Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Surmodics Inc (SRDX, Financial) reported an 18% year-over-year increase in total revenue, reaching $32 million in the second fiscal quarter.
- The Medical Device segment of Surmodics Inc (SRDX) saw a significant revenue increase of 26% year-over-year, driven primarily by a 40% increase in product sales.
- Surmodics Inc (SRDX) achieved a notable improvement in profitability, transitioning from a GAAP net loss to GAAP net income, alongside a $6.3 million increase in adjusted EBITDA.
- Cash flow from operations was robust at $7.4 million for the quarter, exceeding expectations partly due to a $3.4 million cash tax refund from the IRS.
- Surmodics Inc (SRDX) successfully advanced key strategic objectives, including the commercialization of new products like the SurVeil DCB, Pounce thrombectomy, and Sublime radial access products.
Negative Points
- Revenue from the In Vitro Diagnostics (IVD) segment decreased by 5% to $7.1 million, reflecting a challenging comparison with a strong prior year quarter.
- The SurVeil drug-coated balloon (DCB) license fee revenue presented a headwind, decreasing by approximately $240,000 year-over-year.
- Product gross margin decreased to 60.8% from 62.6% in the prior year period, impacted by under absorption and production inefficiencies.
- R&D expenses, while lower, indicate a shift in spending that could impact future innovation velocity.
- Despite overall growth, the dependency on a few key products and segments for revenue performance could pose risks if market dynamics shift.
Q & A Highlights
Q: Can you help us to calibrate the TAM for SurVeil today and whether the level of revenue the product is generating is sufficient to maintain Abbott's long-term interest?
A: Gary R. Maharaj - Surmodics, Inc. - CEO, President & Director: The partnership with Abbott is strong and it's still early in the commercialization phase. The TAM for drug-coated balloons, given the FDA's recent changes, is significantly larger than the current market, potentially applicable to every patient treated with balloon angioplasty. Tim added that the TAM hasn't changed, with over 500,000 above-the-knee cases annually in the U.S., translating to about $1 billion TAM.
Q: Regarding Abbott's recent approval for a dissolving drug-coated stent for below-the-knee, is there any new or renewed interest in your products developed for below the knee?
A: Gary R. Maharaj - Surmodics, Inc. - CEO, President & Director: There have been no discussions with Abbott about below-the-knee products related to the recent approval. Surmodics is looking for partners interested in the Sundance project, which requires significant investment to reach IDE level.
Q: With the recent launches of Pounce LP and Pounce Venous, can you provide more color on the $15.5 million revenue guidance for Pounce, SurVeil, and Sublime?
A: Timothy J. Arens - Surmodics, Inc. - Senior VP of Finance & Information Technology and CFO: The $15.5 million guidance includes modest contributions from the new launches, with significant contributions from SurVeil and Pounce. Specific revenue details per product are not disclosed, but Pounce Arterial alone is generating over $1 million per quarter.
Q: Can you discuss the profit-sharing arrangement for SurVeil and whether you are participating in it yet?
A: Timothy J. Arens - Surmodics, Inc. - Senior VP of Finance & Information Technology and CFO: Surmodics estimates profit-sharing when shipping products to Abbott, based on several assumptions including selling price and units sold. The first profit-sharing report from Abbott is yet to be received, and any adjustments will be made based on actual sales data.
Q: Are there any plans for Abbott to launch SurVeil outside the United States?
A: Gary R. Maharaj - Surmodics, Inc. - CEO, President & Director: Currently, there are no discussions or plans for an international launch of SurVeil by Abbott. The focus remains on the U.S. market.
Q: Given the strong performance in the first half of the fiscal year, can you provide any insights into what fiscal year 2025 might look like?
A: Gary R. Maharaj - Surmodics, Inc. - CEO, President & Director: It is too early to provide specific guidance for fiscal year 2025 as the company is still validating various hypotheses and assumptions related to newly launched products. More concrete data will be available closer to the end of the fiscal year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
