Financial Data and Key Metrics Changes - Total revenue for the second quarter was $28.2 million, an 8% decline compared to the same period in 2024 [21] - Adjusted EBITDA from continuing operations was negative $200,000, a decline of $4.9 million compared to the same period in 2024 [28] - Gross margin for the second quarter was 51%, down 16 percentage points from the same period last year, primarily due to a one-time $3 million charge related to lower yields [25][26] Business Line Data and Key Metrics Changes - Regenerative solutions revenue grew 41% year over year, driven by the Integrity Implant System [18][22] - Revenue in the OEM channel declined 13% to $16.3 million, reflecting continued pressure on demand and pricing for OrthoVisc and lower pricing for MONOVisc [23] - International OA pain sales experienced a 10% decline, primarily due to unfilled orders stemming from lower yields [22] Market Data and Key Metrics Changes - The U.S. augmentation market remains primarily driven by the shoulder, but there is meaningful traction in other areas such as the hip, knee, and ankle, representing over $40 million in addressable market opportunity [16] - Integrity has achieved sequential growth for five consecutive quarters and is on track to more than double in 2025 [22] Company Strategy and Development Direction - The company plans to submit the third and final PMA module for HYALOFAST in the second half of the year, with an extended commercial timeline to 2027 [13][14] - The company is focused on leveraging proprietary hyaluronic acid technologies and has streamlined its organizational structure to align with future growth [28][19] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the key value drivers of the business, particularly the performance of Integrity and the anticipated double-digit organic growth in the commercial channel [35] - Despite the HYALOFAST trial not meeting its primary endpoints, management believes the totality of the data supports a viable path to FDA approval [35][44] Other Important Information - The company ended the second quarter with $53 million in cash and no debt, maintaining strong liquidity [30] - The company has successfully completed divestitures of Parkis and Arthrosurface, allowing for a focused strategy on core products [19] Q&A Session Summary Question: What will drive the sequential improvement in gross margin? - Management indicated that the sequential improvement is expected due to the resolution of one-time charges and improved performance excluding those impacts [38][39] Question: Any progress on additional OEM partnerships? - Management stated that there are no new updates on additional OEM partnerships but continues to assess opportunities [40][41] Question: How should the market opportunity for Integrity be viewed with new configurations? - Management expressed optimism about the expanded market opportunity with new shapes and sizes for Integrity, which are expected to enhance market penetration [42][43] Question: What gives confidence for FDA approval of HYALOFAST despite missed primary endpoints? - Management noted that the FDA has encouraged submission of the full data package, including secondary endpoints that achieved statistical significance [44][45] Question: How should gross margin be viewed as the commercial channel grows? - Management indicated that while the commercial channel may have lower gross margins, new products like Integrity and HYALOFAST are expected to be accretive to gross margin [50][52] Question: Will cash flow improve going forward? - Management expects improvements in operating cash flow, although capital expenditures may impact cash balance [55][56] Question: Will capacity be sufficient to meet demand for new products? - Management indicated that continued investments will be necessary to meet future demand for Integrity, CINGAL, and HYALOFAST [57][58] Question: Any updates on the HYALOFAST trial's patient data? - Management confirmed that the study had a target of 200 patients, but dropout rates were higher in the microfracture arm, impacting the data set [62][63]

Financial Data and Key Metrics Changes - Total revenue for the first quarter was $26.2 million, down 10% compared to the same period in 2024, primarily due to pricing pressure in the OEM channel [8][19] - Gross margin decreased to 56%, down nine percentage points year over year, driven by a $4 million drop in MONOVISC and ORTHOVISC sales [21][22] - Operating expenses were $19 million, down 12% year over year, reflecting cost-saving measures [24] Business Line Data and Key Metrics Changes - Revenue in the commercial channel increased by 18% year over year to $11.3 million, with international OA pain products growing by 13% [19] - Regenerative solutions revenue grew by 33% year over year, driven by the performance of the Integrity product [20][11] - OEM channel revenue decreased by 23% to $14.9 million, primarily due to lower pricing for MONOVISC and ORTHOVISC [20][21] Market Data and Key Metrics Changes - The U.S. market for MONOVISC and ORTHOVISC continues to face pricing volatility, which has not been fully offset by measures implemented by J and J MedTech [9][10] - The company anticipates a modest pricing rebound in the second quarter, but overall OEM revenue is expected to decline by 16% to 20% for the full year [28][29] Company Strategy and Development Direction - The company is focusing on leveraging proprietary hyaluronic acid technologies and expanding its commercial channel, which has shown strong growth [6][11] - Strategic initiatives include diversifying revenue sources and enhancing product offerings, particularly in regenerative solutions [10][12] - The company is advancing its pipeline programs, including HYALOFAST and CINGAL, with expected U.S. launches in 2026 [15][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in overcoming short-term manufacturing challenges and returning to historic production levels in the second half of the year [34] - The company remains well-positioned to fund its product pipeline and expects to see improvements in gross margins in the second half of the year [32][70] Other Important Information - The company ended the quarter with $53 million in cash and no debt, indicating strong liquidity to support ongoing operations and regulatory processes [27][69] - Adjusted EBITDA guidance for 2025 has been revised to a range of negative 3% to positive 3%, reflecting lower manufacturing yields and pricing pressures [30][32] Q&A Session Summary Question: Could you elaborate on the timeline and investment needed for the CINGAL bioequivalence study? - Management expects to begin the study by the end of the year and will provide further updates as progress is made [38][39] Question: What drives the expected improvement in OEM revenue through the year? - The improvement is primarily driven by anticipated price stabilization in the second quarter [41] Question: What factors influenced the decision to maintain commercial revenue guidance? - The decision was based on strong Q1 performance and expectations of continued growth despite tougher comparisons in Q2 [42] Question: Can you provide insight into the distribution plans for CINGAL once approved? - The company is exploring various distribution opportunities and will provide more details in the future [65][66] Question: Is there sufficient cash to get through the regulatory process? - Management confirmed that the company has adequate cash to support regulatory filings for both HYALOFAST and CINGAL [69][70]