Anika Therapeutics Inc

NASDAQ:ANIK

Earnings Call Transcript 2024-Q1

[Operator]

Good evening, ladies and gentlemen, and welcome to Anika's First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded.

I will now turn the call over to Mark Namaroff, Vice President, Investor Relations, ESG and Corporate Communications. Please proceed.

[Mark Namaroff, executive]

Thank you. Good afternoon, everyone. Thank you for joining us for Anika's First Quarter 2024 Conference Call and Webcast. Our Q1 earnings press release was issued after the close of the market today and is available on our Investor Relations website located 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 Mike Levitz, Executive Vice President, Chief Financial Officer and Treasurer.

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 include adjusted gross margin, adjusted EBITDA, adjusted net income and adjusted earnings per share, which are used in addition to the 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 adjusted non-GAAP financial results to the most comparable GAAP measurements are available at the end of the presentation slide deck and our first quarter 2024 press release.

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

[Cheryl Blanchard, executive]

Thanks, Mark. Good afternoon, everyone, and thanks for joining us. Please turn to Slide 3. Last quarter, we outlined the actions we're taking to focus our business, optimize performance and drive even stronger results as we accelerate our path to profitability. With continued strength in our market-leading OA Pain Management platform and expanding and highly differentiated HA-based regenerative solutions pipeline and continued cost discipline, we delivered a good start to the year and are on track to achieve our 2024 guidance. And we are confident that the core elements of our strategy position us well to maximize value creation in an orderly fashion in 2024 and beyond.

In the first quarter, our overall revenue was up 7% compared to Q1 last year, driven by another strong quarter in OA Pain Management. We also completed the cost reduction initiatives that we spoke about last quarter, including significant head count reductions, putting Anika on the path to realize $10 million in annualized cost savings. These cost savings will enable Anika to deliver 75% growth in adjusted EBITDA in 2024, accelerating our profitability for the year.

Let me now review our key achievements from the quarter. First, OA Pain Management had another great quarter with revenue of $24.3 million, representing a 7% increase year-over-year on growing market demand and some favorable order timing. And we're pleased to announce that we've extended the exclusive distribution agreement with our established Canadian commercial partner, Pendopharm, to sell Cingal, Monovisc, Orthovisc through 2030, building on the existing market leadership position in Canada. Cingal remains a key driver as the next-generation non-opioid OA pain product of choice in now over 40 countries outside the United States. We continue to see strong growth and are exploring partnership opportunities in select Asian markets, and we remain confident that Cingal will truly be a game changer when it is approved in the U.S.

To that end, as we continue to interact with the FDA on a regular basis, we recently received feedback from the agency in response to our proposals that were requested by FDA during the Type-C meeting in April of last year. While the FDA feedback provided some clarity, there's additional information Anika needs regarding what FDA will require for nonclinical data. We have reverted back to the FDA with questions. As we've said previously, we will begin the remaining nonclinical testing once we have received additional clarity from the FDA.

Moving to Joint Preservation and Restoration. We had revenues of $13.8 million, up 3%. We are seeing good progress following the recent launches of several new innovative solutions. These early results have energized our teams as we work diligently to increase the adoption of our new products, which offset headwinds from some of our more mature products during the quarter.

Let me first describe the progress we are making on the regenerative side. We have now completed more than 200 cases with over 40 surgeons using our HA-based Integrity Implant System since its limited market release at the end of last November, which is double the number since our last update. We continue to receive incredibly positive clinical feedback as it becomes increasingly adopted by surgeons not only for rotator cuff repair but also in other tendon repair applications such as in the foot and ankle. The full market release remains on track for the middle of this year and is expected to increase growth in our regenerative business in the back half of 2024.

Hyalofast continues to do very well outside the U.S., now selling in over 35 countries. As a reminder, Hyalofast, our HA single-stage cartilage repair system, was granted Breakthrough Device Designation by the FDA. We expect to begin filing the modular PMA this year with a target product launch by 2026, creating a highly differentiated entrant into the $1 billion plus U.S. cartilage repair market opportunity.

With great clinical feedback on Integrity and 15-year data likely publishing this year on Hyalofast, Anika now has 2 highly differentiated regenerative platforms to leverage as the basis for additional near-term regenerative products. We continue to build out our exciting regenerative pipeline, and we look forward to providing additional details about it in the future.

