EDEN PRAIRIE, Minn.–(BUSINESS WIRE)–Aug 1, 2012–SurModics, Inc. (Nasdaq:SRDX), a leading provider of surface modification and in vitro diagnostic technologies to the healthcare industries, today announced results for its fiscal 2012 third quarter.
“We are pleased to report strong results for the quarter, which reflects our continued efforts to grow our core businesses,” stated Gary Maharaj, President and Chief Executive Officer of SurModics. “Our focus on driving organic growth produced record quarterly revenue in both hydrophilic coatings and in vitro diagnostic products. Based on this strong performance, we are increasing our outlook for full year fiscal 2012.”
Third Quarter Fiscal Year 2012 Summary
Revenue for the third quarter totaled $14.0 million, a 7% increase from the $13.0 million reported in the third quarter of last year. Diluted earnings per share from continuing operations was $0.18 for the third quarter compared with $0.17 for the same period last year. Diluted earnings per share, including discontinued operations, was $0.17 for the third quarter.
Results for the fiscal 2012 third quarter, when compared with the fiscal 2011 third quarter, benefited from in vitro diagnostic product sales and hydrophilic coatings revenue growth which offset a $1.1 million decline in royalty and product revenue associated with Cypher and Cypher Select Plus drug eluting stents, products which are no longer marketed by Cordis. Excluding the impact of Cypher, non-GAAP revenue increased 17% from the year ago period. Excluding Cypher items, non-GAAP diluted earnings per share from continuing operations in the third quarter was $0.17 compared with $0.12 last year.
NOTE: Unless otherwise noted financial information presented excludes the $0.1 million fiscal 2012 third quarter loss associated with discontinued operations of our former Pharmaceuticals business.
Medical Device Third Quarter Fiscal Year 2012 Highlights
Revenue for the Medical Device business unit, which includes hydrophilic coatings and device drug delivery technologies, was $10.3 million, up 7% from the prior year period. Third quarter hydrophilic coating revenue of $10.0 million was up 18% compared with the year ago period. Excluding the impact of Cypher, Medical Device non-GAAP revenue grew 22% from the year ago period.
Medical Device generated $5.2 million of operating income during the quarter, a 13% increase from last year. Excluding Cypher, Medical Device non-GAAP operating income grew 52% from the year ago period.
Additional Medical Device highlights during the quarter include:
Three medical device customers launched new products during the third quarter utilizing SurModics hydrophilic coatings
Double-digit hydrophilic royalty growth in key medical device growth segments – neurovascular, peripheral vascular and transcatheter valves
Record quarterly hydrophilic coating revenue
In Vitro Diagnostics Third Quarter Fiscal Year 2012 Highlights
For the third quarter, our In Vitro Diagnostics (“IVD”) revenue was $3.7 million, up 7% compared with the third quarter of fiscal 2011. The IVD business unit generated $1.1 million of operating income during the third quarter, a 26% decline from the year ago period, as product costs more than offset revenue growth and lower operating expenses.
Additional In Vitro Diagnostic highlights during the quarter include:
Seven consecutive quarters of year-to-year product revenue growth
Record quarterly product revenue
Addition of six new diagnostic test kit manufacturer customers
Full-Year Fiscal 2012 Revenue and Earnings Outlook
Based on our strong year-to-date performance, SurModics has increased its full-year outlook for fiscal 2012 revenue and earnings from continuing operations. Our updated outlook includes revenue associated with Cordis’ Cypher and Cypher Select Plus drug eluting stents.
On a GAAP basis, revenue from continuing operations for fiscal 2012 is now expected to be in the range of $51 to $52 million, above our initial guidance of $47 to $51 million. Earnings per share from continuing operations for fiscal 2012 is now expected to be in the range of $0.56 to $0.59 per share, above our initial guidance of $0.45 to $0.53 per share. Per share information does not take into account any share repurchases that might occur during the balance of fiscal 2012.
Live Webcast
SurModics will host a webcast at 5:00 p.m. ET (4:00 p.m. CT) today to discuss the third quarter results. To access the webcast, go to the investor relations portion of the Company’s website at www.surmodics.com and click on the webcast icon. A replay of the third quarter conference call will be available by dialing 800-406-7325 and entering conference call ID passcode 4556791. The audio replay will be available beginning at 8:00 p.m. ET on Wednesday, August 1, until 8:00 p.m. ET on Wednesday, August 8.
About SurModics, Inc.
