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Anika Therapeutics' Inc. (NASDAQ:ANIK)

Q4 2013 Results Earnings Conference Call

February 27, 2014 9:00 AM ET

Executives

Sylvia Cheung - Chief Financial Officer

Dr. Charles Sherwood - Chief Exec. Officer

Analysts

Joe Munda - Sidoti & Company

Jim Gentrup - Discovery Investment

Greg Garner - Millennium Asset Management

Patrick Griffin - Morgan Partnership

Operator

Good day, ladies and gentlemen. And welcome to the Anika Therapeutics Fourth Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Sylvia Cheung, Anika’s Chief Financial Officer. Please proceed.

Sylvia Cheung

Thank you, Charlotte. Good morning, everyone, and thank you for joining us. If you have not received a copy of the Anika news release, which was issued yesterday after the market closed or you would like to be added to our contact list, please contact Sharon Merrill Associates at 617-542-5300. The news release is also posted in the Investor Relations section of our website at anikatherapeutics.com.

In addition, a slide presentation is posted on the Anika website. It illustrates many of the key points we’ll be covering during today’s call. The slides will be found -- can be found on the Investor Relations section, under Events, Webcasts & Presentations tab. We invite you to take a moment to open the file and follow the presentation along with us.

Please turn to slide number two. Before we begin, please remember that the statements made in this call, which are not statements of historical facts, are forward-looking statements as defined in the Securities and Exchange Act of 1934. These statements are based on current beliefs and expectations of management and are subject to significant risks and uncertainties.

The company’s actual results could differ materially from any anticipated future results, performance, or achievements. Please see our SEC filings for more information about factors that could affect our results.

Please turn to slide number three, as I turn the call over to Dr. Charles Sherwood.

Dr. Charles Sherwood

Thank you, Sylvia. As many of you are aware, we hit a few very significant milestones for the company this week, namely the FDA approval of Monovisc and the completion of enrollment in the Phase III Cingal clinical trial, more about those events later.

Now, let’s begin, as usual, with our prepared remarks. Anika concluded a record year for revenue and earnings. Our net income was up 49% from $4.5 million in the fourth quarter of last year to $6.7 million. Earnings increased from $0.31 per share a year ago to $0.44 per share in the fourth quarter of 2013.

For the full year, Anika’s net income was up 75%, while total revenue grew 5%. This was despite a $4 million anticipated drop in ophthalmic revenue. Overall, non-ophthalmic revenue increased 13%, driven primarily by growing demand for Orthovisc both in United States and internationally.

Our total revenue for the fourth quarter of 2013 was down from Q4 of 2012 by 6%, which was in line with our internal expectations. Please recall that in Q4 of 2012, we filled a large number of orders that were delayed due to a temporary scale up issue after moving into our Bedford, Massachusetts manufacturing facility. This resulted in a deferral of product revenue from the third quarter of 2012 to the fourth quarter of 2012.

Please now turn to slide number four. In terms of the bottom line, our net income growth for both the fourth quarter and full year 2013 reflected the strength of our Orthobiologics franchise, as well as improvements in operational efficiencies. Product gross margin was up substantially, driven primarily by gains from our new manufacturing facility in Bedford and the elimination of dual facilities since mid-2012.

Product gross margin also improved due to the closure of our tissue engineering operation in Italy in the beginning of 2013. The gains we made in operations in manufacturing more than offset our planned increase in R&D expenses as we commenced our Cingal clinical trial.

Please turn now to slide number five. We are committed to strengthening Anika's product pipeline in order to drive growth and profitability improvement going forward. Anika is focused on leveraging its viscosupplementation franchise and existing innovation -- innovative technologies to develop advanced tissue regeneration therapy. We are evolving from a HA biomaterials company into an organization with more focused yet expensive product offerings, including regenerative therapy.

