SurModics Inc (SRDX)

[Democritus_of_Abdera]

Last night’s CC was a shock...

Several issues were raised that deserve consideration by those investing in SRDX; I recommend listening to the CC (see iBox for link to presentation) ....

I expect that the initial focus and the one that will affect near term stock price action is best reflected in Richard Rinkoff’s question set, i.e.

<Q – Richard Rinkoff>: Thanks. Phil, do you expect all of the three revenue lines to be down in 2011?
<A – Philip Ankeny>: Most likely, yes.

<Q – Richard Rinkoff>: So that means that despite all that you’re working on, all the products that you have for sale yourself, and all of the royalties that are already in the market, all of those categories are dropping?
<A – Philip Ankeny>: In the range we’ve got, yes, that’s a plausible scenario.

<Q – Richard Rinkoff>: Should we assume that there are no milestone payments from Genentech or anyone else of any size?
<A – Philip Ankeny>: Within our guidance we do not have any significant milestone payments assumed. So any that do come would be -- would represent up side. But at this point, since those are never a certainty, we don’t want to include those in any of our forecasts.

<Q – Richard Rinkoff>: Cash from operations for the year was 22 million. Is there an estimate for 2011?
<A – Philip Ankeny>: We don’t have one right now.
<Q – Richard Rinkoff>: Would it be positive?
<A – Philip Ankeny>: Oh, positive operating cash flow? Yeah.

<Q – Richard Rinkoff>: Okay. And I noticed on your R&D line that the R&D expense was more than the revenue. Is there an explanation for that?
<A – Philip Ankeny>: You know, that’s really...
<Q – Richard Rinkoff>: Customer R&D, I mean?
<A – Philip Ankeny>: It’s principally, and we’ve been there in some prior quarters as well. The main reason there is really just the facility costs that are allocated to that customer R&D line. And when the R&D revenue is softer, the margin gets upside down.