Good afternoon, ladies and gentlemen, and welcome to Anika’s Second Quarter 2024 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Mark Namaroff, Vice President, Investor Relations, ESG and Corp. Communications.

Thank you. Good afternoon everyone. Thank you for joining us for Anika’s second quarter 2024 conference call and webcast. Our Q2 earnings press release was issued after the close of the market today and is available on our Investor Relations website located at anika.com as our as our 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 Steve Griffin, Executive Vice President, Chief Financial Officer and Treasurer. Please take a moment and 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 our 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 that 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 the adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation deck and our second quarter 2024 press release. And now I’d like to turn the call over to our President and CEO, Dr. Cheryl Blanchard. Cheryl?

Good afternoon, everyone, and thanks for joining us. Please turn to Slide 3. Now midway through 2024, we’re making great progress on the execution of our strategy to refocus the business on the areas that deliver the greatest value to our shareholders and drive results that accelerate our path to profitability. Our efforts in the first half of the year set the stage for the rest of 2024 and beyond as we announced the full market release of our newest regenerative product integrity, and have completed our cost savings initiatives to realize significant operating expense savings this year. Let me walk you through the key highlights of the quarter, and then I’ll turn the call over to Steve to review the financials and our guidance for 2024. Overall revenue for the second quarter was lower by 5% due to the timing of very strong U.S. Orthovisc and Monovisc units ordered in the second quarter of 2023. I’m very pleased to say that we delivered healthy adjusted EBITDA margins of 15% during the quarter as we’re making meaningful progress on our refocused business strategy in our path to profitability. In joint preservation and restoration, we delivered 7% growth as we’re seeing the results of our new product launches, particularly X-Twist and our new regenerative Hyaluronic Acid or HA-based Integrity Implant System, which I’ll speak to more in a moment. This quarter, OA Pain Management was lower by 9% as we expected on higher U.S. revenue last year, offset by strong international growth, which is up 17% year-to-date. The strong OUS growth continues to be driven by market share gains as well as new country expansion across all 3 brands of Cingal, Monovisc and Orthovisc. International growth across our OA Pain Portfolio has been a key value driver as Cingal is becoming…

Thank you, Cheryl. Before I begin with an overview of the quarter, I’d like to take a moment to reflect on my early impressions after joining Anika in June. I joined Anika because of the opportunity to partner with this leadership team on developing and commercializing the next generation of regenerative solutions built on the rich history of HA technology that exists here at Anika. Each employee I’ve had the opportunity to meet with is mission-oriented and passionate about unlocking the full value of these products and technologies for patients around the world. It’s an exciting time to join this energized team as we refocus our attention on our highest returning programs to deliver great patient and shareholder outcomes. Please refer to Slide 5 in the online presentation, where I’ll walk through the results of the second quarter of 2024. Anika generated $41.9 million in the total revenue in the second quarter, down $2.4 million as compared to the same period in 2023 and in-line with prior expectations, driven by the timing of U.S. OA Pain Management orders. Revenue in our largest product family, OA pain management decreased 9% in the second quarter to $26.7 million. This was primarily due to lower U.S. sales as a result of higher-than-normal shipments in the second quarter of 2023, as previously disclosed. In the quarter, international sales grew by an impressive 19%, representing growth in all 3 brands, Monovisc, Orthovisc, and Cingal as we continue to enter new markets and gain share with our international distributors. Joint Preservation and Restoration revenue increased 7% in the second quarter to $13.5 million. This growth was led by our limited market release of Integrity as well as contributions from X-Twist, partially offset by lower sales of more mature products. Our regenerative solutions portfolio, including Integrity, continues…

Thanks, Steve. Please turn to Slide 7. In closing, the second quarter was strong, where we demonstrated our commitment to delivering for customers, their patients and shareholders while advancing the next generation of pain management and regenerative technology. The full market release of Integrity provides Anika with a highly differentiated product that enables us to control our market access and engage directly with surgeon customers to continue to develop new products that advance early intervention orthopedic care. Our OA Pain Management franchise remains a foundational pillar for Anika and our recent international growth demonstrates the value of Cingal and opportunity set that lies ahead in the U.S. Our refocused business strategy provides clarity on our highest ROI initiatives, while we continue to strategically assess all value creation opportunities. Lastly, our progress to date wouldn’t be possible without every member of the Anika team. I’m proud of their resilience and hard work, and we look forward to sharing more about our progress in the coming months. With that, we’ll open up the line for questions.

Thank you. [Operator Instructions] Your first question comes from Jim Sidoti from Sidoti Company.

Good afternoon. Thanks for taking the questions. So it sounds like there’s some headwinds in the U.S. on the pain management business. Is the growth internationally for those products? Is that enough to offset those headwinds?

Yes. Good to talk to you, Jim. The short answer is yes. We are reaffirming our total revenue guidance on OA Pain. And you’ll see that the outsized growth that we saw in the first half of this year, up 17%, has done really, really well, and it will continue here into the second quarter, somewhat moderately lower than how it performed in the first quarter or the first half, but we do expect that, that will be able to offset some of the softness that you referenced on the U.S. side.

