UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
| | 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
Anika Therapeutics, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| | |
| (State or Other Jurisdiction of | (I.R.S. Employer Identification No.) |
| Incorporation or Organization) |
(Address of Principal Executive Offices) (Zip Code)
(
(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 |
| | | |
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.
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).
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 ☐ | | 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 31, 2022, there were
ANIKA THERAPEUTICS, INC.
TABLE OF CONTENTS
References in this Quarterly Report on Form 10-Q to “we,” “us,” “our” and “our company,” and other similar references refer to Anika Therapeutics, Inc. and its subsidiaries unless the context otherwise indicates.
Anika, Anika Therapeutics, Anikavisc, Arthrosurface, Cingal, Hyaff, Monovisc, Orthovisc, Parcus Medical, Tactoset and Hyvisc 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 licensed to us.
| FINANCIAL INFORMATION |
| FINANCIAL STATEMENTS |
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share data)
(unaudited)
| September 30, | December 31, | |||||||
| ASSETS | 2022 | 2021 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, less allowance for credit losses of $ and $ at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Other long-term assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Contingent consideration | ||||||||
| Total current liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Deferred tax liability | ||||||||
| Lease liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ par value; shares authorized, shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Common stock, $ par value; shares authorized, and shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Retained earnings | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Research & development | ||||||||||||||||
| Selling, general & administrative | ||||||||||||||||
| Change in fair value of contingent consideration | ( | ) | ( | ) | ||||||||||||
| Total operating expenses | ||||||||||||||||
| (Loss) income from operations | ( | ) | ( | ) | ||||||||||||
| Interest and other income (expense), net | ( | ) | ( | ) | ||||||||||||
| (Loss) income before income taxes | ( | ) | ( | ) | ||||||||||||
| (Benefit from) provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Net (loss) income per share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| Consolidated Statements of Stockholders' Equity | ||||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Common Stock | Other | Total | ||||||||||||||||||||||
| Number of | $.01 Par | Additional Paid | Retained | Comprehensive | Stockholders' | |||||||||||||||||||
| Shares | Value | in Capital | Earnings | Loss | Equity | |||||||||||||||||||
| Balance, January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Issuance of common stock for equity awards | - | - | ||||||||||||||||||||||
| Vesting of restricted stock units | ( | ) | - | - | - | |||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | - | - | ( | ) | ||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||
| Other comprehensive income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Vesting of restricted stock units | ( | ) | - | - | ||||||||||||||||||||
| Issuance of ESPP shares | - | - | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | - | - | ( | ) | ||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||
| Other comprehensive income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Vesting of restricted stock units | - | - | ||||||||||||||||||||||
| Issuance of ESPP shares | - | - | - | |||||||||||||||||||||
| Stock-based compensation expense | - | - | - | - | ||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | - | - | ( | ) | ||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||
| Other comprehensive income | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||
| Balance, September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Nine Months Ended September 30, 2021 | ||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Common Stock | Other | Total | ||||||||||||||||||||||
| Number of | $.01 Par | Additional Paid | Retained | Comprehensive | Stockholders' | |||||||||||||||||||
| Shares | Value | in Capital | Earnings | Loss | Equity | |||||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Issuance of common stock for equity awards | - | |||||||||||||||||||||||
| Vesting of restricted stock units | ( | ) | ||||||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Other comprehensive income | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Issuance of common stock for equity awards | ||||||||||||||||||||||||
| Vesting of restricted stock units | ||||||||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Issuance of common stock for equity awards | ||||||||||||||||||||||||
| Vesting of restricted stock units | ||||||||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||||||
| Retirement of common stock for minimum tax withholdings | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Other comprehensive income | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Nine Months Ended September 30 |
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| 2022 |
2021 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net (loss) income |
$ | ( |
) |
$ | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation |
||||||||
| Amortization of acquisition related intangible assets |
||||||||
| Amortization of acquisition related inventory step-up |
||||||||
| Non-cash operating lease cost |
||||||||
| Change in fair value of contingent consideration |
( |
) | ||||||
| Loss on disposal of fixed assets |
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| Stock-based compensation expense |
||||||||
| Deferred income taxes |
( |
) |
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| Provision (recovery) for doubtful accounts |
( |
) | ||||||
| Provision for inventory |
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| Other |
( |
) | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
( |
) |
( |
) | ||||
| Inventories |
( |
) |
( |
) | ||||
| Prepaid expenses, other current and long-term assets |
( |
) |
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| Accounts payable |
( |
) |