We also remain encouraged by the performance of our X-Twist Fixation System, which has been a standout product for us. More than 10,000 X-Twist anchors have now been implanted globally since the limited release of the PEEK version early last year, which is a real milestone for us. Between the Biocomposite version now fully launched this month and X-Twist PEEK, we are addressing the entire $600 million U.S. rotator cuff market.

Lastly, regarding our RevoMotion Reverse Shoulder System. We regularly engage with our distributors to improve our channel and commercial execution, and we're actively training surgeons on the safe and effective use of the system. The pace of adoption remains slower than anticipated due to a more complex sales cycle, including obtaining facility approvals. That said, we are encouraged by the recent CMS decision to now reimburse shoulder arthroplasty procedures in the ASC and that surgeons are taking RevoMotion to their surgery centers due to our efficient 2-instrument tray system design.

I'm proud of the work we've done to build on our momentum, [ enhanced ] execution across our business. We are laser-focused on maximizing value for our shareholders and remain open to paths that will help us achieve this objective while continuing to invest in our greatest opportunities.

On a separate note, we announced earlier today that Mike made a personal decision to step down as CFO effective June 3. On behalf of all of us at Anika, I'd like to thank Mike for his leadership over the past 4 years. Mike joined Anika in mid-2020 following our 2 acquisitions. His strategic and operational insights have helped Anika navigate this period of significant change while positioning the company for an exciting future. I appreciate everything Mike has done for Anika, and we all wish him the best.

We're excited to welcome Steve Griffin as our new CFO on June 3. Steve comes to Anika with more than 15 years of experience in public company CFO and other senior finance leadership roles and a proven track record of value creation at both large and small public companies. We are confident that Steve will help us build on our momentum to achieve the meaningful growth and profitability potential across the business. Mike will remain with Anika through the end of the year and will work closely with Steve and me to ensure a smooth transition of responsibilities. We're glad to continue benefiting from his expertise during that time, and in the near term, looking forward to introducing you all to Steve.

Mike, I'll now turn it over to you for a few words on our financial results.

[Michael Levitz, executive]

Thank you very much, Cheryl. While I have decided to leave Anika to spend more time with my family, I am very thankful for the opportunity to have been a part of the Anika team over the last 4 years. When I joined the company, it was just starting to absorb its acquisitions of Parcus Medical and Arthrosurface in the midst of the first few months of the COVID pandemic. COVID lasted much longer than expected, and its impacts were more widespread.

The company has navigated this challenging period and made meaningful strides, including thoughtful investments, strengthening the core OA business and advancing a meaningful portfolio and pipeline of products that leverage Anika's HA expertise, while at the same time, maintaining a healthy balance sheet and making targeted cost reductions to support sustainable and growing cash generation. Anika's foundation is strong, and the company has tremendous opportunity with its established and differentiated products and pipeline to both fulfill its mission to customers and their patients and deliver value for our shareholders.

These last 4 years, I have so appreciated the opportunity to work closely with Cheryl, with my peers and team in finance and IT, with the many wonderful, dedicated people across Anika globally and with such a quality Board of Directors. Cheryl is a smart and resilient leader who exemplifies the Anika core values of doing the right things the right way, focused on driving high-quality products that truly improve lives. Steve is joining a talented team, and I look forward to supporting his transition as Anika's next CFO and to following Anika's success for years to come.

Now please refer to Slide 4 on the online presentation, where I will walk through the results for the first quarter of 2024. Unless otherwise stated, all comparisons will be against the same period in the prior year.

I'm pleased to report total revenue for the first quarter grew to $40.5 million, driven by growing demand as well as favorable order timing. Revenue in our largest product family, OA Pain Management, increased 7% in the first quarter to $24.3 million due to growing demand as well as favorable ordering patterns from both J&J Mitek in the United States and from our international distributors. Our Joint Preservation and Restoration revenue increased 3% in the first quarter to $13.8 million, driven by our recent product launches in the U.S. led by X-Twist and Integrity. This growth was partially offset by lower sales of certain of our more mature products. Lastly, our Non-Orthopedic revenue increased 29% to $2.4 million on growing demand and year-over-year order timing in the high-risk veterinary sales.

Moving to gross margin. Our gross margin in the first quarter was 61%, up from 60% on lower intangible amortization. Our adjusted gross margin was 62% in the quarter, down from 64% due primarily to the timing of impact of production inefficiencies and reserves in the quarter.

