Anika Therapeutics' CEO Discusses Q2 2012 Earnings Results - Earnings Call Transcript

Anika Therapeutics, Inc. (ANIK)

Q2 2012 Earnings Call

August 2, 2012 9:00 am ET

Executives

Kevin W. Quinlan – Chief Financial Officer, Treasurer & Secretary

Charles H. Sherwood, Ph. D. – President, Chief Executive Officer & Director

Analyst

Jim Gentrup – Discovery Investments

Greg Garner – Singular Research

Andre Thomas – Summer Street Research

Presentation

Operator

Welcome to the second quarter 2012 Anika Therapeutics investor conference call. At this time all participants are in a listen only mode. We will conduct a question and answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Mr. Kevin Quinlan, Anika’s Chief Financial Officer.

Kevin W. Quinlan

If you have not received a copy of the Anika news release which was issued yesterday after the market closed or you would like to be added to our contact list, please contact Sharon Merrill Associates at 617-542-5300. The news release is posted in the investor relations section of our website at www.AnikaTherapeutics.com. In addition, the slide presentation is posted on the Anika website that illustrates some of the points that we’ll be covering during today’s call. The slides can be found on the investor relations section 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 Number 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, 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 turn to Slide Number Three as I turn the call over to Anika’s President and Chief Executive Officer, Dr. Charles Sherwood.

Charles H. Sherwood, Ph. D.

Overall, Q2 was another good quarter for Anika. We generated all time record quarterly revenue and earnings while making solid progress towards some key strategic goals. Even with the success, not everything moved forward as rapidly as we had hoped and our business in Italy and other parts of Europe fell short of our expectation, a situation that we will address and improve as the year progresses.

Total revenue was up 22% from the second quarter last year driven primarily by strong sales of our bonded products and Orthovisc, both domestically and internationally. Domestic sales of Orthovisc increased both domestically and internationally. Domestic sales of Orthovisc increased 22% from Q2 of 2011 and Orthovisc sales to markets outside the US grew 16%. Our second quarter earnings reflect this overall top line growth.

Product gross margin improved to slightly over 57% and companywide R&D and SG&A expenses remained well managed and net income for the second quarter grew to $3.7 million or $0.26 per diluted share from $2.3 million or $0.17 in Q2 last year, an increase of 53%. From an operational perspective we successfully closed our Woburn facility and consolidated all of our manufacturing in Bedford by the end of the quarter on schedule.

We had a positive meeting with the FDA regarding our PMA application for Monovisc and we made further progress on our preparations for initiating clinical trials for Hyalograft C and Cingal in Europe. I’ll discuss these items in detail including some comments on the business outlook after Kevin’s financial review.

With that I’ll turn the call back to you Kevin.

Kevin W. Quinlan

Please turn to Slide Number Four in the presentation. Anika delivered record revenue and earnings per share in the second quarter of 2012. Total revenue increased 22% from the second quarter last year to $19.6 million. Product revenue was also up 22%. This growth reflected strong performance in our ophthalmic franchise as well as continued growth and demand for Orthovisc in our orthobiologics franchise.

Turning to orthobiologics on Slide Number Five, total franchise revenue for the second quarter grew 12% year-over-year to $10.9 million. As I said this growth was primarily driven by strong sales of Orthovisc in both the US and international markets. However, other than Orthovisc this was a challenging quarter internationally. Sales of Monovisc were lower than Q2 last year primarily due to order timing, a shift in distributors taking place in Turkey, and cautious ordering and inventory management by our European distributors in general related to the current macroeconomic conditions including Euro weakness versus the dollar.

International sales of our orthopedic products from S.r.l. were also lower as a result of several factors. Besides the impact of macroeconomic factors I just described, it is taking longer for our new Italian distributor to come up to speed in that market. Nonetheless we’re optimistic about the prospects in Europe for our products. We’re working to increase S.r.l.’s orthopedic sales in the coming quarters by expanding our distribution network for these products in markets outside of Italy which will be discussed later in the presentation.

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