SurModics Inc (SRDX)

[Democritus_of_Abdera]

Re: Sale of Pharmaceutical Division...

Foolish, I'm not troubled by the possible sale of the pharmaceutical business... Albeit, I don't relish the idea of selling it for a substantial loss.

I've been uneasy with the thought that SRDX might morph into a low-margin high-volume business model such as that characterizing a contract manufacturer. I had been comforted by the thought that the initial costs might be recouped fairly rapidly by manufacture of a Lucentis long acting release formulation. However, my reading of the recent 10K is that the Lucentis program is essentially dead. see pg 3 of: http://www.sec.gov/Archives/edgar/data/924717/000095012310113522/c61767e10vk.htm

On October 5, 2009, we entered into a License and Development Agreement with F. Hoffmann-La Roche, Ltd. (“Roche”) and Genentech, Inc., a member of the Roche Group (“Genentech”). Under the terms of the License Agreement, Roche and Genentech have an exclusive license to develop and commercialize a sustained drug delivery formulation of Lucentis® (ranibizumab injection) utilizing SurModics’ proprietary biodegradable microparticle drug delivery system. Under the terms of the agreement, we received an upfront licensing fee of $3.5 million, are eligible to receive potential payments of up to approximately $200 million in fees and milestone payments in the event of the successful development and commercialization of multiple products, and will be paid for development work done on these products. Roche and Genentech will have the right to obtain manufacturing services from SurModics. In the event a commercial product is developed, we will also receive royalties on sales of such product. During fiscal 2010, the focus of our development activities have changed, primarily as a result of technical issues experienced in the Lucentis® microparticle product development program. Such technical issues reflect the inherent challenges often experienced in the development of new or reformulated pharmaceutical products. We are continuing to collaborate with Genentech under our agreement on sustained drug delivery products utilizing our proprietary biodegradable microparticle drug delivery system. However, the program remains subject to a number of risks and uncertainties, including those detailed under the heading “Risk Factors” in Item 1A of this Form 10-K.