Anika Therapeutics, Inc. Aktie

Good morning, ladies and gentlemen, and welcome to the Anika's First Quarter Earnings Conference Call. I will now turn the call over to Mr. Matt Hall, Executive Director, Corporate Development and Investor Relations. Please go ahead.

Good morning, and thank you for joining us for Anika's First Quarter 2026 Conference Call and Webcast. I'm Matt Hall, Anika's Executive Director of Corporate Development and Investor Relations. Our earnings press release was issued earlier this morning and is available on our Investor Relations website located at www.anika.com, as are the supplementary PowerPoint slides that will be used for the discussion today.

With me on the call today are Steve Griffin, President and Chief Executive Officer; and Ian McLeod, Senior Vice President, Chief Accounting Officer and Treasurer. They will present our first quarter 2026 financial results and business highlights. Please take a moment and open the slide presentation and refer to Slide 2. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements.

We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance. In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted gross margin, adjusted EBITDA, adjusted net income from continuing operations and adjusted earnings per share from continuing operations, which are used in addition to results presented in accordance with GAAP financial measures. We believe that non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measures are available at the end of the presentation slide deck and our first quarter 2026 press release.

With that context, I'll turn the call over to our President and CEO, Steve Griffin, to walk through our performance and discuss our priorities as we move forward.

Steve?

Good morning, everyone, and thank you for joining us. In the first quarter of 2026, we made meaningful progress across Anika's three strategic priorities: driving sustainable commercial channel growth, advancing our hyaluronic acid-based innovation pipeline and strengthening execution across our organization. Our first quarter performance reflects a more focused business with early benefits from the operational changes we put in place. I want to walk through our first quarter results through the lens of these three priorities and importantly, in the context of what we said we would do. First, our top priority remains accelerating sustainable revenue growth, and the first quarter results reflect continued progress in that direction.

In the first quarter, commercial channel revenue continued to grow at a double-digit rate, increasing 12%, reflecting strong performance across both regenerative solutions and our international OA pain management portfolio. Within Regenerative Solutions, Integrity continues to be a central driver of that momentum with U.S. procedures up 35% year-over-year, generating nearly $2 million in revenue. Growth was driven by U.S. surgeon adoption, the full launch of larger sizes and expanding international penetration. We continue to be pleased with Integrity's performance as it progresses through the commercialization curve, having now surpassed 3,000 cases with accelerating adoption.

We are seeing surgeons progress to their fifth and tenth Integrity cases faster than initially expected, with acceleration evident across each stage of adoption. This reinforces that once surgeons begin using Integrity, utilization ramps quickly as confidence builds. We are closely tracking new surgeon adoption with new surgeon users per month growing at a double-digit rate month-over-month. This reflects continued success both in expanding our surgeon base and in deepening engagement as surgeons increase their use of Integrity over time. We're pleased by early results following the launch of the larger Integrity sizes with demand tracking ahead of expectations. But the bigger opportunity is adoption.

Today, augmentation is used in only about 8% of rotator cuffs in the U.S. In other words, more than 90% of patients do not receive a patch at all, even though we know augmentation can support better healing. Our strategy is to change that. By expanding the Integrity platform with additional sizes, configurations and enabling instrumentation, we aim to make augmentation easier for surgeons to adopt. Over time, that can both improve patient outcomes and significantly expand the total addressable market for Integrity in the ASC.

Hyalofast also continues to contribute to the strength of our regenerative solutions portfolio, delivering steady growth outside the United States, supporting overall commercial channel performance. International demand remains solid, driven by established clinical adoption and continued expansion across key markets, underscoring Hyalofast's role as a durable contributor to our regenerative platform and a complementary driver alongside newer products within the portfolio. Turning to our international OA Pain Management portfolio. We delivered strong first quarter revenue of nearly $9 million, reflecting the continued strength of our commercial channel. Performance was driven by ongoing regional expansion and improved market share across multiple geographies for CINGAL, MONOVISC and ORTHOVISC.

Lastly, the OEM channel grew 14% year-over-year, primarily due to favorable order timing for both our U.S. OA pain management products sold through our partnership with J&J MedTech and our non-orthopedic products. We continue to expect quarterly variability in this channel. Within the U.S. OA Pain Management portfolio, performance was driven by MONOVISC unit volumes that exceeded our internal projections for the quarter.

With pricing tracking in line with expectations, MONOVISC delivered meaningful favorability and more than offset lower-than-expected demand for ORTHOVISC. This product level mix shift highlights the inherent variability in our OEM channel, where timing and demand can differ by product and quarter without changing our full year expectations. Non-orthopedic revenue was up in the quarter, driven by order timing of our animal health products.

As a reminder, we continue to assess optionality as legacy distribution agreements cycle through with a clear focus on maximizing shareholder value. Our second priority is advancing our HA-based innovation pipeline centered on Integrity, Hyalofast and CINGAL and doing so through a structured and predictable development approach. During the first quarter, we continue to make steady progress across each of these programs. The Hyalofast PMA review is ongoing as we continue to engage with the FDA through their review process. CINGAL also advanced during the quarter.

Enrollment in the bioequivalent study remains on track as we continue to prepare for an NDA submission, including the necessary CMC work to support hyaluronic acid as a drug. In addition, CINGAL has successfully achieved European Union MDR certification, becoming our third MDR certified product alongside MONOVISC and Hyalofast. Importantly, the certification includes expanded indications across multiple joints, including the knee, hip, shoulder and ankle, reinforcing CINGAL's clinical versatility and supporting continued international growth.

In parallel, the post-market clinical follow-up study supporting marketing and the Integrity EU MDR submission continues to enroll and remains on track to complete enrollment later this year. We began 2026 with a clear focus on execution and the progress delivered in the first quarter underscores that commitment. Within our regenerative pipeline, we are advancing an early-stage regenerative suture and tape program that underscores the meaningful potential still to be unlocked from our hyaluronic acid technology platform. Leveraging [ HYAFF ] fiber, we can tailor both mechanical strength and biological response to specific soft tissue and tendon repair needs across a broad range of clinical applications.

While development remains early, and we are not yet quantifying its financial impact, the preclinical data are very encouraging, and we look forward to sharing more as this and other programs progress. Our third priority, strengthening operational discipline and execution has been an increased area of focus, and it was a significant contributor to our first quarter financial performance. Gross margin improved meaningfully compared to the first quarter of 2025. That improvement reflects a combination of higher manufacturing productivity and throughput, the continued benefits of our margin improvement initiatives and greater discipline across our operations. As a result, adjusted EBITDA increased by more than $4 million compared to the first quarter of last year.

Importantly, these results are not the outcome of a single quarter or a onetime action. They are being delivered through deliberate operational transformation that embeds lean manufacturing principles across our operations with a strong focus on continuous improvement and empowering our teams. We have reduced nonstandard work, strengthened engineering solutions and improved productivity by enabling teams closer to the work to drive meaningful change. At the same time, targeted investments in equipment upgrades have supported these efforts, allowing us to execute more efficiently and with greater consistency. Collectively, these actions are changing how we run the business, tightening processes, increasing operational discipline and building a more scalable operating model as volumes grow.

While we don't expect margin performance to move in a straight line each quarter, the first quarter provides clear evidence that our operational transformation is underway and beginning to create meaningful operating leverage in the business. On the expense side, we continue to demonstrate strong cost control across the organization. Excluding onetime severance charges related to actions we took earlier in the year, SG&A remained well managed, reflecting the benefits of a more focused operating model and disciplined resource allocation.

R&D expenses increased this quarter as expected, reflecting deliberate investment in our key pipeline programs. These investments are targeted and aligned with the advanced programs, we believe offer the greatest potential to drive future growth and value creation.

With that, I'll turn it over to Ian to walk through the financial details.

Thanks, Steve. Please refer to Slide 5 of the presentation as I provide updates on the first quarter of 2026. In the first quarter, Anika generated $29.6 million in total revenue, up 13% year-over-year. Commercial channel revenue grew 12%, reaching $12.6 million, driven by strong international execution and continued momentum in Integrity, which continues to exceed our commercial expectations. Our international OA pain management business remained a key contributor, delivering 9% growth in the quarter to $8.9 million of revenue, led by sustained market share gains for MONOVISC and CINGAL across several regions.

OEM channel revenue was $17 million in the quarter, representing a 14% increase year-over-year. The increase was driven primarily by order timing, including shipments of U.S. OA pain management products sold through J&J MedTech as well as certain non-orthopedic OEM products. As we have discussed, the OEM channel is subject to variability related to customer ordering patterns. As a result, some revenue shifted into the first quarter, which may affect reported OEM revenue in the second quarter. Importantly, this timing-related variability does not change our expectations for the full year.

Our gross margin improved in the first quarter, driven by higher volumes and improved execution across our manufacturing operations. GAAP gross margin increased to 64%, up from 56% in the prior year, reflecting higher productivity, increased throughput and the early benefits of our lean manufacturing efforts. Turning to operating expenses. First quarter operating expenses were $24.5 million compared to $19 million in the prior year period. Selling, general and administrative expenses increased to $17.8 million from $12.9 million a year ago, primarily reflecting $4.9 million of onetime severance-related costs associated with previous announced cost reduction actions. R&D expense was $6.6 million, up 11% from $6 million a year ago, driven by continued investment in key regulatory and clinical programs, including Hyalofast and CINGAL.

We are continuing to closely monitor operating expenses, balancing disciplined spending with targeted investment in the programs most critical to long-term growth. Total adjusted EBITDA for the quarter was $4.3 million, driven by strong gross margin expansion and improved operating leverage. We ended the quarter with $41 million in cash with no debt, giving us a strong liquidity position and the flexibility to continue investing in our growth priorities. First quarter cash usage reflected typical seasonal expense dynamics, and we expect cash flow to improve as the year progresses. As previously communicated, we initiated a $15 million 10b5-1 stock repurchase plan in November 2025. And as of April 10, that program has been completed. As part of the second 10b5-1, we have purchased $15 million of stock at an average price of $10.76.

Now please turn to Slide 6 as I review our financial outlook for 2026. Based on our first quarter performance and current visibility across the business, we are maintaining our previously issued full year 2026 guidance. At the total company level, we continue to expect full year revenue of $114 million to $122.5 million, representing 1% to 9% year-over-year growth. This outlook reflects continued momentum in our commercial channel alongside the market dynamics we've discussed in our OEM business. Within the commercial channel, we are maintaining our expectation for 10% to 20% growth or $53 million to $58 million for the full year.

Growth is expected to be driven by the ongoing expansion of Integrity in the U.S., sustained Hyalofast performance outside the U.S. and increasing adoption across our international OA pain management portfolio. For the OEM channel, we continue to expect revenue to be flat to down approximately 5% year-over-year or $61 million to $64.5 million. This outlook reflects anticipated MONOVISC unit volume growth, partially offset by lower pricing. Turning to profitability. We are maintaining our expectation for adjusted EBITDA to be in the range of 5% to 10% of revenue.

At the midpoint, this improvement is driven by higher expected revenue led by commercial channel momentum, along with the benefits of previously announced G&A cost reduction actions and continued productivity and manufacturing improvements as demonstrated in the first quarter. These gains are partially offset by modestly lower J&J MedTech pricing. With that, I'll turn the call back over to Steve.

