ANIKA THERAPEUTICS, INC. You should read the following discussion in conjunction with our financial statements and related notes appearing elsewhere in this report and our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , or our 2021 Form 10-K. In addition to historical information, this report contains "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 concerning our business, consolidated financial condition, and results of operations.The Securities and Exchange Commission , or theSEC , encourages companies to disclose forward-looking statements so that investors can better understand a company's prospects and make informed investment decisions. Forward-looking statements are subject to risks and uncertainties, many of which are outside our control, which could cause actual results to differ materially from these statements. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements can be identified by such words as "will," "likely," "may," "believe," "expect," "anticipate," "intend," "seek," "designed," "develop," "would," "future," "can," "could," "estimate," "potential," and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters. All statements other than statements of historical facts included in this report regarding our strategies, prospects, financial condition, operations, costs, plans, and objectives are forward-looking statements. Examples of forward-looking statements include, among others, statements regarding the effect of COVID-19 and related impacts on our business, operations, and financial results, expected future operating results, expectations regarding the timing and receipt of regulatory results, anticipated levels of capital expenditures, and expectations of the effect on our financial condition of claims, litigation, and governmental and regulatory proceedings. Please also refer to those factors described in "Part I, Item 1A. Risk Factors" of our 2021 Form 10-K for important factors that we believe could cause actual results to differ materially from those in our forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. Management Overview We are a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care. Based on our collaborations with clinicians to understand what they need most to treat their patients, we develop minimally invasive products that restore active living for people around the world. We are committed to leading in high opportunity spaces within orthopedics, including osteoarthritis, or OA, pain management, regenerative solutions, sports medicine soft tissue repair and bone preserving joint technologies. We have thirty years of global expertise developing, manufacturing and commercializing products based on and/or enhanced with our hyaluronic acid, or HA, technology platform. HA is a naturally occurring polymer found throughout the body that is vital for proper joint health and tissue function. Our proprietary technologies for modifying the HA molecule allow product properties to be tailored specifically to multiple uses, including enabling longer residence time to support OA pain management and creating a solid form of HA called Hyaff, which is a platform utilized in our regenerative solutions portfolio. In early 2020, we expanded our overall technology platform, product portfolio, and significantly enhanced and accelerated our commercial infrastructure, especially inthe United States , through our strategic acquisitions ofParcus Medical, a sports medicine and instrumentation solutions provider focused on soft tissue repair, and Arthrosurface, a company specializing in bone preserving partial and total joint replacement solutions. Through these acquisitions, we have transformed our company. We expanded our addressable market from the over$1 billion global OA pain management market to the over$8 billion global joint preservation market (which includes the faster growing sports medicine soft tissue repair and extremities segments), advanced our commercial capabilities, instituted systems and processes to support our transformation, and expanded our product pipeline and research and development expertise in our target markets. 18
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As we look towards the future, our business is positioned to capture value within our target market of joint preservation. We believe our success will be driven by our:
? Decades of experience in HA-based regenerative solutions and early
intervention orthopedics combined under new seasoned leadership with astrong financial foundation for future investment in meaningful solutions
for our customers and their patients;
? Robust network of stakeholders in our target markets to identify evolving
unmet patient treatment needs;
? Prioritized investment in differentiated pipeline of regenerativesolutions, bone preserving implants and sports medicine soft tissue repair
products;
? Leveraging our global commercial expertise to drive growth across the
portfolio, with an intentional and increased focus on the ambulatory
surgery centers site of care in the United States ;
? Opportunity to pursue strategic inorganic growth opportunities, including
potential partnerships and smaller acquisitions, technology licensing, and
leveraging our strong financial foundation and operational capabilities;
and
? Energized and experienced team focused on strong values, talent, and culture.