Great. And then for some of the new products that you expect to have in the next couple of years, like Hyalofast and Cingal, any initial comments on how you plan to distribute those products?

Hi, Jim. Thanks for the question. Yes, so for Hyalofast, that’s obviously a regenerative product and very core to the early intervention portfolio that we’ve put together. It’s a product that we already sell, that we’re very excited about, that has lots of clinical data, 40 publications, will have 15-year data this year. And we have a really strong process, as you heard me talk about on the call as we’re starting to engage with FDA on that product. So I think you can expect to hear more from us on Hyalofast. Regarding Cingal, that is a product that, I think, fits more into that OA Pain Management portfolio, and we obviously haven’t announced anything relative to how we would consider distributing that in the United States. But we clearly have a different model that we deploy today with our other OA pain products. I think more to come on that relative to Cingal.

And it seems like the cost savings initiatives have really made a difference. Were there any one-time cost savings in the quarter or should we expect these levels going forward?

Yes. I mean when you take a look at the press release, you’ve been able to see the one-time adjustments of those non-recurring items, but when you back those out, you just look at it on a year-over-year basis, I think your conclusion is right. We’re seeing about $3 million of real cost savings on the OpEx lines driven by the actions that were taken in the first quarter. Those will continue as we move forward here, driven by the actions.

Okay, alright. Thank you.

Thanks, Jim.

Thank you. The next question comes from Harrison Parsons from Stephens. Please go ahead.

Good afternoon and thanks for taking the questions. I wanted to just dig in a little bit about your comments around the more mature products and the Joint Preservation Restoration segment. What percentage of that segment do those products make up? And are they declining? Or is it just slower growth that you’re seeing from those?

Yes. Hi, George [ph]. Thanks for the questions. We have talked about this in prior quarters. There are some, I would say, legacy products in that JPR business that are either kind of flat, a couple of them to declining. It’s not all the products for sure. We certainly haven’t broken them out with any kind of percentages and that’s obviously largely being offset by some higher growth, newer products like X-Twist and Integrity as we’ve talked about it today. So, I think you will see us going forward, continuing to focus on the new products as we really leverage the expertise that we have got here at Anika around hyaluronic acid. And the new products is really where we have made a lot of our investments. So, we look forward to continuing to report out on the growth of that business relative to the new products in particular.

And the only thing I might add to that is, specifically, the regenerative piece of the JPR business is performing quite well, as you can tell, and that’s really where you are going to start to see the benefits of the Integrity launch come through. So, in the first half of the year, we saw mid-teens growth coming from that regenerative part of the portfolio and we expect that to pick up now as we head into the second half of the year.

Okay, great. That’s helpful. And then I just wanted to – just staying on that segment, just kind of dig into any products beyond X-Twist and Integrity that are driving that growth to get you to the full year guide?

Sure. There are other products that are driving growth, but I think we have chosen to focus on X-Twist and Integrity just because those are the newer products. We obviously just got to full market release on the biocomposite version of X-Twist that allows us now to address that full $600 million-plus rotator cuff market on the soft tissue fixation side. And now it’s early days, but we are in about a month into the full market release of Integrity. So, those two products are really, I would say, the higher growing portions of that JPR part of the business and why we chose to point those two out. We will obviously continue to update as we go forward. I will tell you though that the regenerative portion of the business, if you want to think about it that way, which includes also Hyalofast and Tactoset, is a piece of that JPR business that is doing very well. Steve, I don’t know if you got anything to add to that.

No, I think that covers it.

Okay.

Thanks for the color.

Alright. Thank you. Your next question comes from Mike Petusky from Barrington Research. Please go ahead.

Good evening. Cheryl, the international growth that you guys called out for OA and you sort of said new country expansion, which countries did you guys recently enter or and I guess, were any of them in the second quarter?

Yes, I will tell you, Mike, we typically don’t break out specifically when we launch in a new country, unless it’s material to the business, but I will tell you that we have continued to expand in Europe and kind of the South America, Latin America regions going forward. And I would say we haven’t expanded into a new country that’s really going to change our numbers materially. When that happens, I will certainly let you know. I think the good news is that the bigger portion of that growth has really come from continued market share capture of the countries in which we already sell. And even when we launch in a new country, it takes a little bit of time for those distributors to kind of get their feet on the ground and get up and running. So, I think we are really starting to see some of the nice impact as we launch in new countries, and they have a chance to really get grounded in the products and drive into those markets. That’s really what we are seeing propel much of that significant growth number with that OUS business. It’s actually very exciting for us.

On Cingal, the regular communication with the FDA that you called out, has the last 90 or so days – I mean are there learnings there where you say, okay, we have pretty much got this dialed in, in terms of what we are going to need to do, or is there still a lot of, I guess additional communication that needs to happen there?

