Good day, ladies and gentlemen and welcome to the Anika Therapeutics’ Q1 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time [Operator Instructions]. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Sylvia Cheung; CFO of Anika Therapeutics. Ma'am, please go ahead.

Thank you, Candice. Good morning everyone and thank you for joining us. If you have not received a copy of the Anika news release, which was issued yesterday after the market closed or you would like to be added to our distribution list, please contact Sharon Merrill Associates at 617-542-5300. The news release is also posted in the Investor Relations section of our website at anikatherapeutics.com. In addition, a slide presentation is posted on the Anika website. It illustrates many of the key points we’ll be covering during today’s call. The slides can be found in the Investor Relations section, under Events, Webcasts and Presentations tab. We invite you to take a moment to open the file and follow the presentation along with us. Please turn to Slide 2. Before we begin, please remember that, the statements made in this call, which are not statements of historical fact, are forward-looking statement as defined in the Securities and Exchange Act of 1934. These statements are based on the current beliefs and expectations of management and are subject to significant risks and uncertainties. The Company’s actual results could differ materially from any anticipated future results, performance or achievements. Please see our SEC filings for more information about factors that could affect our results. Please turn to Slide 3 and I'll begin our financial and franchise review. Anika's total revenue for the first quarter of 2015 was $15.5 million. In the year-ago quarter, we reported $19.7 million, a milestone and contract revenue associated with our U.S. license agreement or Monovisc, resulting in total Q1 2014 revenue of $34 million. When you exclude milestone and contract revenue from the first quarter of 2014, product revenue was up 8% in 2015. Revenue for the first quarter for our largest franchise Orthobiologics increased 3% from the…

Thank you, Sylvia and good morning everyone. On our last call, we discussed the momentum that we saw building at Anika and excited we have about our future. This momentum continues to accelerate as we made excellent clinical, regulatory and commercial progress during the past three months across our product franchises. Please now turn to Slide Number 6, we have a focused strategy to achieve a 15% share of the global viscosupplementation market by the end of 2018. This includes growing sales of Monovisc, expanding our international presence and bringing new products to market. Our growth target for Monovisc in the U.S. is to more than double our share of the single injection market reaching a minimum of 5% share by yearend 2015. With CMS reimbursement codes and the choice of products, the Mitek offering will be of increased attractiveness to private payers and should facilitate entry into new formularies and competitive accounts. Our unique J-Code for Monovisc became effective January 1 of this year and that contributed to the 41% sequential increase in end user sales of Q1. We’re pleased about the domestic Orthovisc and Monovisc growth and it's our target to reach overall viscosupplementation market share leadership in the U.S. 2017 from our combined viscosupplementation product portfolio. Internationally, we continue to work on expanding our distribution network into new markets where we believe our viscosupplementation product portfolio can thrive. Currently some of our distributors are being pressured as a result of currency fluctuations that are limiting their investments. We are working on additional marketing and clinical efforts internally to provide support for our distributors. Let’s take a look now at Slide Number 7. We made excellent progress with Cingal during the past quarter. After submitting our CE Mark application in Europe in the fourth quarter, we filed a…

[Operator Instructions] And our first question comes from the line of Jeremy Hellman of Singular Research. Your line is now open.

Hi good morning, everybody.

Good morning, Jeremy.

Hey certainly I wanted to be excited about here. I just wanted to reconcile something though as it relate to Monovisc and Orthovisc where Monovisc sales were up nice sequentially there, but overall orthobiologics were down sequentially. Is that to imply that Orthovisc sales are coming down?

Orthovisc sale is not coming down. Orthobiologics franchise year-over-year is up 3% sequentially down and as previously discussed because of our distributor modeled business there is lumpiness in terms of quarterly revenue. Part of that is also related to the inventory reset that we discussed earlier. So in short summary, the Orthovisc end user revenue is increasing and the Monovisc share is increasing in the market space as well to close to 3%.

Let me -- I think you understand, but let me make that even simpler. Our total revenue with these products we essentially get paid twice. We get paid when they take the product equivalent to roughly a transfer price and then we get paid when the sell the product. So the end user sales we talk about we're doing extremely well. Orthovisc continues to grow and Monovisc is picking up nicely. It’s the transfer of the product that’s related to their inventory situation that is having an impact on our growth rate and when we finally clear through that in the third quarter, then we're going to see a nice pick up in that area and there has never been a problem in end user sales area.

Okay. Thanks for that clarification. That's helpful and then one follow-up for me, just on single, FDA usually gives a PMA update within 45 days, it looks like they've gone past that deadline and when you talk about the timeline being end of Q2, is that kind of refer that you might to go down the drug pathway with those.

