Surmodics(US:SRDX)2021-08-07 16:37Financial Performance - The company generated $23.9 million in revenue for Q3 2021, a decline of 11% compared to $26.9 million in the same period last year, which included a $6.7 million milestone payment from Abbott [5][24][32] - Excluding the milestone payment, revenue grew by 17% year-over-year, driven by record IVD revenue and significant royalty revenue growth [6][24] - The GAAP loss per share was $0.24, including $0.03 related to acquisition costs, while the non-GAAP loss per share was $0.17 [6][32] Business Line Performance - Medical Device revenue decreased by 18% to $16.8 million, while IVD revenue reached a record $7.1 million, growing 12% year-over-year [24][30] - Royalty revenue increased by 63% to $7.8 million, benefiting from an easier comparison to the prior year, which was impacted by COVID-19 [26][27] - Product revenue was flat at $12.1 million, with Medical Device product revenue down 5% due to softness in legacy balloon catheter sales [27][28] Market Data - The IVD business experienced strong growth, driven by favorable order timing for distributed antigen products and microarray slide development projects [24][30] - The company reported broad-based growth in its royalties portfolio, with serene hydrophilic coatings doubling compared to the prior year [22][27] Company Strategy and Industry Competition - The company completed the acquisition of Vetex Medical, which strengthens its thrombectomy portfolio and provides opportunities to expand into other vascular beds [19][20] - The company is focused on advancing its product pipeline, including the SurVeil drug-coated balloon and the Pounce thrombectomy platform, while optimizing cash flow from its IVD and Medical Device businesses [8][19] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting the potential for significant long-term shareholder value creation through a robust product portfolio [23][38] - The company expects to generate product revenue from the Vetex acquisition in the second half of calendar 2022, with a low to mid-single-digit U.S. market share necessary for the acquisition to be accretive to non-GAAP earnings [37][38] Other Important Information - The company has a strong cash position, with $72 million in cash and investments as of June 30, 2021, and no debt [33][34] - The updated fiscal 2021 revenue guidance is between $103.5 million and $105.5 million, reflecting growth in royalty revenue and including $16 to $17 million of license fee revenue from the Abbott agreement [38][39] Q&A Session Summary Question: Timing for SurVeil revenue post-PMA approval - Management indicated that while they are targeting a PMA approval by December 2021, it is more likely to occur in the second fiscal quarter of 2022, with order fulfillment taking an additional 3 to 4 months [43][44] Question: Commercialization of Vetex products - Management confirmed that Vetex's ReVene system has received both U.S. 510(k) clearance and CE Mark, allowing for commercialization in Europe and the U.S. [45] Question: Paclitaxel sentiment and FDA outlook - Management expressed optimism regarding the clinical use of paclitaxel, citing overwhelming evidence in its favor and a potential positive shift in FDA regulations [48][50] Question: Impact of patent expirations on core business - Management reported that the unfavorable impact from patent expirations has diminished, with a broad-based growth in the royalty portfolio across all patent families [51] Question: Future acquisitions and product distribution strategy - Management confirmed an active corporate development program, indicating a willingness to pursue complementary high-value technologies while evaluating distribution strategies for their products [67][68]