During 2013, we spent a significant amount of time and energy in realigning our organization to reflect and drive this direction in our business. We completed a strategic realignment of our issue engineering operations at our Italian subsidiary in the beginning of 2013. In closing the tissue engineering operations, we were able to shift our resources towards developing Hyalofast, our orthobiologic tissue regeneration product.

Hyalofast is a one step second generation and significantly more cost-effective product that is better aligned with the future trends in medical practice and healthcare economics. We made a similar shift in the advanced wound care business, which involved discontinuing our work on our low margin but clinically effective self-ceded products and focusing our efforts on Hyalomatrix. Hyalomatrix is our lead advanced wound care product that allows us to provide similar therapeutic benefits, but on a more cost-effective basis.

To deliver on our growth potential, we have also been building our internal capabilities. We made progress in strengthening our scientific, commercial and operations groups, both by building on the talents within the company, as well as adding leadership bandwidth. These initiatives will continue in 2014.

The objectives are to expand while still reducing the manufacturing costs of our existing product to improve our productivity in pipeline development and to enhance our ability to successfully market our products.

Our vision, again, is to transform Anika by leveraging our position as a preeminent HA biomaterials company to establishing ourselves as a leader in providing advanced tissue healing and regenerative medical solutions.

Now, let's turn to the business highlights starting with Orthobiologics franchise on slide number six. Orthobiologics is Anika's near-term primary growth driver, led by Orthovisc which has been growing at a rate more than double the U.S. domestic marketplace growth rates.

Orthovisc is not only the market leader in the U.S. multi-injection segment but it’s also the number two U.S. brand in viscosupplementation overall. For 2013, domestic Orthovisc end user sells were up 21% from 2012, while overall revenue from Mitek grew 9% during the same period.

The somewhat slower year-over-year growth was due to Mitek taking a more conservative and somewhat abrupt approach to their Orthovisc inventory management. It is important to note, this change in ordering pattern is unrelated to the underlying demand for Orthovisc in the marketplace.

Looking at the big picture, strategic investments are being made to expand the Orthovisc franchise, marketing efforts are multipronged and include a variety of outreach programs for patient and practitioner expansion. Compared with surgery, Orthovisc is a noninvasive and lower cost option for treating osteoarthritis of the knee.

Consequently, it is well aligned to drive for cost containment in healthcare. It is our position that this strategy will endure, despite the questions of some orthopedist concerning the role of viscosupplementation in the degenerative osteoarthritis treatment regimen.

We're also continuing to see good success in our internally driven efforts to strengthen our international distribution channel in orthobiologics, where our products include Orthovisc, our single injection product, Monovisc, as well as our next-generation cartilage regeneration product Hyalofast.

Our commercial and business development teams worked effectively during the year to wider distributors with the resources they need to make physicians and patients more aware of our products therapeutic advantages. These efforts resulted in 34% revenue increase year-over-year.

This growth mainly reflects stronger sales in Canada and the Middle East. In late 2012, we signed a new distribution agreement for Orthovisc and Monovisc in Canada for the top 10 pharmaceutical company in that country. We also signed a new contract with a large pharmaceutical company in Turkey to reactivate our sales in that region. We've been seeing the results of these efforts all year.

In the short to medium-term horizon, we are exploring opportunities in South America and some larger markets in Asia. We believe the recent FDA approval of Monovisc will increase our abilities to enter certain international markets. We are allocating resources in this area and expect to grow that segment over our business at a healthy rate.

On our Q3 call, I discussed our work with international leaders in the field of cartilage regeneration to develop strategies to promote Hyalofast and other pipeline products. In connection with this strategy, during the fourth quarter we attended the International Cartilage Repair Society Focus Meeting on cartilage regeneration in Bologna, Italy, and continued discussions with our Advisory Board there.

While Hyalofast is currently targeted for use in trauma settings, we believe the product has the potential to treat a wider range of orthopedic applications. The Advisory Panel Meeting this quarter focused on this and a possible protocol design for a randomized placebo-controlled international human clinical trial to commence later this year in support of a PMA submission to the FDA.

