EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Apr. 29, 2009-- SurModics, Inc. (Nasdaq: SRDX), a leading provider of drug delivery and surface modification technologies to the healthcare industry, today reported financial results for the second quarter ended March 31, 2009.

Second Quarter Summary:

• Financial highlights:
  • Revenue of $20.9 million
  • Operating income of $6.2 million
  • Net income of $4.2 million
  • Diluted EPS of $0.24
• Revenue by market:
  • Therapeutic:
    • Cardiovascular – $9.6 million
    • Ophthalmology – $3.7 million
    • Other Markets – $2.9 million
  • Diagnostic – $4.7 million
• Product sales of $4.8 million, representing 24% sequential growth from the first quarter of 2009
• First license fee revenue from SurModics Pharmaceuticals (formerly Brookwood Pharmaceuticals)
• Repurchased $2.2 million of SurModics stock; cumulative $27.7 million purchased in $35 million program authorized in November 2007

• Cash and investments of $58.9 million; no debt
• Six new licenses with SurModics customers
• Five new product classes introduced by our customers

“SurModics is pleased to deliver solid financial results for the second quarter, particularly in light of the difficult economic environment,” said Bruce Barclay, president and CEO. “Our second quarter performance is especially gratifying coming on the heels of soft product sales in the first quarter. Product sales increased 24% on a sequential basis compared with the first quarter. Further, the restructuring actions taken in the first quarter of fiscal 2009, while difficult, have already begun to yield positive results from both financial and operational standpoints. In total, we have reduced our operating expenses, excluding product costs, in the second quarter by nearly $3.5 million compared with the year-ago quarter.”

“In addition, we are making good progress against our published fiscal 2009 goals, particularly with respect to signed license agreements and customer product launches. More broadly, we remain on track to achieve our remaining fiscal 2009 goals,” continued Barclay. “We continue to add new projects in ophthalmology and are making excellent progress in our partner-supported product development programs for both back-of-the-eye and front-of-the-eye diseases. As further evidence of the progress we are making with our business model, SurModics Pharmaceuticals generated its first license fee revenue during the quarter.”

Revenue for the second quarter of fiscal 2009 was $20.9 million, compared with $25.7 million in the year earlier period. Operating income was $6.2 million, compared with $7.2 million in the prior-year period. Net income was $4.2 million, compared with $5.1 million in the same period last year. Diluted earnings per share was $0.24, compared with $0.28 in the second quarter of fiscal 2008.

For the first six months of fiscal 2009, revenue was $84.1 million, compared with $49.5 million in the year earlier period. Operating income was $48.9 million, compared with $14.8 million in the prior year period; net income was $31.3 million, compared with $10.8 million in the year earlier period; and diluted net income per share was $1.78, compared with $0.58 in the first six months of fiscal 2008. Results for the first quarter of fiscal 2009 included the recognition of $34.8 million of previously deferred revenue, as well as a $9 million milestone payment, both in connection with Merck’s termination of its agreement with SurModics.

SurModics’ pipeline continues to represent significant potential. The Company added six new licenses in the second quarter, for a fiscal year-to-date total of 14 against its goal of signing 18 new licenses in fiscal 2009. The Company’s customers launched five new product classes in the marketplace during the quarter, for a fiscal year-to-date total of seven against its goal of 10 launches in fiscal 2009. As of March 31, 2009, SurModics’ customers had 102 licensed product classes generating royalty revenue, compared with 100 a year ago; the total number of licensed product classes not yet launched was 106, up from 103 in the prior-year period; and major non-licensed opportunities totaled 92, compared with 90 a year ago. In total, SurModics now has a portfolio of 198 potential commercial products in development diversified across multiple clinical indications and technology platforms.

SurModics’ cash and investment balance totaled $58.9 million as of March 31, 2009, with no debt. For the first six months of fiscal 2009, operating cash flow was $16.9 million, compared with $8.9 million in the first six months of fiscal 2008. Operating cash flow for the second quarter was negative $0.6 million, compared with positive $4.5 million in the second quarter of fiscal 2008.

“SurModics continues to be in excellent financial health,” said Phil Ankeny, senior vice president and chief financial officer. “The negative operating cash flow experienced in the second quarter reflects timing issues associated with tax payments and accounts receivable. We anticipate a return to positive quarterly operating cash flow for the upcoming quarters. The Company’s strong year-to-date operating cash flow and healthy balance sheet with zero debt provide a major competitive advantage in the current environment. In addition, we continue to demonstrate disciplined deployment of capital with a goal of enhancing shareholder value, principally in the areas of share repurchase and facilities-related and business development investments. We repurchased approximately $2.2 million of our stock in the second quarter, and as of March 31, 2009, we had a remaining authorization of $7.3 million. Additionally, the build-out of our development and cGMP manufacturing facility in Alabama is currently tracking to our timeline and budget. Finally, SurModics is continuing to review business development opportunities, which are even more abundant in the current environment.”

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 website at www.surmodics.com, and click on the second quarter webcast icon. If you do not have access to the Internet and want to listen to the audio by phone, dial 800-257-2182. A replay of the first quarter conference call will be available by dialing 800-405-2236 and entering conference call ID 11130107. The audio replay will be available beginning at 7:00 p.m. CT on Wednesday, April 29, until 7:00 p.m. CT on Wednesday, May 6.

About SurModics, Inc.

SurModics’ vision is to extend and improve the lives of patients through technology innovation. The Company partners with the world’s foremost medical device, pharmaceutical and life science companies to develop and commercialize innovative products that result in improved diagnosis and treatment for patients. Core offerings include: drug delivery technologies (coatings, microparticles, nanoparticles, and implants); surface modification coating technologies that impart lubricity, prohealing, and biocompatibility capabilities; and components for in vitro diagnostic test kits and specialized surfaces for cell culture and microarrays. SurModics is headquartered in Eden Prairie, Minnesota and its SurModics Pharmaceuticals subsidiary is located in Birmingham, Alabama. For more information about the Company, visit www.surmodics.com. The content of SurModics’ website is not part of this release or part of any filings the Company makes with the SEC.

Safe Harbor for Forward-Looking Statements

This press release contains forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, such as our expectations about our pipeline, our ability to achieve our fiscal 2009 company goals, , our expected return to positive quarterly operating cash flow, our continued growth, and our performance in the near- and long-term, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including the following: (1) our reliance on third parties (including our customers and licensees) and their failure to successfully develop, obtain regulatory approval for, market and sell products incorporating our technologies may adversely affect our business operations, our ability to realize the full potential of our pipeline, and our ability to achieve our fiscal 2009 company goals; (2) costs or difficulties relating to the integration of the businesses of SurModics Pharmaceuticals and BioFX Laboratories, and the drug delivery assets and collaborative programs acquired from PR Pharmaceuticals, Inc., with SurModics’ business may be greater than expected and may adversely affect the Company’s results of operations and financial condition; (3) developments in the regulatory environment, as well as market and economic conditions, may adversely affect our business operations and profitability; and (4) other factors identified under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2008, and updated in our subsequent reports filed with the SEC. These reports are available in the Investors section of our website at www.surmodics.com and at the SEC website at www.sec.gov. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.

Source: SurModics, Inc.

SurModics, Inc.
Phil Ankeny, Senior Vice President and Chief Financial Officer
(952) 829-2700