COVID-19 Pandemic InMarch 2020 , theWorld Health Organization declared the spread of the COVID-19 virus a pandemic. This pandemic has caused an economic downturn on a global scale, as well as significant volatility in the financial markets. There has been significant volatility in our results on a quarterly basis due to the worldwide cancellation or delay of elective procedures, staffing shortages and supply chain disruptions, as well as the impact on timelines associated with certain clinical studies. Resurgence of COVID-19 as a result of emerging variants or other factors could result in additional staffing shortages or supply chain disruptions that could impact our business and operations. We have had some disruption in our ability to supply products to our customers due to supply chain disruptions and staffing shortages which has caused back orders or delays in certain shipments to our customers. Our commercial day-to-day operations have been impacted due to the worldwide cancellations and/or delays of elective procedures and restrictions on travel for both our employees and our clinician customers, and timelines associated with certain clinical studies and research and development programs have been delayed. While the impact has been limited to these items to date, we caution that there continues to be a possibility for potential future implementation of certain additional restrictions or other challenges associated with infections, staffing shortages, volatility in elective surgical procedures or supply chain disruptions due to COVID-19 and its current or new variants in certain jurisdictions. The impact of these challenges are currently unknown, but could be significant. Products OA Pain Management
Our OA Pain Management product family consists of:
? Monovisc and Orthovisc, our single- and multi-injection, HA-based
viscosupplement product offerings indicated to provide pain relief from OA
conditions solely for use in the knee. Our OA Pain Management products are
generally administered to patients in an office setting. In the United
States, Monovisc and Orthovisc are marketed exclusively by
Mitek Sports Medicine, part of the Johnson & Johnson Medical Companies. The
Monovisc and Orthovisc products have been the market leaders, based on
combined overall revenue in the viscosupplement market, since 2018.
Internationally, we market our OA Pain Management products directly through
a worldwide network of commercial distributors.
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? Cingal, our novel, third-generation, single-injection OA Pain Management
product consisting of our proprietary cross-linked HA material combined with
a fast-acting steroid. Cingal is designed to provide both short- and
long-term pain relief. Cingal is CE Mark approved and for several years has
been sold outside
our network of distributors. In
product currently under clinical trial studies and is not available for
commercial sale.
? Hyvisc, our high molecular weight injectable HA veterinary product approved
for the treatment of joint dysfunction in horses due to non-infectious
synovitis associated with equine OA.
Joint Preservation and Restoration
Our Joint Preservation and Restoration product family consists of:
? Bone Preserving Joint Technologies. Our portfolio of more than 150 bone
preserving joint technologies, including partial joint replacement, joint
resurfacing, and minimally invasive and bone sparing implants, is designed
to treat upper and lower extremity orthopedic conditions as well as knee and
hip conditions caused by arthritic disease, acute trauma and injury. These
products span multiple joints including the shoulder, foot/ankle, wrist,
knee and hip and are generally intended to restore a patient's natural
anatomy and movement. These products are often used to treat patients with
OA progression beyond where our OA Pain Management products can allow the
patients to retain an active lifestyle when early surgical intervention
becomes preferable.
? Soft Tissue Repair. Our line of soft tissue repair solutions is used by
surgeons to repair and reconstruct damaged ligaments and tendons resulting
from sports injuries, acute trauma and disease. These more traditional
sports medicine solutions include screws, sutures, suture anchors, grafts
and other surgical systems that facilitate surgical procedures on the
shoulder, knee, hip, upper and lower extremities, and other soft tissues.
? Regenerative Solutions. Our portfolio of orthopedic regenerative solutions
leveraging our proprietary technologies based on HA and Hyaff, which is a
solid form of HA. These products include Tactoset Injectable Bone
Substitute, an HA-enhanced injectable bone repair therapy designed to treat
insufficiency fractures and for augmenting hardware fixation, such as suture
anchors and Hyalofast, a biodegradable support for human bone marrow
mesenchymal stem cells used for cartilage regeneration and as an adjunct for
microfracture surgery. Tactoset cleared and commercialized principally in
available outside
States, Hyalofast is a product under clinical trial studies and is not
available for commercial sale.
We currently commercialize Bone Preserving Joint Technologies, Soft Tissue
Repair products, and Tactoset (from our Regenerative Solutions portfolio) in the
United States by selling to hospitals and ambulatory surgery centers, through an
independent network of sales representatives and distributors, and utilize our
distributor network for sales in certain international markets.
Non-Orthopedic
Our Non-Orthopedic product family consists of legacy HA-based products that are
marketed principally for non-orthopedic applications. These products include
Hyalobarrier, an anti-adhesion barrier indicated for use after abdomino-pelvic
surgeries, Hyalomatrix, used for the treatment of complex wounds such as burns
and ulcers, as well as products used in connection with the treatment of ears,
nose and throat disorders, and ophthalmic products, including injectable, high
molecular weight HA products such as Anikavisc and Nuvisc, used as viscoelastic
agents in ophthalmic surgical procedures such as cataract extraction and
intraocular lens implantation. These Non-Orthopedic products are sold through
commercial sales and marketing partners around the world.
