<Page>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

------------------------

FORM 10-Q

<Table>

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</Table>

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

<Table>

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</Table>

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 000-21326

------------------------

ANIKA THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

<Table>

MASSACHUSETTS 04-3145961
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

236 WEST CUMMINGS PARK, 01801
WOBURN, MASSACHUSETTS (Zip Code)
(Address of Principal Executive Offices)
</Table>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (781) 932-6616

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

------------------------

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the last 90 days. Yes /X/ No / /

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.

At August 6, 2001 there were issued and outstanding 9,934,280 shares of
Common Stock, par value $.01 per share.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<Page>
PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

ANIKA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
------------ ------------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 8,263,944 $ 8,265,936
Marketable securities..................................... 7,421,823 10,039,849
Accounts receivable, net of allowance for doubtful
accounts of $124,000.................................... 1,206,148 1,692,457
Inventories............................................... 4,624,673 4,737,645
Prepaid expenses and other current assets................. 475,067 612,890
------------ -----------
Total current assets.................................... 21,991,655 25,348,777

Property and equipment, at cost........................... 9,247,934 8,621,579
Less: accumulated depreciation............................ (5,969,815) (5,498,455)
------------ -----------
3,278,119 3,123,124
Long term deposits........................................ 118,660 124,600
Notes receivable from officers............................ 253,000 382,000
------------ -----------
Total assets.............................................. $ 25,641,434 $28,978,501
============ ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,651,609 $ 870,502
Accrued expenses.......................................... 1,881,041 1,395,677
Deferred revenue.......................................... 237,657 --
------------ -----------
Total current liabilities............................... 3,770,307 2,266,179
------------ -----------

Commitments and contingencies (Note 9)

Stockholders' equity:
Redeemable convertible preferred stock, $.01 par value
authorized 750,000 shares, no shares issued and
outstanding............................................. -- --
Undesignated preferred stock, $.01 par value authorized
1,250,000 shares, no shares issued and outstanding...... -- --
Common stock, $.01 par value: authorized 30,000,000
shares; Issued 9,991,943 shares in 2001 and 2000........ 99,919 99,919
Additional paid-in capital................................ 31,640,232 31,735,660
Treasury stock (at cost, 57,663 shares)................... (279,756) (279,756)
Deferred compensation..................................... (21,477) (244,549)
Accumulated deficit....................................... (9,567,791) (4,598,952)
------------ -----------
Total stockholders' equity.............................. 21,871,127 26,712,322
------------ -----------
Total liabilities and stockholder's equity.................. $ 25,641,434 $28,978,501
============ ===========
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.

2
<Page>
ANIKA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
2001 2000 2001 2000
----------- ---------- ----------- ----------

Product revenue.............................. $ 2,919,034 $3,668,765 $ 5,097,652 $6,289,598
Licensing revenue............................ -- 100,000 -- 200,000
----------- ---------- ----------- ----------
Total revenue.............................. 2,919,034 3,768,765 5,097,652 6,489,598
Cost of product revenue...................... 2,109,049 2,422,617 4,077,997 3,655,585
----------- ---------- ----------- ----------
Gross profit............................. 809,985 1,346,148 1,019,655 2,834,013
Operating expenses:
Research & development..................... 921,325 907,227 2,269,195 2,220,964
Selling, general & administrative.......... 1,858,790 987,151 3,247,364 1,986,613
Litigation settlement costs................ 886,480 -- 950,716 --
----------- ---------- ----------- ----------
Total operating expenses..................... 3,666,595 1,894,378 6,467,275 4,207,577

Loss from operations......................... (2,856,610) (548,230) (5,447,620) (1,373,564)
Interest income............................ 206,202 329,741 478,781 590,989
----------- ---------- ----------- ----------
Net loss................................... $(2,650,408) $ (218,489) $(4,968,839) $ (782,575)
=========== ========== =========== ==========

Basic and diluted net loss per common
share...................................... $ (0.27) $ (0.02) $ (0.50) $ (0.08)
=========== ========== =========== ==========

Shares used for computing basic and diluted
net loss per common share.................. 9,934,280 9,918,842 9,934,280 9,847,476
=========== ========== =========== ==========
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.

3
<Page>
ANIKA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30,

(UNAUDITED)

<Table>
<Caption>
2001 2000
----------- -----------

Cash flows from operating activities:
Net loss.................................................... $(4,968,839) $ (782,575)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization............................. 471,360 444,945
Amortization of deferred compensation..................... 127,645 193,039
Forgiveness of debt on officer loans...................... 129,000 --
Changes in operating assets and liabilities:
Accounts receivable..................................... 486,309 (9,177)
Inventories............................................. 112,972 (1,740,712)
Prepaid expenses and other current assets............... 137,823 235,312
Accounts payable........................................ 781,107 680,302
Accrued expenses........................................ 485,363 (136,048)
Deferred revenue........................................ 237,657 (32,537)
----------- -----------
Net cash used for operating activities...................... (1,999,603) (1,147,451)
----------- -----------

Cash flows from investing activities:
Proceeds from sale of held-to-maturity marketable
securities.............................................. 12,001,865 --
Purchase of held-to-maturity marketable securities........ (9,383,839) 61,070
Purchase of property and equipment........................ (626,355) (380,296)
Decrease in long term deposits............................ 5,940 --
----------- -----------
Net cash provided by (used for) investing activities........ 1,997,611 (319,226)
----------- -----------

Cash flows from financing activities:
Proceeds from exercise of stock options and warrants...... -- 495,402
----------- -----------
Net cash provided by financing activities................... -- 495,402
----------- -----------
Decrease in cash and cash equivalents....................... (1,992) (971,275)
Cash and cash equivalents at beginning of period............ 8,265,936 6,440,705
----------- -----------
Cash and cash equivalents at end of period.................. $ 8,263,944 $ 5,469,430
=========== ===========
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.

4
<Page>
ANIKA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. NATURE OF BUSINESS

Anika Therapeutics, Inc. ("Anika" or the "Company") develops, manufactures
and commercializes therapeutic products and devices intended to promote the
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. Due to its unique biophysical and biochemical
properties, HA plays an important role in a number of physiological functions
such as the protection and lubrication of soft tissues and joints, the
maintenance of the structural integrity of tissues, and the transport of
molecules to and within cells. The Company's currently marketed products consist
of ORTHOVISC(R), which is an HA product used in the treatment of some forms of
osteoarthritis in humans, and HYVISC(R), which is an HA product used in the
treatment of equine osteoarthritis. ORTHOVISC(R) is currently approved for sale
and is being marketed in Canada, parts of Europe, Turkey, and Israel. In the
U.S., ORTHOVISC(R) is currently limited to investigational use. The Company
manufactures AMVISC(R) and AMVISC(R) Plus for Bausch & Lomb Surgical, which are
HA products used as viscoelastic supplements in ophthalmic surgery.
STAARVISC(R)II, an injectable ophthalmic viscoelastic, is produced for STAAR
Surgical Company.

2. BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, these consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of June 30, 2001, the results of operations for the three and six
months ended June 30, 2001 and 2000 and the cash flows for the six months ended
June 30, 2001 and 2000.

The accompanying consolidated financial statements and related notes should
be read in conjunction with the Company's annual financial statements filed with
the Annual Report on Form 10-K for the year ended December 31, 2000, as the same
will be amended to reflect the restatement referred to in Note 10 herein. The
results of operations for the three and six months ended June 30, 2001 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2001. (See "Risk Factors and Certain Factors Affecting Future
Operating Results".)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
Anika Therapeutics, Inc. and its wholly owned subsidiaries, Anika Securities
Corporation and Anika Therapeutics UK, Ltd. All intercompany transactions have
been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consists of cash and investments with original
maturities of 90 days or less.

5
<Page>
ANIKA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
MARKETABLE SECURITIES

The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES. Marketable securities consist of commercial paper with
maturities within twelve months of the balance sheet date. The Company
classifies these marketable securities as held to maturity, and accordingly they
are carried at amortized costs. Aggregate fair value, amortized cost and average
maturity for marketable securities held at June 30, 2001 and December 31, 2000
are as follows:

<Table>
<Caption>
JUNE 30, 2001
----------------------------------------
GROSS
AMORTIZED UNREALIZED
COST HOLDING GAIN FAIR VALUE
----------- ------------ -----------

Commercial Paper (weighted average
maturity of 2.1 months).............. $ 7,421,823 $114,099 $ 7,535,922
=========== ======== ===========
</Table>

<Table>
<Caption>
DECEMBER 31, 2000
----------------------------------------
GROSS
AMORTIZED UNREALIZED
COST HOLDING GAIN FAIR VALUE
----------- ------------ -----------

Commercial Paper (weighted average
maturity of 3.4 months).............. $10,039,849 $ 82,384 $10,122,233
=========== ======== ===========
</Table>

During the six months ending June 30, 2001, securities classified as held to
maturity with an amortized cost aggregating $12,001,865, including interest and
realized gains of $310,020 matured.

FINANCIAL INSTRUMENTS

SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS,
requires disclosure about fair value of financial instruments. Financial
instruments consist of cash equivalents, marketable securities, accounts
receivable, notes receivable from officers and accounts payable. The estimated
fair values of the Company's other financial instruments approximate their
carrying values.

REVENUE RECOGNITION

Product revenue is derived from the sales of AMVISC(R) products, HYVISC(R)
and ORTHOVISC(R). ORTHOVISC(R) is sold through several distribution arrangements
as well as two outsource order processing arrangements ("logistic agents").
Product revenue is recognized upon shipment to the customer as long as there is
persuasive evidence of an arrangement, the sales price is fixed or determinable
and collection of the related receivable is probable. Amounts billed or
collected prior to recognition of revenue is classified as deferred revenue.
Sales of product through third party logistics agents in certain markets are
recognized in revenue upon shipment by the logistics agent to the customer.

