2013
ANNUAL
REPORT
Anika Therapeutics, Inc.
2014 Letter to Shareholders
Dear Shareholders:
Anika’s 2013 was a record year for revenue and earnings, driven by solid Orthobiologics
product demand and productivity improvements in operations and manufacturing. Consolidated
total revenue increased 5% year-over-year. Although Ophthalmic revenue declined by $4 million
from 2012, as we anticipated, non-ophthalmic revenue increased 13%. This growth continued to
be fueled primarily by increased sales of our flagship product, Orthovisc® in both domestic and
international markets.
Anika’s profitability for 2013 improved substantially year-over-year, reflecting the
strength of our Orthobiologics franchise, as well as improvements in operational efficiencies.
Product gross profit and net income were up considerably in 2013, driven mostly by gains from
our new manufacturing facility in Bedford and the elimination of dual facilities since mid-2012,
and more favorable product mix. Closing our tissue engineering operations in Italy in early 2013
also contributed to the improvement. Operating income increased 65% this year to $33 million
from $20 million in 2012. Our net income rose to $1.39 per diluted share from $0.82 last year. In
addition, Anika generated $25 million in cash from operations, compared with $11 million a year
ago.
The Orthobiologics franchise continued to be Anika’s primary growth driver in 2013.
The growth of Orthovisc consistently outpaced the U.S. domestic marketplace growth rate in
years past. Orthovisc is not only the market leader in the U.S. multi-injection segment, but also is
the country’s number two brand in viscosupplementation overall. Orthovisc is a noninvasive and
lower cost option for treating osteoarthritis of the knee and well aligned with the drive for cost
containment in health care.
Elsewhere in Orthobiologics, 2013 was a year of hard work and perseverance in the
regulatory arena, highlighted by productive collaboration with the U.S. Food and Drug
Administration (FDA). As a result, in February 2014 we received FDA marketing approval for
our single-injection viscosupplementation product, Monovisc® – the first such FDA-approved
product with hyaluronic acid (HA) from a non-animal source. The U.S. market for
viscosupplementation therapy is experiencing double-digit growth annually. With FDA approval
of Monovisc, we are better positioned with our single and multi-injection products to meet the
varying needs of physicians and patients across the viscosupplementation therapy spectrum.
We also continue to see good success in our internally driven efforts to strengthen our
international distribution channel in Orthobiologics, focusing not only on Orthovisc and
Monovisc but also Hyalofast™, our next-generation cartilage regeneration product. Hyalofast is
significantly more cost-effective than our legacy cartilage regeneration products, which makes it
far better aligned with future trends in medical practice and healthcare economics. In 2013 we
spent a significant amount of time and energy reshaping our organization to reflect and drive this
direction in our business. Our objectives are to reduce the manufacturing cost of Anika’s existing
products, improve our productivity in pipeline development, and enhance our capabilities in
product marketing. We completed a strategic realignment of our tissue engineering operations at
our Italian subsidiary in the beginning of 2013, which enabled us to shift our resources toward
high potential, innovative and more cost-effective medical solutions such as Hyalofast for
cartilage regeneration, and Hyalomatrix® for advanced wound care.
We also made product development advancements in 2013 on CingalTM, which is a key
product in our Orthobiologics pipeline. Cingal is a single-injection viscosupplementation
treatment for osteoarthritis that includes a therapeutic anti-inflammatory agent. It is designed to
provide patients and clinicians with an innovative treatment that promises potentially significant
benefits over currently available therapies. Midway through last year we commenced a
multinational Phase III clinical study in support of our CE Mark application for Cingal and other
global regulatory applications. Full patient enrollment was achieved in February 2014, and our
goal is to complete the study and submit our CE Mark application for Cingal by the end of the
year or shortly thereafter.
We are beginning 2014 in a strong position. Demand for our viscosupplementation
products is growing, both in the U.S. and internationally. Looking farther ahead, we are
encouraged by the potential in Hyalofast, Hyalomatrix and our pipeline products led by Cingal.
We are committed to strengthening Anika’s product pipeline in order to drive growth and
profitability improvement over the long term. Our vision is to transform Anika by leveraging our
preeminence in HA biomaterials to establish the company as a leader in providing advanced
tissue-regeneration medical solutions. We look forward to reporting new milestones as we work
to achieve this vision in 2014. Thank you for your continued trust and support.
Sincerely,
Charles H. Sherwood, Ph.D.
President and Chief Executive Officer
April 23, 2014
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(cid:2)(cid:3)
(cid:4)(cid:3)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 000-21326
Anika Therapeutics, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Massachusetts
(State or Other Jurisdiction of Incorporation or Organization)
04-3145961
(IRS Employer Identification No.)
32 Wiggins Avenue, Bedford, Massachusetts 01730
(Address of Principal Executive Offices) (Zip Code)
(781) 457-9000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $.01 per share
Preferred Stock Purchase Rights
Name of Each Exchange on Which Registered: NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:3)(cid:4) No (cid:3)(cid:2)(cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:3)(cid:4) No (cid:3)(cid:2)(cid:3)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes (cid:3)(cid:2) No (cid:3)(cid:4)(cid:3)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes (cid:3)(cid:2) No (cid:3)(cid:4)(cid:3)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:3)(cid:2)(cid:3)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)
Large accelerated filer (cid:4)(cid:3)
Accelerated filer (cid:2)(cid:3)
Non-accelerated filer (cid:4)(cid:3)
(Do not check if a smaller
reporting company)
Smaller reporting company (cid:4)(cid:3)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes(cid:3)(cid:4) No(cid:3)(cid:2)(cid:3)
The aggregate market value of voting and non-voting equity held by non-affiliates of the Registrant as of June 30, 2013, the last day of the Registrant’s
most recently completed second fiscal quarter, was $228,892,947 based on the close price per share of Common Stock of $17.00 as of such date as reported on the
NASDAQ Global Select Market. Shares of our Common Stock held by each executive officer, director and each person or entity known to the registrant to be an
affiliate have been excluded in that such persons may be deemed to be affiliates; such exclusion shall not be deemed to constitute an admission that any such person is
an “affiliate” of the registrant. At March 10, 2014, there were issued and outstanding 14,324,920 shares of Common Stock, par value $.01 per share.
The registrant intends to file a proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2013. Portions
of such proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K.
Documents Incorporated By Reference
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ANIKA THERAPEUTICS, INC.
TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits and Financial Statement Schedules
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76
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Signatures
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FORM 10-K
ANIKA THERAPEUTICS, INC.
For Fiscal Year Ended December 31, 2013
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including the documents incorporated by reference into this Annual
Report on Form 10-K, 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, including, without limitation, statements regarding:
(cid:2) Our future sales and product revenue, including geographic expansions, possible retroactive price
adjustments, and expectations of unit volumes or other offsets to price reductions;
(cid:2) Our manufacturing capacity, efficiency gains and work-in-process manufacturing operations;
(cid:2) The timing, scope and rate of patient enrollment for clinical trials;
(cid:2) The development of possible line extensions and new products;
(cid:2) Our ability to achieve and/or maintain compliance with laws and regulations;
(cid:2) The timing of and/or receipt of Food and Drug Administration (“FDA”), foreign or other regulatory
approvals, clearances, and/or reimbursement approvals of current, new or potential products, and any
limitations on such approvals;
(cid:2) Our intention to seek patent protection for our products and processes, and protect our intellectual
property;
(cid:2) Our ability to effectively compete against current and future competitors;
(cid:2) Negotiations with potential and existing partners, including our performance under any of our existing
and future distribution, license or supply agreements or our expectations with respect to sales and sales
threshold milestones pursuant to such agreements;
(cid:2) The level of our revenue or sales in particular geographic areas and/or for particular products, and the
market share for any of our products;
(cid:2) Our current strategy, including our corporate objectives, research and development activities and
collaboration activities;
(cid:2) Our expectations regarding our joint health products, including existing products and expectations
regarding new products, expanded uses of existing products, new distribution partnerships and revenue
growth;
(cid:2) Our intention to increase our market share for joint health products in international and domestic
markets or otherwise penetrate growing markets for osteoarthritis of the knee and other joints;
(cid:2) Our expectations regarding next generation osteoarthritis/joint health product development, clinical
trials, regulatory approvals and commercial launches;
(cid:2) Our and Bausch & Lomb’s performance under the non-exclusive, three-year contract for the supply of
AMVISC® and AMVISC® Plus ophthalmic viscoelastic products, and our expectations regarding
revenue from ophthalmic products;
(cid:2) Our ability to commercialize AnikaViscTM and AnikaViscTM Plus and our expectations regarding such
commercialization and the potential profits generated thereby;
(cid:2) Our ability to license our aesthetics product to new distribution partners domestically and outside the
United States;
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(cid:2) Our ability, and the ability of our distribution partners, to market our aesthetics dermatology product;
and our expectations regarding the distribution and sales of our ELEVESSTM product and the timing
thereof;
(cid:2) Our expectations regarding development of aesthetics product line extensions;
(cid:2) Our expectations regarding HYVISC® sales;
(cid:2) Our expectations regarding product gross margin;
(cid:2) Our expectations regarding CINGALTM, including the expense associated therewith, and our ability to
obtain regulatory approvals for this product;
(cid:2) Our expectation for changes in operating expenses, including research and development and selling,
general and administrative expenses;
(cid:2) The rate at which we use cash, the amounts used and generated by operations, and our expectation
regarding the adequacy and usage of such cash;
(cid:2) Our expectation for capital expenditures spending and future amounts of interest income and expense;
(cid:2) Possible negotiations or re-negotiations with existing or new distribution or collaboration partners;
(cid:2) Our ability to continue streamlining operations and improving our manufacturing capabilities;
(cid:2) Our ability to obtain additional funds through equity or debt financings, strategic alliances with
corporate partners and other sources, to the extent our current sources of funds are insufficient;
(cid:2) Our ability to manage the operations of Anika Therapeutics S.r.l. (“Anika S.r.l.”) from one with losses,
into a company generating continued profits;
(cid:2) The strength of the economies in which the Company operates or will operate, as well as the political
stability of any of those geographic areas;
(cid:2) Our ability to effectively prioritize the many research and development projects underway;
(cid:2) Our ability to obtain U.S. approval for orthopedic and other product franchises of Anika S.r.l.,
including the timing and potential success of such efforts, and to expand sales of these products in the
U.S., including the impact such efforts may have on our revenue; and
(cid:2) Our ability to successfully defend the Company against lawsuits and claims and the uncertain financial
impact such lawsuits and claims and related defense costs may have on the Company.
Furthermore, additional statements identified by words such 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 which do not relate to historical matters,
also identify forward-looking statements.
You should not rely on forward-looking statements because they involve known and unknown risks,
uncertainties and other factors, some of which are beyond our control, including those factors described in the
section titled “Risk Factors” in this Annual Report on Form 10-K or elsewhere in this report. These risks,
uncertainties and other factors may cause our actual results, performance or achievement to be materially different
from the anticipated future results, performance or achievement, expressed or implied by the forward-looking
statements. These forward-looking statements are based upon the current assumptions of our management and are
only expectations of future results. You should carefully review all of these factors, and you should be aware that
there may be other factors that could cause these differences, including those factors discussed in the sections titled
“Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
elsewhere in this Annual Report on Form 10-K. We undertake no obligation to publicly update or revise any
forward-looking statement to reflect changes in underlying assumptions or factors, new information, future events
or other changes.
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PART I
ITEM 1. BUSINESS
Overview
Anika Therapeutics, Inc. (“Anika,” and together with its subsidiaries, the “Company,” “we,” “us,” or “our”)
was incorporated in 1992 as a Massachusetts company. Anika develops, manufactures and commercializes
therapeutic products for tissue protection, healing and repair. These products are based on hyaluronic acid (“HA”), a
naturally occurring, biocompatible polymer found throughout the body. Due to its unique biophysical and
biochemical properties, HA plays an important role in a number of physiological functions such as the protection
and lubrication of soft tissues and joints, the maintenance of the structural integrity of tissues, and the transport of
molecules to and within cells.
Anika Therapeutics, Inc.’s wholly-owned subsidiary, Anika Therapeutics S.r.l., has over 20 products
currently commercialized, primarily in Europe. These products are also all made from hyaluronic acid, based on two
technologies: “HYAFF”, which is a solid form of HA, and ACP gel, an autocross-linked polymer of HA. Both
technologies are protected by an extensive portfolio of owned and licensed patents.
In December 2012, the Company announced a strategic shift which involved the closure of its tissue
engineering facility in Abano Terme, Italy due to the inability to meet strict regulatory standards established by the
European Medicines Agency (“EMA”) for Advanced Therapy Medicinal Products (“ATMP”) (cell based) products
that became effective January 1, 2013. In 2013, the Company completed a restructuring plan which included a
reduction-in-force of 12 people and provided for severance payments, disposals of related supplies, equipment, and
other assets. This plan was intended to improve the efficiency and financial performance of the Company's Italian
operations by reducing costs and focusing on products and technology with strong commercial potential. In
connection with the plan, the Company recorded a fourth quarter 2012 pre-tax charge of approximately $2.5 million,
including $1.3 million for severance, various expenses, and write-offs of supplies and equipment, and a $1.2 million
non-cash charge in connection with the abandonment of the Hyalograft C autograft in-process R&D project.
Anika’s proprietary technologies for modifying the HA molecule allow product properties to be tailored
specifically to therapeutic use. Our patented technology chemically modifies the HA to allow for longer residence
time in the body. We offer therapeutic products from these aforementioned technologies in the following areas:
Anika Anika S.r.l.
Orthobiologics
Dermal
Advanced wound care
Aesthetic dermatology
Surgical
Anti-adhesion
Ear, nose and throat care (“ENT”)
Ophthalmic
Veterinary
X
X
X
X
X
X
X
X
X
The following sections provide more specific information about our products and related activities:
Orthobiologics
Our orthobiologics products consist of joint health and orthopedic products. These products are used in a
wide range of treatments, from providing pain relief from osteoarthritis, to regenerating damaged tissue such as
cartilage. Osteoarthritis is a debilitating disease causing pain, swelling and restricted movement in joints. It occurs
when the cartilage in a joint gradually deteriorates due to the effects of mechanical stress, which can be caused by a
variety of factors, including the normal aging process. In an osteoarthritic joint, particular regions of articulating
surfaces are exposed to irregular forces, which result in the remodeling of tissue surfaces that disrupt the normal
equilibrium or mechanical function. As osteoarthritis advances, the joint gradually loses its ability to regenerate
cartilage tissue and the cartilage layer attached to the bone deteriorates to the point where eventually the bone
becomes exposed. Advanced osteoarthritis often requires surgery and the possible implantation of artificial joints.
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The current treatment options for osteoarthritis, before joint replacement surgery, include viscosupplementation,
analgesics, non-steroidal anti-inflammatory drugs and steroid injections.
Our joint health products include ORTHOVISC®, ORTHOVISC® mini, and MONOVISC®. ORTHOVISC
is available in the U.S., Canada, Europe and other international markets for the treatment of osteoarthritis of the
knee, and in Europe for the treatment of osteoarthritis in all joints. ORTHOVISC mini is available in Europe, and is
designed for the treatment of osteoarthritis in small joints. MONOVISC is our single injection osteoarthritis
treatment indicated for all joints in Europe, and for the knee in the U.S., Turkey and Canada. ORTHOVISC mini and
MONOVISC are our joint health viscosupplementation products which became available in certain international
markets since the second quarter of 2008. Our most recent product approval was received in February 2014 for
MONOVISC in the U.S. The related commercial introduction is planned for March 2014.
In the U.S., ORTHOVISC is indicated for the treatment of pain caused by osteoarthritis of the knee in
patients who have failed to respond adequately to conservative non-pharmacologic therapy and to simple analgesics,
such as acetaminophen. It is a sterile, clear, viscoelastic solution of hyaluronan dissolved in physiological saline, and
dispensed in a single-use syringe. A complex sugar of the glycosaminoglycan family, hyaluronan is a high
molecular weight polysaccharide composed of repeating disaccharide units of sodium glucuronate and N-acetyl
glucosamine. ORTHOVISC is injected into joints in a series of three intra-articular injections one week apart.
ORTHOVISC became available for sale in the U.S. on March 1, 2004, and is marketed by DePuy Synthes, Mitek
Sports Medicine (“Mitek”), under the terms of a ten-year licensing, distribution, supply and marketing agreement
which was entered into in December 2003 (the “JNJ Agreement”). In November 2012, the JNJ Agreement was
extended for an additional 5 years under the existing terms. Outside of the U.S., we have a number of distribution
relationships servicing international markets including Canada, Europe, the Middle East, Latin America, and Asia.
We will continue to seek to establish distribution relationships in other regions. See the sections captioned
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Management
Overview” and “Risk Factors.”
In addition to the three viscosupplementation products discussed above, we also offer several additional
products used in connection with orthopedic regenerative medicine. These products are based on the HYAFF
technology and are currently available in Europe and Asia. They include Hyalofast®, a biodegradable support for
human bone marrow mesenchymal stem cells which is used in connection with soft tissue regeneration; Hyalonect®,
a woven gauze used as a graft wrap; and Hyaloss TM, HYAFF fibers used to mix blood/bone grafts to form a paste
for bone regeneration. We also offer Hyaloglide®, an ACP gel used in tenolysis treatment, with the potential for use
in flexor tendon adhesion prevention, and in the shoulder for adhesive capsulitis with additional clinical data. These
products are commercialized through a network of distributors, primarily in Europe, the Middle East, and Korea.
Dermal
Our dermal products consist of advanced wound care products, based on the HYAFF technology, and
aesthetic dermal fillers, based on Anika’s proprietary chemically modified cross-linked HA technology, BCDI. Our
HYAFF technology offers products for the treatment of skin wounds, ranging from burns to diabetic ulcers. The
products cover a variety of wound treatment solutions including debridement agents, advanced therapies to aid
healing and scaffolds used in connection with skin substitutes. Leading products include Hyalomatrix and Hyalofill,
for treatment of complex wounds such as burns and ulcers. The dermal products are commercialized through a
network of distributors, primarily in Europe, Latin America and the Middle East. Several of the products are also
approved for sale in the United States including Hyalomatrix, Hyalofill, and Hyalogran. In 2012, the Company
entered into a distribution agreement for sales of advanced wound care products in nine South American countries,
including Argentina, Brazil, Mexico, and Chile.
Our aesthetic dermatology product is a dermal filler based on our proprietary chemically modified, cross-
linked HA, and is commercialized in Europe, Canada, the U.S., Korea and selected countries in South America.
Internationally, this product is marketed under the ELEVESS name. In the U.S., the trade name is HYDRELLETM,
although the product is not currently marketed in the U.S.
Surgical
Our surgical business consists of products used to prevent surgical adhesions, and to treat ENT disorders.
Hyalobarrier is a clinically proven post-operative adhesion barrier for use in the abdomino-pelvic area. The product
is currently commercialized by Anika S.r.l. in Europe, the Middle East and certain Asian countries through a
distribution network, but is not approved in the U.S. INCERT, approved for sale in Europe, Turkey, and Malaysia, is
a chemically modified, cross-linked HA product, for the prevention of spinal post-surgical adhesions. There are
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currently no plans at this time to distribute INCERT in the U.S. Anika co-owns issued U.S. patents covering the use
of INCERT for adhesion prevention. See the section captioned “Patent and Proprietary Rights.”
Surgical adhesions occur when fibrous bands of tissues form between adjacent tissue layers during the
wound healing process. Although surgeons attempt to minimize the formation of adhesions, they nevertheless occur
quite frequently after surgery. Adhesions in the abdominal and pelvic cavity can cause particularly serious problems
such as intestinal blockage following abdominal surgery, and infertility following pelvic surgery. Fibrosis following
spinal surgery can complicate re-operation and may cause pain.
Anika S.r.l. offers several products used in connection with the treatment of ENT disorders. The lead
products are Merogel, a woven fleece nasal packing, and Merogel Injectable, a thick, viscous hydrogel composed of
cross-linked hyaluronic acid—a biocompatible agent that creates a moist wound-healing environment. Anika S.r.l.
has partnered with Medtronic for worldwide distribution of these ENT products.
Ophthalmic
Our ophthalmic business includes HA viscoelastic products used in ophthalmic surgery. The ophthalmic
products we manufacture include the AMVISC and AMVISC Plus product line, STAARVISC-IITM, Optivisc™
(formerly ShellGel™), AnikaVisc and AnikaVisc Plus. They are injectable, high molecular weight HA products
used as viscoelastic agents in ophthalmic surgical procedures such as cataract extraction and intraocular lens
implantation. These products coat, lubricate and protect sensitive tissue such as the endothelium, and maintain the
shape of the eye, thereby facilitating ophthalmic surgical procedures.
Anika previously manufactured the AMVISC product line for Bausch & Lomb (“B&L”) under the terms of
an exclusive supply agreement that expired on December 31, 2010 (the “2004 B&L Agreement”) for viscoelastic
products used in ophthalmic surgery. Effective January 1, 2011, we entered into a non-exclusive, two year contract
with B&L intended to transition the manufacture of AMVISC and AMVISC Plus to an alternative, low-cost supplier
formerly affiliated with B&L, and continued to supply B&L with these products during 2011. Effective January 1,
2012, the parties agreed to a three year contract for Anika to continue to supply these products to B&L as a second
supplier with committed annual volumes through 2014.
B&L accounted for 5% of product revenue for the year ended December 31, 2013; based on contractual
minimums, product revenue is expected to be modestly lower in 2014. Operating margins under the 2004 B&L
Agreement were low and will remain at a similar level under the current contract. See also Item 1A. “Risk Factors.”
Veterinary
HYVISC is a high molecular weight injectable HA product for the treatment of joint dysfunction in horses
due to non-infectious synovitis associated with equine osteoarthritis. HYVISC has viscoelastic properties that
lubricate and protect the tissues in horse joints. HYVISC is distributed by Boehringer Ingelheim Vetmedica, Inc. in
the United States and selected countries in the Middle East.
See Note 13 to our Consolidated Financial Statements, “Revenue by Product Group, by Significant
Customer and by Geographic Region; Geographic Information” for a discussion regarding our segments and
geographic sales.
Research and Development of Potential Products
Anika’s research and development efforts primarily consist of the development of new medical applications
for our HA-based technology, the management of clinical trials for certain product candidates, the preparation and
processing of applications for regulatory approvals or clearances at all relevant stages of product development, and
process development and scale-up manufacturing activities for our existing and new products. Our development
focus includes products for tissue protection, healing and repair. For the years ended December 31, 2013, 2012 and
2011, these expenses were $7.1 million, $5.4 million, and $6.2 million, respectively. We anticipate that our research
and development efforts, including clinical trials, will increase significantly in the near future over historical levels.
Our first next generation osteoarthritis product is MONOVISC, which received FDA approval in February
2014. MONOVISC is a single-injection treatment product that uses a non-animal sourced HA, and is our first
osteoarthritis product based on our proprietary cross-linked HA technology. Our second single-injection
osteoarthritis product, currently under development, is CINGAL, which is based on our hyaluronic acid material
with an added active therapeutic molecule designed to provide broad pain relief and for a longer period of time. We
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have completed the formulation and biocompatibility studies of the product. During the second quarter of 2013, we
commenced a phase III clinical trial to obtain the needed clinical data for CE Mark submission and approval, and to
support other product registrations, including in the United States.
The technologies obtained through our acquisition of Anika S.r.l. have enhanced our research and
development capabilities, and our pipeline of product candidates. Anika S.r.l. has research and development
programs for new products including Hyalofast, an innovative, biodegradable support for human bone marrow
mesenchymal stem cells used in connection with soft tissue regeneration and Hyalospine, an adhesion prevention gel
for use after spinal surgery. Our research and development efforts may not be successful in (1) developing our
existing product candidates, (2) expanding the therapeutic applications of our existing products, or (3) resulting in
new applications for our HA technology. There is also a risk that we may choose not to pursue development of
potential product candidates. We may not be able to obtain regulatory approval for any new applications we
develop. Furthermore, even if all regulatory approvals are obtained, there can be no assurances that we will achieve
meaningful sales of such products or applications. See Item 1A. “Risk Factors.”
Patent and Proprietary Rights
Our products and trademarks, including our Company name, product names and logos, are proprietary. We
rely on a combination of patent protection, trade secrets and trademark laws, license agreements, confidentiality and
other contractual provisions to protect our proprietary information.
We have a policy of seeking patent protection for patentable aspects of our proprietary technology. Anika
co-owns certain U.S. patents and a patent application with claims relating to the chemical modification of HA and
certain adhesion prevention uses and certain drug delivery uses of HA. Anika also solely owns patents covering
composition of matter and certain manufacturing processes. Anika S.r.l.’s issued patents have expiration dates
through 2028. The Anika S.r.l. patent estate is extensive and partly intertwined with its former parent company,
Fidia Farmaceutici S.p.A., through a cross-licensing agreement which provides both companies with access to each
other’s patents to the extent required to support their own products. We intend to seek patent protection for products
and processes developed in the course of our activities when we believe such protection is in our best interest and
when the cost of seeking such protection is not inordinate relative to the potential benefits. See also the section
captioned “Risk Factors—We may be unable to adequately protect our intellectual property rights.”
In 2013, we were granted 7 new patents in the U.S., Japan and Canada. The patents covered regenerative
technologies and products such as Hyalofast, among others. Other entities have filed patent applications for, or have
been issued patents concerning, various aspects of HA-related products or processes. In addition, the products or
processes we develop may infringe the patent rights of others in the future. Any such infringement may have a
material adverse effect on our business, financial condition, and results of operations. See also the section captioned
“Risk Factors—We may be unable to adequately protect our intellectual property rights.”
We rely upon trade secrets and proprietary know-how for certain non-patented aspects of our technology.
To protect such information, we require certain customers and vendors, and all employees, consultants and licensees
to enter into confidentiality agreements limiting the disclosure and use of such information. These agreements,
however, may not provide adequate protection. See also the section captioned “Risk Factors—We may be unable to
adequately protect our intellectual property rights.”
We have granted Mitek an exclusive and non-transferable royalty bearing license to develop,
commercialize and sell ORTHOVISC, and other products developed pursuant to the JNJ Agreement, in the U.S.
This includes a license to manufacture, and have manufactured, such products in the event that we are unable to
supply them with ORTHOVISC in accordance with the terms of the JNJ Agreement. We have also granted Mitek
the exclusive, royalty free right to use the trademark ORTHOVISC in connection with the marketing, distribution
and sale of the licensed product within the U.S.
On December 21, 2011, the Company entered into a license, supply and distribution agreement (the “Mitek
MONOVISC Agreement”) with Mitek for an exclusive, multi-year U.S. license of the Company’s MONOVISC
product, a highly purified, high molecular weight form of hyaluronic acid for treating pain in patients suffering from
osteoarthritis of the knee. In connection with the execution of the Mitek MONOVISC Agreement, the Company
received an initial payment of $2.5 million. The Company will also be entitled to receive additional payments from
Mitek, as well as receive royalties based on the net sales of MONOVISC generated by Mitek. The Mitek
MONOVISC Agreement applies only to the United States. The Mitek MONOVISC Agreement has an initial term of
fifteen years, unless earlier terminated pursuant to any one of several early termination rights of each party, and
provides for Anika to be the exclusive supplier to Mitek of MONOVISC.
