What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2025-03-17 compared with 2024-03-15 · 137 added, 168 removed, 264 unchanged (54% of the section changed)

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Issuer Purchases of Equity Securities

In April 2023, we agreed to establish a share repurchase program for an aggregate purchase price of $20.0 million.

Of the $20.0 million, the first $5.0 million was to be effected through an accelerated stock repurchase program, the second $5.0 million was to be purchased in the open market and the remaining $10.0 million was to be purchased in the open market subject to positive cash flow.

On May 12, 2023, we entered into an accelerated share repurchase agreement with Bank of America, N.A., or Bank of America, pursuant to a Fixed Dollar Accelerated Share Repurchase Transaction, or ASR Agreement, to purchase $5.0 million of shares of its common stock.

During the second quarter of 2023, 158,983 shares were delivered to us, constituting the initial delivery of shares and representing 80% of the then estimated total number of shares expected to be repurchased under the ASR Agreement.

In July 2023, we received the remaining 29,046 additional shares at a final settlement price based on the average purchase price of $26.59 per share.

The following is a summary of stock repurchases for the three-month period ended December 31, 2024 (in thousands, except share and per share data):

Total number of shares

purchased (1)

Price per Share

Total number of

shares purchased as

part of publicly

announced plans or

Maximum number (or

approximate dollar

value) of shares that may

yet be purchased under

the plans or programs

October 1 to 31, 2024

November 1 to 30, 2024

December 1 to 31, 2024

(1) In May 2024, we agreed to implement a share repurchase program for an aggregate purchase price of $40.0 million to occur as follows:

(i) first $15.0 million was to be effected through a Rule 10b5-1 plan initiated prior to June 1, 2024 and to be effective through June 30, 2025, and (ii) the remaining amount to be purchased in the open market (the “ 2024 Share Repurchase Program ”).

In the event of positive “free cash flow” as defined in the 2024 Cooperation Agreement dated May 28, 2024, with Caligan Partners LP, Caligan Partners Master Fund LP and David Johnson, for the period from July 1, 2024 through June 30, 2025, the amount under the share repurchase program shall be increased by 50% of such positive amount and in no event would we be required to make any purchases in the event that our cash would be less than $45.0 million after taking into account the share repurchase and reasonably anticipated capital expenditures and restructuring costs.

On May 28, 2024, the Company entered into a share repurchase agreement under a Rule 10b5-1 with Bank of America.

As of December 31, 2024, the Company had repurchased 505,903 shares at an average cost of $21.57 per share, representing 27% of the then estimated total number of shares expected to be repurchased under the 2024 Share Repurchase Program.

Securities Authorized for Issuance Under Equity Compensation Plans

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Based on our collaborations with clinicians to understand what they need most to treat their patients, we develop minimally invasive products that restore active living for people around the world.

We are committed to leading in high opportunity spaces within orthopedics, including OA pain management, regenerative solutions, sports medicine and Arthrosurface joint solutions.

We have thirty years of global expertise developing, manufacturing and commercializing products based on our HA technology platform.

We are committed to leading in high opportunity spaces within orthopedics, including osteoarthritis (“OA”) Pain Management and Regenerative Solutions.

We have thirty years of global expertise developing, manufacturing and commercializing products based on our hyaluronic (“HA”) technology platform.

HA is a naturally occurring polymer found throughout the body that is vital for proper joint health and tissue function.

Our proprietary technologies for modifying the HA molecule allow product properties to be tailored specifically to multiple uses, including enabling longer residence time to support OA Pain Management and creating a solid form of HA called Hyaff, which is a platform utilized in our regenerative solutions portfolio.

In early 2020, we expanded our overall technology platform, product portfolio, and significantly expanded our commercial infrastructure, especially in the United States, through our strategic acquisitions of Parcus Medical, LLC, a sports medicine and instrumentation solutions provider, and Arthrosurface, Inc., a company specializing in bone preserving partial and total joint replacement solutions.

In early 2020, we expanded our overall technology platform, product portfolio, and significantly expanded our commercial infrastructure, especially in the United States, through our strategic acquisitions of Parcus Medical, LLC, a sports medicine and instrumentation solutions provider, and Arthrosurface Incorporated, a company specializing in bone preserving partial and total joint replacement solutions.

These acquisitions augmented our HA-based OA Pain Management and regenerative products with a broad suite of products and capabilities focused on early intervention joint preservation primarily in upper and lower extremities such as shoulder, foot/ankle, knee and hand/wrist.

As we look towards the future, our business is positioned to capture value within our target market of joint preservation.

In October 2024, we announced a strategic shift to concentrate on OA Pain Management and our Regenerative Solutions products.

This strategic decision involved the sale of Arthrosurface Incorporated in October 2024 and the divestiture of Parcus Medical, LLC, in March 2025.

As we look towards the future, our business is positioned to capture value within our target market of OA Pain Management and Regenerative Solutions product portfolios.

