22-JUN-18 – Anika Therapeutics (ANIK:BUY) ANIK shares drop 37% after disappointing results from Cingal 16-02 Phase III clinical trial. Due to increased risk, we reduce our price target to $50 from $60, but maintain our Buy rating.

FLASH UPDATE

Cingal is the first product that combines hyaluronic acid (HA) for joint repair and a corticosteroid for pain relief in a single injection. The 16-02 study was the third Phase III trial of Cingal. The initial 26-week study showed that Cingal provided superior pain relief compared to a placebo and the second 26-week trial proved that Cingal was safe and more effective than a corticosteroid alone in relieving knee pain. The third study also showed a strong safety profile and greater pain relief compared to a corticosteroid at every time point of the study, but the difference in pain relief at the 26 week end-point was not statistically significant.

ANIK is following up the six-month trial with a three-month extension study that will collect patient data through 39 weeks. Results from the nine-month study should be available in late summer. ANIK will review the data and work with regulators to determine a pathway towards Cingal’s US regulatory approval.

ANIK shares were already down roughly 28% YTD following Q1:18 results when the company announced a voluntary, short-term recall of three minor products and reduced its full-year sales guidance.

The disappointing results from this latest Phase III trial will likely delay the US launch of Cingal, which we originally targeted for H1:19, but we still believe that Cingal will ultimately secure US market approval. Cingal is already marketed in Europe, where sales grew 280% YOY in Q1:18, and addresses a $2 billion worldwide market. Due to greater uncertainly regarding the US launch, we reduce our price target from $60 to $50, but maintain our “Buy” rating. We think the recent price declines present an excellent entry point. ANIK shares are down 46% YTD and currently trade 40% below our $50 target price.

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