Moving to operating expenses. Our operating expenses in the first quarter totaled $29.7 million. That's down $5.7 million. These lower operating expenses reflect fewer nonrecurring costs as well as effective cost control following the launches of key products and addressing the new regulatory requirements in the EU to continue to sell our legacy products there. As a reminder, Anika incurred $5.8 million in nonrecurring costs in the first quarter of last year for the Parcus arbitration settlement, shareholder activism and other items. In comparison, operating expenses in the first quarter this year reflected $1.4 million of nonrecurring items, including severance costs for the head count reductions we took in the first quarter and shareholder activism costs.

Our net loss for the quarter was $4.5 million or $0.31 per share compared to a net loss of $10.4 million or 71% -- $0.71 per share, excuse me. We generated adjusted net income of $1.2 million in the first quarter or $0.09 per diluted share, up from an adjusted net loss of $2.2 million or $0.14 per share. As we highlighted on our last earnings call, beginning this year, the calculations of adjusted net income and adjusted EPS have been revised to exclude stock-based compensation, net of tax, and this revised calculation is reflected for all periods presented.

Anika generated adjusted EBITDA in the quarter of $2.5 million, up from a negative $1.2 million. And our adjusted EBITDA margin in the quarter grew to 6%, up from a negative 3%. The 9 point improvement was primarily due to the combined benefit of both revenue growth and reduced spending.

Lastly, with regards to our cash flow and capital structure. Operating cash flows were just below breakeven in the first quarter, a $3.5 million improvement from cash outflows of $3.6 million, reflecting lower nonrecurring costs and reduced spending. Our capital expenditures in the quarter totaled $1.8 million, up $0.4 million, reflecting continued investments in manufacturing capabilities, supporting growth in our OA Pain Management product lines. We ended the quarter with $68.6 million in cash and no debt.

Please turn to Slide 5. Now I'd like to review our full year financial outlook for 2024. Based on our progress to date, we are reiterating our guidance for 2024 with total company revenue of $168 million to $173 million, representing growth of 1% to 4%.

In OA Pain Management, we continue to expect revenue to grow to $102 million to $104 million, up 0% to 2%. This reflects continued above-market growth in end-user sales, led by growth of Monovisc globally and Cingal outside the U.S. This year, the impact of the continued above-market growth is offset by unfavorable order timing year-over-year. On a quarterly basis, we also expect ordering patterns to be lumpy as they've been historically with higher revenue in the second half of 2024 based on projected timing of transfer shipments compared to quarterly timing last year.

In Joint Preservation and Restoration, we continue to expect revenues to grow to $58 million to $60.5 million, up 6% to 10% as faster growth in our new products led by X-Twist and Integrity is partially offset by lower sales of certain legacy products. We continue to expect that growth to be weighted more towards the second half of the year due both to normal seasonality and the full market release of Integrity, which remains right on schedule.

In Non-Orthopedic, we expect revenues to be $8 million to $8.5 million, a decrease of 14% to 19%.

With regard to gross margin, we continue to expect adjusted gross margin for 2024 of 66% to 66.5%. From a spending perspective, we executed on the planned workforce reduction and other spending reductions in the first quarter and are on track to deliver the $10 million of annualized operating expense savings, as previously announced. As we have said, a partial year impact will be realized this year due to the timing of the actions. In 2024, we plan to use a portion of the savings to fund the filing of the first PMA module for Hyalofast in the United States as well as additional clinical follow-up for our HA-based regenerative products such as Integrity.

We continue to expect our adjusted EBITDA in 2024 to be between $25 million and $30 million, representing an increase of over 75% at the midpoint. This translates to an adjusted EBITDA margin improvement of over 6 points, growing to at least 15% for the year. We continue to be positioned to deliver positive adjusted net income this year and generate positive free cash flow even as we invest in higher capital spending this year focused on our OA Pain Management manufacturing operations, in part reflecting timing from last year.

In summary, the first quarter was a solid start to 2024, demonstrating the strength of our market-leading core OA franchise and growing momentum from our new products like Integrity. And Anika is on track for significant bottom line growth this year.

I will now turn the call back to Cheryl.

[Cheryl Blanchard, executive]

Thanks, Mike. Please turn to Slide 6. It's clear that Anika's renewed focus is proving effective as we accelerate our path to profitability. It's still early days, and we're continuing to take the necessary steps to optimize performance. We'll remain nimble in our approach, and we are confident that Anika is on the right path. With our product portfolio and exciting pipeline, we will continue to improve the lives of the millions of patients in need of early intervention orthopedic care. We appreciate the support of our Anika colleagues, without whom none of this will be possible. And we appreciate the support of our shareholders as we work to deliver value on their investments.

