What happened
Shares of Surmodics (SRDX) were up 16% early Tuesday afternoon as the healthcare company, which provides chemicals for in vitro diagnostic immunoassay tests and makes coatings for intravascular medical devices, got an upgraded rating from Needham. The stock is down more than 22% so far this year.
So what
Needham analyst Michael Matson upgraded his rating on the stock from hold to buy, with a price target of $36, based on the likelihood that the Food and Drug Administration (FDA) soon would grant an approval to the company's SurVeil drug coated balloon to treat peripheral artery disease (PAD).
Abbott Laboratories has a commercialization agreement with Surmodics that gave Surmodics $25 million in an up-front payment, with the promise of an additional $67 million in milestone payments. Once the device is approved, