Anika Therapeutics Inc. Q1 2010 Earnings Call Transcript

Anika Therapeutics Inc. Q1 2010 Earnings Call Transcript
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Anika Therapeutics Inc. (ANIK)

Q1 2010 Earnings Call

May 11, 2010 09:00 a.m. ET


Kevin Quinlan - CFO

Charles Sherwood - President and CEO




Good day, ladies and gentlemen, and welcome to the first quarter 2010 Anika Therapeutics investors' conference call. (Operator Instructions)

I would now like to turn the call over to Mr. Kevin Quinlan, Chief Financial Officer. Please proceed.

Kevin Quinlan

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Thank you, (Francine), and good morning, everyone. If you have not received a copy of the Anika news release, which was issued yesterday after the market closed, or would like to be added to our contact list, please contact Sharon Merill Associates at 617-542-5300. The news release is also posted in the Investor Relations section of Anika Therapeutics' website at

Also, I want to mention that we have slides posted on the Anika website that illustrates some of the financial information we'll be discussing during today's call. These slides could be found on the Investor Relations section of the website, under the 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 two. Before we begin, please remember that the statements made in this call which are not statements of historical fact are forward-looking statements as defined in the Securities Exchange Act of 1934. Words such as will, believe, appear, plan, expect, anticipate, forward, seek, continued target, goals, objectives, on track, intend, pursue, outlook, as well as other expressions which are predictions or indications of future events or trends and which do not constitute historical matters, identify forward-looking statements.

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 described in the forward-looking statements as a result of a number of factors, which includes those set forth in last evening's press release and the company's SEC filings.

Please move to slide three as I turn the call over to Anika's President and Chief Executive Officer, Dr. Charles Sherwood.

Charles Sherwood

Thank you, Kevin, and good morning everyone, and thanks for joining us today. This was a great start to a year that promises to be full of milestones for Anika. Total revenue increased 35% year-over-year, while total product revenue was up 37%.

On an organic basis, that is, excluding FAB, Fidia Advanced Biopolymers, our product revenue increased to 18% from the first quarter last year, extending our record to 11 consecutive quarters of product revenue growth compared to the previous year's same quarter.

Net income increased 37%, in line with the revenue increase.

I concluded our call last quarter by outlining our key goals for 2010. My comments this morning will focus on the progress we made on those objectives in the first quarter and the advances we expect to report as we move through the rest of the year.

We'll start however, with the financial review, so now I'll turn the call back over to you, Kevin.

Kevin Quinlan

Thanks, Chuck. Please turn to slide four in the presentation. Total revenue in the first quarter of 2010, including FAB, grew 35% from the first quarter last year to $12.5 million. Consolidated product revenue grew by 37%, and as Chuck said, organic product revenue growth for Anika excluding FAB was 18%. This was driven primarily by the continuing strong performance of our joint health franchise.

You can also see on this slide, the additional therapeutic areas where FAB is contributing to revenue, including Advanced Wound Care and Post Surgical Products.

Turning to slide five, which looks at Orthopedics/Joint Health products in detail, you'll see that revenue increased 34% to $6.9 million from the first quarter of 2009. Revenue growth was driven by strong domestic performance of ORTHOVISC. Domestic Joint Health sales were up 44%. International sales, including FAB were up 9.6 %.

Turning to slide six, you can see the impact of this revenue growth on the other lines in our income statement. Our first quarter consolidated gross margin was 56% compared with 62% in the first quarter last year. The decline this quarter largely reflected the addition of FAB products into the overall mix. On an organic basis, Anika's gross margin was essentially level with first quarter last year.

Looking forward, as I mentioned last quarter, the transition of manufacturing operations to our Bedford facility will be taking place on an incremental basis by product line as we move through the year. This means we'll be manufacturing both at our Woburn and Bedford facilities for a significant portion of 2010, accompanied by some inventory build in preparation for the transition. We expect this to result in a slight decline in margins for 2010 compared with 2009.

Net income for the first quarter of 2010 was $714,000 compared to $523,000 in last year's first quarter, a solid 37% increase, just slightly better than the total revenue increase of 35%. As you know, we issued almost 2 million new shares of Anika's stock in connection with the FAB acquisition on December 30, 2009. So the fully diluted earnings per share for the quarter was $0.05 per share, level with the $0.05 we reported for the first quarter last year.

Anika's standalone contributions were about $0.12 for the quarter, significantly improved over last year, and the FAB results for the quarter were in line with our expectations, and consistent with our goal for FAB this year. I'll expand on this point in a moment.

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