With that, we'll open up the line for questions.

[Operator]

[Operator Instructions] Your first question comes from the line of George Sellers from Stephens.

[George Sellers, analyst]

Maybe just to start on guidance. Just curious. The OA Pain Management business continues to outperform. It was pretty strong throughout 2023 with a couple of quarters of double-digit growth and another strong quarter here. I'm just curious. How should we think about sort of the cadence through the remainder of the year to get to your guidance? Or those tough comps, what's sort of limiting stronger burn increase in that guidance? And then also, how should we think about for the Joint Preservation and Restoration piece some of the new products like the HA-based patch system, how should we think about those contributing more significantly to revenue growth?

[Michael Levitz, executive]

George, it's Mike. Thank you for your questions. First, the guidance on OA Pain Management. One of the things that we mentioned last year and we wanted to continue to mention is that the underlying business is growing above market. One of the things that -- those that have followed this company know quite well is we do generally have volatile order timing because we deal with big companies like Johnson & Johnson. And so that definitely occurred last year. Q2 last year was very high, and we called that out in the period and said that was not sustainable. That was just timing of how they manage their inventories.

So this year, we have a tough comp as we go into the second quarter because of that. And so the way to think about the cadence this year is, again, our guidance, we reiterated our guidance. There's no change to our guidance for the year. So 0% to 2% for the year because of the timing of transfer shipments. I do expect the second half to be higher than the first half this year for revenues in our OA Pain Management business just based upon the year-over-year comp. So last year, Q2 was bigger this year, Q3 will be bigger.

So that's how I would think about the cadence. So you'll see we guided 0% to 2%, but we grew 7% this quarter. I would expect given the tough comp next quarter, on a year-over-year basis, it will be down. But that's not any issue or challenge just as because of the timing of last year, frankly.

With regards to the joint preservation cadence, the growth this year, so we reiterated the guidance of 6% to 10%. The growth this year is driven -- we said on the last call, it was going to be second half loaded in the sense that we knew we were launching the Integrity product in the middle of the year. And as Cheryl said, we remain right on track to do that. We're very excited about what we're seeing in the limited market release, and that product is right on track.

And so as we look at joint preservation, we've again reiterated our guidance. We expect the second half to be stronger, both due to Integrity moving into full market release as well as the continued growth and ramp of our new products. We are very pleased this first quarter to have the X-Twist Biocomposite launch, and X-Twist continues to be a really nice product and doing exactly what we expected it to do when we gave our guidance. So I hope that's helpful, George.

[George Sellers, analyst]

Yes. That's really helpful color. I appreciate that. And then maybe looking potentially beyond this year. I'm just curious. We've seen some announcements of some studies at various other companies. I'm just curious how you all are thinking about the competitive dynamics about potentially some competing offerings in the HA injection market or with what Hyalofast is going to bring to the table when that's approved. Has there been any change from your perspective on competition in the market as we look beyond this year?

[Cheryl Blanchard, executive]

George, this is Cheryl. Can I just ask you to clarify what competition you're referring to, just to make sure I answer your question?

[George Sellers, analyst]

Sure. So one specific example would be Organogenesis announcing the Phase III trial results from their ReNu injection. Just curious if you all view that as a competing offering to Orthovisc and Monovisc. And then also products like CartiHeal gaining momentum in the market, if that's a competitive concern.

[Cheryl Blanchard, executive]

Got it. Thank you. I appreciate that. Yes. So Organogenesis did just announce a readout on their first Phase III clinical trial. It's difficult for me to comment on that because they didn't provide any data. So I'll be in a better position to have a thought about that from a competitive perspective once I see their data. But they didn't put any data out yet.

And then on the cartilage repair side, from a CartiHeal perspective, obviously, CartiHeal will be launching here soon into the space where they'll be competing with the MACI product with -- and CartiHeal's play is with the situation with a product that has to remove healthy bone to be implanted. So I think it will be going after a smaller segment of the cartilage repair market, that being the osteochondral defect market.

Hyalofast, I'm very excited to bring that to market, and we'll start filing that modular PMA this year. We've got 15 years of data that is likely publishing this year. It is off the shelf, single stage and something that we know how it plays in the market based on our commercial experience OUS and doesn't require you to take healthy bone, doesn't require a second surgery. And so we're very excited to compete with that inside the United States. We just updated that we now sell Hyalofast in over 35 countries outside the United States. So I'm ready to go with Hyalofast, and we've got surgeons like waiting for it here in the United States.

