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Anika Therapeutics, Inc. (ANIK) Message Board

  • islb3 islb3 Aug 12, 2013 4:03 PM Flag

    Burn rate fears?

    Wish these guys had been more specific about the run up in R&D expenditures. That generalized statement that we'll make more $ from operations but expend it all and more on increases in R&D is leaving too much to the imagination.
    This sells at multiples of net earnings and if holders assume the worse mid teens could be in order. Anyone have any insight into the R&D increased spending?

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    • That would be kind of crazy in my opinion to slip back to mid-teens. They have given guidance over the past few quarters about total costs for the clinical study. Its estimated at $6 million. They spent some in Q2, but I think its safe to assume an incremental $2.5 million each quarter 3 and quarter 4. You have to remember that these are one time expenses. I really wouldn't be too worried about it. Its an investment and at the conclusion of the study it will revert back to earlier levels or will be replaced by studies for a new product, but each study has a certain probability associated with it of driving significantly greater incremental revenues and profits. An incremental $2.5 million on a company that just did $10 million of ebitda in the quarter is not unreasonable - particularly given the one-time nature of it. That would be very shortsighted to over-react to the costs associated with these trials. With any company, you really need to normalize earnings and growth each quarter. For example, last year Q2 had $5 million in ophthalmic revenues. That was a complete fluke and really should not have been factored in when valuing the company last year. if you normalize last year's q2, you might revise that ophthalimic number to say $750K. In that case revenues last year in Q2 should have been $15.1 million not $19.6 million. So when comparing this year to last year, we really grew at 38% not 6%. If you are a short term trader, then of course you can play the momentum, etc. but if you are a fundamental player and long term perspective, you need to normalize and adjust to get accurate view. This is an earnings machine with an incredible platform for growth long into the future.

      Sentiment: Strong Buy

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