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Government Regulation
United States Regulation
Our research (including clinical research), development, manufacture, and marketing of products are
subject to regulation by numerous governmental authorities in the U.S. and other countries. Medical devices and
pharmaceuticals are subject to extensive and rigorous regulation by the FDA and by other federal, state and local
authorities. The Federal Food, Drug and Cosmetic Act (“FDC Act”) and respective regulations govern the
conditions of safety, efficacy, clearance, approval, manufacture, quality system requirements, labeling, packaging,
distribution, storage, record keeping, reporting, marketing, advertising, and promotion of our products.
Noncompliance with applicable requirements can result in, among other things, fines, injunctions, civil penalties,
recall or seizure of products, total or partial suspension of production, failure of the government to grant premarket
clearance or approval of products, withdrawal of clearances and approvals, and criminal prosecution.
Medical products regulated by the FDA are generally classified as drugs, biologics, and/or medical devices.
Medical devices intended for human use are classified into three categories (Class I, II or III), on the basis of the
controls deemed reasonably necessary by the FDA to assure their safety and efficacy. Class I devices are subject to
general controls, for example, labeling and adherence to the FDA’s Good Manufacturing Practices/Quality System
Regulation (“GMP/QSR”). Many Class I devices are exempt from the FDA 510(k) review process. Class II devices
are subject to general and special controls (for example, performance standards, post-market surveillance, and
patient registries). Most Class II devices are subject to premarket notification and may be subject to clinical testing
for purposes of premarket notification and clearance for marketing. Class III is the most stringent regulatory
category for medical devices. Most Class III devices require premarket approval (“PMA”) from the FDA.
AMVISC, AMVISC Plus, ShellGel/Optivisc, STAARVISC, and AnikaVisc are approved as Class III
medical devices in the U.S. for intraocular ophthalmic surgical procedures used in humans. ORTHOVISC is
approved as a Class III medical device in the U.S. for treatment of pain resulting from osteoarthritis of the knee in
humans. HYDRELLE is approved as a Class III medical device in the U.S. for treatment of facial wrinkles and
folds, such as nasolabial folds. HYVISC is approved as an animal drug for intra-articular injection in horse joints to
treat degenerative joint disease associated with synovitis. Most HA products for human use are regulated as medical
devices. We believe that our INCERT product, should we decide to seek U.S. approval to market, will have to meet
the regulatory requirements for Class III devices and will require clinical trials and a PMA submission.
Our subsidiary, Anika S.r.l., has three advanced wound care products cleared in the U.S. as Class II devices
through premarket notification (510(k)): Hyalomatrix, Hyalofill-R, and Hyalofill-F. Anika S.r.l. also has an
advanced wound care product in the U.S., Hyalogran, which is classified under 510(k) as Class I exempt. All of
Anika S.r.l.’s ENT products are 510(k) cleared by Medtronic as Class II devices. The FDA’s 510(k) clearance
process is under review and changes to the process may have an impact on current or future product approvals.
Unless a new device is exempted from premarket notification, its manufacturer must obtain marketing
clearance from the FDA through premarket notification (510(k)) or approval through PMA before the device can be
introduced to the market. Product development and approval within the FDA regulatory framework takes a number
of years and involves the expenditure of substantial resources. This regulatory framework may change or additional
regulations may arise at any stage of our product development process and may affect approval of, or delay in, an
application related to, a product, or require additional expenditures by us. There can be no assurance that the FDA
review of marketing applications will result in product approval on a timely basis, if at all. The PMA approval
process is lengthy, expensive, and typically requires, among other things, valid scientific evidence which generally
includes extensive data such as pre-clinical and clinical trial data to demonstrate a reasonable assurance of safety
and effectiveness.
Human clinical trials in the U.S. for significant risk devices must be conducted under Good Clinical
Practice (“GCP”) regulations through Investigational Device Exemption (“IDE”), which must be submitted to the
FDA and either be approved or be allowed to become effective before the trials may commence. There can be no
assurance that submission of an IDE will result in the ability to commence clinical trials or future approval of the
product. In addition, the IDE approval process could result in significant delays. Even if the FDA approves an IDE
or allows an IDE for a clinical investigation to become effective, clinical trials may be suspended at any time for a
number of reasons. Among others, these reasons may include: a) failure to comply with applicable requirements;
b) inadequacy of informed consent; and c) the data generated suggests that: the risks to clinical subjects are not
outweighed by the anticipated benefits to clinical subjects and the importance of the knowledge to be gained, the
investigation is scientifically unsound, or there is reason to believe that the device, as used, is ineffective. A trial
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may be terminated if serious unanticipated adverse events present an unreasonable risk to subjects. If clinical studies
are suspended or terminated, we may be unable to continue the development of the investigational products affected.
Upon completion of required clinical trials, for Class III medical devices, results might be presented to the
FDA in a PMA application. In addition to the results of clinical investigations, the New Drug Application (“NDA”)
applicant must submit other information relevant to the safety and efficacy of the device, including, among other
things, the results of non-clinical tests and clinical trials; a full description of the device and its components; a full
description of the methods, facilities and controls used for manufacturing; and proposed labeling. The FDA also
conducts an on-site inspection to determine whether an applicant conforms to the FDA’s current Quality System
Regulation, formerly known as GMP. FDA review of the PMA may not result in timely, or any PMA approval, and
there may be significant conditions on approval, including limitations on labeling and advertising claims and the
imposition of post-market testing, tracking, or surveillance requirements.
Upon completion of required clinical trials for pharmaceuticals, results might be presented to the FDA in a
NDA or New Animal Drug Application (“NADA”). In addition to the results of clinical investigations, the NDA or
NADA applicant must submit other information relevant to the safety and efficacy of the product, including, among
other things, the results of non-clinical tests and clinical trials; a full description of the product formulation; a full
description of the methods, facilities and controls used for manufacturing; and proposed labeling. The FDA also
conducts an on-site inspection to determine whether an applicant conforms to the FDA’s current Good
Manufacturing Practices (“cGMP”) related to pharmaceuticals. FDA review of the NDA or NADA may not result in
timely, or any, FDA approval, and there may be significant conditions on approval, including limitations on labeling
and advertising claims and the imposition of post-market testing, tracking, or surveillance requirements.
Post-approval product or manufacturing changes where such change affects the safety and efficacy of the
medical products as well as the use of a different facility for manufacturing, could necessitate additional review and
approval by the FDA. Post-approval changes in labeling, packaging or promotional materials may also necessitate
further review and approval by the FDA.
Legally marketed products are subject to continuing requirements by the FDA relating to design control,
manufacturing, quality control and quality assurance, maintenance of records and documentation, reporting of
adverse events, and labeling and promotion. The FDC Act requires medical product manufacturers to comply with
QSR for medical devices and cGMP regulations related to pharmaceuticals. The FDA enforces these requirements
through periodic inspections of manufacturing facilities. To ensure full compliance with requirements set forth in the
GMP/QSR regulations, manufacturers must continue to expend time, money and effort in the area of production and
quality control to ensure full technical compliance. Other federal, state, and local agencies may inspect
manufacturing establishments as well.
A set of regulations known as the Medical Device Reporting and Drug Adverse Events Reporting System
regulations obligates manufacturers to inform the FDA whenever information reasonably suggests that one of their
medical products may have caused or contributed to a death or serious injury, or when one of their devices
malfunctions and if the malfunction were to recur, the device or a similar device would be likely to cause or
contribute to a death or serious injury.
The process of obtaining approvals from the FDA and foreign regulatory authorities can be costly, time
consuming, and subject to unanticipated delays. Approvals of our products, processes or facilities may not be
granted on a timely basis or at all, and we may not have available resources or be able to obtain the financing needed
to develop certain of such products. Any failure or delay in obtaining such approvals could adversely affect our
ability to market our products in the U.S. and in other countries.
In addition to regulations enforced by the FDA, we are subject to regulation under the Occupational Safety
and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation
and Recovery Act and other existing and future federal, state and local laws and regulations as well as those of
foreign governments. Federal, state and foreign regulations regarding the manufacture and sale of medical products
are subject to change. We cannot predict what impact, if any, such changes might have on our business.
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Foreign Regulation
In addition to regulations enforced by the FDA, we and our products are subject to certain foreign
regulations. International regulatory bodies often establish regulations governing product standards, packing
requirements, labeling requirements, import restrictions, tariff regulations, duties, and tax requirements.
ORTHOVISC is approved for sale and is marketed in Canada, Europe, Turkey, and parts of the Middle East and
Asia. In the European Union (“EU”), ORTHOVISC is sold under the CE mark authorization, a certification required
under European Union medical device regulations.
The CE mark, achieved in 1996, allows ORTHOVISC to be marketed without further approvals in most of
the EU nations as well as other countries that recognize EU device regulations. ORTHOVISC mini, a treatment for
osteoarthritis targeting small joints, is available in Europe under CE mark authorization received in 2008. In August
2004, we received a CE Design Examination Certificate which entitled us to affix a CE mark to INCERT-S as a
barrier to adhesion formation following surgery. AMVISC and AMVISC Plus are CE marked, and in May 2005, we
received a CE Design Examination Certificate which entitled us to affix a CE mark to ShellGel/Optivisc as an
ophthalmic viscoelastic surgical device. We also received EU CE Mark for AnikaVisc Plus in October 2011.
Staarvisc, an ophthalmic viscoelastic surgical device, was licensed in Canada in May 2002. We received EU CE
Mark approval for ELEVESS during the second quarter of 2007. MONOVISC, a medical device for treatment of
pain associated with osteoarthritis, was approved in the EU in October 2007, in Canada in August 2009, and in the
U.S. in February 2014. In addition, Anika has received approval for several of its products in Latin America, Korea,
Turkey, the Middle East, including the United Arab Emirates and Saudi Arabia, and several markets in Asia.
Almost all of Anika S.r.l.’s products are CE marked for European sale. In addition, Anika S.r.l. has
received approval for several of its products in Egypt, South Korea, Malaysia, Singapore, Mexico, Argentina, Chile,
Saudi Arabia, Turkey, and the United Arab Emirates. We may not be able to achieve and/or maintain the compliance
required for CE marking or other foreign regulatory approvals for any or all of our products. The requirements
relating to the conduct of clinical trials, product licensing, marketing, pricing, advertising, promotion and
reimbursement also vary widely from country to country.
Competition
We compete with many companies including, among others, large pharmaceutical firms and specialized
medical products companies across all of our product lines. Many of these companies have substantially greater
financial resources, larger research and development staffs, more extensive marketing and manufacturing
organizations and more experience in the regulatory process than we have. We also compete with academic
institutions, governmental agencies and other research organizations, which may be involved in research,
development and commercialization of products. Many of our competitors also compete against us in securing
relationships with collaborators for their research and development and commercialization programs.
Competition in our industry is based primarily on product efficacy, safety, timing and the scope of
regulatory approvals, availability of supply, marketing and sales capability, reimbursement coverage, product
pricing and patent protection. Some of the principal factors that may affect our ability to compete in our HA
development and commercialization markets include:
(cid:2) The quality and breadth of our technology and technological advances;
(cid:2) Our ability to complete successful clinical studies and obtain FDA marketing and foreign regulatory
approvals prior to our competitors;
(cid:2) Our ability to recruit and retain skilled employees; and
(cid:2) The availability of capital resources to fund discovery, development and commercialization activities
or the ability to defray such costs through securing relationships with collaborators for our research
and development and commercialization programs.
We are aware of several companies that are developing and/or marketing products utilizing HA for a
variety of human applications. In some cases, competitors have already obtained product approvals, submitted
applications for approval or have commenced human clinical studies, either in the U.S. or in certain foreign
countries. All of the Company’s products face substantial competition. There exist major worldwide competing
products, made from HA and other materials, for use in orthopedics, surgical adhesion prevention, advanced wound
care, ENT, cosmetic dermal fillers and in ophthalmic surgery. There is a risk that we will be unable to compete
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effectively against our current or future competitors. See also the section captioned “Risk Factors—Substantial
competition could materially affect our financial performance.”
Employees
As of December 31, 2013, we had 102 employees, 22 of whom are located outside the U.S. We consider
our relations with our employees to be good. None of our U.S. employees are represented by labor unions, but most
of the employees based in Italy are represented by unions, adding complexity and additional risks to the wage and
employment decision process.
Environmental Laws
We believe that we are in compliance with all foreign, federal, state and local environmental regulations
with respect to our manufacturing facilities and that the cost of ongoing compliance with such regulations does not
have a material effect on our operations.
Product Liability
The testing, marketing and sale of human health care products entail an inherent risk of allegations of
product liability, and we cannot assure that substantial product liability claims will not be asserted against us.
Although we have not received any material product liability claims to date and have coverage under our insurance
policy of $5,000,000 per occurrence and $5,000,000 in the aggregate, we cannot assure that if material claims arise
in the future, our insurance will be adequate to cover all situations. Moreover, we cannot assure that such insurance,
or additional insurance, if required, will be available in the future or, if available, will be available on commercially
reasonable terms. Any product liability claim, if successful, could have a material adverse effect on our business,
financial condition, and results of operation.
Available Information
Our Annual Reports on Form 10-K, including our consolidated financial statements, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K and other information, including amendments and exhibits to such
reports, filed or furnished pursuant to the Securities Exchange Act of 1934, as amended, are available free of charge
in the “SEC Filings” section of our website located at http://www.anikatherapeutics.com, as soon as reasonably
practicable after the reports are filed with or furnished to the Securities and Exchange Commission (“SEC”). The
information on our website is not part of this Annual Report on Form 10-K. Reports filed with the SEC may be
viewed at www.sec.gov or obtained at the SEC Public Reference Room at 100 F Street NE, Washington, D.C.
20549. Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-
800-SEC-0330.
ITEM 1A. RISK FACTORS
Our operating results and financial condition have varied in the past and could in the future vary
significantly depending on a number of factors. From time to time, information provided by us, or statements made
by our employees, contain “forward-looking” information that involves risks and uncertainties. In particular,
statements contained in this Annual Report on Form 10-K, and in the documents incorporated by reference into this
Annual Report on Form 10-K, that are not historical facts, including, but not limited to statements concerning new
products, product development and offerings, regulatory approvals, product and price competition, competition and
strategy, customer diversification, product price and inventory, contingent consideration payments, deferred
revenues, economic and market conditions, potential government regulation, seasonal factors, international
expansion, revenue recognition, profits, growth of revenues, composition of revenues, cost of revenues, operating
expenses, including research and development expenses, sales, marketing and support expenses, general and
administrative expenses, restructuring charges, product gross profit, interest income, interest expense, anticipated
operating and capital expenditure requirements, cash inflows, collection of non-U.S. accounts receivable, contractual
obligations, taxes, tax rates, stock-based compensation, leasing and subleasing activities, acquisitions, liquidity,
litigation matters, intellectual property matters, distribution channels, suppliers, stock price, third party licenses and
potential debt or equity financings constitute forward-looking statements and are made under the safe harbor
provisions of Section 27 of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These statements are neither promises nor guarantees. Our actual results of operations and
financial condition have varied and could in the future vary significantly from those stated in any forward-looking
statements. The following factors, among others, including those elsewhere in this report, could cause actual results
to differ materially from those contained in forward-looking statements made in this Form 10-K, in the documents
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incorporated by reference into this Form 10-K or presented elsewhere by our management from time to time. Such
factors, among others, could have a material adverse effect upon our business, results of operations and financial
condition.
Our business is subject to comprehensive and varied government regulation and, as a result, failure to obtain
FDA or other U.S. and foreign governmental approvals for our products may have a material adverse effect on
our business, financial condition, and results of operations.
Product development and approval within the FDA framework takes a number of years and involves the
expenditure of substantial resources. There can be no assurance that the FDA will grant approval for our new
products, including line extensions, on a timely basis, if at all, or that FDA review will not involve delays that will
adversely affect our ability to commercialize additional products or expand permitted uses of existing products, or
that the regulatory framework will not change, or that additional regulation will not arise at any stage of our product
development process which may adversely affect approval of, or delay in, an application or require additional
expenditures by us. In the event our future products are regulated as human drugs or biologics, the FDA’s review
process of such products typically would be substantially longer and more expensive than the review process to
which they are currently subject as devices.
Our second single-injection osteoarthritis product under development is CINGAL, which is based on our
hyaluronic acid material with an added active therapeutic molecule designed to provide broad pain relief for a longer
period of time. We have completed the formulation and biocompatibility studies of the product. During the second
quarter of 2013, we commenced the clinical trial to obtain the needed clinical data for a CE Mark submission and
approval, and to support other product registrations, including in the United States.
In addition, we cannot assure that:
(cid:2) We will begin or successfully complete U.S. clinical trials for next generation products and new
products;
(cid:2) The clinical data will support the efficacy of these products;
(cid:2) We will be able to successfully complete the FDA or foreign regulatory approval or clearance process,
where required;
(cid:2) Additional clinical trials will support a PMA application and/or FDA approval or other foreign
regulatory approvals, where required, in a timely manner or at all; or
(cid:2) European and other regulations may not change for the marketing of cell based products and thus
impact our ability to continue commercialization of these products.
We also cannot assure that any delay in receiving FDA approvals will not adversely affect our competitive
position. Furthermore, even if we do receive FDA approval or clearance:
(cid:2) The approval or clearance may include significant limitations on the indications and other claims
sought for use for which the products may be marketed;
(cid:2) The approval or clearance may include other significant conditions of approval such as post-market
testing, tracking, or surveillance requirements; and
(cid:2) Meaningful sales may never be achieved.
Once obtained, marketing approval can be withdrawn by the FDA for a number of reasons, including,
among others, the failure to comply with regulatory requirements, or the occurrence of unforeseen problems
following initial approval. We may be required to make further filings with the FDA under certain circumstances.
The FDA’s regulations require a PMA supplement for certain changes if they affect the safety and effectiveness of
an approved device, including, but not limited to, new indications for use, labeling changes, process or
manufacturing changes, the use of a different facility to manufacture, process or package the device, and changes in
performance or design specifications. Our failure to receive approval of a PMA supplement regarding the use of a
different manufacturing facility or any other change affecting the safety or effectiveness of an approved device on a
timely basis, or at all, may have a material adverse effect on our business, financial condition, and results of
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operations. The FDA could also limit or prevent the manufacture or distribution of our products and has the power
to require the recall of such products. It also might be necessary for us, in applicable circumstances, to initiate a
voluntary recall per FDA regulations of one or several of our products. Significant delay or cost in obtaining, or
failure to obtain FDA approval to market products, any FDA limitations on the use of our products, or any
withdrawal or suspension of approval or rescission of approval by the FDA could have a material adverse effect on
our business, financial condition, and results of operations.
In addition, all FDA approved or cleared products manufactured by us must be manufactured in compliance
with the FDA’s cGMP regulations and, for medical devices, the FDA’s QSR. Ongoing compliance with QSR and
other applicable regulatory requirements is enforced through periodic inspection by state and federal agencies,
including the FDA. The FDA may inspect our facilities, from time to time, to determine whether we are in
compliance with regulations relating to medical device and pharmaceutical companies, including regulations
concerning manufacturing, testing, quality control and product labeling practices. We cannot assure that we will be
able to comply with current or future FDA requirements applicable to the manufacture of our products.
FDA regulations depend heavily on administrative interpretation and we cannot assure you that the future
interpretations made by the FDA or other regulatory bodies, with possible retroactive effect, will not adversely
affect us. In addition, changes in the existing regulations or adoption of new governmental regulations or policies
could prevent or delay regulatory approval of our products.
Failure to comply with applicable regulatory requirements could result in, among other things, warning
letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production,
refusal of the FDA to grant pre-market clearance or pre-market approval for devices or drugs, withdrawal of
approvals and criminal prosecution.
In addition to regulations enforced by the FDA, we are subject to other existing and future federal, state,
local and foreign regulations. International regulatory bodies often establish regulations governing product
standards, packing requirements, labeling requirements, quality system and manufacturing requirements, import
restrictions, tariff regulations, duties and tax requirements. We cannot assure you that we will be able to achieve
and/or maintain compliance required for CE marking or other foreign regulatory approvals for any or all of our
products or that we will be able to produce our products in a timely and profitable manner while complying with
applicable requirements. Federal, state, local and foreign regulations regarding the manufacture and sale of medical
products are subject to change. We cannot predict what impact, if any, such changes might have on our business.
The process of obtaining approvals from the FDA and other regulatory authorities can be costly, time
consuming, and subject to unanticipated delays. We cannot assure that approvals or clearances of our products will
be granted or that we will have the necessary funds to develop certain of our products. Any failure to obtain, or
delay in obtaining, such approvals or clearances, could adversely affect our ability to market our products.
Uncertain economic conditions, including a credit crisis affecting the financial markets and global recession,
could adversely affect our business, results of operations and financial condition.
The worldwide financial markets have experienced turmoil, characterized by volatility in security prices,
rating downgrades of investments and reductions in available credit. These events materially and adversely impacted
the availability of financing to a wide variety of businesses, and the resulting uncertainty led to reductions in capital
investments, overall spending levels, future product plans, and sales projections across industries and markets.
The financial markets remain uncertain and renewed turmoil in the financial markets could have a material
adverse impact on our business, our ability to achieve planned results of operations and our financial condition by:
(cid:2) Reducing demand for our products;
(cid:2)
(cid:2)
Increasing risk of order cancellations or delays;
Increasing pressure on the prices for our products;
(cid:2) Creating greater difficulty in collecting accounts receivable; and
(cid:2)
Increasing the risks to our liquidity, including the possibility that we might not have sufficient access
to cash when needed.
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We are unable to predict the likelihood of renewed disruption in financial markets and adverse economic
conditions in the U.S. and other countries.
Substantial competition could materially affect our financial performance.
We compete with many companies, including, among others, large pharmaceutical companies, specialized
medical products companies and healthcare companies. Many of these companies have substantially greater
financial resources, larger research and development staffs, more extensive marketing and manufacturing
organizations and more experience in the regulatory process than us. We also compete with academic institutions,
governmental agencies and other research organizations that may be involved in research, development and
commercialization of products. Because a number of companies are developing or have developed HA products for
similar applications and have received FDA approval, the successful commercialization of a particular product will
depend in part upon our ability to complete clinical studies and obtain FDA marketing and foreign regulatory
approvals prior to our competitors, or, if regulatory approval is not obtained prior to our competitors, to identify
markets for our products that may be sufficient to permit meaningful sales of our products. For example, we are
aware of several companies that are developing and/or marketing products utilizing HA for a variety of human
applications. In some cases, competitors have already obtained product approvals, submitted applications for
approval or have commenced human clinical studies, either in the U.S. or in certain foreign countries. There exist
major competing products for the use of HA in ophthalmic surgery. In addition, certain HA products made by our
competitors for the treatment of osteoarthritis in the knee have received FDA approval before ours and have been
marketed in the U.S. since 1997, as well as select markets in Canada, Europe and other countries. There can be no
assurance that we will be able to compete against current or future competitors or that competition will not have a
material adverse effect on our business, financial condition and results of operations.
We are uncertain regarding the success of our clinical trials.
Several of our products require clinical trials to determine their safety and efficacy for U.S. and
international marketing approval by regulatory bodies, including the FDA. We have hired experienced clinical
development and regulatory staff to develop and supervise our clinical trials and regulatory processes. However, we
will remain dependent upon third party contract research organizations to carry out some of our clinical and
preclinical research studies for the foreseeable future. As a result, we have had and will have less control over the
conduct of the clinical trials, the timing and completion of the trials, the required reporting of adverse events and the
management of data developed through the trials than would be the case if we were relying entirely on our own
staff. Outside parties may have staffing difficulties, may undergo changes in priorities or may become financially
distressed, adversely affecting their willingness or ability to conduct our trials. We may also experience unexpected
cost increases that are beyond our control. Furthermore, there can be no assurance that we will be able to
successfully complete the U.S. or international regulatory approval process for any of our products in development.
In addition, there can be no assurance that we will not encounter additional problems that will cause us to delay,
suspend or terminate our clinical trials. In addition, we cannot make any assurance that clinical trials will be deemed
sufficient in size and scope to satisfy regulatory approval requirements, or, if completed, will ultimately demonstrate
these products to be safe and efficacious.
We are dependent upon marketing and distribution partners and the failure to maintain strategic alliances on
acceptable terms will have a material adverse effect on our business, financial condition and results of
operations.
Our success will be dependent, in part, upon the efforts of our marketing and distribution partners and the
terms and conditions of our relationships with such partners. We cannot assure you that such partners will not seek
to renegotiate their current agreements on terms less favorable to us or terminate such agreements. We are
continuing to seek to establish long-term distribution relationships in regions and countries not covered by existing
agreements, but can make no assurances that we will be successful in doing so. There can be no assurance that we
will be able to identify or engage appropriate distribution or collaboration partners or effectively transition to any
such partners. There can be no assurance that we will obtain reimbursement approvals or, if such approvals are
obtained, that they will be obtained on a timely basis or at a satisfactory level of reimbursement.
We may need to obtain the assistance of additional marketing partners to bring new and existing products
to market and to replace certain marketing partners. The failure to establish strategic partnerships for the marketing
and distribution of our products on acceptable terms will have a material adverse effect on our business, financial
condition, and results of operations.
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Our future success depends upon market acceptance of our existing and future products.
Our success will depend in part upon the acceptance of our existing and future products by the medical
community, hospitals and physicians and other health care providers, third-party payers, and end-users. Such
acceptance may depend upon the extent to which the medical community and end-users perceive our products as
safer, more effective or cost-competitive than other similar products. Ultimately, for our new products to gain
general market acceptance, it may also be necessary for us to develop marketing partners for the distribution of our
products. There can be no assurance that our new products will achieve significant market acceptance on a timely
basis, or at all. Failure of some or all of our future products to achieve significant market acceptance could have a
material adverse effect on our business, financial condition, and results of operations.
We may be unable to adequately protect our intellectual property rights.
Our efforts to enforce our intellectual property rights may not be successful. We rely on a combination of
copyright, trademark, patent and trade secret laws, confidentiality procedures and contractual provisions to protect
our proprietary rights. Our success will depend, in part, on our ability to obtain and enforce patents, protect trade
secrets, obtain licenses to technology owned by third parties when necessary, and conduct our business without
infringing on the proprietary rights of others. The patent positions of pharmaceutical, medical products and
biotechnology firms, including ours, can be uncertain and involve complex legal and factual questions. There can be
no assurance that any patent applications will result in the issuance of patents or, if any patents are issued, whether
they will provide significant proprietary protection or commercial advantage, or will not be circumvented by others.
In the event a third party has also filed one or more patent applications for any of its inventions, we may have to
participate in interference proceedings declared by the United States Patent and Trademark Office to determine
priority of invention, which could result in failure to obtain, or the loss of, patent protection for the inventions and
the loss of any right to use the inventions. Even if the eventual outcome is favorable to us, such interference
proceedings could result in substantial cost to us, and diversion of management’s attention away from our
operations. Filing and prosecution of patent applications, litigation to establish the validity and scope of patents,
assertion of patent infringement claims against others and the defense of patent infringement claims by others can be
expensive and time consuming. There can be no assurance that in the event that any claims with respect to any of
our patents, if issued, are challenged by one or more third parties, that any court or patent authority ruling on such
challenge will determine that such patent claims are valid and enforceable. An adverse outcome in such litigation
could cause us to lose exclusivity covered by the disputed rights. If a third party is found to have rights covering
products or processes used by us, we could be forced to cease using the technologies or marketing the products
covered by such rights, we could be subject to significant liabilities to such third party, and we could be required to
license technologies from such third party. Furthermore, even if our patents are determined to be valid, enforceable,
and broad in scope, there can be no assurance that competitors will not be able to design around such patents and
compete with us using the resulting alternative technology. We have a policy of seeking patent protection for
patentable aspects of our proprietary technology. We intend to seek patent protection with respect to products and
processes developed in the course of our activities when we believe such protection is in our best interest and when
the cost of seeking such protection is not inordinate. However, no assurance can be given that any patent application
will be filed, that any filed applications will result in issued patents or that any issued patents will provide us with a
competitive advantage or will not be successfully challenged by third parties. The protections afforded by patents
will depend upon their scope and validity, and others may be able to design around our patents.
