Anika Therapeutics, Inc.: Form 10-Q for the period ended Mar 31, 2026

You should read the following discussion in conjunction with our financial statements and related notes appearing elsewhere in this report and our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2025, or our 2025 Form 10-K. In addition to historical information, this report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, concerning our business, consolidated financial condition, and results of operations. The Securities and Exchange Commission, or the SEC, encourages companies to disclose forward-looking statements so that investors can better understand a company’s future prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as "will," "likely," "may," "believe," "expect," "anticipate," "intend," "seek," "designed," "develop," "would," "future," "can," "could," and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans, and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements regarding expected future operating results, expectations regarding the timing and receipt of regulatory results, anticipated levels of capital expenditures, and expectations of the effect on our financial condition of claims, litigation, and governmental and regulatory proceedings.

Please also refer to “Item 1A. Risk Factors” of our 2025 Form 10-K for important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Management Overview

We are a global leader in the design, development, manufacturing, and commercialization of hyaluronic acid, or HA innovations. In partnership with clinicians, our sole focus is dedicated to delivering and advancing osteoarthritis, or OA pain management, and orthopedic regenerative solutions. At our core is a passion to deliver a differentiated portfolio that improves patient outcomes around the world.

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

As we look forward to the future, our business is positioned to capture value within our target markets of OA Pain Management and Regenerative Solutions. We believe our future success will be driven by our:

• 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 (e.g. Cingal) and regenerative (e.g. Integrity Implant System and Hyalofast) markets;
• Growth of the Integrity Implant System, our HA-based scaffold for rotator cuff and other tendon repairs, with first commercial cases in 2023;
• Targeting to introduce key HA-based products into the U.S. 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;
• 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; and
• Energized and experienced team focused on strong values, talent, and culture.

Products

OA Pain Management

Our OA Pain Management product family consists of Monovisc and Orthovisc, our injectable, HA-based OA pain management offerings that are indicated to provide pain relief from OA conditions; and Cingal, our novel, single-injection OA Pain Management product consisting of our proprietary cross-linked HA material combined with a fast-acting steroid.

Cingal is our next generation fast-acting, long-lasting, non-opioid, clinically proven OA pain product that is designed to provide both short- and long-term pain relief through at least six months. It is currently sold outside the United States in over 35 countries. In 2022, we completed a third Phase III clinical trial for Cingal, which achieved its primary endpoint. We have been actively engaging with the U.S. Food and Drug Administration, or the FDA, on next steps for U.S. regulatory approval. We have made significant progress in addressing the FDA's requirements for Cingal's approval. In April 2023, we held a Type-C meeting with the FDA, which led to an advice letter received from the FDA in April 2024. The letter included positive feedback and new challenges that we are actively addressing. We also received confirmation that the clinical data for Cingal is a review issue and not a filing issue. Additionally, in September 2024, we acquired the Aristospan New Drug Application, or NDA, which allowed us to address a recent FDA requirement and will enable us to source the reference drug for a bioequivalence study. In April 2025, we subsequently sold the Aristospan NDA to a third-party manufacturer who will supply the reference drug for the bioequivalence study. We had another Type-C meeting with the FDA in February 2025 to discuss finalizing NDA submission requirements, including bioequivalence study requirements. The preclinical and bioequivalence studies have been initiated. We are committed to bringing this revolutionary pain management therapy to the approximate $1 billion U.S. addressable market.

Regenerative Solutions

Our Regenerative Solutions product family consists of: (a) our portfolio of orthopedic regenerative solutions products utilizing HA, including Integrity, our HA-based scaffold for rotator cuff repair and other tendon procedures, Tactoset, an HA-enhanced, flowable, injectable and settable bone void filler used to facilitate bone regeneration and augment hardware in poor quality bone, and Hyalofast, a hyaluronic acid scaffold for cartilage repair, sold outside of the United States in over 30 countries. In the United States, Hyalofast is a pipeline product under a pivotal Investigational Device Exemption or IDE clinical trial and is not available for commercial sale. We submitted a premarket approval or PMA on October 31, 2025 with the FDA, and we are targeting a U.S. launch by 2027, pending approval from the FDA.

Results of Operations

Three Months Ended March 31, 2026, Compared to Three Months Ended March 31, 2025

(in thousands, except percentages)

Revenue

The following table presents revenue by product family for the three-month periods ended March 31, 2026, and 2025 as follows:

(in thousands, except percentages)

Revenue for the three-month period ended March 31, 2026, was $29.6 million, an increase of $3.4 million, or 13%, compared to the same period in 2025. The increase in revenue was driven by higher sales activity with our Original Equipment Manufacturer, or OEM Channel partners, primarily J&J MedTech and certain non-orthopedic products as well as higher Integrity revenues and international OA Pain Management revenues.

