023 Form 10-K for the fiscal year ended December 31, 2023 and is updated in the Notes to the condensed consolidated financial statements included in this report.

 

Contractual Obligations and Other Commercial Commitments

 

Our contractual obligations and other commercial commitments are summarized in the section captioned “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations and Other Commercial Commitments” in our 2023 Form 10-K for the year ended December 31, 2023. There were no material changes to our contractual obligations reported in our 2023 Form 10-K during the nine months ended September 30, 2024. For additional discussion, see Note 9 to the condensed consolidated financial statements included in this report.

 

To the extent that funds generated from our operations, together with our existing capital resources, are insufficient to meet future requirements, we will be required to obtain additional funds through equity or debt financings, strategic alliances with corporate partners and others, or through other sources. No assurance can be given that any additional financing will be made available to us or will be available on acceptable terms should such a need arise.

 

26

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our market risks and the ways we manage them are summarized in the section captioned “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2023. There have been no material changes in the first six months of 2024 to our market risks or to our management of such risks.

 

ITEM 4.

CONTROLS AND PROCEDURES

 

(a) Evaluation of disclosure controls and procedures.

 

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based upon that evaluation, the chief executive officer and chief financial officer have concluded as of September 30, 2024 that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. On an on-going basis, we review and document our disclosure controls and procedures, and our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

 

(b) Changes in internal controls over financial reporting.

 

There were no material changes in our internal control over financial reporting during the quarter ended September 30, 2024, that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

 

PART II:

OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS

 

We are involved from time-to-time in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, we do not expect the resolution of these occasional legal proceedings to have a material adverse effect on our financial position, results of operations, or cash flow. There have been no material changes to the information provided in the section captioned “Part I, Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

ITEM 1A.

RISK FACTORS

 

There have been no material changes to the risk factors described in the section captioned “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 as amended and supplemented by the information in “Part II, Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2024 and June 30, 2024. In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section captioned “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and in “Part II, Item 1A. Risk Factors” in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2024 and June 30, 2024, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report on Form 10-K and such subsequently filed Quarterly Report on Form 10-Q are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may have a material adverse effect on our business, financial condition, and/or operating results.

 

The impact of the Russian invasion of Ukraine and the conflict in the Middle East on the global economy, energy supplies and raw materials is uncertain, but may prove to negatively impact our business and operations.

 

The short and long-term implications of Russia’s invasion of Ukraine and the conflict in the Middle East are difficult to predict at this time. We continue to monitor any adverse impact that the outbreak of war in Ukraine, the subsequent institution of sanctions against Russia by the United States and several European and Asian countries, and the conflict in the Middle East may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and other third parties with which we conduct business. For example, a prolonged conflict in Ukraine or the Middle East may result in increased inflation, escalating energy prices and constrained availability, and thus increasing costs, of raw materials. We also have suppliers and customers in and around those areas that we periodically do business with that could be disrupted by these events. We will continue to monitor this fluid situation and develop contingency plans as necessary to address any disruptions to our business operations as they develop. To the extent these conflicts may adversely affect our business as discussed above, it may also have the effect of heightening many of the other risks described herein. Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; disruptions in global supply chains; and constraints, volatility, or disruption in the capital markets, any of which could negatively affect our business and financial condition.

 

27

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Issuer Purchases of Equity Securities

 

The following is a summary of stock repurchases for the three-month period ended September 30, 2024 (in thousands, except share and per share data):

 

Period

 

(a)

Total number of shares
purchased (1)

   

(b)

Average
Price per Share

   

(c)

Total number of
shares purchased as
part of publicly
announced plans or
programs

   

(d)

Maximum number (or
approximate dollar
value) of shares that may
yet be purchased under
the plans or programs

 

July 1 to 31, 2024

    49,245     $ 27.23       49,245     $ 37,289  

August 1 to 31, 2024

    53,605     $ 25.76       53,605     $ 35,908  

September 1 to 30, 2024

    50,002     $ 24.94       50,002     $ 34,661  

Total

    152,852               152,852          

 

(1) In May 2024, we agreed to implement a share repurchase program for an aggregate purchase price of $40.0 million to occur as follows: (i) first $15.0 million was to be effected through a Rule 10b5-1 plan initiated prior to June 1, 2024 and to be effective through June 30, 2025, and (ii) the remaining amount to be purchased in the open market (the “2024 Share Repurchase Program”).  In the event of positive “free cash flow” as defined in the Cooperation Agreement dated May 28, 2024, with Caligan Partners LP, Caligan Partners Master Fund LP and David Johnson, for the period from July 1, 2024 through June 30, 2025, the amount under the share repurchase program shall be increased by 50% of such positive amount and in no event would we be required to make any purchases in the event that our cash would be less than $45.0 million after taking into account the share repurchase and reasonably anticipated capital expenditures and restructuring costs. This new authorization replaces our share repurchase program previously announced in April 2023. On May 28, 2024, the Company entered into a share repurchase agreement under a Rule 10b5-1 with Bank of America. As of September 30, 2024, the Company had repurchased 205,404 shares at an average cost of $25.99 per share, representing 13% of the then estimated total number of shares expected to be repurchased under the 2024 Share Repurchase Program.

 

Recent Sales of Unregistered Securities

 

None.

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4.

MINE SAFETY DISCLOSURES.

 

Not applicable.

 

 

ITEM 5.

OTHER INFORMATION.

 

Rule 10b5-1 Trading Plans

 

During the fiscal quarter ended September 30, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

 

28

 

 

 

ITEM 6.

EXHIBITS

 

Exhibit No.

Description

   

3.1

Certificate of Incorporation of Anika Therapeutics, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K (File No. 001-14027) filed by the Registrant on June 6, 2018)

   

3.2

Bylaws of Anika Therapeutics, Inc., effective as of June 6, 2018 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K (File No. 001-14027) filed by the Registrant on June 6, 2018)

   

(31)

Rule 13a-14(a)/15d-14(a) Certifications

   

*31.1

Certification of Dr. Cheryl R. Blanchard, pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

   

*31.2

Certification of Stephen Griffin, pursuant to Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

   

(32)

Section 1350 Certifications

   

**32.1

Certification of Dr. Cheryl R. Blanchard, and Stephen Griffin, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

   

(101)

XBRL

   

*101

The following materials from Anika Therapeutics, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 as filed with the SEC on October 31, 2024, formatted in Inline XBRL (eXtensible Business Reporting Language), as follows:

 

 

i.

Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023 (unaudited)

 

 

ii.

Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2024 and September 30, 2023 (unaudited)

 

 

iii.

Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2024 and September 30, 2023 (unaudited)

 

 

iv.

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and September 30, 2023 (unaudited)

 

 

v.

Notes to Condensed Consolidated Financial Statements (unaudited)

 

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

*

Filed herewith.

 

**

Furnished herewith.

 

29

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

ANIKA THERAPEUTICS, INC.

 
   

(Registrant)

 
       

Date: November 4, 2024

By:

/s/ STEPHEN GRIFFIN

 
   

Stephen Griffin

 
   

Executive Vice President, Chief Financial Officer and Treasurer

   

(Authorized Officer and Principal Financial Officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30

EXHIBIT 31.1

 

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Cheryl Blanchard, certify that:

 

 

1.

I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2024 of Anika Therapeutics, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: November 4, 2024

 

/s/ CHERYL BLANCHARD

Cheryl R. Blanchard, Ph.D.

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

 

EXHIBIT 31.2

 

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

I, Stephen Griffin, certify that:

 

 

1.

I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2024 of Anika Therapeutics, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have:

 

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: November 4, 2024

 

/s/ STEPHEN GRIFFIN

Stephen Griffin

Executive Vice President, Chief Financial Officer and Treasurer

(Principal Financial Officer)

 

 

 

 

 

EXHIBIT 32.1

 

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

The undersigned officers of Anika Therapeutics, Inc. (the “Company”) hereby certify to their knowledge and in their respective capacities that the Company’s Quarterly Report on Form 10-Q to which this certification is attached (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: November 4, 2024

 

/s/ CHERYL BLANCHARD

Cheryl R. Blanchard, Ph.D.