SurModics’ mission is to exceed our customers’ expectations and enhance the well-being of patients by providing the world’s foremost, innovative surface modification technologies and in vitro diagnostic chemical components. The Company partners with the world’s leading and emerging medical device, diagnostic and life science companies to develop and commercialize innovative products designed to improve patient diagnosis and treatment. Core offerings include surface modification coating technologies that impart lubricity, prohealing, and biocompatibility capabilities; and components for in vitro diagnostic test kits and microarrays. SurModics is headquartered in Eden Prairie, Minnesota. For more information about the Company, visit http://www.surmodics.com. The content of SurModics’ website is not part of this press release or part of any filings that the Company makes with the SEC.
Safe Harbor for Forward-Looking Statements
This press release contains forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations regarding our ability to achieve sustainable long-term growth and value creation, our expectations regarding the Company’s performance in the near- and long-term, including our revenue and earnings expectations for fiscal 2012, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including (1) reliance on third parties (including our customers and licensees) and their failure to successfully develop, obtain regulatory approval for, market and sell products incorporating our technologies may adversely affect our business operations, our ability to realize the full potential of our pipeline, and our ability to achieve our corporate goals; (2) possible adverse market conditions and possible adverse impacts on our cash flows, and (3) the factors identified under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2011, and updated in our subsequent reports filed with the SEC. These reports are available in the Investors section of our website at www.surmodics.com and at the SEC website at www.sec.gov. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, SurModics is reporting non-GAAP financial results including non-GAAP revenue, non-GAAP operating income, non-GAAP net income and non-GAAP diluted net income per share. We believe that these non-GAAP measures provide meaningful insight into our operating performance excluding certain event-specific charges, and provide an alternative perspective of our results of operations. We use non-GAAP measures, including those set forth in this release, to assess our operating performance and to determine payout under our executive compensation programs. We believe that presentation of certain non-GAAP measures allows investors to review our results of operations from the same perspective as management and our board of directors and facilitates comparisons of our current results of operations. The method we use to produce non-GAAP results is not in accordance with GAAP and may differ from the methods used by other companies. Non-GAAP results should not be regarded as a substitute for corresponding GAAP measures but instead should be utilized as a supplemental measure of operating performance in evaluating our business. Non-GAAP measures do have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. As such, these non-GAAP measures presented should be viewed in conjunction with both our financial statements prepared in accordance with GAAP and the reconciliation of the supplemental non-GAAP financial measures to the comparable GAAP results provided for the specific periods presented, which are attached to this release.
SurModics, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
Three Months Ended
Nine Months Ended
June 30,
June 30,
2012
2011
2012
2011
(Unaudited)
(Unaudited)
Revenue:
Royalties and license fees
$
7,104
$
7,478
$
19,997
$
22,638
Product sales
5,748
4,966
15,449
14,543
Research and development
1,107
555
2,639
1,674
Total revenue
13,959
12,999
38,085
38,855
Operating costs and expenses:
Product costs
2,251
1,302
5,456
4,714
Research and development
3,503
3,907
10,653
10,212
Selling, general and administrative
3,412
3,533
10,272
10,730
Restructuring charges
―
―
―
609
Total operating costs and expenses
9,166
8,742
26,381
26,265
Operating income from continuing operations
4,793
4,257
11,704
12,590
Other income (loss):
Investment and other income
139
318
590
877
Impairment loss on investment
―
―
(804
)
―
Other income (loss), net
139
318
(214
)
877
Income from continuing operations before income taxes
4,932
4,575
11,490
13,467
Income tax provision
(1,758
)
(1,524
)
(4,215
)
(4,732
)
Income from continuing operations
3,174
3,051
7,275
8,735
Discontinued operations:
(Loss) income from discontinued operations, net of taxes
(30
)
791
1,231
(8,576
)
Loss on sale of discontinued operations, net of taxes
(82
)
―
(1,015
)
―
(Loss) income from discontinued operations
(112
)
791
216
(8,576
)
Net income
$
3,062
$
3,842
$
7,491
$
159
Basic income (loss) per share:
Continuing operations
$
0.18
$
0.17
$
0.42
$
0.50
Discontinued operations
(0.01
)
0.05
0.01
(0.49
)
Net income
$
0.17
$
0.22
$
0.43
$
0.01
Diluted income (loss) per share:
Continuing operations
$
0.18
$
0.17
$
0.41
$
0.50
Discontinued operations
(0.01
)
0.05
0.01
(0.49
)
Net income
$
0.17
$
0.22
$
0.43
$
0.01
Weighted average number of shares outstanding:
Basic
17,528
17,437
17,505
17,409
Diluted
17,647
17,529
17,593
17,456
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