Revenue from our OEM Channel product family increased by 14% for the three-month period ended March 31, 2026, as compared to the same period in 2025. For the three-month period ended March 31, 2026, the $2.1 million increase was driven by a $1.0 million increase in J&J MedTech revenue and a $1.1 million increase in non-orthopedic revenue. The J&J MedTech revenue increase was primarily due to $2.8 million increase in sales volume, offset by a $1.8 million decrease due to lower pricing. The non-orthopedic increase was due to a $1.5 million increase in the timing of veterinary product sales offset by a $0.4 million decrease in ophthalmic and wound care revenues.

Revenue from our Commercial Channel product family increased 12% for the three-month period ended March 31, 2026, as compared to the same period in 2025. For the three-month period ended March 31, 2026, the $1.3 million increase was driven by a $0.7 million increase in international OA pain management revenues and a $0.6 million increase in regenerative revenue. The international OA pain management revenue increase was due to higher Monovisc and Cingal product sales offset by lower Orthovisc product sales. The regenerative revenue increase was due to higher Integrity and Hyalofast product sales offset by lower Tactoset revenues.

Gross Profit and Margin

Gross profit for the three-month period ended March 31, 2026, increased $4.3 million to $19.0 million, representing a 64% gross margin for the period as compared to 56% in the prior year period. The increase in gross profit for the three-month period ended March 31, 2026, as compared to the same period in 2025, primarily resulted from higher sales activity. Gross margin for the three-month period ended March 31, 2026, increased compared to the same period of prior year due to higher sales activity, increased production volume and lower inventory reserves and scrap.

Research and Development

Research and development expenses for the three-month period ended March 31, 2026, are as follows:

(in thousands, except percentages)

Research and development expenses for the three-month period ended March 31, 2026, were $6.7 million, an increase of $0.7 million as compared to the same period in 2025. This is primarily due to increased spending on the Cingal clinical study and headcount.

Selling, General and Administrative

Selling, general and administrative expenses for the three-month period ended March 31, 2026, were $17.8 million, an increase of $4.9 million, as compared to the same period in 2025. The increase for the three-month period ended March 31, 2026, was primarily driven by a $3.3 million increase in stock-based compensation and $1.6 million in severance costs associated with our restructuring strategy.

Loss from Continuing Operations

For the three-month period ended March 31, 2026, the loss from continuing operations was $5.1 million, compared to a loss from continuing operations of $4.0 million for the same period in 2025. The $1.1 million increase in the loss from continuing operations was due to higher stock-based compensation and severance costs from our restructuring strategy.

Income Taxes

The income tax expense was $0.2 million for the three-month period ended March 31, 2026, resulting in an effective tax rate of (4.9%). The income tax expense was $0.1 million for the three-month period ended March 31, 2025, resulting in an effective tax rate of (2.3%). The tax rates are consistent for the three-month period ended March 31, 2026, as compared to the same period in 2025, primarily due to a full valuation allowance being recorded against domestic deferred tax assets on March 31, 2026, and 2025.

Non-GAAP Financial Measures

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

We have presented adjusted EBITDA, adjusted net income, and 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. We believe these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. In particular, we believe that the exclusion of these items in calculating these measures can provide a useful tool for period-to-period comparisons of our core operating performance. Accordingly, we believe that these measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by our management in their financial and operational decision-making.

Adjusted EBITDA

We present information below with respect to adjusted EBITDA, which we define as our net loss excluding interest and other (income), net, provision for income tax, depreciation and amortization, share-based compensation, severance costs and non-recurring professional fees.

Adjusted EBITDA is not prepared in accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of adjusted EBITDA rather than net (loss) income, which is the nearest GAAP equivalent. Some of these limitations are:

• adjusted EBITDA excludes depreciation and amortization, and, although these are non-cash expenses, the assets being depreciated or amortized may have to be replaced in the future, the cash requirements for which are not reflected in adjusted EBITDA;
• we exclude share-based compensation expense from adjusted EBITDA although (a) it has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy and (b) if we did not pay out a portion of our compensation in the form of stock-based compensation, the cash salary expense included in operating expenses would be higher, which would affect our cash position;
• 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;

The following is a reconciliation of adjusted EBITDA, a non-GAAP metric, to net loss, the most directly comparable GAAP financial measure, for the three-month periods ended March 31, 2026 and 2025, respectively:

(in thousands)

Adjusted EBITDA in the three-month period ended March 31, 2026, increased $4.2 million as compared with the same period in 2025. The increase in adjusted EBITDA for the period was primarily due to higher revenue and gross profit.

Adjusted Net Income (Loss) and Adjusted EPS

We present information below with respect to adjusted net income(loss) and adjusted EPS. We define adjusted net income (loss) as our net loss excluding share-based compensation, severance costs, and non-recurring professional fees. We define adjusted EPS as GAAP diluted EPS excluding the above adjustments to net income (loss) used in calculating adjusted net income (loss), each on a per share and tax effected basis.