6
<Page>
ANIKA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT

Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets,
as follows:

<Table>

Machinery and equipment................. 3-10 years
Furniture and fixtures.................. 3-5 years
Shorter of estimated useful life or life
Leasehold improvements.................. of lease
</Table>

IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF

The Company follows the provisions of SFAS No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
During the six months ended June 30, 2001, the Company did not identify any
impairments.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred.

INCOME TAXES

The Company provides for income taxes in accordance with SFAS No. 109,
ACCOUNTING FOR INCOME TAXES. SFAS No. 109 requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of temporary
differences between the financial reporting and tax bases of assets and
liabilities.

REPORTING COMPREHENSIVE INCOME

SFAS No. 130, REPORTING COMPREHENSIVE INCOME establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. Comprehensive income is the total of net income and all
other non-owner changes in equity including such items as unrealized holding
gains/losses on securities, foreign currency translation adjustments and minimum
pension liability adjustments. The Company had no other items of comprehensive
income for the three and six months ended June 30, 2001 and 2000 except for its
reported net loss.

DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

Operating segments are identified as components of an enterprise about which
separate discrete financial information is available for evaluation by the chief
operating decision maker, or decision-makers, in making decisions regarding how
to allocate resources and assess performance. The Company's chief
decision-making group consists of two individuals: the chief executive officer
and chief financial officer, and the president and chief operating officer.
Based on the criteria established by SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION, the Company has one reportable operating
segment, the results of which are disclosed in the accompanying financial

7
<Page>
ANIKA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
statements. Substantially all of the operations and assets of the Company have
been derived from and are located in the United States.

Revenues by geographic location in total and as a percentage of total
revenues are as follows for the three and six months ended June 30, 2001 and
2000, respectively:

<Table>
<Caption>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------------------------- -------------------------------------------------
2001 2000 2001 2000
----------------------- ----------------------- ----------------------- -----------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF
GEOGRAPHIC LOCATION: REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE
- -------------------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------

United States........ $1,955,793 67.00% $2,531,665 67.17% $3,396,275 66.62% $4,732,998 72.93%
Middle East.......... -- 0.00% 995,000 26.40% 11,950 0.23% 1,512,500 23.31%
Other/Europe......... 963,241 33.00% 242,100 6.42% 1,689,427 33.14% 244,100 3.76%
---------- ------ ---------- ------ ---------- ------ ---------- ------
Total.............. $2,919,034 100.00% $3,768,765 100.00% $5,097,652 100.00% $6,489,598 100.00%
========== ====== ========== ====== ========== ====== ========== ======
</Table>

Since early 2001, sales of product for the Turkish market have been made to
a European-based entity and have accordingly been classified in the
"Other/Europe" category since that time.

<Table>
<Caption>
PERCENT OF PRODUCT REVENUE PERCENT OF PRODUCT REVENUE
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------

AMVISC(R):
Bausch & Lomb............................ 50.9% 50.8% 56.9% 59.5%
ORTHOVISC(R):
Pharmaren AG (Biomeks in Year 2000)...... 23.7% 27.1% 22.1% 21.6%
Zimmer................................... 0.0% 12.1% 0.0% 8.5%
Other.................................... 9.0% 0.0% 11.5% 0.0%
---- ---- ---- ----
83.6% 90.0% 90.5% 89.6%
==== ==== ==== ====
</Table>

4. EARNINGS PER SHARE

The Company reports earnings per share in accordance with SFAS No. 128,
EARNINGS PER SHARE, which establishes standards for computing and presenting
earnings (loss) per share.

Basic earnings per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share is computed by dividing net income (loss) by the weighted
average number of common shares and dilutive potential common shares outstanding
during the period. Under the treasury stock method, the dilutive unexercised
options are assumed to be exercised at the beginning of the period or at
issuance, if later. The assumed proceeds are then used to purchase common shares
at the average market price during the period. For periods where the Company has
incurred a loss, dilutive net loss per share is equal to basic net loss per
share. Accordingly, the dilutive effect of outstanding options totaling 416,500
and 1,255,809, respectively at June 30, 2001 and 2000, are excluded from the
calculation of diluted weighted average shares outstanding because to include
them would have been antidilutive for the periods presented.

8
<Page>
ANIKA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

5. INVENTORIES

Inventories consist of the following:

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
---------- ------------

Raw materials....................................... $1,322,072 $1,386,504
Work in-process 2,822,997 3,169,358
Finished goods...................................... 479,604 181,783
---------- ----------
Total............................................... $4,624,673 $4,737,645
========== ==========
</Table>

Inventories are stated at the lower of cost or market, with cost being
determined using the first-in, first-out (FIFO) method. Work-in-process and
finished goods inventories include materials, labor, and manufacturing overhead.

6. PROPERTY & EQUIPMENT

Property and equipment is stated at cost and consists of the following:

<Table>
<Caption>
JUNE 30, DECEMBER 31,
2001 2000
----------- ------------

Machinery and equipment............................ $ 5,723,630 $ 6,071,812
Furniture and fixtures............................. 695,300 670,923
Leasehold improvements............................. 2,829,004 1,878,844
----------- -----------
9,247,934 8,621,579
----------- -----------
Less accumulated depreciation...................... (5,969,815) (5,498,455)
----------- -----------
Total.............................................. $ 3,278,119 $ 3,123,124
=========== ===========
</Table>

Costs of $835,000 for a clean room under construction had previously been
included in machinery and equipment. This amount was reclassified to leasehold
improvements upon its completion in the first quarter of Q1 2001.

7. NOTES RECEIVABLE FROM OFFICERS

Notes receivable from officers of $253,000 consists of loans made to one
officer and two former officers. The loan amounts are generally due at the
earlier of the end of five years from the date of the note or at the termination
of the officers' employment. The notes receivable from the former officers are
secured by mortgages on their primary residences. Interest accrues at annual
rates between 5.54% to 6.22% and is payable monthly over the term of the loans.
In connection with the departure of two former officers in June 2001, notes
totaling $129,000 were forgiven. In addition, the maturity of a note in the
amount of $75,000 to the Company's former chief executive officer, which is
secured by a mortgage on his primary residence, was extended to the earlier of
the sale of such residence or March 31, 2002.

9
<Page>
ANIKA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

8. LICENSING AND DISTRIBUTION AGREEMENT

In July 2000, the Company entered into a seven-year supply agreement (the
"BLS Agreement") with Bausch & Lomb Surgical, a unit of Bausch & Lomb. Under the
terms of the BLS Agreement, effective January 1, 2001, the Company became
Bausch & Lomb's exclusive provider of AMVISC(R) and AMVISC(R) Plus, ophthalmic
viscoelastic products, in the U.S. and international markets. The BLS Agreement
expires December 31, 2007, superceding an existing supply contract with
Bausch & Lomb Surgical that was set to expire December 31, 2001. The BLS
Agreement is subject to early termination and/or reversion to a non-exclusive
basis under certain circumstances. The BLS Agreement lifts contractual
restrictions on the Company's sales of certain ophthalmic products to other
companies, subject to payment of royalties to Bausch & Lomb by the Company. In
exchange, the Company agreed to a reduction in unit selling prices effective
April 1, 2000, and the elimination of minimum unit purchase obligations by BLS.
Under the terms of the agreement, the price for units sold in a calendar year is
dependent on total unit volume of sales of certain ophthalmic products during
the year. Accordingly, unit prices for sales occurring in the six months ended
June 30, 2001 are subject to possible retroactive price adjustments when the
annual unit volume becomes known. In accordance with the Company's revenue
recognition policy, any amounts received in excess of revenue recognized is
recorded as deferred revenue. At June 30, 2001, the deferred revenue amounted to
$237,657.

9. LEGAL MATTERS

SECURITIES AND EXCHANGE COMMISSION INVESTIGATION. The SEC has issued a
formal order of investigation and has required the Company to provide
information in connection with certain revenue recognition matters. The Company
has been cooperating fully. These matters, relating to the Company's historical
accounting for and disclosures concerning sales of ORTHOVISC(R) under a
long-term supply and distribution agreement with Zimmer, were also the subject
of the Company's March 15, 2000 disclosure concerning an informal SEC inquiry
and the restatement of results for 1998 and the first three quarters of 1999. On
August 14, 2001, as a result of the SEC's on-going investigation, the Company,
in conjunction with its independent auditors, determined to again restate its
financial results for the fourth quarter of 1998 and the first quarter of 1999
(as discussed in Note 10 herein). The Company is not in a position to predict
the probable outcome of this matter or its potential impact on the Company's
business or operations.

PUTATIVE CLASS ACTION COMPLAINTS. Three putative class action complaints
have been filed against the Company, J. Melville Engle, the Company's former
chief executive officer, and Sean Moran, the Company's former chief financial
officer, in the United States District Court for the District of Massachusetts
(the "Court") on behalf of all purchasers of the Company's shares between
April 15, 1998 and May 30, 2000 (the "Class"). The first, filed on or about
June 8, 2000, is captioned CASAZZA, ET AL. V. ANIKA THERAPEUTICS, INC., J.
MELVILLE ENGLE AND SEAN MORAN, Civil Action No. 00-11127-WGY. The second, filed
on or about June 26, 2000, is captioned NEMETH-COSLETT, ET AL. V. ANIKA
THERAPEUTICS, INC., J. MELVILLE ENGLE AND SEAN MORAN, Civil Action
No. 00-11257-WGY. The third, filed on or about August 2, 2000, is captioned
ROCKEFELLER, ET AL. V. ANIKA THERAPEUTICS, INC., J. MELVILLE ENGLE AND SEAN
MORAN, Civil Action No. 00-11540-WGY. Each of these putative class action
complaints encompasses the same class period and covers almost identical
allegations. On or about August 7, 2000, David and Vivian West, alleged members
of the Class, filed a motion to appoint themselves lead plaintiffs, and their
law firm, lead counsel; as well as a motion for consolidation of the above
cases. On or about September 13, 2000, the Court granted David and Vivian West's
motions, consolidated the cases and recaptioned the

10
<Page>
ANIKA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9. LEGAL MATTERS (CONTINUED)
case IN RE ANIKA THERAPEUTICS, INC. SECURITIES LITIGATION, Civil Action
No. 00-11127-WGY. On or about October 30, 2000, lead plaintiffs filed a
consolidated amended complaint. The complaint alleges that the Company and the
individual defendants violated the federal securities laws by, INTER ALIA,
making material misrepresentations and omissions in certain public disclosures
during the period between April 15, 1998 and May 30, 2000. The alleged
misrepresentations and omissions relate to the Company's historical revenue
recognition policies and its restatement of revenues for 1998 and the first
three quarters of 1999. The complaint seeks an unspecified amount of monetary
damages, costs and expenses, and equitable and/or injunctive relief to restrict
the defendants from disposing of various assets in order to assure adequate
funds are available for the claimed damages. On December 14, 2000, the Company,
Mr. Engle and Mr. Moran each filed motions to dismiss the consolidated amended
complaint. On January 29, 2001, plaintiffs' counsel filed oppositions to
defendants' motions to dismiss. The Defendants filed reply briefs on
February 12, 2001.