Other entities have filed patent applications for, or have been issued patents concerning various aspects of
HA-related products or processes. There can be no assurance that the products or processes developed by us will not
infringe on the patent rights of others in the future. Any such infringement may have a material adverse effect on our
business, financial condition, and results of operations.
We also rely upon trade secrets and proprietary know-how for certain non-patented aspects of our
technology. To protect such information, we require all employees, consultants and licensees to enter into
confidentiality agreements limiting the disclosure and use of such information. There can be no assurance that these
agreements provide meaningful protection or that they will not be breached, that we would have adequate remedies
for any such breach, or that our trade secrets, proprietary know-how, and our technological advances will not
otherwise become known to others. In addition, there can be no assurance that, despite precautions taken by us,
others have not and will not obtain access to our proprietary technology. Further, there can be no assurance that third
parties will not independently develop substantially equivalent or better technology.
Our manufacturing processes involve inherent risks and disruption could materially adversely affect our
business, financial condition and results of operations.
- 16 -
The operation of biomedical manufacturing plants involves many risks, including the risks of breakdown,
failure or substandard performance of equipment, the occurrence of natural and other disasters, and the need to
comply with the requirements of directives of government agencies, including the FDA. In addition, we rely on a
single supplier for certain key raw materials and a small number of suppliers for a number of other materials
required for the manufacturing and delivery of our HA products. Although we believe that alternative sources for
many of these and other components and raw materials that we use in our manufacturing processes are available, we
cannot be certain that the supply of key raw materials, specifically HA, will continue be available at current levels or
will be sufficient to meet our future needs. Any supply interruption could harm our ability to manufacture our
products until a new source of supply is identified and qualified. We also rely on a single supplier for certain
finished products, and if such manufacturer fails to meet production and delivery schedules, it could have an adverse
impact on our ability to sell such products. We may not be able to find a sufficient alternative supplier in a
reasonable time period, or on commercially reasonable terms, if at all, and our ability to produce and supply our
products could be impaired.
Furthermore, our manufacturing processes and research and development efforts for some of our
ophthalmic and veterinary products involve products derived from animals. We procure our animal-derived raw
materials from qualified vendors, who control for contamination and have processes that effectively inactivate
infectious agents; however, we cannot assure you that we can completely eliminate the risk of transmission of
infectious agents. Furthermore, regulatory authorities could in the future impose restrictions on the use of animal-
derived raw materials that could impact our business.
The utilization of animals in research and development and product commercialization is subject to
increasing focus by animal rights activists. The activities of animal rights groups and other organizations that have
protested animal based research and development programs or boycotted the products resulting from such programs
could cause an interruption in our manufacturing processes and research and development efforts. The occurrence of
material operational problems, including but not limited to the events described above, could have a material
adverse effect on our business, financial condition, and results of operations during the period of such operational
difficulties.
Our financial performance depends on the continued growth and demand for our products and we may not be
able to successfully manage the expansion of our operations.
Our future success depends on substantial growth in product sales. There can be no assurance that such
growth can be achieved or, if achieved, can be sustained. There can be no assurance that even if substantial growth
in product sales and the demand for our products is achieved, we will be able to:
(cid:2) Develop and maintain the necessary manufacturing capabilities;
(cid:2) Obtain the assistance of additional marketing partners;
(cid:2) Attract, retain and integrate required key personnel; and
(cid:2)
Implement the financial, accounting and management systems needed to manage growing demand for
our products.
Our failure to successfully manage future growth could have a material adverse effect on our business,
financial condition, and results of operations.
We engage in acquisitions as a part of our growth strategy in which we will incur a variety of costs and we may
never realize the anticipated benefits of such acquisitions or strategic alliances.
Our business strategy includes the acquisition of businesses, technologies, services or products that we
believe are a strategic fit with our business. Such acquisitions could reduce stockholders’ ownership, cause us to
incur debt, expose us to liabilities and result in amortization expenses related to intangible assets with definite lives.
In addition, acquisitions involve other risks, including diversion of management resources otherwise available for
ongoing development of our business and risks associated with entering new markets with which we have limited
experience or where distribution alliances with experienced distributors are not available. Our future profitability
may depend in part upon our ability to develop further our resources to adapt to these new products or business areas
and to identify and enter into satisfactory distribution networks. Moreover, we may fail to realize the anticipated
benefits of any acquisition as rapidly as expected or at all, or the acquired business may not perform in accordance
- 17 -
with our expectations. We may also incur significant expenditures in anticipation of an acquisition that is never
realized.
We may not be able to realize the expected synergies and cost savings from the integration of acquired
businesses or assets with our existing operations and technologies. In addition, the integration and/or reorganization
processes for our acquisitions may be complex, costly, time consuming and include unanticipated issues, expenses
and liabilities. We may have difficulty in developing, manufacturing and marketing the products of a newly acquired
company in a manner that enhances the performance of our combined businesses or product lines and allows us to
realize value from expected synergies. Following an acquisition, we may not achieve the revenue or net income
levels that justify the acquisition. Acquisitions may also result in one-time charges, such as write-offs or
restructuring charges, impairment of goodwill or acquired In-Process Research and Development (“IPR&D”), which
could adversely affect our operating results. Additionally, we may fund acquisitions of new businesses, strategic
alliances or joint ventures by utilizing our cash, incurring debt, issuing shares of our common stock, or by other
means.
We may not realize the expected benefits from acquisitions due to difficulties integrating the businesses,
operations and product lines.
Our ability to achieve the benefits of acquisitions depends in part on the integration and leveraging of
technology, products, operations, sales and marketing channels and personnel. If we undertake any acquisition, the
process of integrating an acquired business may result in unforeseen operating difficulties and expenditures and may
absorb significant management attention that would otherwise be available for ongoing development of our business
even if completed in a timely and efficient manner.
We may have difficulty successfully integrating acquired businesses, the domestic and foreign operations
or the product lines, and as a result, we may not realize any of the anticipated benefits of the acquisitions. Moreover,
we may lose key clients or employees of acquired businesses as a result of the change in ownership to us.
Additionally, we cannot assure that our growth rate will equal the growth rates that have been experienced by us and
the acquired companies, respectively, operating as separate companies in the past.
We may not fully realize the intended benefits of our restructuring plan.
On December 28, 2012, the Company announced a strategic shift involving the closure of its tissue
engineering facility in Abano Terme, Italy due to the inability to meet strict regulatory standards established by the
European Medicines Agency for ATMP (cell based) products that became effective January 1, 2013. The
restructuring plan adopted included a reduction-in-force of 12 people, and the disposal of related supplies,
equipment, and other assets. We completed the restructuring plan within the first six months of 2013. The
restructuring plan was intended to improve the efficiency and financial performance of the Company's Italian
operations, by reducing costs and focusing on products and technology with strong commercial potential. There is
no guarantee that the restructuring plan will produce the expected future savings.
We may face circumstances in the future that will result in impairment charges, including, but not limited to,
goodwill impairment charges.
If the fair value of any of our long-lived assets decreases as a result of an economic slowdown, a downturn
in the markets where we sell products and services or a downturn in our financial performance and/or future outlook,
we may be required to record an impairment charge on such assets, including goodwill.
We are required to test intangible assets with indefinite life periods for potential impairment annually and
on an interim basis if there are indicators of a potential impairment. We also are required to evaluate amortizable
intangible assets and fixed assets for impairment if there are indicators of a possible impairment. Impairment
charges could have a negative impact on our results of operations and financial position, as well as on the market
price of our common stock.
Customer, vendor and employee uncertainty about the effects of any acquisitions could harm us.
We and the customers of any companies we acquire may, in response to the consummation of any
acquisitions, delay or defer purchasing decisions. Any delay or deferral in purchasing decisions by customers could
adversely affect our business. Similarly, employees of acquired companies may experience uncertainty about their
future role until or after we execute our strategies with regard to employees of acquired companies. This may
- 18 -
adversely affect our ability to attract and retain key management, sales, marketing and technical personnel following
an acquisition.
The acquisitions we have made or may make in the future may make us the subject of lawsuits from either an
acquired company’s stockholders, an acquired company’s previous stockholders or our current stockholders.
We may be the subject of lawsuits from either an acquired company’s stockholders, an acquired company’s
previous stockholders or our current stockholders. These lawsuits could result from the actions of the acquisition
target prior to the date of the acquisition, from the acquisition transaction itself or from actions after the acquisition.
Defending potential lawsuits could cost us significant expense and detract management’s attention from the
operation of the business. Additionally, these lawsuits could result in the cancellation of or the inability to renew,
certain insurance coverage that would be necessary to protect our assets.
Attractive acquisition opportunities may not be available to us in the future.
We will consider the acquisition of other businesses. However, we may not have the opportunity to make
suitable acquisitions on favorable terms in the future, which could negatively impact the growth of our business. In
order to pursue such opportunities, we may require significant additional financing, which may not be available to us
on favorable terms, if at all. The availability of such financing is limited by the continued tightening of the global
credit markets. We expect that our competitors, many of which have significantly greater resources than we do, will
compete with us to acquire compatible businesses. This competition could increase prices for acquisitions that we
would likely pursue.
Sales of our products are largely dependent upon third party reimbursement and our performance may be
harmed by health care cost containment initiatives.
In the U.S. and other markets, health care providers, such as hospitals and physicians, that purchase health
care products, such as our products, generally rely on third party payers, including Medicare, Medicaid and other
health insurance and managed care plans, to reimburse all or part of the cost of the health care product. We depend
upon the distributors for our products to secure reimbursement and reimbursement approvals. Reimbursement by
third party payers may depend on a number of factors, including the payer’s determination that the use of our
products is clinically useful and cost-effective, medically necessary and not experimental or investigational. Since
reimbursement approval is required from each payer individually, seeking such approvals can be a time consuming
and costly process which, in the future, could require us or our marketing partners to provide supporting scientific,
clinical and cost-effectiveness data for the use of our products to each payer separately. Significant uncertainty
exists as to the reimbursement status of newly approved health care products, and any failure or delay in obtaining
reimbursement approvals can negatively impact sales of our new products. In addition, third party payers are
increasingly attempting to contain the costs of health care products and services by limiting both coverage and the
level of reimbursement for new therapeutic products and by refusing in some cases to provide coverage for uses of
approved products for disease indications for which the FDA has not granted marketing approval. Also, Congress
and certain state legislatures have considered reforms that may affect current reimbursement practices, including
controls on health care spending through limitations on the growth of Medicare and Medicaid spending. There can
be no assurance that third party reimbursement coverage will be available or adequate for any products or services
developed by us. Outside the U.S., the success of our products is also dependent in part upon the availability of
reimbursement and health care payment systems. Domestic and international reimbursement laws and regulations
may change from time to time. Lack of adequate coverage and reimbursement provided by governments and other
third party payers for our products and services, including obtaining coverage for MONOVISC in the U.S., and
change of classification by Centers for Medicare and Medicaid Services (“CMS”) for ORTHOVISC under a unique
J-code for Medicare/Medicaid reimbursement, could have a material adverse effect on our business, financial
condition, and results of operations.
- 19 -
We may seek financing in the future, which could be difficult to obtain and which could dilute your ownership
interest or the value of your shares.
We had cash and cash equivalents of $63.3 million at December 31, 2013. Our future capital requirements
and the adequacy of available funds will depend, however, on numerous factors, including:
(cid:2) Market acceptance of our existing and future products;
(cid:2) The success and sales of our products under various distributor agreements;
(cid:2) The successful commercialization of products in development;
(cid:2) Progress in our product development efforts;
(cid:2) The magnitude and scope of such product development efforts;
(cid:2) Any potential acquisitions of products, technologies or businesses;
(cid:2) Progress with preclinical studies, clinical trials and product approvals and clearances by the FDA and
other agencies;
(cid:2) The cost and timing of our efforts to manage our manufacturing capabilities and related costs;
(cid:2) The cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property
rights and the cost of defending any other legal proceeding;
(cid:2) Competing technological and market developments;
(cid:2) The development of strategic alliances for the marketing of certain of our products;
(cid:2) The terms of such strategic alliances, including provisions (and our ability to satisfy such provisions)
that provide upfront and/or milestone payments to us; and
(cid:2) The cost of maintaining adequate inventory levels to meet current and future product demands.
To the extent 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. The terms of any future
equity financings may be dilutive to you and the terms of any debt financings may contain restrictive covenants,
which limit our ability to pursue certain courses of action. Our ability to obtain financing is dependent on the status
of our future business prospects as well as conditions prevailing in the relevant capital markets. 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.
We could become subject to product liability claims, which, if successful, could materially adversely affect our
business, financial condition and results of operations.
The testing, marketing and sale of human health care products entail an inherent risk of allegations of
product liability, and there can be no assurance that substantial product liability claims will not be asserted against
us. Although we have not received any material product liability claims to date and have an insurance policy of
$5,000,000 per occurrence and $5,000,000 in the aggregate to cover such product liability claims should they arise,
there can be no assurance that material claims will not arise in the future or that our insurance will be adequate to
cover all situations. Moreover, there can be no assurance that such insurance, or additional insurance, if required,
will be available in the future or, if available, will be available on commercially reasonable terms. Any product
liability claim, if successful, could have a material adverse effect on our business, financial condition and results of
operations.
- 20 -
Our business is dependent upon hiring and retaining qualified management and technical personnel.
We are highly dependent on the members of our management and technical staff, the loss of one or more of
whom could have a material adverse effect on us. We have experienced a number of management changes in recent
years. There can be no assurances that such management changes will not adversely affect our business. We believe
that our future success will depend in large part upon our ability to attract and retain highly skilled, technical,
managerial and manufacturing personnel. We face significant competition for such personnel from other companies,
research and academic institutions, government entities and other organizations. There can be no assurance that we
will be successful in hiring or retaining the personnel we require. The failure to hire and retain such personnel could
have a material adverse effect on our business, financial condition and results of operations.
We are subject to environmental regulations and any failure to comply with applicable laws could subject us to
significant liabilities and harm our business.
We are subject to a variety of local, state, federal and foreign government regulations relating to the
storage, discharge, handling, emission, generation, manufacture and disposal of toxic, or other hazardous substances
used in the manufacture of our products. Any failure by us to control the use, disposal, removal or storage of
hazardous chemicals or toxic substances could subject us to significant liabilities, which could have a material
adverse effect on our business, financial condition, and results of operations.
As our international sales and operations grow, including through our acquisition of Anika S.r.l., we could
become increasingly subject to additional economic, political and other risks that could harm our business.
Since we manufacture and sell our products worldwide, our business is subject to risks associated with
doing business internationally. During the years ended December 31, 2013, 2012 and 2011, approximately, 23%,
19%, and 25%, respectively, of our product sales were to international distributors. We continue to be subject to a
variety of risks, which could cause fluctuations in the results of our international and domestic operations. These
risks include:
(cid:2) The impact of recessions and other economic conditions in economies, including Europe in particular,
outside the United States;
(cid:2) Sovereign risk associated with doing business with government financed healthcare hospitals and
institutions in Italy;
(cid:2)
Instability of foreign economic, political and labor conditions;
(cid:2) Unfavorable labor regulations applicable to our European operations, such as severance and the
unenforceability of non-competition agreements in the European Union;
(cid:2) The impact of strikes, work stoppages, work slowdowns, grievances, complaints, claims of unfair labor
practices or other collective bargaining disputes;
(cid:2) Difficulties in complying with restrictions imposed by regulatory or market requirements, tariffs or
other trade barriers or by U.S. export laws;
(cid:2)
Imposition of governmental controls limiting the volume of international sales;
(cid:2) Longer accounts receivable payment cycles;
(cid:2) Potentially adverse tax consequences, including, if required, difficulties transferring funds generated in
non-U.S. jurisdictions to the U.S. in a tax efficient manner;
(cid:2) Difficulties in protecting intellectual property;
(cid:2) Difficulties in managing international operations; and
(cid:2) Burdens of complying with a wide variety of foreign laws.
- 21 -
Our success depends, in part, on our ability to anticipate and address these risks. We cannot guarantee that
these or other factors will not adversely affect our business or operating results.
Currency exchange rate fluctuations may have a negative impact on our reported earnings.
Approximately 9% of our business during fiscal year 2013 was conducted in functional currencies other
than the U.S. dollar, which is our reporting currency. Thus, currency fluctuations among the U.S. dollar and the
other currencies in which we do business have caused and will continue to cause foreign currency transaction gains
and losses. Currently, we attempt to manage foreign currency risk through the matching of assets and liabilities. In
the future, we may undertake to manage foreign currency risk through additional hedging methods. We recognize
foreign currency gains or losses arising from our operations in the period incurred. We cannot guarantee that we will
be successful in managing foreign currency risk or in predicting the effects of exchange rate fluctuations upon our
future operating results because of the variability of currency exposure and the potential volatility of currency
exchange rates.
Our stock price has been and may remain highly volatile, and we cannot assure you that market making in our
common stock will continue.
The market price of shares of our common stock may be highly volatile. Factors such as announcements of
new commercial products or technological innovations by us or our competitors, disclosure of results of clinical
testing or regulatory proceedings, governmental regulation and approvals, developments in patent or other
proprietary rights, public concern as to the safety of products developed by us and general market conditions may
have a significant effect on the market price of our common stock. The trading price of our common stock could be
subject to wide fluctuations in response to quarter-to-quarter variations in our operating results, material
announcements by us or our competitors, governmental regulatory action, conditions in the health care industry
generally or in the medical products industry specifically, or other events or factors, many of which are beyond our
control. In addition, the stock market has experienced extreme price and volume fluctuations which have particularly
affected the market prices of many medical products companies and which often have been unrelated to the
operating performance of such companies. Our operating results in future quarters may be below the expectations of
equity research analysts and investors. In such an event, the price of our common stock would likely decline,
perhaps substantially.
No person is under any obligation to make a market in our common stock or to publish research reports on
us, and any person making a market in our common stock or publishing research reports on us may discontinue
market making or publishing such reports at any time without notice. There can be no assurance that an active public
market in our common stock will be sustained.
Our charter documents contain anti-takeover provisions that may prevent or delay an acquisition of us.
Certain provisions of our Restated Articles of Organization and Amended and Restated By-laws could have
the effect of discouraging a third party from pursuing a non-negotiated takeover of us and preventing certain
changes in control. These provisions include a classified Board of Directors, advance notice to the Board of
Directors of stockholder proposals, limitations on the ability of stockholders to remove directors and to call
stockholder meetings, the provision that vacancies on the Board of Directors be filled by vote of a majority of the
remaining directors. In addition, the Board of Directors renewed a Shareholders Rights Plan in April 2008. We are
also subject to Chapter 110F of the Massachusetts General Laws which, subject to certain exceptions, prohibits a
Massachusetts corporation from engaging in any of a broad range of business combinations with any “interested
stockholder” for a period of three years following the date that such stockholder became an interested stockholder.
These provisions could discourage a third party from pursuing a takeover of us at a price considered attractive by
many stockholders, since such provisions could have the effect of preventing or delaying a potential acquirer from
acquiring control of us and our Board of Directors.
Our revenues are derived from a small number of customers, the loss of which could materially adversely affect
our business, financial condition and results of operations.
We have historically derived the majority of our revenues from a small number of customers, most of
whom resell our products to end-users and most of whom are significantly larger companies than us. For the year
ended December 31, 2013, five customers accounted for approximately 79% of product revenue. We expect to
continue to be dependent on a small number of large customers for the majority of our revenues. Our failure to
generate as much revenue as expected from these customers or the failure of these customers to purchase our
products would seriously harm our business. In addition, if present and future customers terminate their purchasing
- 22 -
arrangements with us, significantly reduce or delay their orders, or seek to renegotiate their agreements on terms less
favorable to us, our business, financial condition, and results of operations will be adversely affected. If we accept
terms less favorable than the terms of the current agreement, such renegotiations may have a material adverse effect
on our business, financial condition, and/or results of operations. Furthermore, in any future negotiations we may be
subject to the perceived or actual leverage that these customers may have given their relative size and importance to
us. Any termination, change, reduction or delay in orders could seriously harm our business, financial condition, and
results of operations. Accordingly, unless and until we diversify and expand our customer base, our future success
will significantly depend upon the timing and size of future purchases by our largest customers and the financial and
operational success of these customers. The loss of any one of our major customers or the delay of significant orders
from such customers, even if only temporary, could reduce or delay our recognition of revenues, harm our
reputation in the industry, and reduce our ability to accurately predict cash flow, and, as a consequence, could
seriously harm our business, financial condition, and results of operations.
Information security breaches or business system disruptions may adversely affect our business.
We rely on our information technology infrastructure and management information systems to effectively
run our business. We may be subject to information security breaches caused by illegal hacking, computer viruses,
or acts of vandalism or terrorism. Our security measures or those of our third-party service providers may not detect
or prevent such breaches. Any such compromise to our information security could result in an interruption in our
operations, the unauthorized publication of our confidential business or proprietary information, the unauthorized
release of customer, vendor, or employee data, the violation of privacy or other laws, and the exposure to litigation,
any of which could harm our business and operating results.
The effects of new regulations relating to conflict minerals may adversely affect our business.
On August 22, 2012, under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the
SEC adopted new requirements for companies that use certain minerals and metals, known as conflict minerals, in
their products, whether or not these products are manufactured by third parties. These requirements require
companies to review, disclose and report whether or not such minerals originate from the Democratic Republic of
Congo and adjoining countries. While we currently believe our products do not include any conflict minerals, we
have to review whether such minerals are used in the manufacture of our products. However, the implementation of
these new requirements could adversely affect the sourcing, availability and pricing of such minerals if they are
found to be used in the manufacture of our products. In addition, we will incur additional costs to comply with the
disclosure requirements, including costs related to determining the source of any of the relevant minerals and metals
used in our products. The first report is due on May 31, 2014 for the 2013 calendar year. In 2013, the U.S. Chamber
of Commerce, the National Association of Manufacturers and the Business Roundtable filed a petition challenging
the adoption of the rules by the SEC and it is unclear if its implementation will be delayed.
The impact of United States healthcare reform legislation on us remains uncertain.
In 2010, federal legislation to reform the United States healthcare system was enacted into law in the
Affordable Care Act. The legislation is far-reaching and is intended to expand access to health insurance coverage,
improve quality and reduce costs over time. We expect the new law will impact certain aspects of our business.
However, it is unclear how the new law will impact patient access to new technologies or reimbursement rates under
the Medicare program. Many of the details of the new law will be included in new and revised regulations, which
have not yet been promulgated, and require additional guidance to be provided by the Department of Health and
Human Services, Department of Labor and Department of the Treasury. We are completing our assessment of the
new law on our business. The legislation could have a material adverse effect on our business, cash flows, financial
condition and results of operations.
Our business may be adversely affected if consolidation in the healthcare industry leads to demand for price
concessions or if we are excluded from being a supplier by a group purchasing organization or similar entity.
Because healthcare costs have risen significantly over the past decade, numerous initiatives and reforms
have been launched by legislators, regulators and third-party payers to curb these costs. As a result, there has been a
consolidation trend in the healthcare industry to create larger companies, including hospitals, with greater market
power. As the healthcare industry consolidates, competition to provide products and services to industry participants
has become and may continue to become more intense. This may result in greater pricing pressures and the
exclusion of certain suppliers from important markets as group purchasing organizations, independent delivery
networks and large single accounts continue to use their market power to consolidate purchasing decisions. If a
group purchasing organization excludes us from being one of their suppliers, our net sales could be adversely
- 23 -
impacted. We expect that market demand, government regulation, third-party reimbursement policies and societal
pressures will continue to change the worldwide healthcare industry, which may exert further downward pressure on
the prices of our products.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters is located in Bedford, Massachusetts (“Bedford facility”), where we lease
approximately 134,000 square feet of administrative, research and development and manufacturing space. We
entered into this lease on January 4, 2007, and the lease commenced on May 1, 2007 for an initial term of ten and a
half years. We have an option under the lease to extend its terms for up to four periods beyond the original
expiration date subject to the condition that we notify the landlord that we are exercising each option at least one
year prior to the expiration of the original or current term thereof. The first three renewal options each extend the
term an additional five years with the final renewal option extending the term six years. Our administrative,
marketing, regulatory, and research and development personnel moved into the Bedford facility in November of
2007. The remaining build-out at the Bedford facility was completed in mid-2008.
We also lease, as part of the acquisition of Anika S.r.l., approximately 28,000 square feet of laboratory,
warehouse and office space in Abano Terme, Italy. The lease commenced on December 30, 2009 for an initial term
of six years. For the year ended December 31, 2013, we had aggregate facility lease expenses of approximately
$1,400,000.
ITEM 3. LEGAL PROCEEDINGS
On July 7, 2010, Genzyme Corporation filed a complaint against the Company in the United States District
Court for the District of Massachusetts seeking unspecified damages and equitable relief. The complaint alleges that
the Company has infringed U.S. Patent No. 5,143,724 by manufacturing MONOVISC in the United States for sale
outside the United States and will infringe U.S. Patent Nos. 5,143,724 and 5,399,351 if the Company begins
manufacture and sale of MONOVISC in the United States. On August 30, 2010, the Company filed an answer
denying liability. On April 26, 2011, Genzyme filed a motion to add its newly-issued U.S. Patent No. 7,931,030 to
this litigation and also filed a separate new complaint in the District of Massachusetts alleging that the Company’s
manufacture and sales of MONOVISC in the United States will infringe that patent. On May 23, 2011, the District
Court entered orders permitting Genzyme to file its supplement complaint adding its newly-issued U.S. Patent No.
7,931,030 to this litigation and requiring Genzyme to withdraw its separately filed complaint. On July 14, 2011, the
Company filed an answer to the supplemental complaint, denying liability. On May 10, 2012, Genzyme dismissed
its claim of infringement of U.S. Patent No. 5,399,351 against the Company. The Company believes that neither
MONOVISC, nor its manufacture, does or will infringe any valid and enforceable claim of the asserted patents.
