Anika Therapeutics, Inc. (Nasdaq: ANIK), a leader in products for tissue protection, healing, and repair, based on hyaluronic acid ("HA") technology, today reported financial results for the quarter ended June 30, 2010.
“Our total revenue increased by 52% year-over-year, while product revenue grew 56%. Organic revenue was up 24% from the second quarter of 2009, driven by strong domestic and international sales of ORTHOVISC. Domestic ORTHOVISC sales were up 31% year-over-year, while international ORTHOVISC sales increased 18% during the same period.”
Key Highlights
- Total revenue and product revenue grew 52% and 56% respectively
- Progress on FAB integration as FAB products perform well in quarter
- Orthobiologics revenue rose 38%, driven by strong global sales of ORTHOVISC®
Revenue
Anika's product revenue increased 56% to $13.7 million for the second quarter of 2010, from $8.8 million in the second quarter of 2009. Excluding revenue from Fidia Advanced Biopolymers, s.r.l. ("FAB"), which was acquired by Anika late in the fourth quarter of 2009, product revenue increased 24% from 2009's second quarter. This growth was primarily due to continued strong sales of the Company's ORTHOVISC product line in U.S. and international markets.
Total revenue for the second quarter of 2010 grew 52% to $14.5 million, from $9.5 million in the second quarter last year.
Product Gross Margin
Product gross margin for the second quarter of 2010 was 57%, compared with 62% in last year's second quarter. The decrease in product gross margin largely reflected the addition of FAB products into Anika's overall product mix and increased inventory reserves of $267,000.
Operating Expenses
Research and development expenses for the second quarter of 2010 decreased to $1.8 million from $2.3 million in the second quarter of 2009. This reflected a decline in R&D spending due to the completion of Anika's U.S. MONOVISC™ clinical trial in the third quarter of 2009, partially offset by the inclusion of FAB R&D expenses.
Selling, general and administrative expenses for the second quarter of 2010 increased to $5.0 million from $2.7 million in the same quarter of 2009, primarily driven by the inclusion of SG&A costs at FAB, integration costs, and increased reserves of $270,000 related to Coapt Systems accounts receivable.
Net Income
Net income for the second quarter of 2010 increased 12% to $1.1 million, compared with $956,000 for the same period last year. Earnings per share for the second quarter was $0.08 per diluted share for both 2010 and 2009. The comparison with the 2009 period was negatively impacted by the dilutive effect of the FAB acquisition.
Cash and Cash Equivalents
Anika's cash and cash equivalents at June 30, 2010 were $23.6 million, compared with $24.4 million on December 31, 2009.
Litigation and Other Legal Matters
On July 7, 2010, Genzyme Corporation filed a complaint against the Company in the United States District Court for the District of Massachusetts seeking unspecified damages and equitable relief. The complaint alleges that the Company has infringed U.S. Patent No. 5,143,724 by manufacturing MONOVISC in the United States for sale outside the United States and will infringe U.S. Patent Nos. 5,143,724 and 5,399,351 if the Company begins manufacture and sale of MONOVISC for sale in the United States. The Company believes that neither MONOVISC, nor its manufacture, does or will infringe any valid and enforceable claim of the asserted patents.
The Trustee in Bankruptcy of Artes Medical, Inc. ("Artes") asked the Company to pay $359,768 to the Trustee, representing the total amount of three payments received by the Company from Artes within the 90 days prior to the filing of Artes' liquidating bankruptcy case under Chapter 7 of the United States Bankruptcy Code. The Trustee asserts that the payments are recoverable as preferences under the Bankruptcy Code. The Company believes that the payments either do not meet the legal requirements of avoidable preferences or are subject to one or more exceptions to the Trustee's powers to recover preferences and recently so advised the Trustee.
Coapt Systems, Inc., the Company's distributor for its HYDRELLE product, made a general assignment for the benefit of creditors and an Assignee began the liquidation of Coapt's assets. The Company's Distribution Agreement with Coapt has been terminated, and the Company plans to directly distribute HYDRELLE in the interim while it determines its worldwide strategy for this product franchise.
Management Commentary
"We made good progress executing on our key goals and driving revenue growth during the second quarter," said Charles H. Sherwood, Ph.D., president and chief executive officer. "Our total revenue increased by 52% year-over-year, while product revenue grew 56%. Organic revenue was up 24% from the second quarter of 2009, driven by strong domestic and international sales of ORTHOVISC. Domestic ORTHOVISC sales were up 31% year-over-year, while international ORTHOVISC sales increased 18% during the same period."
"Our second-quarter net income grew 12%, tempered by the dilutive effect of the FAB acquisition," said Sherwood. "One of our key goals for the year is to reduce FAB's operating loss, and we made progress on that goal during the quarter. At the same time, we made progress during the quarter in generating further cost synergies through the integration of FAB's operations with those of Anika. We completed the integration of the Anika and FAB research and development functions, implemented organizational changes at FAB, and began installing a new network and ERP system that will enable FAB and Anika to operate more effectively."
Sherwood continued, "on the regulatory front, during the quarter, in a meeting with the FDA on Anika's PMA for our single-injection osteoarthritis product MONOVISC, the FDA requested additional statistical analyses. We expect to submit the additional data requested and responses to the FDA's questions in September. This lengthens our approval process, and we currently believe will delay our timeline for launching MONOVISC in the U.S. market into 2011. We are also working on 510(K) applications for a number of FAB products, and anticipate the first approval by year-end 2010 with the other approvals to follow in early 2011."
"We continue to execute successfully on our strategic goals and produce solid financial results, both on a consolidated and organic basis," said Sherwood. "We are clearly advancing toward our vision to provide innovative therapeutic products which we believe will expand Anika's opportunities and position us for earnings growth."
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