We believe our success will be driven by our:

Decades of experience in HA-based regenerative solutions and early intervention orthopedics combined under new seasoned leadership with a strong financial foundation for future investment in meaningful solutions for our customers and their patients;

Utilizing HA-based technology and manufacturing expertise to provide new and differentiated solutions for the growing joint preservation and regenerative medicine markets;

Introducing key HA-based products into the US market upon FDA approval/clearance, such as Cingal, Hyalofast and the Integrity Implant System, our arthroscopic patch system for rotator cuff repair;

Over 30 years of experience in HA and HA-based regenerative solutions and early intervention orthopedics combined with seasoned leadership with a strong financial foundation for future investment in meaningful solutions for our customers and their patients;

Utilizing proprietary HA-based technology and manufacturing expertise to provide new and differentiated solutions in next generation OA Pain Management (eg.

Cingal) and regenerative (eg.

Integrity Implant System and Hyalofast) markets;

Launching the Integrity Implant System, our arthroscopic patch system for rotator cuff repair, in 2024;

Targeting to introduce key HA-based products into the US market upon FDA approval/clearance, such as Cingal and Hyalofast, and developing additional products that leverage our proprietary Hyaff regenerative platform;

Robust network of stakeholders in our target markets to identify evolving unmet patient treatment needs;

Prioritized investment in differentiated pipeline of regenerative solutions, bone preserving implants and sports medicine products;

Global commercial expertise which we will leverage to drive growth across our product portfolio, including an intentional site of care focus on ambulatory surgical centers in the United States and continued international expansion;

Global commercial expertise which we will leverage to drive growth across our product portfolio, including continued international expansion;

Opportunity to pursue strategic inorganic growth opportunities, including potential partnerships and smaller acquisitions, technology licensing, and leveraging our strong financial foundation and operational capabilities;

Pursuit of strategic inorganic growth opportunities, including potential partnerships and smaller acquisitions and technology licensing, by leveraging our strong financial foundation and operational capabilities;

Energized and experienced team focused on strong values, talent, and culture.

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Business” of this Annual Report on Form 10-K.

Key Developments during the Year Ended December 31, 2023

Strengthening Leadership Position in OA Pain Management

Achieved record annual revenues of $101.9 million in OA Pain Management with single-injection Monovisc, multi-injection Orthovisc and Cingal outside the U.S.;

Increasing leading U.S.

market share position.

Cingal, Anika’s next generation non-opioid single-injection HA-based osteoarthritis pain product, continued strong double-digit growth outside the U.S.

Awaiting FDA feedback on proposed non-clinical next steps regarding Cingal U.S.

regulatory approval following a Type C meeting with the FDA in early 2023 and success in meeting its latest Phase III Pivotal primary endpoint in 2022.

Advancing a Highly Differentiated Portfolio of HA-Based Regenerative Solutions

Successfully completed over 100 cases with the Integrity Implant System, Anika’s HA-based regenerative rotator cuff patch system, following the limited market release in late November 2023;

on-track for full market release in mid-2024.

Fully enrolled Hyalofast , Anika’s HA off-the-shelf single-stage cartilage repair product, Phase III clinical trial;

modular PMA submission with break-through device designation commencing in 2024;

final PMA module filing expected in 2025 with product launching by 2026.

Launched Key Products in Sports Medicine and Arthrosurface Joint Solutions

X-Twist Biocomposite Fixation System launched in the first quarter of 2024, compliments the PEEK version launched in early 2023.

RevoMotion Reverse Shoulder Arthroplasty System full market release in September 2023.

OA Pain Management

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We have been actively engaging with the U.S.

Food and Drug Administration, or the FDA, on next steps for U.S.

Food and Drug Administration (“FDA”) on next steps for U.S.

regulatory approval.

Joint Preservation and Restoration

Our Joint Preservation and Restoration product family consists of:

(a) our portfolio of orthopedic regenerative solutions products utilizing HA, including Integrity, our new arthroscopic regenerative patch system for rotator cuff repair and other tendon procedures, Tactoset products, and Hyalofast outside of the United States in over 30 countries;

(b) our line of sports medicine solutions used to repair and reconstruct damaged ligaments and tendons due to sports injuries, trauma and disease;

and (c) our Arthrosurface portfolio of bone preserving joint technologies, including partial joint replacement, joint resurfacing, and minimally invasive and bone sparing implants, designed to treat upper and lower extremity orthopedic conditions caused by trauma, injury and arthritic disease.

Non-Orthopedic

Our Non-Orthopedic product family consists of legacy HA-based products that are marketed principally for non-orthopedic applications, including our adhesion barrier product, advanced wound care products, our ear, nose and throat products, and our ophthalmic products.

Non-Orthopedic also includes Hyvisc, our high molecular weight injectable HA veterinary product approved for the treatment of joint dysfunction in horses due to non-infectious synovitis associated with equine OA.

Hyvisc was previously reported in the OA Pain Management product family but has been reclassified to the Non-Orthopedic product family beginning in 2023.

We acquired the Aristospan New Drug Application (“NDA”) regulatory approval in the United States in September 2024 to assist with our Cingal regulatory filing with the FDA.

Regenerative Solutions

Our Regenerative Solutions product family consists of:

(a) our portfolio of orthopedic regenerative solutions products utilizing HA, including Integrity, our new arthroscopic patch system for rotator cuff repair and other tendon procedures, Tactoset to facilitate bone regeneration, and Hyalofast, sold outside of the United States in over 30 countries, for cartilage repair.