Let's turn now to slide number seven in our product pipeline, starting with our Cingal clinical trial. By way of background, Cingal is the single injection viscosupplementation treatment for osteoarthritis that includes a therapeutic anti-inflammatory agent. It's designed to provide patients and clinicians with an innovative treatment that promises potentially significant benefits over currently available therapies.

At the end of the second quarter of 2013, we commenced a multinational Phase III clinical study in support of our CE Mark application for Cingal and other global regulatory applications. We have now fully completed patient enrollment, which is ahead of the previously discussed target date at the end of this current quarter. Our revised goal is to complete the trial and submit our CE Mark application for Cingal by the end of 2014 or shortly thereafter.

Overall, 2013 was a successful year for Anika from an R&D perspective, not only did we make solid progress on Cingal, but we also significantly strengthened our intellectual property position. We were awarded seven patents during the year in the U.S., Canada and Japan, for inventions from the Anika S.r.l. business, most of which are for regenerative technologies and products such as Hyalofast.

Please now turn to slide number eight for an update on Monovisc in the United States. On Tuesday of this week, we announced FDA's marketing approval of our single-injection viscosupplementation product, Monovisc. Monovisc is the first FDA single injection product approved with HA from a non-animal source. We are very pleased with the achievement of this important milestone, which results from our hard work and perseverance and the recent productive collaboration with the agency.

The U.S. market for viscosupplementation therapy is experiencing double-digit growth annually. With FDA approval of Monovisc, we can be better positioned with our single and multi-injection products to meet the varying needs of physicians and patients. We are moving forward rapidly with Mitek to capitalize on the strengths of our viscosupplementation portfolio.

As previously disclosed, under the license agreement with Mitek, Anika will receive a milestone payment of $5 million upon first commercial sale of Monovisc in the marketplace. The agreement also calls for a potential additional payment contingent on achieving certain performance and sales threshold milestones in addition to product transfer and royalty fees.

The launch of Monovisc in the United States is planned to take place in conjunction with the Annual Meeting of the American Academy of Orthopedic Surgeons in New Orleans coming up in mid-March.

And with that, I’ll turn the call back to you, Sylvia, for the financial review.

Sylvia Cheung

Thank you, Chuck. Please now turn to slide number nine in the presentation, which covers our income statement highlights for the quarter and the full year. Anika’s total revenue for the fourth quarter of 2013 was $21.3 million compared with $22.6 million a year ago. For the full year, total revenue increased to $75.1 million from $71.4 million in 2012. This year-over-year comparison reflected last year’s shipment delays as well as the anticipated $4 million decline in ophthalmic revenue, which were previously discussed.

As the Orthobiologics franchise was discussed earlier by Chuck, I would now highlight our remaining franchises. Our advanced wound care product revenue in the dermal franchise was up 69% year-over-year. This growth reflected increased business through our existing distributors in Europe as well as territorial expansion in South America. Our surgical franchise delivered an overall 8% product revenue growth, driven by increases in Hyalobarrier sales in Europe and ENT surgical product sales in the United States. The veterinary franchise was up 36% year-over-year, primarily due to order timing.

Lastly, the ophthalmic franchise. You’ll recall that we’re now one of the two key suppliers to Bausch & Lomb. As we expected, our product revenue from B&L decreased by about $4 million year-over-year and our ophthalmic business is now at the current contract level, and it’s not part of our strategic investment growth plan.

Our 2013 product gross margin was up 68%, up 11 percentage points from 2012. This improvement was driven by manufacturing and operational efficiency gains at our Bedford, Massachusetts facility, closing the tissue engineering operation in Italy and transferring S.r.l.’s gel-based products manufacturing from Italy to Bedford as well as favorable product mix. The favorable product mix was due to the higher proportions of Orthobiologics revenue as a percentage of total revenue and lower ophthalmic product sales.