Before the Court decided the motions to dismiss, the parties reached
agreement on the terms of a potential settlement of the action. Accordingly, the
parties negotiated and entered into a Memorandum of Understanding dated
March 8, 2001 and the parties negotiated and entered into a Stipulation and
Agreement of Settlement, Compromise and Release ("Stipulation") dated May 25,
2001, which contains the terms of a settlement of the action, subject to
approval by the Court.

The Stipulation was submitted to the Court and, on May 31, 2001, the Court
entered an Order of Preliminary Approval in connection with the settlement
proceedings. After preliminary approval, plaintiff's counsel sent notice of the
proposed settlement to the Class, and the Company paid $1.25 million into a
settlement fund that may, among other things, be used to pay authorized members
of the Class. The Company entered into an agreement with its directors and
officers liability insurer, under which the insurer paid the Company $400,000 in
exchange for a release of the insurer's obligations under the policy, which
policy's term was from December 1, 1999 to November 30, 2000 and which time
period covers the allegations made in the securities class action litigation as
well as the SEC investigation. The Company applied the $400,000 to the
settlement amount in the shareholder class action lawsuit.

In the Stipulation, the parties requested that the Court have a Final
Settlement Hearing at which, among other things, (i) the Court would certify,
for purposes of settlement, the Class, and certify, for purposes of settlement,
the Action as a class action; (ii) the Court would finally approve the
settlement as provided for in the Stipulation, including the release of all
claims by Class members against the Defendants; and (iii) the Court would enter
final judgment dismissing with prejudice all claims of the plaintiffs and the
Class against the Defendants. The Court originally scheduled the Final
Settlement Hearing for August 8, 2001. Pursuant to the joint request of counsel
for the plaintiffs and counsel for the Company, the hearing was extended because
of the restatement of financial results for certain prior periods as discussed
in Note 10 herein. The Final Settlement Hearing has not yet been rescheduled.
The Court has not yet finally approved the Settlement. The Company is not able
to provide any assurances that: (i) the proposed settlement will be finally
approved by the Court; or (ii) the terms of any final settlement approved by the
Court will not differ from the terms of the Stipulation.

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ANIKA THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

10. RESTATEMENT

On August 14, 2001, as a result of the SEC's ongoing investigation, the
Company announced the restatement of its financial results for the fourth
quarter of 1998 and the first quarter of 1999. This restatement involves the
timing of recognition of revenues for the sale of ORTHOVISC(R) to Zimmer,
formerly an ORTHOVISC(R) distributor. The Company and its independent auditors
determined that certain revenue previously recognized in the fourth quarter of
1998 should have been recognized in the first quarter of 1999. Accordingly,
revenue for the fourth quarter of 1998 is reduced by $343,000 to $3,060,000 and
revenue for the first quarter of 1999 is increased by the same amount to
$3,679,000. The impact on earnings in the fourth quarter of 1998 is a reduction
of $119,000, or $.01 per share, to income of $489,000. The impact on earnings in
the first quarter of 1999 is an increase of $119,000, or $.01 per share, to a
loss of $3,050,000. The restated revenue for the years ended December 31, 1998
and 1999 is $12,930,000 and $13,826,000, respectively. The restated results for
the years ended December 31, 1998 and 1999 include, respectively, net income of
$3,633,000, or $.33 per share, and a net loss of $2,377,000, or $.23 per share.
The Company expects to file an amended Form 10-K for the year ended
December 31, 2000.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS OF ANIKA THERAPEUTICS, INC. AND THE NOTES THERETO AS WELL
AS THE "RISK FACTORS AND CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS"
HEREIN.

The Company derives a substantial portion of its revenue from the sale of
AMVISC(R) and AMVISC(R)Plus to Bausch & Lomb Surgical. For the three months
ended June 30, 2001 and 2000, AMVISC sales accounted for 50.9% and 50.8% of
product revenue, respectively. For the six months ended June 30, 2001 and 2000,
AMVISC sales accounted for 56.9% and 59.5% of product revenue, respectively.

RESULTS OF OPERATIONS

PRODUCT REVENUE. Product revenue for the three months ended June 30, 2001
was $2,919,034, a decrease of $749,731, or 20%, from $3,668,765 recorded in the
corresponding quarter of 2000. Product revenue associated with ORTHOVISC(R)
decreased by $716,317 in the second quarter of 2001 compared to the second
quarter of 2000. Product revenue for the six months ended June 30, 2001 was
$5,097,652, a decrease of $1,191,946, or 19%, over the $6,289,598 recorded in
the comparable period of the prior year. The decrease was primarily attributable
to lower ORTHOVISC(R) sales of $589,006 and lower AMVISC(R) product sales of
$749,443. The Company believes that lower ORTHOVISC(R) sales are attributable to
reduced sales in Europe and Canada as a result of the termination of the
ORTHOVISC(R) distribution agreement with Zimmer, as well as reduced selling
prices to another customer. The reduced selling price was negotiated to meet
competitive market conditions and is not expected to result in increased volume
to offset the price reduction in future periods. AMVISC(R) product sales were
lower compared with 2000 as a result of lower unit prices under the BLS
Agreement, effective April 1, 2000, partially offset by higher unit volumes.

LICENSING REVENUE. There was no licensing revenue for the three and six
months ended June 30, 2001 due to the termination of the ORTHOVISC distribution
agreement on November 10, 2000. For the three and six months ended June 30,
2000, licensing revenues of $100,000 and $200,000, respectively, represented the
annual amortization of certain milestone payments received in 1997 and 1998 in
connection with terminated ORTHOVISC(R) agreement with Zimmer.

GROSS PROFIT. Gross profit for the three months ended June 30, 2001 was
$809,985, a decrease of $536,163, or 40%, from $1,346,148 recorded in the prior
year corresponding quarter. Gross profit for the six months ended June 30, 2001
was $1,019,655 compared with $2,834,013 for the first six months of 2000, a
decrease of 36%. These decreases reflect lower sales, as well as lower prices
for ORTHOVISC(R) sales to the Company's distributor for the Turkish market, as
well as the absence of amortized license fee revenue included in the prior year
period. In addition, the first quarter of 2001 reflects lower unit prices for
the Company's sales to Bausch and Lomb. Further, costs of sales for the three
and six months ending June 30, 2001 includes approximately $500,000 and
$1,200,000, respectively, attributable to underutilization of manufacturing
capacity resulting from the Company's efforts to reduce work-in-process and
other inventory. The Company expects to continue to experience the impacts of
this underutilization through 2001.

RESEARCH & DEVELOPMENT. Research and development expenses for the three
months ended June 30, 2001 increased by $14,098 to $921,325 from $907,227
recorded in the corresponding quarter of the prior year. Research and
development expenses for the six months ended June 30, 2001 increased $48,231,
or 2%, compared to the same period in 2000. Research and development was
$426,545 lower in the second quarter of 2001 compared with the first quarter of
2001. The first quarter included approximately $700,000 in startup costs
associated with the new ORTHOVISC(R) Phase III clinical

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trial and development costs for INCERT(R). Enrollment of patients in the
ORTHOVISC(R) clinical trial has been slower than the Company had anticipated and
this will delay completion of the trial. Costs for INCERT(R) in the second
quarter were substantially lower than in the first quarter as the Company is
evaluating various development options for this product and its underlying
technology, including reconsideration of the Company's previous plans to launch
a clinical trial in 2001.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the three months ended June 30, 2001 increased by $871,639, or 88%,
to $1,858,790 from $987,151 in the corresponding quarter of the prior year. For
the six months ended June 30, 2001, selling, general and administrative expenses
increased $1,260,751 or 63% compared to the same period in the prior year. The
increase was largely attributable to accrued separation costs of $515,000
related to management changes implemented in June 2001. Costs of the management
separation include the forgiveness of officer loans totaling $129,000. For the
six-month period, professional fees represent approximately $138,000 of the
increase in 2001 as compared with 2000.

LITIGATION SETTLEMENT COSTS. Litigation settlement costs for the three and
six months ended June 30, 2001 includes a charge of $850,000, which is the
amount of the $1.25 million settlement amount contributed by the Company, in
settlement fees, and $36,480 in professional fees related to the putative class
action suit. For the six months ended June 30, 2001, professional fees related
to the putative class action suit were $100,716. The settlement is subject to
final court approval. See Note 9.

NET INTEREST INCOME. The Company's net interest income decreased by
$123,539 to $206,202 for the three months ended June 2001 from $329,741 in the
corresponding quarter of the prior year. Net interest income for the six months
ended June 30, 2001 was $478,781 compared with $590,989 for the same period in
2000. The decrease is attributable to reduced average cash balances and lower
interest rates during the first six months of 2001.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2001, the Company had cash, cash equivalents and short term
investments of $15.7 million and working capital of $18.2 million versus cash,
cash equivalents and short term investments of $18.3 million and working capital
of $23.1 million at December 31, 2000. Investments at June 30, 2001 consist of
commercial paper of various maturities of less than one year.