For additional information with respect to our products, including information related to how they are sold and new product development initiatives, please see the sections captioned “Products,” “Sales Channels,” and “Research and Development” contained within “Part I.

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Selling, general & administrative

Impairment of intangible assets

Total operating expenses

Loss from operations

(Loss) income from operations

Interest and other expense, net

Loss before income taxes

Benefit from income taxes

(Loss) income before income taxes

Provision for (benefit from) income taxes

Loss from continuing operations

Loss from discontinued operations, net of tax

During the year ended December 31, 2024, we changed our classification of revenue.

We previously disclosed revenue in three categories:

OA Pain Management, Joint Preservation and Restoration and Non-Orthopedic.

As a result of a change in strategic focus announced by us in 2024, revenue classification was delineated to provide the investment community a clear view to our value drivers.

Revenue has been split between the Commercial Channel and the Original Equipment Manufacturer (“OEM”) Channel.

In the Commercial Channel, we have full responsibility for sales, marketing, and pricing of products through our commercial leaders, direct sales representatives, and independent distributors.

Revenue from our Regenerative Solutions and international OA Pain Management businesses is included in the Commercial Channel.

In the OEM Channel, we are responsible for development and manufacturing of products sold to our OEM partners governed by long-term agreements, but we do not control sales, marketing, or pricing with end users.

Revenue from our U.S.

OA Pain Management business and the Non-Orthopedic business is now included in the OEM Channel.

All other revenue is reported in the Commercial Channel.

The following table presents revenue by product family for fiscal years 2024 and 2023 (dollars in thousands):

Years Ended December 31,

OA Pain Management

Joint Preservation and Restoration

Non-Orthopedic

Revenue for the year ended December 31, 2023 was $166.7 million, an increase of $10.5 million, or 7%, compared to the prior year.

The increase in revenue was driven by growing global commercial adoption of our products as well as our introduction of new products in recent years.

Revenue from our OA Pain Management product family increased 11% for the year ended December 31, 2023, as compared to prior year, due to a global sales growth of our Monovisc single injection pain product and favorable ordering patterns, as well as continued double-digit international growth of our Cingal next generation non-opioid single injection pain product.

Revenue from our Joint Preservation and Restoration product family increased 9% for the year ended December 31, 2023, as compared to prior year, due to commercial adoption of our newest products, such as X-Twist, and higher international sales.

Revenue from our Non-Orthopedic product family decreased 29% for the year ended December 31, 2023, as compared to prior year, primarily due to lower sales to veterinary customers due to timing of ordering patterns and lower sales following last-time-buys in 2022 associated with termination of certain legacy distributor contracts.

Effective January 1, 2023, we began to report revenue from product sales to veterinary customers within the Non-Orthopedic product family whereas such revenue had historically been reported within the OA Pain Management revenue product family for the prior period year ended December 31, 2022.

Revenue from product sales to veterinary customers amounted to $4.2 million and $5.9 million for 2023 and 2022, respectively, with the 2022 revenue reclassified to Non-Orthopedic to conform to current presentation.

Commercial Channel

Revenue for the year ended December 31, 2024 was $119.9 million, a decrease of $0.9 million, or 1%, compared to the prior year.

The decrease in revenue was driven by lower sales activity with our OEM channel partners, primarily J&J MedTech and the discontinuation of certain non-orthopedic products.

Revenue from our OEM Channel product family decreased 8% for the year ended December 31, 2024, as compared to prior year, due to lower J&J MedTech revenue, mostly related to Orthovisc and the discontinuation of certain non-orthopedic products.

Revenue from our Commercial Channel product family increased 17% for the year ended December 31, 2024, as compared to prior year, due to an international sales growth on all our main OA Pain Management products (Monovisc, Cingal and Orthovisc).

We also launched a full market release of Integrity in the U.S.

Gross Profit and Margin

Gross profit for the year ended December 31, 2024 was $76.0 million, or gross margin of 63%, as compared with $82.5 million, or gross margin of 68%, for the year ended December 31, 2023.

The increase in gross profit for the year ended December 31, 2023, primarily resulted from higher revenue growth, improved manufacturing efficiency and lower product rationalization charges.

This increase was partially offset by higher costs due to inflationary pressures for raw materials and freight charges.

The decrease in gross profit for the year ended December 31, 2024, primarily resulted from lower revenue, primarily related to OA Pain Management products in the U.S., product channel mix and higher inventory product rationalization charges.

Research and Development

Research and development expenses for the year ended December 31, 2023 were $32.7 million, an increase of $4.5 million, or 16%, as compared to the prior year, primarily due to increased costs to ensure compliance with growing regulatory requirements globally, such as EU MDR, as well as new product development associated with our research and development pipeline, led by Integrity, which received FDA clearance in August 2023 and was launched with first surgeries in rotator cuff repair and other tendon procedures in November 2023.

Research and development expenses for the year ended December 31, 2024 were $25.5 million, an increase of $3.7 million, or 17%, as compared to the prior year, primarily due to increased costs to ensure compliance with growing regulatory requirements globally, such as EU MDR, as well as regulatory, clinical and product development costs associated with our research and development pipeline, led by Hyalofast, in which we submitted the first part of our modular PMA application with the FDA in October 2024.

