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SurModics Reports Third Quarter Fiscal Year 2012 Results

Wed, 08/01/2012 - 4:01pm
The Associated Press

EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Aug 1, 2012--SurModics, Inc. (Nasdaq:SRDX), a leading provider of surface modification and in vitro diagnostic technologies to the healthcare industries, today announced results for its fiscal 2012 third quarter.

“We are pleased to report strong results for the quarter, which reflects our continued efforts to grow our core businesses,” stated Gary Maharaj, President and Chief Executive Officer of SurModics. “Our focus on driving organic growth produced record quarterly revenue in both hydrophilic coatings and in vitro diagnostic products. Based on this strong performance, we are increasing our outlook for full year fiscal 2012.” Third Quarter Fiscal Year 2012 Summary Revenue for the third quarter totaled $14.0 million, a 7% increase from the $13.0 million reported in the third quarter of last year. Diluted earnings per share from continuing operations was $0.18 for the third quarter compared with $0.17 for the same period last year. Diluted earnings per share, including discontinued operations, was $0.17 for the third quarter.

Results for the fiscal 2012 third quarter, when compared with the fiscal 2011 third quarter, benefited from in vitro diagnostic product sales and hydrophilic coatings revenue growth which offset a $1.1 million decline in royalty and product revenue associated with Cypher and Cypher Select Plus drug eluting stents, products which are no longer marketed by Cordis. Excluding the impact of Cypher, non-GAAP revenue increased 17% from the year ago period. Excluding Cypher items, non-GAAP diluted earnings per share from continuing operations in the third quarter was $0.17 compared with $0.12 last year.

NOTE: Unless otherwise noted financial information presented excludes the $0.1 million fiscal 2012 third quarter loss associated with discontinued operations of our former Pharmaceuticals business.

Medical Device Third Quarter Fiscal Year 2012 Highlights Revenue for the Medical Device business unit, which includes hydrophilic coatings and device drug delivery technologies, was $10.3 million, up 7% from the prior year period. Third quarter hydrophilic coating revenue of $10.0 million was up 18% compared with the year ago period. Excluding the impact of Cypher, Medical Device non-GAAP revenue grew 22% from the year ago period.

Medical Device generated $5.2 million of operating income during the quarter, a 13% increase from last year. Excluding Cypher, Medical Device non-GAAP operating income grew 52% from the year ago period.

Additional Medical Device highlights during the quarter include: Three medical device customers launched new products during the third quarter utilizing SurModics hydrophilic coatings Double-digit hydrophilic royalty growth in key medical device growth segments – neurovascular, peripheral vascular and transcatheter valves Record quarterly hydrophilic coating revenue In Vitro Diagnostics Third Quarter Fiscal Year 2012 Highlights For the third quarter, our In Vitro Diagnostics (“IVD”) revenue was $3.7 million, up 7% compared with the third quarter of fiscal 2011. The IVD business unit generated $1.1 million of operating income during the third quarter, a 26% decline from the year ago period, as product costs more than offset revenue growth and lower operating expenses.

Additional In Vitro Diagnostic highlights during the quarter include: Seven consecutive quarters of year-to-year product revenue growth Record quarterly product revenue Addition of six new diagnostic test kit manufacturer customers Full-Year Fiscal 2012 Revenue and Earnings Outlook Based on our strong year-to-date performance, SurModics has increased its full-year outlook for fiscal 2012 revenue and earnings from continuing operations. Our updated outlook includes revenue associated with Cordis’ Cypher and Cypher Select Plus drug eluting stents.

On a GAAP basis, revenue from continuing operations for fiscal 2012 is now expected to be in the range of $51 to $52 million, above our initial guidance of $47 to $51 million. Earnings per share from continuing operations for fiscal 2012 is now expected to be in the range of $0.56 to $0.59 per share, above our initial guidance of $0.45 to $0.53 per share. Per share information does not take into account any share repurchases that might occur during the balance of fiscal 2012.

Live Webcast SurModics will host a webcast at 5:00 p.m. ET (4:00 p.m. CT) today to discuss the third quarter results. To access the webcast, go to the investor relations portion of the Company’s website at www.surmodics.com and click on the webcast icon. A replay of the third quarter conference call will be available by dialing 800-406-7325 and entering conference call ID passcode 4556791. The audio replay will be available beginning at 8:00 p.m. ET on Wednesday, August 1, until 8:00 p.m. ET on Wednesday, August 8.