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| Operating lease liabilities |
( |
) |
( |
) |
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| Accrued expenses, other current and long-term liabilities |
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| Contingent consideration |
( |
) | ||||||
| Income taxes |
( |
) |
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| Net cash provided by operating activities |
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| Cash flows from investing activities: |
||||||||
| Acquisition of Parcus Medical and Arthrosurface, net of cash acquired |
( |
) |
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| Proceeds from maturities of investments |
||||||||
| Purchases of property and equipment |
( |
) |
( |
) |
||||
| Net cash used in investing activities |
( |
) |
( |
) |
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| Cash flows from financing activities: |
||||||||
| Payments made on finance leases |
( |
) |
( |
) |
||||
| Cash paid for tax withheld on vested restricted stock awards |
( |
) |
( |
) |
||||
| Proceeds from exercises of equity awards |
||||||||
| Contingent consideration payout |
( |
) | ( |
) | ||||
| Net cash used in financing activities |
( |
) |
( |
) | ||||
| Exchange rate impact on cash |
( |
) |
( |
) |
||||
| Decrease in cash and cash equivalents |
( |
) |
( |
) | ||||
| Cash and cash equivalents at beginning of period |
||||||||
| Cash and cash equivalents at end of period |
$ | $ | ||||||
| Supplemental disclosure of cash flow information: |
||||||||
| Non-cash investing activities: |
||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities |
$ | $ | ||||||
| Purchases of property and equipment included in accounts payable and accrued expenses |
$ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
NOTES TO 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, soft tissue repair and bone preserving joint technologies.
In early 2020, the Company expanded its overall technology platform through its strategic acquisitions of Parcus Medical, LLC (“Parcus Medical”), a sports medicine implant and instrumentation solutions provider focused on sports medicine and soft tissue repair, and Arthrosurface, Inc. (“Arthrosurface”), a company specializing in less invasive, bone preserving partial and total joint replacement solutions. These acquisitions broadened the Company’s product portfolio, developed over its 30 years of expertise in hyaluronic acid technology, into the broader joint preservation and restoration market with greater market potential, added high-growth revenue streams, increased the Company’s commercial capabilities, diversified its revenue base, and expanded its product pipeline and research and development expertise.
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 and foreign regulations and approval requirements, as well as the ability to grow the Company’s business through appropriate commercial strategies.
There continue to be uncertainties regarding the pandemic of the ongoing coronavirus (“COVID-19”), and the Company is closely monitoring the impact of COVID-19 on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, business partners and a broader impact on elective surgeries. The Company is unable to predict the specific impact that COVID-19 may have on its financial position and operations moving forward due to the numerous uncertainties. Any estimates made herein may change as new events occur and additional information is obtained, and actual results could differ materially from any estimates made herein under different assumptions or conditions. The Company will continue to assess the evolving impact of COVID-19.
| 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 (“SEC”) and in accordance with accounting principles generally accepted in the United States (“US 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 US GAAP have been or omitted pursuant to SEC rules and regulations relating to interim financial statements. The December 31, 2021 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, 2021. The results of operations for the three-month and nine-month periods ended September 30, 2022, are not indicative of the results to be expected for the year ending December 31, 2022
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 is its President and Chief Executive Officer as of September 30, 2022. Based on the criteria established by Accounting Standards Codification 280, Segment Reporting, the Company has one operating and reportable segment.
| 3. | Business Combinations |
Parcus Medical, LLC
On January 24, 2020, the Company completed the acquisition of Parcus Medical pursuant to the terms of the Agreement and Plan of Merger, dated as of January 4, 2020 (the “Parcus Medical Merger Agreement”). Parcus Medical is a sports medicine implant and instrumentation solutions provider focused on surgical repair and reconstruction of soft tissue.
Consideration Transferred
Pursuant to the Parcus Medical Merger Agreement, the Company acquired all outstanding equity of Parcus Medical for estimated total purchase consideration of $
| Cash consideration | $ | |||
| Deferred consideration | ||||
| Estimated fair value of contingent consideration | ||||
| Estimated total purchase consideration | $ |
Pursuant to the Parcus Medical Merger Agreement, contingent consideration represents additional payments that the Company may be required to make in the future which could total up to $
The fair value of contingent consideration related to net sales as of January 24, 2020, and at each reporting date, was determined based on a Monte Carlo simulation model in an option pricing framework, whereby a range of possible scenarios were simulated. The liability for contingent consideration was included in current liabilities on the condensed consolidated balance sheets and will be remeasured at each reporting period until the contingency is resolved. During the three months ended September 30, 2022, the Company paid the contingent consideration related to net sales in the amount of $
Acquisition-related costs were not included as a component of consideration transferred but were expensed in the periods in which the costs are incurred. The Company incurred approximately $
Fair Value of Net Assets Acquired
The estimate of fair value as of the acquisition date required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable, however, actual results may differ from these estimates.
