Surmodics Inc (SRDX) Q1 2021 Earnings Call Transcript

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Surmodics Inc (SRDX -3.16%)
Q1 2021 Earnings Call
Feb 9, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Surmodics First Quarter Fiscal 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Tim Arens, Senior Vice President of Finance and Chief Financial Officer. Please go ahead.

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Thank you, Stephanie. Good morning and welcome to Surmodics' fiscal 2021 first quarter earnings call. Before we begin, I would like to remind you that during this call we will make forward-looking statements. These forward-looking statements are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements regarding Surmodics' future financial and operating results or other statements that are not historical facts.

Please be advised that actual results could differ materially from those stated or implied by our forward-looking statements resulting from certain risks and uncertainties, including those described in our SEC filings. Surmodics disclaims any duty to update or revise our forward-looking statements as a result of new information, future events, developments or otherwise. We'll also refer to non-GAAP measures, because we believe they provide useful information for our investors.

Today's news release contains reconciliation tables to GAAP results. This conference call is being webcast and is accessible through the Investor Relations section of the Surmodics website, where the audio recording of the webcast will also be archived for future reference. A press release disclosing our quarterly results was issued this morning and is available on our website at surmodics.com.

I will now turn the call over to Gary Maharaj. Gary.

Gary R. Maharaj -- President and Chief Executive Officer

Thank you, Tim. Good morning and welcome to Surmodics' fiscal first quarter 2021 Earnings call. During our first quarter, I was pleased with our solid financial and operational performance, as well as the progress we made on our strategic objectives. My thanks and a huge shout out to the entire Surmodics team, their dedication, perseverance and grit admirable by any standard.

During our first quarter, we made important progress in our strategic objectives for fiscal 2021. As a reminder, they are, first, to continue building traction with SurVeil marching toward the PMA approval beginning with our final submission to the FDA. Second, to accelerate the advancement of our robust product pipeline through product development, regulatory clearances and clinical evaluation and feedback. Third, to optimize cash flow from our IVD and medical device coatings offerings to support our strategic growth initiatives.

Starting with SurVeil: on January 25 at the LINC 2021 Virtual Event, Dr. Ken Rosenfield, the principal investigator of the TRANSCEND study presented safety and efficacy data of our SurVeil drug-coated balloon. In this late-breaking session, the data demonstrated that SurVeil was non-inferior to the IN.PACT Admiral drug-coated balloon in both the primary safety and efficacy endpoint. Despite the fact that the IN.PACT device has 75% more Paclitaxel on board. In theory from a benefit to risk viewpoint, if a lower dose of the powerful cytotoxic drug can produce similar positive outcomes for a patient as a higher dose of the same powerful cytotoxic drug, then the benefit to risk profile favors the low dose formulation of the drug and may represent a better clinical choice for that patient. This is why we performed first and still only, as far as I'm aware, pre-market head-to-head pivotal multicenter, multi-geography trial of its kind versus the high dose device. This has provided strong clinical evidence to support SurVeil as a compelling therapeutic choice in any market where it secures regulatory approval for commercialization. This is a significant achievement for a small organization. However, we had lots of help. We had many partners along this journey and I want to thank the entire internal Surmodics SurVeil team and extended large friends and clinical trial team of physicians, healthcare providers, clinical research partners and research coordinators for their support in the conduct of a very difficult but necessary trial in the midst of both the Paclitaxel debate and the COVID-19 pandemic. I'd especially like to thank our national principal investigators and the trial steering committee. We are well on our way and on plan. However, we're not yet done.

Regarding the PMA approval process, after several meetings with the FDA we now have clarity on the required long-term mortality data and the process for submitting these data as part of our PMA submission. As we've discussed on previous calls, to ascertain long-term safety, the FDA is requiring a minimal threshold of mortality, also called vital status, follow-up data for patients of 2 years and 3 years from the time of their treatment. While I can't comment on the specifics of these requirements, I believe we remain on track to receive the PMA for SurVeil by the end of calendar 2021. You'll recall that substantial financial outcomes from our commercialization agreement with Abbott, including $45 million of remaining milestones. We expect payment later this month for the first component of this, the $50 million milestone based on Abbott's receipt and review of the final written clinical report and related materials that demonstrate the primary safety endpoint and the primary efficacy endpoint for the TRANSCEND clinical study were met.

