Good morning, ladies and gentlemen, and welcome to Anika's Fourth Quarter and Year End Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] Also note that this call is being recorded on Wednesday, March 12, 2025. I will now turn the call over to Matt Hall, Director, Corporate Development and Investor Relations. Please go ahead, sir.

Thank you, Sylvie. Good evening, and thank you for joining us for Anika's fourth quarter and year end 2024 conference call and webcast. I'm Matt Hall, Anika's Director of Corporate Development and Investor Relations. Our earnings press release was issued earlier this afternoon and is available on our Investor Relations website located at www.anika.com as are the supplementary PowerPoint slides that will be used for the discussion today. With me on the call today are Dr. Cheryl Blanchard, President and Chief Executive Officer; and Steve Griffin, Executive Vice President, Chief Financial Officer and Treasurer, who will present our fourth quarter and year-end 2024 financial results and business highlights. Please take a moment and open the slide presentation and refer to slide number two. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance. In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted gross margin, adjusted EBITDA, adjusted net income for continuing operations and adjusted earnings per share from continuing operations, which are used in addition to the results presented in accordance with GAAP financial measures. We believe that non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our fourth quarter and full year 2024 press release. And now I'd like to turn the call over to our President and CEO, Dr. Cheryl Blanchard. Cheryl?

Thanks, Matt. Good afternoon, everyone, and thank you for joining us. Please turn to slide 3. I'm pleased to report since our last call that we've made meaningful progress advancing our strategic initiatives and refocusing our strategy. As we've communicated, a key objective has been to focus our human and financial capital on our most promising opportunities to create shareholder value. As a result, we divested Arthrosurface in Q4 of 2024, and last week announced that we have completed the sale of Parcus Medical. These divestitures align with our focus to capitalize on our core HA products that provide us with the best value building opportunities, including the integrity implant system and the US approvals of Hyalofast and Cingal. I'll start today by sharing our financial results for the quarter and full year. Overall revenue in the fourth quarter was $30.6 million, up 1% compared to the same period in 2023. For the year, revenue was $119.9 million, a slight decrease of 1% compared to 2023. Commercial channel revenue was up 25% in the quarter and 17% for the full year, while OEM channel revenue decreased by 8% for the quarter and the full year, consistent with our expectations. During the fourth quarter, we delivered 22% international OA pain management growth and 16% growth for the full year. This success was driven by continued geographic expansion and market share gains, highlighting our robust international presence. Our efforts to penetrate new markets and strengthen our distribution networks have paid off, and we are committed to further expanding our global footprint. In 2024, we made significant progress across the refocused company. We executed on key objectives that drove strong growth in our commercial channel, fueled by continued gains in our international OA pain management business and further acceleration of integrity. We sharpened…

Thank you, Cheryl. Before I review the quarter, I'll start by providing some further details regarding the recently announced sale of the Parcus business. In line with our announcement in October of last year, we completed the simultaneous signing and closing of the Parcus Sports Medicine business on Friday, March 7 to Medacta, a well-respected and growing global orthopedic company. This deal positions the Parcus business to continue to serve patients, while enabling Anika to prioritize our investments on our highest growth, higher-margin hyaluronic acid technologies. The transaction closed with cash received at closing subject to customary post-closing networking capital conditions. We expect to support the Parcus and Medacta teams through a transition services agreement in 2025 to ensure continuity of business services. We have now successfully closed on the sales of Arthrosurface and Parcus. Both businesses will be included in the discontinued operations income statement. And the associated assets and liabilities have been re-classed to held-for-sale in their respective balance sheet periods. This strategic move, including an all-cash transaction at closing for the second sale, allows us to streamline our operations and focus on our core strengths, while providing these businesses with new opportunities under their new leadership. Going forward, our continuing operations will reflect the core products serve Anika's hyaluronic acid future, and key reconciliations to quarter results are provided in the appendix materials of today's presentation. I'll now provide updates on the fourth quarter of 2024. Please refer to Slide 4 of the presentation. In the fourth quarter, Anika generated $30.6 million in total revenue, up 1% versus the same period in 2023. Revenue in the commercial channel, which includes our highly differentiated products sold globally through commercial leaders, direct sales representatives and independent distributors, was up 25% year-over-year to $10.9 million, slightly ahead of our previously…

Thanks, Steve. So as you've heard today, we're making excellent progress; driving our refocused strategy and have line of sight to significant shareholder value creation in the not-so-distant future as we continue to execute. What do we need to do for that to happen? We need to continue to grow international OA pain products and integrity domestically, and we need to get Hyalofast approved and move Cingal to an NDA filing. I'm more confident than ever that we can accomplish these critical objectives. As we achieve these goals, the impact and importance of the long-standing J&J and Anika contracts will be substantially lessened as Anika will be a drastically different company. Moreover, our financial structure is on solid footing, and we have the means to deliver on these goals without the need to raise capital. We look forward to sharing our progress in the coming quarters. Finally, I'd like to sincerely thank all the team members who left the company as part of the Arthrosurface and Parcus divestitures. I wish them all the best as they continue to serve patients. I would also like to thank those at Anika, who contributed to our financial performance this quarter and furthered our programs. Finally, I would also like to thank the distributors and surgeons who have remained committed to Anika, and we look forward to continuing to work together. And with that, we'll open up the line for questions.

Thank you. [Operator Instructions] First, we will hear from Jim Sidoti at Sidoti & Co. Please go ahead, Jim.

Hi, good afternoon. Thanks for taking the questions. I'm sorry if I missed this, but what were the one-time legacy program expenses you referred to?