President and Chief Executive Officer

(Principal Executive Officer)

 

 

/s/ STEPHEN GRIFFIN

Stephen Griffin

Executive Vice President, Chief Financial Officer and Treasurer

(Principal Financial Officer)

 

 

This certification shall not be deemed “filed” for any purpose, nor shall it be deemed to be incorporated by reference into any filing, under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

 

 
 
 
 
 
 
v3.24.3
Document And Entity Information - shares
9 Months Ended
Sep. 30, 2024
Oct. 28, 2024
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2024  
Document Transition Report false  
Entity File Number 001-14027  
Entity Registrant Name Anika Therapeutics, Inc.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 04-3145961  
Entity Address, Address Line One 32 Wiggins Avenue  
Entity Address, City or Town Bedford  
Entity Address, State or Province MA  
Entity Address, Postal Zip Code 01730  
City Area Code 781  
Local Phone Number 457-9000  
Title of 12(b) Security Common Stock, par value $0.01 per share  
Trading Symbol ANIK  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding (in shares)   14,645,596
Entity Central Index Key 0000898437  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q3  
Amendment Flag false  
v3.24.3
Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Current assets:    
Cash and cash equivalents $ 62,368 $ 72,867
Accounts receivable, net 28,357 35,961
Inventories 39,629 46,386
Prepaid expenses and other current assets 5,752 8,095
Total current assets 136,106 163,309
Property and equipment, net 44,572 46,198
Right-of-use assets 27,208 28,767
Other long-term assets 11,310 18,672
Deferred tax assets 1,472 1,489
Intangible assets, net 3,081 4,626
Goodwill 7,656 7,571
Total assets 231,405 270,632
Current liabilities:    
Accounts payable 6,805 9,860
Accrued expenses and other current liabilities 18,688 21,199
Total current liabilities 25,493 31,059
Other long-term liabilities 806 404
Lease liabilities 25,242 26,904
Commitments and contingencies (Note 9)  
Stockholders’ equity:    
Preferred stock, $0.01 par value; 1,250 shares authorized, no shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively 0 0
Common stock, $0.01 par value; 90,000 shares authorized, 15,087 issued and 14,694 outstanding and 14,848 issued and 14,660 outstanding at September 30, 2024 and December 31, 2023, respectively 147 147
Additional paid-in-capital 91,886 90,009
Accumulated other comprehensive loss (5,701) (5,943)
Retained earnings 93,532 128,052
Total stockholders’ equity 179,864 212,265
Total liabilities and stockholders’ equity $ 231,405 $ 270,632
v3.24.3
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares
shares in Thousands
Sep. 30, 2024
Dec. 31, 2023
Preferred stock, par value (in dollars per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 1,250 1,250
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock shares authorized (in shares) 90,000 90,000
Common stock, shares issued (in shares) 15,087 14,848
Common stock, shares outstanding (in shares) 14,694 14,660
v3.24.3
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenue $ 38,753 $ 41,465 $ 121,197 $ 123,691
Cost of product revenue 37,313 16,521 67,764 46,932
Gross Profit 1,440 24,944 53,433 76,759
Operating Expenses:        
Research & development 7,244 7,791 22,806 25,105
Selling, general & administrative 19,112 24,827 60,445 75,512
Long lived asset impairment 3,101 0 3,101 0
Total operating expenses 29,457 32,618 86,352 100,617
Loss from operations (28,017) (7,674) (32,919) (23,858)
Interest and other income, net 406 635 1,593 1,735
Loss before income taxes (27,611) (7,039) (31,326) (22,123)
Provision for (benefit from) income taxes 2,307 (463) 3,194 (2,456)
Net loss $ (29,918) $ (6,576) $ (34,520) $ (19,667)
Net loss per share:        
Basic (in dollars per share) $ (2.03) $ (0.45) $ (2.34) $ (1.34)
Diluted (in dollars per share) $ (2.03) $ (0.45) $ (2.34) $ (1.34)
Weighted average common shares outstanding:        
Basic (in shares) 14,768 14,635 14,769 14,659
Diluted (in shares) 14,768 14,635 14,769 14,659
Net loss $ (29,918) $ (6,576) $ (34,520) $ (19,667)
Foreign currency translation adjustment 715 (407) 242 (121)
Comprehensive loss $ (29,203) $ (6,983) $ (34,278) $ (19,788)
v3.24.3
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
Common Stock Outstanding [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Total
Balance (in shares) at Dec. 31, 2022 14,625        
Balance at Dec. 31, 2022 $ 146 $ 81,141 $ 210,719 $ (6,443) $ 285,563
Issuance of common stock for equity awards (in shares) 1        
Issuance of common stock for equity awards $ 0 7 0 0 7
Vesting of restricted stock units (in shares) 177        
Vesting of restricted stock units $ 2 (2) 0 0 0
Stock-based compensation expense $ 0 3,717 0 0 3,717
Retirement of common stock for minimum tax withholdings (in shares) (62)        
Retirement of common stock for minimum tax withholdings $ (1) (1,620) 0 0 (1,621)
Net loss 0 0 (10,350) 0 (10,350)
Other comprehensive income (loss) $ 0 0 0 272 272
Balance (in shares) at Mar. 31, 2023 14,741        
Balance at Mar. 31, 2023 $ 147 83,243 200,369 (6,171) 277,588
Balance (in shares) at Dec. 31, 2022 14,625        
Balance at Dec. 31, 2022 $ 146 81,141 210,719 (6,443) 285,563
Net loss         (19,667)
Balance (in shares) at Sep. 30, 2023 14,637        
Balance at Sep. 30, 2023 $ 146 85,852 191,052 (6,564) 270,486
Balance (in shares) at Mar. 31, 2023 14,741        
Balance at Mar. 31, 2023 $ 147 83,243 200,369 (6,171) 277,588
Issuance of common stock for equity awards (in shares) 1        
Issuance of common stock for equity awards $ 0 30 0 0 30
Vesting of restricted stock units (in shares) 70        
Vesting of restricted stock units $ 1 (1) 0 0 0
Stock-based compensation expense $ 0 4,150 0 0 4,150
Retirement of common stock for minimum tax withholdings (in shares) (16)        
Retirement of common stock for minimum tax withholdings $ 0 (432) 0 0 (432)
Net loss 0 0 (2,741) 0 (2,741)
Other comprehensive income (loss) $ 0 0 0 14 14
Issuance of ESPP shares (in shares) 20        
Issuance of ESPP shares $ 0 456 0 0 456
Repurchase of common stock (in shares) (159)        
Repurchase of common stock $ (1) (5,049) 0 0 (5,050)
Balance (in shares) at Jun. 30, 2023 14,657        
Balance at Jun. 30, 2023 $ 147 82,397 197,628 (6,157) 274,015
Vesting of restricted stock units (in shares) 12        
Vesting of restricted stock units $ 0 0 0 0 0
Stock-based compensation expense $ 0 3,561 0 0 3,561
Retirement of common stock for minimum tax withholdings (in shares) (3)        
Retirement of common stock for minimum tax withholdings $ 0 (107) 0 0 (107)
Net loss 0 0 (6,576) 0 (6,576)
Other comprehensive income (loss) $ 0 0 0 (407) (407)
Repurchase of common stock (in shares) (29)        
Repurchase of common stock $ (1) 1 0 0 0
Balance (in shares) at Sep. 30, 2023 14,637        
Balance at Sep. 30, 2023 $ 146 85,852 191,052 (6,564) 270,486
Balance (in shares) at Dec. 31, 2023 14,660        
Balance at Dec. 31, 2023 $ 147 90,009 128,052 (5,943) 212,265
Issuance of common stock for equity awards (in shares) 1        
Issuance of common stock for equity awards $ 0 23 0 0 23
Vesting of restricted stock units (in shares) 250        
Vesting of restricted stock units $ 2 (2) 0 0 0
Stock-based compensation expense $ 0 3,430 0 0 3,430
Retirement of common stock for minimum tax withholdings (in shares) (90)        
Retirement of common stock for minimum tax withholdings $ (1) (2,295) 0 0 (2,296)
Net loss 0 0 (4,514) 0 (4,514)
Other comprehensive income (loss) $ 0 0 0 (372) (372)
Balance (in shares) at Mar. 31, 2024 14,821        
Balance at Mar. 31, 2024 $ 148 91,165 123,538 (6,315) 208,536
Balance (in shares) at Dec. 31, 2023 14,660        
Balance at Dec. 31, 2023 $ 147 90,009 128,052 (5,943) 212,265
Net loss         (34,520)
Balance (in shares) at Sep. 30, 2024 14,694        
Balance at Sep. 30, 2024 $ 147 91,886 93,532 (5,701) 179,864
Balance (in shares) at Mar. 31, 2024 14,821        
Balance at Mar. 31, 2024 $ 148 91,165 123,538 (6,315) 208,536
Issuance of common stock for equity awards (in shares) 2        
Issuance of common stock for equity awards $ 0 53 0 0 53
Vesting of restricted stock units (in shares) 49        
Vesting of restricted stock units $ 1 (1) 0 0 0
Stock-based compensation expense $ 0 3,103 0 0 3,103
Retirement of common stock for minimum tax withholdings (in shares) (4)        
Retirement of common stock for minimum tax withholdings $ 0 (206) 0 0 (206)
Net loss 0 0 (88) 0 (88)
Other comprehensive income (loss) $ 0 0 0 (101) (101)
Issuance of ESPP shares (in shares) 24        
Issuance of ESPP shares $ 0 411 0 0 411
Repurchase of common stock (in shares) (53)        
Repurchase of common stock $ (1) (1,369) 0 0 (1,370)
Balance (in shares) at Jun. 30, 2024 14,839        
Balance at Jun. 30, 2024 $ 148 93,156 123,450 (6,416) 210,338
Vesting of restricted stock units (in shares) 10        
Vesting of restricted stock units $ 0 0 0 0 0
Stock-based compensation expense $ 0 2,718 0 0 2,718
Retirement of common stock for minimum tax withholdings (in shares) (3)        
Retirement of common stock for minimum tax withholdings $ 0 (21) 0 0 (21)
Net loss 0 0 (29,918) 0 (29,918)
Other comprehensive income (loss) $ 0 0 0 715 715
Repurchase of common stock (in shares) (152)        
Repurchase of common stock $ (1) (3,967) 0 0 (3,968)
Balance (in shares) at Sep. 30, 2024 14,694        
Balance at Sep. 30, 2024 $ 147 $ 91,886 $ 93,532 $ (5,701) $ 179,864
v3.24.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Cash flows from operating activities:    
Net loss $ (34,520) $ (19,667)
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 5,324 4,806
Amortization of acquisition related intangible assets 985 5,837
Non-cash operating lease cost 1,561 1,633
Loss on disposal of property and equipment 97 1,852
Long lived asset impairment 3,101 0
Stock-based compensation expense 10,875 11,428
Deferred income taxes 26 (4,484)
Provision for credit losses 1,023 74
Provision for inventory 26,078 2,607
Changes in operating assets and liabilities:    
Accounts receivable 6,638 (201)
Inventories (11,815) (8,257)
Prepaid expenses, other current and long-term assets 504 818
Accounts payable (2,385) (1,319)
Operating lease liabilities (1,505) (1,575)
Accrued expenses, other current and long-term liabilities (2,734) 914
Income taxes 568 108
Net cash provided by (used in) operating activities 3,821 (5,426)
Cash flows from investing activities:    
Purchases of property and equipment (6,427) (3,587)
Acquisition of intangible assets (600) 0
Net cash used in investing activities (7,027) (3,587)
Cash flows from financing activities:    
Proceeds from employee stock purchase program 411 456
Cash paid for tax withheld on vested restricted stock awards (2,523) (2,159)
Proceeds from exercises of equity awards 76 37
Repurchases of common stock (5,339) (5,000)
Net cash used in financing activities (7,375) (6,666)
Exchange rate impact on cash 82 3
Decrease in cash and cash equivalents (10,499) (15,676)
Cash and cash equivalents at beginning of period 72,867 86,327
Cash and cash equivalents at end of period 62,368 70,651
Supplemental disclosure of cash flow information:    
Purchases of property and equipment included in accounts payable and accrued expenses $ 118 $ 749
v3.24.3
Note 1 - Nature of Business
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Nature of Operations [Text Block]