About SurModics, Inc. SurModics’ mission is to exceed our customers’ expectations and enhance the well-being of patients by providing the world’s foremost, innovative surface modification technologies and in vitro diagnostic chemical components. The Company partners with the world’s leading and emerging medical device, diagnostic and life science companies to develop and commercialize innovative products designed to improve patient diagnosis and treatment. Core offerings include surface modification coating technologies that impart lubricity, prohealing, and biocompatibility capabilities; and components for in vitro diagnostic test kits and microarrays. SurModics is headquartered in Eden Prairie, Minnesota. For more information about the Company, visit http://www.surmodics.com. The content of SurModics’ website is not part of this press release or part of any filings that the Company makes with the SEC.

Safe Harbor for Forward-Looking Statements This press release contains forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations regarding our ability to achieve sustainable long-term growth and value creation, our expectations regarding the Company’s performance in the near- and long-term, including our revenue and earnings expectations for fiscal 2012, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including (1) reliance on third parties (including our customers and licensees) and their failure to successfully develop, obtain regulatory approval for, market and sell products incorporating our technologies may adversely affect our business operations, our ability to realize the full potential of our pipeline, and our ability to achieve our corporate goals; (2) possible adverse market conditions and possible adverse impacts on our cash flows, and (3) the factors identified under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2011, and updated in our subsequent reports filed with the SEC. These reports are available in the Investors section of our website at www.surmodics.com and at the SEC website at www.sec.gov. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.

Use of Non-GAAP Financial Information In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, SurModics is reporting non-GAAP financial results including non-GAAP revenue, non-GAAP operating income, non-GAAP net income and non-GAAP diluted net income per share. We believe that these non-GAAP measures provide meaningful insight into our operating performance excluding certain event-specific charges, and provide an alternative perspective of our results of operations. We use non-GAAP measures, including those set forth in this release, to assess our operating performance and to determine payout under our executive compensation programs. We believe that presentation of certain non-GAAP measures allows investors to review our results of operations from the same perspective as management and our board of directors and facilitates comparisons of our current results of operations. The method we use to produce non-GAAP results is not in accordance with GAAP and may differ from the methods used by other companies. Non-GAAP results should not be regarded as a substitute for corresponding GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating our business. Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. As such, these non-GAAP measures presented should be viewed in conjunction with both our financial statements prepared in accordance with GAAP and the reconciliation of the supplemental non-GAAP financial measures to the comparable GAAP results provided for the specific periods presented, which are attached to this release.

      SurModics, Inc. and Subsidiaries Condensed Consolidated Statements of Income (in thousands, except per share data)   Three Months Ended Nine Months Ended June 30, June 30, 2012   2011 2012   2011 (Unaudited) (Unaudited) Revenue: Royalties and license fees $ 7,104 $ 7,478 $ 19,997 $ 22,638 Product sales 5,748 4,966 15,449 14,543 Research and development   1,107     555     2,639     1,674   Total revenue   13,959     12,999     38,085     38,855   Operating costs and expenses: Product costs 2,251 1,302 5,456 4,714 Research and development 3,503 3,907 10,653 10,212 Selling, general and administrative 3,412 3,533 10,272 10,730 Restructuring charges ― ― ―   609   Total operating costs and expenses   9,166     8,742     26,381     26,265   Operating income from continuing operations 4,793 4,257 11,704 12,590   Other income (loss): Investment and other income 139 318 590 877 Impairment loss on investment ― ―   (804 ) ― Other income (loss), net   139     318     (214 )   877   Income from continuing operations before income taxes 4,932 4,575 11,490 13,467 Income tax provision   (1,758 )   (1,524 )   (4,215 )   (4,732 ) Income from continuing operations   3,174     3,051     7,275     8,735   Discontinued operations: (Loss) income from discontinued operations, net of taxes (30 ) 791 1,231 (8,576 ) Loss on sale of discontinued operations, net of taxes   (82 ) ―   (1,015 ) ― (Loss) income from discontinued operations   (112 )   791     216     (8,576 ) Net income $ 3,062   $ 3,842   $ 7,491   $ 159     Basic income (loss) per share: Continuing operations $ 0.18 $ 0.17 $ 0.42 $ 0.50 Discontinued operations (0.01 ) 0.05 0.01 (0.49 ) Net income $ 0.17 $ 0.22 $ 0.43 $ 0.01   Diluted income (loss) per share: Continuing operations $ 0.18 $ 0.17 $ 0.41 $ 0.50 Discontinued operations (0.01 ) 0.05 0.01 (0.49 ) Net income $ 0.17 $ 0.22 $ 0.43 $ 0.01   Weighted average number of shares outstanding: Basic 17,528 17,437 17,505 17,409 Diluted 17,647 17,529 17,593 17,456  

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