Good afternoon. Thanks for joining us again at the 23rd annual Needham Healthcare Conference. I'm Mike Matson. I lead the MedTech and Diagnostics Equity Research Team here at Needham & Company. I'm pleased to introduce Anika Therapeutics. Presenting from Anika, we have CEO Cheryl Blanchard and CFO Mike Levitz. They're gonna give a presentation on Anika, and there may be some time at the end for questions. If you do have any questions you'd like to ask, you can submit them electronically through the conference website, or feel free to email them to me at mmatson@needhamco.com, and I'll do my best to fit them in. With that, I'll turn it over to Cheryl, and she can get started.
Great. Thanks, Mike, and thanks, everyone, for joining us. As Mike said, I'm Cheryl Blanchard. I'm President and CEO of Anika Therapeutics, and I came into the company with a transition of the company already underway. I would say that, over that time, we've learned a lot. We've made a lot of progress. Really now are a a company that's positioned well with a compelling future. Mark, if you wanna advance, I think, to slide 3. There you go. We've got a a business that, if you look on the left, is it's a very strong business with a very resilient cash flow that really comes from our core osteoarthritis franchise based on in the injectable hyaluronic acid products that we sell: Monovisc, Orthovisc, and Cingal. Cingal, you'll hear me talk about later as a product that we sell in over 35 countries outside the United States.
It's our next generation OA pain product that we're working hard to bring into the United States. But that resilient cash flow is really what we've been using to fund the products that we've been developing and launching that allow us to address larger addressable markets that are growing at a much faster rate, really addressing a number of unmet medical needs. So one of the other things I'll talk about today are the key product launches that we've already done and a little bit of information on our future product launches. But you'll hear me being very focused on the products that we're launching that are based on our hyaluronic acid technology in the regenerative medicine space.
On this graph, you can see Integrity and Hyalofast as the primary examples of that with Cingal in the U.S. coming as the next generation really advanced osteoarthritis pain medicine product. So with that, I'll move on to the next slide and really kinda speak to the fact that at this stage in our journey, we're really very focused now on what we're calling orderly value maximization as we accelerate our pivot to profitability. In fact, you can see here on this slide, and Mike will speak more, likely in the Q&A, around some of the more specific numbers that we're driving for this year. But we're actually gonna be growing our Adjusted EBITDA at least 75% this year, and we're really just getting started.
We're doing that by continuing to stay focused on the more resilient base business where we have a number one U.S. market share position with our two OA pain products, Monovisc and Orthovisc. And with the new products that we've just recently launched, Integrity that I'm gonna talk about, X-Twist Biocomposite that we just launched along with X-Twist. That's a key product in our sports medicine franchise. And then RevoMotion, a new key product that filled a pretty significant gap in our Arthrosurface Joint Solutions franchise. With Cingal and Hyalofast in the U.S. coming along now, excuse me, with line of sight to those in the midterm. Again, I'll be talking more about those in just a minute.
But I wanna highlight here with Integrity, Cingal, Hyalofast, and the areas that we're focused on in our new product development pipeline, we have a real right to win with this proprietary hyaluronic acid technology that we've developed over the years at Anika. Another thing that we talked about recently on our earnings call is that we're very open to transactions that would provide value maximization for our shareholders. We talked about the fact that we had recently engaged Piper Sandler last year, and as we go forward, that our pipeline is gonna be really focused on additional regenerative medicine products that are focused on the hyaluronic acid platform and are more short term in nature. And if we wanna turn to the pipeline slide now, I can dig in a little bit more here.
Integrity, which is our rotator cuff patch system that also includes fixation and arthroscopic instrument delivery system. We launched a limited market release at the end of Q4 last year. This is addressing a $150 million+ market in the United States, one that is growing fast. And we're very excited to have this product out. I have a slide on it, and I'm gonna talk more about it in a minute. X-Twist and RevoMotion, I mentioned earlier, we now have X-Twist fully launched with a PEEK version and a biocomposite version that allows us to go after the significant $600 million+ rotator cuff repair market. And then RevoMotion, our reverse shoulder that was launched in late 2023 that we now kinda have fully launched into this year that goes after the $1 billion+ reverse shoulder market.
