Replies to post #1103 on SurModics Inc (SRDX)

[Democritus_of_Abdera]

Re: Octoplus 2006 Annual Report....

Dew: Thanks for providing the link to the OCTO annual report. I note that the annual meeting is scheduled for Apr 24.

In the link you provided, they state that a material component of OCTO’s business strategy is to establish and maintain collaborative arrangements with pharmaceutical and biotechnology companies, research institutions, etc.... In this vein, they report that “Surmodics is making good progress in developing a biodegradable medical device coating technology capable of delivering biologically active compounds”; they do not provide any additional detail. They also make reference to a development project initiated in 2005 by InnoCore Technologies B.V. Again there is little additional detail provided. I suspect that these initiatives relate to Surmodic’s exploration of the OctoDex and PolyActive biodegradable polymers.

After reading the report, I continue to have faith in management... they seem to be straight-shooters, telling it like it is without a lot of hype. But I am not excited about the company’s prospects. The products under development appear to provide incremental advances but no break-through achievements. In particular,

1. PhI evaluation of Locteron (a long acting formulation of interferon alpha for treatment of chronic hepatitis C) has been completed. It is safe and patients reported shorter lasting flu-like symptoms than those receiving PEG-Intron. But the main advantage of the product put forward by the company is that patients will need bi-weekly rather than weekly injections during the 48 week treatment period... an incremental advance in in my opinion.

2. In the PhI evaluation of OP-145 (a treatment for chronic otitis media) there was either full recovery or a meaningful improvement after the 2-wk course of therapy in 9 of 16 patients. These patients had been therapy resistant for average of 17 yrs. The efficacy is impressive for the population studied, but I wonder how big the market will be for this product.

3. They have started pre-clinical tests for hGH-OctoDEX for Growth hormone deficiency. I did not see any reference to the innovation that this formulation is expected to bring to market.

4. The OctoVAX projects (vaccines for hepatitis B and Japanese encephalitis) are in early stages. However, the results reported for HBV-OctoVAX demonstrated only a two-fold higher titer in mice after 2 months when compared to a sequentially-dosed yeast vaccine.