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SurModics Reports First Quarter Results; Record Revenue and Earnings

EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Jan. 26, 2005--- SurModics, Inc. (Nasdaq:SRDX), a leading provider of surface modification and drug delivery technologies to the medical device industry, today reported financial results for the first quarter ended December 31, 2004.

    First Quarter Highlights:

    --  Record Revenue of $14.1 million

    --  R&D Revenue Growth for Fourth Consecutive Quarter

    --  Operating Income of $8.6 million; Operating Margin of 61%

    --  Record Net Income of $5.7 million

    --  Record Diluted EPS of $.32

"SurModics is pleased to report record revenue and earnings for the first quarter," said Dale Olseth, Chairman and CEO. "Particularly gratifying is the broad-based contribution to this growth coming from a number of our customers."

Revenue for the first quarter of fiscal 2005 was a record $14.1 million, an increase of 16% from $12.1 million in fiscal 2004. Operating income grew 37% to a record $8.6 million, from $6.3 million in the prior-year period. Net income increased 38% to a record $5.7 million, from $4.1 million in the same period last year. Diluted earnings per share was a record $.32, compared with $.23 in fiscal 2004.

"We continue to execute on our revenue growth plan and are encouraged by the level of customer interest in SurModics' growing portfolio of surface modification and drug delivery technologies," said Bruce Barclay, President and COO. "We believe the continued growth in research and development revenue this quarter - the fourth consecutive quarter of sequential growth - speaks to the relevance of our technologies for our customers."

"We are also pleased with the growth Cordis has achieved with its CYPHER stent," Barclay continued. "Their reported sales of CYPHER of $561 million for the December quarter reflects a 28% growth sequentially from the September quarter. We are particularly delighted with their results in Japan, where we expect Cordis to have the only drug eluting stent available until the second half of 2006."

SurModics' pipeline continues to expand. The Company signed four new licenses in the first quarter, making good progress toward our goal of 12 new licenses for fiscal 2005. At December 31, SurModics' customers had 80 coated products generating royalty revenue, compared with 70 in the prior-year period; the total number of licensed products not yet launched was 63, unchanged from a year ago; and major non-licensed opportunities increased to 68, from 33 a year ago. In total, the Company now has 131 potential commercial products in development with opportunities in each of the company's four focus markets - ophthalmology, cardiovascular, neurology and orthopedics.

"We are in excellent financial condition," said Phil Ankeny, CFO and Vice President of Business Development. "Our balance sheet remains strong, with a cash and investment balance of $61.8 million and no debt as of December 31. We are pleased with our continued progress putting the balance sheet to work. The two transactions we announced last week - our investment in OctoPlus and our acquisition of InnoRx - position us well strategically."

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 web site, 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, dial 800-366-7449. A replay of the first quarter conference call, will be available by dialing 800-405-2236 and entering conference call ID 11022149. The audio replay will be available beginning at 6:00 p.m. CT on Wednesday, January 26, until 5:00 p.m. CT on Wednesday, February 2.

About SurModics, Inc.

SurModics, Inc., a leading provider of surface modification and drug delivery solutions, licenses its proprietary technologies to medical device, diagnostics, and biotechnology companies around the world. A significant portion of SurModics' revenue is generated through royalties on the sale of coated products. SurModics' Internet address is www.surmodics.com.

Safe Harbor for Forward Looking Statements

Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and SurModics intends that such forward looking statements be subject to the safe harbor created thereby. SurModics does not undertake an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

                            SurModics, Inc.
                         Statements of Income
                 (In thousands, except per share data)


                                                  Three Months Ended
                                                      December 31,
                                             -------------------------
                                                   2004          2003
                                             -----------   -----------
                                                    (Unaudited)
Revenue:
  Royalties and license fees                    $10,091        $8,629
  Product sales                                   2,000         2,600
  Research & development                          1,978           858
                                             -----------   -----------
     Total revenue                               14,069        12,087

Operating expenses:
  Product                                           620           736
  Research & development                          3,355         3,271
  Sales & marketing                                 262           418
  General & administrative                        1,194         1,375
                                             -----------   -----------
     Total operating expenses                     5,431         5,800
                                             -----------   -----------
Income from operations                            8,638         6,287

Investment income                                   417           295
                                             -----------   -----------
Income before income taxes                        9,055         6,582

Income tax provision                             (3,373)       (2,471)
                                             -----------   -----------
Net income                                       $5,682        $4,111
                                             ===========   ===========

Basic net income per share                        $0.32         $0.24
                                             ===========   ===========

Diluted net income per share                      $0.32         $0.23
                                             ===========   ===========

Weighted average shares outstanding
  Basic                                          17,574        17,454
  Diluted                                        17,950        17,766



                            SurModics, Inc.
                       Condensed Balance Sheets
                            (In thousands)

                                           December 31,  September 30,
                                                 2004          2004
                                             -----------  ------------
Assets                                         (Unaudited)
------
Current assets:
      Cash & investments                        $13,484       $19,215
      Accounts receivable                         9,497         8,130
      Inventories                                 1,105         1,040
      Other current assets                        1,184         1,184
                                             -----------  ------------
              Total current assets               25,270        29,569

Property & equipment, net                        15,299        15,738
Long-term investments                            48,349        44,088
Other assets                                     21,781        20,386

                                             -----------  ------------
      Total assets                             $110,699      $109,781
                                             ===========  ============

Liabilities & Stockholders' Equity
---------------------------------------------

Total current liabilities                        $6,764       $11,789

Other liabilities                                 3,573         3,488

Total stockholders' equity                      100,362        94,504

                                             -----------  ------------
      Total liabilities & stockholders'
       equity                                  $110,699      $109,781
                                             ===========  ============

CONTACT: SurModics, Inc.
Phil Ankeny, 952-829-2700

SOURCE: SurModics, Inc.