And then with Cingal and Hyalofast, Cingal is our next generation OA pain product that we're very excited to continue to progress into the U.S. market. We sell it over 35 countries OUS. And we continue to remain engaged with the FDA to inform us on next steps in our process to bring Cingal to the United States. But that product grows consistent double digits for us outside the United States. And then back on the regenerative topic, Hyalofast, our single stage off the shelf cartilage repair product that we begin filing our modular PMA with a breakthrough device designation now this year that we estimate that we'll be launching by 2026. And then on the very bottom here, I've got new regenerative listed.
We have a number of product development activities that we'll start talking more about as we go forward that are really leveraging the technology that we developed with the Integrity implant and with Hyalofast, where we have some shorter term product launches that we have planned that are based on those technologies that will leverage a 510(k) regulatory pathway in the United States. So if we wanna go to the next slide, I wanna talk a bit about Integrity. We talked about the fact that we've launched this product the last week of November. At our earnings call, we had done over 100 cases. We continue to see strong usage of this product even in the limited market release. And in the limited market release, we're focused on really perfecting the surgical technique and the arthroscopic instruments.
But we're getting great feedback on the way we designed the patch implant itself, the regenerative element itself, because it's thin, it's strong, it's very manipulatable in an arthroscope. And the strength really lends itself to a number of different tendon augmentation applications. Specifically, it has very high suture retention strength even when wet. So very different from the first generation collagen patches that are in the market today. And what that's allowed us to do is really see surgeons starting to use it in the foot and ankle applications, for example, in Achilles and peroneal tendon repairs. And other tendons, including patella tendon in the elbow and other areas that we'll be talking about. We have a broad 510(k) indication for tendon. And so these uses, the surgeons are really very excited because of the fact that it's highly regenerative.
They're having already early but great clinical outcomes. And the fact that it's versatile and has this strength and manipulatability gives it really great potential for not just being a very strong player in the rotator cuff patch market and rotator cuff repair market, but in other tendon repairs where the current technologies really don't work. So this is another opportunity to leverage this platform with those new product development projects I just alluded to, where we'll be focused on additional products with that 510(k) route that really leverages this technology. And then on the next couple of slides, I'll touch briefly on X-Twist. We've talked about X-Twist in the past. This is a product that has really been a significant add to our sports medicine portfolio. We launched the PEEK version, fully launched it last year.
We've got a limited release ongoing, leading to a full market release of the biocomposite version, now able to address that full $600 million U.S. rotator cuff market. A lot of advantages with this product also used in the rotator cuff repair space, often alongside Integrity as we're seeing it. So this is a product that's growing nicely. We look forward to continuing to grow it now that we have the biocomposite version available. And then if you wanna move on to the next slide, I'll speak to the RevoMotion reverse shoulder implant for a moment. Again, this was fully launched in September of last year. And then shortly following on, we launched the AIM Planning Software, preoperative planning software in November of 2023. This is a great product. It aligns with the design philosophies of Arthrosurface in that it's bone preserving.
It has very personalized options. Most importantly, it has a two instrument tray design, which aligns nicely with the recent announcement that CMS is now reimbursing shoulders in the ASC environment. Again, an environment we've been focused on with our sports and regenerative business. It lends itself nicely because of the reduced load on the central processing facility in an ASC relative to a lot of the competitive systems that have many, many more trays that have to be processed through in a given day. We're seeing really great clinical results and great feedback from the surgeons on the implant itself, the surgical technique, but also the ease of use in the ASC facility. Then finally, I'll bookend this on the next slide to to finish up the product discussion, to remind everybody that we have Hyalofast in the U.S. and Cingal in the U.S. coming.
Hyalofast, again, as a reminder, is our single-stage, which means one surgery off-the-shelf cartilage repair product. And this is really a very exciting product. We have been selling in Europe and other countries OUS in about 30 countries for many years. And in fact, we'll have 15-year data on this product coming this year. This is gonna give us a market entrant in the regenerative space in early intervention orthopedics that's a billion-plus market opportunity in the United States. We've completed enrollment on the definitive clinical trial. And with a two-year endpoint, that clinical data will mature in early 2025. The FDA designated this as a breakthrough device. So that will give us prioritized interaction and review. And we will begin filing that PMA this year.