For additional information on our research and development activities, please see the section captioned “Part I.

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Selling, General and Administrative

Selling, general and administrative, or SG&A, expenses for the year ended December 31, 2023 were $95.9 million, an increase of $11.0 million, or 13%, as compared to the prior year.

The increase in SG&A expenses for the year ended December 31, 2023 was primarily due to $13.0 million of non-recurring costs related to the Parcus Medical unitholder arbitration settlement, shareholder activism, discontinuation of a software development project and other non-recurring corporate costs.

During the year, spending increased as we continued to expand our commercial capability in the United States, including increased marketing, medical education and other operational capabilities to support our business growth, as well as due to increased commissions resulting from sales growth.

Impairment of Intangible Assets

We assess our long-lived assets for impairment under certain circumstances, such as when events or changes in circumstances indicate there may be impairment.

During the fourth quarter of 2023, we performed a quantitative assessment of intangible assets impairment related to the Parcus Medical and Arthrosurface reporting unit.

The results of these impairment tests indicated that the estimated fair value of this reporting unit was less than its carrying value.

Consequently, a non-cash impairment of intangible assets charge of $62.2 million was recorded in the quarter ended December 31, 2023.

The decline in fair value was primarily due to lower growth expectations for future revenue and related cash flows related the Parcus Medical and Arthrosurface reporting unit.

The benefit from income taxes was $2.7 million for the year ended December 31, 2023, resulting in an effective tax rate of 3.1%.

The benefit from income taxes was $3.9 million for the year ended December 31, 2022, resulting in an effective tax rate of 20.7%.

The decrease in our effective rate for the year ended December 31, 2023 as compared to the year ended December 31, 2022 is primarily due to a valuation allowance being recorded on U.S.

deferred tax assets in 2023 offset somewhat by non-deductible stock-based compensation.

For the year ended December 31, 2023, the net loss was $82.7 million, or $5.64 per basic and diluted loss per share, compared to a net loss of $14.9 million, or $1.02 per basic and diluted share, for the prior year.

The $67.8 million increase in the net loss was due to the $62.2 million pre-tax impairment charge on intangible assets recorded in the fourth quarter of 2023 and $13.0 million in pre-tax expenses associated with other non-recurring costs earlier in 2023.

Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2024 were $55.6 million, a decrease of $4.4 million, or 7%, as compared to the prior year.

The decrease in SG&A expenses for the year ended December 31, 2023 was primarily due to lower headcount and reduced shareholder activism costs.

Income (Loss) from Operations

For the year ended December 31, 2024, the loss from operations was $5.1 million, compared to income from operations of $0.8 million for the prior year.

The $5.9 million decrease in income from operations was due to lower gross profit and higher research and development costs.

The provision for income taxes was $6.1 million for the year ended December 31, 2024, resulting in an effective tax rate of (219.4%).

The provision from income taxes was $6.6 million for the year ended December 31, 2023, resulting in an effective tax rate of 209.0%.

The decrease in our effective rate for the year ended December 31, 2024 as compared to the year ended December 31, 2023 is primarily due to a lower valuation allowance being recorded on U.S.

deferred tax assets in 2024.

Non-GAAP Financial Measures

We present certain information with respect to adjusted gross profit and adjusted gross margin, adjusted Earnings Before Interest, Tax, Depreciation and Amortization, or EBITDA, adjusted net income, adjusted diluted earnings per share or adjusted Earnings Per Share, or EPS, which are financial measures not based on any standardized methodology prescribed by accounting principles generally accepted in the United States, or GAAP, and is not necessarily comparable to similarly titled measures presented by other companies.

We present certain information with respect to adjusted gross profit and adjusted gross margin, adjusted Earnings Before Interest, Tax, Depreciation and Amortization (“EBITDA”), adjusted net income, adjusted diluted earnings per share or adjusted Earnings Per Share (“EPS”), which are financial measures not based on any standardized methodology prescribed by accounting principles generally accepted in the United States (“GAAP”), and is not necessarily comparable to similarly titled measures presented by other companies.

We have presented adjusted gross profit and adjusted gross margin, adjusted EBITDA, adjusted net income, adjusted EPS, because they are key measures used by our management and board of directors to understand and evaluate our operating performance and to develop operational goals for managing our business.

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Adjusted Gross Profit and Adjusted Gross Margin

We define adjusted gross profit as our gross profit excluding amortization of certain acquired intangible assets, the impact of inventory fair-value step up associated with our recent acquisitions and certain product rationalization charges.

The amortized assets contribute to revenue generation, and the amortization of such assets will likely continue in future periods until such assets are fully amortized.

These assets include the fair value of certain identified assets acquired in acquisitions, including developed technology and acquired trade names.

We define adjusted gross profit as our gross profit excluding certain product rationalization charges.

We define adjusted gross margin as adjusted gross profit divided by total revenue.

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Product rationalization charges

Acquisition related intangible asset amortization

Adjusted gross profit

Adjusted gross margin

Adjusted gross profit for the year ended December 31, 2023 increased $7.1 million to $110.1 million representing 66% of revenue.

Adjusted gross profit for the year ended December 31, 2024 decreased $6.7 million to $76.6 million representing 64% of revenue.

