Surmodics, Inc. (NASDAQ:SRDX) Q1 2024 Earnings Call Transcript

The Pounce supplement featured case studies and interviews with 10 physicians, including a diverse set of vascular surgeons, interventional radiologists, and interventional cardiologists. It provides clinicians with insights into how their peers are integrating Pounce into the approach to treating patients with acute limb ischemia. With case studies featuring pre and post-procedure angiograms, it also simply and powerfully demonstrated Pounce’s ability to quickly remove multiple mixed morphology clots in a single treatment session, eliminating the need for capital equipment or aspiration and reducing reliance on lytic drugs. I encourage you to read the supplements, and draw your own conclusions and develop your own view as to whether our VI products are not far and away the best in any class including products marketed by current large incumbents.

You’ve heard me say in the past, the future has already been created, it’s just not evenly distributed yet. The latter is our job to be done with the Surmodics VI portfolio. These supplements serve as an important resource to do just that, to increase awareness for potential customers and for a relatively small but talented sales team to increase the leverage. Turning to our second strategic objective. We continue to make progress in our efforts to drive durable growth and cash flow generation across our core medical device performance coatings and IVD businesses. Our team delivered a strong start to fiscal 2024 with revenue from these two areas growing 10% year-over-year on a combined basis, driven by growth in each business. The performance of medical device performance coatings was driven by growth in royalty and license fee revenue as well as revenue from R&D services.

Our IVD sales growth was fueled by sales of our antigen and slide products and benefited from a combination of factors as I mentioned earlier, including flu season demand, the timing of orders, and the return of more normalized customer purchasing patterns. These core businesses are tracking towards our expectations of low to mid-single-digit growth for the full year of fiscal 2024. Note, however, that the performance of these core businesses was an important contributor to the adjusted EBITDA profitability that we achieved in the first quarter. And lastly, with respect to our third strategic objective; we continue to lay the foundation for future long-term growth by advancing our pipeline of new products and line extensions, with notable progress on multiple fronts.

In our medical device performance coatings business, we secured the first 510(k) clearance and initiated the commercial launch of our Preside line of hydrophilic coatings, the most advanced hydrophilic coating our team has ever developed, and I believe that the world has ever seen. As I discussed in detail in our last earnings call, Preside is specifically formulated with the next-generation neurovascular, coronary, and peripheral vascular devices in mind. It is designed to provide both enhanced coating durability and industry-leading lubricity, enabling coated devices to reach distal treatment sites across challenging coronary lesions and chronic total occlusions, all with minimal particulate generation. By addressing these specific needs, Preside complements and enhances our existing portfolio, including our Serene hydrophilic coating, and facilitates improved treatment outcomes, and furthermore reinforces our position as the market leader and provider of performance coating technologies for years to come.

In the months following the commercial launch of Preside, we’ve been pleased with the level of interest we’re seeing from both new customers and existing customers, most notably in the neurovascular segment of the market. We look forward to supporting their efforts as they integrate Preside into the next-generation devices and pursue regulatory clearance. In our Vascular Interventions portfolio, we continue to make strides in the limited market evaluation of our Pounce Venous Thrombectomy system. Physician feedback from the LME continues to highlight the product’s visibility when it comes to treating different clot morphologies and its atraumatic design, which enables clinicians to make multiple passes with a single device while minimizing stress or damage to the vein.

In our most recent LME, we have completed just under 60 cases at the end of the quarter, compared to just under 40 as of September 30. Looking ahead, our team remains focused on gathering additional physician feedback as we complete the remaining cases in this LME and prepare for commercialization on a limited basis before initiating our full commercial launch in the second half of fiscal 2024. This past week, we were also pleased to announce the successful early clinical use of our low-profile Pounce arterial thrombectomy system, otherwise known as Pounce Arterial LP in tandem with initiating our limited market evaluation of the product. As a reminder, our Pounce arterial thrombectomy system is designed to remove acute to chronic thrombi and emboli in peripheral arteries throughout the body in vessels ranging from 3.5 millimeters to 6 millimeters in diameter.

By comparison, Pounce LP is cleared for use in vessels ranging from 2 millimeters to 4 millimeters in diameter, which extends the treatment range of our Pounce arterial portfolio to include smaller diameter vessels such as those found below the knee and potentially all the way to the ankle. Pounce arterial LP represents a promising enhancement to our product offering as it is extremely difficult for clinicians to remove thrombi and emboli from vessels below the knee with the currently available technologies in the market. Many interventionalists will tell you the prospect of losing a piece of embolus or plaque downstream into the tibials during an endovascular procedure is a major concern. Surgery is likely the most course of action to address issues in this region and it’s not always a viable option.

With this in mind, Pounce arterial LP has the potential to be a game changer, providing clinicians with an ideal non-surgical solution below the knee in an area that I believe is not well-served because of the limitations of the current technology marketed by incumbents. Clinical outcomes and feedback from the initial 10-plus cases have been overwhelmingly positive and I stress that, and we look forward to gaining additional insight as we continue to progress through the limited market evaluation in Q2. In summary, we’re pleased to kick off the new fiscal year with considerable progress across each of the three strategic objectives that we committed to fiscal 2024. Our team’s performance with respect to these objectives enabled us to deliver impressive revenue growth in both of our segments, coupled with considerable year-over-year improvements in our profitability profile, while also enhancing our strategic position in the markets we serve.