Tim will provide more details later in today's call on the fiscal 2021 financial impact of this $50 million milestone payment. The remaining $30 million milestone payment would be achieved upon approval of all SurVeil DCB by the FDA.

Regarding our product pipeline, we continue to move forward the products in all three platforms within our pipeline. The first of these platforms is vascular drug delivery by our drug-coated balloon technology. After SurVeil, the next product in our DCB pipeline using our proprietary technology is our Sundance sirolimus drug-coated balloon. It's a 014 percutaneous PTA platform. I'm pleased to announce that in January, we completed enrollment in the SWING first-in-human clinical trial for Sundance ahead of schedule. SWING enrolled 35 patients across eight sites in Europe, Australia and New Zealand. As a reminder, the primary safety and efficacy endpoints of the trial, a composite freedom for Major Adverse Limb Event and perioperative death of 30 days, and Late Lumen Loss of 6 months respectively. We anticipate having 6-month results from this trial in early Q1 of fiscal '22. We believe that Sundance has the potential to improve the treatment of arterial blockage below the knee, which left untreated can lead to amputation and eventually death.

Our third DCB product in our pipeline is our Avess AV fistula drug-coated balloon. Six- month data from our Avess first-in-human study demonstrated that the target lesion patency at 30 days and 6 months was 100% and 90.9% respectively and only one reintervention was required within 6 months. The data, which -- the study showed no mortality and no device nor procedure related adverse events at 30 days and all patients maintained functional arteriovenous fistula or AVF for hemodialysis. We're quite pleased with these results and it strengthens our belief that the Avess DCB could be a safe and promising treatment. We plan on using our ongoing learnings from SurVeil to guide us through the best regulatory and clinical strategy for our next steps with Avess. We're currently completing the development of the full matrix of drug-coated balloon sizes for Avess for use in future clinical trials and regulatory submissions.

The second platform of our product pipeline is our Sublime Radial Access platform. We have already had our first clinical use of our Sublime Guide Sheath with excellent positive feedback from the treating physician. We'll continue to expand the clinical use and the product evaluation of the Sublime Guide Sheath so that we have substantial information on its performance in a broad scope of cases. We have encountered some delays in scale-up, manufacturing validation of our Sublime 014 Radial below the knee PTA balloon catheter. Our team is working diligently to get back on schedule.

Regarding our follow-on offering, the 018 balloon dilation catheter, we are making progress in completing this development and expect to file for FDA 510(k) clearance which we expect to submit in Q3 of this fiscal year. We believe that developing these first of their kind devices were quite challenging given peripheral interventions is another essential tool to treat proximal vessels behind and above the knee via Radial Access for all patients suffering a peripheral artery disease.

Finally, we received many questions about our exciting Pounce thrombectomy platform. As a reminder, we received FDA clearance for our Pounce Thrombus Retrieval System last September, which gives peripheral interventions an individual non-surgical tool for treating arterial thrombotic occlusion. Our team is working diligently in all the necessary product and the process validation and early manufacturing builds, so that we can have products for clinical use before the end of our fiscal year.

Turning to our IVD and medical device businesses. Tim will comment on the detailed financial performance shortly. With regard to our Medical Device business, the dramatic increase in COVID-19 cases and hospitalization in our fiscal Q1 in many large metropolitan areas of United States and in certain areas of Europe have forced many hospitals to postpone or even cancel numerous elective procedures. Our Medical Devices team has done a superb job of dealing with all the difficult logistical and operational circumstances brought on by the pandemic even as we continue to support our customers with the ultimate goal of providing essential services to patients. Our IVD business had a great quarter, strong demand of our distributed antigen products and our microarray slides service product led to a 17% year-over-year revenue growth and delivered 53% operating margin.

In closing, I'm proud of our continued execution of our critical strategic objectives, while protecting our team's health and safety in meeting all of our partners' and customers' requirements. While we can't predict when things will be back to a pre-COVID normal, we continue to execute our strategic plan. In the past 9 months, we have received multiple regulatory clearances, announced strong clinical data for two exciting new products even as we manage our core businesses, optimize cash and capital allocation during the worldwide pandemic. While there is much yet to done, I'm highly confident that we are well-positioned to deliver sustained growth and shareholder value over the long-term.

I'll now turn the call over to Tim to provide more details on our fiscal first quarter '21 results. Tim?