1.

Nature of Business

 

Anika Therapeutics, Inc. (the “Company”) is a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care, including in the areas of osteoarthritis (“OA”) pain management, regenerative solutions, sports medicine and Arthrosurface joint solutions. The Company has over 30 years of expertise in hyaluronic acid (“HA”) technology.

 

In early 2020, the Company expanded its overall technology platform through its acquisitions of Parcus Medical, LLC (“Parcus Medical”), a sports medicine implant and instrumentation company, and Arthrosurface Incorporated (“Arthrosurface”), a company specializing in less invasive, bone preserving partial and total joint replacement solutions.

 

On October 31, 2024, the Company sold its equity interests in Arthrosurface (Note 15) and the Company announced its intention to divest of the Parcus Medical business. These decisions were a result of a strategic review to focus on the Company’s core HA technology and regenerative solutions products to maximize shareholder value.

 

The Company is subject to risks common to companies in the life sciences industry including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, commercialization of existing and new products, and compliance with U.S. Food and Drug Administration (“FDA”) and foreign regulations and approval requirements, as well as the ability to grow the Company’s business through appropriate commercial strategies.

v3.24.3
Note 2 - Basis of Presentation
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Business Description and Basis of Presentation [Text Block]

2.

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The financial statements include the accounts of Anika Therapeutics, Inc. and its subsidiaries. Inter-company transactions and balances have been eliminated. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to SEC rules and regulations relating to interim financial statements. The December 31, 2023 balances reported herein were derived from the audited consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the condensed consolidated financial statements.

 

The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s annual financial statements filed with its Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the three and nine-month periods ended September 30, 2024 are not indicative of the results to be expected for the year ending December 31, 2024.

 

Segment Information

 

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker as of September 30, 2024 was its President and Chief Executive Officer. Based on the criteria established by Accounting Standards Codification 280, Segment Reporting, the Company has one operating and reportable segment.

 

Recent Accounting Pronouncements

 

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the new guidance will enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows for the entity. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is evaluating the impact of ASU 2023-07 on its consolidated financial statements and related disclosures.

 

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation and must also disaggregate income taxes paid. ASU 2023-09 is effective for fiscal years and interim periods beginning after December 15, 2024. The Company is evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.

v3.24.3
Note 3 - Accounts Receivable
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Accounts and Nontrade Receivable [Text Block]

3.

Accounts Receivable

 

The Company estimates an allowance for credit losses with its accounts receivable resulting from the inability of its customers to make required payments, which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations. In determining the adequacy of the allowance, management specifically analyzes individual accounts receivable, historical bad debts, customer concentrations, customer creditworthiness, current and reasonable and supportable forecasts of future economic conditions, accounts receivable aging trends, and changes in the Company’s customer payment terms.

 

The components of the Company’s accounts receivable are as follows:

 

   

As of

   

As of

 
   

September 30,

   

December 31,

 
   

2024

   

2023

 

Accounts receivable

  $ 30,927     $ 37,580  

Less: Allowance for credit losses

    2,570       1,619  

Net balance, end of period

  $ 28,357     $ 35,961  

 

A summary of activity in the allowance for credit losses is as follows:

 

   

As of September 30,

 
   

2024

   

2023

 

Balance, beginning of the period

  $ 1,619     $ 1,608  

Amounts provided

    1,284       353  

Amounts recovered

    (261

)

    (279

)

Amounts written off

    (78

)

    (101

)

Translation adjustments

    6       (7

)

Balance, end of period

  $ 2,570     $ 1,574  

 

 

v3.24.3
Note 4 - Fair Value Measurements
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

4.

Fair Value Measurements

 

The Company has certain cash equivalents in money market funds that are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets. For cash, accounts receivables, accounts payable, and accrued interest, the carrying amounts approximate fair value, because of the short maturity of these instruments, and therefore fair value information is not included in the table below. There were no transfers between fair value levels during the nine-month periods ended September 30, 2024 and 2023, respectively.

 

The classification of the Company’s cash equivalents within the fair value hierarchy was as follows:

 

   

September 30,

   

Active
Markets
for Identical
Assets

   

Significant
Other
Observable
Inputs

   

Significant
Unobservable
Inputs

   

Amortized

 
   

2024

   

(Level 1)

   

(Level 2)

   

(Level 3)

   

Cost

 

Cash equivalents:

                                       

Money Market Funds

  $ 45,538     $ 45,538     $ -     $ -     $ 45,538  

 

   

December 31,

   

Active
Markets
for Identical
Assets

   

Significant
Other
Observable
Inputs

   

Significant
Unobservable
Inputs

   

Amortized

 
   

2023

   

(Level 1)

   

(Level 2)

   

(Level 3)

   

Cost

 

Cash equivalents:

                                       

Money Market Funds

  $ 55,485     $ 55,485     $ -     $ -     $ 55,485  

 

v3.24.3
Note 5 - Inventories
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Inventory Disclosure [Text Block]

5. 

Inventories

 

Inventories consist of the following:

 

   

September 30,

   

December 31,

 
   

2024

   

2023

 

Raw materials

  $ 16,401     $ 15,507  

Work-in-process

    16,423       17,002  

Finished goods

    17,528       32,084  

Total

  $ 50,352     $ 64,593  
                 
                 

Inventories

  $ 39,629     $ 46,386  

Other long-term assets

    10,723       18,207  

Total

  $ 50,352     $ 64,593  

 

Inventories are stated net of inventory reserves of approximately $6.5 million and $11.7 million, as of September 30, 2024 and December 31, 2023, respectively. As described in more detail in Note 15, the Company sold its Arthrosurface business on October 31, 2024. As a result of this transaction, the Company adjusted the carrying value of the inventories related to the Arthrosurface business to the net realizable value. Accordingly, the company recorded a write-down of inventories of $22.7 million which was charged to Cost of Goods Sold during the three-month and nine-month periods ended September 30, 2024.

 

 

v3.24.3
Note 6 - Acquired Intangible Assets, Net
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]

6.