During the first half of 2001, the Company utilized $1,999,603 of cash in
operations, primarily related to the net loss, including the payment of $850,000
to the settlement fund in connection with the pending shareholder litigation
settlement, and partially offset by the decrease in accounts receivable, and an
increase in accounts payable and accrued expenses.

Capital expenditures were $626,355 during the six month period ended
June 30, 2001. Approximately $340,000 of these expenditures was used for the
construction of certain pilot laboratory projects, as previously disclosed.
Aggregate capital investments for 2001 are expected to be approximately
$1 million.

As described in financial statement Note 10--"Legal Matters", three putative
class action lawsuits have been filed against the Company and former officers of
the Company. These lawsuits have been consolidated. The parties negotiated and
entered into a Memorandum of Understanding dated March 8, 2001, and the parties
negotiated and entered into a Stipulation and Agreement of Settlement,
Compromise and Release ("Stipulation") dated May 25, 2001, which contains the
terms of a settlement of the action, subject to approval by the Court.

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$1.25 million into a settlement fund that may, among other things, be used to
pay authorized members of the Class. The Company entered into an agreement with
its directors and officers liability insurer, under which the insurer paid the
Company $400,000 in exchange for a release of the insurer's obligations under
the policy, which policy's term was from December 1, 1999 to November 30, 2000
and which time period covers the allegations made in the securities class action
litigation as well as the SEC investigation. The Company applied the $400,000 to
the settlement amount in the shareholder class action lawsuit.

The Company's future capital requirements and the adequacy of available
funds will depend on numerous factors, including: market acceptance of its
existing and future products; the successful commercialization of products in
development; progress in its product development efforts; the magnitude and
scope of such efforts; progress with preclinical studies; clinical trials and
product clearances by the FDA and other agencies; the cost, and timing
requirements of its efforts to expand its manufacturing capabilities; the cost
of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights; defending, negotiating, and settling legal
matters; competing technological and market developments; and the development of
strategic alliances for the marketing of certain of its products. There can be
no assurance that the Company will record profits in future periods. See "Risk
Factors and Certain Other Factors Affecting Future Operating Results--History of
Losses; Uncertainty of Future Profitability" for other factors which could
affect the Company's future capital requirements and the adequacy of available
funds.

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RISK FACTORS AND CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS

THIS QUARTERLY REPORT ON FORM 10-Q 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. THE WORDS "BELIEVE," "EXPECT,"
"ANTICIPATE," "INTEND," "WILL", "DEVELOP", "WOULD", FUTURE", "CAN", "MAY",
"COULD" AND OTHER EXPRESSIONS, WHICH ARE PREDICTIONS OF, OR INDICATE FUTURE
EVENTS AND TRENDS AND WHICH DO NOT RELATE TO HISTORICAL MATTERS, IDENTIFY
FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN
RISKS, UNCERTAINTIES AND OTHER FACTORS, INCLUDING BUT NOT LIMITED TO STATEMENTS
REGARDING: FUTURE SALES AND PRODUCT REVENUES, NEGOTIATIONS WITH POTENTIAL AND
EXISTING CUSTOMERS, POSSIBLE DEVELOPMENT OF NEW PRODUCTS, POSSIBLE STRATEGIC
INVESTMENTS, POSSIBLE REGULATORY APPROVAL OF NEW OR POTENTIAL PRODUCTS, THE
IMPACT OF THE TERMINATION OF THE ORTHOVISC(R) DISTRIBUTION AGREEMENT WITH
ZIMMER, ACQUISITION OF NEW DISTRIBUTION AND COLLABORATION PARTNERS, PERFORMANCE
UNDER THE BLS AGREEMENT AND THE OUTCOME, AND IMPACT OF THE SEC INVESTIGATION AND
PAYMENT OF EXPENSES CONCERNING THE PUTATIVE CLASS ACTION COMPLAINT. THE
COMPANY'S ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENT COULD DIFFER MATERIALLY
FROM ANTICIPATED RESULTS, PERFORMANCE OR ACHIEVEMENT, EXPRESSED OR IMPLIED IN
SUCH FORWARD-LOOKING STATEMENTS. IN PARTICULAR, THERE CAN BE NO ASSURANCE THAT
THE COMPANY WILL: (I) BEGIN CLINICAL TRIALS OF INCERT(R)-S; (II) SUCCESSFULLY
COMPLETE CLINICAL TRIALS OF ORTHOVISC(R) OR INCERT(R)-S; (III) OBTAIN CLINICAL
DATA TO SUPPORT A PRE-MARKET APPROVAL APPLICATION AND/OR FDA APPROVAL OF
ORTHOVISC(R) OR INCERT(R)-S; (IV) RECEIVE FDA OR OTHER REGULATORY APPROVALS OF
ORTHOVISC(R) OR INCERT(R)-S OR THAT SUCH APPROVALS WILL BE OBTAINED IN A TIMELY
MANNER OR WITHOUT THE NEED FOR ADDITIONAL CLINICAL TRIALS. THERE CAN BE NO
ASSURANCE THAT THE TERMINATION OF THE DISTRIBUTION AGREEMENT WITH ZIMMER WILL
NOT CONTINUE TO HAVE A MATERIAL ADVERSE IMPACT ON SALES OR DISTRIBUTION OF
ORTHOVISC(R) OR THAT THE COMPANY WILL BE ABLE TO IDENTIFY OR ENGAGE APPROPRIATE
DISTRIBUTION OR COLLABORATION PARTNERS FOR SALES OF ORTHOVISC(R) OR INCERT(R)-S
OR EFFECTIVELY TRANSITION THE DISTRIBUTION OF ORTHOVISC(R) OR INCERT(R)-S TO
SUCH DISTRIBUTORS, IF ENGAGED. IN ADDITION, THERE CAN BE NO ASSURANCE THAT ANY
DELAY IN RECEIVING ANY SUCH APPROVALS WILL NOT ADVERSELY EFFECT THE COMPANY'S
COMPETITIVE POSITION OR, IF COMPLETED, MEANINGFUL SALES OF THE PRODUCTS WILL BE
ACHIEVED. THERE CAN BE NO ASSURANCE THAT THE COMPANY'S INVENTORY REDUCTION OR
OTHER EFFORTS WILL RESULT IN IMPROVED GROSS MARGINS DURING 2001 OR EVER. THERE
CAN BE NO ASSURANCES THAT: (I) THE COMPANY WILL ACHIEVE INCREMENTAL SALES OF ITS
OPHTHALMIC PRODUCTS TO BAUSCH & LOMB SURGICAL AND/OR OTHER COMPANIES SUFFICIENT
TO OFFSET THE EFFECTS OF THE PRICE REDUCTION AND ROYALTIES TO BE PAID TO
BAUSCH & LOMB SURGICAL OR (II) BAUSCH & LOMB SURGICAL WILL MAKE PURCHASES IN
ACCORDANCE WITH ITS FORECASTS. FURTHERMORE, THE COMPANY CANNOT MAKE ANY
ASSURANCE THAT THE CURRENT LEVELS OF SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES WILL NOT CONTINUE. ADDITIONAL FACTORS THAT MIGHT CAUSE SUCH A
DIFFERENCE ARE SET FORTH HEREIN AND IN THE "MANAGEMENT'S DISCUSSIONS AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" BEGINNING ON PAGE 11
OF THIS QUARTERLY REPORT ON FORM 10-Q AS WELL AS THOSE DESCRIBED IN THE
COMPANY'S ANNUAL REPORT ON FORM 10-K, AS IT WILL BE AMENDED, ITS QUARTERLY
REPORT ON FORM 10-Q, AND THE COMPANY'S PRESS RELEASES AND OTHER FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE COMPANY UNDERTAKES NO OBLIGATION TO
PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENT WHETHER AS A RESULT OF
NEW INFORMATION, FUTURE EVENTS OF OTHERWISE.

COMPREHENSIVE GOVERNMENT REGULATION; NO ASSURANCE OF FDA APPROVAL. The
Company's products, product development activities, manufacturing processes, and
current and future sales and marketing are subject to extensive and rigorous
regulation by the Food & Drug Administration (FDA) and comparable agencies in
foreign countries. In the United States, the FDA regulates the marketing,
advertising, promotion, and distribution of medical devices, drugs, and
biologics, as well as testing, safety, effectiveness, clearance, approval,
manufacturing, labeling, packing, storage, record keeping, and reporting
activities for such products.

Medical products regulated by the FDA are generally classified as medical
devices and/or drugs and/or biologics. Product development and approval within
the FDA framework takes a number of years and involves the expenditure of
substantial resources. There can be no assurance that the FDA will grant
approval for the Company's new products on a timely basis if at all, or that FDA
review will

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not involve delays that will adversely affect the Company's ability to
commercialize additional products or expand permitted uses of existing products,
or that the regulatory framework will not change, or that additional regulation
will not arise at any stage of the Company's product development process which
may adversely affect approval of or delay an application or require additional
expenditures by the Company. In the event the Company's future products are
regulated as human drugs or biologics, the FDA's review process of such products
typically would be substantially longer and more expensive than the review
process to which they are currently subject as devices.

