Anika Therapeutics Reports 2003 Fourth Quarter and Year-End Financial Results.

Business Editors/Health/Medical Writers

WOBURN, Mass.--(BUSINESS WIRE)--Feb. 27, 2004

Anika Therapeutics, Inc. (Nasdaq:ANIK) today announced financial results for the fourth quarter and year ended December 31, 2003.

Marking the company's first full year of profitable operations since 1998, net income for the year ended December 31, 2003, was $827,000, or $0.08 per diluted share, compared with a net loss of $3,040,000, or $0.31 per diluted share, for 2002. Revenues grew 17% to $15,404,000 from $13,187,000 last year.

For the 2003 fourth quarter, net income totaled $801,000, or $0.07 per fully diluted share, compared with net income of $829,000, or $0.08 per diluted share, in the fourth quarter of 2002. Revenues for the quarter increased 12% to $5,014,000 from $4,471,000 for the same period last year. Results for the latest quarter included recognition of $846,000 in revenue previously deferred for the first three quarters of 2003 in accordance with Anika's revenue recognition policies compared with deferred revenue of $839,000 recognized in the 2002 fourth quarter.

"In the last several months we've achieved some highly significant milestones for the company," said Charles H. Sherwood, Ph.D., president and chief executive officer. "In December, we signed a multi-year U.S. licensing and supply agreement with Johnson & Johnson's Ortho Biotech Products, L.P. for OrthoVisc(R), our treatment for osteoarthritis of the knee. In February, we received final marketing approval from the U.S. Food and Drug Administration (FDA) for OrthoVisc. With these achievements behind us, our initial focus for 2004 is on supporting Ortho Biotech's U.S. launch for OrthoVisc and to move two potential therapies in our product pipeline -- one for cosmetic tissue augmentation and another for preventing post-surgical adhesions -- into human clinical trials," he added.

Anika received an initial payment of $2 million from Ortho Biotech in the fourth quarter of 2003 and has also received a milestone payment of $20 million in the first quarter of 2004 as a result of the FDA approval. Commencing in the first quarter of 2004, these cash payments are to be recognized as revenue ratably over the remaining initial ten-year term of the agreement.

Gross margins were 48% and 55% for the full year and fourth quarter of 2003, respectively. This compares with 39% and 59% for the corresponding periods in 2002. The full-year improvement stemmed from a combination of manufacturing efficiency gains and higher margin product mix, while fourth quarter of 2003 margins reflected lower production levels compared to the same quarter last year.

Research and development expenses decreased 17% for the fourth quarter and 34% for the full year of 2003. The decrease was primarily due to lower costs associated with the clinical trial for OrthoVisc in 2003 compared to 2002. Selling, general and administrative (SG&A) expenses for the fourth quarter increased 20% compared with the fourth quarter of 2002 mainly due to personnel-related costs and outside and professional service fees. SG&A expenses decreased 5% on a year-over-year basis mainly due to lower overall outside and professional service fees.

Cash and restricted cash at December 31, 2003, totaled $15.4 million compared with cash and marketable securities of $13.5 million at December 31, 2002.

Conference Call Information

The company will hold a conference call to review its financial results on Friday, February 27, 2004, at 11:00 a.m. EST. To listen to the conference call, dial 706-634-1550 approximately 10 minutes before the starting time and reference Anika Therapeutics. In addition, the conference call will be available to interested parties through a live audio Internet broadcast at http://www.anikatherapeutics.com/newset.htm. The call will be archived and accessible on the same Web site for one year beginning at 2:00 p.m. EST  Friday, February 27.

About Anika Therapeutics, Inc.

Headquartered in Woburn, Anika Therapeutics, Inc. (www.anikatherapeutics.com) develops, manufactures and commercializes therapeutic products and devices intended to promote the repair, protection and healing of bone, cartilage and soft tissue. These products are based on hyaluronic acid (HA), a naturally occurring, biocompatible polymer found throughout the body. Anika products include OrthoVisc(R), a treatment for osteoarthritis of the knee available internationally and marketed in the U.S. by Ortho Biotech Products, L.P., and Hyvisc(R), a treatment for equine osteoarthritis marketed in the U.S. by Boehringer Ingelheim Vetmedica, Inc. Anika manufactures Amvisc(TM) and Amvisc Plus(TM), HA viscoelastic products for ophthalmic surgery, for Bausch & Lomb. It also produces CoEase(TM), which is marketed by Advanced Medical Optics, Inc.; STAARVISC(TM)-II, distributed by STAAR Surgical Company; and Shellgel(TM) for Cytosol Ophthalmics, Inc.