[Operator]

Your next question comes from the line of Jim Sidoti from Sidoti & Company.

[James Sidoti, analyst]

Can you talk a little more about the growth rates for the joint business? It was down from the fourth quarter of '23, and you talked about some of the mature products that are growing as quickly. Are you deemphasizing sales of those products? I mean will you continue to sell those going forward?

[Cheryl Blanchard, executive]

Jim, thanks for the question. Yes, I would tell you that our new products are doing really well. I mean we just announced that we're over 10,000 implantations of X-Twist. Integrity is doing very well even in the limited market release, where our goal there was to get feedback in an LMR, and we're feeling a real pull from the market with that product. We are facing headwinds with some of our more mature products. And while we have a subset of distributors that are doing very well for us and growing strong double digits, we've talked about the fact that, that is an area that we continue to focus on and that we are not happy with currently.

So we continue to focus on commercial execution and on really driving those new products that are differentiated and have great clinical results. And again, I would just say in that business, we have great products that are doing well, and really the new products are driving the growth in the face of some of those headwinds.

[James Sidoti, analyst]

Okay. So it sounds like you're going to continue to sell those products and maybe step up some of the marketing efforts for those products.

[Cheryl Blanchard, executive]

Yes, we are continuing to sell those products, and we continue to train and educate on them. We continue to make some investments in them. I will just highlight, again, one of the things that we announced last quarter with our cost reduction initiatives really put us in a place where that -- again, we report on one segment, but that part of the business is no longer kind of a drag on our adjusted EBITDA. So we've been thoughtful about how we're making our investments there and where we can invest to really drive that growth. And we're focusing on the products that we think are more differentiated.

[James Sidoti, analyst]

Okay. And then if we switch to Cingal, you talked about working with the FDA to figure out what nonclinical data they require. Once you guys come to an understanding, how long do you think it will take to get that data to the FDA?

[Cheryl Blanchard, executive]

Yes, it's a great question. As soon as I have complete clarity on the additional nonclinical testing that we're going to need to do, I will be in a better position to answer that question. So it is not -- again, just to reiterate, it is not the -- what -- some years ago, the company was talking about doing a significant clinical trial. It is really just the remaining nonclinical testing that the FDA has been talking to us about. As soon as I have that clarity, I will be the first one to be talking about it.

[James Sidoti, analyst]

Okay. Got it. And then on pain management, your numbers the past few quarters, even with the lumpiness to the distributor, your numbers have been growing very, very nicely. Your competitor [ reported the last time ] they're seeing some good growth. So it feels like that market is very healthy right now. Is that more attributable to procedure growth or pricing improvements?

[Cheryl Blanchard, executive]

Yes. I think there's a couple of things that have happened. First of all, I think the companies that were more subject to the ASP changes that happened have anniversaried out of that dynamic. I think really just starting to see it happen this quarter. So over a period of time, that complete market in the U.S. actually shrunk a bit because of that ASP dynamic. With a couple of those companies that have anniversaried out of that dynamic, I think we're going to start to see growth of that market [ in dollars ]. That market, although had some dollar shrinkage because of the ASP dynamic, it never stopped growing from a unit perspective.

And so we continue to see kind of low single-digit growth of that market in the United States. And it is a healthy market. It is still the kind of along with immediate release steroids that can be used repeatedly to frontline treatment for osteoarthritis before people move on to a total knee replacement. So it does continue to have very healthy underlying market fundamentals.

[Michael Levitz, executive]

And I would just add, consistent with what I said at year-end, we're seeing really healthy growth in our injection volume. But the pricing has essentially been fairly consistent over the last couple of years for us, a decline low to mid-single digits on a fairly consistent basis. But the volume growth in our Cingal and in our Monovisc products is very healthy.

[James Sidoti, analyst]

Okay. And then 2 quick ones for Mike. Gross margin -- adjusted gross margin for the quarter was 62%, but you're guiding 66% to 66.5% of the year. So is that because of a bunch of onetimes in the first quarter? Or do you expect product mix to become much more favorable in the back half of the year?