So we're very excited to keep that moving with a launch by 2026. Then with Cingal, our next generation OA pain product. We have had ongoing dialogue with FDA. This is a real game-changing product. We sell in over 35 countries OUS with consistent double-digit growth. It is a non-opioid, non-addictive OA pain product. Something that the United States really needs. Very differentiated. We see what it's done in the market with our OUS sales. And we continue to assess very significant interest with potential partners in select Asian countries and the United States while we continue our engagement with FDA as they work with us to clarify next steps on getting this great product filed in the U.S.
So again, with a great focus on Mark, if you wanna go to the next slide, a great focus on our strong performance coming off of a great 2023 with record revenue in that OA pain management space where we have the resilient cash flow and strong growth led by Monovisc and Cingal outside the United States. Really significant progress with our regenerative portfolio, including Integrity, which is now in the market. Hyalofast, which we sell OUS and has a path through the FDA now, plus additional shorter term new product development projects through a 510(k) route, really leveraging that proprietary HA technology where we have a real right to win. Continued strong clinical feedback with Integrity, X-Twist, RevoMotion.
We've continued to focus on optimizing our performance and accelerating our profitability in 2024 as we increase our Adjusted EBITDA by 75% this year and beyond. So with that, I'll pause and Mike can come back on camera and we're happy to take questions.
Yeah, thanks. So, I guess, you know, I'll just start, you know, with the pivot to profitability that you mentioned. You know, how does that sort of change Anika's focus on your product portfolio?
Yeah, it's a great question, Mike. So one of the things we talked about on our earnings call, and I wanna continue to highlight, is with these two acquisitions that we did with our sports medicine business and our Arthrosurface business, there was a product portfolio that existed, and then we've been very focused on bringing products to the market that really address significant gaps that existed there. As part of this pivot, we're accelerating our pivot to profitability. We did that by cutting costs. We announced recently some cost reductions. That allows us to accelerate the profitability while continuing to focus the investments that we are making on driving those new products because that's really where the growth opportunities lie.
Also, by continuing to focus on that regenerative portion of our business, including Integrity, Hyalofast, and Tactoset along with the new product development pipeline that we'll continue to talk about going forward that really leverages those regenerative medicine platforms that we've already developed. We think we have a real right to win by doing that.
Okay, got it. And then you mentioned the cost reductions again. So, you know, how should we think about the bottom line in 2024 and into 2025?
Hi, Mike. I'll take that question. Mark, if you would turn to slide four. You can see there, Anika is a company that for its size has generated a significant amount of EBITDA historically. We have a significant increase in our EBITDA guidance that we just announced on our last call from what we've had in prior years. And so our guide that we announced on the last call that we're reiterating here is EBITDA of $25 million-$ 30 million this year. We operate as one segment, one company, and we don't break out separate financials for the different pieces of the business. But I will provide a little additional color because we did a strategic review of the business and did a pro forma assessment of the various parts of the business. As Cheryl said, our legacy OA business is highly cash generative.
Our EBITDA in that business is north of $30 million. And so our guide of $25 million-$30 million, the EBITDA is driven by that legacy OA business based upon our hyaluronic acid platform. But with the cost reductions that we just announced, so we announced $10 million of cost reductions on an annualized basis. This year, we will not realize all of that because those cost reductions occurred at the end of the first quarter. So we'll have a partial year of those reductions.
But with those reductions on a going forward basis within the joint preservation side of our business, the Arthrosurface and the sports medicine pieces of that, again, we don't track these separately or report them separately, but if you take away the shared resources, the direct costs of those parts of the business will no longer be a drain on EBITDA following these cost reductions on a going forward basis. And that gives us a lot of flexibility here because as Cheryl said, we have now finished development of a number of key products. They're now on the market, RevoMotion, X-Twist, but now here with Integrity. And so the success we've had in addressing MDR costs and addressing those requirements, we can deliver this increase to the bottom line. And we're just getting started because that is only a partial year impact.