The allocation of purchase price to the identifiable assets acquired and liabilities assumed was based on estimates of fair value as of January 24, 2020, and was as follows:
| Recognized identifiable assets acquired and liabilities assumed: | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Prepaid expenses and other current assets | ||||
| Property and equipment, net | ||||
| Right-of-use assets | ||||
| Intangible assets | ||||
| Accounts payable, accrued expenses and other current liabilities | ( | ) | ||
| Other long-term liabilities | ( | ) | ||
| Lease liabilities | ( | ) | ||
| Net assets acquired | ||||
| Goodwill | ||||
| Estimated total purchase consideration | $ |
The acquired intangible assets based on estimates of fair value as of January 24, 2020 were as follows:
| Developed technology | $ | |||
| Trade name | ||||
| Customer relationships | ||||
| Total acquired intangible assets | $ |
The fair value of developed technology will be amortized over a useful life of
The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill and assigned to the newly established reporting unit for Parcus Medical and Arthrosurface. The goodwill was impaired in 2020 and there was no remaining goodwill as of December 31, 2020.
Arthrosurface, Inc.
On February 3, 2020, the Company completed the acquisition of Arthrosurface pursuant to the terms of the Agreement and Plan of Merger, dated as of January 4, 2020 (the “Arthrosurface Merger Agreement”). Arthrosurface is a joint preservation technology company specializing in less invasive, bone-preserving partial and total joint replacement solutions.
Consideration Transferred
Pursuant to the Arthrosurface Merger Agreement, the Company acquired all outstanding equity of Arthrosurface for estimated total purchase consideration of $
| Cash consideration | $ | |||
| Estimated fair value of contingent consideration | ||||
| Estimated total purchase consideration | $ |
Pursuant to the Arthrosurface Merger Agreement, the Company could be required to make future payments of up to $
Acquisition-related costs were not included as a component of consideration transferred but were expensed in the periods in which the costs are incurred. The Company incurred approximately $
Fair Value of Net Assets Acquired
The estimate of fair value required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that the Company believes to be reasonable. However, actual results may differ from these estimates.
The allocation of purchase price to the identifiable assets acquired and liabilities assumed was based on estimates of fair value as of February 3, 2020, as follows:
| Recognized identifiable assets acquired and liabilities assumed: | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Inventories | ||||
| Prepaid expenses and other current assets | ||||
| Property, plant and equipment | ||||
| Other long-term assets | ||||
| Intangible assets | ||||
| Accounts payable, accrued expenses and other liabilities | ( | ) | ||
| Deferred tax liabilities | ( | ) | ||
| Net assets acquired | ||||
| Goodwill | ||||
| Estimated total purchase consideration | $ | |||
| Intangible assets acquired consist of: | ||||
| Developed technology | $ | |||
| Trade name | ||||
| Customer relationships | ||||
| IPR&D | ||||
| Total acquired intangible assets | $ |
The fair value of developed technology will be amortized over an estimated useful life of
The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill and assigned to the newly established reporting unit for Parcus Medical and Arthrosurface. The goodwill was impaired in 2020 and there was no remaining goodwill as of December 31, 2020.
| 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. Contingent consideration related to the previously described business combinations are classified within Level 3 of the fair value hierarchy as the determination of fair value uses considerable judgement and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability. There were no transfers between fair value levels during the nine-month periods ended September 30, 2022 or 2021. See Note 3, Business Combinations for additional discussion of contingent consideration as of September 30, 2022.
| Active Markets | Significant Other | Significant | ||||||||||||||||||
| for Identical Assets | Observable Inputs | Unobservable Inputs | ||||||||||||||||||
| September 30, 2022 | (Level 1) | (Level 2) | (Level 3) | Amortized Cost | ||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||
| Money Market Funds | $ | $ | $ | $ | $ | |||||||||||||||
| Other current liabilities: | ||||||||||||||||||||
| Contingent Consideration - Short Term | $ | $ | $ | $ | $ | |||||||||||||||
| Active Markets | Significant Other | Significant | ||||||||||||||||||
| for Identical Assets | Observable Inputs | Unobservable Inputs | ||||||||||||||||||
| December 31, 2021 | (Level 1) | (Level 2) | (Level 3) | Amortized Cost | ||||||||||||||||
| Cash equivalents: | ||||||||||||||||||||
| Money Market Funds | $ | $ | $ | $ | $ | |||||||||||||||
| Other current liabilities: | ||||||||||||||||||||
| Contingent Consideration - Short Term | $ | $ | $ | $ | $ | |||||||||||||||
Contingent Consideration
The following table provides a rollforward of the contingent consideration related to business acquisitions discussed in Note 3, Business Combinations
| Nine Months Ended | Nine Months Ended | |||||||
| September 30, 2022 | September 30, 2021 | |||||||
| Balance, beginning | $ | $ | ||||||
| Payments | ( | ) | ( | ) | ||||
| Change in fair value | ( | ) | ||||||
| Balance, ending | $ | $ | ||||||
| 5. | Inventories |
Inventories consist of the following:
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Finished goods | ||||||||
| Total | $ | $ | ||||||
| Inventories | $ | $ | ||||||
| Other long-term assets | ||||||||
| Total | $ | $ | ||||||
Inventories are stated net of inventory reserves of $
| 6. | Intangible Assets |
| Nine Months Ended September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||
| Gross | Less: Accumulated | Less: | Net Book | Net Book | Weighted | |||||||||||||||||||
| Developed technology | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
| IPR&D | ( | ) | Indefinite | |||||||||||||||||||||
| Customer relationships | ( | ) | ||||||||||||||||||||||
| Distributor relationships | ( | ) | ( | ) | ||||||||||||||||||||
| Patents | ( | ) | ( | ) | ||||||||||||||||||||
| Tradenames | ( | ) | ||||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
The aggregate amortization expense related to intangible assets was $
| 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, 2022 were as follows:
| Nine Months Ended September 30, 2022 | ||||
| Balance, beginning | $ | |||
| Effect of foreign currency adjustments | ( | ) | ||
| Balance, ending | $ | |||
| 8. | Leases |
The Company leases its buildings and manufacturing facilities under operating leases. As of September 30, 2022, the Company had real estate leases in Bedford, Massachusetts, Franklin, Massachusetts, Sarasota, Florida, Warsaw, Indiana and Padova, Italy.
In June 2022, the Company finalized renewal options to extend the current term of its leases for its building and manufacturing facility in Bedford as well as its two facilities in Sarasota. With the extension of these renewal options, the Bedford lease term extends to 2027 with several lease renewal options into 2038 and the two leases in Sarasota extend to 2027 but may be extended by mutual agreement. The Sarasota leases also include a right to terminate in 2025 at the Company’s option. The current term of the Franklin lease extends to 2023 and the current term of the Padova lease extends to 2032, with a right to terminate at the Company’s option without penalty.
The following table summarizes the Company’s significant commitments under lease agreements as of September 30, 2022:
| Operating Leases | ||||
| 2022 (Remainder of Year) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Present value adjustment | ( | ) | ||
| Present value of lease payments | ||||
| Less current portion included in accrued expenses and other current liabilities | ( | ) | ||
| Total lease liabilities | $ | |||
During the three and nine months ended September 30, 2022, the Company incurred lease expense of $
| 9. | Accrued Expenses and Other Liabilities |
Accrued expenses and other liabilities consist of the following:
| September 30, 2022 | December 31, 2021 | |||||||
| Compensation and related expenses | $ | $ | ||||||
| Professional fees | ||||||||
| Operating lease liability – current | ||||||||
| Clinical trial costs | ||||||||
| Financing lease liability – current | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
| 10. | 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 is immaterial. The Company had
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.
