Executive Summary / Key Takeaways

• Anika Therapeutics has strategically pivoted to focus exclusively on its core hyaluronic acid (HA) technology platform, divesting non-core assets to concentrate resources on high-potential OA Pain Management and Regenerative Solutions.
• The company's future growth is heavily reliant on its Commercial Channel, driven by strong international OA Pain sales and the promising early adoption of the Integrity Implant System, which is showing superior performance characteristics.
• Key pipeline products, Hyalofast (cartilage repair) and Cingal (next-generation OA pain), are progressing towards potential U.S. market entry by 2026 and beyond, representing significant greenfield opportunities.
• Near-term financial performance is impacted by pricing pressure in the OEM channel (primarily U.S. OA Pain sales through J&J MedTech) and temporary manufacturing yield issues, leading to updated 2025 revenue and Adjusted EBITDA guidance.
• Despite near-term headwinds and planned investments in the regenerative pipeline, Anika maintains a strong balance sheet with $53.4 million in cash and no debt, providing the financial flexibility to fund its strategic initiatives and regulatory pathways.

A Strategic Pivot Towards Hyaluronic Acid's Promise

Anika Therapeutics, Inc. stands at a pivotal juncture, having recently completed a strategic realignment to sharpen its focus on its foundational strength: hyaluronic acid (HA) technology. With over 30 years of expertise in developing HA-based solutions for early intervention orthopedics, the company has built a portfolio spanning osteoarthritis (OA) pain management and regenerative medicine. This journey, marked by initial success with products like Monovisc and Orthovisc, saw a period of expansion through the 2020 acquisitions of Parcus Medical and Arthrosurface, aimed at broadening its orthopedic footprint. However, a comprehensive strategic review concluded that these acquired assets did not deliver expected synergies and faced increasing complexities. This led to the decisive divestitures of Arthrosurface in October 2024 and Parcus Medical in March 2025, signaling a clear return to the core HA platform as the primary engine for future value creation.

This strategic shift is reflected in Anika's new revenue classification, dividing the business into two distinct channels: the Commercial Channel and the OEM Channel. The Commercial Channel represents products where Anika controls sales, marketing, and pricing, including its international OA Pain portfolio (Monovisc, Orthovisc, Cingal) and its regenerative solutions (Integrity, Tactoset, Hyalofast). This is the company's designated growth engine, leveraging its direct commercial capabilities and proprietary technology. The OEM Channel, conversely, comprises products developed and manufactured by Anika under long-term agreements, primarily U.S. OA Pain products sold through J&J MedTech, where Anika does not control commercial activities. While still a significant revenue contributor and cash generator, this channel is subject to external market dynamics and partner strategy.

At the heart of Anika's strategy is its differentiated HA technology. Beyond standard viscosupplementation, Anika possesses proprietary methods to modify the HA molecule, tailoring properties for specific applications. A key differentiator is the HYAFF technology, which transforms HA into a solid biopolymer platform. This enables the development of advanced resorbable regenerative products like Hyalofast, a single-stage, off-the-shelf scaffold for cartilage repair, and the Integrity Implant System, an HA-based scaffold for tendon repair. The Integrity system, in particular, is highlighted for its superior regenerative properties and crucial "time zero" mechanical strength compared to traditional collagen products, a quantifiable benefit that resonates with surgeons and is driving its early adoption. Anika's R&D efforts are focused on expanding this platform, with new shapes and sizes of Integrity in development targeting specific procedures like foot and ankle repair, aiming to accelerate growth and address unmet needs. The strategic intent is clear: leverage this unique technological capability to develop and commercialize high-value, differentiated products, particularly through the controlled Commercial Channel.

Competitive Landscape and Positioning

Anika operates within competitive markets dominated by larger, diversified players. In OA Pain Management, its Monovisc and Orthovisc products compete directly with HA viscosupplements from global pharmaceutical giants like Sanofi (SNY) (Synvisc) and major orthopedic companies like Johnson & Johnson (JNJ) (through its partnership with Anika and potentially other offerings). While Monovisc and Orthovisc maintain a market-leading position in the U.S. despite recent pricing pressures, Anika's OEM channel revenue is vulnerable to the pricing strategies and market access dynamics controlled by its partner, J&J MedTech, and the broader competitive environment where multi-injection products are losing share to single-injection options. Sanofi, with its vast scale and global distribution, benefits from economies of scale and can exert pricing pressure, although Anika's specialized HA manufacturing may offer a cost advantage at the unit level.

