SurModics Reports Second Quarter 2009 Results

EDEN PRAIRIE, Minn.--(Business Wire)--
SurModics, Inc. (Nasdaq: SRDX), a leading provider of drug delivery and surface
modification technologies to the healthcare industry, today reported financial
results for the second quarter ended March 31, 2009.

Second Quarter Summary:

* Financial highlights:

* Revenue of $20.9 million
* Operating income of $6.2 million
* Net income of $4.2 million
* Diluted EPS of $0.24

* Revenue by market:

* Therapeutic:

* Cardiovascular - $9.6 million
* Ophthalmology - $3.7 million
* Other Markets - $2.9 million

* Diagnostic - $4.7 million

* Product sales of $4.8 million, representing 24% sequential growth from the
first quarter of 2009
* First license fee revenue from SurModics Pharmaceuticals (formerly Brookwood
Pharmaceuticals)
* Repurchased $2.2 million of SurModics stock; cumulative $27.7 million
purchased in $35 million program authorized in November 2007

* Cash and investments of $58.9 million; no debt
* Six new licenses with SurModics customers
* Five new product classes introduced by our customers

"SurModics is pleased to deliver solid financial results for the second quarter,
particularly in light of the difficult economic environment," said Bruce
Barclay, president and CEO. "Our second quarter performance is especially
gratifying coming on the heels of soft product sales in the first quarter.
Product sales increased 24% on a sequential basis compared with the first
quarter. Further, the restructuring actions taken in the first quarter of fiscal
2009, while difficult, have already begun to yield positive results from both
financial and operational standpoints. In total, we have reduced our operating
expenses, excluding product costs, in the second quarter by nearly $3.5 million
compared with the year-ago quarter."

"In addition, we are making good progress against our published fiscal 2009
goals, particularly with respect to signed license agreements and customer
product launches. More broadly, we remain on track to achieve our remaining
fiscal 2009 goals," continued Barclay. "We continue to add new projects in
ophthalmology and are making excellent progress in our partner-supported product
development programs for both back-of-the-eye and front-of-the-eye diseases. As
further evidence of the progress we are making with our business model,
SurModics Pharmaceuticals generated its first license fee revenue during the
quarter."

Revenue for the second quarter of fiscal 2009 was $20.9 million, compared with
$25.7 million in the year earlier period. Operating income was $6.2 million,
compared with $7.2 million in the prior-year period. Net income was $4.2
million, compared with $5.1 million in the same period last year. Diluted
earnings per share was $0.24, compared with $0.28 in the second quarter of
fiscal 2008.

For the first six months of fiscal 2009, revenue was $84.1 million, compared
with $49.5 million in the year earlier period. Operating income was $48.9
million, compared with $14.8 million in the prior year period; net income was
$31.3 million, compared with $10.8 million in the year earlier period; and
diluted net income per share was $1.78, compared with $0.58 in the first six
months of fiscal 2008. Results for the first quarter of fiscal 2009 included the
recognition of $34.8 million of previously deferred revenue, as well as a $9
million milestone payment, both in connection with Merck`s termination of its
agreement with SurModics.

SurModics` pipeline continues to represent significant potential. The Company
added six new licenses in the second quarter, for a fiscal year-to-date total of
14 against its goal of signing 18 new licenses in fiscal 2009. The Company`s
customers launched five new product classes in the marketplace during the
quarter, for a fiscal year-to-date total of seven against its goal of 10
launches in fiscal 2009. As of March 31, 2009, SurModics` customers had 102
licensed product classes generating royalty revenue, compared with 100 a year
ago; the total number of licensed product classes not yet launched was 106, up
from 103 in the prior-year period; and major non-licensed opportunities totaled
92, compared with 90 a year ago. In total, SurModics now has a portfolio of 198
potential commercial products in development diversified across multiple
clinical indications and technology platforms.

SurModics` cash and investment balance totaled $58.9 million as of March 31,
2009, with no debt. For the first six months of fiscal 2009, operating cash flow
was $16.9 million, compared with $8.9 million in the first six months of fiscal
2008. Operating cash flow for the second quarter was negative $0.6 million,
compared with positive $4.5 million in the second quarter of fiscal 2008.

"SurModics continues to be in excellent financial health," said Phil Ankeny,
senior vice president and chief financial officer. "The negative operating cash
flow experienced in the second quarter reflects timing issues associated with
tax payments and accounts receivable. We anticipate a return to positive
quarterly operating cash flow for the upcoming quarters. The Company`s strong
year-to-date operating cash flow and healthy balance sheet with zero debt
provide a major competitive advantage in the current environment. In addition,
we continue to demonstrate disciplined deployment of capital with a goal of
enhancing shareholder value, principally in the areas of share repurchase and
facilities-related and business development investments. We repurchased
approximately $2.2 million of our stock in the second quarter, and as of March
31, 2009, we had a remaining authorization of $7.3 million. Additionally, the
build-out of our development and cGMP manufacturing facility in Alabama is
currently tracking to our timeline and budget. Finally, SurModics is continuing
to review business development opportunities, which are even more abundant in
the current environment."

Live Webcast

SurModics will host a webcast at 5:00 p.m. ET (4:00 p.m. CT) today to discuss
the quarterly results. To access the webcast, go to the investor relations
portion of the Company`s website at www.surmodics.com, and click on the second
quarter webcast icon. If you do not have access to the Internet and want to
listen to the audio by phone, dial 800-257-2182. A replay of the first quarter
conference call will be available by dialing 800-405-2236 and entering
conference call ID 11130107. The audio replay will be available beginning at
7:00 p.m. CT on Wednesday, April 29, until 7:00 p.m. CT on Wednesday, May 6.