Adjusted gross profit for the year ended December 31, 2023 was $83.3 million, or 69% of revenue.

The increase in adjusted gross profit for the year ended December 31, 2023 as compared to 2022, primarily resulted from the growth of revenue.

There was no change in adjusted gross margin for the year ended December 31, 2023 as compared to 2022, as the benefits of higher revenue and related production volumes were offset by increased supply chain costs due to inflationary pressures and a higher proportion of international sales in which product margins are generally lower.

The decrease in adjusted gross profit for the year ended December 31, 2024 as compared to 2023, primarily resulted from slower manufacturing production, higher supply chain costs, and a higher proportion of international sales in which product margins are generally lower.

Adjusted EBITDA

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we exclude goodwill impairment charges and changes in the fair value of contingent consideration;

we exclude certain other non-recurring costs, such as the arbitration settlement with Parcus Medical, costs associated with shareholder activism, and discontinuation of a software project;

we exclude certain other non-recurring costs, such as costs associated with shareholder activism;

the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their operating results;

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adjusted EBITDA does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments.

The following is a reconciliation of adjusted EBITDA to net loss for the years ended December 31, 2023 and 2022 respectively:

The following is a reconciliation of adjusted EBITDA to net loss from operations for the years ended December 31, 2024 and 2023 respectively:

Years Ended December 31,

Net loss from continuing operations

Interest and other expense, net

Benefit from income taxes

Provision for income taxes

Depreciation and amortization

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Product rationalization charges

Arbitration settlement

Acquisition related intangible asset amortization

Impairment of intangible assets

Discontinuation of software development project

Costs of shareholder activism

Adjusted EBITDA

Adjusted EBITDA for year ended December 31, 2023 was $15.5 million, an increase of $2.9 million as compared to 2022.

The increase in adjusted EBITDA was primarily due to an increase in revenue and adjusted gross profit as well as a slower ramp up of commercial spending in 2023 and overall spending control.

Adjusted Net Loss and Adjusted EPS

We present information below with respect to adjusted net loss and adjusted EPS.

We define adjusted net loss as our net loss excluding amortization and depreciation of acquired assets, the impact of inventory fair-value step up on cost of revenue, changes in the fair value of contingent consideration, as well as certain impairment charges, including impairment related to IPR&D assets and non-cash product rationalization charges, each on a tax effected basis.

Adjusted EBITDA for year ended December 31, 2024 was $15.5 million, a decrease of $8.2 million as compared to 2023.

The decrease in adjusted EBITDA was primarily due to lower adjusted gross profit and higher research and development spending in 2024 on product development and clinical activity, primarily with Integrity, Hyalofast and Cingal.

Adjusted Net Loss and Adjusted EPS from Continuing Operations

We present information below with respect to adjusted net loss and adjusted EPS from continuing operations.

We define adjusted net loss from continuing operations as our net loss from continuing operations excluding amortization and depreciation of acquired assets, the impact of inventory fair-value step up on cost of revenue, changes in the fair value of contingent consideration, as well as certain impairment charges, including impairment related to IPR&D assets and non-cash product rationalization charges, each on a tax effected basis.

Acquisition-related expenses are those that we would not have incurred except as a direct result of acquisition transactions.

The amortized assets contribute to revenue generation and the amortization of such assets will recur in future periods until such assets are fully amortized.

These assets include the estimated fair value of certain identified assets acquired in acquisitions, including in-process research and development, or IPR&D, developed technology, customer relationships and acquired trade names.

We define adjusted EPS as U.S.

GAAP diluted earnings per share excluding the above adjustments to net loss used in calculating adjusted net loss, each on a per share and tax effected basis.

The following is a reconciliation of adjusted net income to net loss for the years ended December 31, 2023 and 2022, respectively:

These assets include the estimated fair value of certain identified assets acquired in acquisitions, including in-process research and development (“IPR&D”), developed technology, customer relationships and acquired trade names.

We define adjusted EPS from continuing operations as U.S.

GAAP diluted earnings per share from continuing operations excluding the above adjustments to net loss from continuing operations used in calculating adjusted net loss from continuing operations, each on a per share and tax effected basis.

The following is a reconciliation of adjusted net income from continuing operations to net loss from continuing operations for the years ended December 31, 2024 and 2023, respectively:

Years Ended December 31,

Net loss from continuing operations

Product rationalization charges, tax effected

Arbitration settlement, tax effected

Acquisition related intangible asset amortization, tax effected

Impairment of intangible assets, tax effected

Discontinuation of software development project, tax effected

Share-based compensation, tax effected

Costs of shareholder activism, tax effected

Adjusted net loss

The following is a reconciliation of adjusted diluted loss per share to diluted loss per share for the years ended December 31, 2023 and 2022, respectively (in thousands, expect per share data):

Adjusted net income from continuing operations

The following is a reconciliation of adjusted diluted income from continuing operations per share to diluted loss from continuing operations per share for the years ended December 31, 2024 and 2023, respectively (in thousands, expect per share data):

Years Ended December 31,

Diluted loss per share

Diluted loss from continuing operations per share

Product rationalization charges, tax effected

Arbitration settlement, tax effected

Acquisition related intangible asset amortization, tax effected

Impairment of intangible assets, tax effected

Discontinuation of software development project, tax effected

Share-based compensation, tax effected

Costs of shareholder activism, tax effected

Adjusted diluted loss per share

Adjusted net loss in 2023 was $4.3 million, a decrease of $2.7 million as compared to 2022.