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--------------------------------------------------------------------------------Results of Operations Three Months EndedMarch 31, 2022 Compared to Three Months EndedMarch 31, 2021 Three Months Ended March 31, 2022 2021 $ Change % Change (in thousands, except percentages) Revenue$ 36,693 $ 34,292 $ 2,401 7 % Cost of revenue 14,889 13,318 1,571 12 % Gross profit 21,804 20,974 830 4 % Gross margin 59 % 61 % Operating expenses: Research and development 6,157 6,361 (204 ) (3 %) Selling, general and administrative 19,201 18,175 1,026 6 % Change in fair value of contingent consideration - (4,820 ) 4,820 (100 %) Total operating expenses 25,358 19,716 5,642 29 % (Loss) income from operations (3,554 ) 1,258 (4,812 ) (383 %) Interest and other income (expense), net (154 ) (43 ) (111 ) 258 % (Loss) income before income taxes (3,708 ) 1,215 (4,923 ) (405 %) Benefit from for income taxes (775 ) (1,623 ) 848 (52 %) Net (loss) income$ (2,933 ) $ 2,838 $ (5,771 ) (203 %) Revenue Revenue for the three-month period endedMarch 31, 2022 was$36.7 million , an increase of$2.4 million as compared to$34.3 million for the three-month period endedMarch 31, 2021 . The increase in revenue was primarily driven by continued recovery from the impact of the COVID-19 pandemic on sales volumes and ordering patterns. Three Months Ended March 31, 2022 2021 $ Change % Change (in thousands, except percentages) OA Pain Management$ 22,733 $ 19,316 $ 3,417 18 % Joint Preservation and Restoration 12,139 12,219 (80 ) (1 %) Non-Orthopedic 1,821 2,757 (936 ) (34 %)$ 36,693 $ 34,292 $ 2,401 7 % Revenue from our OA Pain Management product family increased 18% for the three-month period endedMarch 31, 2022 , as compared to the same period in 2021, due primarily to continued recovery from the impact of the COVID-19 pandemic on global sales volumes and strategic partner and distributor ordering patterns which can vary significantly on a quarterly basis. Revenue from our Joint Preservation and Restoration product family decreased 1% for the three-month period endedMarch 31, 2022 , as compared to the same period in 2021, due primarily to the impact of limitations on access to customers during the early part of the quarter due to a surge in COVID-19 cases caused by a new variant. Revenue from our Non-Orthopedic product family decreased 34% for the three-month endedMarch 31, 2022 , as compared to the same period in 2021, primarily due to timing of distributor sales as well as due to higher revenues from certain legacy products related to end-of-life purchases during the first quarter of 2021. 21
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Gross Profit and Margin Gross profit for the three-month period endedMarch 31, 2022 increased$0.8 million to$21.8 million , representing a 59% gross margin for the period as compared to 61% in the prior year. The increase in gross profit for the three-month period endedMarch 31, 2022 , as compared to the same period in 2021, was primarily resulted from increased revenue. Gross margin for the three-month period endedMarch 31, 2022 , decreased compared to the same period of prior year due primarily to unfavorable production volumes caused partially by supply chain and staffing challenges, due largely to the impact of the COVID-19 pandemic, and increased inventory reserves. The gross margin included the impact of inventory step-up associated with the Arthrosurface and Parcus Medical acquisitions, as well as acquisition-related amortization expenses, which together increased cost of revenue by$1.6 million , or 5 points of gross margin, for the three-month period endedMarch 31, 2022 , as compared to increased cost of revenue of$4.1 million , or 12 points of gross margin, for the same period in 2021. Research and Development
Research and development expenses for the three-month period ended
Selling, General and Administrative
Selling, general and administrative expenses for the three-month period endedMarch 31, 2022 were$19.2 million , an increase of$1.0 million , as compared to the same period in 2021. This increase for the three-month period endedMarch 31, 2022 was due to expansion of our commercial capabilities inthe United States and expanded marketing activities and other operational capabilities to support the growing business needs. Certain marketing and medical education activities also were more limited in 2021 due to the COVID-19 pandemic.
