Surmodics(SRDX) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q1 2022 increased by 3% to $23 million compared to$22.3 million in the prior year quarter, driven by solid performance from both Medical Device and In Vitro Diagnostics businesses [10][39] - GAAP diluted loss per share was negative $0.20, while non-GAAP diluted loss per share was negative$0.13 [10][55] - Royalty and license fee revenue totaled $8.1 million, down$1.2 million from the prior year, with royalty revenue declining 13% to $6.9 million [41][55] Business Line Data and Key Metrics Changes - Medical Device business revenue grew 4$16.9 million, driven by strong product sales [39] - In Vitro Diagnostics business revenue was essentially flat at $6.1 million, with growth in stabilization and colorimetric substrate products offset by a decline in slide product revenue [40][47] - Product revenue in the Medical Device business increased by 22$12.3 million, with a 49% growth in product revenue specifically driven by increased demand for coating reagents and medical devices [45][47] Market Data and Key Metrics Changes - The company faced challenges due to COVID-19, including elective procedure delays and staffing shortages impacting both suppliers and internal operations [8][9] - The company estimates that more than half of its royalty revenues are associated with devices used in elective or moderately urgent procedures, which have been deferred due to the pandemic [37] Company Strategy and Development Direction - The company aims to achieve PMA for SurVeil and support Abbott's commercialization efforts, while also focusing on becoming a first-line treatment for patients with its Sublime Radial platform [11][12] - The company is prioritizing the commercialization of its Sublime and Pounce platforms, with a focus on building a robust sales pipeline and increasing market awareness [19][28] - The company plans to continue investing in its commercialization pipeline to drive consistent double-digit revenue growth beginning in fiscal 2023 [29][33] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about achieving fiscal 2022 financial and strategic objectives despite recent headwinds from COVID-19 [9] - The company reaffirms its fiscal 2022 guidance, expecting revenue to range from $97 million to$101 million, with GAAP EPS losses projected between $2.05 and$1.55 [58] - Management anticipates sequential revenue growth in Q2 2022 compared to Q1, assuming the current COVID wave subsides [83] Other Important Information - The company reported a product gross margin of 64%, an increase from 63% in the prior year quarter, with improved margins in both Medical Device and IVD businesses [49] - R&D expenses increased to $11.7 million, representing 51$20 million in cash, excluding potential milestone payments [57] Q&A Session Summary Question: Will Q2 results be lower than Q1 due to market headwinds? - Management indicated that Q2 results will likely be influenced by a significant milestone payment recognized in the prior year, but they expect year-on-year revenue growth overall [62][63] Question: Has the success with Sublime and Pounce changed the long-term strategy regarding partnerships? - Management expressed caution, emphasizing the importance of early market validation and the competitive nature of the market for sales personnel [64][65] Question: What is the timeline for SurVeil's FDA approval and commercialization? - Management outlined that after a pre-submission meeting in late April, a 90-day review period would follow, with potential approval expected in the second half of 2022 [81][82] Question: Why is additional analysis requested for Sundance? - The Steering Committee requested further analysis to ensure adherence to trial protocols, not due to safety concerns [72][74] Question: How will revenue be recognized once SurVeil is approved? - Revenue will be recognized from product sales and profit sharing, with more details to be provided as the situation develops [99]