Thanks, Ian. As we continue the transformation of the company following our divestitures in 2025, the Board is also evolving to reflect this next phase and two directors will be stepping down as outlined in the proxy filed last night. We are grateful for Dr. Glenn Larsen and Bill Jellison's contributions and valuable service to the company. With that context, before we move to Q&A, I want to briefly reinforce what we're focused on and how we're operating. Our priorities are clear. First, we are continuing to drive revenue growth across our commercial channels.

Second, we are advancing our HA-based innovation pipeline through key regulatory milestones in a disciplined and predictable way. And third, we are building on the progress we've made operationally to support improved profitability and long-term scalability. Equally important is how we're going about this. We are running the company with a simple operating mindset built around two principles broadly shared by the best lean manufacturing systems.

First, respect for people; and second, continuous improvement. Respect for people means recognizing that the most important work happens closest to our products and our customers. Leaders exist to support that work to simplify processes, remove obstacles and make it easier for teams to execute and improve every day. Continuous improvement is about being practical, disciplined and honest about where we can do better and then acting on it. This approach is helping us operate more effectively, staying close to customers and surgeons and running the business with a leaner, more focused leadership structure while maintaining strong accountability and execution. I want to thank our employees across the company who are embracing this way of working and showing up every day focused on execution and improvement.

I'd also like to thank the surgeons and patients who rely on our products and partner with us. We value that trust and it keeps us focused on delivering consistent quality and performance. And finally, I want to acknowledge our shareholders. We appreciate your support and engagement as we make these changes to work to build a stronger, more durable business. Your interests are aligned with ours and those of our employees and customers as we focus on long-term value creation.

With that, I'd like to now open it up for questions.

[Operator Instructions] And your first question comes from Mike Petusky from Barrington Research.

So I guess the first question I have is sort of around gross margin. Obviously, a really good quarter in terms of gross margin with some favorable order timing or I should say, favorable mix, particularly, I think, and obviously getting some benefit from manufacturing efficiencies. I guess going forward, I'd assume probably mid -- I'm sorry, upper 50s for most of '26. I mean, is that the right way to model this as things sort of normalize in terms of mix? Or might 60% or very low 60% be more of the new normal going forward?

Yes. Mike, thanks for the question. I think the first quarter is a demonstration of what we can do, and I think the lean manufacturing improvements that we've made are starting to show through. You are correct that we received some favorability in the first quarter as it relates to mix and some of the order timing on the OEM side that benefits the overall business. And so I do think that it will be likely lower over time, and it's going to vary quarter-to-quarter.

I haven't given a specific guide, but it's implied through the EBITDA guidance that we don't expect it to maintain at the same level as it's at in the first quarter. But I think it is a good demonstration of what we're shooting for. Longer term, beyond just the course of this year, we're focused on improving the manufacturing productivity so that we can reduce our cost per unit as we continue to scale and grow operations. And I think this is an important step in that right direction.

Okay. Great. And Steve, you sort of -- you gave a lot of detail, and I really appreciate, I'm sure other people really appreciate around integrity and sort of utilization and the footprint you're building out there with surgeons, et cetera. So given the opportunity that you sort of described, how do you guys sort of, I guess, approach that in terms of training surgeons? I mean, is there sort of a cadence, a rhythm that you all are going out and trying to achieve? Like what's the plan there to sort of get after that 92% of the market opportunity you don't think you're touching now?

Yes. It's an excellent question. And I would say we've talked in the past about the investment that we've made in our commercial channel. It's primarily related to the need to train surgeons on the procedure. And that's really where we spend a lot of our time and focus is on that new surgeon adoption. We closely monitor and track how long it takes the surgeons to get to that fifth and tenth case because that's really an indication of how well they're getting through the learning curve of the product. And that's been sort of our primary focus with the team that we have that are boots on the ground that have done a really great job of establishing a footprint here in the U.S.

I think the broader question you're asking about in terms of how big the total addressable market is, just given sort of the current rotator cuff augmentation percentage rates is another clear indication of where we want to try and grow. And that's going to come not just from surgeon adoption, but also from the ease of use and the different sizes and shapes and instrumentation that we can deploy. And I think that we've got a really interesting product here from its regenerative capability and where we're focused on for R&D in the [ HYAFF ] space in the U.S. is around trying to make that easier so that surgeons are able to deploy it more rapidly to more patients. So it's not just the adoption, but it's also the R&D efforts in that space. And that, plus the clinical data that we're working to gather are sort of all part of our plan as we launch this U.S. commercial channel.

Okay. Steve, I don't think I asked that question as well as I wanted to. I'm going to take a second shot at it. Is there targets internally, and I'd love if you'd be willing to share some of it in terms of how many trainings, how many new surgeons you want to train on Integrity over the course of '26? Like are there targets that you guys are trying to achieve there?

Yes. I appreciate the question. I'll answer it super simply. Yes, we have targets. Yes, our team works against those to try and get new surgeons adopted to the technology. And no, we're not going to share those externally.

All right. Last question for me, at least for now. In terms of the share repurchase, obviously, completed it. Congratulations, particularly on the cost basis of those shares that you all repurchased. I guess my question is, given $40 million of cash on the balance sheet, as you look at sort of capital allocation priorities post the completed share repurchase, what would you call out there in terms of your priorities going forward?

Yes, I appreciate that question. Certainly, the share repurchase is part of a broader capital allocation strategy at the company level. And when we think about capital allocation, there's a few different facets to it. First is the operational investments we've made. So we've made investments in the CapEx in our manufacturing facility, and those are important to allow us to drive growth and scalability. Second will be the investments we've made into our U.S. regenerative commercial channel. So that's been an investment that we've talked about historically as something that's a drag to the P&L.

We think of that really as a capital allocation decision we're making. And then as we think about capital allocation longer term, the share repurchase opportunity is certainly a piece of it. We think about that in the sense that it represents a long-term shareholder value, and we think that the shares today represent value, but we're also considering other elements of the business associated with the long-term potential and where we see our business headed. And at this point, we have nothing further to share.

And your next question comes from Anderson Schock from B. Riley Securities.

Congratulations on the strong quarter. So you mentioned that Hyalofast review time line remains intact. Could you remind us that time line and when you expect to submit the complete response and your working assumptions for an FDA decision window?

Absolutely. Appreciate the question this morning. So we had previously communicated from an impact to Anika's revenue opportunity that it could impact the fourth quarter of next year. That's built into our guidance. And with that is an expectation of sort of an extended time frame of discussions with the FDA. As you noted, we did submit the third and final module in the fourth quarter of 2025, and we received the deficiency letter from the FDA in the first quarter of this year, and we're working on those responses.

We haven't given a specific timetable as to when we expect to have our full response back into them, but it's safe to say that it's in the coming months in terms of what we're planning on submitting back to them, and then we expect to have it back and forth with them associated with the previously announced clinical data.

Okay. Got it. And 2027 guidance remains unchanged. So I guess at what point in the year would you need a positive FDA decision to have enough lead time to ramp commercial infrastructure to support the expected $3 million of 2027 U.S. Hyalofast revenue?

Yes. I think it's safe to say that we've built in a level of buffer in terms of what we think we would need for the commercialization ramp-up to support our business. Everything that we've kind of built into our assumption here of our back and forth with them is kind of built into that overall financial framework. Our teams are obviously working internally on the things that we can do now in support of a potential launch of Hyalofast and then a ramp further in next year would be decisions we would make depending upon FDA.

Okay. Got it. And then could you provide an update on CINGAL's bioequivalent study enrollment to date? Does the current enrollment pace allow you to provide more specific completion and NDA filing window?

It doesn't, but I expect that as we continue to work our way through that, we will be in a position to share more associated with an NDA filing time frame. As you noted, we are working through sort of the two elements of it, which is the bioequivalence study, which I'm not going to share the specific numbers, but it remains on track versus our original expectations as we've started this year.

I think we noted on our fourth quarter call that we had initiated the study in the December time frame of 2025. And so the pace of enrollment is on track. And then we're working that in conjunction with preparation of the CMC work to be able to file for Hyalofast as a drug. So those two things are running concurrently.

Okay. Got it. And then finally, you mentioned a new regenerative sutures and tapes program in development. Could you provide some more color on the size of the market opportunity here?

Yes. I'd say it's a little early. I noted in the prepared remarks that we're not going to necessarily share, I'll call it, financial projections of this because it's still early. Really, what we wanted to do is just highlight the opportunity that exists for HYAFF as a regenerative technology in spaces that are outside of the areas that we're currently covering. Certainly, suture and tape is the space that we think would be most opportunistic. It's a very large addressable market, but that doesn't mean that it would be entirely addressable for us. But it's an area for where we think about regenerative technology in the long term, it could have a bigger impact. I don't think we're at the point yet to share more on that, but the early indication we have on some of the data we've seen has been encouraging.

And there are no further questions at this time. Mr. Steve Griffin, you may please proceed.

Thank you. Thank you, everybody, for joining our call today, and we look forward to speaking with you on our second quarter earnings call.

Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation. You may now disconnect. Have a good day.

Good morning, ladies and gentlemen, and welcome to Anika's Fourth Quarter and Year-End Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, February 26, 2026.

I would now like to turn the call over to Matt Hall, Executive Director, Corporate Development and Investor Relations. Please proceed.

Good morning, and thank you for joining us for Anika's Fourth Quarter and Year-end 2025 Conference Call and Webcast. I'm Matt Hall, Anika's Executive Director of Corporate Development and Investor Relations. Our earnings press release was issued earlier this morning and is available on our Investor Relations website located at www.anika.com as are the supplementary PowerPoint slides that will be used to the discussion today.

With me on the call today are Steve Griffin, President and Chief Executive Officer; and Ian McLeod, Senior Vice President, Chief Accounting Officer and Treasurer. They will present our fourth quarter and year-end 2025 financial results and business highlights.

Please take a moment and open the slide presentation and refer to Slide #2. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance.

In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted gross margin, adjusted EBITDA, adjusted net income from continuing operations and adjusted earnings per share from continuing operations which are used in addition to results presented in accordance with GAAP financial measures. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. Reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our fourth quarter and full year 2025 press release.

And now I'd like to turn the call over to our President and CEO, Steve Griffin. Steve?

Good morning, everyone, and thank you for joining us. Before turning to the results, I want to express how grateful I am for the opportunity to lead Anika and for the continued trust and support of our Board as I step into the CEO role. I also want to recognize Cheryl Blanchard for her leadership in repositioning the company and for the partnership she has provided through this transition. Under her tenure, Anika took important steps to sharpen its focus, including portfolio actions and progress across Integrity, Hyalofast and Cingal, which put us in a stronger position to execute going forward. I'm especially appreciative that in her new role as Executive Chair, we will continue to benefit from Cheryl's experience, perspective and relationships as we execute on our priorities particularly as we work to advance key regulatory, commercial and pipeline initiatives.

As we begin today's call, I want to clearly outline the 3 strategic priorities that guide how we run the business, allocate capital and measure success. These priorities build directly on the foundation established under Cheryl's leadership and sharpen our execution as we move forward.