We've provided guidance that in 2025, we're targeting 20% EBITDA margin, which would continue to be a nice acceleration. There are a number of opportunities to drive the top and bottom line within Anika, as Cheryl mentioned, and I think that's gonna be an important part of our story here going forward.
Okay, got it. And then the OA pain products, Monovisc and Orthovisc, they had a really good year in 2023, but the outlook for 2024 is a bit lower. Can you talk about what's going on here with J&J and internationally?
Sure. Thank you, Mike. One of the things that we find in our business is there's lumpiness on a quarterly basis because of Johnson & Johnson making up such a significant portion of our business, then their ordering patterns can impact us on a quarterly basis, but they generally don't on an annual basis. However, this year, they actually do. And so just as a reminder, the majority of our revenues in the United States come from our sales to Johnson & Johnson, our what we refer to as transfer sales. The lesser portion of our sales are royalty sales where, when they sell it to their end customer, we get a royalty on that. The royalty sales are more indicative of the underlying business growth. The transfer sales can be based upon the buying patterns within Johnson & Johnson, how they manage their inventories in different locations.
So on the last call, we provided additional clarity because of this volatility on an annual basis where last year, we had double-digit growth in OA pain management, but that was based upon mid single-digit growth in royalties. The double-digit was driven by timing, favorable timing of the transfer units. In 2024, our guidance of 0%-2% OA pain management growth still has mid single-digit growth in the end user sales and the royalty revenues. But the timing of inventory purchases is now working against us, and that's why it's lower. So the underlying business remains strong, robust, cash generative, driven by the single injection Monovisc in the United States and by Cingal outside the United States and Monovisc. But it does look a lot lower this year, and that's really driven by timing. Now, the same is true.
There's some favorable timing internationally, as we called out on our last call as well.
Okay, got it. And it sounds like you've got some exciting new products. They're just entering the market. You know, I wanted to ask one on the Integrity product. You mentioned you've done over 100 cases during the limited market release. Can you talk about what you've been hearing from the surgeons who've tried it and maybe give us an update until you on the timing of when you expect the full market release?
Yeah. We're very excited about Integrity. We did previously announce that we'd done well, we've done well over 100 cases now, which frankly, I think speaks to the excitement around the product. Oftentimes, surgeons will be a bit more cautious in a limited release until they've had some experience and they learn some things. But what we're seeing is first and foremost, the HA patch material itself is highly regenerative. The surgeons are very happy with what it's doing for their patients. We know from having done a head-to-head animal study with the leading product that's a first-generation collagen product that our material has about three times the regenerative capacity to that. That is something that we'll continue to study as we get into the full market release and get some clinical studies going.
But the initial feedback from the surgeons on that topic is as we expected and is very strong. A couple of other points, though, I mentioned earlier that suture retention strength has gotten a lot of surgeons excited about using the patch-only material in a number of other indications that are related to tendon repair where they haven't had access to anything other than a suture repair where a lot of patients need a bit of reinforcement and a bit of biological regeneration to accelerate to get their healing going. And so foot and ankle applications, we're seeing it in the knee and the elbow. We've even seen a case in the hip. So we're very excited about how the surgeons are viewing it.
And then I think the other thing I would highlight is just the fact that we, in the rotator cuff application, we're really focused on making that procedure efficient and easy with a lateral row first surgical technique. It's making it much easier for the surgeons to access, to get it in there. You know, a lot of these folks are in the OR doing 5, 10 of these cases a day and giving them something that's repeatable and easy to use is another important thing that we focused on and that we're getting really good feedback around also.
So, a lot of excitement here, and the company spent a lot of time really developing that platform technology that is used in the patch that we see a lot of, and we're getting a lot of feedback from surgeons on other applications that it will work well for, which will feed directly into our product pipeline.
Okay, got it. And can you tell me who Integrity competes with? Is it like Smith & Nephew's Regeneten and CONMED's BioBrace and I think Zimmer Biomet acquired one. I can't remember the name of it right now, but and then maybe how your product compares. I guess it's a different material, but are there other differences in versus those other products?