The statements made in this press release which are not statements of historical fact are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements that may be identified by words such as "expectations," "remains," "focus," "expected," "prospective," "expanding," "building," "continue," "progress," "efforts," "hope," "believe," "objectives," "opportunities," "will," "seek" and other expressions which are predictions of or indicate future events and trends and which do not constitute historical matters identify forward-looking statements. These statements also include statements regarding: (i) the Company's efforts and expectations in entering into long-term arrangements to market and distribute ophthalmic and osteoarthritis products; (ii) the level of the Company's revenue or sales in particular geographic areas and/or for particular products; (iii) the market share of any of the Company's products; (iv) expectations regarding future results of operations, including the Company's expectations regarding cash utilization; (v) the Company's intention to strengthen, expand and grow its ophthalmic franchise and the growth of the Company's ophthalmic business; (vi) the Company's expectations of the size of the U.S. and European markets, including Germany and France, for osteoarthritis of the knee; (vii) the Company's intention to increase market share for ORTHOVISC(R) in international and domestic markets or otherwise penetrate growing markets for osteoarthritis of the knee; (viii) the Company's corporate objectives and research and development and collaboration opportunities, including, without limitation, intended preclinical development of potential cosmetic tissue augmentation products and commencement of INCERT(R) clinical trials; and (ix) the timing and results of the U.S. launch for ORTHOVISC(R). These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks, uncertainties and other factors. The Company's actual results could differ materially from any anticipated future results, performance or achievements described in the forward-looking statements as a result of a number of factors, including: (i) the Company's ability to successfully commence and/or complete clinical trials of its products on a timely basis or at all, obtain clinical data to support a pre-market approval application and/or FDA approval, and/or receive FDA or other regulatory approvals of its products, or that such approvals will not be obtained in a timely manner or without the need for additional clinical trials; (ii) the success of the Company's efforts to improve the financial performance of its core business; (iii) the Company's research and product development efforts and their relative success, including whether the Company has any meaningful sales of any new products resulting from such efforts; (iv) the cost effectiveness and efficiency of our manufacturing operations and production planning; (v) the strength of the Turkish, German, Canadian and French economies, in general, and other economies in which the Company operates or will be operating, as well as the political stability of any of those geographic areas; or (vi) future determinations by the Company to allocate resources to products and in directions not presently contemplated. Any delay in receiving any regulatory approvals may adversely affect the Company's competitive position. Even if regulatory approvals are obtained, there is a risk that meaningful sales of the products may not be achieved. There is also a risk that (i) the Company's existing distributors or customers will not continue to place orders at historical levels or that any of them will seek to modify or terminate existing arrangements; (ii) the Company's efforts to enter into long-term marketing and distribution arrangements will not be successful; (iii) new distribution arrangements, including the agreement with Ortho Biotech Products, L.P. pertaining to ORTHOVISC(R), will not result in meaningful sales of the Company's products; (iv) the Company will be unable to achieve performance and sales threshold milestones in its distribution agreements; (v) competitive products will adversely impact the Company's product sales; (vi) the estimated size of the markets to which the Company has targeted its products will fail to be achieved; or (vii) increased sales of the Company's products, including HYVISC(R), ORTHOVISC(R) or its ophthalmic products, will not continue or sales will decrease or not reach historical sales levels, or even if such increases occur that such increases will improve gross margins, any of which may have a material adverse effect on the Company's business and operations. Certain other factors that might cause the Company's actual results to differ materially from those in the forward-looking statements include those set forth under the headings "Business," "Risk Factors and Certain Factors Affecting Future Operating Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in each of the Company's Annual Report on Form 10-K for the year ended December 31, 2002, its Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, and Current Reports on Form 8-K, as well as those described in the Company's other press releases and SEC filings.

