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Table of Contents

 
 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 20, 2005

SurModics, Inc.

(Exact name of Registrant as Specified in its Charter)

Minnesota
(State or Other Jurisdiction of Incorporation)

     
0-23837
(Commission File Number)
  41-1356149
(IRS Employer
Identification No.)

9924 West 74th Street
Eden Prairie, Minnesota 55344
(Address of Principal Executive Offices and Zip Code)

(952) 829-2700
(Registrant’s telephone number, including area code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

     
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


TABLE OF CONTENTS

Item 2.02 Results of Operations and Financial Condition.
Item 9.01 Financial Statements and Exhibits.
SIGNATURES
Press Release


Table of Contents

Item 2.02 Results of Operations and Financial Condition.

     On April 20, 2005, SurModics, Inc. issued a press release announcing the results for the quarter and six months ended March 31, 2005. The full text of the press release is set forth in Exhibit 99.1 attached hereto and is incorporated in this Current Report as if fully set forth herein.

Item 9.01 Financial Statements and Exhibits.

     (a) Financial Statements: None.

     (b) Pro forma financial information: None

     (c) Exhibits:

     99.1       Press Release dated April 20, 2005.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
  SURMODICS, INC.
 
 
  By /s/ Philip D. Ankeny    
Date: April 20, 2005  Name:   Philip D. Ankeny   
  Title:   Chief Financial Officer   
 

 


Table of Contents

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

EXHIBIT INDEX
to
FORM 8-K

SURMODICS, INC.

Date of Report:   Commission File No.:
April 20, 2005   0-23837          
       
Exhibit No.   ITEM
99.1
  Press Release dated April 20, 2005.

 

exv99w1
 

Exhibit 99.1

SurModics Reports Second Quarter Results

Record Revenue; Record Profit Excluding One-Time Charge

EDEN PRAIRIE, Minnesota — April 20, 2005 — SurModics, Inc. (Nasdaq: SRDX), a leading provider of surface modification and drug delivery technologies to the healthcare industry, today reported financial results for the second quarter ended March 31, 2005.

Second Quarter Highlights:

•   Record revenue of $15.7 million
 
•   Including one-time, non-cash in-process R&D charge of $30.3 million related to the acquisition of InnoRx:

  •   Operating loss of $21.1 million
 
  •   Net loss of $24.4 million
 
  •   Diluted EPS of ($1.34)

•   Excluding the charge:

  •   Record operating income of $9.1 million; operating margin of 58%
 
  •   Record net income of $5.9 million
 
  •   Diluted EPS of $.32

•   Fourth consecutive quarter with non-Cordis revenue exceeding Cordis revenue
 
•   Six new licenses signed; two new customer products introduced

“SurModics is pleased to report record revenue and net income, excluding the one-time charge, for the second quarter,” said Dale Olseth, Chairman and CEO. “This marks our third straight quarter of record revenue. We are proud of the progress we have achieved across our six business units.”

Revenue for the second quarter of fiscal 2005 was a record $15.7 million, an increase of 23% from $12.7 million in the second quarter of fiscal 2004. During the quarter, the company recorded a $30.3 million charge for in-process research and development (IPR&D) in connection with its acquisition of InnoRx, Inc., which was completed in January 2005. Including the one-time, non-cash IPR&D charge, the company reported an operating loss of $21.1 million and a net loss of $24.4 million, or ($1.34) per diluted

 


 

share. Excluding the charge, operating income grew 37% to a record $9.1 million, from $6.7 million in the prior-year period; net income increased 36% to a record $5.9 million, from $4.3 million in the same period last year; and diluted earnings per share was $.32, compared with $.24 in the second quarter of fiscal 2004.

For the first six months of fiscal 2005, revenue was a record $29.8 million, an increase of 20% from $24.8 million in fiscal 2004. Including the one-time, non-cash IPR&D charge, the company reported an operating loss of $12.5 million and a net loss of $19.1 million, or ($1.07) per diluted share. Excluding the IPR&D charge, operating income grew 37% to a record $17.8 million, from $13.0 million in the prior-year period; net income increased 37% to a record $11.1 million, from $8.4 million in the same period last year; and diluted earnings per share was a record $.61, compared with $.47 in the first six months of fiscal 2004.

“We are pleased with the growth Cordis has achieved again this quarter with its CYPHER stent,” said Bruce Barclay, President and COO. “Their reported CYPHER sales of $617 million for the March quarter is a record and reflects sequential growth of 10% from the December quarter. Additionally, we believe that the growing body of clinical data, which was enhanced at the American College of Cardiology conference in March, bodes very well for CYPHER’s continued growth.”

“Against this backdrop of strong sequential revenue growth from Cordis, our non-Cordis revenue has grown even faster and has exceeded Cordis revenue for the fourth consecutive quarter,” continued Barclay. “We are greatly encouraged by the level of customer interest in the company’s growing technology portfolio and are particularly excited about our future opportunities in ophthalmology, following our recent acquisition of InnoRx.”

“After closing the acquisition of InnoRx in January, we have been actively integrating the company into our operations,” commented Barclay. “We expect to begin human clinical trials for our drug-coated intravitreal implant in our fiscal third quarter. Interest in the acquired technology platforms remains very strong.”

 


 

SurModics’ pipeline remains strong. The Company signed six new licenses in the second quarter, bringing year-to-date licenses to 10 and demonstrating strong progress toward the company’s stated goal of signing 12 new licenses in fiscal 2005. During the quarter, SurModics’ customers introduced 2 new products, bringing the fiscal year-to-date total to 6, well on the way to the goal of 10 for fiscal year 2005. At March 31, a total of 82 coated products were on the market generating royalty revenue, compared with 72 in the prior-year period; the total number of licensed products not yet launched was 64, compared with 63 a year ago; and major non-licensed opportunities stood at 52, compared with 57 a year ago. In total, the company now has 116 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 $56.7 million and no debt as of March 31. We are pleased with our continued progress putting the balance sheet to work. The three transactions we completed in the second quarter — our acquisition of InnoRx, our investment in OctoPlus and our license from Rutgers — 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 second quarter webcast icon. If you do not have access to the Internet and want to listen to the audio, dial 800-240-2430. A replay of the second quarter conference call, will be available by dialing 800-405-2236 and entering conference call ID 11027932. The audio replay will be available beginning at 6:00 p.m. CT on Wednesday, April 20, until 5:00 p.m. CT on Wednesday, April 27.

 


 

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. The content of SurModics’ web site is not part of this release or part of any filings the company makes with the SEC.

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.

Contact

Phil Ankeny, Chief Financial Officer and Vice President, Business Development (952) 829-2700

 


 

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

                                 
    Three Months Ended     Six Months Ended  
    March 31,     March 31,  
    2005     2004     2005     2004  
    (Unaudited)     (Unaudited)  
            Restated             Restated  
Revenue:
                               
Royalties and license fees
  $ 12,268     $ 8,944     $ 22,359     $ 17,572  
Product sales
    2,321       2,803       4,321       5,403  
Research & development
    1,116       991       3,094       1,850  
 
                       
Total revenue
    15,705       12,738       29,774       24,825  
Operating expenses:
                               
Product
    730       752       1,349       1,488  
Research & development
    3,890       3,140       7,246       6,411  
Sales & marketing
    307       588       569       1,006  
General & administrative
    1,649       1,580       2,843       2,955  
Purchased In-Process R&D
    30,277             30,277        
 
                       
Total operating expenses
    36,853       6,060       42,284       11,860  
 
                       
Income (loss) from operations
    (21,148 )     6,678       (12,510 )     12,965  
Investment income
    315       203       287       499  
 
                       
Net income (loss) before income taxes
    (20,833 )     6,881       (12,223 )     13,464  
Income tax provision
    (3,538 )     (2,576 )     (6,911 )     (5,048 )
 
                       
Net income (loss)
    ($24,371 )   $ 4,305       ($19,134 )   $ 8,416  
 
                       
Basic net income (loss) per share
    ($1.34 )   $ 0.25       ($1.07 )   $ 0.48  
 
                       
Diluted net income (loss) per share
    ($1.34 )   $ 0.24       ($1.07 )   $ 0.47  
 
                       
Weighted average shares outstanding
                               
Basic
    18,135       17,483       17,851       17,468  
Diluted
    18,135       17,775       17,851       17,774  

Results previously reported have been restated to show the impact of accounting for InnoRx under the equity method. Prior to completing the acquisition of InnoRx in January 2005, the company accounted for its investment in InnoRx under the cost method.

 


 

SurModics, Inc.
Comparative Analysis of Earnings
(In thousands, except per share data)

                                 
    Three Months Ended     Six Months Ended  
    March 31,     March 31,  
    2005     2004     2005     2004  
    (Unaudited)     (Unaudited)  
            Restated             Restated  
Income (loss) from operations (GAAP)
    ($21,148 )   $ 6,678       ($12,510 )   $ 12,965  
Add: Purchased In-Process R&D
  $ 30,277           $ 30,277        
Comparative income from operations
  $ 9,129     $ 6,678     $ 17,767     $ 12,965  
Diluted net income (loss) per share (GAAP)
    ($1.34 )   $ 0.24       ($1.07 )   $ 0.47  
Add: Net impact of Purchased In-Process R&D
  $ 1.66           $ 1.68        
Comparative diluted net income per share
  $ 0.32     $ 0.24     $ 0.61     $ 0.47  

Results previously reported have been restated to show the impact of accounting for InnoRx under the equity method. Prior to completing the acquisition of InnoRx in January 2005, the company accounted for its investment in InnoRx under the cost method.

Certain information in the attached financial release may be considered non-GAAP Financial Information as contemplated by SEC Regulation G. Accordingly, we are providing the preceding table, which reconciles results to their corresponding GAAP based operating results presented under our Statement of Operations, in the accompanying press release.

Management believes the presentation of these non-GAAP financial results, in connection with the results of the fiscal quarter ended March 31, 2005, provide useful information to investors regarding our results of operations, as these non-GAAP financial measures allow investors to better evaluate ongoing business performance and factors that influenced performance during the period under report. Management also uses these non-GAAP measures internally to monitor performance of the business. These non-GAAP financial measures should be considered in addition to, and not a substitute for, financial measures prepared in accordance with GAAP.

 


 

SurModics, Inc.
Condensed Balance Sheets
(in thousands)

                 
    March 31,     September 30,  
    2005     2004  
    (Unaudited)     Restated  
Assets
               
Current assets:
               
Cash & investments
  $ 8,843     $ 19,215  
Accounts receivable
    11,277       8,130  
Inventories
    992       1,040  
Other current assets
    1,439       1,184  
 
           
Total current assets
    22,551       29,569  
Property & equipment, net
    15,155       15,738  
Long-term investments
    47,832       44,088  
Other assets
    23,949       20,192  
 
           
Total assets
  $ 109,487     $ 109,587  
 
           
 
Liabilities & Stockholders’ Equity
               
Total current liabilities
  $ 4,570     $ 11,789  
Other liabilities
    11,523       3,488  
Total stockholders’ equity
    93,394       94,310  
 
           
Total liabilities & stockholders’ equity
  $ 109,487     $ 109,587  
 
           

Results previously reported have been restated to show the impact of accounting for InnoRx under the equity method. Prior to completing the acquisition of InnoRx in January 2005, the company accounted for its investment in InnoRx under the cost method.