On October 21, 2021, the Company received notice that the former unitholders of Parcus Medical had filed a request for arbitration regarding the earnout provisions agreed to in the Parcus Medical Merger Agreement. The Company has engaged in the arbitration process and does not anticipate a resolution during 2022. The Company is unable to estimate the potential liability with respect to this matter at this time. There are numerous factors that make it difficult to estimate reasonably possible loss or range of loss at this stage of the matter, including the significant number of legal and factual issues still to be resolved in the arbitration process. The Company intends to vigorously defend against the claims and believes it has strong defenses to the claims asserted.
| 11. | Revenue and Geographic Information |
Revenue by product family was as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| OA Pain Management | $ | $ | $ | $ | ||||||||||||
| Joint Preservation and Restoration | ||||||||||||||||
| Non-Orthopedics | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Revenue from the Company’s sole significant customer, DePuy Synthes Mitek Sports Medicine (“Mitek”), part of the Johnson & Johnson Medical Companies, as a percentage of the Company’s total revenue was
The Company receives payments from our customers based on billing schedules established in each contract. Up-front payments are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements. Amounts are recorded as accounts receivable when our right to consideration is unconditional. Deferred revenue was $
Total revenue by geographic location was as follows:
| Three Months Ended September 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Total | Percentage of | Total | Percentage of | |||||||||||||
| Revenue | Revenue | Revenue | Revenue | |||||||||||||
| Geographic Location: | ||||||||||||||||
| United States | $ | % | $ | % | ||||||||||||
| Europe | % | % | ||||||||||||||
| Other | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2022 | 2021 | |||||||||||||||
| Total | Percentage of | Total | Percentage of | |||||||||||||
| Revenue | Revenue | Revenue | Revenue | |||||||||||||
| Geographic Location: | ||||||||||||||||
| United States | $ | % | $ | % | ||||||||||||
| Europe | % | % | ||||||||||||||
| Other | % | % | ||||||||||||||
| Total | $ | % | $ | % | ||||||||||||
| 12. | 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 and June 8, 2022. On June 8, 2022, the Company’s stockholders approved an amendment to the 2017 Plan increasing the number of shares by
The Anika Therapeutics, Inc. 2021 Inducement Plan (the “Inducement Plan”) was adopted by the Company’s board of directors on November 4, 2021. The Inducement Plan reserves
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 years with a maximum contractual term of 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 (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Cost of revenue | $ | $ | $ | $ | ||||||||||||
| Research & development | ||||||||||||||||
| Selling, general & administrative | ||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
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
The following summarizes the activity under the Company’s stock option plans:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||
| Outstanding as of December 31, 2021 | $ | |||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( | ) | $ | $ | ||||||||||||
| Forfeited and canceled | ( | ) | $ | |||||||||||||
| Outstanding as of September 30, 2022 | $ | $ | ||||||||||||||
| Vested, September 30, 2022 | $ | $ | ||||||||||||||
| Vested or expected to vest, September 30, 2022 | $ | $ | ||||||||||||||
The aggregate intrinsic value of options exercised for the nine-month period ended September 30, 2022 was immaterial.
The Company granted
As of September 30, 2022, there was $
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 Company estimates the fair value of TSRs using Monte-Carlo simulation model where the expected volatility assumption is evaluated over
The assumptions used in the Black-Scholes pricing model for options granted during the nine months ended September 30, 2022 and 2021, along with the weighted-average grant-date fair values, were as follows:
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Risk free interest rate |
| - |
|
| - |
| ||
| Expected volatility | | - | | | - | | ||
| Expected life (years) | | | ||||||
| Expected dividend yield |
|
| ||||||
| Fair value per option | $ | $ | ||||||
Restricted Stock Units
RSUs generally vest in equal annual installments over a -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, 2022 was as follows:
| Number of Shares | Weighted Average Fair Value | |||||||
| Outstanding as of December 31, 2021 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited and cancelled | ( | ) | $ | |||||
| Outstanding as of September 30, 2022 | $ | |||||||
The weighted-average grant-date fair value per share of RSUs granted was $
As of September 30, 2022, there was $
Performance Stock Units
PSU activity for the nine-month ended September 30, 2022 was as follows:
| Number of Shares | Weighted Average Fair Value | |||||||
| Outstanding as of December 31, 2021 | $ | |||||||
| Performance factor adjustment | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited and cancelled | ( | ) | $ | |||||
| Outstanding as of September 30, 2022 | $ | |||||||
The total fair value of PSUs vested was $
| 13. | Income Taxes |
The Company recorded an income tax benefit of $
The decrease in the effective tax rate for the three-month period ended September 30, 2022, as compared to the same period in 2021, was primarily due to non-deductible stock-option activity during the three-month period ended September 30, 2021. The increase in the effective tax rate for the nine-month period ended September 30, 2022, as compared to the same period in 2021, was primarily due to the year-to-date net tax benefit in 2021 on the change in the fair value of contingent consideration, in the amount of $