Total operating expenses for the fourth quarter of 2012 decreased 18% from the same period last year. Higher R&D expense, primarily related to Cingal clinical trial spending, was offset by lower SG&A expense. Included in Q4 and full year 2013’s operating expenses was $2.5 million of restructuring charge as a result of the closure of our Italian-based tissue engineering facility and related products, which we discussed earlier.

Operating income for the fourth quarter of 2013 was $10.4 million, up 34% from the $7.8 million we reported in the fourth quarter of 2012. Net income was $6.7 million or $0.44 per diluted share compared with $4.5 million or $0.31 per diluted share a year ago. Our growth in both the operating income and net income continued to be primarily driven by the improved product gross profit. For the year, operating income was up 65% to $32.6 million, and net income grew 75% to $20.6 million or $1.39 per share from $11.8 million or $0.82 per share a year ago.

For 2014, we hope that our base business, independent of US Monovisc, will achieve low to mid-teen percentage growth rates for both the top and bottom lines. Given the recent FDA approval, its impact on 2014 is difficult to predict at this particular moment. We also expect the first and second quarters of 2014 to be less robust than the second half of the year, a larger part of our growth will be in Q3 and Q4 due to seasonality, as well as timing of revenue expansion milestones.

Now, please turn to slide number 10. Anika held approximately $63 million of cash at the end of the year, up $19 million from the $44 million at December 2012. This was after a pay down of our outstanding debt of $8.4 million in November 2013, leaving us debt free. In addition to the increased profits, this cash flow was also driven by increased collections on our accounts receivable and stock option exercises during the year.

With that, I will turn the call back to Chuck.

Dr. Charles Sherwood

Thank you, Sylvia. Let's turn to slide number 11 and the business outlook. 2013 was a successful year for Anika and we are beginning 2014 in a strong position. Underlying demand for our viscosupplementation products is solid both in the United States and internationally. We are enthusiastic about the potential for Monovisc in the United States and encouraged by the potential for Hyalofast to become a leading product for regenerative orthopedic applications.

We are continuing to strengthen our product pipeline and we are making good progress in building the internal capabilities we need to expand beyond viscosupplementation and deliver on our growth potential.

Finally, we are beginning to focus on effectively deploying the cash currently on our balance sheet as a result of our carefully managing the business. We expect to maintain our bias towards being conservative with our cash, while generating the highest possible returns. At the same time, management and our Board of Directors will continue to consider and explore the full range of options for maximizing shareholder value.

Summing up, we're pleased with our 2013 accomplishments and the achievement of FDA approval for Monovisc. We're encouraged by our business prospects and we look forward to reporting our progress as the rest of 2014 unfolds.

And with that, I'll turn the call back over to Charlotte for any questions you may have.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question will come from the line of Joe Munda from Sidoti & Company. Your line is open.

Joe Munda - Sidoti & Company

Good morning, Chuck and Sylvia.

Dr. Charles Sherwood

Good morning.

Sylvia Cheung

Good morning, Joe.

Joe Munda - Sidoti & Company

Quite an eventful last couple days here. My first question and my follow-up, Chuck, on the Monovisc approval, any concerns about possible cannibalization between Monovisc and Orthovisc? And I guess my follow-up would be for Sylvia. I was wondering if you could break out some of that international sales growth that you saw, the 34%, any color on what the breakout was between Monovisc and Orthovisc would be very helpful. Thanks.

Dr. Charles Sherwood

Okay. We have been -- the question of cannibalization of Orthovisc and Monovisc has been brought up before. And we pretty much said that we do not believe that Monovisc will significantly cannibalize Orthovisc. However, it's likely that the introduction of Monovisc will eat into the growth of Orthovisc.

So that's still our position. I think that we need to get Monovisc out into the marketplace and see how it -- how the uptake is to make any changes to that, but I think that the growth of Orthovisc has been pretty significant. There must be a lot of customer satisfaction. I have personal experience and know the product works pretty well. So for now, I think it -- the growth may flatten out and the market share gains will be through Monovisc but we'll have to see if that's indeed the case. But we don't anticipate a significant deterioration in Orthovisc sales by any means.