Acquired Intangible Assets, Net

 

Intangible assets as of September 30, 2024 and December 31, 2023 consisted of the following:

 

                                                   

December 31,

         
            Nine Months ended September 30, 2024    

2023

         
   

Gross Value

   

Plus: Additions

   

Less: Accumulated Currency Translation Adjustment

   

Less: Current Period Impairment Charge

   

Less: Accumulated Amortization

   

Net Book Value

   

Net Book Value

   

Weighted Average Useful Life

 

Developed technology

  $ 33,061     $ 600    

$

(1,608 )  

$

(718 )   $ (29,997 )   $ 1,338     $ 1,973     $ 15  

In-process research & development

    2,656       -       (1,006 )     -       -       1,650       1,650    

Indefinite

 

Customer relationships

    3,887       -       -       (316 )     (3,571 )     -       360       10  

Distributor Relationships

    4,700       -       (415 )     -       (4,285 )     -       -       5  

Patents

    1,000       -       (189 )     -       (764 )     47       83       16  

Tradenames

    4,641       -       -       (126 )     (4,469 )     46       560       5  

Total

  $ 49,945     $ 600    

$

(3,218 )  

$

(1,160 )   $ (43,086 )   $ 3,081     $ 4,626       12  

 

The aggregate amortization expense related to intangible assets was $0.3 million and $1.9 million for the three-month periods ended September 30, 2024 and 2023, respectively and $1.0 million and $5.8 million for the nine-month periods ended September 30, 2024 and 2023, respectively. During the three-month period ended September 30, 2024, the Company acquired $0.6 million new drug application (“NDA”) that has regulatory approval in the U.S. that it has recorded as developed technology. The Company also recorded a $1.2 million charge to intangible assets related to its Arthrosurface asset group during the three-month period ended September 30, 2024 due to the Company not expecting to recover the value of the intangible asset from the expected net proceeds related to the sale of the Arthrosurface business (see Note 15).

 

As of September 30, 2024 scheduled amortization of intangible assets is as follows:

 

Remainder of 2024

  $ 252  

2025

    347  

2026

    232  

2027

    182  

2028

    32  

Thereafter

    386  

Total

  $ 1,431  

 

v3.24.3
Note 7 - Goodwill
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Goodwill Disclosure [Text Block]

7.

Goodwill

 

The Company assesses goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment.

 

Changes in the carrying value of goodwill for the nine-months ended September 30, 2024 were as follows:

 

   

Nine Months Ended
September 30,

 
   

2024

 

Balance, beginning of period

  $ 7,571  

Effect of foreign currency adjustments

    85  

Balance, ending of period

  $ 7,656  

 

 

v3.24.3
Note 8 - Accrued Expenses and Other Current Liabilities
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Accounts Payable and Accrued Liabilities Disclosure [Text Block]

8.

Accrued Expenses and Other Current Liabilities

 

Accrued expenses and other current liabilities consist of the following:

 

   

September 30,

   

December 31,

 
   

2024

   

2023

 

Compensation and related expenses

  $ 10,500     $ 11,828  

Professional fees

    3,449       3,240  

Operating lease liability – current

    2,292       2,133  

Stock-based compensation

    1,624       -  

Clinical trial costs

    363       460  

Income taxes payable

    82       1,240  

Discontinuation of software development project

    -       1,904  

Other

    378       394  

Total

  $ 18,688     $ 21,199  

 

 

v3.24.3
Note 9 - Commitments and Contingencies
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]

9.

Commitments and Contingencies

 

In certain of its contracts, the Company warrants to its customers that the products it manufactures conform to the product specifications as in effect at the time of delivery of the specific product. The Company may also warrant that the products it manufactures do not infringe, violate, or breach any U.S. or international patent or intellectual property right, trade secret, or other proprietary information of any third party. On occasion, the Company contractually indemnifies its customers against any and all losses arising out of, or in any way connected with, any claim or claims of breach of its warranties or any actual or alleged defect in any product caused by the negligent acts or omissions of the Company. The Company maintains a products liability insurance policy that limits its exposure to these risks. Based on the Company’s historical activity, in combination with its liability insurance coverage, the Company believes the estimated fair value of these indemnification agreements are immaterial. The Company had no accrued warranties as of September 30, 2024 or December 31, 2023 and has no history of claims paid.

 

The Company is also involved from time-to-time in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material adverse effect on its financial position, results of operations, or cash flow.

v3.24.3
Note 10 - Revenue and Geographic Information
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

10.

Revenue and Geographic Information

 

Revenue by product family is as follows:

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 
                                 

OA Pain Management

  $ 24,428     $ 24,888     $ 75,404     $ 76,855  

Joint Preservation and Restoration

    11,950       13,470       39,345       39,583  

Non-Orthopedic

    2,375       3,107       6,448       7,253  
    $ 38,753     $ 41,465     $ 121,197     $ 123,691  

 

Revenue from the Company’s sole significant US customer, J&J Medtech (previously known as DePuy Synthes Mitek Sports Medicine), part of the Johnson & Johnson Medical Companies, as a percentage of the Company’s total revenue was 45% and 44% for the three-months ended September 30, 2024 and 2023, respectively, and 43% and 45% for the nine-months ended September 30, 2024 and 2023, respectively.

 

Total revenue by geographic location based on the location of the customer in total and as a percentage of total revenue were as follows:

 

   

Three Months Ended September 30,

 
   

2024

   

2023

 
           

Percentage of

           

Percentage of

 
   

Revenue

   

Revenue

   

Revenue

   

Revenue

 

Geographic Location:

                               

United States

  $ 27,699       71

%

  $ 30,831       74

%

Europe

    5,688       15

%

    5,420       13

%

Other

    5,366       14

%

    5,214       13

%

Total

  $ 38,753       100

%

  $ 41,465       100

%

 

   

Nine Months Ended September 30,

 
   

2024

   

2023

 
           

Percentage of

           

Percentage of

 
   

Revenue

   

Revenue

   

Revenue

   

Revenue

 

Geographic Location:

                               

United States

  $ 85,923       71

%

  $ 90,986       74

%

Europe

    18,264       15

%

    16,757       13

%

Other

    17,010       14

%

    15,948       13

%

Total

  $ 121,197       100

%

  $ 123,691       100

%

 

 

v3.24.3
Note 11 - Equity Incentive Plan
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Share-Based Payment Arrangement [Text Block]

11.

Equity Incentive Plan

 

Equity Incentive Plan

 

The Anika Therapeutics, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”) was approved by the Company’s stockholders on June 13, 2017 and subsequently amended on June 18, 2019, June 16, 2020, June 16, 2021, June 8, 2022 and June 14, 2023. On June 14, 2023, the Company’s stockholders approved an amendment to the 2017 Plan increasing the number of shares by 435,000 shares from 4,850,000 shares to 5,285,000 shares. The 2017 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock awards, performance restricted stock units (“PSUs”), restricted stock units (“RSUs”), total shareholder return options (“TSRs”) and performance options that may be settled in cash, stock, or other property. In accordance with the 2017 Plan approved by the Company’s stockholders, including the amendments thereto, each share award other than stock options or SARs will reduce the number of total shares available for grant by two shares. Subject to adjustment for specified types of changes in the Company’s capitalization, no more than 4.6 million shares of common stock may be issued under the 2017 Plan. There were 0.7 million shares available for future grant at September 30, 2024 under the 2017 Plan.

 

The Anika Therapeutics, Inc. 2021 Inducement Plan (the “Inducement Plan”) was adopted by the Company’s board of directors on November 4, 2021 and subsequently amended on December 22, 2023 and May 2, 2024. On May 2, 2024, the Company’s board of directors approved an amendment to the Inducement Plan increasing the number of shares by 100,000 shares. The Inducement Plan reserves 350,000 shares of common stock for issuance pursuant to equity-based awards granted under the Inducement Plan. Such awards may be granted only to an individual who was not previously the Company’s employee or director with the Company. The Inducement Plan provides for the grant of awards under terms substantially similar to the 2017 Plan (as amended). There were 0.1 million shares available for future grant at September 30, 2024 under the Inducement Plan.

 

The Company may satisfy the awards upon exercise, or upon fulfillment of the vesting requirements for other equity-based awards, with either newly issued shares or shares reacquired by the Company. Stock-based awards are granted with an exercise price equal to or greater than the market price of the Company’s stock on the date of grant. Awards contain service conditions or service and performance conditions, and they generally become exercisable ratably over three years with a maximum contractual term of ten years.

 

The Company presents the expenses related to stock-based compensation awards in the same expense line items as cash compensation paid to each of its employees as follows:

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Cost of revenue

  $ 92     $ 181     $ 391     $ 532  

Research & development

    485       304       1,587       1,474  

Selling, general & administrative

    2,817       3,076       8,897       9,422  

Total stock-based compensation expense

  $ 3,394     $ 3,561     $ 10,875     $ 11,428  

 

Stock Options

 

Stock options are granted to purchase common shares at prices that are equal to the fair market value of the shares on the date the options are granted or, in the case of premium options, are granted with an exercise price at 110% of the market price of the Company’s common stock on the date of grant. Options generally vest in equal annual installments over a period of three years and expire 10 years after the date of grant. The grant-date fair value of options is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.

 

The following summarizes the activity under the Company’s stock option plans:

 

                   

Weighted

         
                   

Average

         
           

Weighted

   

Remaining

   

Aggregate

 
           

Average

   

Contractual

   

Intrinsic

 
   

Number of

   

Exercise

   

Term

   

Value

 
   

Options

   

Price

   

(in years)

   

(in thousands)

 

Outstanding as of December 31, 2023

    1,812,729     $ 33.42             $ 127  

Granted

    541,100     $ 28.13                  

Exercised

    (3,556

)

  $ 21.96             $ 14  

Forfeited and canceled

    (127,008

)

  $ 37.50             $ 30  

Outstanding as of September 30, 2024

    2,223,265     $ 31.92       7.5     $ 248  

Vested, September 30, 2024

    1,276,640     $ 34.57       6.5     $ 102  

Vested or expected to vest, September 30, 2024

    2,223,265     $ 31.92       7.5     $ 248  

 

The Company uses the Black-Scholes pricing model to determine the fair value of options granted. The calculation of the fair value of stock options is affected by the stock price on the grant date, the expected volatility of the Company’s common stock over the expected term of the award, the expected life of the award, the risk-free interest rate and the dividend yield.

 

The assumptions used in the Black-Scholes pricing model for options granted during the nine months September 30, 2024 and 2023, along with the weighted-average grant-date fair values, were as follows:

 

   

Nine Months Ended

 
   

September 30,

 
   

2024

   

2023

 

Risk free interest rate

    3.6% - 4.6

%

    3.5% - 4.4 %

Expected volatility

    44.5% - 48.2

%

    48.2% - 49.4 %

Expected life (years)

    4.5       4.5  

Expected dividend yield

    0.0 %     0.0 %

Fair value per option

  $ 10.53     $ 11.46  

 

As of September 30, 2024, there was $7.4 million of unrecognized compensation cost related to unvested stock options. This expense is expected to be recognized over a weighted average period of 2.0 years.

 

Restricted Stock Units

 

RSUs generally vest in equal annual installments over a three-year period. The grant-date fair value of RSUs is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company determines the fair value of RSUs based on the closing price of its common stock on the date of grant.

 

RSU activity for the nine-month period ended September 30, 2024 was as follows:

 

           

Weighted

 
   

Number of

   

Average

 
   

Shares

   

Fair Value

 

Outstanding as of December 31, 2023

    771,358     $ 27.19  

Granted

    491,541     $ 26.62  

Vested

    (308,634

)

  $ 27.73  

Forfeited and cancelled

    (74,874

)

  $ 26.43  

Outstanding as of September 30, 2024

    879,391     $ 26.74  

 

The weighted-average grant-date fair value per share of RSUs granted was $26.62 and $26.66 for the nine-month periods ended September 30, 2024 and 2023, respectively. The total fair value of RSUs vested was $9.6 million and $6.8 million for the nine-month periods ended September 30, 2024 and 2023, respectively. As of September 30, 2024, there was $7.1 million of unrecognized compensation cost related to time-based RSUs that are expected to settle in shares, which was expected to be recognized over a weighted-average period of 1.3 years.

 

The Company’s annual grant of RSU awards in March 2024 can be settled at vesting in cash or shares at the Company’s election. The Company has recorded these RSUs as a liability due to the expectation that the Company will settle the vesting of the March 2024 RSU awards in cash due to a potential shortage of shares in the 2017 Plan at the time of vesting. As a result, these RSUs will be subject to change in value at the time of each reporting period. As of September 30, 2024, the Company had 381,029 shares outstanding in which a liability of $1.6 million was recorded in Accrued Expenses and Other Liabilities. There was $7.7 million of unrecognized compensation cost for these RSUs recorded as a liability which was expected to vest over a weighted-average period of 2.4 years.

v3.24.3
Note 12 - Income Taxes
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

12.

Income Taxes

 

The income tax expense was $2.3 million and $3.2 million for the three- and nine-month periods ended September 30, 2024, resulting in effective tax rates of (8.4%) and (10.2%), respectively. The income tax benefit was $0.5 million and $2.5 million for the three- and nine-month periods ended September 30, 2023, resulting in an effective tax rate of 6.6% and 11.1%, respectively.

 

The net change in the effective tax rate for the three- and nine-month periods ended September 30, 2024, as compared to the same periods in 2023, was primarily due to the impact of the valuation allowance in the US in both the current and prior periods and the impact of recording of $1.5 million of discrete items during the nine-month period ended September 30, 2024.  The Company’s effective tax rate for the three-month and nine-month periods ended September 30, 2024 was primarily driven by the full valuation on the Company's deferred tax assets in the US and the projected taxable income for the Company resulting in expected current tax expense in 2024.

 

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. The Company has incurred operating losses in recent years. As a result, the Company anticipates that deferred tax assets originating during the year ended December 31, 2024 will exceed the availability of reversing taxable temporary differences. Due to significant negative evidence, including the Company’s prior year operating losses, the Company concluded its anticipated net deferred tax assets in the U.S. are not more likely than not to be realizable. Accordingly, the estimated annual effective tax rate used to compute the income tax provision for the nine-month period ended September 30, 2024 includes an adjustment for the valuation allowance required against the U.S. deferred tax assets. As of September 30, 2024, the Company continues to believe its foreign deferred tax assets are realizable based upon future reversals of existing taxable temporary differences and projected future taxable income.

 

The Company files income tax returns in the United States on a federal basis, in certain U.S. states, and in certain foreign jurisdictions. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate, which varies by jurisdiction. In September 2024, the Company was notified by the Italian tax authorities that it had selected the Company’s tax returns for its Italian subsidiary for 2021 for examination and remains under review.

v3.24.3
Note 13 - Earnings Per Share ("EPS")
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Earnings Per Share [Text Block]

13.

Earnings Per Share (EPS)

 

Basic EPS is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the period. Unvested restricted shares, although legally issued and outstanding, are not considered outstanding for purposes of calculating basic EPS. Diluted EPS is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding share-based awards using the treasury stock method. Due to the Company’s loss position, the share-based payment awards are anti-dilutive.

 

The Company had a net loss during the three and nine-month periods ended September 30, 2024 and 2023, respectively, and therefore all potential common shares would have been anti-dilutive and accordingly were excluded from the computation of diluted EPS. Stock options of 2.2 million shares and 1.8 million shares were outstanding at September 30, 2024 and 2023, respectively. Restricted stock units totaling 0.9 million and 0.8 million were outstanding at September 30, 2024 and 2023, respectively. These securities were not included in the computation of diluted EPS because the awards’ impact on EPS would have been anti-dilutive.

v3.24.3
Note 14 - Share Repurchase
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Equity [Text Block]

14.

Share Repurchase

 

In May 2024, the Company agreed to implement a share repurchase program for an aggregate purchase price of $40.0 million to occur as follows: (i) first $15.0 million was effected through a Rule 10b5-1 Plan initiated prior to June 1, 2024 and to be effective through June 30, 2025, and (ii) the remaining amount to be purchased in the open market through June 2026.  In the event of positive “free cash flow” as defined in the Cooperation Agreement dated May 28, 2024, with Caligan Partners LP, Caligan Partners Master Fund LP and David Johnson, for the period from July 1, 2024 through June 30, 2025, the amount under the share repurchase program shall be increased by 50% of such positive amount and in no event would we be required to make any purchases in the event that the Company’s cash would be less than $45.0 million after taking into account the share repurchase and reasonably anticipated capital expenditures and restructuring costs. This new authorization replaces our share repurchase program previously announced in April 2023.

 

On May 28, 2024, the Company entered into a share repurchase agreement under a Rule 10b5-1 with Bank of America. As of September 30, 2024, the Company had repurchased 205,404 shares at an average cost of $25.99 per share for a total cost of $5.3 million.

v3.24.3
Note 15 - Subsequent Event
9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Subsequent Events [Text Block]

15.

Subsequent Event

 

On October 31, 2024 (the “Closing Date”), the Company completed the sale of all of the outstanding equity interests (the “Transaction”) of Arthrosurface Incorporated, a Delaware corporation and former wholly-owned subsidiary of the Company (“Arthrosurface”), which held the Company’s Arthrosurface business, to Phoenix Brio, Incorporated, a Delaware corporation (“Buyer”), pursuant to the terms and conditions of a Share Purchase Agreement, dated as of the Closing Date (the “Purchase Agreement”), by and among the Company, Arthrosurface and Buyer (the “Transaction”).

 

As consideration for the Transaction, at the closing Buyer delivered to the Company a ten-year non-interest bearing promissory note in the principal amount of $7.0 million. Under the terms of the Purchase Agreement, the Company is also eligible to receive: (i) for each calendar quarter, an amount equal to a percentage of the net sales (the “Revenue Payments”) for the sale of certain commercial and pipeline products during the period commencing on the Closing Date and ending on the earlier of the fifth (5th) anniversary of the Closing Date or the date on which the Buy-Out Payment (as defined below) is paid to the Company; and (ii) a percentage of the gross proceeds with respect to the sale of certain commercial and pipeline products in a bona-fide arm’s length transaction with a third party that is not an affiliate of Buyer or the Company occurring within the first twenty four (24) months following the Closing Date. The Buyer can also elect to make a payment in an amount equal to the greater of (A) $14.0 million or (B) ten (10) times the Revenue Payments ((A) and (B) together, the “Buy-Out Payment”) paid to the Company during the last full calendar year prior to the consummation of a change of control transaction or Buyer’s written notice to the Company that it is electing to make the Buy-Out Payment. Pursuant to the Purchase Agreement, the aggregate consideration is subject to customary post-closing adjustments.

