EDEN PRAIRIE, Minn.--(BUSINESS WIRE)--Nov. 6, 2024-- Surmodics, Inc. (Nasdaq: SRDX), a leading provider of medical device and in vitro diagnostic technologies to the healthcare industry, today reported financial results for its fourth quarter and fiscal year ended September 30, 2024.

Fourth Quarter Fiscal 2024 Financial Summary

• Total Revenue of $33.2 million, an increase of 19% year-over-year
• Total Revenue excluding SurVeil™ drug-coated balloon (“DCB”) license fee revenue⁽¹⁾ of $31.3 million, an increase of 17% year-over-year
• GAAP net loss of $(3.4) million, compared to net income of $6.7 million in the prior-year period
• Adjusted EBITDA⁽²⁾ of $4.4 million, compared to $1.7 million in the prior-year period

Fiscal 2024 Financial Summary

• Total Revenue of $126.1 million, compared to $132.6 million in the prior-year period which included $25.0 million in license fee revenue recognized upon receipt of a $27.0 million milestone payment associated with obtaining FDA premarket approval of the SurVeil DCB
• Total Revenue excluding SurVeil DCB license fee revenue⁽¹⁾ of $121.0 million, an increase of 17% year-over-year
• GAAP net loss of $(11.5) million, compared to $(1.5) million in the prior-year period
• Adjusted EBITDA⁽²⁾ of $14.7 million, compared to $21.5 million in the prior-year period

Fourth Quarter and Recent Business Highlights

• On May 29, 2024, Surmodics announced it had entered into a definitive agreement to be acquired by an affiliate of GTCR LLC (“GTCR”) for $43.00 per share in cash, representing an approximate equity value of $627 million (the “Merger”). The Merger was approved by Surmodics’ shareholders at a special meeting on August 13, 2024. On the same date, the company announced that it and an affiliate of GTCR each received a request for additional information and documentary materials (a “Second Request”) from the U.S. Federal Trade Commission (“FTC”) in connection with the Merger. The Merger remains subject to the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR Act”). The company and GTCR currently expect to consummate the Merger in the company’s second fiscal quarter ending March 31, 2025, subject to customary closing conditions, including required regulatory approval.
• On October 1, 2024, Surmodics announced the receipt of U.S. Food and Drug Administration (“FDA”) 510(k) clearance for its Pounce™ XL Thrombectomy System, which will allow for clot removal in larger peripheral arteries (5.5 mm to 10 mm in diameter), expanding the addressable market and clinical utility of the Pounce Thrombectomy Platform.
• On October 30, 2024, Surmodics announced early results from its PROWL registry study of real-world limb ischemia patients treated with Surmodics’ Pounce Thrombectomy System. Early subset analysis of 60 patients with acute, subacute, or chronic symptoms of limb ischemia demonstrated 96.8% procedural flow restoration, with 81.7% of subjects not receiving additional thromboemboli removal treatment post Pounce System use.

“We are proud to deliver a strong conclusion to fiscal 2024, with total revenue growth in the fourth quarter of 19% year-over-year fueled by impressive performance in our Medical Device segment – including product revenue growth of nearly 40% year-over-year – combined with solid contributions from our IVD segment,” said Gary Maharaj, President and CEO of Surmodics, Inc. “Our Medical Device segment product sales growth in the fourth quarter was driven primarily by demand for our vascular interventional products, including our Pounce Thrombectomy Platform and SurVeil DCB, as well as increased sales of our performance coating reagents.”

“I want to thank the Surmodics’ team for their extraordinary dedication and focus in delivering strong quarterly and full-year operating results while we work to substantially comply with the FTC’s Second Request.”

Fourth Quarter Fiscal 2024 Financial Results

Total revenue increased $5.3 million, or 19%, to $33.2 million, compared to $28.0 million in the fourth quarter of fiscal 2023. Excluding SurVeil DCB license fee revenue,⁽¹⁾ total revenue increased $4.5 million, or 17%, to $31.3 million, compared to $26.9 million in the fourth quarter of fiscal 2023.