First, revenue growth driven by the commercial channel. Our top priority is accelerating sustainable revenue growth with the commercial channel as the primary driver. This includes continued expansion of our international OA pain portfolio and scaling Integrity as a differentiated regenerative platform. These businesses generate attractive, stable margins, give us greater control over pricing and reduce our reliance on our OEM channel partners while meaningfully improving revenue diversification over time.

The second priority is advancing our HA-based innovation pipeline, centered on Integrity, Hyalofast, Cingal and longer-term development opportunities. These programs address large underserved markets and will further Anika's leadership position in hyaluronic acid. We've made meaningful progress in recent years and remain focused on advancing these programs toward regulatory approvals in the markets where they are not yet approved.

Third, improving operational execution. The third priority in an increased area of focus is strengthening operational execution. This includes improving manufacturing productivity, yield and capacity, which directly supports growth in both our commercial business and our OEM partnership with J&J MedTech, which continues to drive double-digit growth in Monovisc unit shipments.

At the same time, we are establishing a more streamlined organizational design to improve profitability and cash generation. This is not a change in direction, but a sharpening of execution to ensure strategy translates into improved financial performance. With that framework in mind, I want to walk through our 2025 performance through the lens of these 3 priorities.

First, revenue growth. In 2025, revenue growth was led by strong performance in our commercial channel, driven by international OA pain management and continued adoption of Integrity. With these two contributors together delivering commercial channel revenue growth of 22% in the fourth quarter and 15% for the full year, in line with our guidance. Internationally, our OA pain management portfolio, which includes Monovisc, Orthovisc and Cingal, delivered another year of strong growth and share gains. International OA pain revenue increased 28% in the fourth quarter and 12% for the full year, reflecting outstanding execution by our global teams and the durability of these products across multiple regions. Hyalofast also continued to gain traction outside the U.S., benefiting from its ease of use and differentiation. Importantly, our international business has driven strong double-digit growth with a lean cost structure.

Integrity also had an exceptional year. In 2025, Integrity procedures and revenue more than doubled to approximately $6 million, marking its seventh consecutive quarter of sequential growth. Since launch, more than 2,500 surgeries have been performed with over 300 surgeons using the product and a majority scheduling additional cases. During the fourth quarter alone, approximately 600 surgeries were performed, up 20% sequentially, supported by continued surgeon adoption, new size introductions and expanding tendon applications. In 2025, our commercial growth was offset by our OEM channel as a result of a more challenging U.S. OA pain management pricing environment. OEM revenue declined 12% in the fourth quarter and 17% for the full year, consistent with expectations. Importantly, J&J MedTech, which sells Orthovisc and Monovisc maintained their market-leading position. As we focus on growing total company revenue, driven by outperformance in our commercial channel, we continue to work with our OEM partners to drive stability and predictability.

Second, advancing the innovation pipeline. Through 2025, we continue to advance our HA-based innovation pipeline with meaningful progress across Hyalofast, Cingal and building on the Integrity platform. For HYALOFAST, we submitted the third and final module of the PMA to the FDA in the fourth quarter of 2025, including results from the FastTRACK Phase III study. As we previously reported, while the study did not achieve its prespecified co-primary endpoints, it did demonstrate statistically significant improvements across key measures of pain and function used to approve other cartilage repair products. As expected, we received a deficiency letter from the FDA in the first quarter of 2026 related to CMC and clinical data. While we can never make an assurance of FDA approval, we are actively engaging with the FDA, and we remain confident in the evidence supporting Hyalofast's clinical value.

Cingal also made important progress during the year. Cingal has now surpassed 1 million injections across more than 40 international markets and continues to demonstrate strong clinician adoption. In the U.S. The FDA identified two remaining filing requirements for Cingal. The first was a set of required toxicity studies, which we initiated and successfully completed in 2025. The second requirement, the bioequivalence study was initiated in December 2025 and is now underway. Together, these steps keep us on track toward NDA submission and position Cingal as a differentiated solution and a large next-generation OA pain management market.

Finally, Integrity continues to mature, not only commercially but clinically. We are now past the halfway point in our post-market clinical study and remain on track to complete enrollment this year. As a reminder, the post-market clinical study data will be used to support NDR filing, which will enable continued Integrity growth outside the U.S. and accelerate commercial growth in the U.S. In addition, a peer-reviewed MRI-based manuscript, led by Dr. Chris Baker, has been accepted for publication, demonstrating early clinical outcomes that align with our preclinical data and support Integrity's differentiated profile.

Our third strategic priority, operational execution was a significant contributor to improved financial performance in the second half of 2025. Through improved manufacturing productivity, higher yields and increased throughput, we delivered expanded gross margins, positive operating income for the fourth quarter and meaningful free cash flow. These improvements not only strengthen profitability, but also enhanced our ability to support increased volumes for both our commercial products and our OEM partner. Fourth quarter revenue performance, which included the recovery of late shipments, demonstrated how increased volume and disciplined execution can drive improved throughput and productivity. While we do not expect these margins at this level every quarter, the quarter provides a clear illustration of the operating leverage that we can achieve as volumes grow, and we continue to deploy our teams efficiently.

Operational execution goes beyond manufacturing and includes our ability to deliver growth with a lean, efficient back office organization that supports improved profitability. In line with this, we recently implemented a new organizational structure designed to streamline leadership layers, reduce expenses and better align resources with our highest priority growth initiatives. These changes include a combination of senior leadership role eliminations and releveling to better match the current scale of our operations. As we implement these changes, we will work through role transitions over the coming months, supported by the strong team we have here at place at Anika.

As part of this evolution, we mutually agreed with David Colleran that he would transition from his role as Executive Vice President, General Counsel and Corporate Secretary, effective May 2026. I want to thank David for his leadership and many contributions over the past 6 years.

All of the announced changes impact our G&A functions. Together with the recent leadership transitions, these actions are expected to drive approximately $2.5 million in annualized head count savings in addition to more than $3 million in stock-based compensation savings. As responsibilities are transitioned internally and the work is realigned, we expect to see improved profitability in the coming quarters.

As part of this new organizational structure and as I step into the CEO role, Ian McLeod, our current Chief Accounting Officer since 2021 has assumed broader responsibilities across our finance and legal organizations. With these changes, we will not backfill the CFO, COO or General Counsel roles. Responsibilities are being absorbed by experienced senior leaders, creating a more efficient structure that supports sustained profitability and improved cash generation. With these priorities, accelerating growth, advancing innovation and strengthening operational execution firmly in place, we enter 2026 with clarity, momentum and confidence in our ability to deliver improved performance and long-term value.

With that, I'll turn it over to Ian to walk through the financial results.

Thanks, Steve. Before I walk through the financials, I want to take a moment to briefly introduce myself. I've had the privilege of serving as Anika's Chief Accounting Officer since 2021 and I'm excited to step into this expanded role supporting both our finance and legal organizations. I look forward to continuing to work closely with Steve and the broader leadership team as we execute our strategy. With that, let me turn to the results.

Please refer to Slide 5 of the presentation as I provide updates on the fourth quarter of 2025. In the fourth quarter, Anika generated $30.6 million in total revenue which was flat year-over-year, consistent with our revised full year expectations. Commercial channel revenue grew 22%, reaching $13.3 million driven by strong international execution and continued momentum in Integrity, which is exceeding our commercial expectations. Our international OA pain management business remains a key contributor delivered 28% growth in the quarter, led by sustained market share gains for Monovisc and Cingal across several regions. In the OEM channel, revenue was $17.3 million for the fourth quarter down 12% year-over-year, in line with our revised full year expectations. Pricing for Monovisc and Orthovisc sold through J&J MedTech was lower year-over-year as previously communicated. Despite these pricing headwinds, both products continue to hold strong market leadership positions and contribute meaningfully to Anika's overall profitability. Non-orthopedic revenue also declined quarter, reflecting lower demand for legacy products.

In the fourth quarter, gross GAAP gross margin increased to 63% from 56% in the prior year reflecting higher revenue from international OA pain sales and higher volumes of U.S. OA pain, both of which improved throughput and productivity within our manufacturing operations. The margin improvement underscores the structural benefits of our revolving revenue mix and positions us well for improvements in profitability as we move into 2026. We're pleased with the improvements in the second half gross margin and will continue to drive improvements in manufacturing operations into 2026 to increase throughput.

In the fourth quarter, operating expenses were $18.5 million, up from $17.8 million in the same year last year. Selling, general and administrative expenses increased to $12.1 million compared to $11.3 million a year ago, driven by higher sales and marketing expenses, primarily with the growth of Integrity. Research and development expense was $6.5 million, flat versus prior year as we continue to invest in key regulatory and clinical programs, including ongoing work on Hyalofast and Cingal. We continue to monitor our total operating expenses closely to focus on disciplined spending, while advancing the program's most critical to long-term growth.

Total adjusted EBITDA from continuing operations was $4.5 million in the quarter, higher than our revised guidance, reflecting strong commercial channel performance and expanding gross margin. Discontinued operations include the Arthrosurface and Parcus results, which were divested in late 2024 and early 2025, with all material transition work completed, we do not anticipate discontinued operations activity going forward.

Now turn to Slide 6, where I will discuss full year results. For the full year 2025, Anika generated total revenue of $112.8 million, a decline of 6% compared to the prior year and consistent with our revised guidance for the year. Commercial channel revenue was $48.4 million, up 15% compared to the prior year and continues to be a key growth driver in increasing adoption across all our international HA-based OA pain management portfolio and continued Integrity growth. International OA pain management remained a bright spot, reflecting the strong execution of our international commercial team and distributor network and Integrity continues to outperform, driven by increased U.S. adoption and more than doubling revenue to $6 million in 2025.

Revenue in our OEM channel totaled $64.4 million, down 17% year-over-year, in line with adjusted expectations. The decline was primarily driven by pricing and market dynamics of Monovisc and Orthovisc in the U.S. market. GAAP gross margin for the full year was 57% compared to 63% in 2024, reflecting product mix, higher manufacturing costs driven by the manufacturing disruptions from earlier in the year and legacy program costs.

Looking at operating expenses for the full year. We continue to strengthen our discipline across the organization while ensuring we invested in the programs most critical to our long-term growth. Total operating expenses for 2025 were $74.9 million, down from $81.1 million in the prior year, reflecting the meaningful cost actions we executed throughout the year and our continued focus on efficiency. R&D expenses were $25.8 million, essentially flat with the prior year as we continue to invest in the regulatory and clinical work activity supporting Hyalofast and Cingal as well as the ongoing expansion of the Integrity platform. In total, we invested approximately [ $5.2 million ] in 2025 to support Hyalofast and Cingal-related regulatory and clinical activities, representing focused investments that will generate meaningful future benefit across both our OA pain management and regenerative solutions portfolios. SG&A expenses were $49.1 million, a reduction from $55.6 million in 2024 driven by lower G&A head count and expense discipline.

For 2025, adjusted EBITDA was $5.3 million or approximately 5% of revenue which represents an outperformance versus our revised full year outlook of minus 3% to plus 3%. Our results reflect the positive impact of revenue, slightly ahead of expectations improved manufacturing yields and disciplined cost management.