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Thank you, Gary. During today's call, I will provide an overview of our first quarter operating performance. While we are not providing fiscal 2021 financial guidance at this time, I will provide comments on the revenue impacts associated with our SurVeil drug-coated balloon distribution and development agreement with Abbott Vascular, including the revenue recognition associated with the achievement of the $15 million TRANSCEND clinical report milestone, which we expect to receive later this month.

Revenue for the first quarter of fiscal 2021 declined 1% to $22.3 million compared to $22.6 million in the prior year. Our medical device revenue declined 7% to $16.2 million as the business faced continued headwinds from the expiration of our Gen4 coating patents and COVID-19. Our In Vitro Diagnostics business grew 17% to $6.1 million, driven by strengthened demand for our distributed antigen and microarray slide surface products. Our first quarter royalty and license fee revenue totaled $9.3 million, down $800,000 or 8% from the prior year period, primarily as a result of the impact of the expiration of our fourth generation hydrophilic coating patents and lower procedure volumes due to COVID-19. Royalty revenue declined 11% to $7.9 million in the first quarter compared to $8.9 million in the prior year quarter.

In the first quarter of fiscal 2021, our royalty revenue experienced unfavorable but expected impacts related to the expiration of our fourth-generation hydrophilic coating patents, and COVID-19 of approximately $900,000 and $400,000 respectively, which was partially offset by continued growth in our next generation Serene coating royalties. Our SurVeil distribution and development agreement with Abbott Vascular generated license fee revenue of $1.3 million in the first quarter and was flat as compared to the year-ago period. Product revenue of $10.1 million in the first quarter was up slightly compared to the prior year quarter. In our Medical Device business, product revenue, which was down 9% to $4.6 million benefited from our recent distribution partnership with Cook Medical for 014 and 018 balloon catheters, which was offset by lower order volume for our coating reagents, as our customers managed inventory levels that had been previously increased to minimize potential supply chain disruptions due to COVID-19.

In Vitro Diagnostics product revenue grew 12% to $5.5 million compared to $5 million in the prior year period, driven by increased demand for our distributed antigen products and our microarray slide surface products. R&D services revenue of $2.9 million was up 15% or $370,000 compared to the prior year period, as our IVD business has benefited from increased customer development project opportunities. Revenue from our medical device R&D service offerings was consistent with the prior year. The Medical Device business reported an operating loss of $600,000 in the first quarter compared to an operating loss of $420,000 in the year ago period. Medical device operating results were unfavorably impacted by lower gross profits, offset by lower operating expenses driven primarily by lower TRANSCEND study costs. The IVD business grew operating income by 24% or $620,000 to $3.2 million in the first quarter. Operating margin grew to 53%, up from the prior year's quarter 50% as we benefited from strong top line growth and margin expansion.

Product gross margins were down in the quarter at 63% as compared to 68% in the prior year quarter. Product gross margins were unfavorably impacted by lower medical device reagent product revenue, partially offset by favorable leverage and IVD revenue growth. R&D expense, including costs of clinical and regulatory activities, was 49% of revenue for the first quarter as compared with 54% in the year-ago period. R&D expense was $10.9 million for the first quarter, down 10% or $1.3 million as compared with the year-ago period, driven primarily by a decline in SurVeil-related costs, including TRANSCEND.

SG&A expense in the first quarter of fiscal 2021 was $7 million or 32% of revenue compared to 31% of revenue in the prior year period. SG&A expense was essentially flat with the year ago period.

Now turning to income taxes, we recorded income tax expense of $170,000 in the first quarter compared to income tax benefit of $250,000 in the prior year period. Both periods reflect the impact of taxable income for the full-year in the US, non-tax benefited amortization and operating losses in Ireland.

On a GAAP bases, diluted earnings per share was a loss of $0.02 in the first quarter as compared with earnings of $0.01 in the prior year quarter. On a non-GAAP basis, diluted EPS was earnings of $0.02 in the first quarter versus earnings of $0.05 in the prior year quarter.

Moving to the balance sheet. We continue to have a strong cash position and no debt. In the first quarter, we began with $61.1 million of cash and short-term investments and used $4.3 million of cash in operating activities. During the quarter, we paid $1.3 million for capital expenditures. As of December 31, 2020, we had cash and short-term investments totaling 53.9 million. Our current cash and investment balances provide adequate capacity to support our strategic growth initiatives.