Medical Device revenue increased $4.7 million, or 22%, to $25.8 million, compared to $21.0 million in the fourth quarter of fiscal 2023. Excluding SurVeil DCB license fee revenue,⁽¹⁾ Medical Device revenue increased $3.9 million, or 20%, to $23.9 million, compared to $20.0 million in the fourth quarter of fiscal 2023, driven primarily by broad-based growth in product sales, as well as growth in performance coating royalties and license fee revenue. Medical Device product sales increased $3.3 million, or 39%, to $11.8 million, compared to $8.5 million in the fourth quarter of fiscal 2023, driven primarily by growth in sales of the Pounce thrombectomy device platform and commercial shipments of the SurVeil DCB to Abbott, the company’s exclusive distribution partner for the product, as well as growth in sales of performance coating reagents. Medical Device performance coating royalties and license fee revenue increased $0.6 million, or 7%, to $9.6 million, compared to $9.0 million in the fourth quarter of fiscal 2023, driven primarily by continued growth in customer utilization of Surmodics’ Serene™ hydrophilic coating. In Vitro Diagnostics (“IVD”) revenue increased $0.5 million, or 8%, to $7.5 million, compared to $6.9 million in the fourth quarter of fiscal 2023, driven primarily by growth in sales of distributed antigen products and microarray slide/surface products.

Product gross profit⁽³⁾ increased $2.1 million, or 25%, to $10.4 million, compared to $8.3 million in the fourth quarter of fiscal 2023. Product gross margin⁽³⁾ was 54.6%, compared to 54.2% in the fourth quarter of fiscal 2023. The increase in product gross margin⁽³⁾ was primarily driven by favorable leverage on increased sales volume and production efficiency improvements from our Pounce thrombectomy and Sublime™ radial access device platforms, partly offset by impacts from the SurVeil DCB including expiration of raw materials inventory and under-absorption.

Operating costs and expenses, excluding product costs, increased $1.8 million, or 8%, to $25.2 million, compared to $23.4 million in the fourth quarter of fiscal 2023. The increase was primarily driven by increased selling, general and administrative expense related to $0.9 million of merger-related charges incurred in the fourth quarter of fiscal 2024 associated with the pending acquisition of Surmodics by GTCR, as well as increased sales compensation expenses.

GAAP net loss was $(3.4) million, or $(0.24) per diluted share, compared to GAAP net income of $6.7 million, or $0.47 per diluted share in the fourth quarter of fiscal 2023. Non-GAAP net loss⁽⁴⁾ was $(1.8) million, or $(0.13) per diluted share,⁽⁴⁾ compared to Non-GAAP net income⁽⁴⁾ of $7.5 million, or $0.53 per diluted share⁽⁴⁾ in the fourth quarter of fiscal 2023.

Adjusted EBITDA⁽²⁾ was $4.4 million, compared to Adjusted EBITDA⁽²⁾ of $1.7 million in the fourth quarter of fiscal 2023.

Fiscal 2024 Financial Results

Total revenue decreased $6.5 million, or 5%, to $126.1 million, compared to $132.6 million in fiscal 2023. Excluding SurVeil DCB license fee revenue,⁽¹⁾ total revenue increased $18.0 million, or 17%, to $121.0 million, compared to $103.0 million in fiscal 2023.