The Company's ORTHOVISC(R) product will have to meet regulatory requirements
for a Class III device as determined by the FDA. Class III devices are those
that generally must receive pre-market approval (PMA) by the FDA (e.g.
life-sustaining, life-supporting and implantable or new devices which have not
been found to be substantially equivalent to legally marketed devices) and
require clinical testing to ensure safety and effectiveness and FDA approval
prior to marketing and distribution. In order for the Company to commercially
distribute ORTHOVISC(R) in the U.S., it must obtain a PMA. The PMA process can
be expensive, uncertain and lengthy. A number of devices for which PMAs have
been sought have never been approved for marketing. The review of an application
often occurs over a protracted time period, potentially taking two years or more
from the filing date to complete. The Company submitted a PMA application for
ORTHOVISC(R) in December 1997. In October 1998, the Company was notified by the
FDA that the Company's PMA application for ORTHOVISC(R) was not approvable and
that additional clinical data would be required to demonstrate the effectiveness
of ORTHOVISC(R). The Company submitted an Investigational Device Exemption (IDE)
to the FDA in February 1999 and received approval in late March 1999 to commence
a second Phase III clinical study. The Company received initial results from the
Phase III clinical trial in late May 2000 that the Company determined did not
show sufficient efficacy to support the filing of a PMA application. The Company
has evaluated available information and announced its intention to pursue
further clinical trials. In February 2001, the Company commenced another Phase
III clinical trial of ORTHOVISC(R). The trial is being conducted in up to 20
centers in the U.S. and Canada, with 360 patients expected to be enrolled, and
with evaluation over a six-month period following treatment. To date, enrollment
of patients in the clinical trial has been slower than the Company had
anticipated which will delay completion of the trial. There can be no assurance
that: (i) any additional clinical data will support the efficacy of
ORTHOVISC(R); (ii) the Company will complete any additional clinical trials of
ORTHOVISC(R); (iii) the Company will be able to successfully complete the FDA
approval process; or (iv) additional clinical trials will support a PMA
application and/or FDA approval in a timely manner or at all. There also can be
no assurance that any delay in receiving FDA approvals will not continue to
adversely affect the Company's competitive position. (See "Competition")
Furthermore, even if the Company were to receive a PMA approval: (i) the
approval may include significant limitations on the indications and other claims
sought for use for which the product may be marketed; (ii) the approval may
include other significant conditions to approval such as post-market testing,
tracking, or surveillance requirements; and (iii) the Company may not be able to
achieve meaningful sales of ORTHOVISC(R) in the U.S.

The Company's HA product under development, INCERT(R)-S, has not obtained
regulatory approval in the U.S. for commercial marketing and sale. The Company
believes that INCERT(R)-S will be regulated as a Class III medical device and
will require a PMA prior to marketing. The Company has received IDE approval
from the FDA and is evaluating product development activities, including the
prospects for conducting clinical trials for INCERT(R)-S. There can be no
assurance that: (i) the Company will begin or successfully complete clinical
trials of INCERT(R)-S; (ii) the clinical data will support the efficacy of
INCERT(R)-S; (iii) it will be able to successfully complete the FDA approval
process; or (iv) additional clinical trials will support a PMA application
and/or FDA approval in a timely manner or at all. There also can be no assurance
that any delay in receiving FDA approvals will not adversely affect the
Company's competitive position. Furthermore, even if the Company does receive
FDA approval: (i) the approval may include significant limitations on the
indications and other

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claims sought for use for which the product may be marketed; (ii) the approval
may include other significant conditions of approval such as post-market
testing, tracking, or surveillance requirements; and /or (iii) meaningful sales
of INCERT(R)-S may never be achieved.

Orquest has not received regulatory approval in the U.S. for the commercial
marketing and sale of OSSIGEL(R). The Company believes that OSSIGEL(R) will be
regulated as a Class III medical device with the FDA's Center of Biologics
Research and Review as the lead review center and will require a PMA prior to
marketing. There can be no assurance that clinical trials of OSSIGEL(R) will
demonstrate that OSSIGEL(R) is safe and effective or otherwise satisfies FDA
requirements.

Once obtained, marketing approval can be withdrawn by the FDA for a number
of reasons, including, among other things, the failure to comply with regulatory
standards, or the occurrence of unforeseen problems following initial approval.
The Company may be required to make further filings with the FDA under certain
circumstances. The FDA's regulations require a PMA supplement for certain
changes if they affect the safety and effectiveness of an approved device,
including, but not limited to, new indications for use, labeling changes, the
use of a different facility to manufacture, process or package the device, and
changes in performance or design specifications. Changes in manufacturing that
effect safety and effectiveness may be deemed approved after a 30-day notice
unless the FDA requests a supplement. Failure by the Company to receive approval
of a PMA supplement regarding the use of a different manufacturing facility or
any other change affecting the safety or effectiveness of an approved device on
a timely basis, or at all, may have a material adverse effect on the Company's
business, financial condition, and results of operations. The FDA could also
limit or prevent the manufacture or distribution of the Company's products and
has the power to require the recall of such products. Significant delay or cost
in obtaining, or failure to obtain FDA approval to market products, any FDA
limitations on the use of the Company's products, or any withdrawal or
suspension of approval or rescission of approval by the FDA could have a
material adverse effect on the Company's business, financial condition, and
results of operations.

In addition, all FDA approved or cleared products manufactured by the
Company must be manufactured in compliance with FDA's Good Manufacturing
Practices (GMP) regulations and, for medical devices, FDA's Good Manufacturing
Practices/Quality System Regulations (GMP/QSR). Ongoing compliance with GMP/QSR
and other applicable regulatory requirements is enforced through periodic
inspection by state and federal agencies, including the FDA. The FDA may inspect
the Company and its facilities from time to time to determine whether the
Company is in compliance with regulations relating to medical device and
manufacturing companies, including regulations concerning manufacturing,
testing, quality control and product labeling practices. There can be no
assurance that the Company will be able to comply with current or future FDA
requirements applicable to the manufacture of products.

FDA regulations depend heavily on administrative interpretation and there
can be no assurance that the future interpretations made by the FDA or other
regulatory bodies, with possible retroactive effect, will not adversely affect
the Company. In addition, changes in the existing regulations or adoption of new
governmental regulations or policies could prevent or delay regulatory approval
of the Company's products.

Failure to comply with applicable regulatory requirements could result in,
among other things, warning letters, fines, injunctions, civil penalties, recall
or seizure of products, total or partial suspension of production, refusal of
the FDA to grant pre-market clearance or pre-market approval for devices,
withdrawal of approvals and criminal prosecution.

In addition to regulations enforced by the FDA, the Company is subject to
other existing and potential future federal, state, local and foreign
regulations. International regulatory bodies often establish regulations
governing product standards, packing requirements, labeling requirements, import
restrictions, tariff regulations, duties and tax requirements. To enable the
Company to market

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ORTHOVISC(R) in Europe, the Company was required to receive a "CE" marking
certification, an international symbol of quality and compliance with the
applicable European medical device directive. In October 1996, the Company
received an EC Design Examination and an EC Quality System Certificate from a
European Notified Body, which entitled the Company to affix a CE marking for
ORTHOVISC(R) as a viscoelastic supplement or a replacement for synovial fluid in
human joints. There can be no assurance that the Company will be able to achieve
and/or maintain compliance required for CE marking or other foreign regulatory
approvals for any or all of its products or that it will be able to produce its
products in a timely and profitable manner while complying with applicable
requirements. Federal, state, local and foreign regulations regarding the
manufacture and sale of medical products are subject to change. The Company
cannot predict what impact, if any, such changes might have on its business. The
requirements relating to the conduct of clinical trials, product licensing,
pricing and reimbursement also vary widely from country to country.

The process of obtaining approvals from the FDA and other regulatory
authorities can be costly, time consuming, and subject to unanticipated delays.
There can be no assurance that approvals or clearances of the Company's products
will be granted or that the Company will have the necessary funds to develop
certain of its products. Any failure to obtain, or delay in obtaining such
approvals or clearances, could adversely affect the ability of the Company to
market its products.

HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY. From its inception,
up until December 31, 1996 and in 1999 and 2000, the Company had incurred annual
operating losses. As of June 30, 2001, the Company had an accumulated deficit of
approximately $9,568,000. The continued development of the Company's products
will require the commitment of substantial resources to conduct research and
preclinical and clinical development programs, and to establish sales and
marketing capabilities or distribution arrangements. The ability of the Company
to reach profitability is highly uncertain. To achieve profitability, the
Company must, among other things, successfully complete development of certain
of its products, obtain regulatory approvals and establish sales and marketing
capabilities or distribution arrangements for certain of its products.

COMPETITION. The Company competes with many companies, including, among
others, large pharmaceutical companies and specialized medical products
companies. Many of these companies have substantially greater financial and
other resources, larger research and development staffs, more extensive
marketing and manufacturing organizations and more experience in the regulatory
process than the Company. The Company also competes with academic institutions,
governmental agencies and other research organizations that may be involved in
research, development and commercialization of products. Because a number of
companies are developing HA products for similar applications, the successful
commercialization of a particular product will depend in part upon the ability
of the Company to complete clinical studies and obtain FDA marketing and foreign
regulatory approvals prior to its competitors, or, if regulatory approval is not
obtained prior to competitors, the markets for these products will be sufficient
to permit meaningful sales of the Company's products. There can be no assurance
that the Company will be able to compete against current or future competitors
or that competition will not have a material adverse effect on the Company's
business, financial condition and results of operations. The Company is
currently experiencing pricing pressures in the Turkish market from increased
competition which may or may continue to hinder its ability to effectively
compete in that market. As a result, prices to our Turkish distributor have
decreased.

UNCERTAINTY REGARDING SUCCESS OF CLINICAL TRIALS. Several of the Company's
products, including ORTHOVISC(R), as well as the potential product of the
Company's collaborative partner such as OSSIGEL(R), will require clinical trials
to determine their safety and efficacy for U.S. and international marketing
approval by regulatory bodies, including the FDA. In late May 2000, the
Company's initial analysis of the results of its second Phase III clinical trial
of ORTHOVISC(R) did not show sufficient efficacy to support the filing of a PMA
application to obtain FDA approval. The

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Company has evaluated available information and announced the commencement of
further clinical trials. The Company has received Investigational Device
Exemption (IDE) approval from the FDA. There can be no assurance that (i) any
additional clinical data will support the efficacy of ORTHOVISC(R), (ii) the
Company will begin clinical trials of INCERT(R)-S or complete any additional
clinical trials of ORTHOVISC(R) or INCERT(R)-S, (iii) it will be able to
successfully complete the FDA approval process for either ORTHOVISC(R) or
INCERT(R)-S, or (iv) additional ORTHOVISC(R) or INCERT(R)-S clinical trials will
support a PMA application and/or FDA approval in a timely manner or at all.
There can be no assurance that the Company or its collaborative partner will not
encounter additional problems that will cause it to delay, suspend or terminate
clinical trials. In addition, the Company cannot provide any assurance that such
clinical trials, if completed, will ultimately demonstrate these products to be
safe and efficacious.