              Anika Therapeutics, Inc. and Subsidiaries
                Consolidated Statements of Operations

                          Quarter Ended             Year Ended
                          December 31,             December 31,
                        2003        2002        2003         2002
                     ----------- ----------- ------------ ------------

Product revenue      $4,992,000  $4,439,000  $15,330,000  $13,129,000
License revenue          22,000      32,000       74,000       58,000
                     ----------- ----------- ------------ ------------
   Total revenue      5,014,000   4,471,000   15,404,000   13,187,000
Cost of product
 revenue              2,260,000   1,845,000    8,005,000    8,109,000
                     ----------- ----------- ------------ ------------
   Gross profit       2,754,000   2,626,000    7,399,000    5,078,000
Operating expenses:
   Research and
    development         656,000     789,000    2,595,000    3,928,000
   Selling, general
    and
    administrative    1,264,000   1,057,000    4,209,000    4,425,000
                     ----------- ----------- ------------ ------------
Total operating
 expenses             1,920,000   1,846,000    6,804,000    8,353,000
                     ----------- ----------- ------------ ------------
Income (loss) from
 operations             834,000     780,000      595,000   (3,275,000)
    Interest
     (income)
     expense, net       (33,000)    (54,000)    (144,000)    (240,000)
                     ----------- ----------- ------------ ------------
Income (loss) before
 provision for
 income taxes           867,000     834,000      739,000   (3,035,000)
Provision for income
 taxes                   66,000       5,000      (88,000)       5,000
                     ----------- ----------- ------------ ------------
Net income (loss)      $801,000    $829,000     $827,000  $(3,040,000)
                     =========== =========== ============ ============

Basic net earnings
 (loss) per share         $0.08       $0.08        $0.08       $(0.31)
                     =========== =========== ============ ============
Basic shares
 outstanding          9,979,068   9,934,280    9,953,733    9,934,280
                     =========== =========== ============ ============

Diluted net earnings
 (loss) per share         $0.07       $0.08        $0.08       $(0.31)
                     =========== =========== ============ ============
Diluted shares
 outstanding         11,188,042   9,968,860   10,849,610    9,934,280
                     =========== =========== ============ ============


              Anika Therapeutics, Inc. and Subsidiaries
                     Consolidated Balance Sheets

                                             December 31, December 31,
                                                 2003         2002
                                             ------------ ------------
                   ASSETS
Current assets:
   Cash and cash equivalents                 $14,592,000  $11,002,000
   Restricted cash                               818,000            -
   Marketable securities                               -    2,500,000
   Accounts receivable, net                    1,421,000    1,198,000
   Inventories                                 3,627,000    2,924,000
   Prepaid expenses and other current assets      81,000      320,000
                                             ------------ ------------
       Total current assets                   20,539,000   17,944,000
Property and equipment                         9,875,000    9,619,000
Less accumulated depreciation                 (8,684,000)  (7,679,000)
                                             ------------ ------------
       Net property and equipment              1,191,000    1,940,000
Long-term deposits                               143,000      143,000
Loan receivable officer                                -       59,000
                                             ------------ ------------
Total assets                                 $21,873,000  $20,086,000
                                             ============ ============

    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                             $349,000     $845,000
   Other accrued expenses                      1,297,000    1,703,000
   Customer deposit                                   --      326,000
   Deferred revenue                              378,000      148,000
   Income taxes payable                           65,000            -
                                             ------------ ------------
       Total current liabilities               2,089,000    3,022,000

Long-Term Deferred Revenue                     1,800,000           --

Stockholders' equity:
   Common stock                                  100,000      100,000
   Additional paid-in capital                 31,480,000   31,640,000
   Treasury stock                                (27,000)    (280,000)
   Accumulated deficit                       (13,569,000) (14,396,000)
                                             ------------ ------------
       Total stockholders' equity             17,984,000   17,064,000
                                             ------------ ------------
Total liabilities and stockholders' equity   $21,873,000  $20,086,000
                                             ============ ============