In the regenerative orthopedics space, Anika's Integrity and Hyalofast compete with a range of products including collagen scaffolds, bone grafts, and other tissue repair solutions offered by companies like Zimmer Biomet (ZBH) and J&J (DePuy Synthes). Anika's competitive edge here lies in its proprietary HA-based technology, particularly the HYAFF platform. The Integrity system's superior mechanical strength at implantation and regenerative properties are presented as key differentiators compared to collagen alternatives, driving surgeon pull and market share gains in the U.S. soft tissue augmentation market, where it captured over 1% of procedures in its first six months of full market release. Hyalofast is positioned as a cost-effective, off-the-shelf option for cartilage repair, aiming to address unmet needs in a market currently served by various techniques and products.

While larger competitors like JNJ and ZBH benefit from extensive sales forces, broad product portfolios, and integrated surgical solutions, Anika's strategy focuses on excelling within specific niches leveraging its HA expertise. Its Commercial Channel growth demonstrates the ability to compete effectively where it controls the go-to-market strategy, particularly internationally and with newer regenerative products like Integrity. The company's strong cash position and lack of debt provide financial flexibility compared to competitors like ZBH, which carry significant debt loads, enabling Anika to invest in R&D and commercial expansion despite its smaller scale. However, supply chain dependencies and customer concentration in the OEM channel remain vulnerabilities compared to the more diversified operations of its larger rivals.

Financial Performance and Outlook

Anika's financial performance in the first quarter of 2025 reflects the dynamics of its refocused strategy and prevailing market conditions. Total revenue for Q1 2025 was $26.2 million, a decrease of 10% compared to $29.0 million in Q1 2024. This decline was entirely attributable to the OEM Channel, where revenue decreased by 23% year-over-year to $14.9 million. This was primarily driven by lower pricing and reduced end-user sales by J&J MedTech in the U.S. OA Pain market, as well as the discontinuation of certain non-orthopedic products.

In contrast, the Commercial Channel demonstrated robust growth, with revenue increasing by 18% year-over-year to $11.3 million in Q1 2025. This growth was fueled by strong international sales of OA Pain products (up 13%) and accelerated commercial adoption of the Integrity Implant System, which achieved sequential growth for the fourth consecutive quarter and is on pace to more than double procedures in 2025 compared to 2024.

Gross profit for Q1 2025 decreased to $14.7 million (56% gross margin) from $19.0 million (65% gross margin) in Q1 2024. The decline in gross profit and margin was primarily due to lower OEM revenue, a larger percentage of lower average selling price international sales, higher manufacturing costs, and increased inventory reserves and scrap. The higher manufacturing costs and yield issues with Monovisc and Cingal were attributed to a change in raw material supplier, although manufacturing enhancements have been implemented and are showing positive results, expected to improve gross margins in the second half of 2025.

Operating expenses saw a significant reduction, totaling $19.0 million in Q1 2025, down 12% from $21.5 million in Q1 2024. This decrease was primarily due to reduced headcount, lower marketing expenses, and other non-recurring corporate costs, reflecting the benefits of the strategic restructuring and cost-saving measures implemented in 2024. Despite lower operating expenses, the loss from continuing operations increased to $4.0 million in Q1 2025 compared to $2.0 million in Q1 2024, primarily due to the decline in higher-margin OEM revenue and increased manufacturing costs. The net loss for the quarter was $4.9 million, including a $0.9 million loss from discontinued operations. Adjusted EBITDA from continuing operations was $0.1 million in Q1 2025, down from $2.7 million in Q1 2024, reflecting the impact of lower OEM revenue and higher manufacturing costs, partially offset by operating expense reductions.