Turning now to the revenue impacts associated with our SurVeil drug-coated balloon. As Gary discussed, we successfully achieved the TRANSCEND clinical report milestone under the SurVeil distribution and development agreement with Abbott Vascular. We estimate the revenue associated with this $15 million milestone payment, which again we expect to receive later this month, to range between $11.3 million and $11.6 million in fiscal 2021, of which approximately $10.5 million will be recognized in Q2.

Furthermore, we estimate the full-year fiscal 2021 license fee revenue associated with the SurVeil agreement, including this clinical report milestone, to range between $16 million and $17 million.

Operator, this concludes our prepared remarks. We would now like to open the call to questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Mike Matson with Needham & Company.

Mike Matson -- Needham & Company -- Analyst

Yeah. Good morning. Thanks for taking my questions. I guess I want to start with SurVeil. So I know you gave some timing there around when you think it could be approved. But I guess my question would be do you expect Abbott to launch this thing, kind of, immediately upon approval or do you expect some kind of lag there in terms of between when it's approved and when they ultimately launch the product?

Gary R. Maharaj -- President and Chief Executive Officer

Yeah, Mike, thanks for the question. You know, one thing to keep in mind today is, we got this trial to the podium, the results to the podium probably faster than any other trial. So the LINC presentation was literally just a couple of days after we had seen the breadth of the data. We had seen the high level data earlier than that. So we have not -- both we and Abbott, a recent vintage digesting the results and are quite pleased, both partners. And so we have not had any detailed discussion on launch timing yet. I suspect -- I don't know this, but I suspect for competitive reasons, they may want to keep some of that close to their hip but when we have a better idea of the broad launch window, we may choose to say something at that point. But really we haven't gotten into any detail with their commercial team.

Mike Matson -- Needham & Company -- Analyst

Okay, thanks. And then you mentioned with the Pounce Thrombectomy product that you expect it to be in clinical use before the end of the fiscal year. I would assume that that's clinical use for the sort of due diligence both on your part and potential partners part before you sign a deal, is that right? And does that mean that it would likely be fiscal '22 before we see any kind of agreement there, distribution deal there for Pounce?

Gary R. Maharaj -- President and Chief Executive Officer

Yeah, good question. I'll ask Tim talk to the latter, the fiscal '22 impact, but, yeah, typically -- and this is just a broad brush, personally in the last 30 something years, I like to see at least 100 clinical uses in a broad swath of case types. And then that way we really have shaken the product down in understanding how it's best to use, what cases is most successful. And so having that data under our belt, we believe dramatically increases the book value. When we say here, we've got something we actually have data to prove it versus merely a regulatory approval and a bunch of nice slides. So definitely, however long it takes to get that level of case feedback, I think that bolsters for us the value of the device dramatically. And that will lead us into, I'd say at least the first quarter of fiscal 2022 to get that case series done.

Mike Matson -- Needham & Company -- Analyst

Right.

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Thank you, Gary. Yeah, Mike it's a great question. And I would guide you to fiscal 2022. Just for the benefit of folks listening in the call, this isn't unlike what we did with Telemark, and with the 014, 018 PTA balloon catheters, which ultimately found distribution agreement signed with Medtronic and Cook. So we're taking a similar page out of the playbook.

Mike Matson -- Needham & Company -- Analyst

Okay, thanks. And then just my final question beyond the royalty headwinds, can you just remind us is this going to be largely through after fiscal 2021 or is that going to spill into fiscal '22? The patent expirations.

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

The patent expirations, absolutely. So I appreciate the question. The Gen 4 patent expiration, we will work our way through that this fiscal year 2021 and it will become a tailwind in 2022. Just for folks' modeling purposes, as they think through the $3 million headwind that we've communicated with regard to the Gen 4 patent expiration, we have realized about a $900,000 impact here this quarter. I would just say probably a simple way to think about this is the remaining $2.1 million would be pro-rata over the next three quarters.

Mike Matson -- Needham & Company -- Analyst

Okay. Thank you.

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

You're welcome.

Operator

Thank you. Our next question comes from Brooks O'Neil with Lake Street Capital Markets.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Good morning, guys. Can you hear me OK?

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Hear you loud and clear, Brooks.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Great. So the only thing going faster than your product development efforts is the speed at which Tim reads his script on this call. So congratulations on your progress. I have a couple questions. First, I'm just curious if the FDA shows any sensitivity to the reality that they're leaving Medtronic Admiral on the market to spread Paclitaxel wantonly, while you have a superior product with 75% less Paclitaxel, which seems to be something that threw all doctors and investigators into a tizzy last year.