The following is a reconciliation of adjusted net income (loss), a non-GAAP metric, to net loss, the most directly comparable GAAP financial measure, for the three-month periods ended March 31, 2026 and 2025, respectively:

(in thousands)

24

The following is a reconciliation of adjusted diluted EPS, a non-GAAP metric, to diluted EPS, the most directly comparable GAAP financial measure, for the three-month periods ended March 31, 2026, and 2025, respectively:

Adjusted net income and adjusted diluted earnings per share in the three-month period ended March 31, 2026, increased by $4.7 million and $0.33, respectively, as compared with the same period in 2025. The increase for the period was primarily due to higher revenue and gross profit.

Liquidity and Capital Resources

We require cash to fund our operating activities and to make capital expenditures and other investments in the business. We expect that our requirements for cash to fund these uses will increase as our operations expand. We continue to generate cash from operating activities and believe that our operating cash flows, cash currently on our condensed consolidated balance sheet and availability under our credit facility will be sufficient to allow us to continue to invest in our existing business, to manage our capital structure on a short and long-term basis, and to meet our anticipated operating cash needs. Cash and cash equivalents aggregated $41.0 million and $57.5 million, and working capital totaled $72.6 million and $80.2 million, at March 31, 2026, and December 31, 2025, respectively.

On November 12, 2021, we entered into a Third Amendment to Credit Agreement with Bank of America N.A. as administrative agent, which amended our existing revolving line of credit agreement dated October 24, 2017, which provides up to $75.0 million in the form of a senior revolving line of credit. Subject to certain conditions, we may request up to an additional $75.0 million for a maximum aggregate commitment of $150.0 million. As of March 31, 2026, and December 31, 2025, there were no outstanding borrowings, and we are in compliance with the terms of the credit facility.

Summary of Cash Flows (in thousands):

The following changes contributed to the net change in cash and cash equivalents in the three-month period ended March 31, 2026 as compared to the same period in 2025.

Operating Activities

Cash used in operating activities was $4.9 million and $0.1 million for the three-month periods ended March 31, 2026 and 2025, respectively. The increase in cash used in operating expenses was mainly due to inventory purchases with increased manufacturing production and building up safety stock and higher accounts receivable due to higher revenues. This was offset by higher stock-based compensation expense primarily related to the acceleration of stock-based compensation associated with the departure of our former Chief Executive Officer and an income tax refund received in the U.S.

Investing Activities

Cash used in investing activities was $1.2 million for the three-month period ended March 31, 2026, as compared to cash provided by investing activities of $1.7 million for the same period in 2025. The change was primarily due to increase in capital expenditures as we are expanding capacity with manufacturing operations at our Bedford facility

Financing Activities

Cash used in financing activities was $10.3 million and $5.4 million for the three-month periods ended March 31, 2026 and 2025, respectively. The increase in cash used in financing activities was primarily attributable to $8.7 million funding share repurchases during the three-month period ended March 31, 2026 versus $5.0 million in share repurchases in the prior year.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We believe that our accounting policies for revenue recognition, accounts receivable and allowance for credit losses, goodwill, acquired in-process research and development, inventory and contingencies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. There have been no significant changes to the above critical accounting policies or in the underlying accounting assumptions and estimates used in such policies from those disclosed in our annual consolidated financial statements and accompanying notes included in our 2025 Form 10-K for the year ended December 31, 2025. We monitor our estimates on an ongoing basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.

Recent Accounting Pronouncements

A discussion of Recent Accounting Pronouncements is included in our 2025 Form 10-K for the fiscal year ended December 31, 2025 and is updated in the Notes to the condensed consolidated financial statements included in this report.

Contractual Obligations and Other Commercial Commitments

Our contractual obligations and other commercial commitments are summarized in the section captioned “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations and Other Commercial Commitments” in our 2025 Form 10-K for the year ended December 31, 2025. There were no material changes to our contractual obligations reported in our 2025 Form 10-K during the three months ended March 31, 2026. For additional discussion, see Note 9 to the condensed consolidated financial statements included in this report.

To the extent that funds generated from our operations, together with our existing capital resources, are insufficient to meet future requirements, we will be required to obtain additional funds through equity or debt financings, strategic alliances with corporate partners and others, or through other sources. No assurance can be given that any additional financing will be made available to us or will be available on acceptable terms should such a need arise.

Our market risks and the ways we manage them are summarized in the section captioned “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes in the first three months of 2026 to our market risks or to our management of such risks.

(a) Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including our chief executive officer (who is also our principal financial officer), we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as amended, as of the end of the period covered by this report. Based upon that evaluation, the president and chief executive officer (who is also our principal financial officer), concluded as of March 31, 2026 that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our president and principal executive officer, and principal financial officer as appropriate to allow timely decisions regarding required disclosure. On an on-going basis, we review and document our disclosure controls and procedures, and our internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

(b) Changes in internal controls over financial reporting.

There were no material changes in our internal control over financial reporting during the quarter ended March 31, 2026, that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors described in the section captioned “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section captioned “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition, or future results. The risks described in our Annual Report on Form 10-K and such subsequently filed Quarterly Report on Form 10-Q are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may have a material adverse effect on our business, financial condition, and/or operating results.