Anika ended Q1 2025 with a solid liquidity position, holding $53.4 million in cash and cash equivalents and no debt. Cash used in operating activities was minimal at $0.1 million in Q1 2025, flat compared to Q1 2024. Investing activities provided $1.7 million, primarily from the $4.5 million proceeds from the sale of Parcus Medical, offset by increased capital expenditures ($2.8 million) to support manufacturing capacity expansion. Financing activities used $5.4 million, largely due to $4.0 million in share repurchases under the company's $40 million program and cash used for tax withholdings on vested equity awards. Management believes its current cash position, operating cash flows, and credit facility availability are sufficient to fund ongoing operations, strategic investments, and regulatory pathways for its pipeline products.

For the full year 2025, Anika updated its guidance. Commercial Channel revenue is expected to be between $47 million and $49.5 million, representing 12% to 18% growth, with accelerated growth anticipated in the second half. OEM Channel revenue is now projected to be between $62 million and $65 million, a 16% to 20% decline from 2024, reflecting lower anticipated pricing from J&J MedTech despite higher expected volumes. Adjusted EBITDA guidance was revised downwards to a range of negative 3% to positive 3%, reflecting the impact of lower OEM revenue, temporary manufacturing inefficiencies (estimated 4-5 point impact), updated tariff rates (estimated half a point impact), and costs associated with the Cingal bioequivalence study (estimated half a point impact). First half 2025 gross margins are expected to be around 53%, improving to 58% to 59% in the second half. The 2025 guidance includes approximately $14 million in investments in the regenerative solutions portfolio. Looking ahead to 2026 and 2027, the company anticipates double-digit revenue growth (20% to 30% annually) in the Commercial Channel, driven by the anticipated U.S. launch of Hyalofast by 2026 and continued Integrity growth, while OEM channel revenue is expected to stabilize or decline modestly.

Risks and Challenges

Despite the strategic focus and promising pipeline, Anika faces several key risks. The significant dependency on J&J MedTech for U.S. OA Pain sales in the OEM channel exposes Anika to pricing pressures and volume fluctuations outside its control. The recent decline in OEM revenue due to lower end-user pricing highlights this vulnerability. While J&J is reportedly working to stabilize pricing, the timing and effectiveness of these efforts are uncertain.

Operational risks include potential disruptions in the supply chain and manufacturing challenges. The recent yield issues with Monovisc and Cingal due to a raw material supplier change underscore the importance of manufacturing reliability and the potential impact on gross margins and product availability. While corrective actions are underway, unforeseen production issues could persist.

Regulatory risks are inherent in the life sciences industry. While Anika has made significant progress with the FDA on Hyalofast and Cingal, the PMA and NDA review processes are complex and subject to potential delays or unexpected requirements. The FDA's designation of HA in Cingal as a drug and the resulting need for additional non-clinical testing and a bioequivalence study illustrate the potential for regulatory hurdles to impact timelines and costs.

Furthermore, the success of the refocused strategy hinges on the successful commercial execution in the Commercial Channel and the market adoption of new products like Integrity and the anticipated U.S. launches of Hyalofast and Cingal. While early signs for Integrity are positive, scaling adoption and competing against established players require sustained investment and effective market penetration strategies.

External factors, including political, trade, and economic developments (such as tariffs), could also impact the company's financial condition and results of operations by affecting supply costs, international sales, or overall market demand.

Conclusion

Anika Therapeutics is undergoing a significant transformation, strategically narrowing its focus to leverage its core expertise in hyaluronic acid technology. By divesting non-core assets, the company is concentrating its resources on the high-growth potential of its Commercial Channel, driven by international OA Pain sales and the promising Integrity Implant System, while simultaneously advancing key pipeline assets, Hyalofast and Cingal, towards potential U.S. market entry.

While the company faces near-term headwinds from pricing pressures in the OEM channel and temporary manufacturing challenges, the strategic pivot positions Anika for accelerated growth in the medium to long term, particularly as Hyalofast and Cingal potentially enter the U.S. market. The company's strong balance sheet provides the necessary financial foundation to weather near-term volatility and fund its strategic investments in R&D and commercial expansion. The success of this strategy will depend on effective execution in scaling the Commercial Channel, navigating regulatory pathways for pipeline products, and mitigating operational and market risks. For investors, Anika represents a focused play on the potential of differentiated HA-based solutions in the growing orthopedic market, with the value creation story centered on the successful commercialization of its innovative pipeline.