 

As a result of the Transaction, the Company tested the assets associated with the Arthrosurface business to determine if the carrying value of the assets at September 30, 2024 were fully recoverable. Given that the expected proceeds from the sale of the Arthrosurface business is expected to be less than the carrying value of its net assets, the Company recorded asset impairment charges totaling $27.4 million during the three-month period ended September 30, 2024 related to a write-down of its accounts receivable, inventories, property and equipment and intangible assets related to the Arthrosurface business.

 

 

 

v3.24.3
Insider Trading Arrangements
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2024
Insider Trading Arr Line Items    
Material Terms of Trading Arrangement [Text Block]  

ITEM 5.

OTHER INFORMATION.

 

Rule 10b5-1 Trading Plans

 

During the fiscal quarter ended September 30, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

 

 

Rule 10b5-1 Arrangement Adopted [Flag] false  
Rule 10b5-1 Arrangement Terminated [Flag] false  
Non-Rule 10b5-1 Arrangement Terminated [Flag] false  
Non-Rule 10b5-1 Arrangement Adopted [Flag] false  
v3.24.3
Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Basis of Accounting, Policy [Policy Text Block]

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The financial statements include the accounts of Anika Therapeutics, Inc. and its subsidiaries. Inter-company transactions and balances have been eliminated. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to SEC rules and regulations relating to interim financial statements. The December 31, 2023 balances reported herein were derived from the audited consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the condensed consolidated financial statements.

 

The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s annual financial statements filed with its Annual Report on Form 10-K for the year ended December 31, 2023. The results of operations for the three and nine-month periods ended September 30, 2024 are not indicative of the results to be expected for the year ending December 31, 2024.

Segment Reporting, Policy [Policy Text Block]

Segment Information

 

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker as of September 30, 2024 was its President and Chief Executive Officer. Based on the criteria established by Accounting Standards Codification 280, Segment Reporting, the Company has one operating and reportable segment.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

 

In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, are intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the new guidance will enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The purpose of the amendments is to enable investors to better understand an entity’s overall performance and assess potential future cash flows for the entity. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is evaluating the impact of ASU 2023-07 on its consolidated financial statements and related disclosures.

 

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation and must also disaggregate income taxes paid. ASU 2023-09 is effective for fiscal years and interim periods beginning after December 15, 2024. The Company is evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures.

v3.24.3
Note 3 - Accounts Receivable (Tables)
9 Months Ended
Sep. 30, 2024
Notes Tables  
Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]
   

As of

   

As of

 
   

September 30,

   

December 31,

 
   

2024

   

2023

 

Accounts receivable

  $ 30,927     $ 37,580  

Less: Allowance for credit losses

    2,570       1,619  

Net balance, end of period

  $ 28,357     $ 35,961  
   

As of September 30,

 
   

2024

   

2023

 

Balance, beginning of the period

  $ 1,619     $ 1,608  

Amounts provided

    1,284       353  

Amounts recovered

    (261

)

    (279

)

Amounts written off

    (78

)

    (101

)

Translation adjustments

    6       (7

)

Balance, end of period

  $ 2,570     $ 1,574  
v3.24.3
Note 4 - Fair Value Measurements (Tables)
9 Months Ended
Sep. 30, 2024
Notes Tables  
Fair Value, Assets Measured on Recurring Basis [Table Text Block]
   

September 30,

   

Active
Markets
for Identical
Assets

   

Significant
Other
Observable
Inputs

   

Significant
Unobservable
Inputs

   

Amortized

 
   

2024

   

(Level 1)

   

(Level 2)

   

(Level 3)

   

Cost

 

Cash equivalents:

                                       

Money Market Funds

  $ 45,538     $ 45,538     $ -     $ -     $ 45,538  
   

December 31,

   

Active
Markets
for Identical
Assets

   

Significant
Other
Observable
Inputs

   

Significant
Unobservable
Inputs

   

Amortized

 
   

2023

   

(Level 1)

   

(Level 2)

   

(Level 3)

   

Cost

 

Cash equivalents:

                                       

Money Market Funds

  $ 55,485     $ 55,485     $ -     $ -     $ 55,485  
v3.24.3
Note 5 - Inventories (Tables)
9 Months Ended
Sep. 30, 2024
Notes Tables  
Schedule of Inventory, Current [Table Text Block]
   

September 30,

   

December 31,

 
   

2024

   

2023

 

Raw materials

  $ 16,401     $ 15,507  

Work-in-process

    16,423       17,002  

Finished goods

    17,528       32,084  

Total

  $ 50,352     $ 64,593  
                 
                 

Inventories

  $ 39,629     $ 46,386  

Other long-term assets

    10,723       18,207  

Total

  $ 50,352     $ 64,593  
v3.24.3
Note 6 - Acquired Intangible Assets, Net (Tables)
9 Months Ended
Sep. 30, 2024
Notes Tables  
Schedule of Finite-Lived and Indefinite-Lived Intangible Assets by Major Class [Table Text Block]
                                                   

December 31,

         
            Nine Months ended September 30, 2024    

2023

         
   

Gross Value

   

Plus: Additions

   

Less: Accumulated Currency Translation Adjustment

   

Less: Current Period Impairment Charge

   

Less: Accumulated Amortization

   

Net Book Value

   

Net Book Value

   

Weighted Average Useful Life

 

Developed technology

  $ 33,061     $ 600    

$

(1,608 )  

$

(718 )   $ (29,997 )   $ 1,338     $ 1,973     $ 15  

In-process research & development

    2,656       -       (1,006 )     -       -       1,650       1,650    

Indefinite

 

Customer relationships

    3,887       -       -       (316 )     (3,571 )     -       360       10  

Distributor Relationships

    4,700       -       (415 )     -       (4,285 )     -       -       5  

Patents

    1,000       -       (189 )     -       (764 )     47       83       16  

Tradenames

    4,641       -       -       (126 )     (4,469 )     46       560       5  

Total

  $ 49,945     $ 600    

$

(3,218 )  

$

(1,160 )   $ (43,086 )   $ 3,081     $ 4,626       12  
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Remainder of 2024

  $ 252  

2025

    347  

2026

    232  

2027

    182  

2028

    32  

Thereafter

    386  

Total

  $ 1,431  
v3.24.3
Note 7 - Goodwill (Tables)
9 Months Ended
Sep. 30, 2024
Notes Tables  
Schedule of Goodwill [Table Text Block]
   

Nine Months Ended
September 30,

 
   

2024

 

Balance, beginning of period

  $ 7,571  

Effect of foreign currency adjustments

    85  

Balance, ending of period

  $ 7,656  
v3.24.3
Note 8 - Accrued Expenses and Other Current Liabilities (Tables)
9 Months Ended
Sep. 30, 2024
Notes Tables  
Schedule of Accrued Liabilities [Table Text Block]
   

September 30,

   

December 31,

 
   

2024

   

2023

 

Compensation and related expenses

  $ 10,500     $ 11,828  

Professional fees

    3,449       3,240  

Operating lease liability – current

    2,292       2,133  

Stock-based compensation

    1,624       -  

Clinical trial costs

    363       460  

Income taxes payable

    82       1,240  

Discontinuation of software development project

    -       1,904  

Other

    378       394  

Total

  $ 18,688     $ 21,199  
v3.24.3
Note 10 - Revenue and Geographic Information (Tables)
9 Months Ended
Sep. 30, 2024
Notes Tables  
Revenue from External Customers by Products and Services [Table Text Block]
   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 
                                 

OA Pain Management

  $ 24,428     $ 24,888     $ 75,404     $ 76,855  

Joint Preservation and Restoration

    11,950       13,470       39,345       39,583  

Non-Orthopedic

    2,375       3,107       6,448       7,253  
    $ 38,753     $ 41,465     $ 121,197     $ 123,691  
Schedule of Revenue and Operating Income by Geographical Areas [Table Text Block]
   

Three Months Ended September 30,

 
   

2024

   

2023

 
           

Percentage of

           

Percentage of

 
   

Revenue

   

Revenue

   

Revenue

   

Revenue

 

Geographic Location:

                               

United States

  $ 27,699       71

%

  $ 30,831       74

%

Europe

    5,688       15

%

    5,420       13

%

Other

    5,366       14

%

    5,214       13

%

Total

  $ 38,753       100

%

  $ 41,465       100

%

   

Nine Months Ended September 30,

 
   

2024

   

2023

 
           

Percentage of

           

Percentage of

 
   

Revenue

   

Revenue

   

Revenue

   

Revenue

 

Geographic Location:

                               