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 connection with the preparation of the financial statements, the Company assessed whether it is more likely than not that it will be able to utilize, in future periods, the Company’s deferred income tax assets to offset future taxable income and tax liabilities. The Company concluded that it is more likely than not that its deferred tax assets will be realized, after evaluation and consideration of both the positive and negative evidence. On December 31, 2021, the Company released a valuation allowance that had been previously recorded related to its net deferred tax assets in Italy in the amount of $
| 14. | 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
The following table provides share information used in the calculation of the Company's basic and diluted earnings per share (in thousands):
| Three Month Period Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Shares used in the calculation of basic earnings per share | ||||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Share-based payment awards | ||||||||||||||||
| Diluted shares used in the calculation of earnings per share | ||||||||||||||||
The Company had a net loss during the three and nine-months ended September 30, 2022, and therefore all potential common shares would have been anti-dilutive and accordingly were excluded from the computation of diluted EPS. Stock options of
| MANAGEMENT’S 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, 2021, or our 2021 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 company’s 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," “estimate,” “potential,” 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 the effect of COVID-19 and related impacts on our business, operations, and financial results, 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 those factors described in “Part I, Item 1A. Risk Factors” of our 2021 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 osteoarthritis, or OA, pain management, regenerative solutions, sports medicine soft tissue repair and bone preserving joint technologies.
We have thirty years of global expertise developing, manufacturing and commercializing products based on and/or enhanced with 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 enhanced and accelerated our commercial infrastructure, especially in the United States, through our strategic acquisitions of Parcus Medical, a sports medicine and instrumentation solutions provider focused on soft tissue repair, and Arthrosurface, a company specializing in bone preserving partial and total joint replacement solutions. Through these acquisitions, we have transformed our company. We expanded our addressable market from the over $1 billion global OA pain management market to the over $8 billion global joint preservation market (which includes the faster growing sports medicine soft tissue repair and extremities segments), advanced our commercial capabilities, instituted systems and processes to support our transformation, and expanded our product pipeline and research and development expertise in our target markets.
As we look towards the future, our business is positioned to capture value within our target market of joint preservation. We believe our success will be driven by our:
| ● |
Decades of experience in HA-based regenerative solutions and early intervention orthopedics combined under new seasoned leadership with a strong financial foundation for future investment in meaningful solutions for our customers and their patients; |
| ● |
Robust network of stakeholders in our target markets to identify evolving unmet patient treatment needs; |
| ● |
Prioritized investment in differentiated pipeline of regenerative solutions, bone preserving implants and sports medicine soft tissue repair products; |
|
| ● |
Leveraging our global commercial expertise and building out our capabilities to drive growth across the portfolio, with an intentional and increased focus on the ambulatory surgery centers site of care in the United States; |
| ● |
Opportunity to pursue strategic inorganic growth opportunities, including potential partnerships and smaller acquisitions, technology licensing, and leveraging our strong financial foundation and operational capabilities; and |
| ● |
Energized and experienced team focused on strong values, talent, and culture. |
COVID-19 Pandemic and Resulting Supply Chain and Staffing Challenges
In March 2020, the World Health Organization declared the spread of the COVID-19 virus a pandemic. This pandemic has caused an economic downturn on a global scale, as well as significant volatility in the financial markets. There has been significant volatility in our results on a quarterly basis due to the worldwide cancellation or delay of elective procedures, staffing shortages and supply chain disruptions, as well as the impact on timelines associated with certain clinical studies. Resurgence of COVID-19 as a result of emerging variants or other factors could result in additional staffing shortages or supply chain disruptions that could impact our business and operations. We have had some disruption in our ability to supply products to our customers due to supply chain disruptions and staffing shortages which has caused back orders or delays in certain shipments to our customers. The companies that produce our products, product components or otherwise support our manufacturing processes, the distribution centers where we manage our inventory, or the operations of our logistics and other service providers, including third parties that sterilize and store our products, are or could be disrupted, temporarily close or experience worker shortages for a sustained period of time. To date, we believe we have taken adequate precaution to mitigate the impact of the current disruption of key materials, components and parts to the extent possible and reasonable. We expect, however, the current supply chain disruption with certain key suppliers to continue, which could have a material adverse effect on our operations. For additional information on the impact of supply chain disruption related to the COVID-19 pandemic on our manufacturing operations, please refer to the section captioned “Part II, Item 1A. Risk Factors.