The decrease in adjusted net loss and adjusted diluted loss per share for the period was primarily due to higher revenues and improved operating performance during the year.

Adjusted diluted income from continuing operations per share

Adjusted net income from continuing operations in 2024 was $2.4 million, a decrease of $10.9 million as compared to 2023.

The decrease in adjusted net income from continuing operations and adjusted diluted income from continuing operations per share for the period was primarily due to higher manufacturing expenses and research and development costs during the year.

Results of Operations

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Selling, general & administrative

Change in fair value of contingent consideration

Total operating expenses

(Loss) income from operations

Income (loss) from operations

Interest and other expense, net

(Loss) income before income taxes

Benefit from income taxes

Net (loss) income

The following table presents product revenue by product family for fiscal years 2022 and 2021 (dollars in thousands):

Income before income taxes

Provision for income taxes

(Loss) income from continuing operations

Loss from discontinued operations

The following table presents revenue by product family for fiscal years 2023 and 2022 (dollars in thousands):

Years Ended December 31,

OA Pain Management

Joint Preservation and Restoration

Non-Orthopedic

Commercial Channel

Revenue for the year ended December 31, 2023 was $120.8 million, an increase of $7.0 million, or 6%, compared to the prior year.

The increase in revenue was driven by recovery outside the U.S.

from the initial impact of the COVID-19 pandemic on sales volumes and related strategic partner ordering patterns, as well as from growing global commercial adoption of our products.

Revenue from our OA Pain Management product family increased 8% for the year ended December 31, 2022, as compared to prior year, due primarily to higher international sales on recovery from the initial impact of the COVID-19 pandemic, favorable ordering patterns and growth in adoption of our products globally.

The increase was also a result of growth in Mitek revenues as well as higher veterinary sales on favorable order patterns and COVID-19 recovery.

Revenue from our Joint Preservation and Restoration product family increased 4% for the year ended December 31, 2022, as compared to prior year, due to improving elective procedure volumes and rapidly growing commercial adoption of our newest products.

Revenue from our Non-Orthopedic product family decreased 2% for the year ended December 31, 2022, as compared to prior year, primarily due to timing of distributor sales as well as last-time purchases of legacy products during 2021.

Revenue from product sales to veterinary customers amounted to $5.9 million and $4.4 million for 2022 and 2021, respectively, with the 2022 and 2021 revenue reclassified to Non-Orthopedic to conform to current presentation.

The increase in revenue was driven by growing global commercial adoption of our OA Pain Management products as well as our introduction of new products in recent years.

Revenue from our OEM channel product family increased 4% for the year ended December 31, 2023, as compared to prior year, due to domestic sales growth of our Monovisc single injection pain product and favorable ordering patterns from J&J MedTech.

Revenue from our Commercial Channel product family increased 12% for the year ended December 31, 2023, as compared to prior year, due to international sales growth of our Monovisc single injection pain product and our Cingal next generation non-opioid single injection pain product, as well as favorable ordering patterns from our distributors.

Gross Profit and Margin

Gross profit for the year ended December 31, 2023 was $82.5 million, or gross margin of 68%, as compared with $73.2 million, or gross margin of 64%, for the year ended December 31, 2022.

The increase in gross profit for the year ended December 31, 2022, primarily resulted from higher revenue growth and the conclusion of the amortization of inventory step-up costs related to the 2020 Arthrosurface and Parcus Medical acquisitions.

This increase was partially offset by higher product rationalization charges, as well as higher manufacturing-related costs.

Gross margin includes acquisition-related amortization expenses and the impact of inventory step-up costs associated with the Arthrosurface and Parcus Medical acquisitions.

These expenses together increased cost of revenue by $6.2 million, or 7 points of gross margin, for the year ended December 31, 2022, as compared to increased cost of revenue of $12.7 million, or 9 points of gross margin for the same periods in 2021.

The increase in gross profit for the year ended December 31, 2023, primarily resulted from higher revenue growth, improved manufacturing efficiency and lower product rationalization charges.

This increase was partially offset by higher costs due to inflationary pressures for raw materials and freight charges.

Research and Development

Research and development expenses for the year ended December 31, 2022 were $28.2 million, an increase of $0.9 million, or 3%, as compared to the prior year, primarily due to increased costs to ensure compliance with growing regulatory requirements globally as well as new product development associated with our research and development pipeline.

Also included in research and development expenses are clinical costs.

We completed a third Phase III clinical trial for Cingal in 2022, which achieved its primary endpoint, and made significant progress in completing enrollment in our Hyalofast clinical trial.

Research and development expenses for the year ended December 31, 2023 were $21.8 million, an increase of $3.5 million, or 19%, as compared to the prior year, primarily due to increased costs to ensure compliance with growing regulatory requirements globally, such as EU MDR, as well as new product development associated with our research and development pipeline, led by Integrity, which received FDA clearance in August 2023 and was launched with first surgeries in rotator cuff repair and other tendon procedures in November 2023.

