Good morning and welcome to day two of the Sidoti & Company Virtual Conference. The next company to present is Anika Therapeutics. With us, we have the CFO, Steve Griffin. As always, this will be a 30-minute presentation. There should be some time at the end for Q&A, so if you have a question, you can type it into the Q&A box at the bottom of your screen. And with that out of the way, Steve, it's all yours.
Great. Good morning. Good morning to everybody. Thank you, Jim, for the introduction, and thank you for the time to present here today. We're excited to talk about our story. So I'm going to start with just an introduction to Anika Therapeutics. Anika is a unique player in this market of hyaluronic acid. The company has been around since 1992. It's headquartered outside of Boston, Massachusetts. And really, the focus for the company has been around visco injections. We have two key leading brands, Monovisc and Orthovisc, our single injection and multi-injection hyaluronic acid injection. We have a market-leading position together with our distribution partner, Johnson & Johnson, here in the United States of America.
And then outside the U.S., we manage our own sales and distribution channel where we have both Monovisc and Orthovisc, as well as a next-generation OA pain product for Cingal that really is focused around combining the treatment options for hyaluronic acid together with steroids for the benefit of osteoarthritis pain patients. Our international business has been a key strength for us over the last few years. So far this year, it's up 14% year to date. It's demonstrated multiple years in a row of mid-teens CAGR, which is great, and we're proud of that.
In addition to the core of the company, which is our hyaluronic acid visco injections, we also have multiple regenerative solutions products that are based on hyaluronic acid but in a biopolymer form, the most near-term of which is called Integrity, which is a rotator cuff or tendon augmentation patch that is used as part of the healing process across all tendons. It's available in the U.S. We went into full market release in July of this year. So far this year, we've completed over 500 cases, and in the third quarter, successfully grew that business sequentially 40%, and we expect that to continue here into the fourth quarter. Integrity represents an important opportunity for our business as we diversify into more of our own direct commercial channel, as well as into our regenerative solutions pipeline of products.
The company, over the last couple of years, has been really kind of founded around our OEM channel, which was our Johnson & Johnson sales product in the U.S. On the right-hand side of the screen, you can see that is represented a very core, stable foundation for the company. And then this year into the future, a little bit less in terms of its growth projections, but it still represents the number one market-leading position for Monovisc and Orthovisc in the U.S. But throughout that time, we've also gone through a fair amount of diversification in the creation of our own commercial channel, which really represents an exciting opportunity for revenue growth for the company, and one that I'm excited to share a bit more about in the future slides here.
We separate our business in this way between OEM and commercial, primarily because our OEM agreements are governed with long-term contracts that will continue to be a little bit more like a CDMO play, whereas the commercial channel represents the products that we manufacture, own the intellectual property for, and then also sell and distribute around the world. Just recently, in the last few months, we've announced a key strategic update that I think is really important to spend a few moments on. And a lot of it comes back to really where we want to take the company in the future. So Anika was based in 1992 on the manufacturing of hyaluronic acid, and it has represented the core of the company for a very long period of time.
What we announced earlier this last two months or so is that we're going to refocus our capital allocation around our core hyaluronic acid capability, which is our visco injection products and our regenerative solutions products. This allows us to deliver the highest return on invested capital for our shareholders, and we believe represents a true differentiated strategy as we move forward. Part and parcel with that is the divestiture of two non-core assets. Back in 2020, there were two acquisitions, one for a company called Arthrosurface, which was closed on as part of a divestiture back in October, and another one for the acquisition of Parcus Medical, which we've announced our intention to sell. These businesses are not truly the core. They don't rely on hyaluronic acid. One is more implants, and the second one is sports.
What this allows us to do is focus our resources, both financial and human capital, around the higher growth areas of the business, which I'll talk about on our next slide. In terms of our near-term pipeline, we have some really differentiated products. I just referenced on the last slide a bit about Integrity, which is a tendon augmentation patch, which is a really interesting market and one that is in a very growth-oriented mode. We have a new opportunity in the 2025 near-term horizon to continue to launch new products leveraging that Integrity platform. Then also in our product pipeline is a product called Hyalofast and a product called Cingal, which I'll talk a bit more about, but those represent real growth drivers for us as we think about 2026, 2027, and 2028.