About SurModics, Inc.

SurModics` vision is to extend and improve the lives of patients through
technology innovation. The Company partners with the world`s foremost medical
device, pharmaceutical and life science companies to develop and commercialize
innovative products that result in improved diagnosis and treatment for
patients. Core offerings include: drug delivery technologies (coatings,
microparticles, nanoparticles, and implants); surface modification coating
technologies that impart lubricity, prohealing, and biocompatibility
capabilities; and components for in vitro diagnostic test kits and specialized
surfaces for cell culture and microarrays. SurModics is headquartered in Eden
Prairie, Minnesota and its SurModics Pharmaceuticals subsidiary is located in
Birmingham, Alabama. For more information about the Company, visit
www.surmodics.com. The content of SurModics` website is not part of this release
or part of any filings 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, such as our expectations about our pipeline, our ability to
achieve our fiscal 2009 company goals, , our expected return to positive
quarterly operating cash flow, our continued growth, and our performance in the
near- and long-term, 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 the
following: (1) our 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 fiscal 2009 company goals; (2) costs or
difficulties relating to the integration of the businesses of SurModics
Pharmaceuticals and BioFX Laboratories, and the drug delivery assets and
collaborative programs acquired from PR Pharmaceuticals, Inc., with SurModics`
business may be greater than expected and may adversely affect the Company`s
results of operations and financial condition; (3) developments in the
regulatory environment, as well as market and economic conditions, may adversely
affect our business operations and profitability; and (4) other 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, 2008, 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.

SurModics, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share data)

Three Months Ended Six Months Ended
March 31, March 31,
2009 2008 2009 2008
(Unaudited) (Unaudited)
Revenue
Royalties and license fees $ 10,052 $ 13,809 $ 57,799 $ 26,987
Product sales 4,776 4,700 8,632 9,907
Research and development 6,097 7,198 17,710 12,642
Total revenue 20,925 25,707 84,141 49,536

Operating costs and expenses
Product costs 1,838 2,154 3,353 4,129
Research and development 8,484 10,370 17,837 19,904
Selling, general and administrative 4,403 6,002 9,086 10,751
Restructuring charges - - 1,798 -
Purchased in-process research and development - - 3,200 -
Total operating expenses 14,725 18,526 35,274 34,784
Income from operations 6,200 7,181 48,867 14,752

Investment income and other 417 1,184 1,002 2,904
Income before income taxes 6,617 8,365 49,869 17,656

Income tax provision (2,401 ) (3,258 ) (18,568 ) (6,903 )
Net income $ 4,216 $ 5,107 $ 31,301 $ 10,753

Basic net income per share $ 0.24 $ 0.28 $ 1.79 $ 0.60

Diluted net income per share $ 0.24 $ 0.28 $ 1.78 $ 0.58

Weighted average shares outstanding
Basic 17,320 18,102 17,509 18,055
Diluted 17,349 18,428 17,554 18,421

SurModics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)

March 31, September 30,
2009 2008
Assets (Unaudited)
Current assets
Cash and short-term investments $ 13,735 $ 24,627
Accounts receivable 12,868 14,589
Inventories 3,105 2,651
Other current assets 2,753 4,642
Total current assets 32,461 46,509

Property and equipment, net 53,640 41,897
Long-term investments 45,181 47,351
Intangibles, net 18,755 16,870
Goodwill 21,055 18,001
Other assets 10,948 20,400

Total assets $ 182,040 $ 191,028

Liabilities and Stockholders` Equity
Current liabilities * $ 13,986 $ 8,191

Deferred revenue (current and long-term) 1,460 37,578

Other liabilities 4,495 3,453

Total stockholders` equity 162,099 141,806

Total liabilities and stockholders` equity $ 182,040 $ 191,028

* Current liabilities exclude current portion of deferred revenue.

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

Six Months Ended
March 31,
2009 2008
(Unaudited)
Operating Activities:
Net income $ 31,301 $ 10,753
Depreciation and amortization 2,999 2,993
Stock-based compensation 3,632 5,351
Purchased in-process research and development 3,200 -
Restructuring charges 1,798 -
Deferred taxes 9,203 (1,129 )
Net other operating activities 563 (1,598 )
Change in operating assets and liabilities:
Accounts receivable 1,721 (1,683 )
Accounts payable and accrued liabilities (2,529 ) 31
Income taxes 1,427 (7,603 )
Deferred revenue (36,118 ) 1,988
Net change in other operating assets and liabilities (335 ) (159 )

Net cash provided by operating activities 16,862 8,944

Investing Activities:
Net purchases of property and equipment (11,269 ) (2,030 )
Business acquisition (4,040 ) -
Cash restricted for land purchase - (1,630 )
Collection of notes receivable - 5,870
Net other investing activities 3,891 3,440

Net cash (used in) provided by investing activities (11,418 ) 5,650

Financing Activities:
Issuance of common stock 655 1,848
Purchase of common stock to fund employee taxes (436 ) (1,450 )
Repurchase of common stock (14,998 ) (2,601 )
Net other financing activities (509 ) 543

Net cash used in financing activities (15,288 ) (1,660 )

Net change in cash and cash equivalents (9,844) 12,934
Cash and cash equivalents
Beginning of period 15,376 13,812
End of period $ 5,532 $ 26,746

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

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