Yeah, those three products you just mentioned are the biggest part of the market with Regeneten representing the lion's share by far the biggest part of the overall $150 million+ market. And then there's a bit also that gets used of cadaveric skin allograft product and just surgical technique without any kind of a biological patch. But I would say that the surgeons that are looking at this are probably already using a patch of some sort and are looking for an improvement to that. That said, we've had surgeons using it that haven't really been a patch user because they didn't think that the outcome and the time it took in surgery really warranted the added expense. So that you did really name the competitors. Those are all collagen. They're all sort of first generation collagen materials.
So they've got strength limitations, especially when wet. I just mentioned the head-to-head animal study that we did demonstrating the enhanced regenerative capacity. And then again, just being focused on coming up with something that had very different suture retention strength that gave them the flexibility to do those other procedures that they just can't use the collagen patches for today. So we look forward to getting the full set out in a full market release sort of in the middle of this year, and we're on track to do that.
Okay, got it. Had some questions on a few of the other newer products you mentioned. So I wanted to start with X-Twist. So can you talk about how the biocomposite version solves versus the PEEK version that you launched last year and, you know, who's your main competitor in this space and how are you differentiating yourself?
Yeah, it's a great question. There's no doubt that there are big competitors that have products that compete in this space, Arthrex being the largest. But we've put some what I would call incremental innovation technology into this. It's a much easier implant to insert. You turn it about half the number of times, which if you're a surgeon in the OR, cranking on these things 100 times a day, that makes a big difference. The way we designed it, it's got nice open fenestration windows so that cells can infiltrate and accelerated healing can happen. With the biocomposite version, it's a very standard biocomposite material that resorbs over time. I think that's just a preference that a lot of surgeons have now that we have that available that really allows us to go after the full market.
We've been in a limited release with the Biocomposite version. It's going very well. We're getting very good feedback on it. And that does open up some of the market that we previously couldn't address without it. So we remain excited about that product, and it's growing nicely.
Okay, got it. And then RevoMotion also sounds like an exciting product. I know there's a lot of reverse shoulders out there. So can you maybe just talk about, you know, what the advantages of RevoMotion is and, you know, how it compares to the other shoulders that are out there? And is there any other kind of price difference or financial aspects to the decision making there?
Yeah, it's a great question. The reverse shoulder market of all the markets that we've launched new products into is by far the most crowded. What I will say is that this implant was really designed with that Arthrosurface design philosophy of being bone preserving, motion preserving, ease of surgical technique. But the big thing that we focused on was getting realizing that the hopefully the ASC decision was coming soon, ASC coverage decision was coming soon. And frankly, I think it came sooner than anybody anticipated, but we already had the product in the market. Being able to have a two instrument tray version with a simple surgical technique that really works well for the patients that are gonna be operated on in the ASC.
You know, if you have big revision cases or more complex cases, I think those will still be done in the hospital. And that's not what we designed this system to address anyway. So we have a lot of surgeons using it and starting to trial it because it's much more user friendly with that 2 instrument tray set in the OR. And I would say that really plays across all of our products. We really developed all of them with the ASC in mind, recognizing that's where a lot of procedures were going. It got accelerated during COVID, that transition into the ASC. And, you know, we see the Integrity system and most of the procedures being done with Integrity largely being done in the ASC, not exclusively. You know, I think it sometimes depends on where the surgeon is doing procedures.
Certainly, X-Twist largely gets used in the ASC. So we're excited to have a reverse shoulder system that surgeons, by the way, also sometimes use X-Twist and Integrity to repair the subscap. That was another application that I didn't mention earlier post a reverse shoulder. So there's nice synergy going on across those systems and really being able to leverage RevoMotion in the ASC is what we're focused on right now.
Okay. And then just one on Cingal. So, you know, it seems like a great product for osteoarthritis pain, but it's taken a long time for the FDA to get back to you. So can you just give us your view on what's happening there and what kind of additional non-clinical work that the FDA has asked for?