What is key for us from a business perspective is really starting to focus our attention around our commercial channel. With our launch and full market release of Integrity this year, we've been able to create a commercial team structure, sales organization, distribution channels in the U.S. and internationally that allow us to sell our products in a differentiated manner, all while still continuing to deliver for our OEM partners. Our OEM partners, say J&J in the U.S., they still represent very profitable businesses for us despite some of the near-term disruptions in the marketplace, and they are very cash flow generative, which allow us to make the important investments to deliver this commercial channel growth. Next, I'll take a moment and just talk about sort of the value drivers. What is the foundation of Anika? It is hyaluronic acid or HA.
And then what is key to our future as a company is also a product that we refer to as HYAFF. HYAFF is a technology that was acquired back in 2009 by the company. And what it represents is hyaluronic acid in a biopolymer form, which allows the product to be used in many ways like a scaffold, either as a patch or as a regenerative solution. So what we're able to do with our hyaluronic acid focus is take the core of the company, the products like Orthovisc and Monovisc, the multi-injection, single injection viscosupplements , plus Cingal, which is a next-generation osteoarthritis pain product, and really take that technology into the HYAFF products, which are Integrity and Hyalofast, as well as our additional pipeline products.
This is going to be sort of the future of the company from an intellectual property perspective, and it allows us to take full advantage of the investments that have been made up to this point. Our international OA pain business is where we manage our own commercial distributors outside the U.S. in over 40 countries selling all three of the products that you see in the dark blue, as well as Hyalofast. Our international OA pain products, which are Orthovisc, Monovisc, and Cingal, have grown 14% year to date, have demonstrated 2+ years of 18+ % growth. And this really is a key demonstration of the clinical differentiation of these products. And probably more so than anything, I think what demonstrates that is in all three of these products, they've all grown this year year to date.
And I think that's important because Orthovisc is a product that's been around since the early 2000s, Monovisc since the early 2010s, and Cingal is the more next-generation pain product. But as we look for the next opportunities domestically here in the U.S., which is to bring Cingal to the U.S., that represents a growth driver for the company. Albeit longer term out, it is still a growth driver because it doesn't necessarily cannibalize existing sales of HA products. The next key value driver for the company that I reference is Cingal. So Cingal is an HA-based product, a visco injection product. And it has been something that the company has been going through significant discussions with the FDA around the regulatory filing pathway.
In the third quarter, we're actually able to address some of the key hurdles that have been put in place, including sort of the regulatory pathway filing purposes for triamcinolone hexacetonide, which is the steroid that's used in Cingal. It's an important one that we had to address because we have two items that we have to work through with the FDA before we can file for U.S. approval. This product is sold in over 40 countries outside the U.S. with very strong clinical data. We have two items that we'll be working through as part of our pre-filing work that is required for the U.S. FDA. First is around toxicity studies. Those studies will commence in the first quarter of 2025. The second one is around bioequivalence studies associated with the triamcinolone hexacetonide.
Once we get through those two filing items, we'll be able to be in a position where we're able to file with the FDA and hopefully be in a point where we can bring this product to market in the U.S. More near-term, though, what represents a key value driver for our company is Integrity and Hyalofast. Integrity is a product that we just recently launched full market release, as I mentioned, in July. It is an augmentation for tendons, primarily in the use of rotator cuff surgery, and it is represented a significant opportunity of growth for us, albeit off of a small base, but one where we're able to differentiate ourselves versus competitors, so I referenced sort of the great success up to this point, 500+ surgeries as of the end of the third quarter, 40+% growth sequentially.