For the full year 2025, we generated $11.2 million in operating cash flow, an improvement over the $5.4 million we generated in 2024 driven by efficient working capital management and lower expenses. Capital expenditures for the year were $6.8 million, reflecting our continued investment in our manufacturing facility to support higher expected output of OA management and regenerative solutions products. We ended the year with $57.5 million in cash with no debt providing us with a strong liquidity decision and the flexibility to continue investing in our growth priorities while executing our share repurchase program. As previously communicated, we initiated a $15 million 10b5-1 stock repurchase plan in November 2025. In the fourth quarter, we purchased 5.5 million common stock. To date, the company has purchased $10.7 million in stock, and the program is expected to be complete in the second quarter of 2026.

Now please turn to Slide 7, as I turn the call back over to Steve to review our financial outlook for 2026.

Thanks, Ian. For 2026, Anika is maintaining its previously communicated revenue guidance ranges by channel and introducing a total company revenue outlook. At the total company level, we expect full year revenue between $114 million and $122.5 million, representing a 1% to 9% year-over-year growth. This outlook reflects continued momentum in our commercial channel and the market dynamics in our OEM business. Within the commercial channel, we are maintaining our outlook of 10% to 20% growth year-over-year or $53 million to $58 million. Growth is expected to be driven by ongoing expansion of Integrity in the U.S. market, sustained Hyalofast performance outside the U.S. and increasing adoption of our international OA pain management portfolio. For the OEM channel, we are maintaining our revenue expectation of flat to down 5% year-over-year or $61 million to $64.5 million. This reflects anticipated Monovisc unit volume growth partially offset by lower pricing, while Orthovisc is remaining modestly flat for the year.

Turning to profitability. As we expect adjusted EBITDA of 5% to 10% of revenue, at the midpoint of this range, this improvement reflects higher expected revenue led by the commercial channel growth, the benefit of our recently initiated G&A cost reduction actions, including leadership changes, as well as productivity and manufacturing gains supporting increased OA pain production, partially offset by modestly lower U.S. OEM pricing dynamics.

To close, we entered 2026 with clarity, momentum and a strong foundation for sustained performance. Our commercial channel is delivering. Our innovation pipeline is advancing with purpose, and our operational execution is driving meaningful improvements in profitability and cash generation. We have the right strategy, the right organization and the right team in place to execute. I'm confident in our ability to build on this progress and create long-term value for our shareholders.

Thank you for your continued support, and we look forward to updating you on our progress throughout the year. With that, we'll open the line for questions.

[Operator Instructions] Your first question comes from Mike Petusky from Barrington Research.

Steve, so real quick on the guidance slide, you guys have U.S. Hyalofast in 2027. And I'm just curious, is a meaningful contribution from Hyalofast in the U.S. aiming the '27, 10% to 20% guide?

I appreciate the question. We had previously shared that we had included about $3 million of anticipated revenue for Hyalofast in '27. We haven't changed that outlook, so it remains the same. Obviously, it's contingent upon approval in the U.S. So that's kind of the big open item that we'll work our way through, but that's the dollar amount associated with it.

Okay. All right. Okay then. Then sort of moving on. In terms of the gross margin, obviously, was really strong this quarter. I'm just wondering as we sort of reset for '26, I mean, should we be thinking more like high 50s for sort of a normalized gross margin? I'm assuming that what you just delivered is not likely, at least sustainable in the near term, although you may get there over time.

Yes, Mike, I think you framed it very well. I think that's exactly what we're planning for. As you noted, I think it illustrates the capability that we have to deliver within our existing business and manufacturing capabilities. To your point, it's not always going to be at that level, but it gives our team something that we're shooting for over the longer term. The high 50s that you just noted though, is appropriate.

Okay. Two more real quick. Obviously, a nice positive free cash for the year and evidently for the quarter. In terms of what you see going forward? And I know it's not an official part of your guidance, but I'm just curious, do you expect free cash to grow off of '25 levels? And if so, I mean, will it be slight or will be somewhat material?

Yes, sure. I would say '26 cash -- I expect it to be probably somewhat in line with '25 just given some of the puts and takes and dynamics that we just referred to. Obviously, we've got to work through some of the restructuring-related elements of the things that I just noted earlier about some of the operating expenses for the business. At this point, though I'd say modestly in line with the '25 results.

Okay. And then just one more, and I'll let other people have a shot here. Obviously, international OA pain outperformed, had a really good year. I'm just curious, in terms of the dynamics internationally, I mean, are there countries where you're there, you're approved, but you're really sort of under optimizing? And then are there also new countries that you don't really have a foothold in, but you could actually commercially launch products?

Sure. Our international OA pain franchise is led by James Chase, who's done an excellent job, as you can tell, in creating a really sustained momentum. And I think it is a multitude of contributors. So first and foremost is market share gains in the places where we play today as well as growth in new markets. There's no one single market that stands out to kind of drive this top line growth. And I'd say he's got a long-term pipeline for each product in each country targeted with each distributor that we work with to find the right opportunities, and it goes out many years. So we're very pleased with the results that he's been able to generate consistently over the last 5 to 6 years, and we look forward to continuing to do that in this year's plan as well.

Your next question comes from Anderson Schock from B.Riley Securities.

Congrats on the strong quarter. So first, on the OEM channel, so you posted some strong sequential improvement, about 9% from the third quarter despite the continued pricing headwinds. Could you unpack what drove that improvement? And as you look at early 2026 order patterns in your conversations with J&J, what gives you the confidence that OEM lands flat to modestly lower for the full year?

Sure. Anderson, thanks for the questions. It's nice Like to talk to you again. We did see a bit of an increase, and I think it's tied primarily to volume and user demand. I noted earlier that we still see very strong end-user demand from a unit perspective on Monovisc, which is the largest contributing factor to the sequential improvement that you're noting. When we look to 2026, we've had many conversations with J&J as they look at the future of this market. We expect to see continued market share gains and volume growth, offset modestly by price. A little too early probably to tell exactly how it will play out. I mean, this is one of those businesses where it could be a little lumpy, and there is some fourth quarter dynamics in the United States to some extent. But we'll see it play out over the course of this year, but suffice to say that we believe that this is the appropriate guide for the year.

Okay. Got it. And then with both the toxicity studies for Cingal now completed, the bioequivalent study initiated in December. Could you provide a more specific time line for the study's completion and expected NDA filing?

Sure. I appreciate the question. So the timing of the NDA filing is going to be paced by the enrollment of the bioequivalent study, which is the final clinical requirement for the submission, and we noted we began enrollment for that in December. The enrollment is ongoing, and the study remains on track. And in parallel to that, our teams are actively preparing other components associated with the NDA, so that we're positioned to move forward efficiently. Once the study is complete, I haven't been able to necessarily give you a timetable, but as we progress further down enrollment of bioequivalence study, we expect to provide that time frame.

Okay. Got it. And then Integrity had $6 million of revenue for '25, more than doubling as guided. And as we think about '26 commercial channel guidance, can you help us frame how much of that growth is from Integrity versus international OA pain? And are there any revenue or procedure volume targets for Integrity in '26?

Internally, absolutely. In terms of what we will share externally, what I would say is we do expect another strong year in the commercial channel on the international OA pain side kind of in that double-digit range that we've seen. And I think when we look at Integrity, it had a very good year, obviously, from a variance percentage basis, it was up almost 100%. I don't think it's going to be up near that same range, but we're still talking about strong double-digit growth, and we're very pleased with the performance in the United States on that growth on Integrity. I'll give further updates as we go throughout the year in terms of the performance.

Okay. Got it. And then finally, so you launched the larger shapes and sizes for Integrity. I guess, how is the early uptake trending? And is this opening up meaningful new call points beyond your existing shoulder focused surgeon base?

We did. We launched two new shapes and sizes last year, and it's gone well. We've seen strong uptick on those products. I'd say this market is still majority rotator cuff. So when we look at the overall market procedures, the rotator cuff represents still the largest portion of it, the largest portion of our overall revenue. But I think the new shapes and sizes help increase surgeon adoption and get further expansion into some of those smaller adjacent markets. We're pleased with how well it's gone so far and look forward to continue to drive adoption into 2026.

Your next question comes from Mike Petusky from Barrington Research.

All right. Excellent. I have a couple more, I appreciate the follow-up. Steve, in terms of the bioequivalence study, what is the targeted enrollment?

It's just under 60 patients.

I mean is that -- I have no idea, is it fairly easy to enroll patients for this kind of study? Or is it a slog?

I wouldn't call it a slog. I mean it does have specific enrollment criteria designed to meet the FDA requirements. We're executing well, but enrollment can take slightly longer than maybe a typical bioequivalent study. So far, it's on track to what we would have expected.

Okay. All right. And then would you be willing to share sort of the revenue run rate that Integrity ended the year with in Q4? I mean is it -- I mean, is it run-rating that $7 million, $8 million. Any help there?

We haven't necessarily broken it out by quarter, but we did $6 million over the course of the full year, and I think we noted that it grew 20% sequentially from 3Q to 4Q. So it's at a pretty decent run rate as we exit the year. I will also note, though, that, that tends to be the case. There's some fourth quarter seasonality just in the United States associated with procedural volumes. So as we look to the start this year, we do expect that seasonality effect to kind of continue, but we're very pleased with its growth.

Okay. Great. And then just one last question. I guess around capital allocation. Obviously, you guys said what you said on finishing up the share repurchase commitment. But as you sort of look at the fact that you guys have been -- if presumably generate some free cash this year, you've got $55-plus million net cash on the balance sheet. I mean outside of the share repurchase, I mean, what are the priorities? I mean, is it potentially some small sort of tuck-in M&A? Or is that just not a thing you can focus on giving given where you are right now?

I appreciate the question, Mike. I would say our capital allocation priorities start first and foremost with being able to deliver for our patients and customers. So we obviously are spending CapEx to improve our manufacturing operations here in Bedford. We will continue to do that. So we'll make investments into our manufacturing capability, and that is the first and foremost.

The second thing that we talk about is capital allocation is the investments we're making into our U.S. sales channel, those are still investments that we are making, and we very consciously evaluate those. And while we operate with a level of expense discipline, it is still an investment nonetheless, I think longer term, there are certainly opportunities for us to evaluate what else we may do. But at this point, it's not something that we're looking to share. We've got a lot on our plate in the very near term, some of the restructuring activities that we mentioned earlier, plus the activities for Integrity, Hyalofast and Cingal, knows a lot on our plate, a lot of shareholder value that can be generated by executing well. And I think the 3 strategic priorities we laid out at the very beginning: first, commercial revenue growth; second, advancing our R&D pipeline; and third, executing with operational discipline. Those are the priorities for us in the near future.

And there are no further questions at this time. I will turn the call back over to Steve Griffin for closing remarks.

Great. Thank you all for joining us today. We hope you have a great week.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to Anika's third quarter earnings conference call. [Operator Instructions]

I will now turn the call over to Matt Hall, Director, Corporate Development and Investor Relations. Please proceed.

Good morning, and thank you for joining us for Anika's Third Quarter 2025 Conference Call and Webcast. I'm Matt Hall, Anika's Director of Corporate Development and Investor Relations.