Management assessed and determined that contingent losses related to this matter were not probable. Therefore,
pursuant to Accounting Standards Codification (“ASC”) 450, Contingencies, an accrual was not recorded for this
loss contingency. Pursuant to the terms of the licensing and supply agreement entered into with DePuy Mitek, Inc.,
currently DePuy Synthes, Mitek Sports Medicine or Mitek, in December 2011, Mitek agreed to assume certain
obligations of the Company related to this litigation. On August 3, 2012, a jury in the United States District Court
for the District of Massachusetts held U.S. Patent No. 7,931,030 invalid as obvious and not infringed in litigation
between Genzyme and Seikagaku Corporation, Zimmer Holdings Inc., Zimmer, Inc. and Zimmer U.S., Inc.
concerning the Gel-One product. On September 19, 2012, Genzyme and the Company jointly requested that the
District Court stay Genzyme’s lawsuit against the Company pending full resolution of the Seikagaku/Zimmer
lawsuit, including through any appeal of the judgment entered in that lawsuit. The District Court granted the motion
on September 28, 2012. In September 2013, the District Court in the Seikagaku/Zimmer lawsuit issued an order
denying all the post-trial motions in that case, except for Seikagaku/Zimmer’s motion for damages against
Genzyme. On October 14, 2013, Genzyme filed a notice of appeal to the United States Court of Appeals for the
Federal Circuit challenging the District Court’s judgment of invalidity and non-infringement. That appeal was
dismissed by the Court of Appeals on January 13, 2014 pursuant to a request made by Genzyme. On January 27,
2014, the District Court granted a joint motion filed by the parties to dismiss with prejudice all claims in the
Seikagaku/Zimmer lawsuit and the case was terminated. On March 7, 2014 Genzyme and the Company filed a joint
motion to lift the stay in Genzyme’s lawsuit against the Company and to dismiss with prejudice all of Genzyme’s
claims. On March 10, 2014, the District Court granted the motion dismissing with prejudice all of Genzyme’s claims
against the Company and the case was terminated.
- 24 -
In 2011, Merogel Injectable was voluntarily withdrawn from the market due to a labeling error on the
product’s packaging. We settled the matter related to this dispute with Medtronic in August, 2012. This labeling
error related to conduct that initially occurred prior to our acquisition of Anika S.r.l. from Fidia Farmaceutici S.p.A.
(“Fidia”) and, as a result, we made claims against Fidia for indemnification for Anika’s losses related to this issue.
Fidia maintained that it did not have liability for this matter, and asserted a counterclaim against Anika for failing to
consent to the release of the remaining shares held in escrow upon the closing of the Anika S.r.l. acquisition. The
Company reached agreement with Fidia in October 2013 to settle this matter without admission of liability by either
party in return for a payment made by Fidia to the Company. As a result of the settlement, the arbitration with Fidia
pending before the London Court of International Arbitration has been withdrawn, and shares previously held in
escrow have been released.
We are also involved in various other legal proceedings arising in the normal course of business. Although
the outcomes of these other legal proceedings are inherently difficult to predict, we do not expect the resolution of
these other legal proceedings to have a material adverse effect on our financial position, results of operations or cash
flow.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
COMMON STOCK INFORMATION
Our common stock has traded on the NASDAQ Global Select Market since November 25, 1997, under the
symbol “ANIK.” The following table sets forth, for the periods indicated, the high and low sales prices of our
common stock on the NASDAQ Global Select Market. These prices represent prices between dealers and do not
include retail mark-ups, markdowns, or commissions and may not necessarily represent actual transactions.
Year Ended December 31, 2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year Ended December 31, 2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
Low
$
14.58
18.07
27.80
38.68
High
$
12.95
17.70
16.29
15.52
$
10.00
12.26
17.02
23.26
Low
$
9.00
12.50
11.77
9.13
At December 31, 2013, the closing price per share of our common stock was $38.16 as reported on the
NASDAQ Global Select Market and there were 174 holders of record as of that date. We believe that the number of
beneficial owners of our common stock at that date was substantially greater.
We have never declared or paid any cash dividends on our common stock. We currently intend to retain
earnings, if any, for use in our business and do not anticipate paying cash dividends on our common stock in the
foreseeable future. Payment of future dividends, if any, on our common stock will be at the discretion of our Board
of Directors after taking into account various factors, including our financial condition, operating results, anticipated
cash needs, and plans for expansion.
- 25 -
Performance Graph (Unaudited)
Set forth below is a graph comparing the total returns of the Company, the NASDAQ Composite Index and
the NASDAQ Biotechnology Index. The graph assumes $100 is invested on December 31, 2008 in the Company's
Common Stock and each of the indices.
Anika Therapeutics, Inc.
NASDAQ Composite Index
NASDAQ Biotechnology Index
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
$
$
$
100.00
100.00
100.00
$
$
$
250.99
143.89
115.63
$
$
$
219.41
168.22
132.98
$
$
$
322.37
165.19
148.69
$
$
$
326.97
191.47
196.12
Dec-13
1,255.26
270.55
324.80
$
$
$
- 26 -
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto and Management’s Discussion and Analysis of Financial Condition and
Results of Operations included elsewhere in this Annual Report on Form 10-K. The Balance Sheet Data at
December 31, 2013 and 2012 and the Statement of Operations Data for each of the three years ended December 31,
2013, 2012 and 2011 have been derived from the audited Consolidated Financial Statements for such years,
included elsewhere in this Annual Report on Form 10-K. The Balance Sheet Data at December 31, 2011, 2010 and
2009, and the Statement of Operations Data for each of the two years in the period ended December 31, 2010 and
2009 have been derived from the audited Consolidated Financial Statements for such years not included in this
Annual Report on Form 10-K.
Statement of Operations Data
(In thousands, except per share data)
Product revenue
Licensing, milestone and contract revenue
Total revenue
Cost of product revenue
Product gross profit
Product gross margin
Total operating expenses
Net income
Diluted net income per common share
Diluted common shares outstanding
$
2013
71,774
3,307
75,081
22,765
49,008
68%
42,474
20,575
1.39
14,826
2012
$
$
$
Years ended December 31,
2011
61,956
2,822
64,778
26,784
35,172
57%
50,811
8,467
0.62
13,748
68,010
3,348
71,358
28,989
39,021
57%
51,643
11,757
0.82
14,345
$
2010
52,736
2,821
55,557
23,827
28,909
55%
48,019
4,316
0.32
13,647
$
$
2009
37,321
2,815
40,136
13,670
23,651
63%
34,549
3,688
0.32
11,562
$
$
$
Balance Sheet Data
(In thousands)
Cash and cash equivalents
Working capital
Total assets
Long term obligations
Retained earnings
Stockholders' equity
$
2013
63,333
85,309
156,042
-
66,584
135,634
$
$
2012
$
Years ended December 31,
2011
35,777
49,600
132,844
11,200
34,252
94,763
44,067
62,932
142,069
9,600
46,010
108,925
2010
28,202
36,952
128,937
12,800
25,786
85,190
$
2009
24,427
33,307
129,431
14,400
21,470
82,144
- 27 -
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following section of this Annual Report on Form 10-K titled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” contains statements that are not statements of historical fact and
are forward-looking statements within the meaning of the federal securities laws. These statements involve known
and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievement
to differ materially from anticipated results, performance, or achievement, expressed or implied in such forward-
looking statements. These statements reflect our current views with respect to future events and are based on
assumptions and are subject to risks and uncertainties. We discuss many of these risks and uncertainties at the
beginning of this Annual Report on Form 10-K and under Item 1 “Business” and Item 1A “Risk Factors.” The
following discussion should also be read in conjunction with the Consolidated Financial Statements of Anika
Therapeutics, Inc. and the Notes thereto appearing elsewhere in this report.
Management Overview
Anika Therapeutics, Inc. (“Anika,” and together, with its subsidiaries, the “Company”) develops,
manufactures and commercializes therapeutic products for tissue protection, healing, and repair. These products are
based on hyaluronic acid (“HA”), a naturally occurring, biocompatible polymer found throughout the body. Due to
its unique biophysical and biochemical properties, HA plays an important role in a number of physiological
functions such as the protection and lubrication of soft tissues and joints, the maintenance of the structural integrity
of tissues, and the transport of molecules to and within cells. Together with our wholly-owned subsidiary, Anika
S.r.l., the Company offers therapeutic products in the following areas:
Anika Anika S.r.l.
Orthobiologics
Dermal
Advanced wound care
Aesthetic dermatology
Ophthalmic
Surgical
Anti-adhesion
Ear, nose and throat care (“ENT”)
Veterinary
X
X
X
X
X
X
X
X
X
Orthobiologics
Anika’s orthobiologics business contributed 78% to our product revenue for the year ended December 31,
2013. Our orthobiologics products consist of joint health and orthopedic products. Joint health products include
ORTHOVISC, ORTHOVISC mini, and MONOVISC. ORTHOVISC is available in the U.S., Canada, and some
international markets for the treatment of osteoarthritis of the knee, and in Europe for the treatment of osteoarthritis
in all joints. ORTHOVISC mini is available in Europe and is designed for the treatment of osteoarthritis in small
joints. MONOVISC is our single injection osteoarthritis treatment indicated for all joints in Europe, and for the knee
in the U.S., Turkey and Canada. ORTHOVISC mini, and MONOVISC are two viscosupplementation products
which became available in certain international markets during the second quarter of 2008. Our most recent product
approval was received in February 2014 for MONOVISC in the U.S. The related commercial introduction is
planned for March 2014.
Anika has marketed ORTHOVISC, our product for the treatment of osteoarthritis of the knee,
internationally since 1996 through various distribution agreements. International sales of ORTHOVISC contributed
8% of product revenue for the year ended December 31, 2013.
Our strategy is to continue to add new products, to expand the indications for usage of these products, and
to add additional countries to our distribution network. The orthobiologics area has been the fastest growing area for
the Company, growing from 57% of our product revenue in 2008 to 78% of our product revenue in 2013. We
continue to seek new distribution partnerships around the world and we expect total orthobiologics product sales to
increase in 2014 compared to 2013, based on sales from existing and new partners.
We currently offer several orthopedic products used in connection with regenerative medicine. The
products currently available in Europe include Hyalofast, a biodegradable support for human bone marrow
- 28 -
mesenchymal stem cells; Hyalonect, a woven gauze used as a graft wrap; and Hyaloss, HYAFF fibers used to mix
blood/bone grafts to form a paste for bone regeneration. We also offer Hyaloglide, an ACP gel used in tenolysis
treatment that with additional clinical data may demonstrate potential for flexor tendon adhesion prevention, and in
the shoulder for adhesive capsulitis. These products are commercialized through a network of distributors, primarily
in Europe, the Middle East, and Korea. Anika believes that the U.S. market offers excellent expansion potential to
increase revenue, and this will continue to be a major focus area for the Company.
Dermal
Our dermal products contributed 3% to our product revenue for the year ended December 31, 2013, and
consist of advanced wound care products based on the HYAFF technology, and aesthetic dermal fillers. Anika S.r.l.
offers products for the treatment of skin wounds ranging from burns to diabetic ulcers. The products cover a variety
of wound treatment solutions including debridement agents, advanced therapies and scaffolds used in connection
with skin substitutes. Leading products include Hyalomatrix and Hyalofill, for treatment of complex wounds such as
burns and ulcers, and Hyalograft 3D and Laserskin scaffolds, for use in connection with the regeneration of skin.
Anika S.r.l.’s dermal products are commercialized through a network of distributors, primarily in Europe, Latin
America and the Middle East. Several of the products are also approved for sale in the United States including
Hyalomatrix, Hyalofill and Hyalogran. Currently, the Company is actively seeking a commercial partner in the
United States. In 2012, the Company entered into a distribution agreement for sales of advanced wound care
products in nine South American countries, including Argentina, Brazil, Mexico and Chile.
Our initial aesthetic dermatology product is a dermal filler based on our proprietary chemically modified,
cross-linked HA, and is approved in Europe, Canada, the U.S., South Korea and certain countries in South America.
Internationally, this product is marketed under the ELEVESS trade name. In the U.S., the trade name is
HYDRELLE, although the product is not currently marketed in the U.S.
Surgical
Our surgical group consists of products used to prevent surgical adhesions, and to treat ENT disorders. For
the year ended December 31, 2013, sales of surgical products contributed 8% of our product revenue. Hyalobarrier
is a clinically proven post-operative adhesion barrier for use in the abdomino–pelvic area. The product is currently
commercialized in Europe, the Middle East and certain Asian countries through a distribution network, but is not
approved in the U.S. INCERT, approved for sale in Europe, Turkey, and Malaysia, is a chemically modified, cross-
linked HA product, for the prevention of spinal post-surgical adhesions. There are currently no plans at this time to
distribute INCERT in the U.S. Anika co-owns issued U.S. patents covering the use of INCERT for adhesion
prevention. See the section captioned “Patent and Proprietary Rights” for additional information.
Anika S.r.l. also offers several products used in connection with the treatment of ENT disorders. The lead
products are Merogel, a woven fleece nasal packing, and Merogel Injectable, a thick, viscous hydrogel composed of
cross-linked hyaluronic acid, a biocompatible agent that creates a moist wound-healing environment. Anika S.r.l. is
partnered with Medtronic for distribution of these products.
In 2011, Merogel Injectable was voluntarily withdrawn from the market due to a labeling error on the
product’s packaging. We settled the matter related to this dispute with Medtronic in August, 2012. This labeling
error related to conduct that initially occurred prior to our acquisition of Anika S.r.l. from Fidia Farmaceutici S.p.A.
(“Fidia”) and, as a result, we made claims against Fidia for indemnification for Anika’s losses related to this issue.
Fidia maintained that it did not have liability for this matter, and asserted a counterclaim against Anika for failing to
consent to the release of the remaining shares held in escrow upon the closing of the Anika S.r.l. acquisition. The
Company reached agreement with Fidia in October 2013 to settle this matter without admission of liability by either
party in return for a payment made by Fidia to the Company. As a result of the settlement, the arbitration with Fidia
pending before the London Court of International Arbitration has been withdrawn, and shares previously held in
escrow have been released.
Ophthalmic
Our ophthalmic business includes HA viscoelastic products used in ophthalmic surgery. For the year ended
December 31, 2013, sales of ophthalmic products contributed 6% of our product revenue. Anika previously
manufactured the AMVISC product line for Bausch & Lomb under the terms of a supply agreement that expired on
December 31, 2010 (the “2004 B&L Agreement”) for viscoelastic products used in ophthalmic surgery. Effective
January 1, 2011, the parties entered into a non-exclusive, two year contract intended to transition the manufacture of
AMVISC and AMVISC Plus to an alternative, low-cost supplier formerly affiliated with B&L, and we continued to
- 29 -
supply B&L with these products during 2011. Effective January 1, 2012, the parties agreed to a three year contract
for Anika to continue to supply these products to B&L as a second supplier with committed annual volumes for
2012, and with lower committed volumes in 2013 and 2014.
B&L accounted for 5% of product revenue for the year ended 2013, and is expected to be lower in 2014
under the current contract. Operating margins under the 2004 B&L Agreement were low and will remain at a similar
level under the current contract. See Item 1A. “Risk Factors.”
Veterinary
U.S. sales of HYVISC, our product for the treatment of equine osteoarthritis, contributed 5% to product
revenue for the year ended December 31, 2013. We continue to look at other veterinary applications and
opportunities to expand geographic territories.
Research and Development
Anika’s research and development efforts primarily consisted of the development of new medical
applications for our HA-based technology, the management of clinical trials for certain product candidates, the
preparation and processing of applications for regulatory approvals or clearances at all relevant stages of product
development, and process development and scale-up manufacturing activities related to our existing and new
products. Our development focus includes products for tissue protection, healing and repair. Our investment in R&D
has been important over the years, and varies considerably depending on the number and size of clinical trials and
studies underway. We anticipate that we will continue to commit significant resources to research and development,
including clinical trials, in the future.
In February 2014 we received FDA approval for MONOVISC. MONOVISC is our first FDA approved
single-injection treatment of osteoarthritis that uses a non-animal sourced HA. It is also our first osteoarthritis
product based on our proprietary cross-linked HA-technology. We received Conformité Européenne (“CE”) Mark
approval for the MONOVISC product in October 2007, and began sales in Europe during the second quarter of
2008.
Our second single-injection osteoarthritis product under development is CINGAL, which is based on our
hyaluronic acid material with an added active therapeutic molecule designed to provide broad pain relief for a longer
period of time. We have completed the formulation and biocompatibility studies of the product. During the second
quarter of 2013, we commenced a phase III clinical trial to obtain the needed clinical data for a CE Mark submission
and approval, and to support other product registrations including in the United States.
With the acquisition of Anika S.r.l., we have enhanced our research and development capabilities, our
technology base, and our pipeline of product candidates. Anika S.r.l. has research and development programs for
new products including Hyalofast, an innovative product for cartilage tissue repair, Hyalospine, an adhesion
prevention gel for use after spinal surgery, and Hyalobone, a bone tissue filler.
Restructuring Plan
On December 28, 2012 the Company announced the closure of its tissue engineering facility in Abano
Terme, Italy due to the inability to meet strict regulatory standards, established by the EMA for Advanced Therapy
Medicinal Products, which became effective January 1, 2013. The restructuring plan primarily involved a workforce
reduction, the disposal of related supplies and equipment, and the termination of the Hyalograft C autograft in-
process R&D project. We recorded restructuring and related impairment charges in the fourth quarter of 2012 of
approximately $2.5 million. Of the total restructuring and related impairment charges, approximately $1.6 million
was related to the noncash disposal of assets. The remaining $0.9 million related to cash payments anticipated to
occur in 2013, primarily for employee termination costs. The restructuring plan was completed in 2013, with a
$286,843 benefit to the statement of operations for the year ended December 31, 2013, based on actual expenses and
payment settlements.
- 30 -
Summary of Critical Accounting Policies; Significant Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these consolidated financial statements requires us to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We monitor our estimates on an on-going 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.
We have identified the policies below as critical to our business operations and the understanding of our
results of operations. The impact and any associated risks related to these policies on our business operations is
discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
where such policies affect our reported and expected financial results. For a detailed discussion on the application of
these and other accounting policies, see Note 2 in the Notes to the Consolidated Financial Statements of this Annual
Report on Form 10-K for the year ended December 31, 2013.
Foreign Currency Translation
The functional currency of our wholly-owned foreign subsidiary is the Euro. Assets and liabilities of the
foreign subsidiary are translated using the exchange rate existing on each respective balance sheet date. Revenues
and expenses are translated using the monthly average exchange rates prevailing throughout the year. The
translation adjustments resulting from this process are included as a component of accumulated currency translation
adjustment.
The Company recognized gains from foreign currency transactions of $259,275 and $200,452 during the
years ended December 31, 2013, and 2012, respectively and losses from foreign currency transactions of $623,093
in 2011.
Fair Value Measurements
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date. When determining the fair value
measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most
advantageous market in which we would transact and consider assumptions that market participants would use when
pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. The accounting
standard establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value.
A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. Three levels of inputs that may be used to measure fair value
are:
• Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1
instruments include securities traded on active exchange markets, such as the New York Stock Exchange.
• Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active and model-based valuation techniques for
which all significant assumptions are observable in the market.
• Level 3 – Valuation is generated from model-based techniques that use significant assumptions not
observable in the market. These unobservable assumptions reflect our own estimates of assumptions
market participants would use in pricing the asset or liability.
- 31 -
Allowance for Doubtful Accounts
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. In determining the adequacy of the allowance for doubtful accounts,
management specifically analyzes individual accounts receivable, historical bad debts, customer concentrations,
customer credit-worthiness, current economic conditions, accounts receivable aging trends and changes in our
customer payment terms.
Inventories
Inventories are stated at the lower of cost or market, with cost being determined using the first-in, first-out
method. Work-in-process and finished goods inventories include materials, labor, and manufacturing overhead.
The Company’s policy is to write-down inventory when conditions exist that suggests inventory may be in
excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company’s
products and market conditions. The Company regularly evaluates the ability to realize the value of inventory based
on a combination of factors including, but not limited to: historical usage rates, forecasted sales or usage, product
end of life dates, and estimated current or future market values. Purchasing requirements and alternative usage
avenues are explored within these processes to mitigate inventory exposure.
Revenue Recognition - General
We recognize revenue from product sales when all of the following criteria are met: persuasive evidence of
an arrangement exists; delivery has occurred or services have been rendered; the seller's price to the buyer is fixed or
determinable; and collection from the customer is reasonably assured.
Product Revenue
Revenue from product sales are recognized when title and risk of loss have passed to the customer, which is
typically upon shipment to the customer. Amounts billed or collected prior to recognition of revenue are classified
as deferred revenue. When determining whether risk of loss has transferred to customers on product sales, or if the
sales price is fixed or determinable, the Company evaluates both the contractual terms and conditions of its
distribution and supply agreements as well as its business practices.
Product revenue also includes royalties. Royalty revenue is based on our distributors’ sales and is
recognized in the same period our distributors record their sale of products manufactured by us. On a quarterly basis
we record royalty revenue based upon sales projections provided to us by our distributor customers. If necessary we
adjust our estimates based upon final sales data received prior to issuing our quarterly unaudited or annual audited
financial statements.
Pursuant to the Health Care and Education Reconciliation Act of 2010, in conjunction with the Patient
Protection and Affordable Care Act, a medical device excise tax (“MDET”) became effective on January 1, 2013 for
sales of certain medical devices. Some of our product sales are subject to the provisions of the MDET. The
Company has elected to recognize any amounts related to the MDET under the gross method as allowed under ASC
605-45. For the period ending December 31, 2013, amounts included in revenue and cost of goods sold for the
MDET were immaterial.
Licensing, Milestone and Contract Revenue
Licensing, milestone, and contract revenue consists of revenue recognized on initial and milestone
payments, as well as contractual amounts received from partners. The Company’s business strategy includes
entering into collaborative license, development and/or supply agreements with partners for the development and
commercialization of the Company’s products.
The terms of the agreements typically include non-refundable license fees, funding of research and
development, and payments based upon achievement of certain milestones. The Company adopted Accounting
Standards Update (“ASU”) 2009-13, Revenue Recognition, in January 2011, which amends Accounting Standards
Codification Subtopic 605-25, Multiple Element Arrangements (“ASC 605-25”) to require the establishment of a
selling price hierarchy for determining the allocable selling price of an item. Under ASC 605-25, as amended by
ASU 2009-13, in order to account for an element as a separate unit of accounting, the element must have objective
and reliable evidence of selling price of the undelivered elements. In general, non-refundable upfront fees and
- 32 -
milestone payments that do not relate to other elements are recognized as revenue over the term of the arrangement
as the Company completes its performance obligations.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method over their
estimated useful lives. Computer hardware and software are typically amortized over three to five years, and
furniture and fixtures over five to seven years. Leasehold improvements are amortized over the shorter of their
useful lives or the remaining terms of the related leases. Property and equipment under capital leases are amortized
over the lesser of the lease terms or their estimated useful lives. Maintenance and repairs are charged to expense
when incurred, while additions and improvements are capitalized. When an item is sold or retired, the cost and
related accumulated depreciation is relieved, and the resulting gain or loss, if any, is recognized in income.
Goodwill and Acquired In-Process Research and Development
Goodwill is the amount by which the purchase price of acquired net assets in a business combination
exceeded the fair values of net identifiable assets on the date of acquisition. Acquired IPR&D represents the fair
value assigned to research and development assets that we acquire that have not been completed at the date of
acquisition or are pending regulatory approval in certain jurisdictions. The value assigned to the acquired IPR&D is
determined by estimating the costs to develop the acquired technology into commercially viable products, estimating
the resulting revenue from the projects, and discounting the net cash flows to present value.
Goodwill and IPR&D are evaluated for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. Factors we consider important, on an overall company
basis, that could trigger an impairment review include significant underperformance relative to historical or
projected future operating results, significant changes in our use of the acquired assets or the strategy for our overall
business, significant negative industry or economic trends, a significant decline in our stock price for a sustained
period, or a reduction of our market capitalization relative to net book value.
To conduct impairment tests of goodwill, the fair value of the acquired reporting unit is compared to its
carrying value. If the reporting unit’s carrying value exceeds its fair value, we record an impairment loss to the
extent that the carrying value of goodwill exceeds its implied fair value. We estimate the fair value for reporting
units using discounted cash flow valuation models which require the use of significant estimates and assumptions
including but not limited to: risk free rate of return on an investment, weighted average cost of capital, future
revenue, operating margin, working capital and capital expenditure needs. Our annual assessment for impairment of
goodwill as of November 30, 2013 indicated that the fair value of our reporting unit exceeded the carrying value of
the reporting unit. Anika S.r.l. is our only acquired reporting unit and currently holds 100% of the goodwill
associated with the 2009 acquisition of that company.
To conduct impairment tests of IPR&D, the fair value of the IPR&D projects is compared to the carrying
value. If the carrying value exceeds its fair value, we record an impairment loss to the extent that the carrying value
of the IPR&D project exceeds its fair value. We estimate the fair values for IPR&D projects using discounted cash
flow valuation models which require the use of significant estimates and assumptions including, but not limited to:
estimating the timing of and expected costs to complete the in-process projects, projecting regulatory approvals,
estimating future cash flows from product sales resulting from completed projects and in-process projects, and
developing appropriate discount rates. Our annual assessment for impairment of IPR&D indicated that the fair value
of our IPR&D as of November 30, 2013 exceeded their respective carrying values.
Through December 31, 2013 there have not been any events or changes in circumstances that indicate that
the carrying value of goodwill or acquired intangible assets may not be recoverable. The excess of the fair value of
the equity of the Anika S.r.l. reporting unit over its carrying value at November 30, 2013 increased from the prior
year. The Company continues to monitor and evaluate the financial performance of the Anika S.r.l. business
including the impact of general economic conditions, to assess the potential for the fair value of the reporting unit to
decline below its book value. There can be no assurance that, at the time future impairment tests are completed, a
material impairment charge will not be recorded.
- 33 -
Long-Lived Assets
Long-lived assets primarily include property and equipment and intangible assets with finite lives
(including purchased software and trade names). Purchased software is amortized over 2 to 10 years and trade
names are amortized over 10 years. We review long-lived assets for impairment when events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of
those assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash
flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair
value based on a discounted cash flow analysis.
Restructuring and Impairment Charges
Restructuring charges are primarily comprised of severance costs, activity termination costs and costs of
facility closure. Restructuring charges are recorded upon approval of a formal management plan and are included in
the operating results of the period in which such plan is approved and the expense becomes estimable. To estimate
restructuring charges, management utilizes assumptions such as the number of employees that would be
involuntarily terminated and the future costs to operate and eventually terminate the subject activity.
Research and Development
Research and development costs consist primarily of salaries and related expenses for personnel and fees
paid to outside consultants and outside service providers, including costs associated with licensing, milestone and
contract revenue. Research and development costs are expensed as incurred.
Stock-Based Compensation
We measure the compensation cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the underlying award. That cost is recognized over the period
during which an employee is required to provide service in exchange for the award. See Note 10 of the
accompanying Consolidated Financial Statements for a description of the types of stock-based awards granted, the
compensation expense related to such awards, and detail of equity-based awards outstanding. See Note 14 of the
accompanying Consolidated Financial Statements for details relative to the tax benefit recognized in the
consolidated statement of operations for stock-based compensation.
Income Taxes
Our income tax expense includes U.S. and international income taxes. Certain items of income and expense
are not reported in tax returns and financial statements in the same year. The tax effects of these differences are
reported as deferred tax assets and liabilities. Deferred tax assets are recognized for the estimated future tax effects
of deductible temporary differences and tax operating loss and credit carry-forwards. Changes in deferred tax assets
and liabilities are recorded in the provision for income taxes. We assess the likelihood that our deferred tax assets
will be recovered from future taxable income and, to the extent we believe that it is more likely than not that all or a
portion of deferred tax assets will not be realized, we establish a valuation allowance. To the extent we establish a
valuation allowance or increase this allowance in a period, we include an expense within the tax provision in the
consolidated statement of operations.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income (loss), which includes
foreign currency translation adjustments. For the purposes of comprehensive income disclosures, we do not record
tax provisions or benefits for the net changes in the foreign currency translation adjustment, as we intend to
indefinitely reinvest undistributed earnings of our foreign subsidiary. Accumulated other comprehensive income
(loss) is reported as a component of stockholders' equity and, as of December 31, 2013 and 2012, was comprised
solely of cumulative translation adjustments.