Sylvia Cheung

With regards to your second question about international viscosupplementation growth, the Orthovisc growth is at about 30%, while the Monovisc growth is about 50%. And keep in mind that the base for Orthovisc is larger, about 2.5 times larger than Monovisc but we're certainly seeing a much more robust growth rate for the Ortho -- for the Monovisc business internationally.

Operator

Thank you. (Operator Instructions) Our next question will come from the line of Jim Gentrup from Discovery Investment. Your line is open.

Jim Gentrup - Discovery Investment

Good morning.

Dr. Charles Sherwood

Good morning.

Sylvia Cheung

Good morning, Jim.

Jim Gentrup - Discovery Investment

Congratulations on the approval.

Dr. Charles Sherwood

Thank you.

Sylvia Cheung

Thank you.

Jim Gentrup - Discovery Investment

I just wanted you to talk a little bit more about the Monovisc opportunity and Genzyme's current market share and just a little bit more detail about it. Again, just remind us what the opportunity is there and the market share gains that -- if you take a stab at that you might be able to obtain in the next one to five years?

Dr. Charles Sherwood

Okay. I'll give you some estimates. I'll throw out some numbers. But keep in mind that these are not verified by strong actual data. But it appears that the marketplace for single injection products still remains somewhere between mid 40s and 50%. There are two products that participate there, Synvisc-One and then, the Zimmer say, they’ve got the product Gel-One.

Gel-One, like any new product has come on a bit slowly. I think they're up to three share or so points now. And the Synvisc product is declining ever so slightly, but seeming to hold on. So that split of the multi-single injection market has held for the last couple years.

I can tell you that Monovisc is a very effective product. I think it will be well received. We've seen it might be differentiated from the other products, at least from the data that we have and the onset of the benefit of the effect. It's a little more rapid. It has absolutely zero safety concerns. So, we think in the hands of Mitek, which also has three injections, our multi-injection regimen at disposal.

We think the combination of those -- that portfolio will make a pretty powerful marketing thrust. Beyond that, Jim, I can't really say much. If you're looking for me to try to give you some market share uptake, I'll give you some historical numbers and then you can go from there.

When we first introduced, Orthovisc, it was the third one in way back, gee, almost ten years ago maybe -- 2004, yeah. And the first couple years, we went from 0% to 1% share, and then 1% to 2%, and then 2% to 4%. So the uptake was not so rapid. Having said that, it was in the hands of another J&J company at the time, called -- I forget the name of it. But after that, it switched over to Mitek and then the growth became much more rapid. So that's one data point.

I just talked to you about Gel-One and I said those guys pretty much went out and maybe they got 1% to 2% market share over the first year, a year and a half or so. I hope that we can do a little better, given Mitek is already positioned in the market with sales people who have been selling viscosupplementation for a while, but that remains to be seen. Was that helpful?

Jim Gentrup - Discovery Investment

Yeah. It's very helpful. If I may, the total market in the U.S. was approximately $840 million, is that correct?

Dr. Charles Sherwood

Thereabout.

Sylvia Cheung

Yeah, that was about 2012. I think it's grown since then, closer to the $900 million.

Dr. Charles Sherwood

$900 million, okay.

Jim Gentrup - Discovery Investment

So, $900 million is the total and so you're saying about roughly $400 million, $450 million would be the single share?

Dr. Charles Sherwood

Somewhere in that range, yeah.

Jim Gentrup - Discovery Investment

Okay. And then if I could ask a quick follow-up as well?

Dr. Charles Sherwood

Sure.

Jim Gentrup - Discovery Investment

The treatment of milestone payments, would that be done the same way historically as you have, would it might be Mitek or would that be recognized as revenue in the period?

Sylvia Cheung

Yeah, same as historic Orthovisc milestone accounting treatment.

Jim Gentrup - Discovery Investment

So, it would be going to the deferred revenue and then amortized off?