Our earnings press release was issued earlier this morning and is available on our Investor Relations website at www.anika.com, as are the supplementary Powerpoint slides that will be used for the discussion today.

With me on the call today are Dr. Cheryl Blanchard, President and Chief Executive Officer; and Steve Griffin, Executive Vice President, Chief Financial Officer and Chief Operating Officer, who will present our third quarter 2025 financial results and business highlights.

Please take a moment and open the slide presentation and refer to Slide #2. Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur, that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance.

In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted EBITDA, adjusted net income from continuing operations and adjusted earnings per share from continuing operations, which are used in addition to results presented in accordance with GAAP financial measures.

We believe that non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our third quarter 2025 press release.

And now, I'd like to turn the call over to our President and CEO, Dr. Cheryl Blanchard. Cheryl?

Thanks, Matt. Good morning, everyone, and thanks for joining us today to discuss Anika's third quarter 2025 results.

Please turn to Slide 3. This quarter reflects strong execution across our strategic priorities, including robust Commercial Channel revenue growth, completing the filing of the third and final PMA module for Hyalofast and continued progress toward completing the final requirements needed to file the Cingal NDA.

I'll start out by walking you through the financial results for the quarter, which are in line with expectations, while also generating strong operating cash flow and positive adjusted EBITDA. Revenue for the quarter was down 6% compared to the same period last year, as expected, as Johnson & Johnson continues efforts to stabilize pricing in our important and profitable U.S. OA Pain Management business, which accounts for the majority of our OEM channel revenue.

As a note, J&J announced their intent to separate their orthopedic business to enhance strategic and operational focus. We do not anticipate any negative impact to our OA Pain Management business related to that separation. And in fact, after the quarter, J&J MedTech exercised its option to extend the current license and supply agreement for Monovisc for another 5-year term through December 2031.

The expected results from our OEM channel were offset by strong continued momentum in our Commercial Channel, where we delivered double-digit growth in the quarter, advancing our strategic priorities, while moving Hyalofast and Cingal closer to FDA approval and launch.

Commercial Channel revenue grew 22%, fueled by strong Integrity growth, continued growth of Hyalofast outside the U.S. and international growth in OA Pain Management. Additionally, the steps we've taken to improve our cost structure is flowing through, with SG&A expenses down 12% year-over-year and overall operating expenses down 3%, driving improved profitability and free cash flow.

Turning to our Commercial Channel portfolio. Integrity procedures in the U.S. grew for the sixth consecutive quarter, driving Regenerative Solutions growth of 25% year-over-year. Integrity growth is outpacing the overall U.S. soft tissue augmentation market, keeping us on track to more than double Integrity procedures and revenue in 2025 compared to last year.

As shown on Slide 4, about 500 Integrity procedures were performed during the quarter, bringing our number of surgeon users to nearly 300. Our U.S. commercial team remains focused on expanding adoption and repeat use, supporting existing users as they integrate Integrity more fully into their practice, while also training new surgeons on its safe and effective use.

Notably, over 60% of users have completed multiple cases, a strong indicator of growing and sustained clinical confidence. We are also excited that we started limited launches of Integrity outside the U.S. and cases have been performed in 10 countries.

This growing base of experienced users demonstrates sustained clinical confidence and adoption of this game-changing technology that offers both enhanced regenerative capacity and greater strength when compared to competitive products.

During the quarter, we also initiated the limited release of the first SKU of the larger shapes and sizes of Integrity, designed for a variety of tendon applications, including in the hip, knee and foot and ankle. A number of surgeries have been performed and the initial feedback from surgeons has been positive. Additional SKUs of shapes and sizes that are designed for more specific tendon augmentation applications, will be released in the coming quarters. We expect these additions to further accelerate adoption and support continued commercial momentum into 2026.

Also contributing to our commercial channel growth was the continued success of our international team, driving Hyalofast expansion and delivering double-digit gains in international OA Pain Management revenue. The team partnered closely with distributors to strengthen business in existing markets and expand into new geographies.

International OA Pain Management revenue grew 21% year-over-year, primarily driven by the timing of distributor orders. Year-to-date, that business is up 6% compared to 2024. This successful quarter for our international business was underscored by a major milestone. We have now surpassed sales of 1 million Cingal injections since the 2016 launch. The strong uptake of Cingal outside the U.S. is a testament to its effectiveness to relieve both short and long-term pain and get patients back to active living.

Turning to Hyalofast. On October 31st, we submitted the third and final module of our PMA to the FDA, marking a major milestone in our U.S. regulatory pathway for our breakthrough cartilage repair device. We look forward to engaging with the agency to progress toward U.S. approval and commercialization.

Concurrent with earnings, we have also released the data from our U.S. Phase III FastTRACK study. As previously reported, while Hyalofast consistently demonstrated improvements in pain and function, the study did not meet its 2 co-primary endpoints under the original statistical framework. This was in part due to a disproportionate amount of missing data in the microfracture active control arm.

While Hyalofast showed clinically meaningful improvements in both KOOS pain and IKDC function from baseline at 24 months, it was not statistically significant when compared to the active microfracture control arm. Statistically significant improvements were achieved in relevant key secondary endpoints, including KOOS sports and recreation function, quality of life and total KOOS, all of which have been used as the basis for FDA approvals of other cartilage repair products.

In addition, because the data was not normal and not missing at random, as assumed in the predefined statistical analysis plan, supplemental statistical analyses were prepared for FDA consideration. These analyses include a review of observed data, which is the data without statistical imputations. In the observed data analysis, we achieved significance for KOOS pain.

The post-hoc analysis also included responder analyses for several outcome measures. Our responder analysis provides the number of patients in the study who achieved a clinically meaningful level of improvement.

In the FastTRACK study, more Hyalofast patients achieved higher levels of improvement in pain at 24 months than microfracture patients did, and with statistical significance. We believe these additional analyses confirm the consistent and meaningful clinical benefit that Hyalofast with BMAC brings to patients with cartilage defects.

We're encouraged by the strength and consistency of the data we have submitted to the FDA, both from the FastTRACK study and the over 15 years of independent clinical experience outside the U.S. The international experience continues to demonstrate Hyalofast's safety and efficacy across a broad range of patients with over 35,000 treated to date as we continue to see strong penetration of Hyalofast in the over 35 markets where it is sold today.

Now turning to Cingal, our next-generation OA pain management product. During the quarter, we made meaningful progress toward our U.S. NDA submission. We successfully completed the first of 2 toxicity studies and initiated patient screening for the bioequivalent study, which remains on track to begin before the end of the year. As a reminder, these studies represent the final steps required for our NDA filing.

We're encouraged by our continued progress with this important program and remain focused on advancing Cingal towards regulatory submission and ultimately, commercial availability in the U.S. market.

Lastly, beginning in 2023, the company undertook a comprehensive strategic review, evaluating a broad range of alternatives. We have formally concluded that process and remain focused on executing our product growth strategy and enhancing operational performance to create shareholder value and return capital.

As part of that commitment, we are commencing a second $15 million share repurchase under our previously announced program. We continue to prioritize key growth and regulatory milestones, including growing integrity, engaging with the FDA on the Hyalofast PMA submission, completing the Cingal bioequivalent study and subsequent NDA submission and delivering ongoing operational improvements aimed at strengthening profitability and cash flow.

And with that, I'll now turn the call over to Steve for a detailed review of our financial results.

Thank you, Cheryl, and thank you, all, for joining us. Our third quarter results reflect steady progress across key areas in both profit and cash flow, with performance in line with expectations and signs of continued momentum. We're executing on our key objectives and the resulting improved financial performance is showing.

Please refer to Slide 5 of the presentation as I provide financial updates on the quarter. In the third quarter, Anika generated $27.8 million in total revenue, a 6% decline compared to the same period in 2024. Our commercial channel, which includes globally distributed, highly differentiated products, delivered $12 million, up 22% year-over-year. This growth was driven by continued momentum in our regenerative solutions portfolio, which was up 25% in the quarter as the Integrity Implant system continues to gain market share.

Integrity has now delivered sequential growth for 6 consecutive quarters in the United States and remains on track to more than double in 2025. With the launch of larger shapes and sizes in the third quarter, we're encouraged by the continued expansion and trajectory of the platform.

Also, within our commercial channel, international OA pain sales grew 21% in the quarter as our international sales team continues to gain share with our existing product portfolio. Year-to-date growth stands at 6%, slightly below expectations, due to shipment timing impacted by the second quarter production-related disruptions. We expect any remaining impact to be resolved before year-end.

While this channel can be somewhat variable quarter-to-quarter, it continues to show strong underlying momentum, building on several years of consistent double-digit growth.

Revenue in the OEM channel, which includes our domestic OA pain and non-orthopedic products sold by third parties under long-term agreements, declined 20% in the third quarter to $15.8 million, in line with our full year guidance, primarily due to pricing pressure on end-user sales.

Orthovisc sales were lower, reflecting both reduced pricing and a continued shift towards single-injection treatments. Monovisc saw strong unit growth, up low double-digits in the quarter, though this was offset by a double-digit decline in pricing. Year-to-date, Monovisc unit volume is up 11%, while average price is down 17%.

Despite ongoing pricing pressure, we continue to expect more stable revenue trends as we head into 2026, supported by anticipated unit volume growth that we believe will mostly offset price dynamics, resulting in flat to modestly lower revenue, in line with our previously provided financial framework.

Recall, J&J is responsible for marketing and selling OA pain products in the U.S. We continue to work with them in an effort to drive for greater price stability and market expansion. On a combined basis, Monovisc and Orthovisc continue to lead the U.S. market and remain profitable contributors to our business. The remainder of our OEM business, our non-orthopedic sales, declined in the quarter due to the timing of customer orders.

Third quarter gross margin was 56%, a decrease of 10 percentage points year-over-year, but an improvement of 5 percentage points sequentially from the second quarter. The year-over-year decline was primarily driven by a $3.2 million reduction in Monovisc and Orthovisc sales to J&J, largely due to lower pricing. This impacted both transfer units and royalty revenues and directly reduces gross profit.

Sequential margin improvement reflects our recovery from early summer production disruptions, which had previously led to elevated inventory reserves and negatively impacted gross profit.

Turning to operating expenses. Total third quarter OpEx was $18.8 million, a decrease of $700,000 or 3% compared to the same period last year. Selling, general and administrative expenses declined $1.7 million or 12%, primarily driven by headcount-related cost savings and lower stock-based compensation.

Following the 2 divestitures completed earlier in 2025, we streamlined and optimized our organizational structure to better align with our strategic priorities and reduce operating costs. Notably, general and administrative expenses were down 17% year-over-year. We remain focused on identifying cost savings initiatives, while continuing to invest in areas that support sustainable long-term growth, partially offsetting the G&A savings.

Research and development expenses increased $1 million or 17%, driven by the costs associated with the Cingal toxicity study. Year-to-date, R&D expenses are up 1%, driven by a $1.8 million increase in external expenses, largely due to a $2 million increase in Cingal pre-filing requirements.

In contrast, total internal R&D expenses are down 12% year-to-date versus 2024, underscoring our commitment to operational efficiency, while maintaining momentum in key development areas.