Some program expenses related to legacy product lines that were no longer going to be carrying, so kind of onetime in nature, Jim, in relation to the quarter, not something we expect to continue going forward.

And what was the magnitude of that?

It's a couple of million dollars, but it's not material. So I'd say between $1 million and $2 million.

And then G&A, down quite a bit from prior quarters because of divestitures that SG&A of around $11 million, $12 million. Is that a good proxy for 2025 in the one times in that?

I think that's a good approximation going forward. The numbers that you see here on a continuing operations basis, so they reflect sort of the go forward of what Anika is with our focus around hyaluronic acid. Obviously, Jim, we're trying to remain very focused around being lean. But in the same respect, this is the right representation of where the business is today.

All right. And it sounds like there were some charges in R&D for Hyalofast, non-recurring charges. Can you tell me about how big those were?

Yes. The Hyalofast filing fee was about $600,000. That was for the first module that was submitted back in October of last year. That's a one-time filing fee.

All right. So if you take that out $6 million in R&D, is that a good proxy for that one?

Yes. I think that's a fair way to look at it. I mean R&D is trending towards the higher end when we enter into 2025. And that's primarily due to the fact that we have the continued work on the completion of Hyalofast from a submission standpoint in the US, as well as the post-market clinical trial for Integrity. And the work associated with toxicity for Cingal. So R&D is ticking a little higher when we had during to 2025 versus 2024, but if you wanted to back that number out of your fourth quarter number on R&D, you could.

Okay. And then lastly, on Cingal, do you expect any major R&D expense in 2025 for Cingal?

We have included -- I think I included this in my remarks just a couple of minutes ago, but we've already built in the costs associated with the toxicity study. So as you know, there's sort of two filing items associated with Cingal. One of them was the toxicity for Monovisc. That work was kicked off and that's assumed. The other one is around bioequivalence for the TH. We'll give an update, I think, when we get to the first quarter earnings call, that's what I referenced in terms of if there are any expenses from an R&D perspective, exactly how much those will be.

Okay. But it sounds like the bulk of that work -- the bulk of the expenses are done at this point. It's just, I guess, responding to questions from the FDA

Certainly, yes. I mean in comparison to what this total program has cost over time, definitely, that's the right way to conclude.

Okay. All right. Thank you.

Thank you. Next question will be from Mike Petusky of Barrington Research. Please go ahead, Mike.

Hi. So Cheryl, I guess in terms of the Integrity progress, do you have anything you can share in terms of sort of uptake from surgeons, meaning like is a handful of guys sort of doing the vast majority of these? Or are you starting to sort of build a base of surgeons and any -- obviously, any quantification of any progress there I would be interested. Thanks.

Yes. Great question, Mike. Thanks. What I would tell you is that our uptake of Integrity is being driven by a broad set of surgeons using it. We obviously have a core group of surgeons who were the kind of initial release surgeons who have continued to adopt Integrity in their practices. But we have built out a very strong group of surgeons, brought a lot of new users, new relationships into Anika. I'll tell you, I met the American Academy of Orthopedic Surgeons meeting this week. We are as a company and we had a presentation at the Academy on Integrity today that was standing room only and have been very busy at the booth with a lot of interest. This product is really a technology that is addressing a lot of unmet needs that are getting surgeons excited. So, it's much broader than like a handful of key surgeons that are using it at this point

All right. Great. And then just turning to Cingal, and forgive me if I missed this in the prepared remarks. But in terms of the go forward, do you have any timetable as far as when the current nonclinical testing when that might be completed?

Yes. We haven't given an updated timetable because we just have this Type C meeting with FDA to get questions answered and make progress on finalizing the bioequivalent study design. Once I get formal feedback from FDA and I have information that I can then further communicate that will give me kind of the last bit that I need around the 2 filing issues that we know we have that we're addressing with the toxicology studies, bioequivalent studies. And that's going to put me in a position to give a timing update as soon as we have that information back from FDA.

And then, I guess, in terms of the longer term -- the longer-term guidance for revenue. The commercial channel you have sort of picking up from sort of 17% the last few years on average to 20% to 30% in the out years. And I'm just curious, is that an acceleration of Integrity? Like what sort of goes into that pick up?

Yes, it's a great question. This year, I'd say the largest piece of the growth is going to come from Integrity. And then, we'll also have some continued growth from the international OA pain. I mean international OA pain for us has been a real bright spot. That's the lion's share of the growth of that 17% CAGR in the last couple of years. We'll see it moderate to some extent this year. But when we get to '26, what we'd expect to see is sort of that, again, slower growth on international OA pain, continued growth on Integrity and then the introduction of Hyalofast in the fourth quarter. And then by 27%, that 20% to 30% range is really going to be mostly driven by the introduction of Hyalofast. That will be the first full year after the FDA approval.

Okay. So that actually includes, okay, we're going to model or at least forecast revenue from Hyalofast in late '26?

Yes, that's correct. I mean it's not a material amount of revenue, but it does contribute. And then we'd expect to see it kind of kick in '27. So I think in total, what you're looking at is Integrity, on the market today, really doing an excellent job. Our teams and the surgeons have really, I think, found a great product here. We expect to continue to take market share as we go through '25 and then into '26 and '27. And then in '27, you really start to see more contribution from Hyalofast.

Okay. All right. All right. Sounds good. Thank you, guys.

Thanks Mike.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session as well as today's conference call. We would like to thank you for taking the time to attend, and you may now disconnect your lines.