Good evening, ladies and gentlemen, and welcome to Anika's First Quarter 2022 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Mark Namaroff, Vice President, Investor Relations, ESG and Corporate Communications. Please proceed.

Thank you, Sarah. Good evening, everyone, and thank you for joining us for Anika's first quarter conference call and webcast. Our first quarter earnings press release was issued after the close of the market today, and is available on our Investor Relations website located at www.anika.com as are the supplementary PowerPoint slides that will be used for the discussion today. With me on the call today are Dr. Cheryl Blanchard, President and Chief Executive Officer; and Mike Levitz, Executive Vice President, Chief Financial Officer and Treasurer. Please take a moment to open the slide presentation and refer to Slide 2. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance. In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which include adjusted gross margin, adjusted EBITDA, adjusted net income and adjusted earnings per share. which are used in addition to results presented in accordance with GAAP financial measures. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the available presentation slide deck and in our first quarter 2022 press release. And now I'd like to turn the call over to our President and CEO, Dr. Cheryl Blanchard. Cheryl?.

Thanks, Mark. Good evening, everyone, and thanks for joining us. Please turn to Slide 3. 2022 is a pivotal year and an exciting time for Anika as we celebrate our 30th year in business on our journey to becoming a leading provider of early intervention, joint preservation solutions, and we're off to a strong start. Since our last call, we've continued to make great progress with our product development and commercial efforts, which I'll review in more detail shortly. I'd like to start by covering our first quarter highlights, and then I'll review updates to our new product development pipeline and turn the call over to Mike for his review of our Q1 financials and guidance for 2022. We ended the quarter with revenue up 7% over the first quarter of 2021, mainly driven by OAP management, which was up 18%, primarily on favorable order timing. Our joint preservation and restoration business was essentially flat with the first quarter of last year. We were initially hampered in January due to Omicron but as procedures lifted in February, we saw some positive recovery through the rest of the quarter. While the downstream macroeconomic effects of staffing shortages and supply chain issues could remain as headwinds for the industry for some time, we were encouraged to see COVID-related impacts abate during the quarter and are cautiously optimistic for market improvement through the year. Our nonorthopedic business was down 34% due to a tougher comparison to last year as there were last time buys for certain legacy products which elevated our prior year first quarter revenues. Our focus in Q1 with some in-person meetings resuming was on ramping up our sales and marketing efforts to drive awareness of Anika and our full joint preservation product offering. In March, we showcased our full early…

Thank you, Cheryl. Please turn to Slide 6. I will now walk you through our financial results for the first quarter of 2022. Total revenue for the quarter was $36.7 million, an increase of 7% over the prior year. The increase was primarily in OA pain management, where revenues rose 18% to $22.7 million due to both continued COVID recovery and favorable order timing in international and veterinary. As a reminder, revenues in OA pain management can vary significantly on a quarterly basis based on ordering patterns by our partners and distributors in the United States and internationally, more so over the last couple of years due to the global impact of COVID but that quarterly volatility generally stabilizes on an annual basis. Our joint preservation and restoration revenue decreased 1% from $12.2 million to $12.1 million, as the business saw some recovery after early quarter COVID headwinds. Our nonorthopedic revenue was $1.8 million, down 34% from last year, reflecting higher revenues from significant end-of-life purchases during the first quarter of last year. Our gross margin in the first quarter was 59%, and includes the impact of $1.6 million of noncash acquisition-related expenses from the 2020 acquisitions of Arthur Surface and Parcus. Our adjusted gross margin, which excludes the acquisition-related expenses, was 64% and reflecting unfavorable volume and reserves driven by supply chain and staffing challenges. From a spending standpoint, our research and development and SG&A expenses together totaled $25.4 million in the first quarter, up from $24.5 million in the same period of 2021 as we expanded medical education and are continuing to strengthen Anika's internal capabilities in support of our global commercial growth objectives. Our net loss for the quarter was $2.9 million or $0.20 per share compared to net income of $2.8 million or $0.20 per diluted…

Thanks, Mike. Please turn to Slide 9, where I'll wrap up, and then we'll take questions. We remain excited as we transform the business, and we're focused on executing our growth story in joint preservation where we believe we have a unique market opportunity and right to win. We continue to make significant progress on our new product development pipeline, including a note suture anchor to launch in the second half of this year, fully launching our in-person medical education programs and commercial execution with the recent addition of Rob Delp to lead that effort. And we view the shift of procedures to the ASC setting as a tailwind for Anika with our focus in that space. The unique product portfolio that we have built differentiates Anika as the company focused on the joint preservation customer and the early intervention orthopedic continuum of care, delivering value in the ASC and to our shareholders.. As always, I'd like to thank the Anika employees for their hard work as we continue our transformation. We're happy to take your questions now.

[Operator Instructions] We'll take our first question from Chris Cooley with Stephens.

Congrats on a solid start here to the new year. I guess just for me, maybe two quick ones here this afternoon. I'd be curious, obviously, you just laid out kind of an enhanced guide for the calendar year 2022. And with that, you talked about kind of -- sorry, looking back down here, low single-digit growth in the OA pain franchise. I'm just curious how you're thinking about that from the perspective of volume and pricing? Obviously, a lot of discussion here in the sector over the last several months as we come into the second half of the year. So I just want to make sure I understand the underlying assumptions there that gets you to that kind of low single-digit growth for the full year? And then I've got a follow-up.