We expect to see that 40% growth continue into the fourth quarter. But what's also been important for us is the number of surgeons that we've been able to bring into the Anika family as a result of this new product. So on average, about 20% of the surgeons that have come to us are new to Anika, meaning they've never purchased anything from Anika in the past. And I think that is the real interesting story here is the HYAFF technology for regenerative solutions that is available through Integrity today is really opening the aperture from a commercial sales perspective that allows us to see us taking advantage of this $220+ million market in the U.S. Second on the HYAFF technology is around Hyalofast. And Hyalofast is a product that is incredibly important from a patient perspective. It serves as a cartilage regeneration product.
What's unique about Hyalofast is it's actually been available outside the U.S. for a significant amount of time. We sell it in 35 countries. We have 15-year clinical data that demonstrates the successful long-term outcome across all lesion types, primarily in the knee, and it is one that represents a growth driver for us in 2026 and beyond. What was important about our recent announcements for this product was that we actually filed the first module PMA for this in 2024, and we expect to complete the second and third modules in 2025 such that we can launch in the U.S. by 2026. I'm going to take a moment and talk about Hyalofast and really what differentiates it.
Hyalofast is a 100% hyaluronic acid in a biopolymer form that is a single stage, which means one surgery off- the- shelf, meaning it's available in a package for surgeons to use, which is reabsorbable and regenerative in terms of being able to develop new cartilage for a lesion. More often than not, cartilage lesions are identified during a procedure for an ACL or an MCL or meniscus. And the fact that this is a one-step, versatile, proven technology that we've used outside the U.S. in over 35 countries is something that we believe sets it apart in a market that is still in very growth mode here in the U.S. We estimate this market to be over $1 billion. We have competitors in the space that have been able to demonstrate real differentiation for why this is a great product.
We believe that we are differentiated against those competitors in the fact that ours is a single stage rather than two stages and available for surgeons to use when they're doing repairs of other product in the knee. From a company highlight on the financial side, we expect the 2024 guidance to be between $117 million and $121 million. That's flat to modestly down, primarily driven by our OEM channel. Our OEM channel is expected to be down this year, driven by some market competitive pressures. Our commercial channel, which really is where we launched our OA pain products outside the U.S., including Cingal, as well as our Integrity products, is going to be up between 14% and 19% this year. That is the real growth driver for the company in the long- term, while the OEM channel represents a significant profitability and free cash flow generator.
And then in the out years, what you'll see is we expect to see significant growth for our commercial channel. So we continue to expect to see strong double-digit growth with that accelerating in 2026 and in 2027 as we launch Hyalofast in the back end of 2026. Our OEM channel will be down next year, primarily related to some of the elements of the market competitive dynamics this year, but then flat to modestly lower. So we're very excited and very passionate about what these regenerative products will bring and with the differentiation that we've been able to deliver for commercial channel, all while continuing to invest for our OEM partners to maintain our market-leading position here in the U.S. with Monovisc and Orthovisc. Before I open it up, Jim, and we take some questions, I thought I would just highlight our summary.
Really, we have completed divestiture, which obviously is a turning point for our company that was announced in October, and we'll be working on the sale of Parcus Medical, and we expect to share more updates when the time is right, but that is an important step for the company as we refocus our priorities. We are incredibly focused on continuing to launch Integrity and demonstrating its effectiveness. The Integrity market will serve really to differentiate why hyaluronic acid is a fantastic regenerative solution, especially compared to collagen, which is what the primary competitors are using in their products. We think it delivers stronger regeneration of the actual tendon itself with strength and healing, and then we will continue to grow our OA pain business internationally, so this is one where we've demonstrated a strong capability with our commercial sales channel.
And as we work our way through our PMA submission with Hyalofast, we'll continue to support our U.S. OEM partners to make sure that Orthovisc and Monovisc maintain a market-leading position. So with that, Jim, that's the entirety of the presentation. I'll open it up to any questions you may have.
Great. Great. Let's start off with one to you. You joined the company in June. You have a history with strategic transformations. And I have a feeling you probably knew that there was something coming at Anika. What drew you to Anika, and how does this compare to some of the other obstacles or opportunities that you've tackled in the past?
Yeah, it's a great question. I'd say what drew me to Anika was the fact that this is a business that's been around since 1992, making a market-leading product that's available in the U.S. and internationally with strong clinical differentiation. So to step into a business that's got a demonstrated capability of delivering profitability and free cash flow on a core product is always a good place to start, but I think what Integrity and Hyalofast represent in the near- term are something that will drastically change the trajectory of the company. As we launch those products through our own commercial channel, I think it helps that we've got a product in the case of Hyalofast that's been available in 35 countries with 15-year clinical data in a market in the U.S. that is completely underserved.
I think most cases, people would estimate the addressable market for cartilage lesions to be $1 billion-$2 billion, depending upon which competitor you talk about. And we're talking about a product like ours that is going to be completely differentiated and one that has proven capability. So for me, it was exciting because it's coming into a great business that has a great core and fundamental with a significant level of upside for products that are well- understood and I think demonstrated in the marketplace. In the second part of your question in terms of how does it compare, I think what's a bit unique about Anika is it's a very capable and proven team on hyaluronic acid. So what we've been able to deliver is really taking the products that have already been available. In many cases, they've been available for 10 or 15 years already.
And this team is ready to run and ready to launch it here in the U.S. So there's a lot of regulatory pathways that are just difficult to overcome. And I think every company in this space deals with that. But this team is ready for it. To me, that's an exciting piece of the story. I spent some time with my team last night just sort of regrouping on the year and talking about 2025. And it's nice to work with a team that's really ready to run and from an experienced perspective has the capability to do so. So I'm excited about that. I think it's a unique set of solutions that they're looking to bring to market. And certainly going through a strategic transformation in a public market with acquisitions and divestitures is not easy.
But in the same respect, I'd say the team here is very excited about the opportunity that lies ahead and for our refocus strategy.
All right. All right. The next one, it might not be a fair question for you, but I'm going to ask it anyway. You were around in 2020. But what do you think the conditions were in 2020 that led the company to acquire these businesses? And what do you think has changed that led to the decision to divest them?
Yeah. I obviously wasn't here, but I've had the time to research and have conversations with folks to understand those decisions that were made. And what I'd say is the level of concentration that existed with Johnson & Johnson in the U.S. that was under an OEM production type agreement, which was not going away, it created a level of risk from an investor perspective.
It created a level of risk from a company perspective, and you can see that playing out to some degree this year as the market moves. We move with that market quite rapidly, and the intention was to diversify, and I don't think that that's a bad decision. I think what existed back then were products that were very far out or stalled, so in the case of Hyalofast, Hyalofast didn't have an enrolled clinical trial and had no real timeline or horizon to file with the FDA. So there was no pathway to being able to commit to when that product would be available in the U.S., despite it being a great product out overseas, and I think because of that, they decided they were going to go with a more accelerated strategy through acquisition. I think what's different in 2024 is Integrity didn't exist.
So it wasn't a product that was available. It was on a piece of paper. And now it's actually been approved through a 510(k). It's available in full market release here in the U.S. and doing exceptionally well. And then on top of that, we've got the more near-term pathway for the filing of Hyalofast. And because of that, I think that gives us a stronger conviction on the sense that we really do see a pathway to launching the business here in the United States with our commercial channel, for which we don't need an acquisition necessarily to do it. And I think that's really what differentiates us is still a desire to diversify our revenue. We would like to have revenue going through our commercial channel, which gives us more nimble and agile ability to respond to the market versus what our current circumstances are.
And I think with the progress that we've made on Integrity, Hyalofast, and Cingal as compared to 2019, we feel like we're ready to do that.
And you talked about the OA pain management business doing pretty well overseas, doing much better overseas than in the U.S. And I would imagine a part of that is there are just some markets overseas that never use that type of product, and you're expanding into those markets. Are there additional markets where you can expand into in the next couple of years to continue to grow that business?
Yes, there are. And I think that will be a continued element of our growth driver overseas for OA pain is we're still getting approvals in certain countries, as you mentioned, for Monovisc. And Monovisc, it's the market leader in the U.S. It's a great product.