Selling, General and Administrative

Selling, general and administrative, or SG&A, expenses for the year ended December 31, 2022 were $84.8 million, an increase of $10.7 million, or 14%, as compared to the prior year.

The increase in SG&A expenses for the year ended December 31, 2022 was primarily related to the expansion of our commercial capability in the United States, including increased marketing, medical education and other operational capabilities to support our growing business needs, as well as increased commissions on higher sales.

The growth in SG&A expenses also reflects the increase in certain activities that were curtailed in the early stages of the COVID-19 pandemic, such as travel, as well as higher stock-based compensation expense driven by the growth in personnel to support Anika’s strategic transformation, and higher general corporate costs.

Contingent Consideration Fair Value Change

In the year ended December 31, 2021, we recorded a $21.1 million net benefit related to the change in fair value of our contingent consideration liabilities incurred associated with the acquisitions of Parcus Medical and Arthrosurface in 2020.

The liability for contingent consideration is remeasured at each reporting period until the contingency is resolved.

The decrease in fair value of the contingent consideration was due primarily to the decrease in the likelihood that certain contingent milestones would be achieved or because certain contingent milestones were not achieved.

In July 2021, we made a regulatory milestone payment in connection with the Arthrosurface acquisition in the amount of $10.0 million upon obtaining a regulatory clearance for a reverse shoulder implant system.

In September 2022, we made a milestone payment in connection with the Parcus Medical acquisition in the amount of $4.3 million.

The benefit from income taxes was $3.9 million for the year ended December 31, 2022, resulting in an effective tax rate of 20.7%.

The benefit from income taxes was $1.7 million for the year ended December 31, 2021, resulting in an effective tax rate of (70.4%).

The increase in our effective rate for the year ended December 31, 2022 as compared to the year ended December 31, 2021 is primarily due to the change in fair value of contingent consideration and the release of the valuation allowance related to the net deferred tax assets in Italy during 2021.

Net Income (Loss)

For the year ended December 31, 2022, net loss was $14.9 million, or $1.02 per diluted share, compared to net income of $4.1 million, or $0.28 per diluted share, for the prior year.

The decrease in net income and diluted earnings per share was primarily due to the net of tax benefit of $17.0 million recorded in 2021 related to the reduction in fair value of contingent consideration, as well as higher operating expenses in 2022 primarily driven by increased spending to expand our commercial capability and development of new products, partially offset by higher revenues and favorable gross profit in 2022.

Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2023 were $59.9 million, an increase of $8.7 million, or 17%, as compared to the prior year.

The increase in SG&A expenses for the year ended December 31, 2023 was primarily due to shareholder activism and related corporate costs during the year.

Income from Operations

For the year ended December 31, 2023, the loss from operations was $0.8 million, compared to income from operations of $3.7 million for the prior year.

The $2.8 million decrease in income from operations was due higher operating expenses.

The provision for income taxes was $6.6 million for the year ended December 31, 2023, resulting in an effective tax rate of 209.0%.

The provision from income taxes was $2.1 million for the year ended December 31, 2022, resulting in an effective tax rate of 49.1%.

The increase in our effective rate for the year ended December 31, 2023 as compared to the year ended December 31, 2022 is primarily due to a higher valuation allowance being recorded on U.S.

deferred tax assets in 2023.

Concentration of Risk

We have historically derived the majority of our revenue from a small number of customers, most of whom resell our products to end-users and are significantly larger companies than us.

For the year ended December 31, 2023, Mitek accounted for 45% of revenue, as compared to 43% in prior year.

While we believe that our expanded commercial infrastructure has been and will continue to diversify our revenue base, we expect to continue to be dependent on a small number of large customers, especially Mitek, for a sizeable portion of our revenues in the near-term future.

For the year ended December 31, 2024, J&J MedTech accounted for 57% of revenue, as compared to 62% in prior year.

While we believe that our expanded commercial infrastructure has been and will continue to diversify our revenue base, we expect to continue to be dependent on a small number of large customers, especially J&J MedTech, for a sizeable portion of our revenues in the near-term future.

The failure of these customers to purchase our products in the amounts they historically have or in amounts that we expect could materially impact our business.

We also have Notes Receivable that we have recorded as consideration related to the divestiture of the Arthrosurface asset group in which repayment will be dependent upon the cash flows from the Arthrosurface asset group.

In addition, if present and future customers terminate their purchasing arrangements with us, significantly reduce or delay their orders, or seek to renegotiate their agreements on terms less favorable to us, our business, financial condition, and results of operations will be adversely affected.

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Operating Activities

Cash (used in) provided by operating activities was $(1.8) million, $4.4 million and $8.4 million for 2023, 2022 and 2021, respectively.

The change in 2023 was primarily attributable to non-recurring expenses for the Parcus arbitration settlement and shareholder activism costs and an increase in inventories, primarily related to new product launches, partially offset by an increase in product sales.

For the foreseeable future, we expect to continue to invest in research and development for new products and clinical trials to support our growth strategy.

Cash provided by (used in) operating activities was $5.4 million, $(1.8) million and $4.4 million for 2024, 2023 and 2022, respectively.