Segment Information
Operating segments, as defined under U.S. GAAP, are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief operating decision maker, or decision-
making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating
decision maker is its Chief Executive Officer. Based on the criteria established by ASC 280, Segment Reporting, the
- 34 -
Company has one reportable operating segment, the results of which are disclosed in Note 13 of the accompanying
Consolidated Financial Statements.
Results of Operations
Year ended December 31, 2013 compared to year ended December 31, 2012
Statement of Operations Detail
Product revenue
Licensing, milestone and contract revenue
Total revenue
Year Ended December 31,
$
2013
71,773,730
3,307,424
75,081,154
$
2012
68,010,169
3,348,336
71,358,505
Inc/(Dec)
$
3,763,561
(40,912)
3,722,649
Inc/(Dec)
6%
(1%)
5%
Operating expenses:
Cost of product revenue
Research & development
Selling, general & administrative
Restructuring charges
Total operating expenses
Income from operations
Interest income (expense), net
Income before income taxes
Provision for income taxes
Net income
Product gross profit
Product gross margin
22,765,404
7,059,875
12,936,001
(286,843)
42,474,437
32,606,717
(127,186)
32,479,531
11,905,010
20,574,521
49,008,326
68%
$
$
28,988,621
5,388,036
14,728,662
2,537,988
51,643,307
19,715,198
(187,777)
19,527,421
7,769,961
11,757,460
39,021,548
57%
$
$
(6,223,217)
1,671,839
(1,792,661)
(2,824,831)
(9,168,870)
12,891,519
60,591
12,952,110
4,135,049
8,817,061
9,986,778
$
$
(21%)
31%
(12%)
-
(18%)
65%
(32%)
66%
53%
75%
26%
Total Revenue. Total revenue for the year ended December 31, 2013 increased by $3,722,649 to
$75,081,154. The increase in total revenue was primarily due to increased orthobiologics product revenue in 2013 as
compared to 2012.
Product revenue by product line. Product revenue for the year ended December 31, 2013 was $71,773,730,
an increase of $3,763,561, or 6%, compared to the prior year.
Year Ended December 31,
Orthobiologics
Dermal
Surgical
Ophthalmic
Veterinary
$
$
2013
55,956,068
1,816,602
5,445,715
4,656,560
3,898,785
71,773,730
2012
49,954,112
1,384,403
5,022,456
8,784,011
2,865,187
68,010,169
Inc/(Dec)
$
6,001,956
432,199
423,259
(4,127,451)
1,033,598
3,763,561
Inc/(Dec)
12%
31%
8%
(47%)
36%
6%
$
$
$
Revenue from orthobiologics increased $6,001,956, or 12%, in 2013 compared to 2012. The improvement
in orthobiologics product revenue was due primarily to increases in domestic and international ORTHOVISC sales.
Our U.S. ORTHOVISC product revenue for 2013 increased 9% compared to 2012. This increase reflects Mitek’s
continued market penetration. International viscosupplementation product revenue in 2013 increased 34% compared
to 2012. The increase in international revenue was driven primarily by growth from existing partners, as well as
geographic expansion. We expect orthobiologics revenue will continue to increase in 2014, both domestically and
internationally.
Dermal revenue increased $432,199, or 31%, in 2013 compared to 2012. The increase was primarily due to
Anika S.r.l.’s advanced wound care products revenue which totaled $1,647,396 in 2013, as compared to $976,388 in
2012. This increase was driven by expansion of advanced wound care revenue from existing distributors as well as
product launches in South America. We expect advanced wound care revenue to increase in 2014 compared to 2013
primarily due to geographic expansion.
Sales of our surgical products increased $423,259, or 8%, as compared to 2012. This product group
consists primarily of Anika S.r.l.’s Hyalobarrier anti-adhesion and ENT products. Our anti-adhesion products
include INCERT and Hyalobarrier. Our leading ear, nose and throat care product is Merogel. Anika S.r.l. is
- 35 -
partnered with Medtronic for distribution of its ENT products. We expect surgical product revenue to increase in
2014 compared to 2013.
Revenue from ophthalmic products in 2013 decreased $4,127,451, or 47%, compared to revenue for these
products in 2012. The decrease was primarily attributable to B&L’s plan to shift manufacturing to an alternative
supplier. B&L accounted for 5% of product revenue for the year ended 2013, and is expected to be lower in 2014
due to the lower minimum purchase requirements under the current three year contract. Operating margins under the
expired 2004 B&L Agreement were low, and remain at a similar level under the current contract.
Veterinary revenue increased $1,033,598, or 36%, in 2013 as compared to 2012. Sales of HYVISC are
made to a single customer under an exclusive agreement which expires December 31, 2014. We expect HYVISC
revenue to be at a similar level in 2014 as compared to 2013.
Licensing, milestone and contract revenue. Licensing, milestone and contract revenue for the year ended
December 31, 2013 was $3,307,424, compared to $3,348,336 for 2012. Licensing and milestone revenue includes
the ratable recognition of the $27,000,000 in up-front and milestone payments related to the JNJ Agreement. These
amounts are being recognized in income ratably over the ten-year initial term of the agreement, or $2,700,000 per
year. The year 2013 was the last year for the recognition of these milestone payments related to ORTHOVISC under
the initial term of the agreement. In November 2012, Mitek exercised its option and extended the JNJ Agreement for
an additional five years through December 2018.
In December 2011, the Company entered into a fifteen-year licensing and supply agreement with Mitek,
Inc. to market MONOVISC in the U.S. The Company received an initial payment of $2,500,000 in December 2011,
which is also being recognized ratably over the life of the underlying agreement of fifteen years. The Company
received FDA PMA approval for MONOVISC in February 2014, and is entitled to receive additional payments from
Mitek, following FDA approval and commercial launch of the product, as well as payments related to future
regulatory, clinical and sales milestones.
Product gross profit and margin. Product gross profit for the year ended December 31, 2013 was
$49,008,326, or 68% of product revenue, compared with $39,021,548, or 57% of product revenue, for the year
ended December 31, 2012. The increase in product gross profit was primarily due to the elimination of duplicate
manufacturing facility costs for a full year in 2013, improved manufacturing efficiencies, as well as improvements
in overall product sales mix, compared to the prior year, with increasing sales of our higher-margin orthobiologics
products as a percent of our total product sales being the primary driver.
Research and development. Research and development (“R&D”) expenses for the year ended
December 31, 2013 increased by $1,671,839, or 31%, as compared to the prior year, due to the timing of the start of
certain clinical trials. R&D as a percentage of revenue was 9% and 8% for the years ended 2013 and 2012,
respectively. We expect research and development expenses will increase in 2014 and thereafter compared to 2013
with our continued efforts for CINGAL, the development efforts for tissue regenerative products, line extension
products, new products, and early-stage development projects.
Selling, general and administrative. Selling, general and administrative expenses for the year ended
December 31, 2013 decreased by $1,792,661, or 12%, as compared to 2012. This decrease was primarily due to a
legal dispute settlement payment received in 2013, as well as on-going cost saving initiatives. We expect general
and administrative expenses for 2014 will increase reflective of the support required to grow our business both
domestically and internationally.
Restructuring charges. On December 28, 2012 the Company announced a strategic shift involving the
closure of its tissue engineering facility in Abano Terme, Italy due to the inability to meet strict regulatory standards,
established by the EMA, which became effective January 1, 2013. As a result of the plan, the Company recorded
restructuring and associated impairment charges in the fourth quarter 2012 of approximately $2.5 million. Of the
total restructuring and associated impairment charges, approximately $1.6 million related to the abandonment and
noncash impairment of assets. The remaining $0.9 million related to cash payments anticipated to occur in 2013,
primarily for employee termination costs. The restructuring plan was completed in 2013, with a $286,843 benefit to
the statement of operations for the year ended December 31, 2013, based on actual expenses and payment
settlements.
Interest income (expense), net. Net interest expense was $127,186 for the year ended December 31, 2013,
as compared to $187,777 in the same period ended 2012. The decrease is the result of the lower balance on our
outstanding variable interest rate debt during 2013. On November 29, 2013, the Company terminated the Credit
- 36 -
Agreement entered into on January 31, 2008 among the Company, as borrower, Anika Securities, Inc., a wholly
owned subsidiary of the Company, as guarantor, each of the lenders from time to time party thereto, and Bank of
America, N.A., as administrative agent. In connection with the termination, the Company pre-paid in full its entire
outstanding debt under the Agreement plus accrued interest. The outstanding debt balance of $8,400,000 was pre-
paid and we did not incur any pre-payment penalties.
Income taxes. Provisions for income taxes were $11,905,010 and $7,769,961 for the years ended
December 31, 2013 and 2012, respectively. The decrease in the effective tax rate in 2013 of 3.1%, as compared to
2012, is primarily due to increased R&D tax credits, increased deductible stock option expenses resulting from
increased exercise activity, and a favorable foreign tax rate differential.
A reconciliation of the U.S. federal statutory tax rate to the effective tax rate for the periods ending
December 31 is as follows:
Statutory federal income tax rate
State tax expense, net of federal benefit
Permanent items, including nondeductible expenses
State investment tax credit
Federal, state and foreign research and development credits
Foreign rate differential
Domestic production deduction
Effective income tax rate
Year ended December 31,
2013
35.0%
4.8%
(0.2%)
(0.1%)
(0.5%)
0.1%
(2.4%)
36.7%
2012
35.0%
6.4%
0.9%
(0.2%)
(1.2%)
2.5%
(3.6%)
39.8%
As of December 31, 2013, the Company had net operating losses (“NOL”) for federal income tax purposes
in Italy of $9,353,750 with no expiration date.
In connection with the preparation of the financial statements, the Company performed an analysis to
ascertain if it was more likely than not that it would be able to utilize, in future periods, the net deferred tax assets
associated with its NOL carry-forward. We have concluded that the positive evidence outweighs the negative
evidence and, thus, that the deferred tax asset not otherwise subject to a valuation allowance are realizable on a
“more likely than not” basis. As such, we have not recorded a valuation allowance at December 31, 2013, and 2012,
respectively.
The 2010 through 2013 tax years remain subject to examination by the Internal Revenue Service (“IRS”)
and other taxing authorities for U.S. federal and state purposes. The 2009 through 2013 tax years remain subject to
examination by the applicable governmental authorities in Italy.
Net income. For the year ended December 31, 2013, net income was $20,574,521, or $1.39 per diluted
share, compared to $11,757,460, or $0.82 per diluted share, for the same period last year. The primary drivers for
this increase in net income were an increase in product gross profit due to improvements in operating efficiencies
and streamlining of manufacturing operations with the consolidation into one facility, a more favorable product mix,
and lower general and administrative expenses.
- 37 -
Year ended December 31, 2012 compared to year ended December 31, 2011
Statement of Operations Detail
Product revenue
Licensing, milestone and contract revenue
Total revenue
Operating expenses:
Cost of product revenue
Research & development
Selling, general & administrative
Restructuring charges
Total operating expenses
Income from operations
Interest income (expense), net
Income before income taxes
Provision for income taxes
Net income
Product gross profit
Product gross margin
$
2012
68,010,169
3,348,336
71,358,505
28,988,621
5,388,036
14,728,662
2,537,988
51,643,307
19,715,198
(187,777)
19,527,421
7,769,961
11,757,460
39,021,548
57%
$
$
Year Ended December 31,
$
2011
61,956,386
2,822,249
64,778,635
Inc/(Dec)
$
6,053,783
526,087
6,579,870
Inc/(Dec)
10%
19%
10%
26,783,738
6,168,937
17,858,558
-
50,811,233
13,967,402
(182,388)
13,785,014
5,318,334
8,466,680
35,172,648
57%
$
$
2,204,883
(780,901)
(3,129,896)
2,537,988
832,074
5,747,796
(5,389)
5,742,407
2,451,627
3,290,780
3,848,900
$
$
8%
(13%)
(18%)
-
2%
41%
3%
42%
46%
39%
11%
Total Revenue. Total revenue for the year ended December 31, 2012 increased by $6,579,870 to
$71,358,505. The increase in total revenue was primarily due to increased orthobiologics product revenue in 2012 as
compared to 2011.
Product revenue by product line. Product revenue for the year ended December 31, 2012 was $68,010,169,
an increase of $6,053,783, or 10%, compared to the prior year.
Year Ended December 31,
Orthobiologics
Dermal
Surgical
Ophthalmic
Veterinary
$
$
2012
49,954,112
1,384,403
5,022,456
8,784,011
2,865,187
68,010,169
2011
39,858,139
3,681,166
4,976,261
10,963,822
2,476,998
61,956,386
Inc/(Dec)
$
10,095,973
(2,296,763)
46,195
(2,179,811)
388,189
6,053,783
Inc/(Dec)
25%
(62%)
1%
(20%)
16%
10%
$
$
$
Revenue from orthobiologics increased $10,095,973, or 25%, in 2012 compared to 2011. The improvement
in orthobiologics product revenue was due primarily an increase in domestic ORTHOVISC sales, offset by
decreases in Anika S.r.l.’s orthopedic revenue which was down in all geographic regions. Our U.S. orthobiologics
product revenue for 2012 increased 42% compared to 2011. This increase reflected Mitek’s continued market
penetration to an estimated market share of 15% in 2012 versus 14% share in 2011. International orthobiologics
product revenue in 2012 decreased 21% compared to 2011. The decrease in international revenue was driven
primarily by the continued economic stagnation being experienced throughout Europe.
Dermal revenue decreased $2,296,763, or 62%, in 2012 compared to 2011. The decrease was primarily due
to Anika S.r.l.’s advanced wound care products revenue which totaled $976,388 in 2012, as compared to $3,331,618
in 2011, due to continued economic challenges faced in the Italian market as well as the impact of changing to a
distributor-based sales model in 2012 in Italy, combined with the poor performance of Anika S.r.l.’s distributor in
the U.S. territory. Aesthetic dermatology revenue was $408,015 for the year ended December 31, 2012, versus
$369,548 for the prior year.
Sales of our surgical products increased $46,195, or 1%, as compared to 2011. This product group consists
primarily of Anika S.r.l.’s Hyalobarrier anti-adhesion and ENT products. Our anti-adhesion products include
INCERT and Hyalobarrier. Our leading ear, nose and throat care product is Merogel. Anika S.r.l. is partnered with
Medtronic for worldwide distribution (except for Italy) of its ENT products.
- 38 -
Revenue from ophthalmic products in 2012 decreased $2,179,811, or 20%, compared to revenue for these
products in 2011. The decrease was primarily attributable to B&L’s plan to shift manufacturing to an alternative
supplier. B&L accounted for 11% of product revenue for the year ended 2012.
Veterinary revenue increased $388,189, or 16%, in 2012 as compared to 2011. Sales of HYVISC are made
to a single customer under an exclusive agreement which expires December 31, 2014.
Licensing, milestone and contract revenue. Licensing, milestone and contract revenue for the year ended
December 31, 2012 was $3,348,336, compared to $2,822,249 for 2011. Licensing and milestone revenue includes
the ratable recognition of the $27,000,000 in up-front and milestone payments related to the JNJ Agreement. These
amounts are being recognized in income ratably over the ten-year initial term of the agreement, or $2,700,000 per
year. The year 2013 is the last year for the recognition of these milestone payments. In November 2012, Mitek
exercised its option and extended the JNJ Agreement for an additional five years through December 2018.
In December 2011, the Company entered into a fifteen-year licensing and supply agreement with Mitek,
Inc. to market MONOVISC in the U.S. The Company received an initial payment of $2,500,000 in December 2011,
which is also being recognized ratably over the life of the underlying agreement of fifteen years. The Company is
entitled to receive additional payments from Mitek, following FDA approval and commercial launch of the product,
as well as payments related to future regulatory, clinical and sales milestones.
Product gross profit and margin. Product gross profit for the year ended December 31, 2012 was
$39,021,548, or 57.4% of product revenue, compared with $35,172,648, or 56.8% of product revenue, for the year
ended December 31, 2011. The increase in product gross profit was primarily due to improvements in Anika’s
overall product sales mix, as compared to the prior year, with increasing sales of our higher-margin orthobiologics
products as a percent of our overall product sales being the primary driver, as well as the realization of operational
efficiencies from our new manufacturing facility after consolidation of sites. The positive effect of the improved
product sales mix was partially offset by the negative impact of a previously disclosed temporary scale-up issue
experienced as we consolidated all of our manufacturing activities into our Bedford facility from our now-closed
Woburn facility. Anika S.r.l. outsourced manufacturing of its medical devices to its former parent company, Fidia
Farmaceutici, contributing to its then current lower gross margins. The Company continued to make progress on its
plan to transfer a significant portion of Anika S.r.l.’s medical device product manufacturing to our Bedford facility
and successfully began manufacturing ACP gel products there during the fourth quarter of 2012.
Research and development. R&D expenses for the year ended December 31, 2012 decreased by $780,901,
or 13%, as compared to the prior year, due to the timing of the start of certain clinical trials. R&D as a percentage of
revenue was 8% and 10% for the years ended 2012 and 2011, respectively.
Selling, general and administrative. Selling, general and administrative expenses for the year ended
December 31, 2012 decreased by $3,129,896, or 18%, as compared to 2011. This decrease was primarily due to
valuation gains associated with the re-measurement of euro-based assets into U.S. dollars as the Dollar weakened
during 2012, as compared to 2011, combined with the placing in service the remainder of the Bedford facility, and
lower legal and professional fees, offset by exit costs associated with the closing of our Woburn facility.
Restructuring charges. On December 28, 2012 the Company announced the closure of its tissue
engineering facility in Abano Terme, Italy due to the inability to meet strict regulatory standards, established by the
EMA, which became effective January 1, 2013. As a result of the plan, the Company recorded restructuring and
associated impairment charges in the fourth quarter of approximately $2.5 million. Of the total restructuring and
associated impairment charges, approximately $1.6 million related to the abandonment and noncash impairment of
assets. The remaining $0.9 million relates to cash payments anticipated to occur in 2013, primarily for employee
termination costs.
Interest income (expense), net. Net interest expense was $187,777 for the year ended December 31, 2012,
as compared to $182,388 in the same period ended 2011. The modest increase was the result of increased rates on
our outstanding variable interest rate debt.
Income taxes. Provisions for income taxes were $7,769,961 and $5,318,334 for the years ended December
31, 2012 and 2011, respectively. The increase in effective tax rate in 2012 of 1.2%, as compared to 2011, was
primarily due to an increase in the federal statutory tax rate and the accompanying foreign rate differential, partially
offset by increased domestic production deductions all resulting from increased domestic taxable income.
- 39 -
A reconciliation of the U.S. federal statutory tax rate to the effective tax rate for the periods ending
December 31 is as follows:
Statutory federal income tax rate
State tax expense, net of federal benefit
Permanent items, including nondeductible expenses
State investment tax credit
Federal, state and foreign research and development credits
Foreign rate differential
Domestic production deduction
Effective income tax rate
Year ended December 31,
2012
35.0%
6.4%
0.9%
(0.2%)
(1.2%)
2.5%
(3.6%)
39.8%
2011
34.0%
5.7%
0.9%
(0.2%)
(0.4%)
0.9%
(2.3%)
38.6%
As of December 31, 2012, the Company had NOL’s for federal income tax purposes in Italy of $9,144,154
with no expiration date. For Massachusetts state income tax purposes, the Company also had an investment tax
credit carry-forward of $298,769 expiring through 2021.
In connection with the preparation of the financial statements, the Company performed an analysis to
ascertain if it was more likely than not that it would be able to utilize, in future periods, the net deferred tax assets
associated with its NOL carry-forward and its investment tax credit carry-forward. We concluded that the positive
evidence outweighs the negative evidence and, thus, that those deferred tax assets not otherwise subject to a
valuation allowance are realizable on a “more likely than not” basis. As such, we did not record a valuation
allowance at December 31, 2012, and 2011, respectively.
The 2010 through 2012 tax years remain subject to examination by the IRS and other taxing authorities for
U.S. federal and state purposes. The 2009 through 2012 tax years remain subject to examination by the applicable
governmental authorities in Italy.
Net income. For the year ended December 31, 2012, net income was $11,757,460, or $0.82 per diluted
share, compared to $8,466,680, or $0.62 per diluted share, for the same period last year. The primary drivers behind
this increase in net income were an increase in product sales with a more favorable product mix, lower clinical
spending due to timing of clinical trial efforts, and lower legal and professional fees. These items were partially
offset by the fourth quarter 2012 restructuring charge and an increase in our effective tax rate.
Liquidity and Capital Resources
We require cash to fund our operating expenses and to make capital expenditures. We expect that our
requirements for cash to fund these uses will increase as our operations expand. Historically we have generated
positive cash flow from operations, which, together with our available cash and investments and debt, have met our
cash requirements. Cash and cash equivalents totaled $63.3 million and $44.1 million, and working capital totaled
approximately $85.3 million and $62.9 million, at December 31, 2013 and December 31, 2012, respectively. The
Company believes it has adequate financial resources to support its business for at least the next twelve months.
Cash provided by operating activities was $25,165,001, $10,548,677 and $10,173,134 for 2013, 2012, and
2011, respectively. Cash provided by operating activities increased by $14,616,324 in 2013, as compared to the
same period ended 2012. The increase was primarily attributable to increased net income in the current year
combined with improvements in accounts receivable collections and the positive effect of deferred income taxes.
These were partially offset by the building of inventories to meet anticipated demand.
Cash used in investing activities was $253,155, $1,504,707 and $1,400,348 in 2013, 2012 and 2011,
respectively. The decrease in cash used in investing activities in 2013, as compared to the same period in the prior
year, is a result of fewer capital purchases associated with our Bedford facility during the current year.
Cash used in financing activities was $5,689,229, $758,854, and $1,165,340 for 2013, 2012, and 2011,
respectively. Cash used in financing activities for 2013 of $9.6 million was due to the pre-payment of long-term debt
of $8.4 million in November 2013, and quarterly payment of principle of $0.4 million in each of the first three
quarters of 2013. This cash decrease is partially offset by $3.1 million of proceeds from exercises of stock options.
- 40 -
Concentration of Risk
A portion of the Company’s accounts receivable arising from product sales within Italy by Anika S.r.l. are
due from public hospitals and other government-funded healthcare agencies. As of December 31, 2013, the
Company’s accounts receivable from all Italian customers totaled approximately $1.2 million of which public
hospital and agency receivables were approximately $0.2 million.
The history with our Italian customers has been such that many of the public healthcare providers funded
by the Italian government have been slow to pay with several maintaining outstanding balances over one year past
due. The Company continuously evaluates these accounts receivables for potential risks associated with, among
other things, governmental funding and reimbursement practices. We have established an allowance against the
gross value of these trade receivables based upon specifically identifiable risks and other currently available
information. For customers where payment is expected over periods of time longer than one year, revenue and trade
receivables have been discounted over the estimated period of time for collection. Allowances for doubtful accounts
have been increased for these customers, but have been immaterial to date. The Company will continue to work
closely with these customers, monitor the economic situation and take appropriate actions as necessary.
See Note 13, Revenue by Product Group, by Significant Customer and by Geographic region; Geographic
Information, in the accompanying Consolidated Financial Statements for information regarding significant
customers.
Accounting for Off-Balance Sheet Arrangements
We do not use special purpose entities or other off-balance sheet financing techniques, except for operating
leases as disclosed in the contractual obligations table below, that we believe have or are reasonably likely to have a
current or future material effect on our financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity or capital resources.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-02,
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income. The provisions of ASU 2013-02 are effective for annual and interim periods beginning after December 15,
2012. The objective of this update is to improve the reporting of reclassifications out of accumulated other
comprehensive income. The amendments in this update seek to attain that objective by requiring an entity to report
the effect of significant reclassifications out of accumulated other comprehensive income on the respective line
items in net income if the amount being reclassified is required under U.S. generally accepted accounting principles
to be reclassified in its entirety to net income. The adoption of this amendment did not have a material impact on our
consolidated financial position, results of operations, or cash flows.
In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent’s
Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of
Assets within a Foreign Entity or of an Investment in a Foreign Entity. The provisions of ASU 2013-05 are effective
for annual and interim periods beginning after December 15, 2013. The objective of the amendments in this update
is to resolve the diversity in practice about whether Subtopic 810-10, Consolidation—Overall, or Subtopic 830-30,
Foreign Currency Matters—Translation of Financial Statements, applies to the release of the cumulative translation
adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer
holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other
than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. The
adoption of this amendment will not have a material impact on our consolidated financial position, results of
operations, or cash flows.
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740) Presentation of an Unrecognized
Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.
The provisions of ASU 2013-11 are effective for annual and interim periods beginning after December 15, 2013.
The main provisions of ASU 2013-11 require an unrecognized tax benefit, or a portion of an unrecognized tax
benefit, to be presented in the financial statements as a reduction to a deferred tax asset for the following; a net
operating loss carryforward, a similar tax loss, or a tax credit carryforward, with certain exceptions. The adoption of
this amendment will not have a material impact on our consolidated financial position, results of operations, or cash
flows.
- 41 -
Contractual Obligations and Other Commercial Commitments
We incurred significant capital investments related to the build-out of our new facility in Bedford,
Massachusetts, as well as the Anika S.r.l. acquisition. Our future capital requirements and the adequacy of available
funds will depend, on numerous factors, including:
(cid:2) Market acceptance of our existing and future products;
(cid:2) The success and sales of our products under current and future distribution agreements;
(cid:2) The successful commercialization of products in development;
(cid:2) Progress in our product development efforts;
(cid:2) The magnitude and scope of such efforts;
(cid:2) Any potential acquisitions of products, technologies or businesses;
(cid:2) Progress with pre-clinical studies, clinical trials and product approvals and clearances by the FDA and
other agencies;
(cid:2) The cost of maintaining adequate manufacturing capabilities;
(cid:2) The cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;
(cid:2) Competing technological and market developments;
(cid:2) The development of strategic alliances for the marketing of certain of our products;
(cid:2) The terms of such strategic alliances, including provisions (and our ability to satisfy such provisions) that
provide upfront and/or milestone payments to us;
(cid:2) The cost of maintaining adequate inventory levels to meet current and future product demands; and
(cid:2) The successful management of Anika S.r.l.
We cannot assure you that we will record profits in future periods. 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, 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. However, we believe that our existing cash and cash
equivalents and future cash provided by operating activities will be sufficient to meet our working capital and capital
expenditure needs for at least the next 12 months. See Item 1A. “Risk Factors.”
The terms of any future equity financings may be dilutive to our stockholders and the terms of any debt
financings may contain restrictive covenants, which could limit our ability to pursue certain courses of action. Our
ability to obtain financing is dependent on the status of our future business prospects as well as conditions prevailing
in the relevant capital markets. No assurance can be given that any additional financing may be made available to us
or may be available on acceptable terms should such a need arise.