And we're still going through the regulatory filings in each country. So we still have countries on our target list where we maybe sell Orthovisc today, but Monovisc is on the list, and then also Cingal. So each one of them is still growing. And then in the countries that they operate in, these products are terrific. So from a clinical differentiation standpoint, they've been able to take share. So in their markets, they're able to take share and also increase with the new product entrance. And I think that's really where the interesting part of the story comes from. The fact that we sell Cingal today in over 40 countries, I think, is a demonstration of why that product has such a strong pull.
The fact that we still continue to see opportunities to grow the number of regions and geographies that we operate in today is the reason for us to continue to make investments in that side of our business. For example, our commercial channel, we have a sales team, obviously. We've got regulatory teams that are helping to support those filings. We're willing to make those investments because they're demonstrated products. We know that the team is capable of launching, and we're willing to make the investments because the return is there.
The overseas sales primarily Europe, and is there potential to launch product in Asia?
It's available, as I mentioned, all over the world. It's not exclusive to any one region. We've got teams all over the world. I would say there are certain regions where we're less penetrated. Asia is one of them, and I don't think we're unique in that sense. That is a market that tends to be at a lower price point. So for a U.S.-based manufacturer, it's not necessarily as competitive from a pricing dynamic. So in the case of certain products in certain countries, we're maybe not as well- positioned. But that doesn't mean that there aren't other opportunities for us to grow in those regions, and we've demonstrated the ability to do so.
Right. And if we move on to Hyalofast, assuming you do get the approval sometime in 2026, how long does it take to roll that out? Is there a lot of surgeon training involved in that? What's the process there?
Yeah. Well, we've got revenue assumed in the fourth quarter of 2026. We expect to be filing the final module of the PMA midway through next year. And so I would share with you that we think it's a relatively smooth adoption time period. What's unique about Hyalofast is it has been around for over 15 years. So there are a lot of surgeons in the U.S. that have seen it overseas, and they're asking us about it. And so I'd say the adoption rate, we expect it to be rather quick.
It's not a complicated procedure in terms of how the product operates inside of the actual lesion. So it's one that I think will be rather smooth in terms of training and medical education. I'd say the one area that we do focus on is around reimbursement. And so you can't file for reimbursement code and work with the payers until you actually get the FDA approval. And so we'll be working through that process over the course of 2026.
But given the strong demand that we hear from the marketplace today from surgeons, we expect to see an uptick in sales in 2026 and then really a ramp up in 2027 and 2028. We believe this is a differentiated product in terms of the time that it takes to perform the procedure. This is really something that's ancillary to the procedure that would already be happening on the MCL or the ACL or the meniscus. So it's a rather quick and easy process. And so because of that, we expect to see a pretty smooth adoption.
And I would imagine since this is a one-step procedure as opposed to a two-step procedure, that it would be more cost-effective to do it this way than have to do the prior surgery and then the second stage.
Yeah, I think that's a safe assumption. Certainly, we haven't shared pricing information yet. We're a bit further out than we're probably ready to do that. But it is safe to say that from a price perspective, we do expect that this can be a cost-competitive solution for cartilage lesions. And on top of that, it actually has 15 years of data to prove that it works. So I think that you're right in that assumption. And I think that's really why we're so excited about it. So we are manufacturing the product today. We obviously sell a lot of it overseas, although at a different price point, just given the reimbursement dynamics between the U.S. and outside the U.S. So we've got a pretty strong understanding around the costs, the manufacturing capability, what's required. And really, this is just about entering the new market and driving more volume.
Does the FDA consider any of that overseas data when they're evaluating the product, or do they only use the U.S. data?
Unfortunately, they do not. The clinical data from the last 15 years' worth of sales isn't necessarily considered, but obviously, we use it as part of our sales pitch when we get to that point. We've got a clinical trial that we'll be submitting. We have our last patient out. We have a two-year endpoint for the clinical trial. Our last patient out for that will be midway through 2025, which is why our filing for the third module, the PMA, will be midway through 2025. That data will be used as part of the consideration by the FDA.