Chris, it's Mike. I'm happy to speak to that on the number side, and Cheryl, feel free to jump in, obviously. So our view of the market in '18 is about a 1% growth in that market. And we expect to grow ahead of the market. Our U.S. franchise that we sell through J&J Mitek is the market leader. This is a mature market. and we're pleased to be the market leader in that space. The guide is consistent with what we've been saying and what I think we've been delivering. We did have faster growth in the first quarter. And that was driven by favorable order timing and some recovery in the non-U.S. parts of our business like our international business as well as to a smaller extent, our veterinary business or veterinary products that we sell. But we are right in line. Our J&J Mitek business grew right in line with our full year guide of low single-digit growth. There were not any dynamics that were unusual relative to pricing. And again, we have a strong market position in that mature market.

I appreciate the additional color there. Also just wanted to touch base, in particular on the CINGAL pilot trial. I'm assuming that would be in terms of just putting that report out, that would be done at a major medical meeting, but just kind of thoughts there that would be presented and you'd have, I guess, continued discussions with the agencies. Just want to kind of make sure I'm thinking about that time line correctly.

Yes. Thanks, Chris. It's Cheryl. Thanks for your question. So the CINGAL pilot trial as we've discussed, completed enrollment, and we expect to have data readout and report on that in the fall. So we will provide an update to -- the Street on that. once we kind of get to that point in the year. But we're looking forward to it, and things are on track for us to be able to do that. Nothing has changed there..

Next, we'll move on to Jim Sidoti for Sidoti & Company.

It sounded like you indicated that the OA pain management business was unusually strong in the quarter. Can you give us a little more color on that? And is that going to impact the second quarter?

Jim, it's Mike. Yes, it was stronger in the quarter, largely due to favorable timing in areas outside the United States as well as we also have veterinary products that we sell. And so we did not change our expectation for the full year guide of low single-digit growth in that space, and that's in line with how J&J Mitek grew our revenue in the first quarter. In terms of guidance for the second quarter, we're not giving specific guidance for -- on a quarterly basis. But I think historically, what we've seen is -- the second quarter generally is a stronger quarter for the J&J Mitek business. But given that we've got the favorability and timing that we saw in the first quarter, there will be -- we would expect that to be a bit of an offset in the second quarter because we just think some people probably accelerated some of their purchases. So that's why we're not changing our guide for the year. We're pleased with the solid start. We are raising our view that we expect to finish towards the upper end of our guide on a total company basis. And that's driven by the favorable performance in the OA Pain Management and retiring some risk there just as we work our way through the year as well as a little bit as well in nonorthopedic. It's a much smaller part of our business, but we're pleased with the orders that we have there, and we updated that guidance a little bit as well.

And then on the joint preservation, you continue to expect mid-single to low double-digit growth there, but it was down in the first quarter. So can you talk about what -- why it was down and was 1Q '21 unusually strong with Omicron, the big factor there? And then can you just talk about why you think it's going to bounce back in the next two quarters?

Jim, it's Cheryl. Thanks for the question. Yes. We -- I think we, along with the rest of the industry, saw a pretty tough January because of Omicron and then recovery throughout the quarter. That's exactly what we saw. If you look at our numbers, you'll see we were essentially flat to last year. And we're excited about the rest of this year and then moving through the rest of our strategic planning period into '23 and '24 because of the growth catalysts that we've got, we expect to see the market improving. That's the general environment health care environment seems to be improving. We've got a number of new product launches planned in the next six to 24 months. We're back in person doing medical education, training on the safe and effective use of our products. We just brought, we think, a really great talent on and Rob Delp, who used to run the Americas U.S. sales for all of Zimmer Biomet, and he's ready to roll up his sleeves and dig in and really bring a level of sales force execution to the organization and commercial execution. And we look to have those growth catalysts really drive us to that acceleration that we're expecting to see in 2023 and 2024.

Okay. Now I know Rob has only been there probably a few weeks, but initial impressions since you've gotten there about specific to the size of the sales force. Do you think you have the right number now? Or do you think you'll be adding in 2022?

Well, I won't speak for Rob yet because you're right. He joined us in April, and I don't want to put any definitive statements out there yet about his thoughts around the size of the sales force. But I think in general, and I've said this before and I'll just reiterate it, I don't think from a size of sales force perspective because we have a hybrid sales force. We've got a strong number of folks from an internal perspective. And then a very large number of independent distributors that we work through in that hybrid model that we have in the United States.. We'll continue to drive excellence around that structure and optimization around that structure and look forward as we move forward with our product launches, our medical education and driving sales execution to continue to really look to that acceleration in the '23 to '24 time frame.

And there are no further questions. I'd like to turn the conference back over to Cheryl Blanchard for any additional or closing remarks.

Thanks, Sarah, and thank you all very much for your attention and your interest in Anika. We look forward to speaking next on our second quarter call in August, and I wish everyone a good night. Thank you.

Thank you. That does conclude today's teleconference. We do appreciate your participation. You may now disconnect.