Sylvia Cheung

Yeah, it will be amortized over the initial terms of the Monovisc contract, which is 15 years. The Orthovisc contract was about 10 years, so there is a timing difference. But the accounting method in terms of amortization and deferred revenue is the same.

Operator

Thank you. (Operator Instructions) Our next question will come from the line of Greg Garner from Millennium Asset Management. Your line is open.

Greg Garner - Millennium Asset Management

Thank you for taking my question. Again, congratulations on the Monovisc approval, Chuck and Sylvia. So, my question has been primarily answered, but I think you might have talked before about the cost of the treatment of the Monovisc versus Orthovisc and I just don't recall what that was. Is it a similar cost or is it a higher cost for the Monovisc? Can you give us some flavor on the comparative cost to the patient?

Dr. Charles Sherwood

Okay. I will. I'll make a couple comments, Greg. One is, it is my understanding that the single injection products that are out in the marketplace right now, namely Synvisc-One and Gel-One are priced at a premium to the multi-injection regimen. So, I use to make examples, but they're not actual examples. So, let's say that the multi would be 500, maybe that the single injection regimen would cost 600 plus.

Greg Garner - Millennium Asset Management

Okay. Good.

Dr. Charles Sherwood

But that -- now what exactly the strategy and initial pricing for Mitek will be. It's likely that will be priced at a premium. Whether or not it will be priced at par with the other injections is not known to me right now.

Greg Garner - Millennium Asset Management

Okay. And with just one -- it comes packaged in the injection vehicle, whatever you call the shot mechanism. So I would presume then that even at a similar price, it would be a higher margin product for Anika. Is that the right way to look at this?

Dr. Charles Sherwood

To some degree. We designed the Monovisc to contain the same dose of HA as is contained in the three injections of Orthovisc. So from a raw material cost of the active ingredient, it would be absolutely just the same.

Obviously, there's one syringe instead of three. The packaging costs, so on and so forth. So there is some margin improvement but since the dose is the same and the largest single expense we have, other than label and overhead is the active ingredient. It's not magnificently better.

Operator

Thank you. Our next question will come from the line of Neil Gore, Private Investor. Your line is open.

Unidentified Analyst

Good morning. Talk about free cash flow cash increased by $19 million last year. However, you also spent $8.4 million to pay down debt. Can we expect cash flow to be similar each quarter going forward this year?

Sylvia Cheung

For operating purposes, yes. For capital investment, for 2013 as well as 2012, our spending had been pretty low and I think in 2014 we will see a slight uptick in terms of capital investment.

Unidentified Analyst

Okay. Thank you.

Operator

Thank you. Our next question will come from the line of Joe Munda from Sidoti & Company. Your line is open.

Joe Munda - Sidoti & Company

Just quick follow up, Chuck and Sylvia. In your prepared remarks you talked about Bausch & Lomb agreement, can you just remind us when that agreement ends and what the plans are for that segment going forward or that business? I know you said it's not part of your strategic plans but any color would be great?

Dr. Charles Sherwood

Sure. The agreement ends this year. Correct, Sylvia?

Sylvia Cheung

Correct.

Dr. Charles Sherwood

2014. We're in discussions now about what will happen after 2014, and you know, it's likely we'll make a bid on continuing with the business. But we should know that by third quarter of this year.

Joe Munda - Sidoti & Company

Okay. And then one quick follow up, if I may. As far as the platform is concerned, any possibility of expanding the indications for Orthovisc or Monovisc, say into osteoarthritis of the hip or even the shoulder?

Dr. Charles Sherwood

There are certainly opportunities to do so. We -- in the European economic union with our CE Mark we have indications for all joints. So the United States is -- FDA is not so open-minded. So any indication into a new joint requires another PMA, clinical trial.

We're talking about that right now with Mitek and how we can share or how we can use some of the leverage, some of the data that we have outside the United States to bring in shoulder and ankle and even hip to bring to bear for other potential U.S. approval but I can't make any other -- any more conclusive statements than that.