Adjusted EBITDA from continuing operations was positive in the quarter, totaling $900,000, a decline of $3.7 million compared to the same period in 2024. This result exceeded the anticipated breakeven level and represented a $1 million improvement over the second quarter.

The year-over-year decline was primarily driven by reduced high-margin revenue from J&J, partially offset by meaningful reductions in operating expenses. The improved expense profile contributed to profitability that was better than previously guided.

Now turning to cash and liquidity. Anika delivered strong operating cash flow of $6.9 million in the third quarter, up from $5 million in the same period last year. This improvement was driven by favorable timing, stronger working capital management and disciplined cost controls.

Year-to-date operating cash flow totaled $6.6 million, a $2.8 million increase over 2024. This performance reflects the company's disciplined approach to working capital and expense management.

We invested $1.9 million in capital expenditures during the quarter, an increase of $700,000 year-over-year, primarily due to timing. These investments are focused on expanding capacity at our Massachusetts manufacturing facility to support anticipated volume growth across Monovisc, Cingal, Integrity and Hyalofast. This positions us to efficiently scale operations and meet future demand.

We ended the third quarter with $58 million in cash and no debt. As Cheryl mentioned, we are commencing a second $15 million share repurchase, consistent with the plan announced in May 2024. This repurchase will be executed under a 10b5-1 program, which we expect to complete by June of 2026. It reflects our ongoing commitment to returning capital to shareholders while preserving the flexibility to pursue strategic growth initiatives.

Now on Slide 6, I'll review our full year financial outlook for 2025. We are maintaining our full year 2025 guidance. We continue to expect our commercial channel to generate between $47 million and $49.5 million in revenue, representing a year-over-year growth of 12% to 18%.

Our OEM channel remains on track to deliver between $62 million and $65 million in revenue for 2025, representing a year-over-year decline of 16% to 20%. At the midpoint of an 18% decline, this range reflects higher volumes offset by lower pricing from J&J.

Now turning to profitability. We are maintaining our 2025 adjusted EBITDA guidance range of positive 3% to negative 3%. Our liquidity remains strong with no need to raise capital, and we remain confident in our ability to execute on our strategy. We continue to be focused on improving our expense profile to deliver positive operating cash flow. This financial discipline enables us to reinvest in the business, capitalize on the value propositions of our product pipeline, and ultimately deliver sustainable returns for our shareholders.

With that, I will now turn the call back over to Cheryl.

Thanks, Steve. In closing, we're pleased with Anika's solid third quarter performance, which reflects continued momentum in our commercial channel, disciplined expense management and meaningful progress across our pipeline. Additionally, with strong operating cash flow, a healthy balance sheet and a clear path toward key regulatory milestones, in total, we believe this will deliver long-term value for shareholders.

We want to thank our shareholders for their continued support, and we'd also like to extend our deepest gratitude to the entire Anika team whose dedication to developing, manufacturing and delivering world-class HA-based products enables us to restore active living for patients around the world.

And with that, we'll open up the line for questions. Operator, please proceed.

[Operator Instructions] Your first question is from Michael Petusky from Barrington Research.

Thanks for some of the additional detail in the presentation today. That's great. So I guess I want to ask a question around Integrity, Cheryl. In terms of what you would view as the bigger priority or maybe the lower-hanging fruit, I mean, is it driving increased utilization with your existing surgeon base? Is it doing more trainings and expanding the footprint? I mean, can you just sort of talk about how you guys are approaching maybe turning 300 surgeons into 600 and 500 cases a quarter into 1,000 cases? Like how do you get there?

Great question. Thanks for that, Mike. So I'd say, first of all, that we're feeling very bullish in the U.S. market with our team coming from a position of strength because what we're seeing from the surgeon reaction and adoption, new surgeon use and further penetration with existing surgeons is that this product really does provide significant clinical advantages.

It's stronger, has higher suture retention even when wet and it has additional regenerative capacity. It just -- it does things that the existing products out there don't do.

So, I would tell you, though, that we are probably equal parts focused on going out and getting new surgeons, getting new surgeons excited about the technology and also continuing to do training and education on the safe and effective use of the product for new and existing surgeons, especially as we continue to launch these additional SKUs that are really designed for use in the other tendon applications in the hip, in the knee, and the foot and ankle.

So, I would say it's really across the board, and our team is very busy doing both. Obviously, we've talked about this year that we are on track to double this year. And so, we continue to invest in this product. We think it's a great product. We believe in what it's doing, and we're excited for that team to continue to drive both penetration and acquiring new customers.

Okay. All right. Great. And I guess, if you could just remind me and maybe others, the timing for sort of wrapping up everything related to Cingal bioequivalence and the second toxicity, is that sort of mid-'26? Is that when you hope to sort of wrap all of that up? Or am I [ misremembering ]?

No, I don't think you're -- we have not given a specific updated timeline, which we will be in a position to do at the next earnings call because we need to get the bioequivalence study started.

We've talked about -- we are on track to start that by the end of the year. We started screening patients for that study. And as soon as that study gets started, we'll be able to provide a more fulsome update on the timeline.

We have one last toxicity study that will be done in the first quarter. And then the timing of the bioequivalent study is really what's going to dictate our fulsome timeline to get to an NDA filing. But everything is on track as we sit here today.

Okay. And then just one more. This is probably for Steve. Steve, in terms of capital deployment priorities, obviously, you guys called out the share repurchase. Can you just talk about either ranking or how you guys think about sort of share repurchase relative to internal investment relative to M&A? Obviously, you have a balance sheet that could support some -- multiple things. Can you just talk about how you think about capital deployment?

Absolutely. I appreciate the question, Mike. When we look at the hierarchy of our capital needs, I'd say, first and foremost, we have internal investment that we're making into our business today. We've shared that we're investing approximately $14 million of profit into our regenerative solutions portfolio, which is the launch of Integrity and then the preparations associated with Hyalofast. We look at that as a strategic investment that we're making as part of the growth of our product pipeline. That's first and foremost that we talk about.

Second is the need for CapEx in the business to support those product launches. Most of all of our CapEx is associated with our Bedford-based manufacturing facility to support the growth of our cross products in Cingal and Monovisc as well as all of our [ high-end ] products, Integrity and Hyalofast.

And then third on that list would be the share repurchase that we've communicated today.

Are there other actions that we could do and things we could look at? Certainly, we have a long list of things that we consider outside of the ones that I just referenced, M&A being one of them. But at this point, that's not something that the company is ready to undertake. And I'd say those -- first 3 of those areas that we pay the most attention to in terms of ranking our priorities.

Okay. And then actually, let me sneak one more in, and then I promise I'll get off and let other people ask questions. Steve, in terms of the production issues, I was under the impression that, that had largely been resolved earlier. In Q3 it seems like some of that persisted. Is that a different issue? Or is that essentially hangover from the same issue?

It's the latter. It's the hangover from the same issue. So from a resolution, we're back to where we are from a yield perspective where we historically were. It's just about getting back on all of our POs for customers that we were not on track to. So this is just a matter of available capacity and running our teams over weekend shifts and the like to get back to PO, which is why I'm focused around getting it back to healthy by year-end.

It is obvious we take every customer PO very seriously, but it has a small impact on some of our [ OUS ] customers and a very minimal impact on our U.S.-based customers.

Okay. I think you had said that you had expected a overall gross margin to sort of return to like the high 50s, like 58%, 59% in the second half. Is that maybe tracking a quarter behind? Like essentially, should we expect gross margin in Q4 to look more like Q3 or more like high 50s?

It's probably between where we are today and a little bit higher towards the fourth quarter. A lot of it comes down to the recovery from a product shipping perspective. So I would say that's probably more associated with some of the current gross margin dynamics.

Okay. But 58%, 59% longer term is doable, I assume.

Yes. A lot of that comes down to pricing with J&J, right? So as you know, that's a very profitable piece of our business. So I don't really give long-term gross margin projections just because that pricing has been so volatile.

What you're seeing us return to is north of 55%, between 55% and 60%. That's kind of a more normalized level for the business today, barring changes that could occur from a pricing perspective.

There are no further questions at this time. And that concludes our question-and-answer session for today. Ladies and gentlemen, the conference call has now ended. Thank you all for joining. You may now disconnect your lines.

Good morning, ladies and gentlemen, and welcome to Anika's second quarter earnings conference call.

I will now turn the call over to Matt Hall, Director, Corporate Development and Investor Relations. Please proceed.

Thank you. Good morning, and thank you for joining us for Anika's Second Quarter 2025 Conference Call and Webcast. I'm Matt Hall, Anika's Director of Corporate Development and Investor Relations. Our earnings press release was issued earlier this morning and is available on our Investor Relations website located at www.anika.com as of the supplementary PowerPoint slides that will be used for the discussion today. With me on the call are Dr. Cheryl Blanchard, President and Chief Executive Officer; and Steve Griffin, Executive Vice President, Chief Financial Officer and Chief Operating Officer, who will present our second quarter 2025 financial results and business highlights. Please take a moment and open the slide presentation and refer to Slide #2.

Before we begin, please understand that certain statements made during the call today constitute forward-looking statements as defined in the Securities Exchange Act of 1934. These statements are based on our current beliefs and expectations and are subject to certain risks and uncertainties. The company's actual results could differ materially from any anticipated future results, performance or achievements. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. Please also see our most recent SEC filings for more information about risk factors that could affect our performance.

In addition, during the call, we may refer to several adjusted or non-GAAP financial measures, which may include adjusted EBITDA, adjusted net income from continuing operations and adjusted earnings per share from continuing operations. which are used in addition to results presented in accordance with GAAP financial measures. We believe that non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial measures and the reconciliation of GAAP measures, they provide an even more complete understanding of our business. A reconciliation of these adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our second quarter 2025 press release.

And now I'd like to turn the call over to our President and CEO, Dr. Cheryl Blanchard. Cheryl?

Thanks, Matt. Good morning, everyone, and thank you for joining us today to discuss Anika's second quarter 2025 results. Please turn to Slide 3.

This has been a meaningful quarter for Anika, including a significant clinical update on Hyalofast. I'll begin today's remarks with that important development. But before I dive in, I want to note that our quarterly performance was in line with expectations, and we remain on track to deliver our full year 2025 guidance. I'll return to our financial results after walking through the Hyalofast clinical update.

Earlier today, we shared an important announcement on the top line results from our U.S. pivotal Phase III Hyalofast clinical trial. This study, which enrolled its first patient in 2015 is a randomized controlled trial comparing Hyalofast in combination with autologous bone marrow aspirate concentrate, also called BMAC, to an active comparator as the control arm, a surgical technique called microfracture in the treatment of articular cartilage defects. Superiority between the groups was to be determined with 2 prespecified co-primary endpoints, percent change from baseline to 2 years in both KOOS Pain and IKDC Function.

While Hyalofast demonstrated consistent improvements in treated patients across all measures of pain and function relative to microfracture, we're disappointed the study missed on achieving statistical significance on its prespecified co-primary endpoints under the original statistical framework. Given the consistently demonstrated improvements over microfracture in this trial and the efficacy of Hyalofast demonstrated in numerous independent studies outside the U.S. We believe these results reflect limitations in the study context rather than the performance of Hyalofast itself. Importantly, we remain highly encouraged by the totality of evidence supporting the product, which I will discuss.