Gary R. Maharaj -- President and Chief Executive Officer

Yeah, first of all, the IN.PACT device clinically, we've not seen any clinical outcome based safety issues. The Paclitaxel, the data, obviously, a broader issue in terms of long-term mortality signals showing up between -- sometime between year two and year three after treatment, but my point is, less is more if you're getting the same impact, right? It's not IN.PACT, sorry, it's a bad pun. So these doses of the Paclitaxel on these drug-coated balloons are not oncology type doses, but frankly if it were me, if I can get the same, you know, similar outcomes with a lower dose of such a powerful drug, I think that's always better. But I'd stop showing or saying or implying that the IN.PACT device is not safe. It's just the therapeutic window of having a low dose drug to me just makes sense to be better.

And the way we think about it too is, technology development always builds on the prior generation, right? So we're glad to see devices like the first generation DCBs in Europe, devices like the IN.PACT Admiral, and those Callorexel[Phonetic] Lutonix devices come to market and even the Boston Scientific Ranger because then it gives us the ability to build upon their technology base, and continue to improve the device. The FDA usually, as when I've dealt with them, you stand alone on your safety, safety is something that you can look comparatively but their keen interest as it should be is about your device's safety pretty much by itself. I know I haven't answered your question, but at least give some color.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

No, no. I understand. And I appreciate all that context. It makes total sense to me. So here's another question. I'm, obviously, tremendously impressed with your pipeline of products and opportunities that you've laid out. And I was hoping you might handicap for us the one or two or three that you think maybe beyond SurVeil offer the greatest long-term opportunities for Surmodics?

Gary R. Maharaj -- President and Chief Executive Officer

You know, that's a good and a challenging question. The three platforms have different reaches and time and impact. And so the PMAs are just long-term cannonballs as we call them, right? I mean, you have to have the patience to get through it. I think what's particularly pleasing is the base technology platform of our drug delivery really appears to work and work well for a lower dose of the drug. So what that means, that's exciting. You know, AV Fistula remain one of the -- keeping the patency of the AV Fistula for of renal dialysis. Remains one of the biggest headaches from an economic viewpoint in the United States for Medicare because the amount of retreatment you need just to dialyze these patients. So I think it helps us feel even better about our Avess platform.

We're quite excited about Sundance. Our clinical team, kudos to them, finishing that enrollment earlier than planned and so we're excited to unwrap how Sundance performs in this -- again, it's safety but you get some mild indication of efficacy, especially since we're doing a follow-up angiogram on these patients. So, that'll be exciting because the critical limb ischemia is -- nothing really works. And having more devices and technologies that can actually help those patients, we think, is pretty exciting.

So, those are two very large addressable markets right there. The radial access platform is a bit of a sleeper. I mean, it's a suite of products that will take some time to develop but if you have the vision that within the next five years, let's say, -- and this is just a vision, right, every OBL will have better patient care, better patient satisfaction and much better economics, if they did the majority of the procedures via radio. So while the adoption curve may take some time, those products are about positioning for us. When that adoption does occur, we're well positioned with a suite of products to help that.

And then Pounce, the market has been really favorable toward thrombectomy devices. By the way, it's not why we're doing it. We think the current generation of devices continue to improve but there's still some pretty big gaps to close in thrombectomy notwithstanding the current devices. So my short answer is, and it's a good thing to look at the perspective of Surmodics, if we have one product of one of these products I think people would be like, wow, you've got something special.

Counterintuitive, sometimes when you have three really amazing platforms it seems to psychologically dilute people to say, OK, they got three things so no one of them could be good. I would say any company would give their right arm to have one of our platforms. So I'm excited about all three for different reasons in the portfolio.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

That's really helpful, Gary. I really appreciate that. So let me ask one last question. So I know I'm not asking you to agree with this or disagree with this, but my own personal view is that as SurVeil gets launched and some of these other things get launched that the revenue growth rate is going to accelerate dramatically at Surmodics. So my question is, philosophically as that happens, should we expect you to continue to invest 30%, 40%, 50% of revenue in R&D or do you think the R&D levels will either stay flat or begin to shrink as some of these things come through the pipeline? Thank you very much for taking my questions.

