Anika Therapeutics, Inc. — Fiscal 2021 Form 10-K Summary
Business context and reporting period
Anika Therapeutics is a global joint-preservation company focused on osteoarthritis pain management, regenerative solutions, soft-tissue repair, and bone-preserving joint technologies. Its portfolio is based primarily on hyaluronic-acid technology and includes products from the 2020 acquisitions of Parcus Medical and Arthrosurface. The filing covers the fiscal year ended December 31, 2021; it is not a quarterly filing.
Anika reported one operating and reportable segment. Its largest customer, DePuy Synthes Mitek Sports Medicine, accounted for 45% of 2021 revenue, compared with 49% in 2020.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $147.8 million | $130.5 million | Up 13% |
| Gross profit | $82.9 million | $69.0 million | Up 20% |
| Gross margin | 56% | 53% | Up 3 percentage points |
| Research and development | $27.3 million | $23.4 million | Up 17% |
| SG&A | $74.1 million | $60.1 million | Up 23% |
| Income from operations | $2.6 million | $(28.3) million | Improved |
| Net income (loss) | $4.1 million | $(24.0) million | Improved |
| Diluted EPS | $0.28 | $(1.69) | Improved |
| Adjusted EBITDA | $16.4 million | $23.9 million | Down $7.5 million |
| Cash flow from operations | $8.4 million | $13.1 million | Down $4.7 million |
| Capital expenditures | $5.1 million | $1.6 million | Up $3.5 million |
Revenue by product family was $89.5 million for OA Pain Management, $48.6 million for Joint Preservation and Restoration, and $9.7 million for Non-Orthopedic products. International customers represented 23% of product sales.
At December 31, 2021, cash and cash equivalents were $94.4 million, compared with $95.8 million at year-end 2020. Cash, cash equivalents and investments totaled $94.4 million, compared with $98.3 million in 2020, and working capital was $138.7 million, compared with $140.5 million. The company had no outstanding borrowings under its $75.0 million senior revolving credit facility and could request up to an additional $75.0 million, subject to conditions and lender approval.
Total assets were $347.5 million and total stockholders’ equity was $287.1 million at year-end. Lease liabilities totaled approximately $19.3 million. Contractual obligations included $28.2 million of operating and finance lease payments and $8.2 million of purchase commitments.
Material changes versus the prior comparable period
- Revenue increased 13%, reflecting partial recovery in elective procedures, improved strategic-partner ordering patterns, adoption of newer products, and a full year of results from Parcus Medical and Arthrosurface.
- Joint Preservation and Restoration revenue increased 23%, driven by organic growth, new-product adoption, and the acquired businesses.
- Gross margin expanded to 56% from 53%, primarily because of lower acquisition-related inventory step-up amortization. This benefit was partly offset by product rationalization charges, lower production levels, and supply-chain and staffing challenges.
- SG&A increased 23% as the company expanded U.S. commercial capabilities, marketing, operating infrastructure, and stock-based compensation.
- Unlike 2020, Anika recorded no goodwill impairment charge in 2021. The 2020 results included a $42.5 million non-cash goodwill impairment charge.
- Anika recorded a $21.1 million operating benefit from reducing the fair value of contingent consideration, compared with a $28.7 million benefit in 2020. A $10.0 million Arthrosurface regulatory milestone was paid in July 2021.
- Reported net income improved to $4.1 million, but adjusted net income declined to $(0.4) million from $10.1 million, and adjusted EBITDA declined, reflecting higher commercial, clinical, stock-compensation, and operating costs.
- Operating cash flow declined despite the return to profitability, primarily due to contingent-consideration payments and working-capital timing.
Guidance, outlook, commentary, risks, and unusual items
The filing does not provide formal financial guidance. Management stated that it expects continued investment in research and development, clinical trials, commercial infrastructure, and new products, funded through cash on hand and expected operating cash flow. The company had previously withdrawn financial guidance because of uncertainty during the COVID-19 pandemic.
- Cingal enrollment in a U.S. pilot study was completed in November 2021. Management expected to complete its data review in mid-2022; a successful pilot could inform a further Phase III trial. Cingal remains unavailable for commercial sale in the United States.
- The company continued its U.S. Hyalofast clinical trial, with enrollment and international site activity affected by COVID-19.
- New products launched or advanced in 2021 included WristMotion Total Wrist Arthroplasty, a Tactoset indication for suture-anchor fixation, and a reverse shoulder implant system that received 510(k) clearance.
- COVID-19 continued to affect elective procedure volumes, customer product approvals, clinical-trial timelines, staffing, manufacturing capacity, logistics, and supply availability. The filing states that procedure volumes had not fully returned to pre-pandemic levels.
- Material concentration remains a key risk: Mitek accounted for 45% of revenue and 41% of accounts receivable. Mitek has substantial control over U.S. pricing, promotion, reimbursement strategy, and ordering patterns for Monovisc and Orthovisc.
- The company relies on a limited number of suppliers and uses a single third-party contract manufacturer for bone-preserving joint technologies. Disruption could affect production and shipments.
- Regulatory execution is a significant risk, including FDA approval requirements for Cingal and Hyalofast, evolving European Medical Device Regulation requirements, clinical-trial delays, and possible product approval limitations.
- Anika recorded a $2.9 million inventory reserve in 2021 and ended the year with approximately $9.1 million of total inventory reserves. Inventory valuation was identified as the audit’s critical audit matter.
- Former Parcus Medical unitholders initiated arbitration concerning earnout provisions. The company does not anticipate resolution during 2022 and cannot estimate the potential liability.
- The company reported unqualified audit opinions on its financial statements and internal control over financial reporting.
Most important facts for an investor to verify
- Whether revenue growth and elective-procedure recovery continued after December 31, 2021, particularly in Joint Preservation and Restoration.
- Progress, results, cost, and timing of the Cingal pilot study, any Phase III trial, and the Hyalofast U.S. clinical program.
- Whether Mitek’s 45% revenue concentration has declined and whether its ordering, pricing, or distribution arrangements have changed.
- Operating cash flow conversion, inventory levels and reserves, and the sustainability of reported profitability after excluding contingent-consideration benefits and other unusual items.
- The status and potential exposure of the Parcus earnout arbitration.
- Compliance costs and product-market impacts from EU MDR and other regulatory requirements.
- The company’s ability to manage supply-chain constraints, staffing shortages, manufacturing dependencies, and COVID-19-related procedure volatility.
- Remaining contingent consideration, lease obligations, credit-facility covenants, and future capital requirements.