- 42 -
The table below summarizes our non-cancelable operating leases and contractual obligations at
December 31, 2013:
Total
Less than
1 year
2 - 3 years
4 - 5 years
More than
5 years
Payments due by period
Operating Leases (1)
Purchase Commitments
Total
$ 10,505,956
5,169,047
$
15,675,003
$ 1,627,388
5,161,476
$
6,788,864
$ 3,211,485
7,571
$
3,219,056
$ 1,943,000
-
$
1,943,000
$ 3,724,083
-
$
3,724,083
(1)
Included in this line is a lease we entered into on January 4, 2007, pursuant to which we lease our Corporate Headquarters
facility, The Facility consists of approximately 134,000 square feet of general office, R&D and manufacturing space located
in Bedford, Massachusetts. The Lease has an initial term of ten and one-half years, and commenced on May 1, 2007. We
have an option under the Lease to extend its terms for up to four periods beyond the original expiration date subject to the
condition that we notify the landlord that we are exercising each option at least one year prior to the expiration of the
original or current term thereof. The first three renewal options each extend the term an additional five years with the final
renewal option extending the term six years. Our administrative and R&D personnel began occupying the Bedford facility in
November of 2007. The Bedford facility was fully validated and approved by applicable regulatory authorities in 2012. We
completed the manufacturing space consolidation and moved all domestic operations into the Bedford facility during the
second quarter of 2012. Also included in the table above is the lease entered into in Italy related to Anika S.r.l. The lease for
our Italian facility commenced on December 30, 2009 for a period of six years.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 31, 2013, we did not utilize any derivative financial instruments, market risk sensitive
instruments or other financial and commodity instruments for which fair value disclosure would be required under
ASC 825, Financial Instruments. Our investments consist of money market funds primarily invested in
U.S. Treasury obligations.
Primary Market Risk Exposures
Our primary market risk exposures are in the area of currency exchange rate risk. We have two major
supplier contracts denominated in foreign currencies. Unfavorable fluctuations in exchange rates would have a
negative impact on our financial statements. The impact of currency exchange rate fluctuation for the two contracts
on our financial statements was immaterial in 2013. Currently, we attempt to manage foreign currency risk through
the matching of assets and liabilities. In the future, we may undertake to manage foreign currency risk through
additional hedging methods. We recognize foreign currency gains or losses arising from our operations in the period
incurred. Our investment portfolio of cash equivalents is subject to interest rate fluctuations, changes in credit
quality of the issuer, or otherwise.
A significant portion of Anika S.r.l.’s revenue, and all operating expenses, are denominated in Euros which
leaves the Company vulnerable to foreign exchange risk.
- 43 -
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ANIKA THERAPEUTICS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31,
2013, 2012 and 2011
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2013, 2012 and 2011
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011
Notes to Consolidated Financial Statements
45
46
47
48
49
50
- 44 -
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Anika Therapeutics, Inc.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
operations and comprehensive income, of stockholders' equity, and of cash flows present fairly, in all material
respects, the financial position of Anika Therapeutics, Inc. and its subsidiaries as of December 31, 2013 and
December 31, 2012 and the results of their operations and their cash flows for each of the three years in the period
ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated
Framework (1992) as issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Company's management is responsible for these financial statements, for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our
responsibility is to express opinions on these financial statements and on the Company's internal control over
financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audits also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 13, 2014
- 45 -
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Balance Sheets
Current assets:
ASSETS
Cash and cash equivalents
Accounts receivable, net of reserves of $593,023 and $337,459 at
December 31, 2013 and 2012, respectively
Inventories
Current portion deferred income taxes
Prepaid expenses and other
Total current assets
Property and equipment, at cost
Less: accumulated depreciation
Long-term deposits and other
Intangible assets, net
Goodwill
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue
Current portion of long-term debt
Income taxes payable
Total current liabilities
Other long-term liabilities
Long-term deferred revenue
Deferred tax liability
Long-term debt
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $.01 par value; 1,250,000 shares authorized, no
shares issued and outstanding at December 31, 2013 and 2012,
respectively
Common stock, $.01 par value; 30,000,000 shares authorized,
14,289,308 and 13,866,060 shares issued and outstanding at
December 31, 2013 and 2012, respectively
Additional paid-in-capital
Accumulated currency translation adjustment
Retained earnings
Total stockholders’ equity
Total Liabilities and Stockholders’ Equity
December 31,
2013
2012
$
63,333,160
$
44,067,477
18,736,845
10,996,785
659,040
865,957
94,591,787
52,413,423
(19,474,712)
32,938,711
69,080
18,998,409
9,443,894
$
156,041,881
21,462,481
8,283,472
2,031,583
1,539,477
77,384,490
52,376,013
(17,263,032)
35,112,981
171,053
20,334,636
9,065,891
$
142,069,051
$
2,793,911
5,537,881
180,433
-
770,276
9,282,501
1,133,544
2,054,941
7,936,864
-
$
2,341,838
5,837,044
2,875,067
1,600,000
1,798,669
14,452,618
1,541,124
2,152,778
6,997,397
8,000,000
-
-
142,893
70,606,031
(1,699,095)
66,584,202
135,634,031
$
156,041,881
138,659
65,431,424
(2,654,630)
46,009,681
108,925,134
$
142,069,051
The accompanying notes are an integral part of these consolidated financial statements.
- 46 -
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
Product revenue
Licensing, milestone and contract revenue
Total revenue
Operating expenses
Cost of product revenue
Research & development
Selling, general & administrative
Restructuring charges
Total operating expenses
Income from operations
Interest income (expense), net
Income before income taxes
Provision for income taxes
Net income
Basic net income per share:
$
For the Years Ended December 31,
2012
68,010,169
3,348,336
71,358,505
$
2013
71,773,730
3,307,424
75,081,154
$
2011
61,956,386
2,822,249
64,778,635
22,765,404
7,059,875
12,936,001
(286,843)
42,474,437
32,606,717
(127,186)
32,479,531
11,905,010
20,574,521
$
28,988,621
5,388,036
14,728,662
2,537,988
51,643,307
19,715,198
(187,777)
19,527,421
7,769,961
11,757,460
$
26,783,738
6,168,937
17,858,558
-
50,811,233
13,967,402
(182,388)
13,785,014
5,318,334
8,466,680
$
Net income
Basic weighted average common shares outstanding
$
1.46
14,086,912
$
0.89
13,260,739
$
0.65
13,064,051
Diluted net income per share:
Net income
Diluted weighted average common shares outstanding
$
1.39
14,825,599
$
0.82
14,344,577
$
0.62
13,747,813
Net income
Other comprehensive income (loss)
Foreign currency translation adjustment
Comprehensive income
$
20,574,521
$
11,757,460
$
8,466,680
955,535
21,530,056
$
412,551
12,170,011
$
(519,405)
7,947,275
$
The accompanying notes are an integral part of these consolidated financial statements.
- 47 -
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Number of
Shares
13,482,384
Common Stock
$.01 Par
Value
$ 134,823
Additional Paid
in Capital
$ 61,817,558
Retained
Earnings
$ 25,785,541
Accumulated
Currency
Translation
Adjustment
$ (2,547,776)
Total
Stockholders'
Equity
$ 85,190,146
148,223
1,482
158,988
-
-
160,470
-
-
-
-
13,630,607
-
-
-
-
136,305
274,190
1,190,697
-
-
63,441,433
-
-
8,466,680
-
34,252,221
-
-
-
(519,405)
(3,067,181)
274,190
1,190,697
8,466,680
(519,405)
94,762,778
235,453
2,354
386,321
-
-
388,675
-
-
-
-
13,866,060
-
-
-
-
138,659
452,471
1,151,199
-
-
65,431,424
-
-
11,757,460
-
46,009,681
-
-
-
412,551
(2,654,630)
452,471
1,151,199
11,757,460
412,551
108,925,134
423,248
4,234
3,049,707
-
-
3,053,941
-
-
-
-
14,289,308
-
-
-
-
$ 142,893
856,830
1,268,070
-
-
$ 70,606,031
-
-
20,574,521
-
$ 66,584,202
-
-
-
955,535
$ (1,699,095)
856,830
1,268,070
20,574,521
955,535
$ 135,634,031
Balance, December 31, 2010
Issuance of common stock for
employee equity awards
Tax benefit related to stock based
compensation
Stock based compensation expense
Net income
Other comprehensive loss
Balance, December 31, 2011
Issuance of common stock for
employee equity awards
Tax benefit related to stock based
compensation
Stock based compensation expense
Net income
Other comprehensive income
Balance, December 31, 2012
Issuance of common stock for
employee equity awards
Tax benefit related to stock based
compensation
Stock based compensation expense
Net income
Other comprehensive income
Balance, December 31, 2013
The accompanying notes are an integral part of these consolidated financial statements.
- 48 -
Anika Therapeutics, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the year ended December 31,
2012
2011
2013
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
Stock-based compensation expense
Deferred income taxes
Provision for doubtful accounts
Provision for inventory
Gain on sale of assets
Tax benefit from exercise of stock options
Restructuring (credits) charges
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Long-term deposits and other
Accounts payable
Accrued expenses
Deferred revenue
Income taxes payable
Other long-term liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property and equipment
Proceeds from sale of assets
Net cash used in investing activities
Cash flows from financing activities:
Principal payments on debt
Proceeds from exercise of stock options
Tax benefit from exercise of stock options
Net cash used in financing activities
$ 20,574,521
$ 11,757,460
$ 8,466,680
4,772,491
1,268,070
2,205,608
238,071
171,089
(126,284)
(856,830)
(160,559)
2,411,247
(2,823,059)
204,519
101,986
622,928
(376,897)
(2,795,285)
152,364
(418,979)
25,165,001
4,525,247
1,151,199
(10,269)
135,353
1,310,953
-
(452,471)
1,604,256
(4,271,129)
(2,370,318)
200,453
33,995
(2,879,330)
1,420,131
(2,858,262)
1,268,442
(17,033)
10,548,677
4,002,391
1,190,697
1,989,708
331,528
1,427,862
-
(274,190)
-
(2,998,037)
224,714
947,263
179,939
(6,594,292)
1,042,845
(213,888)
450,482
(568)
10,173,134
(440,890)
187,735
(253,155)
(1,504,707)
-
(1,504,707)
(1,400,348)
-
(1,400,348)
(9,600,000)
3,053,941
856,830
(5,689,229)
(1,600,000)
388,675
452,471
(758,854)
(1,600,000)
160,470
274,190
(1,165,340)
Exchange rate impact on cash
43,066
5,139
(32,156)
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
19,265,683
44,067,477
$ 63,333,160
8,290,255
35,777,222
$ 44,067,477
7,575,290
28,201,932
$ 35,777,222
Supplemental disclosure of cash flow information:
Cash paid for income taxes
Cash paid for interest
$ 9,841,546
$ 125,978
$ 6,496,000
$ 184,881
$ 2,651,212
$ 193,880
The accompanying notes are an integral part of these consolidated financial statements.
- 49 -
Anika Therapeutics, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Business
Anika Therapeutics, Inc. (“Anika,” the “Company,” “we,” “us,” or “our”) develops, manufactures and
commercializes therapeutic products for tissue protection, healing and repair. These products are based on
hyaluronic acid (“HA”), a naturally occurring, biocompatible polymer found throughout the body. Due to its unique
biophysical and biochemical properties, HA plays an important role in a number of physiological functions such as
the protection and lubrication of soft tissues and joints, the maintenance of the structural integrity of tissues, and the
transport of molecules to and within cells.
The Company is subject to risks common to companies in the biotechnology and medical device industries
including, but not limited to, development by the Company or its competitors of new technological innovations,
dependence on key personnel, protection of proprietary technology, commercialization of existing and new
products, and compliance with FDA and foreign regulations and approval requirements, as well as the ability to
grow the Company’s business.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the
United States of America requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Anika Therapeutics, Inc. and
its wholly owned subsidiaries, Anika Securities, Inc. (a Massachusetts Securities Corporation), and Anika
Therapeutics S.r.l. All intercompany balances and transactions have been eliminated in consolidation. Certain prior
period and intra-period amounts have been reclassified to conform to the current period presentation. There was no
impact on operating income.
Foreign Currency Translation
The functional currency of our foreign subsidiary is the Euro. Assets and liabilities of the foreign subsidiary
are translated using the exchange rate existing on each respective balance sheet date. Revenues and expenses are
translated using the monthly average exchange rates prevailing throughout the year. The translation adjustments
resulting from this process are included as a component of accumulated currency translation adjustment.
The Company recognized gains from foreign currency transactions of $259,275 and $200,452 during the
years ended December 31, 2013, and 2012 respectively and a loss from foreign currency transactions of $623,093 in
2011.
Fair Value Measurements
Fair value is defined as the price that would be received from selling an asset, or paid to transfer a liability,
in an orderly transaction between market participants at the measurement date. When determining the fair value
measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most
advantageous market in which we would transact and consider assumptions that market participants would use when
pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. The accounting
standard establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value.
A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of
input that is significant to the fair value measurement. Three levels of inputs that may be used to measure fair value
are:
- 50 -
• Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1
instruments include securities traded on active exchange markets, such as the New York Stock Exchange.
• Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active and model-based valuation techniques for
which all significant assumptions are observable in the market.
• Level 3 – Valuation is generated from model-based techniques that use significant assumptions not
observable in the market. These unobservable assumptions reflect our own estimates of assumptions
market participants would use in pricing the asset or liability.
Cash equivalents in money market accounts measured and recorded at fair value on a recurring basis were
$34,266,501 and $34,264,268 at December 31, 2013 and 2012 respectively, and were classified as Level 2 and Level
1 instruments, accordingly.
The Company did not have any debt instruments as of December 31, 2013. The carrying value of our debt
instrument at December 31, 2012 was $9,600,000. The estimated fair value of our debt instrument at December 31,
2012 approximated book value using market observable inputs and interest rate measurements.
Allowance for Doubtful Accounts
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. In determining the adequacy of the allowance for doubtful accounts,
management specifically analyzes individual accounts receivable, historical bad debts, customer concentrations,
customer credit-worthiness, current economic conditions, accounts receivable aging trends and changes in our
customer payment terms. Our allowance for doubtful accounts on trade accounts receivable was $593,023 and
$337,459 at December 31, 2013 and 2012, respectively.
Balance, beginning of the year
Amounts provided
Amounts written off
Balance, end of the year
December 31,
2013
$ 337,459
255,564
-
$
593,023
2012
$ 334,473
138,339
(135,353)
$
337,459
There were no uncollectible trade accounts receivables written-off in 2013. Uncollectible trade accounts
receivable written-off were $135,353 and $2,047 in 2012, and 2011, respectively. Provisions for bad debt expense
were $238,071, $138,339, and $306,520 in 2013, 2012, and 2011, respectively, and are included in general and
administrative expenses in the accompanying consolidated statements of operations.
Revenue Recognition - General
We recognize revenue from product sales when all of the following criteria are met: persuasive evidence of
an arrangement exists, delivery has occurred or services have been rendered, the seller's price to the buyer is fixed or
determinable, and collection from the customer is reasonably assured.
Product Revenue
Revenues from product sales are recognized when title and risk of loss have passed to the customer, which
is typically upon shipment to the customer. Amounts billed or collected prior to recognition of revenue are classified
as deferred revenue. When determining whether risk of loss has transferred to customers on product sales, or if the
sales price is fixed or determinable, the Company evaluates both the contractual terms and conditions of its
distribution and supply agreements as well as its business practices.
Product revenue also includes royalties. Royalty revenue is based on our distributors’ sales and recognized
in the same period our distributors record their sale of products manufactured by us. On a quarterly basis we record
royalty revenue based upon sales projections provided to us by our distributor customers. If necessary we adjust our
estimates based upon final sales data received prior to issuing our quarterly unaudited or annual audited financial
statements.
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Pursuant to the Health Care and Education Reconciliation Act of 2010, in conjunction with the Patient
Protection and Affordable Care Act, a medical device excise tax (“MDET”) became effective on January 1, 2013 for
sales of certain medical devices. Some of our product sales are subject to the provisions of the MDET. The
Company has elected to recognize any amounts related to the MDET under the gross method as allowed under ASC
605-45. For the period ending December 31, 2013, amounts included in revenue and cost of goods sold for the
MDET were immaterial.
Licensing, Milestone and Contract Revenue
Licensing, milestone, and contract revenue consist of revenue recognized on initial and milestone
payments, as well as contractual amounts received from partners. The Company’s business strategy includes
entering into collaborative license, development and/or supply agreements with partners for the development and
commercialization of the Company’s products.
The terms of the agreements typically include non-refundable license fees, funding of research and
development, and payments based upon achievement of certain milestones. The Company adopted ASU 2009-13,
Revenue Recognition, in January 2011, which amends ASC Subtopic 605-25, Multiple Element Arrangements
(“ASC 605-25”) to require the establishment of a selling price hierarchy for determining the allocable selling price
of an item. Under ASC 605-25, as amended by ASU 2009-13, in order to account for an element as a separate unit
of accounting, the element must have objective and reliable evidence of selling price of the undelivered elements. In
general, non-refundable upfront fees and milestone payments that do not relate to other elements are recognized as
revenue over the term of the arrangement as the Company completes its performance obligations.
Cash, Cash Equivalents and Marketable Investments
We consider only those investments which are highly liquid, readily convertible to cash, and that mature
within three months from date of purchase to be cash equivalents. Marketable investments are those with original
maturities in excess of three months.
At December 31, 2013 and 2012, respectively, cash equivalents were comprised of money market funds
secured by U.S. Treasury obligations, which approximates fair market value. We had no marketable investments at
December 31, 2013 and 2012, respectively.
Concentration of Credit Risk and Significant Customers
The Company has no significant off-balance sheet risks related to foreign exchange contracts, option
contracts or other foreign hedging arrangements. The Company currently maintains its cash equivalent balance with
one major international financial institution.
The Company, by policy, routinely assesses the financial strength of its customers. As a result, the
Company believes that its accounts receivable credit risk exposure is limited.
As of December 31, 2013, Mitek, Medtronic Xomed, Soylu Medikal San ve Dis Tic Ltd., Pharmascience,
Inc., and Bausch & Lomb, combined, represented 67% of the Company’s accounts receivable balance. As of
December 31, 2012, Mitek, Medtronic Xomed, Soylu Medikal San ve Dis Tic Ltd., Rivex Pharma, and Takeda,
combined, represented 78% of the Company’s accounts receivable balance.
Inventories
Inventories are stated at the lower of cost or market, with cost being determined using the first-in, first-out
method. Work-in-process and finished goods inventories include materials, labor, and manufacturing overhead.
The Company’s policy is to write-down inventory when conditions exist that suggests inventory may be in
excess of anticipated demand or is obsolete based upon assumptions about future demand for the Company’s
products and market conditions. The Company regularly evaluates the ability to realize the value of inventory based
on a combination of factors including, but not limited to: historical usage rates, forecasted sales or usage, product
end of life dates, and estimated current or future market values. Purchasing requirements and alternative usage
avenues are explored within these processes to mitigate inventory exposure.
- 52 -
When recorded, inventory write-downs are intended to reduce the carrying value of inventory to its net
realizable value. Inventory of $10,996,785 and $8,283,472 as of December 31, 2013 and 2012, respectively, is stated
net of aggregate inventory write-downs of $758,106 and $1,161,805, respectively. If actual demand for the
Company’s products deteriorates, or market conditions are less favorable than those projected, additional inventory
write-downs may be required.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the straight-line method over their
estimated useful lives. Computer hardware and software are typically amortized over three to five years, and
furniture and fixtures over five to seven years. Leasehold improvements are amortized over the shorter of their
useful lives or the remaining terms of the related leases which range from six months to 24 years at December 31,
2013. Property and equipment under capital leases are amortized over the lesser of the lease terms or their estimated
useful lives. Maintenance and repairs are charged to expense when incurred; additions and improvements are
capitalized. When an item is sold or retired, the cost and related accumulated depreciation is relieved, and the
resulting gain or loss, if any, is recognized in income.
Goodwill and Acquired Intangible Assets
Goodwill is the amount by which the purchase price of acquired net assets in a business combination
exceeded the fair values of net identifiable assets on the date of acquisition. Acquired IPR&D represents the fair
value assigned to research and development assets that we acquire that have not been completed at the date of
acquisition or are pending regulatory approval in certain jurisdictions. The value assigned to the acquired IPR&D is
determined by estimating the costs to develop the acquired technology into commercially viable products, estimating
the resulting revenue from the projects, and discounting the net cash flows to present value.
Goodwill and IPR&D are evaluated for impairment annually or more frequently if events or changes in
circumstances indicate that the asset might be impaired. Factors we consider important, on an overall company
basis, that could trigger an impairment review include significant underperformance relative to historical or
projected future operating results, significant changes in our use of the acquired assets or the strategy for our overall
business, significant negative industry or economic trends, a significant decline in our stock price for a sustained
period, or a reduction of our market capitalization relative to net book value.
To conduct impairment tests of goodwill, the fair value of the acquired reporting unit is compared to its
carrying value. If the reporting unit’s carrying value exceeds its fair value, we record an impairment loss to the
extent that the carrying value of goodwill exceeds its implied fair value. We estimate the fair value for reporting
units using discounted cash flow valuation models which require the use of significant estimates and assumptions
including but not limited to; risk free rate of return on an investment, weighted average cost of capital, future
revenue, operating margin, working capital and capital expenditure needs. Our annual assessment for impairment of
goodwill as of November 30, 2013 indicated that the fair value of our reporting units exceeded the carrying value of
the reporting units. Anika S.r.l. is our only acquired reporting unit and currently holds 100% of the goodwill
associated with the 2009 acquisition of that company. There can be no assurance that, at the time future impairment
tests are completed, a material impairment charge will not be recorded.
To conduct impairment tests of IPR&D, the fair value of the IPR&D project is compared to its carrying
value. If the carrying value exceeds its fair value, we record an impairment loss to the extent that the carrying value
of the IPR&D project exceeds its fair value. We estimate the fair value for IPR&D projects using discounted cash
flow valuation models which require the use of significant estimates and assumptions including but not limited to:
estimating the timing of and expected costs to complete the in-process projects, projecting regulatory approvals,
estimating future cash flows from product sales resulting from completed projects and in-process projects, and
developing appropriate discount rates. Our annual assessment for impairment of IPR&D indicated that the fair value
of our IPR&D as of November 30, 2013 exceeded their respective carrying values. There can be no assurance that,
at the time future impairment tests are completed, a material impairment charge will not be recorded.
As part of the restructuring plan we adopted during the fourth quarter of 2012, we terminated an IPR&D
project related to our tissue engineering operation and included an expense of approximately $1.2 million as a
component of the overall restructuring charge for the year ended December 31, 2012. See “Restructuring Charges,”
below, and Note 16 for additional disclosure.
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Long-Lived Assets
Long-lived assets primarily include property and equipment and intangible assets with finite lives
(including purchased software and trade names). Purchased software is amortized over 2 to 10 years and trade
names are amortized over 10 years. We review long-lived assets for impairment when events or changes in business
circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of
those assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash
flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair
value based on a discounted cash flow analysis.
As part of the restructuring plan we adopted during the fourth quarter of 2012, we disposed of long-lived
assets related to our tissue engineering operation and included an expense of approximately $0.3 million as a
component of the overall restructuring charge for the year ended December 31, 2012. See “Restructuring Charges,”
below, and Note 16 for additional disclosure.
Restructuring Charges
Restructuring charges are primarily comprised of severance costs, activity termination costs and costs of
facility closure. Restructuring charges are recorded upon approval of a formal management plan and are included in
the operating results of the period in which such plan is approved and the expense becomes estimable. To estimate
restructuring charges, management utilizes assumptions such as the number of employees that would be
involuntarily terminated and the future costs to operate and eventually terminate the subject activity.
Research and Development
Research and development costs consist primarily of salaries and related expenses for personnel and fees
paid to outside consultants and outside service providers, including costs associated with licensing, milestone and
contract revenue. Research and development costs are expensed as incurred.
Stock-Based Compensation
We measure the compensation cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the underlying award. That cost is recognized over the period
during which an employee is required to provide service in exchange for the award. See Note 10 for a description of
the types of stock-based awards granted, the compensation expense related to such awards, and detail of equity-
based awards outstanding. See Note 14 for detail of the tax benefit recognized in the consolidated statement of
operations related to stock-based compensation.
Income Taxes
Our income tax expense includes U.S. and international income taxes. Certain items of income and expense
are not reported in tax returns and financial statements in the same year. The tax effects of these timing differences
are reported as deferred tax assets and liabilities. Deferred tax assets are recognized for the estimated future tax
effects of deductible temporary differences, tax operating losses, and tax credit carry-forwards (including investment
tax credits). Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. We assess
the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe
that it is more likely than not that all or a portion of deferred tax assets will not be realized, we establish a valuation
allowance to reduce the deferred tax assets to the appropriate valuation. To the extent we establish a valuation
allowance or increase or decrease this allowance in a given period, we include the related tax expense or tax benefit
within the tax provision in the consolidated statement of operations in that period.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income (loss), which includes
foreign currency translation adjustments. For the purposes of comprehensive income disclosures, we do not record
tax provisions or benefits for the net changes in the foreign currency translation adjustment, as we intend to reinvest
permanently undistributed earnings of our foreign subsidiary. Accumulated other comprehensive income (loss) is
reported as a component of stockholders' equity and, as of December 31, 2013 and 2012, respectively, was
comprised solely of cumulative translation adjustments.
- 54 -
Segment Information
Operating segments, as defined under U.S. GAAP, are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief operating decision maker, or decision-
making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating
decision maker is its Chief Executive Officer. Based on the criteria established by ASC 280, Segment Reporting, the
Company has one reportable operating segment, the results of which are disclosed in the accompanying consolidated
financial statements.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2013-02,
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income. The provisions of ASU 2013-02 are effective for annual and interim periods beginning after December 15,
2012. The objective of this update is to improve the reporting of reclassifications out of accumulated other
comprehensive income. The amendments in this update seek to attain that objective by requiring an entity to report
the effect of significant reclassifications out of accumulated other comprehensive income on the respective line
items in net income if the amount being reclassified is required under U.S. generally accepted accounting principles
to be reclassified in its entirety to net income. The adoption of this amendment did not have a material impact on our
consolidated financial position, results of operations, or cash flows.
In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent’s
Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of
Assets within a Foreign Entity or of an Investment in a Foreign Entity. The provisions of ASU 2013-05 are effective
for annual and interim periods beginning after December 15, 2013. The objective of the amendments in this update
is to resolve the diversity in practice about whether Subtopic 810-10, Consolidation—Overall, or Subtopic 830-30,
Foreign Currency Matters—Translation of Financial Statements, applies to the release of the cumulative translation
adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer
holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other
than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. The
adoption of this amendment will not have a material impact on our consolidated financial position, results of
operations, or cash flows.
In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740) Presentation of an Unrecognized
Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.
The provisions of ASU 2013-11 are effective for annual and interim periods beginning after December 15, 2013.
The main provisions of ASU 2013-11 require an unrecognized tax benefit, or a portion of an unrecognized tax
benefit, to be presented in the financial statements as a reduction to a deferred tax asset for the following; a net
operating loss carryforward, a similar tax loss, or a tax credit carryforward, with certain exceptions. The adoption of
this amendment will not have a material impact on our consolidated financial position, results of operations, or cash
flows.
3. Earnings per Share (“EPS”)
Basic EPS is calculated by dividing net income by the weighted average number of shares outstanding
during the period. Unvested restricted shares, although legally issued and outstanding, are not considered
outstanding for purposes of calculating basic earnings per share. Diluted EPS is calculated by dividing net income
by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options,
stock appreciation rights (“SAR’s”), restricted shares and restricted stock units (collectively “RSA’s”) using the
treasury stock method.