Gary R. Maharaj -- President and Chief Executive Officer

Sure. You know, the way I look at the percentage of it is a derivative of what work needs to be done in product development. And right now because the high revenue ramp hasn't started in some of these pipeline activities, so I would expect it to go down just because the absolute number of things we can work on is not infinite, obviously. And so, therefore, that ratio, that percentage clearly would go down. But I want to bring back one thing, if we have an opportunity to start on other aspects of those platforms, or I should say if we have an opportunity to accelerate with our experience in some of these platforms, we wouldn't hold back because of a ratio or percentage number.

Tim will release the funds then only we can do it. But I don't see anything of that quite frankly. It'd be very hard for us to maintain that rate with the revenue we expect. Tim?

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Yeah, Brooks, it's a great question. And Gary is precisely right on this one. Look, we will continue to fund the appropriate opportunities. And what really increases the percentage of the R&D spend compared to revenue is the funding of pivotal clinical studies that we've seen for SurVeil. There's potential on our future where we may be funding pivotal studies for Avess and for Sundance. That yet remains to be determined, but remember in the case of SurVeil, we found ourselves in a position where we're able to secure significant upfront license fees and milestone payments for the technology. And that makes good business sense.

Gary and I pre-pandemic had established, kind of, a point of view in terms of what investors could expect longer-term. And we commented on an EBITDA margin of 25% or greater. And I think we've commented on that beginning in fiscal 2022. We haven't changed that perspective. Clearly the pandemic creates a little bit of fogginess with regard to that, but I think what folks can expect from us is that we're going to be delivering double-digit top line revenue growth over time and we're going to be expanding the margins. We think these technologies are high value technologies and products, and expanding margins can lead to significant long-term shareholder value creation and we'll fund those things that we think believe provides the greatest opportunity to help us with that endeavor.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Absolutely. Makes sense. Will you send us a copy of your prepared remarks so we know what that gives[Phonetic] us?

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Absolutely.

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from Jim Sidoti with Sidoti & Company.

Jim Sidoti -- Sidoti & Company -- Analyst

Hi, good morning. Can you hear me?

Gary R. Maharaj -- President and Chief Executive Officer

Hear you loud and clear, Jim.

Jim Sidoti -- Sidoti & Company -- Analyst

Great, thank you. So it's been about two years since the meta-analysis from Dr. Katsanos came out and kind of turned the world upside down for you guys. I mean, looking back now, do you think that this is actually going to be a positive for you going forward because of the data that you presented last month?

Gary R. Maharaj -- President and Chief Executive Officer

You know, the safety issues really, Jim, are long-term versus just more drug and even without the Paclitaxel, the data and the concerns of the long-term mortality, we still believe less is more when it comes to powerful drugs, right, like Paclitaxel. But as far as the safety issues, I think you all saw that the FDA, the SWEDEPAD data was published earlier this year, and the SWEDEPAD data they looked at the two -- I think the average follow-up was 2.49 years on that trial. And really the hazard ratio, the difference between non-drug and drug didn't show any statistical significance. And the FDA actually responded publicly in a letter to the editor in the New England Journal, I think it was early January, to that publication, Dr. Andrew Farb and Dr. Bill Maisel and Misti Malone responded to that.

And as far as the Paclitaxel debate, the FDA was pretty clear, they said a couple things. One is, current products going through the approval process will have to bring long-term data [Technical Issues] an example. But they also said, they will be looking to carefully monitoring the data as these data, the vintage of the data gets from 2.5 years to 3.5 years. I believe that data, I don't know this, will demonstrate no statistically different signals and will give the FDA an ability to unwind this process. Because the signal seems to show up between years two and three, I believe the FDA is looking for data that's now beyond three years to demonstrate that these devices are safe. So as far as being a benefit in the marketplace, I think we have that with or without the Paclitaxel debate but it ends up being the psychology in the mind of the customer, or the treating physicians of whether less is more because of the Paclitaxel debate. Does it make any sense?

Jim Sidoti -- Sidoti & Company -- Analyst

Yeah, yeah, I agree. Then you commented that the royalty revenue is off in the December quarter, in part due to the slowdown in procedures. I know it's still early in the March quarter, but now that the vaccine is out and in case you seem to be on the downswing, have you heard any anecdotal data that procedures have started to come back?