Medical Device revenue decreased $8.3 million, or 8%, to $97.5 million, compared to $105.8 million in fiscal 2023. Medical Device revenue included a total of $5.1 million in SurVeil DCB license fee revenue, compared to $29.6 million in the fourth quarter of fiscal 2023 – of which $25.0 million was revenue recognized on the $27.0 million milestone payment received in the period from Abbott Vascular, Inc. (“Abbott”) associated with obtaining FDA approval of the SurVeil DCB. Excluding SurVeil DCB license fee revenue,⁽¹⁾ Medical Device revenue increased $16.2 million, or 21%, to $92.4 million, compared to $76.2 million in fiscal 2023, driven primarily by growth in product sales and performance coating royalties and license fee revenue. Medical Device product sales increased $11.5 million, or 34%, to $45.6 million, compared to $34.1 million in fiscal 2023, driven primarily by commercial shipments of the SurVeil DCB to Abbott, the company’s exclusive distribution partner for the product, and growth in sales of the Pounce thrombectomy device platform. Medical Device performance coating royalties and license fee revenue increased $4.6 million, or 14%, to $37.4 million, compared to $32.8 million in fiscal 2023, driven primarily by continued growth in customer utilization of Surmodics’ Serene hydrophilic coating, as well as from $1.4 million in catch-up payments received in the normal course of our customers reporting sales-based royalties. IVD revenue increased $1.8 million, or 7%, to $28.6 million, compared to $26.8 million in the fiscal 2023, driven primarily by growth in sales of distributed antigen products and microarray slide/surface products, partly offset by decreased sales of colorimetric substrate products.

GAAP net loss was $(11.5) million, or $(0.82) per diluted share, compared to GAAP net loss of $(1.5) million, or $(0.11) per diluted share in fiscal 2023. Non-GAAP net loss⁽⁴⁾ was $(4.6) million, or $(0.32) per diluted share,⁽⁴⁾ compared to Non-GAAP net income⁽⁴⁾ of $2.2 million, or $0.16 per diluted share⁽⁴⁾ in fiscal 2023.

Adjusted EBITDA⁽²⁾ was $14.7 million, compared to Adjusted EBITDA⁽²⁾ of $21.5 million in fiscal 2023.

Balance Sheet Summary

As of September 30, 2024, Surmodics reported $40.1 million in cash and investments, $5.0 million in outstanding borrowings on its revolving credit facility, and $25.0 million in outstanding borrowings on its term loan facility. The company had access to approximately $65.0 million in additional debt capital as of September 30, 2024 under its revolving credit and term loan facilities. Surmodics reported $3.7 million in cash provided by operating activities and $0.5 million in capital expenditures in the fourth quarter of fiscal 2024. In the fourth quarter of fiscal 2024, cash and investments increased by $1.9 million, which consisted of the change in the combined balance of cash and cash equivalents and investments in available-for-sale securities from June 30, 2024 to September 30, 2024.

Fiscal Year 2025 Financial Guidance

Surmodics is not introducing financial guidance for fiscal 2025 in light of the pending acquisition by GTCR.

Conference Call

Given the pending acquisition by GTCR, Surmodics will not be hosting a live webcast and conference call to discuss fourth quarter and fiscal 2024 financial results and accomplishments.

About the Pending Acquisition of Surmodics by GTCR

On May 29, 2024, Surmodics announced it had entered into a definitive agreement to be acquired by GTCR, a leading private equity firm with a long track record of investment expertise across healthcare and healthcare technology. Under the terms of the agreement, an affiliate of GTCR will acquire all outstanding shares of Surmodics (the “Merger”). Surmodics shareholders will receive $43.00 per share in cash, for a total equity valuation of approximately $627 million. The transaction will be financed through a combination of committed equity from funds affiliated with GTCR and committed debt financing. Upon completion of the transaction, Surmodics will be a privately held company and its common stock will no longer be listed on The Nasdaq Stock Exchange.

The Merger was approved by Surmodics’ shareholders at a special meeting on August 13, 2024. On the same date, the company announced that it and an affiliate of GTCR each received a Second Request. The company and GTCR are gathering information and documentary materials to respond to the Second Request as expeditiously as possible. The Merger remains subject to the expiration or termination of the waiting period under the HSR Act. The company and GTCR currently expect to consummate the Merger in the company’s second fiscal quarter ending March 31, 2025, subject to customary closing conditions, including required regulatory approval.

About Surmodics, Inc.