DEPENDENCE UPON MARKETING AND DISTRIBUTION PARTNERS. The Company's success
will be dependent, in part, upon the efforts of its marketing partners and the
terms and conditions of the Company's relationships with such marketing
partners.

In addition, there can be no assurances that such marketing partners will
not seek to renegotiate their current agreements on terms less favorable to the
Company. Under the terms of the BLS Agreement, effective January 1, 2001, the
Company became Bausch & Lomb Surgical's exclusive provider of AMVISC(R) and
AMVISC(R) Plus, ophthalmic viscoelastic products, in the U.S. and international
markets. The BLS Agreement expires December 31, 2007, superseding an existing
supply contract with Bausch & Lomb Surgical that was set to expire December 31,
2001. The BLS Agreement is subject to early termination and/or reversion to a
non-exclusive basis under certain circumstances. The BLS Agreement lifts
contractual restrictions on the Company's sales of certain ophthalmic products
to other companies, subject to payment of royalties by the Company. In exchange,
the Company agreed to a reduction in unit selling prices retroactively effective
to April 1, 2000 and the elimination of minimum unit purchase obligations by
BLS.

The Company has not achieved incremental sales of its ophthalmic products to
Bausch & Lomb Surgical and/or other companies sufficient to offset the effects
of the price reduction and royalties to Bausch & Lomb Surgical and there can be
no assurances that the Company will be able to do so in the future. The Company
expects that, at least through 2001, the reduction in unit prices will result in
a decrease in the Company's revenue and gross margin from Bausch & Lomb
Surgical. In addition, under certain circumstances, (i) Bausch & Lomb Surgical
has the right to terminate the agreement and/or (ii) the agreement may revert to
a non-exclusive basis; in each case, the Company cannot make any assurances that
such circumstances will not occur. For the three months ended June 30, 2001 and
2000, sales of AMVISC(R) products to Bausch & Lomb Surgical accounted for 50.9%
and 50.8% of product revenues, respectively. For the six months ended June 30,
2001 and 2000, sales of AMVISC(R) products to Bausch & Lomb Surgical accounted
for 56.9% and 59.5% of product revenues, respectively. Although the Company
intends to continue to seek new opthalmic product customers, there can be no
assurances that the Company will be successful in obtaining new customers or to
achieve meaningful sales to such new customers.

The ORTHOVISC(R) Distribution Agreement with Zimmer provided Zimmer with
exclusive marketing and distribution rights to ORTHOVISC(R) in the United
States, Canada, Latin America, Asia and most of Europe. On November 10, 2000,
the Company reached an agreement with Zimmer for an early termination of its
marketing and distribution agreement for ORTHOVISC(R). The termination may
continue to have a material adverse effect on the Company's ability to market
ORTHOVISC(R), which is likely to have a material adverse effect on the Company's
future operating results. The Company has relationships with logistics agents
(outsource order processing providers) to distribute ORTHOVISC(R) to customers
in Canada and European countries previously served by Zimmer. The Company is
seeking to establish long-term relationships with new distribution partners in
those countries where Zimmer previously sold the product. There can be no
assurance that the

20
<Page>
Company will be able to identify or engage appropriate distribution or
collaboration partners or effectively transition to any such partners. There can
be no assurance that the Company will obtain European or other reimbursement
approvals or, if such approvals are obtained, they will be obtained on a timely
basis or at a satisfactory level of reimbursement.

The Company will need to obtain the assistance of additional marketing
partners to bring new and existing products to market and to replace certain
marketing partners, such as Zimmer. There can be no assurance that such
additional partners will be available or that such partners will agree to market
the Company's products on acceptable terms. The failure to establish strategic
partnerships for the marketing and distribution of the Company's products on
acceptable terms will have a material adverse effect on the Company's business,
financial condition, and results of operations.

UNCERTAINTY OF MARKET ACCEPTANCE OF FUTURE PRODUCTS. The Company's success
will depend in part upon the acceptance of the Company's future products by the
medical community, hospitals and physicians and other health care providers, and
third-party payors. Such acceptance may depend upon the extent to which the
medical community perceives the Company's products as safer, more effective or
cost-competitive than other similar products. Ultimately, for the Company's new
products to gain general market acceptance, it will also be necessary for the
Company to develop marketing partners for the distribution of its products.
There can be no assurance that the Company's new products will achieve
significant market acceptance on a timely basis, or at all. Failure of some or
all of the Company's future products to achieve significant market acceptance
could have a material adverse effect on the Company's business, financial
condition and results of operations.

DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY. The Company's success
will depend, in part, on its ability to obtain and enforce patents, protect
trade secrets, obtain licenses to technology owned by third parties when
necessary, and conduct its business without infringing on the proprietary rights
of others. The patent positions of pharmaceutical, medical products and
biotechnology firms, including the Company, can be uncertain and involve complex
legal and factual questions. There can be no assurance that any patent
applications will result in the issuance of patents or, if any patents are
issued, whether they will provide significant proprietary protection or
commercial advantage, or will not be circumvented by others. In the event a
third party has also filed one or more patent applications for any of its
inventions, the Company may have to participate in interference proceedings
declared by the U.S. Patent and Trademark Office ("PTO") to determine priority
of invention (see below), which could result in failure to obtain or the loss of
patent protection for the inventions and the loss of any right to use the
inventions. Even if the eventual outcome is favorable to the Company, such
interference proceedings could result in substantial cost to the Company. Filing
and prosecution of patent applications, litigation to establish the validity and
scope of patents, assertion of patent infringement claims against others and the
defense of patent infringement claims by others can be expensive and time
consuming. There can be no assurance that in the event that any claims with
respect to any of the Company's patents, if issued, are challenged by one or
more third parties, that any court or patent authority ruling on such challenge
will determine that such patent claims are valid and enforceable. An adverse
outcome in such litigation could cause the Company to lose exclusivity covered
by the disputed rights. If a third party is found to have rights covering
products or processes used by the Company, the Company could be forced to cease
using the technologies or marketing the products covered by such rights, could
be subject to significant liabilities to such third party, and could be required
to license technologies from such third party. Furthermore, even if the
Company's patents are determined to be valid, enforceable, and broad in scope,
there can be no assurance that competitors will not be able to design around
such patents and compete with the Company using the resulting alternative
technology.

The Company has a policy of seeking patent protection for patentable aspects
of its proprietary technology. It filed five (5) patent applications in the
first quarter of 2001. The Company co-owns certain United States patents with
claims relating to the chemical modification of HA and certain adhesion
prevention and drug delivery uses of HA. Two patents in this portfolio were
issued in the year

21
<Page>
2000. The Company also solely owns patents directed to certain manufacturing
processes. The Company holds an exclusive license from Tufts University to use
technologies claimed in a United States patent application which has been
granted a Notice of Allowance from the U.S. Patent Office for the
anti-metastasis applications of HA oligosaccharides. The Company's patents
expire between 2007 and 2015 and the license expires upon expiration of all
related patents. The Company intends to seek patent protection with respect to
products and processes developed in the course of its activities when it
believes such protection is in its best interest and when the cost of seeking
such protection is appropriate. However, no assurance can be given that any
patent application will be filed, that any filed applications will result in
issued patents or that any issued patents will provide the Company with a
competitive advantage or will not be successfully challenged by third parties.
The protections afforded by patents will depend upon their scope and validity,
and others may be able to design around the Company's patents. The Company's
issued patents and any licensed patents would provide competitive protection, if
at all, only in the United States. The Company has not, to date, pursued foreign
patents equivalent to those issued or applied for in the United States.

Other entities have filed patent applications for or have been issued
patents concerning various aspects of HA-related products or processes. There
can be no assurance that the products or processes developed by the Company will
not infringe on the patent rights of others in the future. Any such infringement
may have a material adverse effect on the Company's business, financial
condition, and results of operations. In particular, the Company received notice
from the PTO in 1995 that a third party was attempting to provoke a patent
interference with respect to one of the Company's co-owned patents covering the
use of INCERT(R) for post-surgical adhesion prevention. It is unclear whether an
interference will be declared. If an interference is declared, it is not
possible at this time to determine the merits of the interference or the effect,
if any, the interference will have on the Company's marketing of INCERT(R) for
this use. The existence of the interference proceeding may have a negative
impact on the marketing of the INCERT(R) product, and no assurance can be given
that the Company would be successful in any such interference proceeding. If the
third-party interference were to be decided adversely to the Company, involved
claims of the Company's patent would be cancelled, the Company's marketing of
the INCERT(R) product may be materially and adversely affected and the third
party may enforce patent rights against the Company which could prohibit the
sale and use of INCERT(R) products, which could have a material adverse effect
on the Company's future operating results.

The Company also relies upon trade secrets and proprietary know-how for
certain non-patented aspects of its technology. To protect such information, the
Company requires all employees, consultants and licensees to enter into
confidentiality agreements limiting the disclosure and use of such information.
There can be no assurance that these agreements provide meaningful protection or
that they will not be breached, that the Company would have adequate remedies
for any such breach, or that the Company's trade secrets, proprietary know-how,
and technological advances will not otherwise become known to others. In
addition, there can be no assurance that, despite precautions taken by the
Company, others have not and will not obtain access to the Company's proprietary
technology. Further, there can be no assurance that third parties will not
independently develop substantially equivalent or better technology.

Pursuant to the BLS Agreement, the Company has agreed to transfer to
Bausch & Lomb Surgical, upon expiration of the term of the agreement on
December 31, 2007, or in connection with earlier termination in certain
circumstances, the Company's manufacturing process, know-how and technical
information which relate to AMVISC(R) products. Upon expiration of the BLS
Agreement, there can be no assurance that Bausch & Lomb Surgical will continue
to use the Company to manufacture AMVISC(R) and AMVISC(R) Plus. If Bausch & Lomb
Surgical discontinues the use of the Company as a manufacturer after such time,
the Company's business, financial condition, and results of operations would
likely be materially and adversely affected.