Contingent Consideration Fair Value Change
The fair value of contingent consideration as ofMarch 31, 2022 did not change compared toDecember 31, 2021 . In the three-month period endedMarch 31, 2021 , the fair value of our contingent consideration liabilities decreased by$4.8 million resulting in a non-cash benefit to net income recorded in that period. Income Taxes The benefit from income taxes was$0.8 million for the three-month period endedMarch 31, 2022 , resulting in an effective tax rate of 20.9%. The benefit from income taxes was$1.6 million for the three-month period endedMarch 31, 2021 , resulting in an effective tax rate of (133.6%). The net change in the effective tax rate for the three-month period endedMarch 31, 2022 , as compared to the same period in 2021, was primarily due to the discrete tax benefit on the decrease in the fair value of contingent consideration that occurred in the first quarter of 2021. Our effective tax rate for the first quarter of 2022 primarily reflects statutory rates, offset partially by a reduction of stock compensation related tax deductions. Net (Loss) Income For the three-month period endedMarch 31, 2022 , net loss was$2.9 million , or$0.20 per diluted share, compared to net income of$2.8 million , or$0.20 per diluted share, for the same period in prior year. The decrease in net income and diluted earnings per share was primarily due to the nonrecurring gain recorded in the first quarter of 2021 related to the change in fair value of contingent consideration, as well as increased spending to expand our commercial capability inthe United States , partially offset by increased revenue. Non-GAAP Financial Measures We present certain information with respect to adjusted gross profit and adjusted gross margin, adjusted Earnings Before Interest, Tax, Depreciation and Amortization, or EBITDA, adjusted net income, adjusted diluted earnings per share or adjusted EPS, which are financial measures not based on any standardized methodology prescribed by accounting principles generally accepted inthe United States , or GAAP, and is not necessarily comparable to similarly titled measures presented by other companies. 22 -------------------------------------------------------------------------------- We have presented adjusted gross profit and adjusted gross margin, adjusted EBITDA, adjusted net income, adjusted EPS, because they are key measures used by our management and board of directors to understand and evaluate our operating performance and to develop operational goals for managing our business. We believe these financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. In particular, we believe that the exclusion of these items in calculating these measures can provide a useful tool for period-to-period comparisons of our core operating performance. Accordingly, we believe that these measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by our management in their financial and operational decision-making.
Adjusted Gross Profit and Adjusted Gross Margin
We define adjusted gross profit as our gross profit excluding amortization of certain acquired intangible assets, the impact of inventory fair-value step up associated with our recent acquisitions and certain product rationalization charges. The amortized assets contribute to revenue generation, and the amortization of such assets will likely continue in future periods until such assets are fully amortized. These assets include the fair value of certain identified assets acquired in acquisitions, including developed technology and acquired tradenames. We define adjusted gross margin as adjusted gross profit divided by total revenue.
The following is a reconciliation of adjusted gross profit to gross profit for
the three-month periods ended
Three-Month Periods Ended March 31,
2022 2021
Gross profit $ 21,804 $ 20,974
Acquisition related intangible asset amortization 1,562 1,562
Acquisition related inventory step up - 2,578
Adjusted gross profit $ 23,366 $ 25,114
Adjusted gross margin 64 % 73 %
Adjusted gross profit for the three-month period ended March 31, 2022 decreased
$1.8 million to $23.4 million representing adjusted gross margin of 64%.
Adjusted gross profit for the three-month period ended March 31, 2021 was $25.1
million , or adjusted gross margin of 73%. This decrease in adjusted gross profit
and adjusted gross margin for the three-month period ended March 31, 2022 as
compared to 2021, is due primarily to unfavorable production volumes and
increased inventory reserves caused in part by supply chain and staffing
challenges, due largely to the impact of the COVID-19 pandemic.
Adjusted EBITDA
We present information below with respect to adjusted EBITDA, which we define as
our net income (loss) excluding interest and other expense, net, income tax
benefit, depreciation and amortization, stock-based compensation, and
acquisition-related expenses. We have also excluded the impact of changes in the
fair value of contingent consideration associated with our acquisition
transactions in early 2020.
Adjusted EBITDA is not prepared in accordance with US GAAP, and should not be
considered in isolation of, or as an alternative to, measures prepared in
accordance with US GAAP. There are a number of limitations related to the use of
adjusted EBITDA rather than net (loss) income, which is the nearest US GAAP
equivalent. Some of these limitations are:
? adjusted EBITDA excludes depreciation and amortization, and, although these
are non-cash expenses, the assets being depreciated or amortized may have to
be replaced in the future, the cash requirements for which are not reflected
in adjusted EBITDA?