Our commercial day-to-day operations have been impacted due to the worldwide cancellations and/or delays of elective procedures and restrictions on travel for both our employees and our clinician customers, and timelines associated with certain clinical studies and research and development programs have been delayed. While the impact has been limited to these items to date, we caution that there continues to be a possibility for potential future implementation of certain additional restrictions or other challenges associated with infections, staffing shortages, volatility in elective surgical procedures or supply chain disruptions due to COVID-19 and its current or new variants in certain jurisdictions. In particular, supply constraints that have continued into 2022 that we have partially been able to mitigate to date have impacted and could be expected to impact our ability to produce and supply our products. The impact of these challenges is currently unknown but could be significant.
Products
OA Pain Management
Our OA Pain Management product family consists of:
| ● |
Monovisc and Orthovisc, our single- and multi-injection, HA-based viscosupplement product offerings indicated to provide pain relief from OA conditions solely for use in the knee. Our OA Pain Management products are generally administered to patients in an office setting. In the United States, Monovisc and Orthovisc are marketed exclusively by DePuy Synthes Mitek Sports Medicine, or “Mitek”, part of the Johnson & Johnson Medical Companies. In December 2011, we entered into a fifteen-year licensing agreement with Mitek to exclusively market Monovisc in the United States through December 2026. In December 2003, we entered into a ten-year licensing agreement with Mitek to exclusively market Orthovisc in the United States. Mitek extended this agreement for additional five-year terms in 2007, 2012, 2017 and most recently in August 2022. The current agreement expires on December 20, 2028 unless extended at the option of Mitek. The Monovisc and Orthovisc products have been the market leaders, based on combined overall revenue in the viscosupplement market, since 2018. Internationally, we market our OA Pain Management products directly through a worldwide network of commercial distributors. |
| ● |
Cingal, our novel, third-generation, single-injection OA Pain Management product consisting of our proprietary cross-linked HA material combined with a fast-acting steroid. Cingal is designed to provide both short- and long-term pain relief. Cingal is CE Mark approved and for several years has been sold outside the United States directly in over 35 countries through our network of distributors. In the United States, Cingal is a pipeline product currently in clinical development and is not available for commercial sale. |
| ● |
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. |
Joint Preservation and Restoration
Our Joint Preservation and Restoration product family consists of:
| ● |
Bone Preserving Joint Technologies. Our portfolio of more than 150 bone preserving joint technologies, including partial joint replacement, joint resurfacing, and minimally invasive and bone sparing implants, is designed to treat upper and lower extremity orthopedic conditions as well as knee and hip conditions caused by arthritic disease, acute trauma and injury. These products span multiple joints including the shoulder, foot/ankle, wrist, knee and hip and are generally intended to restore a patient’s natural anatomy and movement. These products are often used to treat patients with OA progression beyond where our OA Pain Management products can allow the patients to retain an active lifestyle when early surgical intervention becomes preferable. |
| ● |
Soft Tissue Repair. Our line of soft tissue repair solutions is used by surgeons to repair and reconstruct damaged ligaments and tendons resulting from sports injuries, acute trauma and disease. These more traditional sports medicine solutions include screws, sutures, suture anchors, grafts and other surgical systems that facilitate surgical procedures on the shoulder, knee, hip, upper and lower extremities, and other soft tissues. |
| ● |
Regenerative Solutions. Our portfolio of orthopedic regenerative solutions leveraging our proprietary technologies based on HA and Hyaff, which is a solid form of HA. These products include Tactoset Injectable Bone Substitute, an HA-enhanced injectable bone repair therapy designed to treat insufficiency fractures and for augmenting hardware fixation, such as suture anchors and Hyalofast, a biodegradable support for human bone marrow mesenchymal stem cells used for cartilage regeneration and as an adjunct for microfracture surgery. Tactoset cleared and commercialized principally in the United States, whereas Hyalofast is CE Mark approved and currently available outside the United States in over 35 countries within Europe, South America, Asia, and certain other international markets. In the United States, Hyalofast is a product under clinical trial studies and is not available for commercial sale. |
We currently commercialize Bone Preserving Joint Technologies, Soft Tissue Repair products, and Tactoset (from our Regenerative Solutions portfolio) in the United States by selling to hospitals and ambulatory surgery centers, through an independent network of sales representatives and distributors, and utilize our distributor network for sales in certain international markets.