22
<Page>
RISKS ASSOCIATED WITH MANUFACTURING. The Company's results of operations
are dependent upon the continued operation of its manufacturing facility in
Woburn, Massachusetts. The operation of biomedical manufacturing plants involves
many risks, including the breakdown, failure or substandard performance of
equipment, natural and other disasters, and the need to comply with the
requirements of directives of government agencies, including the FDA. In
addition, the Company relies on a single supplier for syringes and a small
number of suppliers for a number of other materials required for the
manufacturing and delivery of its HA products. Furthermore, manufacturing
processes and research and development efforts of the Company involve animals
and products derived from animals. The utilization of animals in research and
development and product commercialization is subject to increasing focus by
animal rights activists. The activities of animal rights groups and other
organizations that have protested animal based research and development programs
or boycotted the products resulting from such programs could cause an
interruption in the Company's manufacturing processes and research and
development efforts. The occurrence of material operational problems, including
but not limited to the events described above, could have a material adverse
effect on the Company's business, financial condition and results of operations
during the period of such operational difficulties.

NO ASSURANCE OF GROWTH OR ABILITY TO MANAGE GROWTH. The Company's future
success depends on substantial growth in product sales. There can be no
assurance that such growth can be achieved or, if achieved, can be sustained.
There can be no assurance that even if substantial growth in product sales and
the demand for the Company's products is achieved, the Company will be able to
(i) develop the necessary manufacturing capabilities; (ii) obtain the assistance
of additional marketing partners; (iii) attract, retain and integrate the
required key personnel; or (iv) implement the financial, accounting and
management systems needed to manage growing demand for its products, should it
occur. Failure of the Company to successfully manage future growth could have a
material adverse effect on the Company's business, financial condition and
results of operations.

THIRD PARTY REIMBURSEMENT AND HEALTH CARE COST CONTAINMENT INITIATIVES. In
the U.S. and other markets, health care providers, such as hospitals and
physicians, that purchase health care products, such as the Company's products,
generally rely on third party payors, including Medicare, Medicaid and other
health insurance and managed care plans, to reimburse all or part of the cost of
the health care product. The Company depends upon the distributors for its
products to secure reimbursement. Reimbursement by a third party payor may
depend on a number of factors, including the payor's determination that the use
of the Company's products are clinically useful and cost-effective, medically
necessary and not experimental or investigational. Since reimbursement approval
is required from each payor individually, seeking such approvals can be a time
consuming and costly process which, in the future, could require the Company or
its marketing partners to provide supporting scientific, clinical and
cost-effectiveness data for the use of the Company's products to each payor
separately. Significant uncertainty exists as to the reimbursement status of
newly approved health care products, and third party payors are increasingly
attempting to contain the costs of health care products and services by limiting
both coverage and the level of reimbursement for new therapeutic products and by
refusing in some cases to provide coverage for uses of approved products for
disease indications for which the FDA has not granted marketing approval. In
addition, Congress and certain state legislatures have considered reforms that
may affect current reimbursement practices, including controls on health care
spending through limitations on the growth of Medicare and Medicaid spending.
There can be no assurance that third party reimbursement coverage will be
available or adequate for any products or services developed by the Company.
Outside the U.S., the success of the Company's products is also dependent in
part upon the availability of reimbursement and health care payment systems.
Lack of adequate coverage and reimbursement provided by governments and other
third party payors for the Company' products and services could have a material
adverse effect on the Company's business, financial condition and results of
operations.

23
<Page>
NEED FOR ADDITIONAL FUNDS; LIQUIDITY. The Company had cash, cash
equivalents and short-term marketable securities of $15.7 million as of
June 30, 2001. The Company's future capital requirements and the adequacy of
available funds will depend, however, on numerous factors, including: market
acceptance of its existing and future products; the successful commercialization
of products in development; progress in its product development efforts; the
magnitude and scope of such efforts, progress with preclinical studies, clinical
trials and product clearances by the FDA and other agencies; the cost and timing
of its efforts to expand its manufacturing capabilities; the cost of filing,
prosecuting, defending and enforcing patent claims and other intellectual
property rights; competing technological and market developments; and the
development of strategic alliances for the marketing of certain of its products.
To the extent that funds generated from the Company's operations, together with
the Company's existing capital resources and are insufficient to meet future
requirements, the Company will be required to obtain additional funds through
equity or debt financings, strategic alliances with corporate partners and
others, or through other sources. The terms of any future equity financings may
be dilutive to the Company's stockholders and the terms of any debt financings
may contain restrictive covenants, which limit the Company's ability to pursue
certain courses of action. The ability of the Company to obtain financing is
dependent on the status of the Company's future business prospects as well as
conditions prevailing in the relevant capital markets. No assurance can be given
that any additional financing will be made available to the Company or will be
available on acceptable terms should such a need arise.

EXPOSURE TO PRODUCT LIABILITY CLAIMS. The testing, marketing and sale of
human health care products entail an inherent risk of allegations of product
liability, and there can be no assurance that substantial product liability
claims will not be asserted against the Company. Although the Company has not
received any material product liability claims to date and has an insurance
policy of $5,000,000 per occurrence and $5,000,000 in the aggregate to cover
such claims should they arise, there can be no assurance that material claims
will not arise in the future or that the Company's insurance will be adequate to
cover all situations. Moreover, there can be no assurance that such insurance,
or additional insurance, if required, will be available in the future or, if
available, will be available on commercially reasonable terms. Any product
liability claim, if successful, could have a material adverse effect on the
Company's business, financial condition and results of operations.

DEPENDENCE UPON KEY PERSONNEL. The Company is highly dependent on the
members of its management and scientific staff, the loss of one or more of whom
could have a material adverse effect on the Company. In June 2001, Mr. Engle,
the former Chief Executive Officer and Chairman of the Board of Directors, and
Mr. Slater, the former Vice President of Operations, ceased to be employees of
the Company. There can be no assurances that such departures will not adversely
affect the Company's business. In addition, the Company believes that its future
success will depend in large part upon its ability to attract and retain highly
skilled, scientific, managerial and manufacturing personnel. The Company faces
significant competition for such personnel from other companies, research and
academic institutions, government entities and other organizations. There can be
no assurance that the Company will be successful in hiring or retaining the
personnel it requires. The failure to hire and retain such personnel could have
a material adverse effect on the Company's business, financial condition and
results of operations.

ENVIRONMENTAL REGULATION. The Company is subject to a variety of local,
state and federal government regulations relating to the storage, discharge,
handling, emission, generation, manufacture and disposal of toxic or other
hazardous substances used in the manufacture of the Company's products. Any
failure by the Company to control the use, disposal, removal or storage of
hazardous chemicals or toxic substances could subject the Company to significant
liabilities, which could have a material adverse effect on the Company's
business, financial condition and results of operations.

24
<Page>
RISKS RELATING TO INTERNATIONAL SALES. During the three months ended
June 30, 2001 and 2000, approximately, 33% and 32.8%, respectively, of the
Company's product sales were sold to international markets. During the six
months ended June 30, 2001 and 2000, approximately, 33.3% and 27%, respectively,
of the Company's product sales were sold to international markets. The Company's
representatives, agents and distributors who sell products in international
markets are subject to the laws and regulations of the foreign jurisdictions in
which they operate and in which the Company's products are sold. A number of
risks are inherent in international sales and operations. For example, the
volume of international sales may be limited by the imposition of government
controls, export license requirements, political and/or economic instability,
trade restrictions, changes in tariffs, difficulties in managing international
operations, import restrictions and fluctuations in foreign currency exchange
rates. The Company sells its ORTHOVISC(R) product to a European sales and
marketing company for supply of the Turkish market. The Turkish economic
situation has been volatile and the impacts of this volatility on future sales
of ORTHOVISC(R) are uncertain. Such changes in the volume of sales may have an
adverse effect on the Company's business, financial condition, and results of
operations.

POTENTIAL VOLATILITY OF STOCK PRICE; NO CONTROL OVER MARKET MAKING. The
market price of shares of the Company's common stock may be highly volatile.
Factors such as announcements of new commercial products or technological
innovations by the Company or its competitors, disclosure of results of clinical
testing or regulatory proceedings, governmental regulation and approvals,
developments in patent or other proprietary rights, public concern as to the
safety of products developed by the Company and general market conditions may
have a significant effect on the market price of the Company's common stock. In
particular, the Company's stock price declined significantly in October 1998
following the Company's announcement that the FDA had notified the Company that
its PMA for ORTHOVISC(R) was not approvable and that additional clinical data
would be required to demonstrate the effectiveness of ORTHOVISC(R). The stock
price declined again in May 2000 following the Company's announcements that
initial analysis of results from the Phase III clinical trial of ORTHOVISC(R)
did not show sufficient efficacy to support the filing of a PMA application to
obtain FDA approval, and that the SEC had issued a formal order of investigation
and required the Company to provide information in connection with certain
revenue recognition matters. The trading price of the Company's common stock
could be subject to wide fluctuations in response to quarter-to-quarter
variations in the Company's operating results, material announcements by the
Company or its competitors, governmental regulatory action, conditions in the
health care industry generally or in the medical products industry specifically,
or other events or factors, many of which are beyond the Company's control. In
addition, the stock market has experienced extreme price and volume fluctuations
which have particularly affected the market prices of many medical products
companies and which often have been unrelated to the operating performance of
such companies. The Company's operating results in future quarters may be below
the expectations of equity research analysts and investors. In such event, the
price of the common stock would likely decline, perhaps substantially.

No person is under any obligation to make a market in the common stock or to
publish research reports on the Company, and any person making a market in the
common stock or publishing research reports on the Company may discontinue
market making or publishing such reports at any time without notice. There can
be no assurance that an active public market in the common stock will be
sustained.

