Surmodics(SRDX) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q1 2020 grew 2% to $22.6 million compared to $22.2 million in Q1 2019 [4][20] - Diluted GAAP earnings were $0.01 per share, while non-GAAP earnings were $0.05 per share in Q1 2020 [4][27] - Medical Device revenue grew 1% to $17.4 million, while In Vitro Diagnostics (IVD) revenue increased 5% to $5.2 million [20][21] Business Line Data and Key Metrics Changes - Medical Device coatings revenue was slightly up, offsetting lower SurVeil license fee and milestone revenue, which decreased by $1.1 million to $1.3 million [21][22] - IVD business unit revenue was up 5% compared to the prior year, outperforming the immunoassay market growth rate of 3% [17][24] Market Data and Key Metrics Changes - The Medical Device business segment is expected to face headwinds due to patent expirations, with anticipated revenue declines of $5 million to $5.5 million for the full fiscal year [22][24] - IVD operating margin improved to 50% from 49% in the prior year quarter, with product gross margins increasing to 68% from 64% [24] Company Strategy and Development Direction - The company aims to ensure the success of SurVeil, advance product development across its pipeline, and optimize revenue from legacy offerings to fuel growth initiatives [5][6] - The innovative product pipeline includes drug-coated balloons and thrombectomy devices, with significant progress expected in clinical studies and regulatory approvals [11][12] Management's Comments on Operating Environment and Future Outlook - Management remains confident in achieving double-digit revenue growth annually, despite challenges related to paclitaxel matters affecting the therapeutic modality [19][20] - The company is committed to rigorous clinical research to demonstrate the safety and efficacy of its devices, with a focus on enhancing foundational elements for long-term growth [18][19] Other Important Information - The company added Dr. Nusrat Sultana as Vice President of Clinical Affairs to drive clinical strategy and support product development [18] - Cash and investments totaled $48.3 million at the end of the quarter, with significant payments made for contingent earn-out obligations and capital expenditures [27] Q&A Session Summary Question: Update on the partnership with Medtronic - The company has shipped several orders and expects Medtronic to launch Telemark in the coming months, with revenue expectations of $0.5 million to $1 million for each of the partnered products [31][33] Question: CE Mark submission status - There are no updates on the CE Mark for SurVeil, but the notified body has registered in Continental Europe, and ongoing communications are taking place [34][35] Question: SG&A expense increase - The increase in SG&A expenses is attributed to headcount additions for clinical support and product pipeline development [43][44] Question: Impact of Coronavirus - Management does not expect any impact on the IVD business and has not heard of negative impacts on the Medical Devices segment [47][48] Question: SurVeil milestones and CE Mark implications - The most likely milestone for fiscal 2020 is the attainment of the CE Mark, with no additional milestones communicated at this time [51][52] Question: R&D capital allocation changes - The company will be more thoughtful in capital allocation due to delays in CE Mark approvals, but R&D guidance remains unchanged [61][64]