UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
(Mark One)
For the quarterly period ended
or
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ |
Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
Smaller reporting company |
Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the registrant’s Common Stock, $0.05 par value per share, as of July 28, 2023 was
TABLE OF CONTENTS
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Item 1. |
3 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
Item 3. |
31 |
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Item 4. |
31 |
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Item 1. |
32 |
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Item 1A. |
32 |
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Item 2. |
32 |
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Item 3. |
32 |
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Item 4. |
32 |
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Item 5. |
32 |
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Item 6. |
33 |
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34 |
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2
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
Surmodics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
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June 30, |
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September 30, |
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2023 |
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2022 |
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(In thousands, except per share data) |
(Unaudited) |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
$ |
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$ |
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Accounts receivable, net of allowances of $ |
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Contract assets — royalties and license fees |
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Inventories, net |
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Income tax receivable |
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— |
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Prepaids and other |
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Total Current Assets |
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Property and equipment, net |
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Intangible assets, net |
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Goodwill |
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Other assets |
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Total Assets |
$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current Liabilities: |
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Accounts payable |
$ |
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$ |
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Accrued liabilities: |
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Compensation |
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Accrued other |
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Short-term borrowings |
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— |
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Deferred revenue |
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Income tax payable |
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— |
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Total Current Liabilities |
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Long-term debt, net |
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— |
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Deferred revenue, less current portion |
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Deferred income taxes |
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Other long-term liabilities |
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Total Liabilities |
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(Note 11) |
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Stockholders’ Equity: |
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Series A Preferred stock — $ |
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Common stock — $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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Retained earnings |
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Total Stockholders’ Equity |
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Total Liabilities and Stockholders’ Equity |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Surmodics, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
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Three Months Ended June 30, |
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Nine Months Ended June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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(In thousands, except per share data) |
(Unaudited) |
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(Unaudited) |
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Revenue: |
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Product sales |
$ |
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$ |
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$ |
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$ |
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Royalties and license fees |
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Research, development and other |
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Total revenue |
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Operating costs and expenses: |
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Research and development |
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Selling, general and administrative |
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Acquired intangible asset amortization |
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Restructuring expense |
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— |
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— |
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— |
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Contingent consideration (gain) expense |
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( |
) |
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( |
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Total operating costs and expenses |
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Operating income (loss) |
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( |
) |
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( |
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Other expense: |
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Interest expense, net |
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( |
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( |
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( |
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( |
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Foreign exchange (loss) gain |
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( |
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( |
) |
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Investment income, net |
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Other expense |
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( |
) |
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( |
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( |
) |
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( |
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Income (loss) before income taxes |
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( |
) |
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( |
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Income tax (expense) benefit |
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( |
) |
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( |
) |
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Net income (loss) |
$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Basic net income (loss) per share |
$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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Diluted net income (loss) per share |
$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Weighted average number of shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Surmodics, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
|
Three Months Ended June 30, |
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Nine Months Ended June 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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(In thousands) |
(Unaudited) |
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(Unaudited) |
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Net income (loss) |
$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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Other comprehensive income (loss): |
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Derivative instruments: |
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Unrealized net gain (loss) |
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— |
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( |
) |
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— |
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Net (gain) loss reclassified to earnings |
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( |
) |
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— |
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( |
) |
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— |
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Net changes related to available-for-sale securities, net of tax |
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— |
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— |
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( |
) |
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Foreign currency translation adjustments |
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( |
) |
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( |
) |
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Other comprehensive income (loss) |
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( |
) |
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( |
) |
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Comprehensive income (loss) |
$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Surmodics, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
|
Three Months Ended June 30, 2023 and 2022 |
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(Unaudited) |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-In |
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Comprehensive |
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Retained |
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Stockholders’ |
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(In thousands) |
Shares |
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Amount |
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Capital |
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Loss |
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Earnings |
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Equity |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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Common stock options exercised, net |
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— |
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— |
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— |
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— |
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— |
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— |
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Purchase of common stock to pay |
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( |
) |
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— |
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( |
) |
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— |
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— |
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( |
) |
Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Other comprehensive loss, net of tax |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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Common stock options exercised, net |
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— |
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— |
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— |
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Purchase of common stock to pay |
|
( |
) |
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— |
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( |
) |
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— |
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— |
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( |
) |
Stock-based compensation |
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— |
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— |
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— |
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— |
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Balance at June 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Nine Months Ended June 30, 2023 and 2022 |
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(Unaudited) |
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Accumulated |
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Additional |
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Other |
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Total |
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Common Stock |
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Paid-In |
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Comprehensive |
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Retained |
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Stockholders’ |
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(In thousands) |
Shares |
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Amount |
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Capital |
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(Loss) Income |
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Earnings |
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Equity |
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Balance at September 30, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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Issuance of common stock |
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— |
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— |
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Common stock options exercised, net |
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— |
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— |
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Purchase of common stock to pay |
|
( |
) |
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( |
) |
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|
( |
) |
|
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— |
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— |
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( |
) |
Stock-based compensation |
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— |
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— |
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— |
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— |
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||
Balance at June 30, 2023 |
|
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$ |
|
|
$ |
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|
$ |
( |
) |
|
$ |
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$ |
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||||||
Balance at September 30, 2021 |
|
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$ |
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$ |
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$ |
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$ |
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$ |
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||||||
Net loss |
— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Other comprehensive loss, net of tax |
— |
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— |
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— |
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( |
) |
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— |
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( |
) |
||||
Issuance of common stock |
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— |
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— |
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||||||
Common stock options exercised, net |
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— |
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— |
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||||||
Purchase of common stock to pay |
|
( |
) |
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( |
) |
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( |
) |
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— |
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— |
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( |
) |
||
Stock-based compensation |
— |
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— |
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— |
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— |
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|
|||||
Balance at June 30, 2022 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
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$ |
|
|||||
|
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||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Surmodics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
|
Nine Months Ended June 30, |
|
|||||
|
2023 |
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|
2022 |
|
||
(In thousands) |
(Unaudited) |
|
|||||
Operating Activities: |
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|
||
Net loss |
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Stock-based compensation |
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Noncash lease expense |
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Amortization of debt issuance costs |
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Provision for credit losses |
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Contingent consideration (gain) expense |
|
( |
) |
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Deferred taxes |
|
( |
) |
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( |
) |
Other |
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|
||
Change in operating assets and liabilities: |
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|
||
Accounts receivable and contract assets |
|
( |
) |
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|
( |
) |
Inventories |
|
( |
) |
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|
( |
) |
Prepaids and other |
|
( |
) |
|
|
( |
) |
Accounts payable |
|
( |
) |
|
|
|
|
Accrued liabilities |
|
( |
) |
|
|
( |
) |
Income taxes |
|
|
|
|
( |
) |
|
Deferred revenue |
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) operating activities |
|
|
|
|
( |
) |
|
Investing Activities: |
|
|
|
|
|
||
Purchases of property and equipment |
|
( |
) |
|
|
( |
) |
Maturities of available-for-sale securities |
|
— |
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
( |
) |
|
|
|
|
Financing Activities: |
|
|
|
|
|
||
Payments of short-term borrowings |
|
( |
) |
|
|
— |
|
Proceeds from issuance of long-term debt |
|
|
|
|
— |
|
|
Payments of debt issuance costs |
|
( |
) |
|
|
— |
|
Issuance of common stock |
|
|
|
|
|
||
Payments for taxes related to net share settlement of equity awards |
|
( |
) |
|
|
( |
) |
Payments for acquisition of in-process research and development |
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
( |
) |
|
Effect of exchange rate changes on cash |
|
|
|
|
( |
) |
|
Net change in cash and cash equivalents |
|
|
|
|
( |
) |
|
Cash and Cash Equivalents: |
|
|
|
|
|
||
Beginning of period |
|
|
|
|
|
||
End of period |
$ |
|
|
$ |
|
||
Supplemental Information: |
|
|
|
|
|
||
Cash paid for income taxes |
$ |
|
|
$ |
|
||
Cash paid for interest |
|
|
|
|
|
||
Noncash investing and financing activities: |
|
|
|
|
|
||
Acquisition of property and equipment, net of refundable credits in other current assets and liabilities |
|
— |
|
|
|
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
— |
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
Surmodics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Period Ended June 30, 2023
(Unaudited)
1. Organization
Description of Business
Surmodics, Inc. and subsidiaries (referred to as “Surmodics,” the “Company,” “we,” “us,” “our” and other like terms) is a leading provider of performance coating technologies for intravascular medical devices and chemical and biological components for in vitro diagnostic (“IVD”) immunoassay tests and microarrays. Surmodics develops and commercializes highly differentiated vascular intervention medical devices that are designed to address unmet clinical needs and engineered to the most demanding requirements. This key growth strategy leverages the combination of the Company’s expertise in proprietary surface modification and drug-delivery coating technologies, along with its device design, development and manufacturing capabilities. The Company’s mission is to improve the detection and treatment of disease. Surmodics is headquartered in Eden Prairie, Minnesota.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include all accounts and wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). All intercompany transactions have been eliminated. The Company operates on a fiscal year ending on September 30. In accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), the Company has omitted footnote disclosures that would substantially duplicate the disclosures contained in the audited consolidated financial statements of the Company. These unaudited condensed consolidated financial statements should be read together with the audited consolidated financial statements for the fiscal year ended September 30, 2022, and notes thereto included in our Annual Report on Form 10-K as filed with the SEC.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from those estimates. The results of operations for the three and nine months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the entire 2023 fiscal year.
Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year presentation.
New Accounting Pronouncements
No new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company’s condensed consolidated financial statements.
8
2. Revenue
The following table presents the Company’s revenues disaggregated by product classification and by reportable segment.
|
Three Months Ended June 30, |
|
|
Nine Months Ended June 30, |
|
||||||||||
(In thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Medical Device |
|
|
|
|
|
||||||||||
Product sales |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Royalties |
|
|
|
|
|
|
|
|
|
|
|
||||
License fees |
|
|
|
|
|
|
|
|
|
|
|
||||
Research, development and other |
|
|
|
|
|
|
|
|
|
|
|
||||
Medical Device Revenue |
|
|
|
|
|
|
|
|
|
|
|
||||
In Vitro Diagnostics |
|
|
|
|
|
|
|
|
|
|
|
||||
Product sales |
|
|
|
|
|
|
|
|
|
|
|
||||
Research, development and other |
|
|
|
|
|
|
|
|
|
|
|
||||
In Vitro Diagnostics Revenue |
|
|
|
|
|
|
|
|
|
|
|
||||
Total Revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contract assets totaled $
3. Collaborative Arrangement
On February 26, 2018, the Company entered into an agreement with Abbott Vascular, Inc. (“Abbott”) whereby Abbott has exclusive worldwide commercialization rights for Surmodics' SurVeilTM drug-coated balloon (“DCB”) to treat the superficial femoral artery (the “Abbott Agreement”). In June 2023, the Company received premarket approval (“PMA”) for the SurVeil DCB from the U.S. Food and Drug Administration (“FDA”), and the product may now be marketed and sold in the U.S. by the Company’s exclusive distribution partner, Abbott. Under the Abbott Agreement, Abbott has the right to purchase commercial units from Surmodics, and the Company will realize revenue from product sales to Abbott at an agreed-upon transfer price, as well as a share of net profits resulting from third-party product sales by Abbott. Timing of commercialization in the U.S. is at the discretion of Abbott.
Under the Abbott Agreement, Surmodics is responsible for conducting all necessary clinical trials, including completion of the ongoing, five-year TRANSCEND pivotal clinical trial. Abbott and Surmodics participate on a joint development committee charged with providing guidance on the Company’s clinical and regulatory activities with regard to the SurVeil DCB product.
As of June 30, 2023, the Company had received payments totaling $
License fee revenue recognized from the Abbott Agreement on the condensed consolidated statements of operations totaled $
As of June 30, 2023 and September 30, 2022, deferred revenue on the condensed consolidated balance sheets included $
9
4. Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis by level of the fair value hierarchy were as follows:
|
June 30, 2023 |
|
|||||||||||||
(In thousands) |
Quoted Prices in Active Markets for Identical Instruments |
|
|
Significant Other |
|
|
Significant |
|
|
Total Fair Value |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents (1) |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total assets |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swap (2) |
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Total liabilities |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
September 30, 2022 |
|
|||||||||||||
(In thousands) |
Quoted Prices in Active Markets for Identical Instruments |
|
|
Significant Other |
|
|
Significant |
|
|
Total Fair Value |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents (1) |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Total assets |
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration (3) |
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Total liabilities |
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||
Contingent consideration liabilities are remeasured to fair value each reporting period using discount rates, probabilities of payment and projected payment dates. Increases or decreases in the fair value of the contingent consideration liability can result from changes in the timing or likelihood of achieving milestones and changes in discount periods and rates. Projected contingent payment amounts are discounted back to the current period using a discount cash flow model. Interest accretion and fair value adjustments associated with contingent consideration liabilities are reported in contingent consideration (gain) expense on the condensed consolidated statements of operations.
10
Changes in the contingent consideration liabilities measured at fair value using Level 3 inputs were as follows:
(In thousands) |
|
|
|
Contingent consideration liability at September 30, 2022 |
$ |
|
|
Additions |
|
— |
|
Fair value adjustments |
|
( |
) |
Settlements |
|
— |
|
Interest accretion |
|
|
|
Foreign currency translation |
|
— |
|
Contingent consideration liability at June 30, 2023 |
$ |
— |
|
Contingent consideration liabilities were associated with the fiscal 2021 acquisition of Vetex Medical Limited ("Vetex") and were included in other long-term liabilities on the condensed consolidated balance sheets as of September 30, 2022.
5. Supplemental Balance Sheet Information
Inventories
Inventories consisted of the following components:
|
June 30, |
|
|
September 30, |
|
||
(In thousands) |
2023 |
|
|
2022 |
|
||
Raw materials |
$ |
|
|
$ |
|
||
Work-in process |
|
|
|
|
|
||
Finished products |
|
|
|
|
|
||
Total |
$ |
|
|
$ |
|
||
Prepaids and Other Assets, Current
Prepaids and other current assets consisted of the following:
|
June 30, |
|
|
September 30, |
|
||
(In thousands) |
2023 |
|
|
2022 |
|
||
Prepaid expenses |
$ |
|
|
$ |
|
||
Irish research and development credits receivable |
|
|
|
|
|
||
CARES Act employee retention credit receivable (1) |
|
|
|
|
|
||
Prepaids and other |
$ |
|
|
$ |
|
||
Intangible Assets
Intangible assets consisted of the following:
|
June 30, 2023 |
|
|||||||||||||
(Dollars in thousands) |
Weighted Average Original Life (Years) |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net |
|
||||
Definite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Customer lists and relationships |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Developed technology |
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Patents and other |
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total definite-lived intangible assets |
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Unamortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Trademarks and trade names |
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
11
|
September 30, 2022 |
|
|||||||||||||
(Dollars in thousands) |
Weighted Average Original Life (Years) |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net |
|
||||
Definite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Customer lists and relationships |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Developed technology |
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Patents and other |
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total definite-lived intangible assets |
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Unamortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
||||
Trademarks and trade names |
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Intangible asset amortization expense was $
(In thousands) |
|
|
|
Remainder of 2023 |
$ |
|
|
2024 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
2028 |
|
|
|
Thereafter |
|
|
|
Definite-lived intangible assets |
$ |
|
|
Future amortization amounts presented above are estimates. Actual future amortization expense may be different as a result of future acquisitions, impairments, changes in amortization periods, foreign currency translation rates, or other factors.
Goodwill
Changes in the carrying amount of goodwill by segment were as follows:
(In thousands) |
In Vitro |
|
|
Medical |
|
|
Total |
|
|||
Goodwill as of September 30, 2022 |
$ |
|
|
$ |
|
|
$ |
|
|||
Currency translation adjustment |
|
— |
|
|
|
|
|
|
|
||
Goodwill as of June 30, 2023 |
$ |
|
|
$ |
|
|
$ |
|
|||
Other Assets, Noncurrent
Other noncurrent assets consisted of the following:
|
June 30, |
|
|
September 30, |
|
||
(In thousands) |
2023 |
|
|
2022 |
|
||
Operating lease right-of-use assets |
$ |
|
|
$ |
|
||
Other |
|
|
|
|
|
||
Other assets |
$ |
|
|
$ |
|
||
Other noncurrent assets consisted primarily of prepaid expenses and receivables related to refundable Irish research and development tax credits.
12
Accrued Other Liabilities
Accrued other liabilities consisted of the following:
|
June 30, |
|
|
September 30, |
|
||
(In thousands) |
2023 |
|
|
2022 |
|
||
Accrued professional fees |
$ |
|
|
$ |
|
||
Accrued clinical study expense |
|
|
|
|
|
||
Accrued purchases |
|
|
|
|
|
||
Acquisition of in-process research and development (1) |
|
|
|
|
|
||
Operating lease liability, current portion |
|
|
|
|
|
||
Other |
|
|
|
|
|
||
Total accrued other liabilities |
$ |
|
|
$ |
|
||
Other Long-term Liabilities
Other long-term liabilities consisted of the following:
|
June 30, |
|
|
September 30, |
|
||
(In thousands) |
2023 |
|
|
2022 |
|
||
Deferred consideration (1) |
$ |
|
|
$ |
|
||
Contingent consideration (2) |
|
— |
|
|
|
|
|
Unrecognized tax benefits (3) |
|
|
|
|
|
||
Operating lease liabilities (4) |
|
|
|
|
|
||
Other long-term liabilities |
$ |
|
|
$ |
|
||
13
6. Debt
Debt consisted of the following:
|
June 30, |
|
|
September 30, |
|
||
(In thousands) |
2023 |
|
|
2022 |
|
||
Short-term borrowings (1) |
$ |
— |
|
|
$ |
|
|
|
|
|
|
|
|
||
Revolving Credit Facility, |
$ |
|
|
$ |
— |
|
|
Tranche 1 Term Loans, |
|
|
|
|
— |
|
|
Long-term debt, gross |
|
|
|
|
— |
|
|
Less: Unamortized debt issuance costs |
|
( |
) |
|
|
— |
|
Long-term debt, net |
$ |
|
|
$ |
— |
|
|
On October 14, 2022, the Company entered into a secured revolving credit facility and secured term loan facilities pursuant to a Credit, Security and Guaranty Agreement (the “MidCap Credit Agreement”) with Mid Cap Funding IV Trust, as agent, and MidCap Financial Trust, as term loan servicer and the lenders from time to time party thereto. The MidCap Credit Agreement provides for availability under a secured revolving line of credit of up to $
The MidCap Credit Agreement also provides for up to $
Pursuant to the MidCap Credit Agreement, the Company provided a first priority security interest in all existing and future acquired assets, including intellectual property and real estate, owned by the Company. The MidCap Credit Agreement contains certain covenants that limit the Company’s ability to engage in certain transactions. Subject to certain limited exceptions, these covenants limit the Company’s ability to, among other things:
The MidCap Credit Agreement also contains customary indemnification obligations and customary events of default, including, among other things, (i) non-payment, (ii) breach of warranty, (iii) non-performance of covenants and obligations, (iv) default on other indebtedness, (v) judgments, (vi) change of control, (vii) bankruptcy and insolvency, (viii) impairment of security, (ix) termination of a pension plan, (x) regulatory matters, and (xi) material adverse effect.
14
In addition, the Company must maintain minimum core net revenue levels tested quarterly to the extent that Term Loans advanced under the MidCap Credit Agreement exceed $
Borrowings under the MidCap Credit Agreement bear interest at the forward-looking,
Subject to certain limitations, the Term Loans have a prepayment fee for payments made prior to the maturity date equal to
7. Derivative Financial Instruments
We periodically enter into interest rate swaps with major financial institutions of high credit quality to mitigate exposure to changes in interest rates on our floating-rate indebtedness. Since the fair value of these interest rate swaps is derived from current market rates, they are classified as derivative financial instruments. We do not use derivatives for speculative or trading purposes.
When the Company has multiple derivative financial instruments with the same counterparty subject to a master netting arrangement, we have elected to offset the amounts: (i) recorded as assets and liabilities and (ii) amounts recognized for the right to reclaim cash collateral we have deposited with the counterparty (i.e., cash collateral receivable). Such offset amounts are presented as either a net asset or liability by counterparty on the condensed consolidated balance sheets.
Cash Flow Hedge — Interest Rate Swap
On October 14, 2022, we entered into a floating-to-fixed interest rate swap agreement to mitigate exposure to interest rate increases related to our Term Loans. See Note 6 Debt for further information on our financing arrangements. The total notional amount of the interest rate swap was $
15
The interest rate swap has been designated as a cash flow hedge. Consequently, changes in the fair value of the interest rate swap are recorded in accumulated other comprehensive loss ("AOCL") within stockholders' equity on the condensed consolidated balance sheets. The unrealized (losses) gains on the interest rate swap associated with the interest payments on the Term Loans that are still forecasted to occur are included in AOCL. These (losses) gains will be reclassified into interest expense on the condensed consolidated statements of operations over the life of the swap agreement as the hedged interest payments occur. Upon termination of the derivative instrument or a change in the hedged item, any remaining fair value recorded on the condensed consolidated balance sheets will be recorded as interest expense consistent with the cash flows associated with the underlying hedged item. Cash flows associated with the interest rate swap are included in cash flows from operating activities on the condensed consolidated statements of cash flows.
The net fair value of designated hedge derivatives subject to master netting arrangements reported on the condensed consolidated balance sheets was as follows:
|
Asset (Liability) |
||||||||||||||||||||
(In thousands) |
Gross Recognized Amount |
|
|
Gross Offset Amount |
|
|
Net Amount Presented |
|
|
Cash Collateral Receivable |
|
|
Net Amount Reported |
|
|
Balance Sheet Location |
|||||
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest rate swap |
$ |
( |
) |
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
|||
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
— |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
— |
The pretax amounts recognized in AOCL on the interest rate swap were as follows:
|
Three Months Ended June 30, |
|
|
Nine Months Ended June 30, |
|
||||||||||
(In thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Beginning unrealized net gain (loss) in AOCL |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Net gain (loss) recognized in other comprehensive income (loss) |
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
Net (gain) loss reclassified into interest expense |
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Ending unrealized net gain (loss) in AOCL |
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
— |
|
|
8
The Company has stock-based compensation plans approved by its shareholders under which it grants stock options, restricted stock awards, restricted stock units and deferred stock units to officers, directors and key employees.
|
Three Months Ended June 30, |
|
|
Nine Months Ended June 30, |
|
||||||||||
(In thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Product costs |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of June 30, 2023, unrecognized compensation costs related to non-vested awards totaled approximately $
16
Stock Option Awards
The Company awards stock options to officers, directors and key employees and uses the Black-Scholes option pricing model to determine the fair value of stock options as of the date of each grant.
|
Nine Months Ended June 30, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Stock option grant activity: |
|
|
|
|
|
||
Stock options granted |
|
|
|
|
|
||
Weighted average grant date fair value |
$ |
|
|
$ |
|
||
Weighted average exercise price |
$ |
|
|
$ |
|
||
Restricted Stock Awards
During the nine months ended June 30, 2023 and 2022, the Company awarded
Restricted Stock Unit Awards
During each of the nine months ended June 30, 2023 and 2022, the Company awarded
Employee Stock Purchase Plan
9. Net Income (Loss) Per Share Data
Basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common and common equivalent shares outstanding during the period. The Company’s potentially dilutive common shares are those that result from dilutive common stock options and non-vested stock relating to restricted stock awards and restricted stock units. The calculation of diluted income (loss) per share excluded
The following table presents the denominator for the computation of diluted weighted average shares outstanding:
|
Three Months Ended June 30, |
|
|
Nine Months Ended June 30, |
|
||||||||||
(In thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Basic weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||
Dilutive effect of outstanding stock options, non-vested restricted stock, and non-vested restricted stock units |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Diluted weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
||||
17
10. Income Taxes
A valuation allowance is required to be recognized against deferred tax assets if, based on the available evidence, it is more likely than not (defined as a likelihood of more than
Discrete tax (expense) benefit related to stock-based compensation awards vested, expired, canceled and exercised was $
18
11. Commitments and Contingencies
Clinical Trials. The Company has engaged clinical trial clinical research organization (“CRO”) consultants to assist with the administration of its ongoing clinical trials. The Company executed separate contracts with two CROs for services in connection with the TRANSCEND pivotal clinical trial for the SurVeil DCB, including pass-through expenses paid by the CROs, of up to approximately $
Asset Acquisitions. In fiscal 2018, the Company acquired certain intellectual property assets of Embolitech, LLC (the “Embolitech Transaction”). As part of the Embolitech Transaction, the Company paid the sellers $
Vetex Acquisition. In fiscal 2021, Surmodics acquired all of the outstanding shares of Vetex with an upfront cash payment of $
12. Restructuring
In the second quarter of fiscal 2023, we initiated a spending reduction plan intended to preserve capital and more closely align our capital allocation priorities with our strategic objectives, which included a workforce restructuring in our Medical Device segment. As a result, for the nine months ended June 30, 2023, we recorded $
(In thousands) |
|
|
|
Restructuring expense accruals as of September 30, 2022 |
$ |
— |
|
Restructuring expense |
|
|
|
Payments |
|
( |
) |
Other adjustments |
|
— |
|
Currency translation |
|
— |
|
Restructuring expense accruals as of June 30, 2023 |
$ |
|
|
Restructuring expense accruals as of June 30, 2023 are expected to be paid during the fourth quarter of fiscal 2023.
19
13. Segment Information
Segment revenue, operating income (loss), and depreciation and amortization were as follows:
|
Three Months Ended June 30, |
|
|
Nine Months Ended June 30, |
|
||||||||||
(In thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
||||
Medical Device |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
In Vitro Diagnostics |
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
||||
Medical Device |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
In Vitro Diagnostics |
|
|
|
|
|
|
|
|
|
|
|
||||
Total segment operating income (loss) |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Corporate |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total operating income (loss) |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization: |
|
|
|
|
|
|
|
|
|
|
|
||||
Medical Device |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
In Vitro Diagnostics |
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate |
|
|
|
|
|
|
|
|
|
|
|
||||
Total depreciation and amortization |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Corporate category includes expenses that are not fully allocated to the Medical Device and In Vitro Diagnostics segments. These Corporate costs are related to administrative corporate functions, such as executive management, corporate accounting, information technology, legal, human resources and Board of Directors. Corporate may also include expenses, such as acquisition-related costs and litigation, which are not specific to a segment and thus not allocated to the reportable segments.
Asset information by segment is not presented because the Company does not provide its chief operating decision maker assets by segment, as the data is not readily available.
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information management believes is useful in understanding the operating results, cash flows and financial condition of Surmodics. The discussion should be read in conjunction with both the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, each included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. This discussion contains various “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statement entitled “Forward-Looking Statements” located at the end of this Item 2.
Overview
Surmodics, Inc. (referred to as “Surmodics,” the “Company,” “we,” “us,” “our” and other like terms) is a leading provider of performance coating technologies for intravascular medical devices and chemical and biological components for in vitro diagnostic (“IVD”) immunoassay tests and microarrays. Surmodics develops and commercializes highly differentiated vascular intervention medical devices that are designed to address unmet clinical needs and engineered to the most demanding requirements. This key growth strategy leverages the combination of the Company’s expertise in proprietary surface modification and drug-delivery coating technologies, along with its device design, development and manufacturing capabilities. The Company’s mission is to improve the detection and treatment of disease. Surmodics is headquartered in Eden Prairie, Minnesota.
Vascular Intervention Medical Device Platforms
Within our Medical Device segment, we develop and manufacture our own proprietary vascular intervention medical device products, which leverage our expertise in performance coating technologies, product design and engineering capabilities. We believe our strategy of developing our own medical device products has increased, and will continue to increase, our relevance in the medical device industry. This strategy is key to our future growth and profitability, providing us with the opportunity to capture more revenue and operating margin with vascular intervention device products than we would by licensing our device-enabling technologies.
Highlighted below are select medical device products within our development pipeline that are a focus for development and commercialization efforts. For both our thrombectomy and radial access platforms, we are pursuing commercialization via a direct sales strategy leveraging a small team of experienced sales professionals and clinical specialists. Beginning in fiscal 2022, we began to see modest, but meaningful and growing revenue associated with the adoption, utilization and sales of our Pounce™ and Sublime™ platform products.
PounceTM Thrombectomy Platform
We have successfully developed, internally and through acquisitions, multiple U.S. Food and Drug Administration ("FDA" or the "Agency") 510(k)-cleared mechanical thrombectomy devices for the non-surgical removal of thrombi and emboli (clots) from the peripheral vasculature (legs). In addition to FDA clearance, our Pounce Venous Thrombectomy System has received the Conformité Européenne Mark (“CE Mark”) approval prerequisite for commercialization in the European Union (”E.U.”). We believe that the ease of use, intuitive design and efficient performance of our thrombectomy products make these devices viable first-line treatment options for interventionalists. These devices include:
In the third quarter of fiscal 2023, the low-profile (LP) model of the Pounce Arterial Thrombectomy System received FDA 510(k) regulatory clearance, which will allow for clot removal in below-the-knee peripheral arteries (2 mm to 4 mm in diameter), expanding the addressable market for the Pounce platform. Limited market evaluations are targeted to begin in the first quarter of fiscal 2024.
21
Sublime Radial Access Platform
We have successfully developed and secured FDA 510(k) regulatory clearance for a suite of devices that enable vascular intervention via radial (wrist) access for which commercial sales began in the first quarter of fiscal 2022. These devices include:
Drug-coated Balloon Platform
Surmodics’ drug-coated balloons (“DCBs”) are designed for vascular interventions to treat PAD, a condition that causes a narrowing of the blood vessels supplying the extremities.
The SurVeil DCB has the necessary regulatory approval for commercialization in the E.U., and timing of commercialization in the E.U. is at the discretion of our exclusive distribution partner, Abbott. In fiscal 2021, the TRANSCEND pivotal clinical trial of our SurVeil DCB met both the primary safety and primary efficacy endpoints and was found to be non-inferior to the control device in those endpoints.
In June 2023, the SurVeil DCB received FDA premarket approval (“PMA”) and may now be marketed and sold in the U.S. by our exclusive distribution partner, Abbott. Under the Abbott Agreement, Abbott has the right to purchase commercial units from us, and we will realize revenue from product sales to Abbott at an agreed-upon transfer price, as well as a share of net profits resulting from third-party product sales by Abbott. Timing of commercialization in the U.S. is at the discretion of Abbott and is targeted for fiscal 2024.
For more information regarding our vascular intervention medical devices, see Part I, Item 1 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.
22
Results of Operations
Three and Nine Months Ended June 30, 2023 and 2022
Revenue. Revenue in the third quarter of fiscal 2023 was $52.4 million, a $27.6 million or 111% increase compared to the prior-year quarter. Revenue in the first nine months of fiscal 2023 was $104.6 million, a $30.7 million or 41% increase compared to the same prior-year period. The following is a summary of revenue streams within each reportable segment.
|
|
Three Months Ended June 30, |
|
Nine Months Ended June 30, |
||||||||||||||||||||||||||||
(Dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
Increase/(Decrease) |
|
2023 |
|
|
2022 |
|
|
Increase/(Decrease) |
||||||||||||||||
Medical Device |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Product sales |
|
$ |
9,299 |
|
|
$ |
6,741 |
|
|
$ |
2,558 |
|
|
38 |
|
% |
|
$ |
25,593 |
|
|
$ |
19,970 |
|
|
$ |
5,623 |
|
|
28 |
|
% |
Royalties |
|
|
8,220 |
|
|
|
7,771 |
|
|
|
449 |
|
|
6 |
|
% |
|
|
23,702 |
|
|
|
23,015 |
|
|
|
687 |
|
|
3 |
|
% |
License fees |
|
|
25,933 |
|
|
|
1,024 |
|
|
|
24,909 |
|
|
2,433 |
|
% |
|
|
28,645 |
|
|
|
3,723 |
|
|
|
24,922 |
|
|
669 |
|
% |
R&D and other |
|
|
2,562 |
|
|
|
1,992 |
|
|
|
570 |
|
|
29 |
|
% |
|
|
6,799 |
|
|
|
6,181 |
|
|
|
618 |
|
|
10 |
|
% |
Medical Device Revenue |
|
|
46,014 |
|
|
|
17,528 |
|
|
|
28,486 |
|
|
163 |
|
% |
|
|
84,739 |
|
|
|
52,889 |
|
|
|
31,850 |
|
|
60 |
|
% |
In Vitro Diagnostics |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Product sales |
|
|
6,368 |
|
|
|
7,178 |
|
|
|
(810 |
) |
|
(11 |
) |
% |
|
|
19,658 |
|
|
|
20,257 |
|
|
|
(599 |
) |
|
(3 |
) |
% |
R&D and other |
|
|
101 |
|
|
|
148 |
|
|
|
(47 |
) |
|
(32 |
) |
% |
|
|
217 |
|
|
|
817 |
|
|
|
(600 |
) |
|
(73 |
) |
% |
In Vitro Diagnostics Revenue |
|
|
6,469 |
|
|
|
7,326 |
|
|
|
(857 |
) |
|
(12 |
) |
% |
|
|
19,875 |
|
|
|
21,074 |
|
|
|
(1,199 |
) |
|
(6 |
) |
% |
Total Revenue |
|
$ |
52,483 |
|
|
$ |
24,854 |
|
|
$ |
27,629 |
|
|
111 |
|
% |
|
$ |
104,614 |
|
|
$ |
73,963 |
|
|
$ |
30,651 |
|
|
41 |
|
% |
Medical Device. Revenue in our Medical Device segment was $46.0 million in the third quarter of fiscal 2023, a 163% increase from $17.5 million in the prior-year quarter. Revenue in our Medical Device segment was $84.7 million in the first nine months of fiscal 2023, a 60% increase from $52.9 million in the same prior-year period.
In Vitro Diagnostics. Revenue in our In Vitro Diagnostics (“IVD”) segment was $6.5 million in the third quarter of fiscal 2023, a 12% decrease from $7.3 million in the prior-year quarter. Revenue in our In Vitro Diagnostics segment was $19.9 million in the first nine months of fiscal 2023, a 6% decrease from $21.1 million in the same prior-year period.
23
Operating Costs and Expenses. Product sales, product costs, product gross profit, product gross margin, and operating costs were as follows:
|
|
Three Months Ended June 30, |
|
Nine Months Ended June 30, |
||||||||||||||||||||||||||||||||
(Dollars in thousands) |
|
2023 |
|
|
|
2022 |
|
Increase/(Decrease) |
|
2023 |
|
2022 |
|
Increase/(Decrease) |
||||||||||||||||||||||
Product sales |
|
$ |
15,667 |
|
|
|
$ |
13,919 |
|
|
|
$ |
1,748 |
|
|
13 |
|
% |
|
$ |
45,251 |
|
|
|
$ |
40,227 |
|
|
|
$ |
5,024 |
|
|
12 |
|
% |
Product costs |
|
|
6,921 |
|
|
|
|
5,141 |
|
|
|
|
1,780 |
|
|
35 |
|
% |
|
|
17,926 |
|
|
|
|
14,745 |
|
|
|
|
3,181 |
|
|
22 |
|
% |
Product gross profit (1) |
|
|
8,746 |
|
|
|
|
8,778 |
|
|
|
|
(32 |
) |
|
— |
|
% |
|
|
27,325 |
|
|
|
|
25,482 |
|
|
|
|
1,843 |
|
|
7 |
|
% |
% Product gross margin (2) |
|
|
55.8 |
|
% |
|
|
63.1 |
|
% |
|
|
(7.3 |
) |
ppt |
|
|
60.4 |
|
% |
|
|
63.3 |
|
% |
|
|
(2.9 |
) |
ppt |
||||||
R&D expense |
|
|
11,232 |
|
|
|
|
12,975 |
|
|
|
|
(1,743 |
) |
|
(13 |
) |
% |
|
|
36,899 |
|
|
|
|
38,350 |
|
|
|
|
(1,451 |
) |
|
(4 |
) |
% |
% Total revenue |
|
|
21 |
|
% |
|
|
52 |
|
% |
|
|
|
|
|
|
|
|
35 |
|
% |
|
|
52 |
|
% |
|
|
|
|
|
|
||||
SG&A expense |
|
|
12,874 |
|
|
|
|
12,854 |
|
|
|
|
20 |
|
|
— |
|
% |
|
|
39,077 |
|
|
|
|
33,159 |
|
|
|
|
5,918 |
|
|
18 |
|
% |
% Total revenue |
|
|
25 |
|
% |
|
|
52 |
|
% |
|
|
|
|
|
|
|
|
37 |
|
% |
|
|
45 |
|
% |
|
|
|
|
|
|
||||
Acquired intangible asset amortization |
|
|
879 |
|
|
|
|
1,024 |
|
|
|
|
(145 |
) |
|
(14 |
) |
% |
|
|
2,659 |
|
|
|
|
3,184 |
|
|
|
|
(525 |
) |
|
(16 |
) |
% |
Restructuring expense |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
1,282 |
|
|
|
|
— |
|
|
|
|
1,282 |
|
|
|
|
||
Contingent consideration (gain) expense |
|
|
(835 |
) |
|
|
|
3 |
|
|
|
|
(838 |
) |
|
|
|
|
|
(829 |
) |
|
|
|
9 |
|
|
|
|
(838 |
) |
|
|
|
||
Product gross margins. Product gross margins were 55.8% and 63.1% in the third quarter of fiscal 2023 and 2022, respectively, and 60.4% and 63.3% in the first nine months of fiscal 2023 and 2022, respectively. In the third quarter and first nine months of fiscal 2023, the decline in product gross margin was primarily driven by the adverse mix impact from increased device product sales, which have lower product gross margins due to low production volumes. Product gross margins may continue to be impacted by the shift in revenue mix towards sales of medical devices at relatively lower margins, particularly during the scale-up phase following initial commercialization.
R&D expense. R&D expense declined 13% in the third quarter of fiscal 2023, or $1.7 million, compared to the prior-year quarter. For the first nine months of fiscal 2023, R&D expense declined 4%, or $1.5 million, compared to the same prior-year period. R&D expense as a percentage of revenue was 21% and 52% in the third quarter of fiscal 2023 and 2022, respectively, and 35% and 52% in the first nine months of fiscal 2023 and 2022, respectively. The decline in R&D expense as a percentage of revenue reflects the impact of higher revenue in the third quarter and first nine months of fiscal 2023, principally from the $24.6 million in license fee revenue recognized in the period upon receipt of the $27.0 million SurVeil DCB PMA milestone payment under the Abbott Agreement. In the second quarter of fiscal 2023, we initiated a spending reduction plan, including a workforce restructuring, to refocus our investments in product development to prioritize progress primarily on our near-term growth opportunities, which resulted in a year-over-year decrease in R&D expense in the third quarter and first nine months of fiscal 2023. For the third quarter and first nine months of fiscal 2023, R&D expense reflects continued investment in medical device product development, including in our Pounce thrombectomy and Sublime radial access product platforms and costs associated with our SurVeil DCB.
Selling, general and administrative (“SG&A”) expense. SG&A expense was flat in the third quarter of fiscal 2023, compared to the prior-year quarter. For the first nine months of fiscal 2023, SG&A expense increased 17.8%, or $5.9 million, compared to the same prior-year period. SG&A expense as a percentage of revenue was 25% and 52% in the third quarter of fiscal 2023 and 2022, respectively, and 37% and 45% in the first nine months of fiscal 2023 and 2022, respectively. The decline in SG&A expense as a percentage of revenue reflects the impact of higher revenue in the third quarter and first nine months of fiscal 2023, principally from the $24.6 million in license fee revenue recognized in the period upon receipt of the $27.0 million SurVeil DCB PMA milestone payment under the Abbott Agreement. For the first nine months of fiscal 2023, the increase in SG&A expense was primarily driven by a year-over-year increase in headcount. Throughout fiscal 2022, we invested in a medical device direct salesforce to support the fiscal 2022 commercialization of our Pounce and Sublime product platforms. We expect SG&A expense for full-year fiscal 2023 to increase between $5.5 million and $6.5 million, compared to fiscal 2022, primarily due to higher average SG&A headcount levels in fiscal 2023 than in fiscal 2022.
24
Acquired intangible asset amortization. We have previously acquired certain intangible assets through business combinations, which are amortized over periods ranging from six to 14 years.
Restructuring expense. In the second quarter of fiscal 2023, we initiated a spending reduction plan intended to preserve capital and more closely align our capital allocation priorities with our strategic objectives, which included a workforce restructuring in our Medical Device segment. As a result, in the first nine months of fiscal 2023, we recorded $1.3 million in severance and related charges in restructuring expense, which represented the total estimated expense as of June 30, 2023 associated with the workforce restructuring.
Contingent consideration (gain) expense. In the third quarter and first nine months of fiscal 2023, we reported a $0.8 gain from the fair value adjustment of acquisition-related contingent consideration liabilities. Gain (expense) recognized is related to changes in the probability and timing of achieving certain contractual milestones, as well as accretion expense for the passage of time.
Other expense. Major classifications of other expense were as follows:
|
Three Months Ended June 30, |
|
|
Nine Months Ended June 30, |
|
||||||||||
(In thousands) |
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Interest expense, net |
$ |
(884 |
) |
|
$ |
(145 |
) |
|
$ |
(2,594 |
) |
|
$ |
(410 |
) |
Foreign exchange (loss) gain |
|
(61 |
) |
|
|
85 |
|
|
|
(261 |
) |
|
|
120 |
|
Investment income, net |
|
182 |
|
|
|
22 |
|
|
|
531 |
|
|
|
73 |
|
Other expense |
$ |
(763 |
) |
|
$ |
(38 |
) |
|
$ |
(2,324 |
) |
|
$ |
(217 |
) |
Interest expense, net increased in the third quarter and first nine months of fiscal 2023, compared to the same respective prior-year periods, due to increased borrowing and higher interest rates. Refer to “Liquidity and Capital Resources” for further discussion of financing arrangements and expectations for fiscal 2023 interest expense. Foreign currency exchange (losses) gains result primarily from the impact of U.S. dollar to Euro exchange rate fluctuations on certain intercompany transactions and balances. Investment income, net increased in the third quarter and first nine months of fiscal 2023, compared to the same respective prior-year periods, due to higher interest rates.
Income taxes. We reported income tax expense of $(13.3) million and income tax benefit of $1.5 million in the third quarter of fiscal 2023 and 2022, respectively. For the first nine months of fiscal 2023 and 2022, we reported income tax expense of $(13.5) million and income tax benefit of $3.2 million, respectively. Our effective tax rate was 65% and 21% for the third quarter of fiscal 2023 and 2022, respectively, and 256% and 20% for the first nine months of fiscal 2023 and 2022, respectively.
25
Segment Operating Results
Operating results for each of our reportable segments were as follows:
|
Three Months Ended June 30, |
|
|
Nine Months Ended June 30, |
|
||||||||||||||||||
(In thousands) |
2023 |
|
|
2022 |
|
|
$ Change |
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
||||||
Operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Medical Device |
$ |
21,777 |
|
|
$ |
(7,308 |
) |
|
$ |
29,085 |
|
|
$ |
7,483 |
|
|
$ |
(16,712 |
) |
|
$ |
24,195 |
|
In Vitro Diagnostics |
|
2,866 |
|
|
|
3,387 |
|
|
|
(521 |
) |
|
|
9,450 |
|
|
|
10,262 |
|
|
|
(812 |
) |
Total segment operating income (loss) |
|
24,643 |
|
|
|
(3,921 |
) |
|
|
28,564 |
|
|
|
16,933 |
|
|
|
(6,450 |
) |
|
|
23,383 |
|
Corporate |
|
(3,231 |
) |
|
|
(3,222 |
) |
|
|
(9 |
) |
|
|
(9,333 |
) |
|
|
(9,034 |
) |
|
|
(299 |
) |
Total operating income (loss) |
$ |
21,412 |
|
|
$ |
(7,143 |
) |
|
$ |
28,555 |
|
|
$ |
7,600 |
|
|
$ |
(15,484 |
) |
|
$ |
23,084 |
|
Medical Device. Our Medical Device business reported operating income of $21.8 million in the third quarter of fiscal 2023, compared to an operating loss of $(7.3) million in the prior-year quarter, representing 47% and (42)% of revenue, respectively. For the first nine months of fiscal 2023, our Medical Device business reported operating income of $7.5 million, compared to an operating loss of $(16.7) million in the same prior-year period, representing 9% and (32)% of revenue, respectively.
R&D expenditures in our Medical Device segment declined year-over-year in the third quarter and first nine months of fiscal 2023. During the second quarter of fiscal 2023, we initiated a spending reduction plan, including a workforce restructuring, to refocus our investments in product development to prioritize progress primarily on our near-term growth opportunities. For the third quarter and first nine months of fiscal 2023, R&D expense reflects continued investment in medical device product development, including in our Pounce thrombectomy and Sublime radial access product platforms and costs associated with our SurVeil DCB.
SG&A expense in our Medical Device business declined modestly year-over-year in the third quarter of fiscal 2023, and SG&A expense increased year-over-year in the first nine months of fiscal 2023 primarily related to increased headcount. Throughout fiscal 2022, we invested in a medical device direct salesforce to support the fiscal 2022 commercialization of our Pounce and Sublime product platforms.
In Vitro Diagnostics. Our In Vitro Diagnostics business reported operating income of $2.9 million and $3.4 million in the third quarter of fiscal 2023 and 2022, respectively, representing 44% and 46% of revenue, respectively. For the first nine months of fiscal 2023 and 2022, our In Vitro Diagnostics business reported operating income of $9.5 million and $10.3 million, respectively, representing 48% and 49% of revenue, respectively.
26
Corporate. The Corporate category includes expenses for administrative corporate functions, such as executive management, corporate accounting, information technology, legal, human resources and Board of Directors related fees and expenses, which we do not fully allocate to the Medical Device and IVD segments. Corporate also includes expenses, such as acquisition-related costs and litigation, which are not specific to a segment and thus not allocated to our reportable segments. The unallocated Corporate expense operating loss was $(3.2) million in both the third quarter of fiscal 2023 and 2022 and $(9.3) million and $(9.0) million in the first nine months of fiscal 2023 and 2022, respectively.
Cash Flow Operating Results
The following is a summary of cash flow results:
|
Nine Months Ended June 30, |
|
|||||
(In thousands) |
2023 |
|
|
2022 |
|
||
Cash provided by (used in): |
|
|
|
|
|
||
Operating activities |
$ |
9,264 |
|
|
$ |
(14,723 |
) |
Investing activities |
|
(2,170 |
) |
|
|
4,802 |
|
Financing activities |
|
17,987 |
|
|
|
(673 |
) |
Effect of exchange rates on changes in cash and cash equivalents |
|
500 |
|
|
|
(485 |
) |
Net change in cash and cash equivalents |
$ |
25,581 |
|
|
$ |
(11,079 |
) |
Operating Activities. Cash provided by operating activities was $9.3 million in the first nine months of fiscal 2023, compared to cash used of $(14.7) million in the same prior-year period. Net loss was $(8.2) million in in the first nine months of fiscal 2023, compared to $(12.5) million in the same prior-year period. Net changes in operating assets and liabilities increased cash flows from operating activities by $5.4 million in the first nine months of fiscal 2023 and reduced cash flows from operating activities by $(11.9) million in the same prior-year period. Significant changes in operating assets and liabilities affecting cash flows during these periods included:
Investing Activities. Cash used in investing activities totaled $(2.2) million for the first nine months of fiscal 2023, compared to cash provided of $4.8 million in the same prior-year period. Capital expenditures for property and equipment totaled $2.2 million and $2.8 million in the first nine months of fiscal 2023 and 2022, respectively. In the prior-year period, maturities of available-for-sale investments were a source of cash of $7.6 million.
Financing Activities. Cash provided by financing activities totaled $18.0 million in the first nine months of fiscal 2023, compared to cash used of $(0.7) million in the same prior-year period. In the first quarter of fiscal 2023, the Company entered into a new, five-year secured credit agreement with MidCap Funding IV Trust, as agent, and MidCap Financial Trust, as term loan servicer and the lenders from time to time party thereto (together “MidCap”). The Company drew $25 million on the term loan and $5 million on the revolving credit facility at close. These proceeds were partially used to retire the Company’s existing revolving credit facility with Bridgewater Bank, of which $10 million was outstanding, as well as to pay a total of $1.0 million in debt issuance costs, including fees to MidCap and legal and other expenses directly associated with the financing transaction.
27
Liquidity and Capital Resources
As of June 30, 2023, working capital totaled $53.8 million, an increase of $28.3 million from September 30, 2022. We define working capital as current assets minus current liabilities. Cash and cash equivalents totaled $44.6 million as of June 30, 2023, an increase of $25.6 million from $19.0 million as of September 30, 2022.
The Company proactively manages its access to capital to support liquidity and continued growth. On October 14, 2022, Surmodics entered into a new, five-year secured credit agreement with MidCap, consisting of up to $100 million in term loans ($25 million of which is at the sole discretion of MidCap) and a $25 million revolving credit facility. At close, the Company drew $25 million on the term loan and $5 million on the revolving credit facility. These proceeds were partially used to retire the Company’s then existing $25 million revolving credit facility with Bridgewater Bank, of which $10 million was outstanding. Upon closing in October 2022, the Company’s cash balance increased by $19.5 million. In fiscal 2023, the Company expects total interest expense under the credit agreement with MidCap to be approximately $3.4 million.
As of June 30, 2023, the Company’s shelf registration statement with the SEC allows the Company to offer potentially up to $200 million in debt securities, common stock, preferred stock, warrants, and other securities or any such combination of such securities in amounts, at prices, and on terms announced if and when the securities are ever offered. This shelf registration statement expires in May 2026.
In the second quarter of fiscal 2023, we initiated a spending reduction plan intended to preserve capital and more closely align our capital allocation priorities with our strategic objectives, which included a workforce restructuring that reduced our workforce by approximately 12%. As a result, we reported $1.3 million in restructuring expense for severance and related charges in the second quarter and first nine months of fiscal 2023, which represented the total estimated expense expected to be incurred associated with the workforce restructuring as of June 30, 2023.
In June 2023, the SurVeil DCB received FDA premarket approval and may now be marketed and sold in the U.S. by our exclusive distribution partner, Abbott. We received a $27.0 million milestone payment from Abbott in the third quarter of fiscal 2023, of which $24.6 million was recognized as revenue during the period. Under the Abbott Agreement, Abbott has the right to purchase commercial units from us, and we will realize revenue from product sales to Abbott at an agreed-upon transfer price, as well as a share of net profits resulting from third-party product sales by Abbott. Timing of commercialization in the U.S. is at the discretion of Abbott and is targeted for fiscal 2024.
In fiscal 2023, we anticipate a year-over-year increase in SG&A expenditures of between $5.5 million and $6.5 million. We expect that increasing SG&A expenditures in fiscal 2023 will exceed any corresponding increases in revenues, and therefore will reduce our cash flow from operations. We also anticipate R&D expenses will continue to be significant in fiscal 2023, primarily related to medical device product development, including continued investments in our Pounce and Sublime product platforms.
We believe that our existing cash and cash equivalents, which totaled $44.6 million as of June 30, 2023, together with cash flow from operations and our revolving credit facility and term loans, will provide liquidity sufficient to meet our cash needs and fund our operations and planned capital expenditures for fiscal 2023. There can be no assurance, however, that our business will continue to generate cash flows at historic levels.
28
Beyond fiscal 2023, our cash requirements will depend extensively on the timing of market introduction and extent of market acceptance of products in our medical device product portfolio, including the commercial launch of the SurVeil DCB by Abbott, our exclusive distribution partner for the product. Our long-term cash requirements also will be significantly impacted by the level of our investment in commercialization of our vascular intervention device products and whether we make future corporate transactions. We cannot accurately predict our long-term cash requirements at this time. We may seek additional sources of liquidity and capital resources, including through borrowing, debt or equity financing or corporate transactions to generate cash flow. There can be no assurance that such transactions will be available to us on favorable terms, if at all.
Customer Concentrations
We have agreements with a diverse base of customers and certain customers have multiple products using our technology. Abbott and Medtronic are our largest customers, comprising 11% and 13%, respectively, of our consolidated revenue for fiscal 2022. These same customers, Abbott and Medtronic, each comprised 32% and 10%, respectively, of our consolidated revenue for the nine months ended June 30, 2023. Revenue generated under our SurVeil DCB license agreement with Abbott represented 27% of total revenue for the nine months ended June 30, 2023. Apart from the SurVeil DCB license, Abbott has several separately licensed products which generate revenue for Surmodics, none of which represented more than 3% of total revenue for the nine months ended June 30, 2023. Medtronic has several separately licensed products that generate revenue for Surmodics, none of which represented more than 3% of our total revenue for the nine months ended June 30, 2023.
Critical Accounting Policies and Significant Estimates
Critical accounting policies are those policies that require the application of management’s most challenging subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgments and uncertainties that are sufficiently likely to result in materially different results under different assumptions and conditions. For the nine months ended June 30, 2023, there were no significant changes in our critical accounting policies. For a detailed description of our other critical accounting policies and significant estimates, see Management’s Discussion and Analysis of Financial Condition and Results of Operations under Item 7 in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.
Forward-looking Statements
This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, our strategies for growth, including our ability to sign new license agreements, conduct clinical evaluations, and bring new products to market; the expected initiation and duration of limited market evaluations for our products; the development of future products and their anticipated attributes; our initiations for product evaluation activities; the period over which deferred revenue related to the Abbott Agreement is expected to be recognized; revenue potential related to the potential commercial launch of the SurVeil DCB; our plans to evaluate our strategy for further clinical investment in the Sundance DCB; future revenue growth, our longer-term valuation-creation strategy, and our future potential; information about our product pipeline; future gross margins and operating expenses; the potential impact of a shift in revenue mix towards sales of medical devices; estimated future amortization expense; expectations regarding operating expenses and their impact on our cash flows; the estimated expense expected to be incurred associated with workforce restructurings; when restructuring accruals are expected to be paid; the period over which unrecognized compensation costs is expected to be recognized; research and development plans and expenses; the estimated amount remaining to be paid on contracts with clinical research organization consultants; the estimated total cost for the TRANSCEND clinical trial; anticipated cash requirements; the intended use of remaining proceeds of our borrowing under the MidCap Credit Agreement; future cash flows and sources of funding, and their ability together with existing cash, and cash equivalents, to provide liquidity sufficient to meet our cash needs and fund our operations and planned capital expenditures for fiscal 2023; statements regarding cash requirements beyond fiscal 2023; expectations regarding capital available under our secured revolving credit facility and secured term loan facilities; expectations regarding the maturity of debt; future impacts of our interest rate swap transactions; the impact of potential lawsuits or claims; the potential impact of interest rate fluctuations on our results of operations and cash flows; the impact of potential change in raw material prices, sources of raw materials and our ability to manufacture raw materials ourselves; the potential impact on the Company of currency fluctuations; future income tax (expense) benefit; expected income tax expense and cash taxes to be paid; the likelihood that we will realize the benefits of our deferred tax assets; and the impact of the adoption of new accounting pronouncements. Without limiting the foregoing, words or phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “project,” “will” and similar terminology, generally identify forward-looking statements. Forward-looking statements may also represent challenging goals for us. These statements, which represent our expectations or beliefs concerning various future events, are based on current expectations that involve a number of risks and uncertainties that could cause actual results to differ materially from those of such forward-looking statements. We caution that undue reliance should not be placed on such forward-looking statements, which speak only as of the date made. Some
29
of the factors which could cause results to differ from those expressed in any forward-looking statement are set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 and in our Quarterly Report on Form 10-Q for the three months ended December 31, 2022. We disclaim any intent or obligation to update publicly these forward-looking statements, whether because of new information, future events or otherwise.
Although it is not possible to create a comprehensive list of all factors that may cause actual results to differ from our forward-looking statements, such factors include, among others:
Many of these factors are outside our control and knowledge and could result in increased volatility in period-to-period results. Investors are advised not to place undue reliance upon our forward-looking statements and to consult any further disclosures by us on this subject in our filings with the Securities and Exchange Commission.
30
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our investment policy requires investments with high credit quality issuers and limits the amount of credit exposure to any one issuer. Our investments consist principally of interest-bearing corporate debt securities with varying maturity dates, which generally are less than one year. Because of the credit criteria of our investment policies, the primary market risk associated with these investments is interest rate risk. As of June 30, 2023, we did not hold any available-for-sale debt securities. Therefore, interest rate fluctuations relating to investments would have an insignificant impact on our results of operations or cash flows. Our policy also allows the Company to hold a substantial portion of funds in cash and cash equivalents, which are defined as financial instruments with original maturities of three months or less and may include money market instruments, certificates of deposit, repurchase agreements and commercial paper instruments.
Loans under the Midcap credit agreement bear interest at floating rates tied to Term SOFR. As a result, changes in Term SOFR can affect our results of operations and cash flows to the extent we do not have effective interest rate swap arrangements in place. On October 14, 2022, we entered into a five-year interest rate swap transaction with Wells Fargo Bank, N.A. with respect to $25.0 million of notional value of the term loans funded under the MidCap credit agreement. The interest rate swap transaction fixes at 4.455% the one-month Term SOFR portion of interest rate under the $25.0 million initial Term Loan funded such that the interest rate on $25.0 million of the Term Loan will be 10.205% through its maturity. We have no other swap arrangements in place for any other loans under the Midcap credit agreement.
Management believes that a reasonable change in raw material prices would not have a material impact on future earnings or cash flows because the Company’s inventory exposure is not material.
We are exposed to increasing Euro currency risk with respect to our manufacturing operations in Ireland. In a period where the U.S. dollar is strengthening or weakening relative to the Euro, our revenue and expenses denominated in Euro currency are translated into U.S. dollars at a lower or higher value than they would be in an otherwise constant currency exchange rate environment. All sales transactions are denominated in U.S. dollars or Euros. We generate royalties revenue from the sale of customer products in foreign jurisdictions. Royalties generated in foreign jurisdictions by customers are converted and paid in U.S. dollars per contractual terms. Substantially all of our purchasing transactions are denominated in U.S. dollars or Euros. To date, we have not entered into any foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, referred to collectively herein as the Certifying Officers, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2023. Based on that evaluation, the Company’s Certifying Officers concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) were effective to ensure that information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Certifying Officers, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, the Company has been involved in various legal actions involving its operations, products and technologies, including intellectual property and employment disputes.
Item 1A. Risk Factors
The risks identified in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, filed with the Securities and Exchange Commission on November 23, 2022, under Part I, Item 1A, “Risk Factors” and the risks identified in our Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2022, filed with the SEC on February 6, 2023, under Part II, Item 1A, “Risk Factors” could affect our financial performance and could cause our actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Quarterly Report on Form 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents the information with respect to purchases made by or on behalf of Surmodics, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during the three months ended June 30, 2023.
|
|
Total Number of |
|
|
Average Price Paid |
|
|
Total Number of Shares Purchased as Part of Publicly Announced Programs |
|
|
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs |
|
||||
Period: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
April 1 – 30, 2023 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
25,300,000 |
|
May 1 – 31, 2023 |
|
|
804 |
|
|
|
20.23 |
|
|
|
— |
|
|
|
25,300,000 |
|
June 1 – 30, 2023 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
25,300,000 |
|
Total |
|
|
804 |
|
|
|
20.23 |
|
|
|
— |
|
|
|
|
|
The Company has an aggregate of $25.3 million available for future common stock purchases under the current authorizations. The MidCap credit agreement restricts our ability to repurchase our common stock.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
32
Item 6. Exhibits |
EXHIBIT INDEX |
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Exhibit |
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Description |
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||
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||
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||
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|
|
101.INS* |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the inline XBRL document. |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema. |
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|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase. |
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase. |
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase. |
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase. |
|
|
|
104* |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* Filed herewith
33
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 thereunto duly authorized.
August 2, 2023 |
Surmodics, Inc. |
|
|
|
|
|
By: |
/s/ Timothy J. Arens |
|
|
Timothy J. Arens |
|
|
Senior Vice President of Finance and Chief Financial Officer |
|
|
|
|
|
(duly authorized signatory and principal financial officer) |
34
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Gary R. Maharaj, certify that:
Dated: August 2, 2023 |
Signature: |
/s/ Gary R. Maharaj |
|
|
Gary R. Maharaj |
|
|
President and |
|
|
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Timothy J. Arens, certify that:
Dated: August 2, 2023 |
Signature: |
/s/ Timothy J. Arens |
|
|
Timothy J. Arens |
|
|
Senior Vice President of Finance and Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Surmodics, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Gary R. Maharaj, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
Dated: August 2, 2023 |
Signature: |
/s/ Gary R. Maharaj |
|
|
Gary R. Maharaj |
|
|
President and |
|
|
Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Surmodics, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission (the “Report”), I, Timothy J. Arens, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
Dated: August 2, 2023 |
Signature: |
/s/ Timothy J. Arens |
|
|
Timothy J. Arens |
|
|
Senior Vice President of Finance and Chief Financial Officer |
|
|
|