SurModics Inc. Reports Operating Results (10-K)
SurModics, Inc. is a leading provider of surface modification technologies in the areas of biocompatibility, site specific drug delivery, biological cell encapsulation, and medical diagnostics. SurModics partners with the world's foremost medical device, pharmaceutical and life science companies to bring innovation together for better patient outcomes. Recent collaborative efforts include the implementation of SurModics' Bravo drug delivery polymer matrix as a key component of the first-to-market drug-eluting coronary stent. SurModics is also active in the ophthalmology market with a sustained drug delivery system that is currently in human trials for treatment of retinal disease. A significant portion of SurModics' revenue is generated by royalties earned from the sale of our customers' commercial products. Surmodics Inc. has a market cap of $417.7 million; its shares were traded at around $23.9 with a P/E ratio of 22.2 and P/S ratio of 3.5. Surmodics Inc. had an annual average earning growth of 41.3% over the past 10 years. Highlight of Business Operations: In January 2005, we extended the application of our drug delivery technologies beyond the cardiovascular market, where our drug delivery polymer expertise first gained prominence, into the ophthalmology market by acquiring all of the assets of InnoRx, Inc., including its innovative sustained drug delivery platform technologies used to treat a variety of serious eye diseases. A Phase I clinical trial to demonstrate safety of the I-vationtm intravitreal implant in patients with diabetic macular edema (DME) was initiated during fiscal 2005. The study was fully enrolled in fiscal 2006 and patients completed their three-year follow-up during fiscal 2009. The clinical data suggest that the I-vationtm TA (triamcinolone acetonide) intravitreal implant is safe and well tolerated in patients with DME. In June 2007, we entered into a License and Research Collaboration Agreement and separate Supply Agreement with Merck & Co., Inc. (Merck) related to this technology. Under the terms of the Merck agreements, we received an up front license fee of $20 million and were eligible to receive up to an additional $288 million in fees and development milestones associated with the successful product development and attainment of appropriate U.S. and EU regulatory approvals, as well as payment for our research and development activities. In September 2008, following a strategic review of its business and product portfolio, Merck terminated its collaborative research and license agreement with us covering the development and possible commercialization of products incorporating our I-vationtm platform, including the I-vationtm TA product. The termination became effective in December 2008. Mercks termination was not related to safety or efficacy concerns with either the I-vationtm platform, generally, or the I-vationtm TA product, specifically. We continue to believe that if future clinical trials demonstrate longer term safety and efficacy of this product, I-vationtm TA could represent a viable commercial product.
License Agreement, Roche and Genentech has an exclusive license to develop and commercialize a sustained drug delivery formulation of Lucentis® (ranibizumab injection) utilizing SurModics proprietary biodegradable microparticles drug delivery system. Under the terms of the agreement, we received an up front licensing fee of $3.5 million, are eligible to receive potential payments of up to approximately $200 million in fees and milestone payments in the event of the successful development and commercialization of multiple products, and will be paid for development work done on these products. Roche and Genentech will have the right to obtain manufacturing services from SurModics. In the event a commercial product is developed, we will also receive royalties on sales of such products.
Read the The complete ReportSRDX is in the portfolios of Bill Frels of MAIRS & POWER INC, PRIMECAP Management, Chuck Royce of ROYCE & ASSOCIATES.