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The following table provides share information used in the calculation of the Company's basic and diluted
earnings per share:
Shares used in the calculation of Basic earnings per share
Effect of dilutive securities:
Stock options, SAR's, RSA's, and shares held in escrow
Diluted shares used in the calculation of earnings per share
Year ended December 31,
2012
13,260,739
2013
14,086,912
738,687
14,825,599
1,083,838
14,344,577
2011
13,064,051
683,762
13,747,813
Stock options to purchase 21,326 shares, 131,273 shares, and 1,142,840 shares for 2013, 2012 and 2011,
respectively, were excluded from the computation of diluted EPS as their effect would have been anti-dilutive.
At December 31, 2013, 2012 and 2011, 52,339 shares, 54,124 shares, and 59,196 shares of issued and
outstanding unvested restricted stock, respectively, were excluded from the basic earnings per share calculation in
accordance with ASC 260.
4. Inventories
Inventories consist of the following:
Raw materials
Work-in-process
Finished goods
Total
5. Property and Equipment
December 31,
2013
$ 5,926,030
2,308,233
2,762,522
$ 10,996,785
2012
$ 6,109,807
777,056
1,396,609
$ 8,283,472
Property and equipment is stated at cost and consists of the following:
Machinery and equipment
Furniture and fixtures
Leasehold improvements
Construction in progress
Subtotal
Less accumulated depreciation
Total
December 31,
2013
$ 23,326,622
1,316,014
27,613,495
157,292
52,413,423
(19,474,712)
$ 32,938,711
2012
$ 22,863,921
1,274,477
28,195,345
42,270
52,376,013
(17,263,032)
$ 35,112,981
Depreciation expense was $2,678,745, $2,496,749 and $1,816,188 for the years ended December 31, 2013,
2012 and 2011, respectively.
6. Acquired Intangible Assets, Net
In November 2007, in connection with the termination of the agreement with Galderma which originally
granted to Galderma the worldwide rights to commercialization, distribution, and marketing of ELEVESS products,
the Company reacquired the worldwide rights and control of the future development and marketing of ELEVESS.
The intangible asset realized during this process was the ELEVESS trade name.
On December 30, 2009, in connection with the acquisition of Anika S.r.l., the Company purchased various
intangible assets. The Company finalized the purchase price allocation relative to this acquisition during the fourth
quarter of 2010.
We completed our annual impairment review as of November 30, 2013 and concluded that no impairment
in the carrying value exists as of that date with respect to both goodwill and IPR&D. Through December 31, 2013
there have not been any events or changes in circumstances that indicate that the carrying value of goodwill or
acquired intangible assets may not be recoverable. The excess of the fair value of the equity of the Anika S.r.l.
- 56 -
reporting unit over its carrying value at November 30, 2013 increased from the prior year. The Company continues
to monitor and evaluate the financial performance of the Anika S.r.l. business including the impact of general
economic conditions, to assess the potential for the fair value of the reporting unit to decline below its book value.
See Note 16, Restructuring, for additional disclosure.
Amortization expense was $2,093,746, $2,028,498, and $2,186,203 for the years ended December 31,
2013, 2012 and 2011, respectively. As of December 31, 2013, amortization expense on intangible assets for the next
five years is expected to be approximately $2.0 million annually.
Intangible assets, stated at cost, consist of the following:
December 31, 2013
December 31, 2012
Developed technology
In-process research & development
Distributor relationships
Patents
Elevess trade name
Total
Gross Value
16,700,000
$
5,502,686
4,700,000
1,000,000
1,000,000
28,902,686
$
Currency
Translation
Adjustment
$
(950,299)
(216,559)
(423,532)
(53,908)
-
$
(1,644,298)
Accumulated
Amortization
$
(3,996,698)
-
(3,412,813)
(226,518)
(623,950)
(8,259,979)
$
7. Accrued Expenses
Accrued expenses consist of the following:
$
$
Net Book
Value
11,753,003
5,286,127
863,655
719,574
376,050
18,998,409
Net Book
Value
12,370,042
4,980,574
1,733,453
749,166
501,401
20,334,636
Useful Life
15
Indefinite
5
16
9
$
$
Payroll and benefits
Professional fees
Clinical trial costs
Research grants
Restructuring costs
Other
Total
8. Deferred Revenue
December 31,
2013
$ 2,728,616
383,231
882,651
610,498
24,638
908,247
$ 5,537,881
2012
$ 2,477,833
642,853
102,414
844,803
933,732
835,409
$ 5,837,044
In December 2003, the Company entered into a ten-year licensing and supply agreement (the “JNJ
Agreement”) with Ortho Biotech Products, L.P., a member of the Johnson & Johnson family of companies, to
market ORTHOVISC in the U.S. In mid-2005, the agreement was assigned to Mitek. Under the JNJ Agreement,
Mitek performs sales, marketing and distribution functions and licenses the right to further develop and
commercialize ORTHOVISC as well as other new products for the treatment of pain associated with osteoarthritis
based on the Company’s viscosupplementation technology. In support of the license, the JNJ Agreement provides
that Mitek will fund post-marketing clinical trials for new indications of ORTHOVISC. The Company received an
initial payment of $2,000,000 upon entering into the JNJ Agreement, a milestone payment of $20,000,000 in
February 2004, as a result of obtaining FDA approval of ORTHOVISC, and a milestone payment of $5,000,000 in
December 2004 for planned upgrades to our manufacturing operations. The Company evaluated the terms of the JNJ
Agreement and determined that the upfront fee and milestone payments did not meet the conditions to be recognized
separately from the supply agreement.
In December 2011, the Company entered into a fifteen-year licensing and supply agreement (the “Mitek
MONOVISC Agreement”) with Mitek, a member of the Johnson & Johnson family of companies, to market
MONOVISC in the U.S. The Company received an initial payment of $2,500,000 in December 2011, which is being
recognized ratably over the fifteen year term of the Mitek MONOVISC Agreement, as there was no stand-alone
value associated with this payment, up-front recognition was prohibited. The Company will receive additional
payments from Mitek, following commercial launch of the product, related to future regulatory, clinical and sales
milestones.
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Current and long-term deferred revenue related to the JNJ Agreement, the Mitek MONOVISC Agreement
and other agreements was $2,235,374 and $5,027,845 at December 31, 2013 and 2012, respectively.
9. Commitments and Contingencies
Leasing Arrangements
The Company’s headquarters facility is located in Bedford, Massachusetts, where the Company leases
approximately 134,000 square feet of administrative, manufacturing, and R&D space. This lease was entered into on
January 4, 2007, and the lease commenced on May 1, 2007 for an initial term of ten and one-half years. The
Company has an option under the lease to extend its terms for up to four additional periods beyond the original
expiration date subject to the condition that we notify the landlord that we are exercising each option at least one
year prior to the expiration of the original or current term thereof. The first three renewal options each extend the
term an additional five years with the final renewal option extending the term six years.
The Company’s administrative and R&D personnel moved into the Bedford facility in November of 2007.
The build-out of the Bedford facility, including the required validation process for the manufacturing space, was
substantially completed during 2011. The Bedford facility was fully validated and approved by applicable regulatory
authorities in 2012.
As part of the acquisition of Anika S.r.l., the Company now leases approximately 28,000 square feet of
laboratory, warehouse and office space in Abano Terme, Italy. The lease commenced on December 30, 2009 for an
initial term of six (6) years.
Rental expense in connection with the various facility leases totaled $1,400,120, $2,486,849 and
$3,479,632, for the years ended December 31, 2013, 2012, and 2011, respectively.
The Company’s future lease commitments as of December 31, 2013 are as follows:
2014
2015
2016
2017
2018 and thereafter
Total
$ 1,627,388
1,305,742
1,605,742
971,500
4,695,583
$ 10,205,955
Warranty and Guarantor Arrangements
In certain of our contracts, the Company warrants to its customers that the products it manufactures
conform to the product specifications as in effect at the time of delivery of the specific product. The Company may
also warrant that the products it manufactures do not infringe, violate, or breach any U.S. patent or intellectual
property rights, trade secret, or other proprietary information of any third party. On occasion, the Company
contractually indemnifies its customers against any and all losses arising out of, or in any way connected with, any
claim or claims of breach of its warranties or any actual or alleged defect in any product caused by the negligence or
acts or omissions of the Company. The Company maintains a products liability insurance policy that limits its
exposure to these risks. Based on the Company’s historical activity, in combination with its liability insurance
coverage, the Company believes the estimated fair value of these indemnification agreements is immaterial. The
Company has no accrued warranties at December 31, 2013 and 2012, respectively, and has no history of claims
paid.
Legal Proceedings
On July 7, 2010, Genzyme Corporation filed a complaint against the Company in the United States District
Court for the District of Massachusetts seeking unspecified damages and equitable relief. The complaint alleges that
the Company has infringed U.S. Patent No. 5,143,724 by manufacturing MONOVISC in the United States for sale
outside the United States and will infringe U.S. Patent Nos. 5,143,724 and 5,399,351 if the Company begins
manufacture and sale of MONOVISC in the United States. On August 30, 2010, the Company filed an answer
denying liability. On April 26, 2011, Genzyme filed a motion to add its newly-issued U.S. Patent No. 7,931,030 to
this litigation and also filed a separate new complaint in the District of Massachusetts alleging that the Company’s
- 58 -
manufacture and sales of MONOVISC in the United States will infringe that patent. On May 23, 2011, the District
Court entered orders permitting Genzyme to file its supplement complaint adding its newly-issued U.S. Patent No.
7,931,030 to this litigation and requiring Genzyme to withdraw its separately filed complaint. On July 14, 2011, the
Company filed an answer to the supplemental complaint, denying liability. On May 10, 2012, Genzyme dismissed
its claim of infringement of U.S. Patent No. 5,399,351 against the Company. The Company believes that neither
MONOVISC, nor its manufacture, does or will infringe any valid and enforceable claim of the asserted patents.
Management assessed and determined that contingent losses related to this matter were not probable. Therefore,
pursuant to ASC 450, Contingencies, an accrual was not recorded for this loss contingency. Pursuant to the terms of
the licensing and supply agreement entered into with Mitek, Inc. in December 2011, Mitek agreed to assume certain
obligations of the Company related to this litigation. On August 3, 2012, a jury in the United States District Court
for the District of Massachusetts held U.S. Patent No. 7,931,030 invalid as obvious and not infringed in litigation
between Genzyme and Seikagaku Corporation, Zimmer Holdings Inc., Zimmer, Inc. and Zimmer U.S., Inc.
concerning the Gel-One product. On September 19, 2012, Genzyme and the Company jointly requested that the
District Court stay Genzyme’s lawsuit against the Company pending full resolution of the Seikagaku/Zimmer
lawsuit, including through any appeal of the judgment entered in that lawsuit. The District Court granted the motion
on September 28, 2012. In September of 2013, the District Court in the Seikagaku/Zimmer lawsuit issued an order
denying all the post-trial motions in that case, except for Seikagaku/Zimmer’s motion for damages against
Genzyme. On October 14, 2013, Genzyme filed a notice of appeal to the United States Court of Appeals for the
Federal Circuit challenging the District Court’s judgment of invalidity and non-infringement. That appeal was
dismissed by the Court of Appeals on January 13, 2014 pursuant to a request made by Genzyme. On January 27,
2014, the District Court granted a joint motion filed by the parties to dismiss with prejudice all claims in the
Seikagaku/Zimmer lawsuit and the case was terminated. On March 7, 2014 Genzyme and the Company filed a joint
motion to lift the stay in Genzyme’s lawsuit against the Company and to dismiss with prejudice all of Genzyme’s
claims. On March 10, 2014, the District Court granted the motion dismissing with prejudice all of Genzyme’s claims
against the Company and the case was terminated.
In 2011, Merogel Injectable was voluntarily withdrawn from the market due to a labeling error on the
product’s packaging. We settled the matter related to this dispute with Medtronic in August, 2012. This labeling
error related to conduct that initially occurred prior to our acquisition of Anika S.r.l. from Fidia Farmaceutici S.p.A.
(“Fidia”) and, as a result, we made claims against Fidia for indemnification for Anika’s losses related to this issue.
Fidia maintained that it did not have liability for this matter, and asserted a counterclaim against Anika for failing to
consent to the release of the remaining shares held in escrow upon the closing of the Anika S.r.l. acquisition. The
Company reached agreement with Fidia in October 2013 to settle this matter without admission of liability by either
party in return for a payment made by Fidia to the Company. As a result of the settlement, the arbitration with Fidia
pending before the London Court of International Arbitration has been withdrawn, and shares previously held in
escrow have been released.
We are also involved in various other legal proceedings arising in the normal course of business. Although
the outcomes of these other legal proceedings are inherently difficult to predict, we do not expect the resolution of
these other legal proceedings to have a material adverse effect on our financial position, results of operations or cash
flow.
10. Equity Incentive Plan
The Anika Therapeutics, Inc. Stock Option and Incentive Plan, as amended, (the “2003 Plan”) provides for
grants of nonqualified and incentive stock options, common stock, restricted stock, restricted stock units, and stock
appreciation rights (“SAR’s”) to employees, directors, officers and consultants. The 2003 Plan was originally
approved by the Board of Directors on April 4, 2003, approved by the Company’s shareholders on June 4, 2003, and
reserved 1,500,000 shares of common stock for grant pursuant to its terms.
On May 29, 2009, the Board of Directors approved changes to the 2003 Plan and adopted the Amended and
Restated 2003 Stock Option and Incentive Plan (the “Amended 2003 Plan”), to increase the number of shares
available to grant by 850,000. The Amended 2003 Plan was approved by the Company’s shareholders on June 5,
2009, and resulted in a total of 2,350,000 shares of common stock being reserved for issuance under the Amended
2003 Plan.
At the 2011 Annual Meeting of Stockholders on June 7, 2011, the shareholders of the Company approved
the Anika Therapeutics, Inc. Second Amended and Restated Stock Option and Incentive Plan (the “2003 Plan”),
which, among other things, increased the number of shares reserved for issuance under the Company’s predecessor
stock option and incentive plan by 800,000 to 3,150,000 shares.
- 59 -
At the 2013 Annual Meeting of Stockholders on June 18, 2013, the shareholders of the Company approved
an additional amendment to the Amended 2003 Plan, which among other things, increased the number of shares
reserved for issuance under the Company’s stock option and incentive plan by 650,000 to 3,800,000 shares.
The Company may satisfy the awards upon exercise, or upon fulfillment of the vesting requirements for
other equity-based awards, with either newly-issued shares or shares reacquired by the Company. Stock-based
awards are granted with an exercise price equal to the market price of the Company’s stock on the date of grant.
Awards contain service or performance conditions and generally become exercisable ratably over one to four years.
The 2003 Plan succeeds the Anika Therapeutics, Inc. 1993 Stock Option Plan (“1993 Plan”) which expired
according to its terms in 2003. As of December 31, 2013, there were no shares outstanding under the 1993 Plan
included in the total outstanding options of 1,513,326. There are 1,266,036 options available for future grant at
December 31, 2013.
The Company estimates the fair value of stock options and SAR’s using the Black-Scholes valuation
model. Fair value of restricted stock is measured by the grant-date price of the Company’s shares. Key input
assumptions used to estimate the fair value of stock options and SAR’s include the exercise price of the award, the
expected award term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free
interest rate over the award’s expected term, and the Company’s expected annual dividend yield.
The Company uses historical data on exercise of stock options and other factors to evaluate and estimate
the expected term of share-based awards. The Company also evaluates actual forfeiture rates periodically and
adjusts the expected forfeiture rate assumption within the model accordingly. The expected volatility assumption is
evaluated against the historical volatility of the Company’s common stock over a four year average and is adjusted if
there are material swings in historical volatility. The risk-free interest rate assumption is based on U.S. Treasury
interest rates at the time of grant.
The fair value of each stock option and SAR award during 2013, 2012, and 2011 was estimated on the
grant date using the Black-Scholes option-pricing model with the following assumptions:
Risk free interest rate
Expected volatility
Expected lives (years)
Expected dividend yield
2013
0.61% to 1.02%
53.60% to 57.60%
4
0.00%
December 31,
2012
0.63% to 0.64%
57.60%
4
0.00%
2011
1.1% to 1.51%
57.60%
4
0.00%
The Company recorded $1,268,070, $1,151,199 and $1,190,697 of share-based compensation expense for
the years ended December 31, 2013, 2012 and 2011, respectively, for stock options, SAR’s and restricted stock
awards. The Company presents the expenses related to stock-based compensation awards in the same expense line
items as cash compensation paid to each of its employees.
- 60 -
Combined stock options and SAR’s activity under our plans is summarized as follows for the years ended
December 31, 2013 and, 2012 respectively:
2013
2012
Weighted
Average
Exercise
Number of Price Per
Weighted
Average
Exercise
Number of Price Per
Shares
Share
Shares
Share
1,793,685
413,500
(243,724)
(9,928)
(440,207)
$
$
$
$
$
8.30
12.55
8.77
9.62
8.71
2,108,003
204,000
(212,749)
(7,714)
(297,855)
$
$
$
$
$
7.26
12.06
6.58
1.68
4.74
Options and SAR's outstanding at
beginning of year
Granted
Cancelled
Expired
Exercised
Options and SAR's outstanding at
end of year
1,513,326 $ 9.14
1,793,685 $ 8.30
Of the 1,513,326 options and SAR’s outstanding at December 31, 2013, 1,484,786 are vested, or are
expected to vest, with a weighted-average exercise price of approximately $7.87 as well as an aggregate intrinsic
value of approximately $28 million related to these awards. The weighted average remaining contractual term of the
vested and expected to vest options and SAR’s was 4.1 years as of December 31, 2013.
As of December 31, 2013, total unrecognized compensation costs related to non-vested options and SAR’s
was approximately $1,974,000 and is expected to be recognized over a weighted average period of 2.9 years.
There were 198,989 incentive stock options exercisable at December 31, 2013 with a weighted-average
exercise price of $8.56 and a weighted-average remaining contractual term of 5.2 years for these awards.
There were 152,968 non-qualified stock options exercisable at December 31, 2013 with a weighted-average
exercise price of $8.43 and a weighted-average remaining contractual term of 5.2 years.
There were 572,453 SAR’s exercisable at December 31, 2013 with a weighted-average exercise price of
$7.49 and a weighted-average remaining contractual term of 3.4 years for these awards.
The aggregate intrinsic value of stock options and SAR’s fully vested at December 31, 2013 and 2012 was
$27,997,198 and $2,115,267, respectively. The aggregate intrinsic value of stock options and SAR’s outstanding at
December 31, 2013 and, 2012 was $43,199,713 and $4,074,471, respectively.
The total intrinsic value of options and SAR’s exercised was $4,370,830 and, $2,214,516 for the years
ended December 31, 2013 and 2012, respectively.
The total fair value of options and SAR’s vested during the years ended December 31, 2013 and 2012 was
$1,088,802 and $997,194, respectively.
The Company received $3,053,941 and $388,675 for exercises of stock options during the years ended
December 31, 2013 and 2012, respectively.
- 61 -
The restricted stock activity for the years ended December 31, 2013 and 2012 is as follows:
2013
Weighted
Average
2012
Weighted
Average
Number of Granted Date
Number of Granted Date
Shares
68,956
36,220
-
-
(25,585)
79,591
Fair Value
$
6.87
$
17.00
$
-
$
-
$
5.95
$
11.93
Shares
59,196
31,312
(25)
-
(21,527)
68,956
Fair Value
$
5.71
$
9.10
$
3.05
$
-
$
5.08
$
6.87
Nonvested at Beginning of year
Granted
Cancelled
Expired
Vested/Released
Nonvested at end of year
The total fair value of restricted stock and restricted stock units vested during the year ended December 31,
2013 was $290,704.
11. Shareholder Rights Plan
On April 4, 2008, the Board of Directors of the Company adopted a Shareholder Rights Plan (“2008 Plan”)
that replaced the Company’s former Shareholder Rights Plan. Under the 2008 Plan, the Rights generally become
exercisable if:
(1) A person becomes an “Acquiring Person” by acquiring 15% or more of the Company’s Common Stock,
or
(2) A person commences a tender offer that would result in that person owning 15% or more of the
Company’s Common Stock.
In the event that a person becomes an “Acquiring Person,” each holder of a Right (other than the Acquiring
Person) would be entitled to acquire such number of shares of preferred stock which are equivalent to shares of the
Company’s Common Stock having a value of twice the exercise price of the Right. If, after any such event, the
Company enters into a merger or other business combination transaction with another entity, each holder of a Right
would then be entitled to purchase, at the then-current exercise price, shares of the acquiring company’s common
stock having a value of twice the exercise price of the Right.
The current exercise price per Right is $75.00. The Rights may be redeemed in whole, but not in part, at a
price of $0.01 per Right (payable in cash, shares of the Company’s Common Stock, or other consideration deemed
appropriate by the Board of Directors) by the Board of Directors only until the earlier of :
(1) The time at which any person becomes an “Acquiring Person”, or
(2) The Expiration Date.
At any time after any person becomes an “Acquiring Person”, the Board of Directors may, at its option,
exchange all or any part of the then outstanding and exercisable Rights for shares of the Company’s Common Stock
at an exchange ratio specified in the Rights Plan. Notwithstanding the foregoing, the Board of Directors generally
will not be empowered to affect such exchange at any time after any person becomes the beneficial owner of 50% or
more of the Company’s Common Stock.
In connection with the establishment of the Rights Plan, the Board of Directors approved the creation of
Preferred Stock of the Company designated as Series B Junior Participating Cumulative Preferred Stock with a par
value of $0.01 per share. The Board also reserved 175,000 shares of preferred stock for issuance upon exercise of
the Rights. Until a Right is exercised, the holder will have no rights as a stockholder of the Company, beyond those
as an existing stockholder, including the right to vote or to receive dividends.
12. Employee Benefit Plan
U.S. employees are eligible to participate in the Company’s 401(k) savings plan. Employees may elect to
contribute a percentage of their compensation to the plan, and the Company will make matching contributions up to
a limit of 5% of an employee’s eligible compensation. In addition, the Company may make annual discretionary
- 62 -
contributions. For the years ended December 31, 2013, 2012, and 2011, the Company made matching contributions
of $362,150, $326,007 and $279,816, respectively.
13. Revenue by Product Group, by Significant Customer and by Geographic Region; Geographic
Information
Product revenue by product group is as follows:
2013
2012
2011
Year Ended December 31,
Orthobiologics
Dermal
Surgical
Ophthalmic
Veterinary
Revenue
$
55,956,068
1,816,602
5,445,715
4,656,560
3,898,785
71,773,730
$
Percentage
of Product
Revenue
78%
3%
8%
6%
5%
100%
Revenue
$
49,954,112
1,384,403
5,022,456
8,784,011
2,865,187
68,010,169
$
Percentage
of Product
Revenue
74%
2%
7%
13%
4%
100%
Revenue
$
39,858,139
3,681,166
4,976,261
10,963,822
2,476,998
61,956,386
$
Percentage
of Product
Revenue
64%
6%
8%
18%
4%
100%
Product revenue by significant customers as a percent of product revenues is as follows:
DePuy Mitek
Boehringer
Bausch & Lomb
Pharmascience/Rivex
Medtronic XoMed
Percentage of Product Revenue
Ye ar Ende d De ce mbe r 31,
2012
61%
4%
12%
2%
3%
82%
2011
47%
4%
16%
1%
6%
74%
2013
63%
5%
5%
3%
3%
79%
Total revenue by geographic location in total and as a percentage of total revenue are as follows:
2013
Revenue
$ 58,490,142
7,411,568
9,179,444
$ 75,081,154
Percentage of
Total Revenue
78%
10%
12%
100%
Year Ended December 31,
2012
Revenue
$ 57,976,667
6,218,890
7,162,948
$ 71,358,505
Percentage of
Total Revenue
81%
9%
10%
100%
2011
Revenue
$ 48,366,140
10,988,664
5,423,831
$ 64,778,635
Percentage of
Total Revenue
75%
17%
8%
100%
United States
Europe
Other
Total
The Company recorded licensing, milestone and contract revenue of $3,307,424, $3,348,336 and
$2,822,249 for the years ended December 31, 2013, 2012, and 2011, respectively. Substantially all licensing,
milestone and contract revenue was derived in the United States for each year presented.
Net long-lived assets, consisting of net property and equipment, are subject to geographic risks because
they are generally difficult to move and to effectively utilize in another geographic area in a reasonable time period
and because they are relatively illiquid.
- 63 -
Net tangible long-lived assets by principal geographic areas were as follows:
Years Ended December 31,
2013
2012
$ 31,999,468
$ 33,792,325
939,243
$ 32,938,711
1,320,656
$ 35,112,981
United States
Italy
Total
14. Income Taxes
Income Tax Expense
The components of the Company’s income before income taxes and our provision for (benefit from)
income taxes consist of the following:
Income (loss) before income taxes
Domestic
Foreign
Provision for (benefit from) income taxes:
Current provision:
Federal
State
Foreign
Deferred provision:
Federal
State
Foreign
Total provision
Year ended December 31,
2012
2011
2013
$ 33,060,976
(581,445)
$ 32,479,531
$ 26,170,313
(6,642,892)
$ 19,527,421
$ 15,962,992
(2,177,978)
$ 13,785,014
Year ended December 31,
2012
2011
2013
$ 8,024,303
1,580,963
94,136
9,699,402
$ 7,594,287
885,958
(188,650)
8,291,595
$ 3,327,626
155,855
90,626
3,574,107
2,374,850
114,546
(283,788)
2,205,608
$ 11,905,010
776,486
602,447
(1,900,567)
(521,634)
$ 7,769,961
1,907,408
570,869
(734,050)
1,744,227
$ 5,318,334
- 64 -
Deferred Tax Assets and Liabilities
Significant components of the Company’s deferred tax assets and liabilities consist of the following:
Deferred tax assets:
Deferred revenue
Stock-based compensation expense
Tax credit carry forward
Net operating loss carryforward, foreign
Accrued expenses and other
Inventory reserve
Deferred tax asset
Deferred tax liabilities:
Acquisition-related Intangibles
Depreciation
Deferred tax liability
Tax Rate
December 31,
2013
2012
$ 852,207
1,358,554
19,967
2,578,640
649,402
283,996
$ 5,742,766
$ 1,988,509
1,584,583
194,364
2,520,746
954,559
405,302
$ 7,648,063
December 31,
2013
2012
$ (6,056,162)
(6,964,428)
$ (13,020,590)
$ (6,482,404)
(6,131,473)
$ (12,613,877)
The reconciliation between the U.S. federal statutory rate and our effective rate is summarized as follows:
Statutory federal income tax rate
State tax expense, net of federal benefit
Permanent items, including nondeductible expenses
State investment tax credit
Federal, state and foreign research and development credits
Foreign rate differential
Domestic production deduction
Effective income tax rate
Year ended December 31,
2012
35.0%
6.4%
0.9%
(0.2%)
(1.2%)
2.5%
(3.6%)
39.8%
2013
35.0%
4.8%
(0.2%)
(0.1%)
(0.5%)
0.1%
(2.4%)
36.7%
2011
34.0%
5.7%
0.9%
(0.2%)
(0.4%)
0.9%
(2.3%)
38.6%
As of December 31, 2013, the Company had NOL’s for federal income tax purposes in Italy of $9,353,750
with no expiration date.
In connection with the preparation of the financial statements, the Company performed an analysis to
ascertain if it was more likely than not that it would be able to utilize, in future periods, the net deferred tax assets
associated with its NOL carry-forward. We have concluded that the positive evidence outweighs the negative
evidence and, thus, that the deferred tax assets not otherwise subject to a valuation allowance are realizable on a
“more likely than not” basis. As such, we have not recorded a valuation allowance at December 31, 2013, and 2012,
respectively.
