Surmodics(SRDX) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q1 fiscal 2021 declined 1% to $22.3 million compared to $22.6 million in the prior year [28] - Medical device revenue decreased 7% to $16.2 million, while In Vitro Diagnostics (IVD) business grew 17% to $6.1 million [28] - Royalty and license fee revenue totaled $9.3 million, down 8% from the prior year, primarily due to patent expirations and lower procedure volumes [29][30] - On a GAAP basis, diluted earnings per share was a loss of $0.02 compared to earnings of $0.01 in the prior year [38] Business Line Data and Key Metrics Changes - Medical device product revenue decreased 9% to $4.6 million, while IVD product revenue grew 12% to $5.5 million [32][33] - R&D services revenue increased 15% to $2.9 million, benefiting from increased customer development project opportunities [34] - Medical device operating results reported a loss of $600,000, while IVD business grew operating income by 24% to $3.2 million [34][35] Market Data and Key Metrics Changes - The IVD business experienced strong demand for distributed antigen products, leading to a 17% year-over-year revenue growth [24] - The medical device business faced challenges due to COVID-19, impacting elective procedures and overall revenue [23] Company Strategy and Development Direction - The company aims to build traction with SurVeil and advance its product pipeline through development and regulatory clearances [7] - Focus on optimizing cash flow from IVD and medical device coatings to support strategic growth initiatives [7] - The company is well-positioned to deliver sustained growth and shareholder value over the long term despite the pandemic [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving PMA approval for SurVeil by the end of calendar 2021 [13] - The company is optimistic about the long-term safety data required by the FDA and believes it will support their product's market entry [12][76] - Management noted that while the pandemic creates uncertainty, they continue to execute their strategic plan [25] Other Important Information - The company has a strong cash position with no debt, starting the quarter with $61.1 million in cash and short-term investments [39] - The SurVeil distribution and development agreement with Abbott Vascular is expected to generate significant revenue, including a $15 million milestone payment [40][41] Q&A Session Summary Question: Will Abbott launch SurVeil immediately upon approval? - Management has not discussed launch timing in detail yet, but competitive reasons may influence the timing [45] Question: Will Pounce thrombectomy product be in clinical use before the end of the fiscal year? - Clinical use is expected to occur before the end of the fiscal year, with a focus on gathering data to support distribution agreements [46][48] Question: Will royalty headwinds continue after fiscal 2021? - The impact from the Gen 4 patent expiration is expected to diminish throughout fiscal 2021, becoming a tailwind in 2022 [51] Question: What are the long-term opportunities beyond SurVeil? - Management highlighted the potential of the AV Fistula and Sundance products, emphasizing their large addressable markets [60][62] Question: Will R&D spending levels change as revenue grows? - R&D spending as a percentage of revenue is expected to decrease as revenue ramps up, but funding will continue for promising opportunities [67][70] Question: Is there any anecdotal data on the recovery of procedures post-vaccine? - Management noted that there hasn't been significant change in procedure volumes yet, but they are monitoring the situation closely [78] Question: Will SG&A expenses increase in the back half of fiscal 2021? - SG&A expenses are expected to ramp up in Q3 and Q4, with low-double-digit growth anticipated [79] Question: Is the strong performance of the IVD business sustainable? - The IVD business is expected to continue mid-to-high single-digit revenue growth, independent of COVID testing [80] Question: What is the total addressable market for radial access and thrombectomy? - The total addressable market for thrombectomy is estimated at $400 million globally, while radial access has significant growth potential due to low current penetration [85][88]