Anika Therapeutics, Inc. (ANIK)
Q2 2010 Earnings Call Transcript
August 10, 2010 9:00 am ET
Kevin Quinlan – CFO
Charles Sherwood – President and CEO
Ali Motamed – Boston Partners
Larry Anderson – Raymond James
Yan Wang [ph] – Greencoast Capital
Gary Siperstein – Eliot Rose Asset Management
Previous Statements by ANIK
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Good day, ladies and gentlemen and welcome to the second quarter 2010 Anika Therapeutics earnings conference call. My name is Josh and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (Operator Instructions) I would now like to turn the presentation over to our host for today's call, the Chief Financial Officer, Kevin Quinlan. You may proceed, sir.
Thank you, Josh 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 Merrill Associates at 617-542-5300. The news release is also posted in the Investor Relations section of Anika Therapeutics' website at anikatherapeutics.com.
Also, I want to mention that we have slides posted on the Anika website that illustrates some of the financial information we will be discussing during today's call. These slides can 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 2. 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, continue, 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 include those set forth in last evening's press release and the company's SEC filings.
Please move to Slide 3 as I turn the call over to Anika's President and Chief Executive Officer, Dr. Charles Sherwood.
Thank you, Kevin. Good morning, everyone and thanks for joining us today. This was a solid quarter for Anika. We made good progress executing on our key goals and driving revenue growth.
Total revenue increased 52% year-over-year, while product revenue was up 56%. On an organic basis, that is, excluding FAB, our product revenue increased 24% from the second quarter last year, extending our record to 12 consecutive quarters of product revenue growth compared with the same quarter of the previous year.
Our net income for Q2 2010 increased 12% from the second quarter last year, reflecting the dilutive effect of the FAB acquisition. One of our six goals for the year is to cut FAB operating loss in half and we made progress toward that goal in Q2. Compared with the first quarter of 2010, FAB's revenue grew 70%, that's 70%, and operating loss declined 39%.
I'll have more to say about the FAB integration and the advances we made on our other goals in the second quarter after Kevin's financial review. And then we will both be happy to take your questions at the end of this presentation. Kevin?
Thanks, Chuck. Please turn to Slide 4 in the presentation. Total revenue in the second quarter of 2010, including FAB, grew 52% from the second quarter last year to $14.5 million. Consolidated product revenue grew by 56% and as Chuck said, organic product revenue growth for Anika, excluding FAB, was 24%. This revenue growth was driven primarily by the continued strong performance of our joint health franchise. As you can see on the slide, FAB is also contributing to our total revenue in additional therapeutic areas including advanced wound care and surgical products.
As you can see on Slide 5, revenue in our Orthobiologics franchise, which includes our joint health products, increased 38% to $7.7 million from the second quarter of 2009, reflecting strong domestic sales of ORTHOVISC. Domestic Orthobiologics sales were up 31% and international Orthobiologics sales, including FAB, were up 58% and they were up 26% excluding FAB.
Slide 6 illustrates the impact of this revenue growth on the other lines in our income statement. Our second quarter consolidated product gross margin was 57% compared with 62% in the second quarter last year. The decline in this quarter largely reflected the addition of FAB products into the overall mix. On an organic basis, Anika's gross margin was down slightly from the second quarter last year at 60%, due largely to added inventory reserves.
As I have mentioned on previous calls, the transition of manufacturing operations to our Bedford facility will result in a slight decline in margins for 2010 compared to 2009. This is because we will be manufacturing in both our Woburn and Bedford facilities for a significant portion of the year, and as a result, experiencing some inefficiencies during the transition.
Net income for the second quarter of 2010 grew 12% to $1.1 million or $0.08 per diluted share from $956,000 or $0.08 per diluted share in the second quarter last year. We issued nearly 2 million new shares of Anika stock in connection with the FAB acquisition last year, which reduced our earnings per share. FAB's contribution was in line with our expectations and consistent with our target for the year, as I'll explain in a moment.