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

So Jim, we're actually not hearing a whole lot right now in terms of any significant changes from what's happened here in December. We're going to stay tuned, obviously, it's pretty important but it just tells you the nature of this virus. It seems like sometimes we might have it under control, and then all of a sudden we get these spikes, and it can influence the ability to perform procedures and treat these patients. You know, some of the things that we have heard are that, certain regions of the country tend to be more impacted than others. I guess, like the rest of the world, we're all waiting to see kind of the effect of the vaccinations and how it can help economies recover, and as well as, allow patients to seek treatment and then be in a position to be treated by their physicians in the proper care setting. So we'll be talking more about this, unfortunately, I think as we go through the year.

Jim Sidoti -- Sidoti & Company -- Analyst

Okay. And then on the income statement, SG&A was actually down from the December quarter, pretty much flat from year-over-year. I was a little bit surprised by that. I thought that you'd increase spending, is that something that you expect to happen in the back half of fiscal 2021?

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Yeah. I think there are clearly a couple of things that impacted the SG&A spend here in Q1. Notably, it was more on the comp side of things. And so in timing of some of the hiring activities, I would expect that we'll probably kind of ramp up here Q3 and Q4, perhaps a bit here in Q2. I would remind folks that back in November, highlighted that we expected somewhere in the low double-digit expense growth on the SG&A line. I wouldn't walk that back quite yet. I think it will be somewhere around there. So that's where I would guide you.

Jim Sidoti -- Sidoti & Company -- Analyst

Okay. And then a last one for me. It was another very strong quarter for the IVD business, is that due to COVID testing and is that sustainable?

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

It actually is not as a result of serology tests or COVID testing. And I think Gary and I have been pretty vocal over the last few years about what a gem of a business that is and how it's been out punching its way, growing at a multiple to the market. The market for amino acids grow about 3% annually. You'll notice that the IVD business throughout the course of rolling four quarters are going to have a couple of quarters that are exceptionally strong. And then a couple of quarters that perhaps are more modest. I will guide you and continue to guide you until otherwise that it's a business that we expect mid-to-high single-digit revenue growth.

Jim Sidoti -- Sidoti & Company -- Analyst

Okay. All right. That's it for me. Thank you.

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Thank you, Jim.

Operator

Thank you. [Operator Instructions] Our next question comes from Mike Petusky with Barrington Research.

Michael Petusky -- Barrington Research -- Analyst

Hi, guys. Good morning. Can you speak to just what you see as sort of the -- and I don't know if the right way to address this as sort of total addressable market or like some kind of term like true market opportunity. But when you think about what you guys are trying to do in Radial Access and thrombectomy, I mean, is there a way to size up what you guys feel are the opportunities for both of those platforms? Thanks.

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Yeah. Absolutely. Why don't we start with Pounce and arterial, the way to think about this market here is to think about the number of patients that present with clots and are treated either medically or with endovascular procedures. And I think in the US, it's approaching 200,000 patients annually. And from what I understand on the endovascular side, there's probably somewhere around about 100,000 cases in which patients are treated either with catheter-directed thrombolysis or with a mechanical or aspiration type technology to remove the clots. And these devices range anywhere from maybe $1,700 to about $3,000, I think, somewhere around the $2,500 range is probably not a bad way to think about it. So that gets you to a total addressable market of about $400 million on a global basis. So, I'm giving you some numbers that are US and just in essence multiplying by two to get to a global view. So it's a very interesting and a market that we view as being sizable and having the potential to grow because of penetration and bringing new technologies to the market.

So, one, that's very exciting. I'll tell you that with regard to other clot removal technologies, notably for deep vein thrombosis or pulmonary embolisms, you'll find that the market has much higher selling prices for those devices, anywhere from $6,000 to $11,000. And you'll see in terms of the number of cases, they can be larger than what you'll find on the arterial side. So really strong addressable markets in other indications and we like what we see with the addressable market with regard to arterial clots.

So Mike, moving on to a radial access, there's over 600,000, almost 650,000 cases that are performed annually above the knee, where an 035 or an 018 PTA balloon catheter are often used. In the vast majority of these cases they're done, they're conducted using the femoral access approach. Going radial is a very small penetrated opportunity today. You're looking probably low single digits in terms of penetration. I'll remind folks that on the coronary side, it's about 40-ish percent of cases in the US today to treat coronary vascular disease are done through Radial Access approach.

