Surmodics(SRDX) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q4 2019 grew 34% to $30.8 million compared to $23 million in Q4 2018 [9][35] - Diluted GAAP earnings were $0.26 per share, while non-GAAP earnings were $0.37 per share in Q4 2019, compared to a loss of $0.13 per share in Q4 2018 [50] - Operating cash flow for Q4 was $12.5 million, contributing to a total of $8 million for fiscal 2019 [51] Business Line Data and Key Metrics Changes - Medical Device revenue increased by 46% to $24.8 million in Q4 2019, driven by strong growth in royalty and license fee revenue [36][37] - In Vitro Diagnostics (IVD) revenue totaled $6 million, down slightly from the previous year, impacted by lower sales of distributed antigen products [41] - R&D services revenue increased by 52% to $3.2 million, reflecting higher demand from coatings customers [39] Market Data and Key Metrics Changes - The Medical Device coatings portfolio continued to grow in the low to mid-single digits, despite challenges from patent expirations [34] - The IVD business unit outperformed the immunoassay market growth of 3%, generating excellent operating margins [34] Company Strategy and Development Direction - The company aims to ensure the success of SurVeil and continue advancing product development and regulatory approvals across its pipeline [12][13] - Strategic objectives for fiscal 2020 include optimizing revenue and cash flow from legacy businesses while advancing new product initiatives [14][22] - The company is focused on building a complete line of radial access products and enhancing its thrombectomy platform [30][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges posed by the paclitaxel debate but expressed confidence in the data supporting their products [11][20] - The company expects fiscal 2020 revenue to range from $87 million to $91 million, excluding potential revenue from SurVeil until more clarity is achieved [52][54] - Management anticipates a diluted loss per share in the range of $0.60 to $0.30 for fiscal 2020, reflecting the impact of patent expirations and other factors [55] Other Important Information - The company has submitted all required modules for CE Mark approval for SurVeil but faces delays due to the ongoing paclitaxel debate [19][20] - The company has received Breakthrough Device Designation status from the FDA for Sundance, indicating potential for significant future growth [26] Q&A Session Summary Question: Clarification on guidance and anticipated payments for Sundance - Management clarified that there are no anticipated license fees or milestone payments associated with the Sundance drug-coated balloon in fiscal 2020 [60][61] Question: Impact of patent expirations on revenue - Management confirmed that the royalty headwind from the expiration of the fourth-generation hydrophilic coating patents is expected to be about $5 million to $5.5 million in fiscal 2020 [67][68] Question: CE Mark approval process and potential alternatives - Management indicated that the notified body has paused the review of new CE Marks for paclitaxel devices, and they are exploring options to address this issue [81][82] Question: Details on milestone payments related to Abbott SurVeil - Management stated that over 50% of the $25 million milestone payment from Abbott has been recognized, with the remaining amount to be recognized over the next 60 months [149]