[Michael Levitz, executive]

Jim, both, actually. So we expect favorable mix as we go through the year compared to the first quarter, and we just had a number of onetime things in the quarter. So we had production inefficiencies that got amortized into the period. We expected that. That was built into our guidance. We also had some reserves that were recorded in the period. Oftentimes, those happen throughout the year. It happened in Q1. So that's why we felt comfortable reiterating our guidance for the year, and we expect that to improve for the balance of the year so that we're in line with our -- the full year guidance.

[James Sidoti, analyst]

Okay. And the $900,000 of severance costs, is that in the SG&A line?

[Michael Levitz, executive]

The severance costs were split in the areas -- they're recorded in the areas to which they related, and so they're split evenly between research and development and SG&A.

[Operator]

Your next question comes from the line of Mike Petusky from Barrington Research.

[Michael Petusky, analyst]

So I'm curious on the sort of the severance and sort of the cost reduction. When did that happen? Did that happen sort of in March, second half of March? When did that happen? Like I'm just curious how this is sort of going to -- how much of that actually impacted Q1 versus Q2.

[Cheryl Blanchard, executive]

Yes. Mike, it was at the end of Q1, so it really didn't have an impact yet in Q1. So you're going to see this year basically an impact of that on 3 quarters but not fully annualized until next year.

[Michael Levitz, executive]

And from a cash perspective, the severance was actually paid out in the second quarter.

[Michael Petusky, analyst]

Okay. Okay. That's helpful. All right. And then, Cheryl, on the FDA feedback, you said some clarity. You talked about nonclinical data. What's your confidence level that you're not going to get surprised and they're going to come back to you and say, actually, we're going to need a material clinical trial to sort of finish this out? I mean what's your confidence level that, that is not on the table?

[Cheryl Blanchard, executive]

Yes. I would never want to try to speculate around FDA, but we have met with our clinical data the endpoints that they set out for the company to meet. We've done so with statistical significance in multiple Phase III clinical trials, and FDA continues to reiterate that our clinical data will be a review issue. So there -- I'm not going to get any additional clarity on that topic until we actually file. But we do have continued ongoing dialogue with them. They did give us some feedback here recently. We went back to them with some additional clarifying questions, and I look forward to continuing to give updates on this as we make progress.

[Michael Petusky, analyst]

And shifting over to Integrity. Any learnings from the last 100 or so cases and new surgeons? Any feedback that is worthy of mention?

[Cheryl Blanchard, executive]

Yes. Thanks for asking. The feedback has been really quite stellar. The surgeons -- a number of the surgeons now have patients in a number of shoulder applications, although primarily rotator cuff repair and a number of foot and ankle applications and some even in other parts of the body with appropriate on-label use where the feedback has just been this is great. It's a -- the implant, the patch implant itself is strong. It's manipulatable under arthroscopy. It's simple surgical technique. The fixation elements are great. Their patients are having great outcomes. And it has just given us really great feedback and the confidence that we need to -- as we remain on track for our full market release in midyear. We're also really experiencing uphold from surgeons and distributors on this product. So we're very excited to get to that full market release.

[Michael Petusky, analyst]

And then just last one, jumping back to the gross margin question. Mike, would you expect sort of -- particularly given the inefficiencies in production manufacturing, I suspect. Is this sort of the cadence of gross margin? I mean should we look for sort of gradual improvement? Or are the factors that sort of impacted Q1's gross margin completely behind and it should be a much cleaner number even starting in Q2?

[Michael Levitz, executive]

Good question. And Mike, we don't give quarterly guidance in part because of the lumpiness of the business, which can impact things on a quarterly basis. One of the things that we did this year, our guidance is essentially consistent with what we guided to last year and what we actually delivered last year. And in Q1 of last year, we had a low gross margin, and then it was higher in the remainder of the year.

I don't know that there's anything unique to the subsequent quarters that I can speak to just because it can move. I think it's fair to say you could take the guidance for the year. And if you wanted to spread it evenly, you probably -- that's a pretty reasonable place to go in terms of the gross margin percent. But what -- but keep in mind that from a gross profit dollars, the revenue growth that we expect to be weighted towards the second half, both in OA Pain Management and in joint preservation. So -- but from a percentage basis, we might get some that moves into Q2 from the timing of things, but it's hard to say at this point.

[Michael Petusky, analyst]

I guess what I was really trying to get at, whatever production inefficiencies you're referring to, has that been rectified? Has that been essentially fixed?

[Michael Levitz, executive]

Yes.

[Operator]

There are no further questions at this time. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.