Absolutely. Yeah, so we had a type C meeting with FDA last year, and we have been in ongoing dialogue with them. Part of the discussion that we had with them is the fact that they've changed how they regulate hyaluronic acid. While we sell Monovisc today as a device in the United States and the HA in Cingal is Monovisc, they chose to regulate the Monovisc in Cingal as a drug. So it's a drug product. And so the requirements for HA as a drug are slightly different from a preclinical perspective than a device. So that's one set of tests that we want to get clarified with them. And I don't want to start those tests until I have clarity from them that they are the tests that they're gonna look for.
The other piece of that is around the triamcinolone hexacetonide and the data for a 505(b)(2) submission since that's already an approved product as a viscosupplement in the United States. So getting the clarity on those two things before we complete that testing, I think, is an important thing so that we then have clear line of sight to filing an NDA. Some of that clarity requires them to go outside of the division to get. And unfortunately, that is rarely a fast process, and that's really what we're waiting for from them. So again, active dialogue ongoing, and we look forward to their feedback on those two topics.
Okay. Next, thanks. And then one on Hyalofast. So you mentioned that you'd be entering the market in 2026. How does this product compare to MACI and CartiHeal? And then, you know, those products have been on the market a lot longer. And how do you think Hyalofast will compete with those?
Yeah, I think very well. So I'll take CartiHeal first because I think that's shorter. I am not exactly sure, actually, if it's fully launched in the United States. Smith & Nephew acquired it more recently. The topic with that product is it is an osteochondral plug. So it requires the surgeon to take healthy bone out to implant it. And when you're working on a regenerative product, you'd like to preserve tissue, not take healthy tissue. So I think it's to be determined. You know, osteochondral defects are about 10% of the cartilage market. There's a place for it, but I don't it doesn't really go after the bigger part of the market. With MACI, again, a great product, it after sort of 25-30 years in the market between Carticel and MACI, it's doing nicely, and Vericel certainly done well with it.
But that product requires two separate surgeries, one surgery to take an autologous biopsy, so a biopsy from the patient in a non-load bearing part of the knee, send it back to the company, expand the cells, seed them on the collagen matrix, send it back. The patient then has to do a second surgery six to eight weeks after the first one. And then have it implanted and then move on. So it is also a very expensive product. It's about a $50,000-$60,000 product just for the product itself. So product cost, insurance reimbursement topics, cost of two surgeries to the healthcare system, two separate rehabs for the patient. Also probably limited because a lot of surgeons don't want to put their patient through that for a defect that they see when they go in for an ACL repair or a meniscal repair.
With Hyalofast available in the OR, they can pull it off the shelf, do the cartilage repair while they're in the index surgery to begin with. So we think there's a lot of upside here for Hyalofast when it comes into the United States. This really is where the cartilage repair market is. While we sell at OUS, the big market opportunity is really here in the United States. We really look forward with a fairly clear path through the FDA to get that launched by 2026.
Okay, got it. And then just one final one, more financial in nature. So can you talk about Anika's capital allocation strategy and, you know, what's your view of buybacks and are you buying back stock right now?
Yeah, Anika has maintained a balanced capital allocation strategy, and we expect that to continue. So the last few years, we have been investing in the business, accepting a lower level of EBITDA for the opportunity in front of us, the opportunities that Cheryl just mentioned, the Integrity product, the Hyalofast product, and the like. Now that we have finished a lot of the development of those products and are accelerating EBITDA, we're now moving back to positive free cash flow, which we're very excited about, and we're just getting started. I mentioned on the previous earnings call that we will have a bit of a higher CapEx this year because we are making investments in the manufacturing for Monovisc and Cingal. Those products are growing very nicely.
And so we have a bit of timing of CapEx that would have happened last year that is now moving in 2024. So you'll see that as a use of cash this year. We also have an authorized stock repurchase program. The board authorized $20 million. Last year, we bought back $5 million. So there's $15 million remaining. And with us being in a positive free cash flow position, we remain committed to that stock repurchase program. So Anika has a balanced approach and expect that to continue.
Okay, great. I think we're almost out of time and questions as well. Also, I think we're gonna wrap up there, but thanks for coming to our conference. Hope you have some good meetings today.
Great. We sure appreciate the opportunity, and thanks for all of you who joined.
Thank you.
Bye-bye.