? we exclude stock-based compensation expense from adjusted EBITDA although
(a) it has been, and will continue to be for the foreseeable future, a
significant recurring expense for our business and an important part of our
compensation strategy and (b) if we did not pay out a portion of our
compensation in the form of stock-based compensation, the cash salary
expense included in operating expenses would be higher, which would affect
our cash position?
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? we exclude acquisition related expenses, including, amortization and
depreciation of acquired assets in recent acquisitions, and the impact of
inventory fair-value step up on cost of revenue?
? the expenses and other items that we exclude in our calculation of adjusted
EBITDA may differ from the expenses and other items, if any, that other
companies may exclude from adjusted EBITDA when they report their operating
results?
The following is a reconciliation of adjusted EBITDA to net (loss) income for
the three-month periods ended
Three Months Ended March 31,
2022 2021
(in thousands)
Net (loss) income $ (2,933 ) $ 2,838
Interest and other expense, net 154 43
Benefit from income taxes (775 ) (1,623 )
Depreciation and amortization 1,830 1,721
Share-based compensation 2,545
2,259
Acquisition related intangible asset amortization 1,787
1,787
Acquisition related inventory step up -
2,578
Change in fair value of contingent consideration - (4,820 ) Adjusted EBITDA $ 2,608 $ 4,783 Adjusted EBITDA in the three-month period endedMarch 31, 2022 decreased$2.2 million as compared with the same period in 2021. The decrease in adjusted EBITDA for the period was primarily due to lower adjusted gross profit, from unfavorable production volumes and increased inventory reserves caused in part by supply chain and staffing challenges due largely to the impact of the COVID-19 pandemic, as well as increased commercial spending to support future growth as certain marketing and medical education activities were more limited in 2021.
Adjusted Net (Loss) Income and Adjusted EPS
We present information below with respect to adjusted net (loss) income and adjusted EPS. We define adjusted net (loss) income as our net (loss) income excluding amortization and depreciation of acquired assets, the impact of inventory fair-value step up on cost of revenue and changes in the fair value of contingent consideration, on a tax effected basis. The amortized assets contribute to revenue generation, and the amortization of such assets will recur in future periods until such assets are fully amortized. These assets include the estimated fair value of certain identified assets acquired in acquisitions, including in-process research and development, developed technology, customer relationships and acquired tradenames. We define adjusted EPS as GAAP diluted earnings per share excluding the above adjustments to net (loss) income used in calculating adjusted net (loss) income, each on a per share and tax effected basis. The following is a reconciliation of adjusted net (loss) income to net (loss) income for the three-month periods endedMarch 31, 2022 and 2021, respectively: Three Months Ended March 31, 2022 2021 (in thousands) Net (loss) income$ (2,933 )
1,345 1,396
Acquisition related inventory step up, tax effected - 2,016
Change in fair value contingent consideration, tax
effected - (5,498 )
Adjusted net (loss) income $ (1,588 ) $ 752
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The following is a reconciliation of adjusted diluted EPS to diluted EPS for the
three-month periods ended
Three Months Ended March 31,
2022 2021
Diluted (loss) earnings per share $ (0.20 )
0.09 0.10
Acquisition related inventory step up, tax effected - 0.14
Change in fair value contingent consideration, tax effected
- (0.38 )
Adjusted diluted (loss) earnings per share $ (0.11 ) $ 0.06
Adjusted net (loss) income and adjusted diluted (loss) earnings per share in the
three-month period ended March 31, 2022 decreased $2.3 million and $0.17 ,
respectively, as compared with the same period in 2021. The decrease for the
period was primarily due to a lower adjusted gross profit, from unfavorable
production volumes and increased inventory reserves caused in part by supply
chain and staffing challenges due largely to the impact of the COVID-19
pandemic, as well as increased commercial spending to support future growth as
certain marketing and medical education activities were more limited in 2021.