Non-Orthopedic
Our Non-Orthopedic product family consists of legacy HA-based products that are marketed principally for non-orthopedic applications. These products include Hyalobarrier, an anti-adhesion barrier indicated for use after abdomino-pelvic surgeries, Hyalomatrix, used for the treatment of complex wounds such as burns and ulcers, as well as products used in connection with the treatment of ears, nose and throat disorders, and ophthalmic products, including injectable, high molecular weight HA products such as Anikavisc and Nuvisc, used as viscoelastic agents in ophthalmic surgical procedures such as cataract extraction and intraocular lens implantation. These Non-Orthopedic products are sold through commercial sales and marketing partners around the world.
Results of Operations
Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||
| 2022 |
2021 |
$ Inc/(Dec) |
% Inc/(Dec) |
2022 |
2021 |
$ Inc/(Dec) |
% Inc/(Dec) |
|||||||||||||||||||||||||
| (in thousands, except percentages) |
(in thousands, except percentages) |
|||||||||||||||||||||||||||||||
| Revenue |
$ | 40,264 | $ | 39,536 | $ | 728 | 2 | % | $ | 116,614 | $ | 111,973 | $ | 4,641 | 4 | % | ||||||||||||||||
| Cost of revenue |
17,485 | 16,513 | 972 | 6 | % | 47,169 | 47,164 | 5 | 0 | % | ||||||||||||||||||||||
| Gross Profit |
22,779 | 23,023 | (244 | ) | (1% | ) | 69,445 | 64,809 | 4,636 | 7 | % | |||||||||||||||||||||
| Gross Margin |
57 | % | 58 | % | 60 | % | 58 | % | ||||||||||||||||||||||||
| Operating expenses: |
||||||||||||||||||||||||||||||||
| Research & development |
7,301 | 7,673 | (372 | ) | (5% | ) | 20,433 | 21,327 | (894 | ) | (4% | ) | ||||||||||||||||||||
| Selling, general & administrative |
21,276 | 17,500 | 3,776 | 22 | % | 61,745 | 53,664 | 8,081 | 15 | % | ||||||||||||||||||||||
| Change in fair value of contingent consideration |
- | (3,450 | ) | 3,450 | (100% | ) | - | (21,920 | ) | 21,920 | (100% | ) | ||||||||||||||||||||
| Total operating expenses |
28,577 | 21,723 | 6,854 | 32 | % | 82,178 | 53,071 | 29,107 | 55 | % | ||||||||||||||||||||||
| (Loss) income from operations | (5,797 | ) | 1,300 | (7,097 | ) | (546% | ) | (12,733 | ) | 11,738 | (24,471 | ) | (208% | ) | ||||||||||||||||||
| Interest and other income (expense), net |
436 | (48 | ) | 484 | (1,008% | ) | 378 | (141 | ) | 519 | (368% | ) | ||||||||||||||||||||
| (Loss) income before income taxes | (5,361 | ) | 1,252 | (6,613 | ) | (528% | ) | (12,355 | ) | 11,597 | (23,952 | ) | (207% | ) | ||||||||||||||||||
| (Benefit from) provision for income taxes | (1,187 | ) | 694 | (1,881 | ) | (271% | ) | (2,404 | ) | 1,670 | (4,074 | ) | (244% | ) | ||||||||||||||||||
| Net (loss) income | $ | (4,175 | ) | $ | 558 | $ | (4,733 | ) | (848% | ) | $ | (9,951 | ) | $ | 9,927 | $ | (19,878 | ) | (200% | ) | ||||||||||||
Revenue
Revenue for the three-month period ended September 30, 2022 was $40.3 million, an increase of $0.8 million as compared to $39.5 million for the three-month period ended September 30, 2021. Revenue for the nine-month period ended September 30, 2022 was $116.6 million, an increase of $4.6 million as compared to $112.0 million for the nine-month period ended September 30, 2021.
The following tables present product revenue by product family:
| Three Months Ended September 30, |
||||||||||||||||
| 2022 |
2021 |
$ Inc/(Dec) |
% Inc/(Dec) |
|||||||||||||
| OA Pain Management |
$ | 25,665 | $ | 26,153 | $ | (488 | ) | (2 | %) |
|||||||
| Joint Preservation and Restoration |
11,821 | 11,193 | 628 | 6 | % |
|||||||||||
| Non-Orthopedic |
2,778 | 2,190 | 588 | 27 | % | |||||||||||
| $ | 40,264 | $ | 39,536 | |||||||||||||