United States

  $ 85,923       71

%

  $ 90,986       74

%

Europe

    18,264       15

%

    16,757       13

%

Other

    17,010       14

%

    15,948       13

%

Total

  $ 121,197       100

%

  $ 123,691       100

%

v3.24.3
Note 11 - Equity Incentive Plan (Tables)
9 Months Ended
Sep. 30, 2024
Notes Tables  
Share-Based Payment Arrangement, Expensed and Capitalized, Amount [Table Text Block]
   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Cost of revenue

  $ 92     $ 181     $ 391     $ 532  

Research & development

    485       304       1,587       1,474  

Selling, general & administrative

    2,817       3,076       8,897       9,422  

Total stock-based compensation expense

  $ 3,394     $ 3,561     $ 10,875     $ 11,428  
Share-Based Payment Arrangement, Option, Activity [Table Text Block]
                   

Weighted

         
                   

Average

         
           

Weighted

   

Remaining

   

Aggregate

 
           

Average

   

Contractual

   

Intrinsic

 
   

Number of

   

Exercise

   

Term

   

Value

 
   

Options

   

Price

   

(in years)

   

(in thousands)

 

Outstanding as of December 31, 2023

    1,812,729     $ 33.42             $ 127  

Granted

    541,100     $ 28.13                  

Exercised

    (3,556

)

  $ 21.96             $ 14  

Forfeited and canceled

    (127,008

)

  $ 37.50             $ 30  

Outstanding as of September 30, 2024

    2,223,265     $ 31.92       7.5     $ 248  

Vested, September 30, 2024

    1,276,640     $ 34.57       6.5     $ 102  

Vested or expected to vest, September 30, 2024

    2,223,265     $ 31.92       7.5     $ 248  
Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]
   

Nine Months Ended

 
   

September 30,

 
   

2024

   

2023

 

Risk free interest rate

    3.6% - 4.6

%

    3.5% - 4.4 %

Expected volatility

    44.5% - 48.2

%

    48.2% - 49.4 %

Expected life (years)

    4.5       4.5  

Expected dividend yield

    0.0 %     0.0 %

Fair value per option

  $ 10.53     $ 11.46  
Share-Based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]
           

Weighted

 
   

Number of

   

Average

 
   

Shares

   

Fair Value

 

Outstanding as of December 31, 2023

    771,358     $ 27.19  

Granted

    491,541     $ 26.62  

Vested

    (308,634

)

  $ 27.73  

Forfeited and cancelled

    (74,874

)