The addition now to -- of Monovisc to the portfolio doesn't complicate things but it makes them more interesting because if you're going to invest, would you invest in a clinical effort to further the Orthovisc brand or would you put your money into furthering the Monovisc brand? And there are certainly some applications where a single injection treatment is much preferred, shoulder being one of them.

Operator

Thank you. (Operator Instructions) Our next question will come from the line of Jim Gentrup from Discovery Investment. Your line is open.

Jim Gentrup - Discovery Investment

Yes. Just wanted to find out on the P&L, I believe you had lower operating expenses on the SG&A line because of benefit or offset from the settlement that you received. Can you quantify that for us?

Sylvia Cheung

Yes. So the cash we received from Fidia to settle the MeroGel injectable was included in the SG&A. It's an undisclosed settlement amount in the six digit order of magnitude closer to the $1 million.

Jim Gentrup - Discovery Investment

Okay. And then also, on the international side, I know you mentioned some of the success you've had in Canada and the Middle East and I guess larger markets, South America I guess you're starting to sell into as well. Can you kind of look forward for us in 2014 and give us an idea where the -- you know, the growth might be the most robust and also just give us a little more color on what's going on and why you're going to grow there?

Sylvia Cheung

Sure. So for 2014, we see continued international viscosupplementation growth both for Orthovisc and Monovisc and the rate of growth in ‘14 will be similar and potentially better than the 2013 growth rates.

What that means is the Monovisc international growth rate is currently planned to exceed the 40% to 50% growth rate that I described earlier. We are focusing in a number of territories, including the Middle East as well as some South American countries. And we believe that we will at the minimum be able to meet, if not exceed, the last year's international growth rate.

Outside of viscosupplementation, we also see our dermal business having international growth potential for our Hyalomatrix product, particularly in South America.

Operator

Thank you. Our next question will come from the line of Patrick Griffin from Morgan Partnership. Your line is open.

Patrick Griffin - Morgan Partnership

Good morning. Congratulations on your acceptance. I have a question on one of your competitors, the three injected Euflexxa. How does the Monovisc compare in comfort level time? In other words, how long are you going to feel good with the one injection versus the three from your competitor, Euflexxa?

Dr. Charles Sherwood

I can only speculate, because I haven't seen any real hard data. I would tell you that the tradition when one runs clinical trials, the FDA really to approve your product you have to show efficacy over a 12-week period. So some people stop at 12 weeks, some people run out to 26 or six months.

I can tell you with Monovisc, we stopped at 26 weeks. So we don't really have a lot of data past the 26 week point. The change from baseline in pain was still pretty strong at that level. So we feel pretty confident in saying that it will last six months on average but I can't say anything more than that.

I can tell you also that magnitude of the pain reduction with Monovisc was pretty good. So I would have to say that it's -- it's at least as good as Euflexxa. We have to go really head on head in the same kind of controlled situation to determine whether it was superior and if it was, how it was superior.

Patrick Griffin - Morgan Partnership

That's great. I think in compared to Orthovisc, arthroscopic surgery, both of them will be the real God send to the country, hopefully. Good luck.

Dr. Charles Sherwood

I've been a patient for -- and getting these injections for probably about five or six years, and I'm only one, but my knees are not -- from sports are not in terrific shape. And they've made a big difference for me. And for me, it affect lasts somewhere between six and 11 months.

Patrick Griffin - Morgan Partnership

Yeah. That's about true for me, also. Great. Well, look forward to the future. Thank you.

Dr. Charles Sherwood

Thank you.

Operator

Thank you. And at this time I'm not showing any further questions, I would now like to turn the call back over for any closing remarks.

Dr. Charles Sherwood

Thank you, Charlotte. And thanks to all of you for participating in the call. As I said in the prepared remarks, we're pretty excited about 2014, and we're looking forward to reporting some more progress on our successive earnings calls throughout the year. So thanks again.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a great day.

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