So the thinking here is, there's a lot of advantages as Gary was describing, there is patient safety, less loss of blood, lower rate of infection. For the patient, it's a more comfortable procedure, they get discharged earlier, and they get to go home quicker. For the healthcare setting, it's better economically, especially in an OBL setting, they can get the patients through the procedure and get them discharged and continue to treat additional patients. So there's benefits all around. And we're in the early innings of this baseball game, if you will. So it's quite attractive.

But as Gary mentioned, it's probably a little bit longer term, it's going to be probably five years to build out that penetration, and will require additional devices to really be able to capture more penetration. So those are things that we're working through at Surmodics but both markets are quite attractive and quite large.

Michael Petusky -- Barrington Research -- Analyst

Okay. And these are my words not your words, but it's not unreasonable to think that incremental revenues from both of these platforms could start as early as fiscal '22, correct?

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

That's how we're thinking about it, Mike. I would say those are our words.

Michael Petusky -- Barrington Research -- Analyst

Okay. And then I may have missed this or you may not have spoken to it, but is there any commercial progress to relate in terms of some of the earliest 510(k) approvals? I guess I'm talking mostly about the balloon catheters and the Telemark, I mean, is there anything to say there in terms of actual revenue generation or any progress you can talk about there?

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Absolutely. In my prepared remarks, which notably, I maybe spoke a little too quickly, so it might have been missed. But I did call out within the product revenue one of the drivers in the Med Device business was, in fact, the sales of our 014, 018 PTA balloon catheters to Cook. Both Cook and Medtronic are still in the process of bringing those products to market. And we like what we're seeing. I'll tell you that back in about a year ago at this time, I think we kind of commented that the expectation for the first full-year of launch could be somewhere between $0.5 million and $1 million per product.

You know, unfortunately, we saw ourselves in the midst of a pandemic as our customers are looking to launch products. I would probably suggest that it's probably not a bad idea to look at the potential for this fiscal year as being somewhat similar to what I previously commented.

I do see, however, longer-term that these products could be looking at somewhere between maybe $1 million and $1.5 million or maybe north depending on the products in terms of revenue to Surmodics on an annual basis. So, again, we need a little bit more time and traction with regard to the partnerships to get a better perspective in terms of how longer-term and how sticky the performance will remain but we like what we see today.

Michael Petusky -- Barrington Research -- Analyst

Okay, great. And then was there any temptation on your guys part to try to put some guidance out there given that there's definitely a feeling that between the vaccine and cases falling off. And maybe this is more understandable going forward and more of a positive outlook, is there any chance, I guess, say next conference call will you guys say, hey, we sort of got our arms around what we think is the lay of the land here, and, we're going to initiate sort of more formal guidance?

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

That would be idea, Mike. I certainly can't promise anything, but what I will tell you is, I believe that we provided some pretty clear color in terms of how to think about the business both from a royalty perspective as well as a survey license fee revenue that we recognize each quarter and also on expenses. So I think there's enough color on the expense side and in some of the larger revenue streams to help folks appreciate and understand how to think about the business this fiscal year. But like you, I certainly hope that we'll be in a position here to provide guidance at some point in fiscal 2021.

Gary R. Maharaj -- President and Chief Executive Officer

And for us, usually, when you have multiple revenue streams, it gives you a smoothing function to provide guidance. In Surmodics' case, our revenue streams are so distinct that they don't smooth each other, they actually increase the variability. So that's one of the reasons we chose not to give guidance now, but our bias would be when Tim and I have the clarity to provide it.

Michael Petusky -- Barrington Research -- Analyst

Fair enough. All right. Well, guys, congratulations on all the progress. Thanks.

Gary R. Maharaj -- President and Chief Executive Officer

Thank you, Mike.

Operator

Thank you. There are no additional questions at this time. I'd like to now turn it back to our presenters for closing remarks.

Gary R. Maharaj -- President and Chief Executive Officer

Well, thank you and thanks for joining us on our first quarter earnings call and please stay safe everyone and until the next time. Thank you.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Timothy J. Arens -- Senior Vice President of Finance and Information Technology and Chief Financial Officer

Gary R. Maharaj -- President and Chief Executive Officer

Mike Matson -- Needham & Company -- Analyst

Brooks O'Neil -- Lake Street Capital Markets -- Analyst

Jim Sidoti -- Sidoti & Company -- Analyst

Michael Petusky -- Barrington Research -- Analyst

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