Surmodics, Inc. is a leading provider of performance coating technologies for intravascular medical devices and chemical and biological components for in vitro diagnostic immunoassay tests and microarrays. Surmodics also develops and commercializes highly differentiated vascular intervention medical devices that are designed to address unmet clinical needs and engineered to the most demanding requirements. This key growth strategy leverages the combination of the company’s expertise in proprietary surface modification and drug-delivery coating technologies, along with its device design, development and manufacturing capabilities. The company’s mission is to improve the detection and treatment of disease. Surmodics is headquartered in Eden Prairie, Minnesota. For more information, visit 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, and disclosures related to it, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements that are not historical or current facts, including statements regarding: the proposed Merger, including anticipated timing of consummating the same, the expected financing of the Merger, and the expectation that the company will be privately held after the Merger; our work to substantially comply with the FTC’s Second Request and to do so as expeditiously as possible; our key growth strategy; our access to additional borrowings under our existing credit agreement; expectations about expanding the addressable market and clinical utility of the Pounce Venous Thrombectomy System, 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, without limitation: (1) risks related to the consummation of the proposed Merger, including the risks that (a) the Merger may not be consummated within the anticipated time period, or at all, (b) the parties may fail to secure the termination or expiration of any waiting period applicable under the HSR Act, (c) other conditions to the consummation of the Merger under the agreement for the Merger (the “Merger Agreement”) may not be satisfied, (d) all or part of GTCR’s financing may not become available, and (e) the significant limitations on remedies contained in the Merger Agreement may limit or entirely prevent the company from specifically enforcing the buyer’s obligations under the Merger Agreement or recovering damages for any breach by the buyer; (2) the effects that any termination of the Merger Agreement may have on the company or its business, including the risks that (a) the company’s stock price may decline significantly if the Merger is not completed, (b) the Merger Agreement may be terminated in circumstances requiring the company to pay the buyer a termination fee of $20,380,000, or (c) the circumstances of the termination, including the possible imposition of a 12-month tail period during which the termination fee could be payable upon certain subsequent transactions, may have a chilling effect on alternatives to the Merger; (3) the effects that the announcement or pendency of the Merger may have on the company and its business, including the risks that as a result (a) the company’s business, operating results or stock price may suffer, (b) the company’s current plans and operations may be disrupted, (c) the company’s ability to retain or recruit key employees may be adversely affected, (d) the company’s business relationships (including, customers, franchisees and suppliers) may be adversely affected, or (e) the company’s management’s or employees’ attention may be diverted from other important matters; (4) the effect of limitations that the Merger Agreement places on the company’s ability to operate its business, return capital to shareholders or engage in alternative transactions; (5) the nature, cost and outcome of pending and future litigation and other legal proceedings, including proceedings related to the Merger and instituted against the company and others; (6) the risk that the Merger and related transactions may involve unexpected costs, liabilities or delays; (7) our ability to successfully commercialize our SurVeil DCB (including realization of the full potential benefits of our agreement with Abbott), Sundance™ DCB, and other proprietary products; (8) our 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; (9) possible adverse market conditions and possible adverse impacts on our cash flows; (10) our ability to successfully and profitably produce and commercialize our vascular intervention products; (11) supply chain constraints; (12) whether our operating expenses are effective in generating profitable revenues; (13) 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, 2023 and subsequent SEC filings. These reports are available in the Investors section of our website at https://surmodics.gcs-web.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 U.S. generally accepted accounting principles, or GAAP, Surmodics is reporting non-GAAP financial results including total revenue excluding SurVeil DCB license fee revenue, Medical Device revenue excluding SurVeil DCB license fee revenue, EBITDA and Adjusted EBITDA, non-GAAP operating income (loss), non-GAAP operating income (loss) percentage, non-GAAP income (loss) before income taxes, non-GAAP net (loss) income, and non-GAAP (loss) income per diluted share. We believe that these non-GAAP measures, when read in conjunction with the company’s GAAP financial statements, provide meaningful insight into our operating performance excluding certain event-specific matters, 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 payouts 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 on our reported financial results. As such, these non-GAAP measures 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.

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Surmodics Investor Inquiries
Jack Powell, Investor Relations
ir@surmodics.com

Source: Surmodics, Inc.