Have you been able to see the data that you have on the prior patients? And are you able to share that at all?
No, it's a blinded study. So we are not able to share that. We'll share it when we get to that point in 2025.
Cingal, now that could be a potential material product for you. Do you expect to do any more trials with patients for that?
We don't expect any substantial trials like what we've done in the past. So there are three trials that were done on patients to demonstrate pain. And I think those trials, we've shared those trial results with the FDA. And back in April, we did get a letter in response from the FDA. And what they've shared with us is the clinical trial data associated with Cingal will be what's called a review item, which means it'll be reviewed once the NDA has been submitted.
And instead, what they've asked for is for us to kind of manage two hurdles associated with what are called filing items. And that's the toxicity study of Monovisc, as well as the bioequivalence testing on the triamcinolone hexacetonide. So to kind of simplify that for you, Monovisc needs to, even though it's sold today in the U.S. market as a medical device, it will be regulated as a drug when it's combined into Cingal as a product. And so we've got to perform tox studies on that. That'll kick off in the first quarter of 2025. That's the first filing item that we talked about with the FDA. The second one is around bioequivalence testing on triamcinolone hexacetonide, which is the steroid. And unfortunately, we had some hurdles we had to overcome in terms of what it will take to get that bioequivalence testing complete.
We'll be requesting a Type C meeting with the FDA to further clarify the study requirements for that bioequivalence test. Once we get through that Type C meeting, I'll be able to share more with you around the specifics of what's required. Certainly, what I would say is from a broader-based clinical trial, those items are going to be more of a review rather than a filing item with the FDA.
Is there potential to announce a partner prior to FDA approval for Cingal?
Cingal represents a really important growth driver for the company. It's one where I think there are a lot of companies that have looked to try and develop the next generation of OA pain. I'd say that there is certainly interest.
But as we work on it, the company has invested a tremendous amount of money into getting this product to market. We want to make sure that if there was a partner that we would work with, that it'd be something that we do at a time that makes the most sense to demonstrate value for our shareholders. So we would consider that as any option we might. But I'd say one of the key items for us is getting a clear pathway with the FDA before we get to that point.
Do you think the transformation, once complete, will that accelerate your drive to profitability and improve cash flow?
I do. I do think that that transformation will help. I mean, one of the elements associated with the acquisition that were done in 2020 was they were rather capital-intensive businesses. A lot of instrumentation, a lot of inventory.
The businesses that we're talking about growing are less so. So I do think that that drives a benefit for our business. Conversely, though, we are investing in our commercial channel, so sales teams and marketing to drive product growth. I think that by the time that we get through sort of the launch of Hyalofast, we'll be talking very differently about sort of the profitability, capability of the company, and also free cash flow generation. We're very excited about it, obviously, but I haven't given you a long-term target other than to say that when we really get into that launch of Hyalofast, I think we'll be able to share more updates around what profitability looks like in the future.
The company's always had a pretty strong balance sheet. That HA business, the pain management, has always been a great cash generator. Do you anticipate any need for capital in the next two to three years?
We don't anticipate a need for capital. It's another good question. So today, we have no debt. We have about $60 million of cash on the balance sheet. There's no real need for financing of the company. All of the investments that we're looking to make in our commercial channel and the growth of Integrity and Hyalofast will be paid for with our OEM channel, which is both the, or excuse me, with the OA pain channel, which is really the products Monovisc, Orthovisc, and Cingal. So we've got a really strong capability to deliver cash flow from that side of the business to invest in the growth side of the business.
We do have a share buyback in place, which we'll complete in 2026, but I don't expect any time in the near- term that we'll be needing financing.
Great. All right. Well, we are out of time. I just want to say thank you. I know it seemed like you've been pretty busy since you got to Anika. I feel you're going to be pretty busy in the next few months. But appreciate the time you took today to give us an update and hope to see you again soon at Anika.
Yeah. Thank you, Jim. I appreciate it.
Okay. Thank you.
Thank you.