Surmodics(SRDX) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q2 2019 grew 19% to $22.7 million compared to $19.1 million in Q2 2018, marking four consecutive quarters of double-digit revenue growth [29] - GAAP diluted earnings were $0.09 per share, down from $0.11 per share in Q2 2018, while non-GAAP earnings remained at $0.07 per share for both periods [39] - The company updated its full-year revenue guidance to $88.5 million to $91.5 million, down from previous expectations of $94 million to $97 million [41][42] Business Line Data and Key Metrics Changes - The Medical Device segment reported a 23% revenue growth, increasing to $17.3 million, while the In Vitro Diagnostics (IVD) segment revenue was $5.4 million, up 7% [29][27] - Royalty and license fee revenue in the Medical Device segment totaled $9.9 million, up $1.5 million from the prior year [30] - Product sales increased by 24%, benefiting from recent product launches in Ireland [31] Market Data and Key Metrics Changes - IVD revenue growth of 7.4% outperformed the immunoassay market growth rates of 2% to 3% [27] - The company noted that the recent FDA communication regarding paclitaxel-coated devices has created uncertainty in the market, impacting enrollment rates in clinical studies [9][10] Company Strategy and Development Direction - The company aims to transform into a complete provider of full product solutions, focusing on the success of SurVeil and advancing its drug-coated balloon pipeline [6][13] - Surmodics plans to commercialize up to 15 innovative technologies over the next five years, targeting unmet clinical needs and expanding its addressable market [21] - The company is committed to maintaining strong performance in its Medical Device and IVD businesses while navigating regulatory challenges [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit revenue growth despite uncertainties surrounding paclitaxel-coated devices [11][28] - The company is closely monitoring enrollment rates in the TRANSCEND trial and has adjusted its financial guidance accordingly [10][42] - Management emphasized the importance of patient safety and welfare in response to FDA recommendations [10] Other Important Information - The company received FDA 510(k) approval for its Sublime guide sheath, enhancing its product offerings for radial access [7][23] - The TRANSCEND trial is over 75% enrolled, but recent FDA communications have impacted enrollment rates [9][16] Q&A Session Summary Question: What do you expect the FDA panel to ask about? - Management speculated that the FDA panel may inquire about the signal of mortality associated with paclitaxel and the implications for clinical practices [46][48] Question: Is there a risk that the trial could slow down further? - Management acknowledged the uncertainties but emphasized their commitment to achieving the milestone and balancing risks in their guidance [52][53] Question: What is the impact of the controversy on the addressable market for drug-coated balloons? - Management indicated that estimates of market impact vary widely, with some institutions suggesting a potential reduction in usage [57][58] Question: How is Abbott responding to the current situation? - Management noted that Abbott has been supportive and engaged, emphasizing the importance of the therapeutic modality [61][62] Question: Is there potential to use different drugs with the SurVeil technology? - Management stated that while it is a possibility, it would require significant time and careful evaluation due to the complexities involved [63][64]