Replies to post #57 on SurModics Inc (SRDX)

[DewDiligence]

>InnoRx – the reason why no partnership has been announced is because they cant find anyone to accept. Genentech signing on is a dream and even when they sign someone up the earliest they can have a DME product much less AMD is 2011-12.
• SRDX will milk this product for headlines, but nothing is ever going to come of it. Poserdex will have a good product in the DME market next year, SRDX is looking 4-5 years out. By then the market will be crowded and SRDX will be late to the party.<

I agree with most of what you say; however, that I’m not sure Posurdex will be as good as you seem to think.

To date, the InnoRx platform is mostly just talk—I’m not yet convinced anyone of consequence will license it.

[shears]

I find it reassuring (perhaps just drinking the Kool-aid here) that SRDX management is continually expanding the pieline and signing up new clients and new products are being released steadilly. The pipeline of future unreleased products is growing faster then current revenues. There are some potential heavy hitters in the pipeline and profit margins in the opthalmalogy realm will be substantially higher since they own the platform as well as the coating. The 6 other stents hydrophyllic coating revenue will help mitigate the loss of Cypher revenue when the time comes. Non stent business is growing briskly and they have a lot of cash for aquisitions to help the bottom line. Personally, I think loss of future Cypher revs is priced in. There is still plenty of room for surface modification in the device industry and they will retain the leadership role as far ahead as I can see. I think the upside long term is worth the risk of the potential blips ahead. This company has an impressive track record of growth and management is certainly not sitting still, IMO.

Sciz

[foolishpremise]

cmini123:

I was very interested in your interpretation of the lubricity royalty rates for DES. SRDX has stated in prior conference calls that their lubricity royalty rate on other DES offerings is comparable to the current cypher (1%) royalty. Some a little more, some a little less. Your (1/10th of this) estimate is certainly not what they seemed to be implying in the CC. I'm not sure how to reconcile the discrepancy. [Are you suggesting, perhaps, the 1% figure SRDX talks about is only 1% of the value of the delivery system, rather than the delivery system and stent? - I'm not sure how or why they would break it down that way]

When Conor "talked of low single digits" could they have been talking about royalty rate, rather than $ per unit sold?

[bridgeofsighs]

"Other big opportunities of SRDX (notice these have not changed or materialized over the last three quarterly calls)
• Talked about opportunities in the orthopedics business but nothing materialized
• Donaldson – slow to start, will contribute a little next year but further out than everyone expects
• Novacell is a zero"
You make some good points and sound like you know the medical device business. I have one major sticking point to say "nothing has materialized in three quarters" three quarters is nothing in development time. The company has said they were going for proof of principal on the intravitrial implant by running a safety trial which will report this
calander year. The Novocell project is moving forward and is as complicated as any trial one could run. I am working with my father on trying to get a femoral artery device ready to show potential buyers it has taken YEARS not quarters.

PS Us shareholders have seen this before the huge short position because Cypher will fall into oblivion been there done that.We were gonna be happy with 30% of the world market after Taxus launched so I think we can live with the 20% you forcast now.

[aslan2772]

Re SRDX sentiment. cmini, I agree with some of what you said, for example that SRDX should invest much more in internal R&D, but I also disagree with much of what you said and in particular believe you miscalculate the value of SRDX's IP and industry branding in the near term. Sorry, I don't have time to address all the points you raise, but rather raise my own: have you taken a look to see how very much SRDX is in demand? From a partnership supply and demand perspective, things are looking very good for SRDX.

Re InnoRx technology value: I am more optimistic. Posurdex may be ahead of Ivation from a regulatory perspective, but it is hardly formidable (drug elution lasts about 4 weeks vs 1-2 years, yet the surgical implant lasts 6 months and is not removeable), and last I heard insertion was not an office procedure (pars plana incision followed by insertion through a 19 gauge Grieshaber cannula). SRDX will be late to the party? Is there anything competetive in clinical trials?