No, I wouldn't reside to it at all. Fundamentally, we're in discussions with the FDA as to what direction they should take. We still -- they've read part of our submission and I would characterize those discussions as very productive. They haven't refused to do anything nor have they accepted to do anything. So they're not really -- that 45-day thing is almost a little bit irrelevant given this particular situation. We firmly believe and we continue to believe based on consults we have ex-FDA and our own perspective that this is ultimately going to be reviewed as a medical device, not as a drug. It's a difficult supplementation product. So we're going to -- we're standing by that position and at this point we have no reason to suspect that we won't prevail.

Okay. Thanks for that clarification and color. Good luck, guys.

Thank you.

Thanks.

[Operator Instructions] And our next question comes from the line of Tim McCandless of Asymmetry Global. Your line is now open.

Good morning, Chuck and Sylvia. I just wanted to come back to the Monovisc end user sales. As you mentioned end user sales were up 41% sequentially, you mentioned the share gains on the Orthovisc. So could you just come back in trying to understand the inventory reductions, those have spanned over three quarters now. I am just trying to true up the positive end user sales with the continual declines on the inventory side.

Right, let me maybe take a minute to explain some of the fundamentals that Chuck already mentioned, but I'll add a little bit more color hopefully it will provide better perspective. The transfer price that we receive from Mitek on product shipment and the royalty that we receive based on their end user sales, on a normal basis, is about 50-50 split roughly. So on an annual basis, in 2014 revenue from Mitek was approximately 70% of total revenue. So you know that the Mitek revenue in total is about $53 million, $54 million and on normal basis, half of it is product, half of it is royalty. The inventory reset that they decided to implement is roughly about a 50% reduction of their targeted on-hand inventory level and basically the impact is for 2015 the overall for the full year, the overall inventory purchase from us to them is roughly flat and from a royalty standpoint, which is based on the end user sales and based on the increase in share, we expect to see a 20% plus royalty revenue increase and that explains the reason why we're not having a better overall product revenue increase. Now the decline that you're referring to comes in with timing. As I mentioned earlier, in Q1, Q2 and Q3 of last year, Mitek was building up inventory versus in 2015 Q1, Q2 and Q3 they are adjusting their inventory down. So from a year-over-year standpoint, the inventory purchase from us is declining and it's offset by the royalty based on the end user sales. So there is the overall inventory adjustment and there is also quarter-by-quarter impact based on the timing of when they build up inventory last year and when they're offloading inventory this year. So hopefully that helps to clarify the situation better for you.

That does and jus to true-up with your guidance, so I think if we look at product sales in Q1 were up about 8%, I think if I heard correctly you said that Q2 and Q3 product sales should be about flattish. So then to get to your greater than 10% product sales for 2015 for the year would imply Q4 growth of greater than 36%. I just want to make sure I am at least thinking about that correctly?

Taking the Q1 actual and assuming roughly similar levels of product revenue for Q2 and Q3, I think Q4 if you do the math correctly will be in the 30% range and that is primarily the results of the timing of when the inventory upload and offload happen between Q1, Q2, Q3 of last year versus Q1, Q2, Q3 and they're going in a complete opposite direction even though the underlying royalty is improving.

Got it. And then just one last question on -- just want to make sure I understand the commentary around Cingal, so following up to Jeremy's question, so we're past the 45 days, it's still a discussion, which you believe will ultimately will be successful on. Is that mean right now that you are filing an FDA request for designation, just to confirm that you will be able to file [CD] [ph] or can you just give us a little bit more color. I am quite sure -- I don't quite understand the delay in the acceptance. Thank you.

We're -- probably the next step is going to have a discussion with the office of combination products and whether or not an RF you need to file we'll see. Please keep in mind though that what I said. We strongly believe this is viscosupplementation product. I want to make -- I want to also talk about the Cingal results and say something and this is important to consider. I talked about the level of clinical benefit and pain relief. The FDA has been known to -- after the approve products set the bar of the last approved product. So if that practice continues, the power of that Cingal trial will set a pretty high bar for any other product that hopes to get approved as a viscosupplementation. I know you can't fully realize that because you don't work in the field, but that is a big deal and that has ramifications for other people that C2 have products to treat osteoarthritis.

Thank you. And I am showing no further questions at this time. And now I turn the conference back over to Dr. Charles Sherwood for any further remarks.

Thank you, Candice. And thanks to all of you for participating on the call. I reiterate that at least we're here very excited about what's going on and we very much look forward to reporting to you in the next conference call. Thanks for your interest in Anika.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Have a great day everyone.