  $ 26.43  

Outstanding as of September 30, 2024

    879,391     $ 26.74  
v3.24.3
Note 2 - Basis of Presentation (Details Textual)
9 Months Ended
Sep. 30, 2024
Number of Operating Segments 1
v3.24.3
Note 3 - Accounts Receivable - Allowance for Doubtful Accounts (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Accounts receivable $ 30,927   $ 37,580
Balance, beginning of the period 1,619 $ 1,608  
Less: Allowance for credit losses 2,570   1,619
Amounts provided 1,284 353  
Net balance, end of period 28,357   $ 35,961
Amounts recovered (261) (279)  
Amounts written off (78) (101)  
Translation adjustments 6 (7)  
Balance, end of period $ 2,570 $ 1,574  
v3.24.3
Note 4 - Fair Value Measurements - Fair Value of Financial Instruments (Details) - Money Market Funds [Member] - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Estimate of Fair Value Measurement [Member]    
Cash equivalents $ 45,538 $ 55,485
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]    
Cash equivalents 45,538 55,485
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]    
Cash equivalents 0 0
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]    
Cash equivalents 0 0
Reported Value Measurement [Member]    
Cash equivalents $ 45,538 $ 55,485
v3.24.3
Note 5 - Inventories (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Inventory Valuation Reserves $ 6,500 $ 6,500   $ 11,700
Inventory Write-down   26,078 $ 2,607  
Arthrosurface [Member] | Disposal Group, Held-for-Sale or Disposed of by Sale, Not Discontinued Operations [Member]        
Inventory Write-down $ 22,700      
Arthrosurface [Member] | Discontinued Operations, Held-for-Sale or Disposed of by Sale [Member]        
Inventory Write-down   $ 22,700    
v3.24.3
Note 5 - Inventories - Summary of Inventories (Details) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Raw materials $ 16,401 $ 15,507
Work-in-process 16,423 17,002
Finished goods 17,528 32,084
Total 50,352 64,593
Inventories 39,629 46,386
Other long-term assets $ 10,723 $ 18,207
v3.24.3
Note 6 - Acquired Intangible Assets, Net (Details Textual) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Amortization of Intangible Assets $ 300 $ 1,900 $ 1,000 $ 5,800
Plus: Additions     600  
Impairment of Intangible Assets, Finite-Lived     $ 1,160  
Disposal Group, Held-for-Sale or Disposed of by Sale, Not Discontinued Operations [Member] | Arthrosurface [Member]        
Impairment of Intangible Assets, Finite-Lived 1,200      
Licensing Agreements [Member]        
Plus: Additions $ 600      
v3.24.3
Note 6 - Acquired Intangible Assets - Summary of Intangible Assets (Details) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Gross Value $ 49,945  
Plus: Additions 600  
Less: Accumulated Currency Translation Adjustment (3,218)  
Less: Current Period Impairment Charge (1,160)  
Less: Accumulated Amortization (43,086)  
Net Book Value $ 3,081 $ 4,626
Weighted Average Useful Life (Year) 12 years  
In Process Research and Development [Member]    
Gross Value $ 2,656  
Less: Accumulated Currency Translation Adjustment (1,006)  
Less: Current Period Impairment Charge 0  
Net Book Value 1,650 1,650
Developed Technology Rights [Member]    
Gross Value 33,061  
Plus: Additions 600  
Less: Accumulated Currency Translation Adjustment (1,608)  
Less: Current Period Impairment Charge (718)  
Less: Accumulated Amortization (29,997)  
Net Book Value $ 1,338 1,973
Weighted Average Useful Life (Year) 15 years  
Customer Relationships [Member]    
Gross Value $ 3,887  
Plus: Additions 0  
Less: Accumulated Currency Translation Adjustment 0  
Less: Current Period Impairment Charge (316)  
Less: Accumulated Amortization (3,571)  
Net Book Value $ 0 360
Weighted Average Useful Life (Year) 10 years  
Distribution Rights [Member]    
Gross Value $ 4,700  
Plus: Additions 0  
Less: Accumulated Currency Translation Adjustment (415)  
Less: Current Period Impairment Charge 0  
Less: Accumulated Amortization (4,285)  
Net Book Value $ 0 0
Weighted Average Useful Life (Year) 5 years  
Patents [Member]    
Gross Value $ 1,000  
Plus: Additions 0  
Less: Accumulated Currency Translation Adjustment (189)  
Less: Current Period Impairment Charge 0  
Less: Accumulated Amortization (764)  
Net Book Value $ 47 83
Weighted Average Useful Life (Year) 16 years  
Trade Names [Member]    
Gross Value $ 4,641  
Plus: Additions 0  
Less: Accumulated Currency Translation Adjustment 0  
Less: Current Period Impairment Charge (126)  
Less: Accumulated Amortization (4,469)  
Net Book Value $ 46 $ 560
Weighted Average Useful Life (Year) 5 years  
v3.24.3
Note 6 - Acquired Intangible Assets - Schedule of Amortization Expense (Details)
$ in Thousands
Sep. 30, 2024
USD ($)
Remainder of 2024 $ 252
2025 347
2026 232
2027 182
2028 32
Thereafter 386
Total $ 1,431
v3.24.3
Note 7 - Goodwill - Changes in the Carrying Value of Goodwill (Details)
$ in Thousands
9 Months Ended
Sep. 30, 2024
USD ($)
Balance $ 7,571
Effect of foreign currency adjustments 85
Balance $ 7,656
v3.24.3
Note 8 - Accrued Expenses and Other Current Liabilities - Summary of Accrued Expenses (Details) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Compensation and related expenses $ 10,500 $ 11,828
Professional fees $ 3,449 $ 3,240
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] Total Total
Operating lease liability – current $ 2,292 $ 2,133
Stock-based compensation 1,624 0
Clinical trial costs 363 460
Income taxes payable 82 1,240
Discontinuation of software development project 0 1,904
Other 378 394
Total $ 18,688 $ 21,199
v3.24.3
Note 9 - Commitments and Contingencies (Details Textual) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Standard and Extended Product Warranty Accrual, Ending Balance $ 0 $ 0
v3.24.3
Note 10 - Revenue and Geographic Information (Details Textual)
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | DePuy Synthes Mitek Sports Medicine [Member]        
Revenues From Agreements as Percent of Total Revenue 45.00% 44.00% 43.00% 45.00%
v3.24.3
Note 10 - Revenue and Geographic Information - Revenues (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenue $ 38,753 $ 41,465 $ 121,197 $ 123,691
OA Pain Management [member]        
Revenue 24,428 24,888 75,404 76,855
Joint Preservation and Restoration [Member]        
Revenue 11,950 13,470 39,345 39,583
Non-Orthopedic [Member]        
Revenue $ 2,375 $ 3,107 $ 6,448 $ 7,253
v3.24.3
Note 10 - Revenue and Geographic Information - Total Revenue by Geographic Location (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenue $ 38,753 $ 41,465 $ 121,197 $ 123,691
Percentage of Revenue 100.00% 100.00% 100.00% 100.00%
UNITED STATES        
Revenue $ 27,699 $ 30,831 $ 85,923 $ 90,986
Percentage of Revenue 71.00% 74.00% 71.00% 74.00%
Europe [Member]        
Revenue $ 5,688 $ 5,420 $ 18,264 $ 16,757
Percentage of Revenue 15.00% 13.00% 15.00% 13.00%
Other Location [Member]        
Revenue $ 5,366 $ 5,214 $ 17,010 $ 15,948
Percentage of Revenue 14.00% 13.00% 14.00% 13.00%
v3.24.3
Note 11 - Equity Incentive Plan (Details Textual) - USD ($)
$ / shares in Units, $ in Millions
9 Months Ended
May 02, 2024
Jun. 14, 2023
Sep. 30, 2024
Sep. 30, 2023
Jun. 13, 2023
Jun. 13, 2017
Premium-Priced Employee Stock Options [Member]            
Share-based Compensation Arrangement by Share-based Payment Award, Premium Priced Options, Exercise Price as Percentage of Market Price     110.00%      
Share-Based Payment Arrangement, Option [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year)     3 years      
Share-Based Compensation Arrangement by Share-Based Payment Award, Expiration Period (Year)     10 years      
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total     $ 7.4      
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)     2 years      
Restricted Stock Units (RSUs) [Member]            
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total     $ 7.1      
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)     1 year 3 months 18 days      
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value (in dollars per share)     $ 26.62 $ 26.66    
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value     $ 9.6 $ 6.8    
Restricted Stock Units (RSUs) [Member] | March 2024 [Member]            
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total     $ 7.7      
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)     2 years 4 months 24 days      
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Unsettled, Number     381,029      
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding     $ 1.6      
Restricted Stock Units (RSUs) [Member] | Minimum [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year)     3 years      
The 2017 Plan [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Additional Shares Authorized (in shares)   435,000        
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Authorized (in shares)   5,285,000     4,850,000  
Number of Shares Available for Grant Reduced By Each Share Award Issued Other Than Options or SARs (in shares)           2
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Available for Grant (in shares)     700,000     4.6
The 2021 Inducement Plan [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Available for Grant (in shares)     0.1      
Common Stock, Capital Shares Reserved for Future Issuance, Number of Shares Increased 100,000          
Common Stock, Capital Shares Reserved for Future Issuance (in shares) 350,000          
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period (Year)     3 years      
Share-Based Compensation Arrangement by Share-Based Payment Award, Expiration Period (Year)     10 years      
v3.24.3
Note 11 - Equity Incentive Plan - Total Stock-based Compensation Expense (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Stock-based compensation expense $ 3,394 $ 3,561 $ 10,875 $ 11,428
Cost of Sales [Member]        
Stock-based compensation expense 92 181 391 532
Research and Development Expense [Member]        
Stock-based compensation expense 485 304 1,587 1,474
Selling, General and Administrative Expenses [Member]        
Stock-based compensation expense $ 2,817 $ 3,076 $ 8,897 $ 9,422
v3.24.3
Note 11 - Equity Incentive Plan - Stock Options (Details) - USD ($)
$ / shares in Units, $ in Thousands
9 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Outstanding, shares (in shares) 1,812,729  
Outstanding, Weighted Average Exercise (in dollars per share) $ 33.42  
Outstanding, aggregate intrinsic value $ 248 $ 127
Granted, shares (in shares) 541,100  
Granted, Weighted Average Exercise Price (in dollars per share) $ 28.13  
Exercised, shares (in shares) (3,556)  
Exercised, Weighted Average Exercise Price (in dollars per share) $ 21.96  
Exercised, Aggregate Intrinsic Value $ 14  
Forfeited and canceled, shares (in shares) (127,008)  
Forfeited and canceled (in dollars per share) $ 37.5  
Forfeited and canceled, aggregate intrinsic value $ 30  
Outstanding, shares (in shares) 2,223,265  
Outstanding, Weighted Average Exercise Price (in dollars per share) $ 31.92  
Outstanding, Weighted Average Remaining Contractual Term (Year) 7 years 6 months  
Vested, shares (in shares) 1,276,640  
Vested, Weighted Average Exercise Price (in dollars per share) $ 34.57  
Vested, Weighted Average Remaining Contractual Term (Year) 6 years 6 months  
Vested, Aggregate Intrinsic Value $ 102  
Vested and expected to vest, shares (in shares) 2,223,265  
Vested and expected to vest, Weighted Average Exercise Price (in dollars per share) $ 31.92  
Vested and expected to vest, Weighted Average Remaining Contractual Term (Year) 7 years 6 months  
Vested and expected to vest, Aggregate Intrinsic Value $ 248  
v3.24.3
Note 11 - Equity Incentive Plan - Assumptions Used to Estimate Fair Value of Stock Options and Stock Appreciation Rights (Details) - $ / shares
9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Expected life (years) (Year) 4 years 6 months 4 years 6 months
Expected dividend yield 0.00% 0.00%
Fair value per option (in dollars per share) $ 10.53 $ 11.46
Minimum [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Risk Free Interest Rate 3.60% 3.50%
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Volatility Rate 44.50% 48.20%
Maximum [Member]    
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Risk Free Interest Rate 4.60% 4.40%
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Volatility Rate 48.20%  
v3.24.3
Note 11 - Equity Incentive Plan - Restricted Stock Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares
9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Outstanding, shares (in shares) 771,358  
Outstanding, weighted average grant date fair value (in dollars per share) $ 27.19  
Granted (in shares) 491,541  
Granted, weighted average grant date fair value (in dollars per share) $ 26.62 $ 26.66
Vested, shares (in shares) (308,634)  
Vested, weighted average grant date fair value (in dollars per share) $ 27.73  
Forfeited and cancelled, shares (in shares) (74,874)  
Forfeited and cancelled, weighted average grant date fair value (in dollars per share) $ 26.43  
Outstanding, shares (in shares) 879,391  
Outstanding, weighted average grant date fair value (in dollars per share) $ 26.74  
v3.24.3
Note 12 - Income Taxes (Details Textual) - USD ($)
$ in Thousands
1 Months Ended 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Tax Expense (Benefit)   $ 2,307 $ (463) $ 3,194 $ (2,456)
Effective Income Tax Rate Reconciliation, Percent   (8.40%) 6.60% (10.20%) 11.10%
Effective Income Tax Rate Reconciliation, Other Adjustments, Amount   $ 1,500   $ 1,500  
Foreign Tax Jurisdiction, Other [Member] | Ministry of Economic Affairs and Finance, Italy [Member]          
Income Tax Examination, Year under Examination 2021        
v3.24.3
Note 13 - Earnings Per Share ("EPS") (Details Textual) - shares
shares in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Restricted Stock Units and Performance Stock Units [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount 2.2 1.8 0.9 0.8
v3.24.3
Note 14 - Share Repurchase (Details Textual) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 4 Months Ended
Sep. 30, 2024
Jun. 30, 2024
Sep. 30, 2023
Jun. 30, 2023
Sep. 30, 2024
May 28, 2024
Stock Repurchased During Period, Value $ 3,968 $ 1,370 $ (0) $ 5,050    
May 2024 Share Repurchase Plan [Member]            
Share Repurchase Program, Authorized, Amount           $ 40,000
Share Repurchase Program, Authorized, Increase Percentage           50.00%
Share Repurchase Program, Authorized, Minimum Cash Balance           $ 45,000
May 2024 Share Repurchase Plan, Rule 10b5-1 [Member]            
Share Repurchase Program, Authorized, Amount           $ 15,000
Stock Repurchased During Period, Shares         205,404  
Stock Repurchased During Period, Average Cost Per Share         $ 25.99  
Stock Repurchased During Period, Value         $ 5,300  
v3.24.3
Note 15 - Subsequent Event (Details Textual) - Arthrosurface [Member] - Disposal Group, Held-for-Sale or Disposed of by Sale, Not Discontinued Operations [Member]
$ in Millions
3 Months Ended
Oct. 31, 2024
USD ($)
Sep. 30, 2024
USD ($)
Disposal Group, Not Discontinued Operation, Gain (Loss) on Disposal   $ (27.4)
Subsequent Event [Member]    
Notes Receivable, Term 10 years  
Financing Receivable, before Allowance for Credit Loss $ 7.0  
Disposal Group, Consideration, Revenue Payments Period 5 years  
Disposal Group, Consideration, Period for Payment of Percentage of Gross Proceeds for Third Party Sales 24 months  
Disposal Group, Consideration, Change of Control, Minimum $ 14.0  
Disposal Group, Consideration, Change of Control, Multiplier of Revenue Payments 10  

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