POSSIBLE ADVERSE EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS. Certain
provisions of the Company's Restated Articles of Organization and Amended and
Restated By-laws could have the effect of discouraging a third party from
pursuing a non-negotiated takeover of the Company and preventing certain changes
in control. These provisions include a classified Board of Directors, advance
notice to the Board of Directors of stockholder proposals, limitations on the
ability of stockholders to remove directors and to call stockholder meetings,
the provision that vacancies on the Board of Directors be

25
<Page>
filled by a majority of the remaining directors. In addition, the Board of
Directors adopted a Shareholders Rights Plan in April 1998. The Company also is
subject to Chapter 110F of the Massachusetts General Laws which, subject to
certain exceptions, prohibits a Massachusetts corporation from engaging in any
of a broad range of business combinations with any "interested stockholder" for
a period of three years following the date that such stockholder became an
interested stockholder. These provisions could discourage a third party from
pursuing a takeover of the Company at a price considered attractive by many
stockholders, since such provisions could have the effect of preventing or
delaying a potential acquirer from acquiring control of the Company and its
Board of Directors.

SEC INVESTIGATION AND SECURITIES CLASS ACTION LITIGATION. The SEC has
issued a formal order of investigation and has required the Company to provide
information in connection with certain revenue recognition matters. The Company
has been cooperating fully. These matters, relating to the Company's historical
accounting for and disclosures concerning sales of ORTHOVISC(R) under a
long-term supply and distribution agreement with Zimmer were also the subject of
the Company's March 15, 2000 disclosure concerning an informal SEC inquiry and
the restatement of results for 1998 and the first three quarters of 1999. On
August 14, 2001, as a result of the SEC's ongoing investigation, the Company, in
conjunction with its independent auditors, determined to again restate its
financial results for the fourth quarter of 1998 and the first quarter of 1999
as discussed in Note 10 in the consolidated financial statements. The Company is
not in a position to predict the probable outcome of this matter or its
potential impact on the Company's business or operations.

Three putative class action lawsuits were filed against the Company and
former officers of the Company. These lawsuits have been consolidated. The
parties negotiated and entered into a Memorandum of Understanding dated
March 8, 2001, and the parties negotiated and entered into a Stipulation and
Agreement of Settlement, Compromise and Release ("Stipulation") dated May 25,
2001, which contains the terms of a settlement of the action, subject to
approval by the Court.

RELIANCE ON A SMALL NUMBER OF CUSTOMERS. The Company has historically
derived the majority of its revenues from a small number of customers, most of
whom resell its products to end users and most

26
<Page>
of whom are significantly larger companies. The Company's failure to generate as
much revenue as expected from these customers or the failure of these customers
to purchase the Company's products would seriously harm the Company's business.
For the three months ended June 30, 2001, Bausch & Lomb Surgical accounted for
50.9% of product revenues and 69.6% of the accounts receivable balance and
Pharmaren (an affiliate of Biomeks), the Company's distributor in Turkey,
accounted for 23.7% of product revenues and none of the accounts receivable
balance. Accordingly, if present and future customers terminate their purchasing
arrangements with the Company, significantly reduce or delay their orders or
seek to renegotiate their agreements on terms less favorable to the Company, the
Company's business, financial condition, and results of operations will be
adversely affected. If the Company accepts terms less favorable than the terms
of the current agreement, such renegotiations may have a material adverse affect
on the Company's business, financial condition, and/or results of operations.
Furthermore, the Company may be subject to the perceived or actual leverage the
customers may have given their relative size and importance to the Company in
any future negotiations. Any termination, change, reduction or delay in orders
could seriously harm the Company's business, financial condition, and results of
operations. Accordingly, unless and until the Company diversifies and expands
its customer base, the Company's future success will significantly depend upon
the timing and size of future purchases by its largest customers and the
financial and operational success of these customers. Product revenue in the
future may continue to be impacted by economic uncertainties associated with the
Turkish market. Furthermore, sales in 2001 to our Turkish distributor are at
lowered prices and negotiations are ongoing to establish a new long-term
distribution agreement for this territory.

The loss of any one of the Company's major customers or the delay of
significant orders from such customers, even if only temporary, could reduce or
delay the Company's recognition of revenues, harm its reputation in the
industry, and reduce its ability to accurately predict cash flow, and, as a
consequence, could seriously harm the Company's business, financial condition,
and results of operations.

The Company, through its distributors, distributes ORTHOVISC(R) in
territories such as Spain, Portugal, Turkey, and Israel. Due to the result of
the unfavorable results of the U.S. ORTHOVISC(R) Phase III clinical trial
announced on May 31, 2000, marketing efforts in these countries have been and
may continue to be negatively affected. There can be no assurance that past
ORTHOVISC(R) sales levels will be maintained or that sales will occur at all in
these countries.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2001, the Company did not participate in any derivative
financial instruments or other financial and commodity instruments for which
fair value disclosure would be required under SFAS No. 107. All of the Company's
investments consist of money market funds and commercial paper that are carried
on the Company's books at amortized cost, which approximates fair market value.
Accordingly, the Company has no quantitative information concerning the market
risk of participating in such investments.

PRIMARY MARKET RISK EXPOSURES

The Company's primary market risk exposures are in the areas of interest
rate risk and foreign currency exchange rate risk. The Company's investment
portfolio of cash equivalent and short-term investments is subject to interest
rate fluctuations, but the Company believes this risk is immaterial due to the
short-term nature of these investments. The Company's exposure to currency
exchange rate fluctuations is specific to certain sales to a foreign customer
and is expected to continue to be modest. The impact of currency exchange rate
movements on sales to this foreign customer was immaterial for the quarter ended
June 30, 2001. Currently, the Company does not engage in foreign currency
hedging activities.

PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 9, "Legal Matters" of the consolidated financial statements. The
description of such matters is incorporated herein by reference to such
financial statements.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On June 6, 2001, the Company held its 2001 Annual Meeting of Stockholders
(the "Annual Meeting"). At the Annual Meeting, Stockholders of the Company were
asked to consider a proposal to elect two Class II Directors of the Company to
serve until the 2004 annual meeting of stockholders and until their successors
are duly elected and qualified (the "Election Proposal").

With respect to the Election Proposal, Samuel F. McKay and Harvey S. Sadow,
Ph.D. were nominated as Class II Directors of the Company. Mr. McKay received
8,162,415 shares voted in favor of his election and 125,883 votes were withheld.
Dr. Sadow received 8,155,970 shares voted in favor of his election and 132,328
votes were withheld. Mr. McKay and Dr. Sadow were therefore elected as Class II
Directors. Joseph L. Bower and Eugene A. Davidson, Ph.D. (Class I Directors),
and J. Melville Engle and Steven E. Wheeler (Class III Directors) continued to
serve their respective terms after the Annual Meeting. Subsequently, as
announced on June 13, 2001, in conjunction with J. Melville Engle's departure
from the Company on that date, Mr. Engle also left the Board of Directors.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

<Table>
<Caption>
(A) EXHIBIT NO. DESCRIPTION
- --------------- -----------

(3) Articles of Incorporation and Bylaws:

3.1 The Amended and Restated Articles of Organization of the
Company, incorporated herein by reference to Exhibit 3.1 to
the Company's Registration Statement on Form 10 (File
no. 000-21326), filed with the Securities and Exchange
Commission on March 5, 1993.
</Table>

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<Page>

<Table>
<Caption>
(A) EXHIBIT NO. DESCRIPTION
- --------------- -----------

3.2 Certificate of Vote of Directors Establishing a Series of
Convertible Preferred Stock, incorporated herein by
reference to Exhibits to the Company's Registration
Statement on Form 10 (File no. 000-21326), filed with the
Securities and Exchange Commission on March 5, 1993.

3.3 Amendment to the Amended and Restated Articles of
Organization of the Company, incorporated herein by
reference to Exhibit 3.1 to the Company's quarterly report
on Form 10-QSB for the period ended November 30, 1996, (File
no. 000-21326), filed with the Securities and Exchange
Commission on January 14, 1997.

3.4 Certificate of Vote of Directors Establishing a Series of a
Class of Stock, incorporated herein by reference to
Exhibit 3.1 of the Company's Registration Statement on
Form 8-AB12 (File no. 001-14027), filed with the Securities
and Exchange Commission on April 7, 1998.

3.5 Amendment to the Amended and Restated Articles of
Organization of the Company, incorporated herein by
reference to the Company's quarterly report on Form 10-QSB
for the quarterly period ending June 30, 1998 (File
no. 001-14027), filed with the Securities and Exchange
Commission on August 14, 1998.

3.6 The Amended and Restated Bylaws of the Company, incorporated
herein by reference to Exhibit 3.4 to the Company's
quarterly report on Form 10-QSB for the period ended
November 30, 1996 (File no. 000-21326), filed with the
Securities and Exchange Commission on January 14, 1997.

(4) Instruments Defining the Rights of Security Holders

4.1 Shareholder Rights Agreement dated as of April 6, 1998
between the Company and Firstar Trust Company, incorporated
herein by reference to Exhibit 4.1 to the Company's
Registration Statement on Form 8-A12B (File no. 001-14027),
filed with the Securities and Exchange Commission on
April 7, 1998.

(10) Material Contracts

*10.1 Separation Agreement between J. Melville Engle and the
Company dated June 13, 2001.

*10.2 Stipulation and Agreement of Compromise, Settlement and
Release dated May 25, 2001 in connection with In Re Anika
Therapeutics, Inc. Securities Litigation.

(11) Statement Regarding the Computation of Per Share Earnings

11.1 See Note 4 to the Financial Statements included herewith.
</Table>

* Filed herewith

(b) Reports on Form 8-K: None

29
<Page>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in Woburn,
Massachusetts on August 14, 2001.

<Table>

ANIKA THERAPEUTICS, INC.

By: /s/ DOUGLAS R. POTTER
-----------------------------------------
Douglas R. Potter
CHIEF EXECUTIVE OFFICER AND CHIEF
FINANCIAL OFFICER (PRINCIPAL FINANCIAL
August 14, 2001 OFFICER AND AUTHORIZED OFFICER)
</Table>