- 65 -
Accounting for Uncertainty in Income Taxes
A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as
follows:
Unrecognized tax benefit, beginning of year
Tax positions related to current year
Tax positions related to prior years
Statute expirations
Unrecognized tax benefit, end of year
2013
$
56,170
-
-
(56,170)
$
-
Year ended December 31,
2012
$
2011
$
56,170
-
38,329
(38,329)
56,170
37,428
38,329
(19,587)
-
56,170
$
$
In the normal course of business, Anika and its subsidiaries may be periodically examined by various
taxing authorities. We file income tax returns in the U.S. federal jurisdiction, in certain U.S. states, and in Italy. The
associated tax filings remain subject to examination by applicable tax authorities for a certain length of time
following the tax year to which those filings relate. The 2010 through 2013 tax years remain subject to examination
by the IRS and other taxing authorities for U.S. federal and state tax purposes. The 2009 through 2013 tax years
remain subject to examination by the appropriate governmental authorities for Italy.
We do not anticipate experiencing any significant increases or decreases in our unrecognized tax benefits
within the twelve months following December 31, 2013.
We incurred expenses related to stock-based compensation in 2013, 2012 and 2011 of $1,268,070,
$1,151,199, and $1,190,697, respectively. Accounting for the tax effects of certain stock-based awards requires that
we establish a deferred tax asset as the compensation expense is recognized for financial reporting prior to
recognizing the related tax deduction upon exercise of the awards. The tax benefit recognized in the consolidated
statement of operations related to stock-based compensation totaled $1,984,280, $285,068, and $219,626 in 2013,
2012 and 2011, respectively.
Upon the settlement of certain stock-based awards (i.e., exercise, vesting, forfeiture or cancellation), the
actual tax deduction is compared with cumulative financial reporting compensation cost and any excess tax
deduction related to these awards is considered a windfall tax benefit. Such benefits are tracked in a "windfall tax
benefit pool" to offset any future tax deduction shortfalls and will be recorded as increases to additional paid-in
capital in the period when the tax deduction reduces income taxes payable. We follow the with-and-without
approach for the direct effects of windfall/shortfall items and to determine the timing of the recognition of any
related benefits. We recorded a net windfall of $856,830, $452,471 and $274,190 in 2013, 2012 and 2011,
respectively.
15. Long-term Debt
On January 31, 2008, the Company entered into an unsecured Credit Agreement (the “Agreement”) with
Bank of America, under which the Company was provided with a revolving credit line through December 31, 2008
of up to a maximum principal amount outstanding of $16,000,000. The Company borrowed the maximum amount of
$16,000,000 in 2008 to finance its new facility construction and capital project validation. On December 31, 2008,
the outstanding revolving credit loans were converted into a term loan with quarterly principal payments of
$400,000 and a final installment of $5,200,000 due on the maturity date of December 31, 2015. Interest on the term
loan was originally payable at a rate based upon, at the Company’s election, either Bank of America’s prime rate or
LIBOR plus 75 basis points. The Company recorded approximately $171,000 as deferred issuance costs which
continue to be amortized over the life of the debt facility.
In connection with the acquisition of Anika S.r.l., the Company entered into a Consent and First
Amendment to the original loan facility with Bank of America. As part of this amendment, the interest rate for
Eurodollar based loans was increased and is payable at a rate based upon, at the Company’s election, either Bank of
America’s prime rate or LIBOR plus 125 basis points. In addition, the Company pledged to the lender sixty-five
percent (65%) of the stock of Anika Therapeutics S.r.l. We also incurred $74,000 of fees charged by Bank of
America which were capitalized in accordance with ASC Subtopic 470-50, Debt – Modifications and
Extinguishments, as the Consent and First Amendment represents a debt modification. On November 29, 2013, the
Company terminated the Credit Agreement entered into on January 31, 2008 with Bank of America, N.A. In
connection with the termination, the Company pre-paid, in full, its entire outstanding debt under the Agreement,
- 66 -
plus accrued interests. As of December 31, 2012, the Company had a total outstanding debt balance of $9,600,000,
of which $1,600,000 was recorded as current. In November 2013, the outstanding debt balance of $8,400,000 was
pre-paid. All capitalized costs associated with the debt facility were recorded as interest expense upon termination.
We did not incur any pre-payment penalties.
16. Restructuring
On December 28, 2012 the Company announced the closure of its tissue engineering facility in Abano
Terme, Italy due to the inability to meet strict regulatory standards, established by the EMA, which became effective
January 1, 2013. As a result of the plan, the Company recorded restructuring and associated impairment charges in
the fourth quarter 2012 of approximately $2.5 million. Of the total restructuring and associated impairment charges,
approximately $1.6 million related to the abandonment and noncash impairment of assets. The remaining $0.9
million related to cash payments anticipated to occur primarily in 2013 and for employee termination costs.
We were completed with the restructuring plan in 2013. Settlements for employee dismissals were lower
than anticipated and previously impaired and written-off assets were sold, resulting in a restructuring credit of
$286,843 for the twelve months ended December 31, 2013. The carrying value of the restructuring accrual
approximated fair value at December 31, 2013.
The following table summarizes restructuring accrual activity for the twelve months ended December 31,
2013:
Employee
Severance and
Related Benefits
801,453
$
(724,064)
(56,549)
869
21,709
$
December 31, 2012
Cash Proceeds, Disbursements
Write Offs and Abandonments
Foreign Exchange Impact
December 31, 2013
17. Related Party
Restructuring Accrual
Activity
Termination and
Facility Closure
Costs
$
132,279
(46,776)
(82,691)
117
2,929
Total
$
933,732
(770,840)
(139,240)
986
24,638
$
$
In connection with the acquisition of Anika S.r.l. by Anika on December 30, 2009, Fidia Farmaceutici
S.p.A ("Fidia") acquired ownership of 1,981,192 shares of the Company's common stock.
Fidia sold 100% of its ownership interest in Anika Therapeutics, Inc. common stock during the third and
fourth quarters of 2013. As such, Fidia owned 0% and 14.3% of the outstanding shares of the Company as of
December 31, 2013 and 2012, respectively. Under the guidance provided by ASC 850, Related Party Disclosures,
Fidia is no longer considered a related party to the Company.
18. Subsequent Event
On March 10, 2014 the United States District Court for the District of Massachusetts issued an order
dismissing, with prejudice, the previously-disclosed litigation between Genzyme Corporation and the Company (see
Note 9). Under the license agreement with Mitek, Anika will receive a milestone payment of $17.5 million upon an
irrevocable resolution of the Genzyme litigation allowing Mitek and Anika to make, use, and sell MONOVISC
without infringing the Genzyme intellectual property.
- 67 -
19. Quarterly Financial Data (Unaudited)
Year 2013
Product revenue
Total revenue
Cost of product revenue
Gross profit on product revenue
Net income
Per common share information:
Basic net income per share
Basic common shares outstanding
Diluted net income per share
Diluted common shares outstanding
Year 2012
Product revenue
Total revenue
Cost of product revenue
Gross profit on product revenue
Net income
Per common share information:
Basic net income per share
Basic common shares outstanding
Diluted net income per share
Diluted common shares outstanding
Quarter ended
December 31,
20,188,488
$
21,251,328
6,235,334
13,953,154
6,654,369
$
Quarter ended
September 30,
17,023,346
$
17,754,438
5,377,568
11,645,778
4,957,258
$
0.47
14,272,606
0.44
15,084,738
0.36
13,682,449
0.33
14,958,965
Quarter ended
December 31,
21,459,124
$
22,606,465
7,269,886
14,189,238
4,463,223
$
Quarter ended
September 30,
14,055,440
$
14,766,611
7,221,028
6,834,412
1,645,250
$
0.33
13,324,942
0.31
14,299,211
0.12
13,287,463
0.11
14,459,154
Quarter ended
June 30,
Quarter ended
March 31,
$
$
$
$
Quarter ended
June 30,
Quarter ended
March 31,
$
$
$
$
20,067,407
20,828,377
6,311,332
13,756,075
5,894,892
0.44
13,510,573
0.40
14,578,927
18,882,277
19,624,769
8,084,226
10,798,051
3,736,868
0.28
13,262,023
0.26
14,443,794
14,494,489
15,247,011
4,841,170
9,653,319
3,068,002
0.23
13,406,952
0.21
14,357,110
13,613,328
14,360,660
6,413,481
7,199,847
1,912,119
0.15
13,162,824
0.14
14,089,946
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
- 68 -
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(a)
Evaluation of disclosure controls and procedures.
As required by Rule 13a-15 under the Securities Exchange Act of 1934 (“Exchange Act”), we carried out
an evaluation under the supervision and with the participation of our management, including our chief executive
officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report. Based upon that evaluation, the chief executive officer
and chief financial officer have concluded 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 Securities and Exchange Commission
rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management, including our chief executive
officer and chief financial officer, or persons performing similar functions, 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.
(b)
Changes in internal controls over financial reporting.
There were no changes in our internal control over financial reporting during the fourth quarter of fiscal
year 2013 that have materially affected, or that are reasonably likely to materially affect, our internal controls over
financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles.
Because of its inherent limitations, internal control over financial reporting can provide only reasonable
assurance and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of
December 31, 2013. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework as
issued in 1992.
Based on our assessment and those criteria, our management believes that the Company maintained
effective internal control over financial reporting as of December 31, 2013.
The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited
by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is
included herein.
ITEM 9B. OTHER INFORMATION
None.
- 69 -
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required under this item is incorporated herein by reference to the Company’s definitive
proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange
Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2013.
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated herein by reference to the Company’s definitive
proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange
Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2013.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required under this item and Item 5 of this Annual Report on Form 10-K under the
heading “Equity Compensation Plan Information” is incorporated herein by reference to the Company’s definitive
proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange
Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2013.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required under this item is incorporated herein by reference to the Company’s definitive
proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange
Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2013.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required under this item is incorporated herein by reference to the Company’s definitive
proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange
Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2013.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)
Documents filed as part of Form 10-K.
(1)
Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Stockholder’s Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(2)
Schedules
45
46
47
48
49
50-68
Schedules have been omitted as all required information has been disclosed in the financial statements and
related footnotes.
- 70 -
(3)
Exhibits
The list of Exhibits filed as a part of this Annual Report on Form 10-K is set forth in the Exhibit Index
(b) below.
(b) Exhibit No.
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession:
Description
2.1
Sale and Purchase Agreement, dated December 30, 2009, by and between Fidia
Farmaceutici S.p.A., as Seller, and the Company, as Buyer, incorporated herein by reference
to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File no. 001-14027), filed
with the Securities and Exchange Commission on January 6, 2010.
(3) Articles of Incorporation and Bylaws:
3.1
Restated Articles of Organization of the Company, incorporated herein by reference to
Exhibit 3.1 to the Company’s Registration Statement on Form 10 (File no. 000-21326), filed
with the Securities and Exchange Commission on March 5, 1993.
3.2
Certificate of Vote of Directors Establishing a Series of Convertible Preferred Stock,
3.3
3.4
3.5
incorporated herein by reference to the Exhibits to the Company’s Registration Statement
on Form 10 (File no. 000-21326), filed with the Securities and Exchange Commission on
March 5, 1993.
Amendment to the Restated Articles of Organization of the Company, incorporated herein
by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-QSB for the
quarterly period ended November 30, 1996 (File no. 000-21326), filed with the Securities
and Exchange Commission on January 14, 1997.
Amendment to the Restated Articles of Organization of the Company, incorporated herein
by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-QSB for the
quarterly period ended June 30, 1998 (File no. 001-14027), filed with the Securities and
Exchange Commission on August 14, 1998.
Amendment to the Restated Articles of Organization of the Company, incorporated herein
by reference to Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2002 (File no. 001-14027), filed with the Securities and
Exchange Commission on August 14, 2002.
3.6
Amended and Restated Certificate of Vote of Directors Establishing a Series of Preferred
Stock of the Company classifying and designating the Series B Junior Participating
Cumulative Preferred Stock, incorporated herein by reference to Exhibit 3.1 to the
Company’s Registration Statement on Form 8-A12B (File no. 001-14027), filed with the
Securities and Exchange Commission on April 7, 2008.
3.7
3.8
Amendment to the Restated Articles of Organization of the Company, incorporated herein
by reference to Exhibit 3.7 to the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2008 (File no. 001-14027), filed with the Securities and Exchange
Commission on March 9, 2009.
Amended and Restated Bylaws of the Company, incorporated herein by reference to Exhibit
3.6 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June
30, 2002 (File no. 001-14027), filed with the Securities and Exchange Commission on
August 14, 2002.
(4) Instruments Defining the Rights of Security Holders
4.1
Shareholder Rights Agreement, dated as of April 7, 2008, between the Company and
American Stock Transfer & Trust Company, incorporated herein by reference to Exhibit 4.1
to the Company’s Registration Statement on Form 8-A12B (File no. 001-14027), filed with
the Securities and Exchange Commission on April 7, 2008.
(10) Material Contracts
10.1
Commercial Lease, dated March 10, 1995, between the Company and Cummings Properties
Management, Inc., incorporated herein by reference to Exhibit 10.8 to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (File no. 001-
14027), filed with the Securities and Exchange Commission on April 2, 2001.
10.2
Amendment to Lease #1, dated December 11, 1997, between the Company and Cummings
Properties Management, Inc., incorporated herein by reference to Exhibit 10.9 to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (File
no. 001-14027), filed with the Securities and Exchange Commission on April 2, 2001.
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10.3
10.4
Lease Extension, dated March 23, 1998, between the Company and Cummings Properties
Management, Inc., incorporated herein by reference to Exhibit 10.10 to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2000 (File no. 001-
14027), filed with the Securities and Exchange Commission on April 2, 2001.
Amendment to Lease #2, dated September 27, 1999, between the Company and Cummings
Properties LLC, incorporated herein by reference to Exhibit 10.11 to the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2000 (File no. 001-14027),
filed with the Securities and Exchange Commission on April 2, 2001.
10.5
Commercial Lease, dated July 9, 1999, between the Company and Cummings Properties
LLC, incorporated herein by reference to Exhibit 10.12 to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2000 (File no. 001-14027), filed with the
Securities and Exchange Commission on April 2, 2001.
10.6
Stipulation and Agreement of Compromise, Settlement and Release, dated May 25, 2001, in
connection with In Re Anika Therapeutics, Inc. Securities Litigation, incorporated herein by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2001 (File no. 001-14027), filed with the Securities and Exchange
Commission on August 14, 2001.
10.7
Amendment to Lease #3, dated November 1, 2001, between the Company and Cummings
Properties, LLC, incorporated herein by reference to Exhibit 10.1 to the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001 (File no.
001-14027), filed with the Securities and Exchange Commission on November 14, 2001.
10.8
Lease Extension, dated October 8, 2003, between the Company and Cummings Properties,
LLC, incorporated herein by reference to Exhibit 10.36 to the Company’s Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 2003 (File no. 001-14027), filed
with the Securities and Exchange Commission on November 14, 2003.
**10.9
License Agreement, dated as of December 20, 2003, by and between the Company and
Ortho Biotech Products, L.P., incorporated herein by reference to Exhibit 10.38 to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (File
no. 001-14027), filed with the Securities and Exchange Commission on March 30, 2004.
**10.10
Supply Agreement, dated as of December 15, 2004, by and between the Company and
Bausch & Lomb Incorporated, incorporated herein by reference to Exhibit 10.43 to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (File
no. 001-14027), filed with the Securities and Exchange Commission on March 16, 2005.
†10.11
†10.12
Form of Incentive Stock Option Agreement under the Company’s Amended and Restated
2003 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit 10.3 to
the Company’s Current Report on Form 8-K (File no. 001-14027), filed with the Securities
and Exchange Commission on October 5, 2004.
Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under the
Company’s Amended and Restated 2003 Stock Option and Incentive Plan, incorporated
herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File no.
001-14027), filed with the Securities and Exchange Commission on October 5, 2004.
†10.13
Form of Stock Appreciation Right Agreement for Employees under the Company’s
Amended and Restated 2003 Stock Option and Incentive Plan, incorporated herein by
reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2006 (File no. 001-14027), filed with the Securities and Exchange
Commission on May 9, 2006.
†10.14
Form of Stock Appreciation Right Agreement for Non-Employee Directors under the
Company’s Amended and Restated 2003 Stock Option and Incentive Plan, incorporated
herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for
the quarterly period ended March 31, 2006 (File no. 001-14027), filed with the Securities
and Exchange Commission on May 9, 2006.
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10.15
Lease, dated January 3, 2007, between the Company and Farley White Wiggins, LLC,
incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K (File no. 001-14027), filed with the Securities and Exchange Commission on January
10, 2007.
10.16
Credit Agreement, dated as of January 31, 2008, among the Company, Anika Securities,
Inc., Bank of America, N.A., and the other lenders party thereto (the “Credit Agreement”),
incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K (File no. 001-14027), filed with the Securities and Exchange Commission on February
6, 2008.
†10.17
Anika Therapeutics, Inc. Senior Executive Incentive Compensation Plan, incorporated
herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File no.
001-14027), filed with the Securities and Exchange Commission on February 6, 2008.
†10.18
Form of Performance Share Award Agreement under the Company’s Amended and
Restated 2003 Stock Option and Incentive Plan, incorporated herein by reference to Exhibit
10.3 to the Company’s Current Report on Form 8-K (File no. 001-14027), filed with the
Securities and Exchange Commission on February 6, 2008.
†10.19
Employment Agreement, dated October 17, 2008, between the Company and Charles H.
Sherwood, Ph.D., incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (File no. 001-14027), filed with the Securities and Exchange
Commission on October 22, 2008.
†10.20
Employment Agreement, dated October 17, 2008, between the Company and Kevin
†10.21
Quinlan, incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report
on Form 8-K (File no. 001-14027), filed with the Securities and Exchange Commission on
October 22, 2008.
Form of Restricted Stock Award Agreement for Employees under the Company’s Amended
and Restated 2003 Stock Option and Incentive Plan, incorporated herein by reference to
Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2007 (File no. 001-14027), filed with the Securities and Exchange
Commission on March 12, 2008.
†10.22
Anika Therapeutics, Inc. Non-Employee Director Compensation Policy, incorporated
†10.23
herein by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2007 (File no. 001-14027), filed with the Securities and
Exchange Commission on March 12, 2008.
Form of Restricted Deferred Stock Unit Award Agreement for Non-Employee Directors
under the Company’s Amended and Restated 2003 Stock Option and Incentive Plan,
incorporated herein by reference to Exhibit 10.25 to the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2008 (File no. 001-14027), filed with the
Securities and Exchange Commission on March 9, 2009.
†10.24
Letter Agreement, dated April 27, 2009, by and between the Company and Frank J.
Luppino, incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K (File no. 001-14027), filed with the Securities and Exchange Commission on
May 29, 2009.
†10.25
Amended and Restated 2003 Stock Option and Incentive Plan, incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File no. 001-
14027), filed with the Securities and Exchange Commission on June 11, 2009.
†10.26
Employment Agreement, dated September 10, 2009, between the Company and Frank J.
Luppino, incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report
on Form 8-K (File no. 001-14027), filed with the Securities and Exchange Commission on
September 14, 2009.
†10.27
Employment Agreement, dated September 10, 2009, between the Company and William J.
10.28
Mrachek, incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report
on Form 8-K (File no. 001-14027), filed with the Securities and Exchange Commission on
September 14, 2009.
Registration Rights Agreement, dated December 30, 2009, between the Company and Fidia
Farmaceutici S.p.A., incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (File no. 001-14027), filed with the Securities and Exchange
Commission on January 6, 2010.
- 73 -
10.29
Lease Agreement, dated December 30, 2009, between Fidia Farmaceutici S.p.A. and Fidia
Advanced Biopolymers S.r.l., incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K (File no. 001-14027), filed with the Securities and
Exchange Commission on January 6, 2010.
10.30
Tolling Agreement, dated December 30, 2009, between Fidia Farmaceutici S.p.A. and Fidia
10.31
10.32
†10.33
†10.34
†10.35
†10.36
Advanced Biopolymers S.r.l., incorporated herein by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K (File no. 001-14027), filed with the Securities and
Exchange Commission on January 6, 2010.
Consent and First Amendment to the Credit Agreement, dated as of December 30, 2009, by
and among the Company, Anika Securities, Inc., Bank of America, N.A. and each lender
signatory thereto, incorporated herein by reference to Exhibit 10.4 to the Company’s
Current Report on Form 8-K (File no. 001-14027), filed with the Securities and Exchange
Commission on January 6, 2010.
Pledge Agreement on a Quota of Fidia Advanced Biopolymers S.r.l., dated March 12, 2010,
dated March 12, 2010, by the Company in favor of Bank of America, N.A., incorporated
herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File
no. 001-14027), filed with the Securities and Exchange Commission on May 10, 2010.
Amendment No. 1 to Employment Agreement by and between the Company and Charles H.
Sherwood, Ph.D., dated December 18, 2010, incorporated herein by reference to Exhibit
10.33 to the Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2010 (file no. 001-14027), filed with the Securities and Exchange Commission on
March 16, 2011.
Amendment No. 1 to Employment Agreement by and between the Company and Kevin W.
Quinlan, dated December 18, 2010, incorporated herein by reference to Exhibit 10.34 to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (file
no. 001-14027), filed with the Securities and Exchange Commission on March 16, 2011.
Amendment No. 1 to Employment Agreement by and between the Company and Frank J.
Luppino, dated December 18, 2010, incorporated herein by reference to Exhibit 10.35 to the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (file
no. 001-14027), filed with the Securities and Exchange Commission on March 16, 2011.
Amendment No. 1 to Employment Agreement by and between the Company and William J.
Mrachek, dated December 18, 2010, incorporated herein by reference to Exhibit 10.36 to
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010
(file no. 001-14027), filed with the Securities and Exchange Commission on March 16,
2011.
†10.37
1993 Stock Option Plan, as amended, incorporated herein by reference to the Company's
†10.38
Proxy Statement (File no. 001-14027), filed with the Securities and Exchange Commission
on April 28, 2000.
Second Amended and Restated 2003 Stock Option and Incentive Plan, incorporated herein
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File no. 001-
14027), filed with the Securities and Exchange Commission on June 10, 2011.
** 10.39
License Agreement, dated as of December 21, 2011, by and between Anika Therapeutics,
Inc. and DePuy Mitek, Inc., incorporated herein by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K (File no. 001-14027), filed with the Securities and
Exchange Commission on December 22, 2011.
†10.40
Separation Agreement by and between the Company and Kevin W. Quinlan, dated
February 1, 2013, incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K (file no. 001-14027), filed with the Securities and Exchange
Commission on February 28, 2013.
†10.41
Amendment to the Second Amended and Restated 2003 Stock Option and Incentive Plan,
incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K (File no. 001-14027), filed with the Securities and Exchange Commission on June 18,
2013.
(11) Statement Regarding the Computation of Per Share Earnings
11.1
See Note 3 to the Financial Statements included herewith.
(21) Subsidiaries of the Registrant
*21.1
List of Subsidiaries of the Registrant.
(23) Consent of Experts
- 74 -
*23.1
Consent of PricewaterhouseCoopers LLP, an independent registered public accounting firm
(31) Rule 13a-14(a) / 15d-14(a) Certifications
*31.1
*31.2
Certification of Charles H. Sherwood, Ph.D. pursuant to Rule 13a-14(a) or 15d-14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
Certification of Sylvia Cheung pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
(32) Section 1350 Certification
***32.1
Certification of Charles H. Sherwood, Ph.D. and Sylvia Cheung, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(101) xBRL
*101
The following materials from the Company’s Annual Report on Form 10-K for the period
ended December 31, 2013, formatted in xBRL: (i) Consolidated Balance Sheets as of
December 31, 2013 and December 31, 2012; (ii) Consolidated Statements of Operations for
the Years Ended December 31, 2013, December 31, 2012, and December 31, 2011; (iii)
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2013,
December 31, 2012, and December 31, 2011; (iv) Consolidated Statements of Cash Flows
for the Years Ended December 31, 2013, December 31, 2012, and December 31, 2011; and
(v) Notes to Consolidated Financial Statements.
*
Filed herewith.
**
Certain portions of this document have been omitted pursuant to a confidential treatment request filed
with the Commission. The omitted portions have been filed separately with the Commission.
***
Furnished herewith.
†
Denotes compensatory plan or arrangement.
- 75 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 13, 2014
ANIKA THERAPEUTICS, INC.
By:
/s/ CHARLES H. SHERWOOD, PH.D.
Charles H. Sherwood, Ph.D.
President and Chief Executive Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ CHARLES H. SHERWOOD, PH.D.
Charles H. Sherwood, Ph.D.
President and Chief Executive Officer
Director
(Principal Executive Officer)
March 13, 2014
/s/ SYLVIA CHEUNG
Sylvia Cheung
/s/ JOSEPH L. BOWER
Joseph L. Bower
/s/ RAYMOND J. LAND
Raymond J. Land
/s/ JOHN C. MORAN
John C. Moran
/s/ JEFFERY S. THOMPSON
Jeffery S. Thompson
/s/ STEVEN E. WHEELER
Steven E. Wheeler
Chief Financial Officer
(Principal Accounting Officer)
March 13, 2014
March 13, 2014
March 13, 2014
March 13, 2014
March 13, 2014
March 13, 2014
Director
Director
Director
Director
Director
- 76 -
SUBSIDIARIES OF ANIKA THERAPEUTICS, INC.
Anika Securities Corp.
Bedford, Massachusetts
Anika Therapeutics S.r.l.
(Formerly: Fidia Advanced Biopolymers S.r.l.)
Abano Terme, Italy
EXHIBIT 21.1
- 77 -
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos.
333-06275, 333-66831, 333-79047, 333-58264, 333-110326, 333-160102, 333-176103 and 333-190597) of Anika
Therapeutics, Inc. of our report dated March 13, 2014 relating to the financial statements and the effectiveness of
internal control over financial reporting, which appears in this Form 10-K.
EXHIBIT 23.1
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 13, 2014
- 78 -
EXHIBIT 31.1
I, Charles H. Sherwood, certify that:
CERTIFICATION
1.
I have reviewed this annual report on Form 10-K for the year ended December 31, 2013 of Anika
Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 13, 2014
/s/ CHARLES H. SHERWOOD, PH.D.
Charles H. Sherwood, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
- 79 -
EXHIBIT 31.2
I, Sylvia Cheung, certify that:
CERTIFICATION
1.
I have reviewed this annual report on Form 10-K for the year ended December 31, 2013 of Anika
Therapeutics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in
this report our conclusions about the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 13, 2014
/s/ SYLVIA CHEUNG
Sylvia Cheung
Chief Financial Officer
(Principal Financial Officer)
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Section 906 Certification
EXHIBIT 32.1
The undersigned officers of Anika Therapeutics, Inc. (the “Company”) hereby certify in their respective
capacities that, to their knowledge, the Company’s Annual Report on Form 10-K to which this certification is
attached (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, fully complies
with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended,
and that the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: March 13, 2014
/s/ CHARLES H. SHERWOOD, PH.D.
Charles H. Sherwood, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
/s/ SYLVIA CHEUNG
Sylvia Cheung
Chief Financial Officer
(Principal Financial Officer)
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Anika Therapeutics, Inc.
32 Wiggins Avenue
Bedford, MA 01730
(781) 457-9000
www.anikatherapeutics.com