The change in 2024 was primarily attributable to a lower net loss in 2024, compared to the same period in 2023.

For the foreseeable future, we expect to continue to invest in research and development for new products and clinical trials related to our HA-based technology to support our growth strategy.

These costs will be funded with a combination of cash on hand and cash expected to be generated from future operations.

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Cash used in investing activities was $8.3 million, $5.4 million and $7.5 million for 2024, 2023 and 2022, respectively.

Most of the spend on investing activities was for capital investments in manufacturing operations to support growing product demand and instruments to support clinical cases.

The change in 2023 was due to lower spending on software implementation.

The change was primarily due to an increase in capital expenditures in 2024 to support the expansion of manufacturing capacity at our Bedford facility and a purchase of developed technology for $0.6 million.

Financing Activities

Cash used in financing activities was $12.7 million, $6.3 million and $4.9 million for 2024, 2023 and 2022, respectively.

The change in 2023 was primarily due to $5.0 million used to fund an accelerated stock repurchase program completed during 2023.

The change in 2024 was primarily due to $10.9 million used to fund the stock repurchase program we started in May 2024.

For a discussion of our liquidity and capital resources as of December 31, 2023, and our cash flow activities for the fiscal year ended December 31, 2023, see “Part II, Item 7.

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Revenue Recognition – General

Pursuant to ASC 606, we recognize revenue when a customer obtains control of promised goods or services.

Pursuant to Accounting Standards Codification (“ASC”) 606, we recognize revenue when a customer obtains control of promised goods or services.

The amount of revenue that is recorded reflects the consideration that we expect to receive in exchange for those goods or services.

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We generate sales principally through three types of customers:

(i) commercial partnerships (ii) hospitals and ASCs, and (iii) distributors, referred to as distribution model.

(i) commercial partnerships (ii) hospitals and ambulatory service centers, and (iii) distributors, referred to as distribution model.

For commercial partnership sales, we sell our products directly to these partners, who perform most of the downstream sales and marketing activities to customers and end-users.

These arrangements may include the grant of certain licenses, performance of development services, and the supply of product.

Our largest such customer, Mitek, represented 45% of total revenues for the year ended December 31, 2023.

Our largest such customer, J&J MedTech, represented 57% of total revenues for the year ended December 31, 2024.

We recognize revenue from product sales when the customer obtains control of our product, which typically occurs upon shipment to the customer.

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Revenue from sales-based royalties is included in revenues in our consolidated statement of operations.

For sales to hospitals and ASCs, which generally pairs in-house sales representatives with local or regional distributors, the inventory is generally consigned so that products are available when needed for surgical procedures.

For sales to hospitals and ambulatory service centers, which generally pairs in-house sales representatives with local or regional distributors, the inventory is generally consigned so that products are available when needed for surgical procedures.

No revenue is recognized upon the placement of inventory into consignment, as we retain the ability to control the inventory.

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There was no deferred revenue as of December 31, 2024 and 2023, respectively.

Generally, customer contracts contain Free on Board, or FOB, or Ex-Works shipping point terms where the customer pays the shipping company directly for all shipping and handling costs.

Generally, customer contracts contain Free on Board (“FOB”) or Ex-Works shipping point terms where the customer pays the shipping company directly for all shipping and handling costs.

In those contracts in which we pay for the shipping and handling, the associated costs are generally recorded along with the product sale at the time of shipment in cost of revenue when control over the products has transferred to the customer.

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Our general product warranty does not extend beyond an assurance that the product or services delivered will be consistent with stated contractual specifications, which does not create a separate performance obligation.

We recognize the incremental costs of obtaining contracts as an expense when incurred as the amortization period of the assets that we otherwise would have recognized is one year or less in accordance with the practical expedient in paragraph ASC 340-40-25-4.

These costs are included in selling, general and administrative expenses.

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These intangible assets are carried at cost, net of accumulated amortization.

Amortization is recorded on a straight-line basis over the intangible assets' useful lives, which range from approximately five to sixteen years.

Amortization is recorded on a straight-line basis over the intangible assets' useful lives, which range from approximately three to sixteen years.

We review long-lived assets for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of those assets are no longer appropriate.

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If impairment is indicated, the asset is written down to its estimated fair value based on a discounted cash flow analysis.

During the year ended December 31, 2023, the Company determined that certain of its intangible assets related to its Arthrosurface and Parcus reporting unit were impaired mainly due to slower than expected revenue growth from product sales that have impacted cash flows with this reporting unit.

As a result, we recorded a $62.2 million charge to intangible assets related to its Arthrosurface and Parcus reporting units during the year ended December 31, 2023.

During the years ended December 31, 2024 and 2023, we determined that certain of our intangible assets related to our Arthrosurface and Parcus reporting unit were impaired mainly due to slower than expected revenue growth from product sales that have impacted cash flows with this reporting unit.

As a result, we recorded $1.5 million and $62.2 million in impairment charges to intangible assets related to our Arthrosurface and Parcus reporting units during the years ended December 31, 2024 and 2023, respectively in discontinued operations.

In determining the useful lives of intangible assets, we consider the expected use of the assets and the effects of obsolescence, demand, competition, anticipated technological advances, changes in surgical techniques, market influences and other economic factors.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity