UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

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

Date of Report (Date of earliest event reported): April 18, 2007

SurModics, Inc.

(Exact name of Registrant as Specified in its Charter)

Minnesota
(State or Other Jurisdiction of Incorporation)

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

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

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

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

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

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

 

 

Item 2.02 Results of Operations and Financial Condition.

     On April 18, 2007, SurModics, Inc. issued a press release announcing the results for the quarter and six months ended March 31, 2007. The copy of the full text of the press release is furnished as Exhibit 99.1 to this report.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements: None.

(b) Pro forma financial information: None

(c) Shell company transactions: None

(d) Exhibits: 99.1 Press Release dated April 18, 2007.

SIGNATURES

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

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

EXHIBIT INDEX
to
FORM 8-K

SURMODICS, INC.

Date of Report:		Commission File No.:
April 18, 2007		0-23837

Exhibit No.		ITEM
99.1		Press Release dated April 18, 2007.

Exhibit 99.1

FOR IMMEDIATE RELEASE

SurModics Reports Second Quarter 2007 Results

19% Growth in Non-CYPHER Revenue

EDEN PRAIRIE, Minnesota — April 18, 2007 — SurModics, Inc. (Nasdaq: SRDX), a leading provider of surface modification and drug delivery technologies to the healthcare industry, today reported financial results for the second fiscal quarter ended March 31, 2007.

Second Quarter Highlights:

•

Revenue of $17.4 million, down 2% year-over-year and up 4% sequentially

•

Record non-CYPHER-related revenue, up 19% year-over-year

•

11th consecutive quarter of growth in non-CYPHER revenue

•

Strong year-over-year revenue growth in two of our three operating segments:

	•		Hydrophilic and Other — up 23%
	•		In Vitro — up 23%
	•		Drug Delivery — down 28%

•

Record product sales of $3.4 million, up 16% year over-year

•

Operating income of $8.1 million

•

Net income of $5.7 million

•

Diluted EPS of $0.31

•

14 new licenses signed with SurModics customers

•

Six new customer products introduced

•

Completed the repurchase of $35 million of common stock; approximately 5% of total shares outstanding retired

“SurModics is pleased to report record non-CYPHER revenue in the second quarter, and for the eleventh consecutive quarter we delivered growth in non-CYPHER revenue,” said Bruce Barclay, President and CEO. “In particular, we delivered strong performance in our In Vitro and Hydrophilic and Other operating segments. While we continue to experience headwinds in the drug eluting stent market, we are pleased with the results generated in the rest of our broad and diverse business portfolio. In fact, despite J&J’s

9% sequential decrease in drug eluting stent sales from the December quarter, total revenue for SurModics actually increased 4% sequentially.”

“Customer interest in SurModics technologies is robust,” continued Barclay. “We are particularly gratified by our success in signing new license agreements. In a strong showing of commitment to SurModics technologies, our customers signed 14 licenses during the quarter. Included in these new agreements is an expanded corporate technology agreement with St. Jude Medical. In addition, interest in our ophthalmology, orthopedics and various cardiovascular technologies remains strong, and we are pleased with the 20% sequential increase in R&D revenue we generated compared with the first quarter.”

“SurModics continues to make excellent progress toward the fiscal 2007 goals announced at our Annual Meeting in January,” continued Barclay. “We achieved another one of our goals last week. Working in concert with Corning Life Sciences and the Donaldson Company, we completed the development and supported Corning’s launch of the first synthetic extracellular matrix cell culture products — a 96 well microplate and a 100mm research dish. Corning officially launched these products and is featuring them at two important industry events — the American Association for Cancer Research meeting and the Society for Biomolecular Sciences meeting. In addition, we remain on track to achieve our remaining corporate goals in fiscal 2007.”

Revenue for the second quarter of fiscal 2007 was $17.4 million, a decrease of 2% from $17.7 million in the year earlier period. Product sales of $3.4 million were an all-time record and increased 16% from the prior year period. Operating income was $8.1 million, a 10% decrease from $9.0 million in the prior year period. Net income was $5.7 million, compared with $1.5 million in the same period last year. Prior year results include a non-cash impairment loss of $4.7 million on our investment in Novocell. Diluted earnings per share was $0.31, compared with $0.08 in the second quarter of fiscal 2006.

For the first six months of fiscal 2007, revenue was $34.1 million, comparable with $34.2 million in the year earlier period. Operating income was $16.2 million, compared with $17.5 million in the prior year period; net income was $11.7 million, compared with $7.7

million in the year earlier period; and diluted earnings per share was $0.64, compared with $0.41 in the first six months of fiscal 2006.

SurModics’ pipeline continues to represent significant potential. The company signed 14 new licenses in the second quarter, reaching a total of 16 licenses fiscal year to date, and nearly achieving the company’s fiscal 2007 goal of 18 new licenses. Our customers launched six new products in the marketplace during the quarter, bringing to 10 the number of launches achieved toward our goal of 20 customer product launches in fiscal 2007. As of March 31, 2007, SurModics’ customers had 95 licensed product classes generating royalty revenue, up from 82 in the prior-year period; the total number of licensed product classes not yet launched was 91, compared with 79 in the prior-year period; and major non-licensed opportunities totaled 77, compared with 73 a year ago. In total, SurModics now has 168 potential commercial products in development representing each of the company’s five focus markets — Cardiovascular, Ophthalmology, Orthopedics, Neurology and In Vitro.

SurModics’ cash and investment balance was $87.6 million as of March 31, 2007, with no debt. Operating cash flow for the quarter was $4.7 million and $16.5 million for the first six months of fiscal 2007. “SurModics remains in excellent financial condition,” said Phil Ankeny, Senior Vice President and Chief Financial Officer. “We are pleased to have completed our $35 million share repurchase program during the quarter, well ahead of our December 2007 anticipated completion date. In the full repurchase program, which was authorized by our Board in September 2006, we retired in excess of one million shares, a reduction of approximately 5% in total shares outstanding. As noted when we announced the repurchase program, we believe the purchase of company shares represents an attractive investment opportunity. Finally, our business development pipeline continues to grow, as we evaluate potentially compelling opportunities to grow our business and put our balance sheet to work.”

About SurModics, Inc.
SurModics, Inc. is a leading provider of surface modification technologies in the areas of biocompatibility, site specific drug delivery, biological cell encapsulation, and medical diagnostics. SurModics partners with the world’s foremost medical device, pharmaceutical and life science companies to bring innovation together for better patient

outcomes. Recent collaborative efforts include the implementation of SurModics’ Bravo™ drug delivery polymer matrix as a key component of the first-to-market drug-eluting coronary stent. SurModics is also active in the ophthalmology market with a sustained drug delivery system that is currently in human trials for treatment of retinal disease. A significant portion of SurModics’ revenue is generated by royalties earned from the sale of our customers’ commercial products. SurModics is headquartered in Eden Prairie, MN. More information about the company can be found at www.surmodics.com. The content of SurModics’ web site is not part of this release or part of any filings the company makes with the SEC.

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

Contact

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

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

		Three Months Ended								Six Months Ended
		March 31,								March 31,
		2007				2006				2007				2006
		(Unaudited)								(Unaudited)
Revenue:
Royalties and license fees		$	13,028			$	13,291			$	26,247			$	25,566
Product sales			3,381				2,908				6,107				5,255
Research& development			953				1,508				1,748				3,351
Total revenue			17,362				17,707				34,102				34,172
Operating expenses:
Product			1,092				869				2,179				1,550
Research & development			5,717				5,060				10,924				9,654
Sales & marketing			335				380				646				704
General & administrative			2,133				2,445				4,159				4,731
Total operating expenses			9,277				8,754				17,908				16,639
Income from operations			8,085				8,953				16,194				17,533
Investment income			1,172				952				2,501				1,680
Impairment loss on investment			—				(4,651	)			—				(4,651	)
Income before income taxes			9,257				5,254				18,695				14,562
Income tax provision			(3,582	)			(3,789	)			(7,029	)			(6,880	)
Net income		$	5,675			$	1,465			$	11,666			$	7,682
Basic net income per share		$	0.31			$	0.08			$	0.64			$	0.42
Diluted net income per share		$	0.31			$	0.08			$	0.64			$	0.41
Weighted average shares outstanding
Basic			18,017				18,481				18,232				18,458
Diluted			18,133				18,649				18,342				18,652

-more-

SurModics, Inc.
Condensed Balance Sheets
(In thousands)

		March 31,				September 30,
		2007				2006
		(Unaudited)
Assets
Current assets:
Cash & investments		$	37,702			$	58,813
Accounts receivable			9,880				14,493
Inventories			990				952
Other current assets			2,702				1,838
Total current assets			51,274				76,096
Property & equipment, net			11,352				11,686
Long-term investments			49,922				47,758
Other assets			25,634				21,862
Total assets		$	138,182			$	157,402
Liabilities & Stockholders’ Equity
Total current liabilities		$	5,844			$	8,989
Other liabilities			2,891				3,210
Total stockholders’ equity			129,447				145,203
Total liabilities & stockholders’ equity		$	138,182			$	157,402

SurModics, Inc.
Condensed Statements of Cash Flows
(In thousands)

		Six months ended
		March 31,
		2007				2006
		(Unaudited)
Operating Activities
Net Income		$	11,666			$	7,682
Depreciation and amortization			1,960				1,758
Net other operating activities			1,801				6,672
Net change in operating assets and liabilities			1,027				2,557
Net cash provided by operating activities			16,454				18,669
Investing Activities
Net purchases of property and equipment			(1,610	)			(4,164	)
Net other investing activities			20,572				(17,861	)
Net cash provided (used) by investing activities			18,962				(22,025	)
Financing Activities
Issuance of common stock			1,885				938
Repurchase of common stock			(35,030	)			--
Net other financing activities			—				77
Net cash provided (used) by financing activities			(33,145	)			1,015
Net change in cash and cash equivalents			2,271				(2,341	)
Cash and Cash Equivalents
Beginning of period			3,751				3,921
End of period		$	6,022			$	1,580

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