As a reminder, Hyalofast has successfully treated more than 35,000 patients in over 35 countries since its launch in 2009 outside the U.S. Let me take a moment to dive into more detail on the study results. The trial required randomization to microfracture, which was considered the standard of care when the study was initiated. Microfracture served as the active comparator. However, over the 10 years of trial enrollment, it's broad use by surgeons declined significantly, and it is no longer regarded as the standard of care for cartilage lesions in most countries, including the U.S.

The study was likely impacted by both a higher subject dropout rate in the microfracture arm and missed visits during COVID, both resulting in missing data. This missing data resulted in a reduced evaluable sample size and complicated the statistical analysis. In accordance with FDA guidelines, Anika's statistically imputed missing data, which did not treat withdrawals from the microfracture arm as treatment failures. To be clear, Hyalofast demonstrated improvements over microfracture but the study did not achieve statistical significance in the co-primary endpoints.

Importantly, we did achieve statistical significance on several key secondary endpoints and other measures including KOOS Sports and Recreation Function, KOOS Quality of Life and Total KOOS, all of which have served as the basis for FDA approval of the other cartilage repair products available in the U.S. In addition, because Anika has sold Hyalofast outside the U.S. for over 15 years, we have a significant amount of clinical data from a number of independent international clinical studies including a paper published last year with positive 15-year outcomes.

We believe the totality of the data, including hitting significance on endpoints used for prior FDA approvals statistically significant responder analyses and multiple independent international studies strongly supports the clinical value of Hyalofast as a single-stage off-the-shelf cartilage repair solution. This is especially compelling when compared to the current U.S. standard of care that requires 2 separate surgical procedures. Based on these results, we plan to submit the third and final PMA module on our original schedule in the second half of this year after data analysis has been completed.

Once the data analysis is complete, we will provide further disclosure of the data. This submission will include post-stock analyses and additional endpoints that achieved statistical significance in this study that have previously been accepted by the FDA and other approvals in addition to the robust international data. We remain confident in the strength of our data and look forward to working closely with the agency as they review our application through the Breakthrough Devices program. In anticipation of upcoming discussions with the FDA. We are extending our commercial time line to 2027 to ensure adequate time for a thorough review and dialogue around the full data package. Hyalofast continues to represent a significant opportunity for Anika to expand our leadership in regenerative solutions and deliver meaningful innovation to patients suffering from cartilage lesions.

Turning to Cingal, I am pleased to announce that we made meaningful progress during the quarter advancing the final steps toward NDA filing and remaining on track to initiate the bioequivalence study by year-end. As a reminder, this bioequivalent study and the toxicity studies initiated earlier this year address the final requirements before submission. We plan to provide an update on the Cingal program timing after we start the bioequivalence study.

Next, I'd like to provide an update on Integrity. I'm pleased to share that Integrity has already exceeded its full year 2024 performance and is currently on track to more than double in 2025, ahead of original expectations, and Integrity led to 41% growth in Regenerative Solutions revenue this quarter. This exceptional growth reflects our early positive clinical data, strong market momentum and increasing adoption across a broader base of surgeons. What's particularly encouraging is that surgeons are not only using Integrity more frequently, but also expanding its application across a wider range of tendon repair procedures. While the shoulder remains the primary driver of the U.S. augmentation market, we see meaningful traction in other anatomies, including the hip, knee and ankle, which together represent over $40 million in addressable market opportunity.

In other news around Integrity momentum, during the quarter, we received 510(k) clearance for 2 new Integrity shapes and sizes that are planned to launch in a limited release by year-end. These 2 new SKUs are designed to support repairs in both insertional and mid substance Achilles tendon, patellar tendon, quadriceps tendon and gluteus medius tendon to name a few. The revenue contributions of these new shapes and sizes will be modest in the second half of this year as we continue to ramp up production and training activities. However, we expect them to positively impact future commercial sales for this critical product. This expansion further strengthens our ability to penetrate this addressable market and reinforces Integrity's position as a versatile and scalable regenerative platform.

Let me now walk you through the high-level financial results for the quarter. I am pleased to report that we delivered financial results in line with expectations as we overcame difficult manufacturing yield challenges at the start of the quarter. I'm proud of the work that our teams have done to overcome these challenges despite the financial impact that it had in the quarter. Revenue in the quarter was down 8%. However, we continued to demonstrate strength in our commercial channel led by our regenerative solutions offerings, which were up 41%. Our OEM channel, although lower year-over-year was in line with our expectations as J&J works to stabilize this important profitable channel for our business.

In light of the near-term revenue pressure, we have taken proactive steps to reset our operating expense profile, driving a 17% reduction in total operating expenses year-over-year. Adjusted EBITDA was roughly flat for the quarter, while we continue to invest in our most promising commercial opportunities.

Lastly, I will mention that we have successfully completed the material transition services activities with respect to the divestitures of both Parcus and Arthrosurface and are now fully focused on our strategy, leveraging our proprietary hyaluronic acid technologies.

With that, I'll now turn the call over to Steve for a detailed review of our financial results.

Thank you, Cheryl. Before we dive into the financial results, I want to begin with an update on the production challenges we encountered earlier this quarter. Since April, our teams have successfully resolved the lower production yields and restored output to historic levels. While we experienced reduced shipments in April and May, I want to emphasize that this did not result in any delayed deliveries to patients. Toward the end of the quarter, we were modestly behind on certain international OA Pain shipments, which impacted commercial revenue slightly. However, we expect to fully recover and deliver product for these purchase orders in the third quarter. I'm proud of the cross-functional collaboration that enabled us to resolve this issue within the quarter. and we've implemented new procedures to help ensure that this disrupt type of disruption does not recur. With that, I'll now provide financial updates on the quarter. Please refer to Slide 4 of the presentation.

In the second quarter, Anika generated $28.2 million in total revenue, an 8% decline compared to the same period in 2024. Revenue in our commercial channel which includes our globally distributed, highly differentiated products was flat year-over-year at $11.9 million. However, within this channel, regenerative solutions delivered standout performance, growing 41% year-over-year driven by continued momentum in the Integrity Implant System. Importantly, Integrity has now achieved sequential growth for 5 consecutive quarters and as of June, we've already exceeded full year 2024 revenue for the product on track to more than double in 2025. This underscores the strength of the platform and the growing demand we are seeing in the market.

Offsetting this growth was a 10% decline in international OA pain sales, primarily due to approximately $900,000 in unfilled orders stemming from previously mentioned lower yields as well as a difficult year-over-year comparison due to the timing of shipments in Q2 2024. Absent the lower yields, we would have expected international OA Pain to be flat in the commercial channel to be up approximately 8%. With yields now fully restored, our teams are working diligently to fulfill backlog distributor orders and expect to recover these orders in the third quarter.

Revenue in the OEM channel, which includes our domestic OA Pain and nonorthopedic products sold under long-term agreements, declined 13% in the second quarter to $16.3 million. This performance was in line with our expectations, reflecting continued pressure on demand and pricing for Orthovisc as well as lower pricing for Monovisc, offset partially by higher end-user volume. Monovisc pricing was stronger this quarter due to the timing of contractually obligated payer rebates from J&J, which, as with others in this market can vary significantly from quarter-to-quarter.

We anticipate a pricing decline in Q3, followed by a modest rebound in the fourth quarter, with no change to our full year pricing outlook. While we do not directly control this channel, we remain actively engaged with our partner to drive for greater price stability and market expansion. Despite ongoing headwinds, Monovisc and Orthovisc continue to lead the U.S. market and remain profitable contributors to our business. The remainder of our OEM business, our nonorthopedic sales grew in the quarter due to the timing of customer orders.

Second quarter gross margin was 51%, down 16 percentage points from the same period last year. The primary driver was a onetime $3 million charge related to the lower yields of Monovisc and Cingal in April and May. This charge, largely noncash represents the full extent of the lower yields and falls within the previously communicated range for the full year impact. Excluding this onetime item, gross margin would have been above 60% for the quarter. In addition, gross margins were impacted by a $3 million year-over-year decline in Monovisc and Orthovisc sales to J&J, primarily driven by lower pricing that impacts both transfer units and royalties and directly reduces gross profit.

With the lower yields now resolved, we expect gross margins to improve in the second half of the year to the 58% to 59% range as we communicated on our first quarter call. That said, the combination of reduced high-margin J&J revenue and the first half manufacturing challenges will result in a lower overall gross margin for 2025. These dynamics were anticipated and are already reflected in our full year guidance.

Turning to operating expenses. Total second quarter OpEx was $18.5 million, down $3.8 million or 17% compared to the same period last year. Selling, general and administrative expenses declined 22%, while research and development expenses were down 6%. The $3 million reduction in SG&A was primarily driven by a onetime nonrecurring $1.6 million expense in 2024 and $1.4 million in headcount-related cost savings actions. As we've pivoted the strategic focus of the company, we continue to streamline and optimize our organizational structure to align with our future direction. These actions reflect our commitment to disciplined cost management and mitigating the impact of revenue pressures while continuing to invest in areas that support long-term growth.

Adjusted EBITDA from continuing operations was negative $200,000 in the second quarter, a decline of $4.9 million compared to the same period in 2024. The decrease was primarily driven by the onetime scrap costs for our recent manufacturing challenges in addition to lower high-margin revenue from J&J, partially offset by the meaningful reductions in operating expenses. Without the onetime scrap costs, the company would have generated positive EBITDA in the quarter. Now turning to cash and liquidity.

In the second quarter, we used $200,000 in operating cash flow an improvement compared to the $1.1 million of cash used in the same period last year. This was driven by stronger working capital management and disciplined cost controls in response to revenue pressures. We invested $1.4 million in capital expenditures during the quarter, down $2 million year-over-year due to timing. These investments are focused on expanding capacity at our Massachusetts manufacturing facility to support anticipated volume growth across Monovisc, Cingal, Integrity and Hyalofast. This will position us well to meet future demand and scale efficiently. We ended the second quarter with $53 million in cash and no debt.

Now on Slide 5, I'll review our full year financial outlook for 2025. We are maintaining our 2025 full year guidance. For the full year, we continue to expect our commercial channel to generate between $47 million and $49.5 million in revenue, representing 12% to 18% growth in 2025. Our OEM channel remains on track to deliver between $62 million and $65 million, a range of 16% to 20% decline versus 2024. At the midpoint of down 18%, this range is reflective of higher volumes but lower pricing for J&J. As a reminder, J&J has full control of sales, marketing and pricing activities for these products in the United States, and Anika receives transfer unit revenue and royalties based on J&J's end user pricing.

Now turning to profitability. We are maintaining our 2025 adjusted EBITDA guidance range of negative 3% to positive 3%. As a reminder, this range is reflective of 3 primary impacts all of which we shared at the end of the first quarter. First, the impacts from lower manufacturing yields and scrap for Monovisc and Cingal experienced in the first half of 2025. Second, lower pricing from J&J for Monovisc and Orthovisc. And lastly, the 2025 costs associated with the Cingal bioequivalent study required for our NDA filing.