Liquidity and Capital Resources
We require cash to fund our operating activities and to make capital expenditures and other investments in the business. We expect that our requirements for cash to fund these uses will increase as our operations expand. We continue to generate cash from operating activities and believe that our operating cash flows, cash currently on our condensed consolidated balance sheet and availability under our credit facility will be sufficient to allow us to continue to invest in our existing business, to manage our capital structure on a short and long-term basis, and to meet our anticipated operating cash needs. Cash, cash equivalents, and investments aggregated$90.3 million and$94.4 million , and working capital totaled$138.3 million and$138.7 million , atMarch 31, 2022 andDecember 31, 2021 , respectively. We are closely monitoring our liquidity and capital resources for any potential impact that the COVID-19 pandemic may have on our operations. OnNovember 12, 2021 , we entered into a Third Amendment to Credit Agreement withBank of America N.A . as administrative agent, amended and restated our existing revolving line of credit agreement datedOctober 24, 2017 which provides up to$75.0 million in the form of a senior revolving line of credit. Subject to certain conditions, we may request up to an additional$75.0 million for a maximum aggregate commitment of$150.0 million . As ofMarch 31, 2022 , andDecember 31, 2021 , there were no outstanding borrowings, and we are in compliance with the terms of the credit facility.
Summary of Cash Flows (in thousands):
Three Months Ended March 31,
2022 2021
Cash provided by (used in)
Operating activities $ (1,869 ) $ (2,431 )
Investing activities (1,326 ) 1,734
Financing activities (862 ) (451 )
Effect of exchange rate changes on cash (4 )
(70 )
Net (decrease) in cash and cash equivalents
The following changes contributed to the net change in cash and cash equivalents in the three-month period endedMarch 31, 2022 as compared to the same period in 2021. Operating Activities Cash used in operating activities was$1.9 million for the three-month period endedMarch 31, 2022 , as compared to cash used in operating activities of$2.4 million for the same period in 2021. The decrease in cash used in operating activities in 2021 was primarily due to an improvement in working capital attributable to timing of collections, decrease in inventories and lower income tax payments. For the foreseeable future, we expect to continue to invest substantial resources in research and development for new products and clinical trials as well as continued investment in our commercial infrastructure to support our growth strategy. These costs will be funded with a combination of cash on hand and cash expected to be generated from future operations. 25 --------------------------------------------------------------------------------
Investing Activities Cash used in investing activities was$1.3 million for the three-month period endedMarch 31, 2022 , as compared to cash provided by investing activities of$1.7 million for the same period in 2021. The change was primarily due to an increase in capital expenditures to support commercial growth of the business in the three-month period endedMarch 31, 2022 and proceeds from maturities of investments that occurred in 2021. Financing Activities Cash used in financing activities was$0.9 million for the three-month period endedMarch 31, 2022 , as compared to cash used in financing activities of$0.5 million for the same period in 2021. In both periods, the cash used in financing activities was primarily attributable to utilization of cash for employee tax withholding in exchange for shares surrendered by equity award holders.
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We believe that our accounting policies for revenue recognition, accounts receivable and allowance for credit losses, goodwill, acquired in-process research and development, inventory and contingencies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. There have been no significant changes to the above critical accounting policies or in the underlying accounting assumptions and estimates used in such policies from those disclosed in our annual consolidated financial statements and accompanying notes included in our 2021 Form 10-K for the year endedDecember 31, 2021 . We monitor our estimates on an ongoing basis for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. We base our estimates on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.
Recent Accounting Pronouncements
A discussion of Recent Accounting Pronouncements is included in our 2021 Form 10-K for the fiscal year endedDecember 31, 2021 and is updated in the Notes to the condensed consolidated financial statements included in this report.
Contractual Obligations and Other Commercial Commitments
Our contractual obligations and other commercial commitments are summarized in the section captioned "Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Contractual Obligations and Other Commercial Commitments" in our 2021 Form 10-K for the year endedDecember 31, 2021 . There were no material changes to our contractual obligations reported in our 2021 Form 10-K during the three months endedMarch 31, 2022 . For additional discussion, see Note 9 to the condensed consolidated financial statements included in this report. To the extent that funds generated from our operations, together with our existing capital resources, are insufficient to meet future requirements, we will be required to obtain additional funds through equity or debt financings, strategic alliances with corporate partners and others, or through other sources. No assurance can be given that any additional financing will be made available to us or will be available on acceptable terms should such a need arise.
Off-balance Sheet Arrangements
We do not use special purpose entities or other off-balance sheet financing
techniques that we believe have, or are reasonably likely to have, a current or
future material effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, or capital
resources.
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