Yes, it’s a great question. And it’s a topic that we would love to have it be going faster. We are in constant communication with FDA. We reported out last quarter that they had come back to us with some feedback. We went back to them with some additional questions and the feedback they gave us from those questions was go ahead and schedule another meeting. So, we are in the process of doing that. And we feel like that represents good progress just because we are really starting to, I would say, hone in on the topics that we want to make sure we get full clarification around before we begin any additional non-clinical testing. So, there is progress being made, and we look forward to providing a more fulsome update by the end of the year relative to how we are thinking about that timing.

Okay. And then on the study you guys, I guess are planning to enroll for Integrity, and I just want to make sure I understand, the primary reason for this is sort of for your MDR filing, and I understand also to strengthen the value proposition in the U.S., but can you guys – I guess first of all, I just want to make sure I understand what the motivation for that is and/or confirm that I understand what the motivation for that is, and then what do you think that costs and over what timeframe?

Yes, absolutely. So, we are excited to be able to get that study going. It’s been in the planning stages as we have been in limited market release. It really is two-fold. We know that we need a good set of high-quality clinical data to really drive market access in the United States in the way that we know is possible with this superior technology. But in Europe now, because this is a Class III device, we have to have high-quality clinical data for the MDR filing prior to marketing, which is different than it used to be. So, it’s really two-fold in nature. And again, we are excited to get it started. I will tell you though, we have a couple of post-market studies already ongoing in the United States that are going to yield some clinical publications next year. So, you will begin to have some clinical data coming out for U.S. marketing and market access purposes before we get to the – what I would consider kind of the higher-quality clinical data that we are going to need for the MDR filing.

Yes, and we don’t necessarily share the details on the breakdown of the cost for each study, but what I would say is we would expect it to start in the second half of this year and continue into next year as well. It will be a little bit of an offset to some of the cost savings that we have seen on the operating expense line. So, while – I mentioned this earlier, we have seen about $3 million of operating expense savings in the second quarter alone. It will eat into that to some degree as we work our way into the fourth quarter here as a little bit of a drag against some of those cost savings, but it will take a number of years to play out associated with the overall study expense.

Any sense of patient enrollment number?

I will tell you what, once we get all the details posted on ClinicalTrials.gov, I will be in a better position to provide you with those details. It’s a study that we have very clear line of sight to around excitement from the clinicians for enrollment. It doesn’t have any complexities in a clinical trial design that’s going to make it difficult to enroll. And as soon as we get that posted, I am going to look forward to going through in a little bit more detail about what it looks like, number of patients and timing.

Sure. I totally understand it’s very, very, very early days till full market release of Integrity, but I am just curious, I mean is there anything you can share in terms of, hey, some of these 60 surgeons that were in the limited market release, they have already done cases in the last 30 days or 35 days or how long you guys have been launched? Is there anything you can share just in terms of the last four weeks, five weeks, six weeks, however long Integrity has been in full market? Thanks.

Yes, absolutely. I am excited to. It’s something that I track multiple times a day and I think there are some interesting factoids that I would be happy to share. I mean first of all, the feedback that we are getting is tremendous. We are getting videos of patients that are rapidly rehabilitating and healing that surgeons are posting on LinkedIn and other social media outlets. They are talking about it. They are excited about the fact that it’s a higher strength construct even when wet, that it has increased regenerative capacity that they are seeing play out clinically. They are really appreciative of the all arthroscopic instrumentation and the streamlined surgical technique and the fact that it’s not using a xenograft or an allograft. So, that’s some of the feedback we are getting. But I will tell you the pull is real from the surgeon community. And even with some of the distributors, you heard me mention that we are signing on some new distributors that are focused on the regen products. The fact that we increased even in a limited market release where we had kind of constrained supply, 40% from Q1 to Q2, I think is a sign. The fact that we are getting feedback from surgeons immediately saying, boy, I would really like to use this in this tendon. I would like a different geometry. I would like a different shape factor. These are all things that are terribly exciting for us and really give us a lot of confidence around our product development pipeline and our ability to make these investments in the regenerative portfolio in a way that there is a real ROI here. And again, this leverages our proprietary HA technology, which is really where Anika has the expertise and the right to win.

Okay. I know a lot of good stuff there, so I mean you were more sharp though, any numbers in terms of surgeons that have actually done cases since the full market?

Oh, yes. I mentioned it in the script. We had over 60 surgeons in ELMA [ph] I would say that…

That was in the limited market, wasn’t it?

In the limited market release, that’s right. If you think about the fact that – I also mentioned that we are looking at kind of 40% quarter-over-quarter growth and about 25% of the surgeons are new to Anika. You can kind of think about it that way. I have seen already just this week at the beginning of the month, a good number of very new customers doing cases just at the beginning of this month. So, again, it’s a different type of product and a different level of pull with totally new customers to Anika.

Yes. The 40% sequential growth is what we have experienced and what we expect to continue here for a short period of time. So, we are excited to share more as we get to the back half of the year.

And I just want to make sure I understand that’s cases, correct, or surgeons?

40% is cases.

Okay. Alright. Great. Thank you.

You’re welcome. Thank you.

Thank you. There are no further questions at this time. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.