SurModics Inc (SRDX)

[DewDiligence]

SurModics Reports FY1Q08 Results

http://biz.yahoo.com/bw/080123/20080123006276.html?.v=1

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Wednesday January 23, 4:02 pm ET

Double-Digit Growth in All Three Operating Segments

EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--SurModics, Inc. (Nasdaq: SRDX ), a leading provider of surface modification and drug delivery technologies to the healthcare industry, today reported financial results for the first quarter ended December 31, 2007.

First Quarter Highlights:

-- Record revenue of $23.8 million, up 42% year-over-year

-- Operating income of $7.6 million, down 7% year-over-year; operating margin of 32%

-- Net income of $5.6 million, down 6% year-over-year

-- Diluted EPS of $0.31, down 3% year-over-year

-- Operating cash flow of $4.4 million

-- Double-digit year-over-year revenue growth in all three operating segments:

-- Drug Delivery - up 62%
-- Hydrophilic and Other - up 43%
-- In Vitro - up 14%

-- Non-CYPHER-related revenue increased 81% year-over-year

-- Nine new licenses signed with SurModics customers

-- Two new customer products introduced

“SurModics is pleased to announce record revenue for the first quarter of fiscal 2008,” said Bruce Barclay, president and CEO. “We are particularly pleased to report broad-based contribution across the company, including double-digit revenue growth in all three operating segments. We continue to make excellent progress on our strategic plan for sustainable growth, including our efforts to diversify our revenue, as evidenced by the 81% increase in non-Cypher-related revenue. First quarter results also represent a record for quarterly revenue in our legacy business, excluding contributions from Brookwood Pharmaceuticals and BioFX Laboratories. We remain confident in our ability to achieve our fiscal 2008 company goals as well as our long-term strategic objectives.”

“Together with our partners, we are making excellent progress in our product development programs. Our collaboration with Merck, as well as additional projects in ophthalmology and other business units are keeping our development teams extremely busy,” noted Barclay. “For example, we performed approximately $1.9 million in billable R&D work for Merck alone in the quarter, even though we recognized less than $100,000 of that as revenue; the remainder sits in deferred revenue and will be recognized in future periods. Also, this is our first full quarter of operations including contributions from Brookwood and BioFX, and the integration of these companies continues to track to our expectations. We are already realizing technology synergies from several joint development projects between Brookwood and SurModics, deepening our capabilities in both polymer-based systemic and site-specific drug delivery. We remain excited about the many opportunities for technology and product synergies gained through these recent acquisitions, and are pleased that both organizations had positive profit contribution in the quarter.”

Revenue for the first quarter of fiscal 2008 was $23.8 million, an increase of 42% from $16.7 million in the year earlier period. Total operating expenses, including product costs, were $16.3 million, an 88% increase from $8.6 million last year. Operating income was $7.6 million, a decrease of 7% compared with $8.1 million in the prior-year period. Net income was $5.6 million, a decrease of 6% from $6.0 million in the same period last year. Diluted earnings per share was $0.31, a 3% decrease from $0.32 in the first quarter of fiscal 2007. Earnings growth did not keep pace with revenue growth primarily as a result of the accounting treatment for revenue and expenses associated with our Merck agreement, as well as a changing mix of revenue sources.

SurModics’ pipeline continues to represent significant potential. The company signed nine new licenses in the first quarter, and has a goal of signing 18 new licenses in fiscal 2008. SurModics customers launched two new product classes in the marketplace during the quarter, as the company works toward its goal of 10 launches in fiscal 2008. As of December 31, 2007, SurModics’ customers had 100 licensed product classes generating royalty revenue, up from 89 in the prior-year period; the total number of licensed product classes not yet launched was 105, compared with 80 in the prior-year period; and major non-licensed opportunities totaled 93, compared with 80 a year ago. In total, SurModics now has 198 potential commercial products in development.

SurModics’ cash and investment balance was $72.5 million as of December 31, 2007. Operating cash flow for the quarter was $4.4 million, compared with $11.8 million in the prior year period. The decrease in operating cash flow principally reflects timing of tax payments both in the first quarter of fiscal 2008 and the first quarter of fiscal 2007.

“SurModics continues to strengthen its financial condition,” said Phil Ankeny, senior vice president and chief financial officer. “SurModics is utilizing its strong balance sheet and solid cash flows, having acquired two companies and completing our first share repurchase program in 2007. Our strong financial position has allowed us to return capital to shareholders, further enhancing long-term shareholder value, and we were pleased to announce a new $35 million share repurchase program in November 2007.” Live Webcast

SurModics will host a webcast at 5:00 p.m. ET (4:00 p.m. CT) today to discuss the quarterly results. To access the webcast, go to the investor relations portion of the company’s website at www.surmodics.com, and click on the first quarter webcast icon. If you do not have access to the Internet and want to listen to the audio by phone, dial 800-240-7305. A replay of the first quarter conference call will be available by dialing 800-405-2236 and entering conference call ID 11107403. The audio replay will be available beginning at 7:00 p.m. CT on Wednesday, January 23, until 7:00 p.m. CT on Wednesday, January 30.
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