As a result of the Hyalofast clinical trial outcomes, we are revising our long-term revenue guidance for the commercial channel to reflect a possible extension of the FDA review process. While we still plan to file the PMA in the second half of 2025, we are now modeling for a 12-month delay in launch timing. As a result, we are updating our commercial channel growth outlook to 10% to 20% in both 2026 and 2027 compared to our prior range of 20% to 30% growth. We currently anticipate a $3 million revenue contribution from Hyalofast in 2027 with full market release in 2028.

These revised projections reflect growth from our already approved products, particularly Integrity and continued strength in our international OA Pain portfolio, both of which have demonstrated strong momentum. Despite this adjustment, our liquidity remains strong with no need to raise capital, and we remain confident in our ability to execute on our long-term strategy.

With that, I will now turn the call back over to Cheryl.

Thanks, Steve. In closing, we remain confident in the key value drivers of our business. Integrity continues to outperform expectations, and we anticipate double-digit organic growth in our commercial channel, consistent with our 2025 guidance. We have a clear path forward to complete the Cingal NDA submission. And while the Hyalofast trial did not meet its primary end points, we believe the totality of the data supports a viable path to FDA approval. I want to sincerely thank the entire Anika team for their continued dedication to delivering innovative solutions that improve the lives of patients around the world.

And with that, we'll open up the line for questions. Operator, please proceed.

[Operator Instructions] Your first question comes from Anderson Schock with B. Riley Securities.

Congrats on a strong quarter. So your gross margin guidance of 58% to 59% implies gross margins returning to about 62% to 63% in the back half of the year. I guess what will drive the sequential improvement?

Yes, I appreciate the question, Anderson, and I appreciate the opportunity to clarify. My commentary is specifically 58% to 59% in the second half of the year. for the overall margin to be slightly below that on the aggregate for the full year, given the first half dynamics. And I think what gives us that confidence is the fact that a lot of the charges that stemmed from the beginning of this quarter aren't very much so onetime in nature. And when I look at the performance of the business, excluding that, the business performed well in the quarter.

I think one thing that we are very aware of is the fact that the gross margins for the second quarter, excluding that onetime impact, are above 60% and the second half will be slightly below that. A lot of that is driven by the timing -- or excuse me, the pricing dynamic for J&J on Monovisc and Orthovisc that we expect in the second half of the year.

Okay. Got it. And then do you have any progress to report on additional OEM partnerships to diversify your OEM revenue away from J&J?

Yes. In terms of kind of additional opportunities in the OEM channel. I don't have anything to report today. That is a topic that we continue to assess. And we have talked about the fact that Cingal will most likely fit into that OEM channel. And as we make continued progress really making meaningful progress here this year in getting closer to an NDA filing. That's certainly a topic that will become probably more visible as we move into the future.

Okay. Got it. Okay. Got it. And then I guess, Integrity has demonstrated some really impressive growth in shoulder. How should we think about the expanded market opportunity with the new configurations for foot and ankle and also knee and hip?

Yes. Thanks for the question. What we've seen with Integrity is even with the current sizes that we sell that the surgeons are so excited about the benefits and features that integrity provides them, especially on kind of the enhanced regenerative capacity and the strength at time zero, even when it's wet that in a lot of those other applications that I talked about today, where there's a real need for additional strength and future retention strength they started using existing integrity in those applications, but it wasn't really fit to purpose from a size and aspect ratio perspective. So they're excited to start using these new shapes and sizes in those other applications.

So I think while we've already been serving that additional kind of $40 million addressable market opportunity, we think these new shapes and sizes that are more purpose fit and designed specifically for those anatomic locations will give us an increased opportunity going forward. And as I mentioned, kind of having a more material impact on our commercial revenue into next year. This year is really around a limited release and getting our feet under us from a manufacturing and training and education and marketing perspective. But we're excited to get those products out there this year, and we have a group of surgeons that are ready to go.

Okay. Got it. And then I guess on Hyalofast, given the missed primary endpoints, I guess, what gives you the confidence that the FDA could approve based on secondary endpoints in the international data?

Yes. It's a great question. So this product falls under the breakthrough device designation. And FDA has encouraged us to file all of our data, the study was really primarily impacted by missing data from the complexities of randomizing to that microfracture arm and the change in medical practice that occurred over the time of the trial. And frankly, missed data that occurred during COVID, which the FDA actually put guidance out around because the number of trials were impacted by that dynamic over that time period.

So FDA has encouraged us to submit our full data package, including the secondary endpoints that we did hit statistical significance on those secondary endpoints are what got used for other products that are currently approved in the United States. And we have a very complete data package and robust data package of independent studies that were performed from our over year -- 15 years of clinical experience outside the United States.

The next question comes from Jim Sidoti with Sidoti & Company.

So with regard to gross margin, how should we think about gross margin going forward as the commercial channel becomes a bigger piece of the revenue part.

Yes, we haven't given long-term guidance as to where to expect gross margins into the future. But I would say the -- we have noted that the commercial channel is at a lower gross margin at its current state because of the fact that it includes our international products being sold, and those are generally at a lower price point. I would say, Jim, so in the future, I would expect it to be in and around the range that I've shared for the second half.

And then there's sort of 2 things that are affecting it. One is the growth in the commercial channel, which could be an element that would depress that gross margin over time. But also the growth in our newest products are -- tend to be at a higher margin. So we'd expect to see that hopefully offset where we'd expect to see the declines from the international growth. So overall, in and around the range for the second half of this year.

Okay. But it sounds like as integrity and hopefully, Hyalofast get into the market that those would be accretive to gross margin.

That is correct.

Okay. And with regards to Cingal, Cheryl, you talked about the distribution a little bit. Could you sign a distribution deal prior to release of the product? Or are you going to wait for FDA approval to announce something?

Yes. I'll tell you on that topic, my focus is in driving as much shareholder value as I can with that incredible product that has very exciting clinical data and a real opportunity in the U.S. market as a next-generation osteoarthritis pain product. So the decision around timing for that is really going to be driven around the best way to drive value. The good news is that we are making real progress with the FDA. We've got processes ongoing to overcome the final 2 filing issues and look forward once we begin that bioequivalent study to giving a full update on the time line of that program.

All right. All right. And the last one for me. Cash, you don't give specific guidance on cash flow, but can we assume you're probably at -- in terms of cash on hand, this is probably a low point for you that at this point, you should start seeing cash on hand start to increase going forward.

We haven't given specifics on a cash balance forecast. I think what we have given some guidance around is that we expect to see improvements in operating cash flow. I think we demonstrated some pretty good controls here as we've come through the disposition of 2 businesses. Jim, the only thing that would cause us to have a lower cash balance would be associated with CapEx investments. So obviously, we've been making some strategic investments into our Massachusetts facility here, and that would likely cause us to have a little bit of a lower cash balance into the future, but we expect to hopefully offset some of that with some of the growth in operating cash flow.

So with regard to capacity, do you think by the end of the year, you'll have sufficient capacity to meet demand for Integrity, Cingal, Hyalofast over the next several years?

I think it's going to be a continued investment that we're making into our facility. So it's something we'll be doing over a period of time. I think the level of CapEx that we forecasted for this year, I think, is appropriate for us to be able to meet the ramp for next year, but we'll be continuing to upgrade equipment, especially in preparation for Cingal as volumes for both Monovisc and Cingal continue to grow and our cross-link products are a little bit more complicated to make and require more investment.

The next question comes from Michael Petusky with Barrington Research.

So I guess, Cheryl, is there any more detail you can give around sort of the reduced sample size, higher dropout. I think there was maybe 200 patients initially targeted in the Hyalofast trial. I'm just curious, I mean, how much -- how many patients did you actually have full data on.

Yes. Thanks for the question, Mike. I will tell you that -- yes, so first of all, you're right. The study design had us enroll 200 patients. And the dropout occurred differentially in the microfracture arm because of the fact that microfracture really, the clinical practice changed, patients dropped out both before surgery, like before they even got the microfracture surgery. And during the course of the trial, like not coming back for appointments sort of as they progress through the trial. So it happened in both cases.

In terms of the number of patients we have full data on, we have not reported out the details of our full data set yet because our analysis continues. And I mentioned in my prepared comments that as soon as we get the full data analysis completed, that we will provide additional disclosure on that. So more to come on kind of the full data set. We also, though, did have missing data, as I mentioned, because this trial was run smack through the middle of COVID, recognized that a lot of clinical trials were impacted by patients not being able to return for follow-up visits. And they actually put out guidance that is helpful to us on how to treat that.

So while the study was primarily impacted really in our miss on statistical significance, I would highlight, though, that Hyalofast consistently demonstrated improvements over microfracture in both pain and function. It's really a miss on statistical significance. And those are the topics that we'll continue to have ongoing dialogue with FDA, but FDA has communicated to us to submit the full data package including all of the analyses, including the additional endpoints that were used for prior approvals and including all of our fulsome data set that we have from our number of independent studies performed outside the U.S. from the over 15 years of clinical experience internationally.

Cheryl, I'm just curious because I don't know the answer to this. Is it typical for the FDA to sort of say in a case where you've sort of missed the primary endpoints, but we really encourage you to submit the full data package. I mean is that just sort of template language that, hey, submit what you have and we'll take a look? Or is there actually something to be encouraged about in terms of what they've said to you regarding that matter.

Yes. I will just communicate to you that they have communicated to us to submit the full data package. They obviously understand that we have missing data. And again, we're not completely done with our data analysis, which is why we haven't put the actual data out until that's completed and QC-ed, which we will do at the point in time that, that's done. But FDA did communicate to us that they wanted us to submit the full data package, including all of those elements that I described. And to keep in mind, this is a breakthrough device.

Right. Okay. So moving on, Steve, I was just curious, in terms of the -- I think it was something like an incremental $14 million investment that you guys are making in the regenerative portfolio. Is that still holding? Or have you guys maybe shifted that at all given the Hyalofast news or just generally your desire to sort of maybe manage this business a little tighter. I'm just curious.

It's a good question. The short answer is it is still on track as a $14 million investment into the business. The news around Hyalofast is, it just got unblinded, so this is very new for us. But I would say that in terms of better cost discipline and thinking about where we can make strategic investments that are going to pay off for our long-term business. We are constantly doing that, and that is something that we will consistently do I'm not going to share anything necessarily here, but I would say that we consistently look at where we're making investments to try to make sure that we're delivering the most optimal outcome for shareholders.

Let me just follow up. Is it possible that $14 million and even like going forward, internal investment you plan to make in '26, is it possible maybe that number is curbed at some point in the second half of this year?

Yes, it's possible. I mean maybe we'll share more in the future when we get to that point, but it's possible.

Okay. All right. Great. And then just last question, I guess, Cheryl, probably bouncing back to you. In terms of integrity, occasionally, you guys have -- and I may have missed this. Forgive me if I missed this, but you occasionally have shared either sort of search and adoption commentary or even surgery numbers. I'm just curious if you have anything to share on that and forgive me if you mentioned that and I just missed it.

Yes. I didn't give an update on surgery numbers because we were really more focused now on what we're driving from a top line perspective and the fact that we're on track to really double that business this year. I'm sure as we go forward, we'll continue to provide those updates. But I think you can just kind of extrapolate that based on the fact that we're really overachieving, we're ahead of expectations, and we're projecting to do a doubling of that business this year.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.