SurModics (SRDX) reported second quarter fiscal 2010 loss per share of 2 cents, down from earnings per share of 24 cents in the year-ago period. However, after adjusting for restructuring and asset impairment charges, the company’s EPS came in at 10 cents, missing the Zacks Consensus Estimate by 6 cents. Although revenues of $18.4 million were down 12% from the year-ago period, revenues increased 6% sequentially.
SurModics has opened a new cGMP facility in Alabama in Jan 2010. The major portion of capital investment for this facility has already been made with another $3 million – $4 million to be spent on equipment in the remainder of fiscal 2010.
In the therapeutic area, SurModics’ revenues from Ophthalmology and Other Markets recorded a sequential growth of 36% ($3.4 million) and 54% ($2.9 million), respectively while revenues from Cardiovascular, accounting for 51% of top-line, were down 14% sequentially at $9.3 million. Revenues from Diagnostic increased 23% sequentially to $2.8 million.
SurModics derives a substantial majority of its drug delivery revenue from the Cypher stent (reflecting revenues from cardiovascular market), which is marketed by Johnson & Johnson’s (JNJ) Cordis division. J&J reported $191 million in sales from the Cypher stent, down 24% year over year and 14% sequentially.
However, J&J has recently launched the Cypher select plus stent in Japan, which is the second largest market for drug-eluting stents in the world. The launch in Japan should boost stent sales in the forthcoming period.
Revenues in each of the four business units are derived from three primary sources: royalties and license fees from licensing patented surface modification and drug delivery technologies and in vitro diagnostic formats to customers; the sale of reagent chemicals to licensees of its technologies, stabilization products to the diagnostics industry and coated glass slides to the genomics market; research and development fees generated on customer projects.
For the reported quarter, royalties and license fees accounted for 42% of total revenues with product sales and research & development each accounting for 29%.
At the end of the reported quarter, SurModics had $19.3 million of cash and short term investments, down marginally from $20.6 million at the end of Sept 2009. We have a Neutral recommendation on the stock.
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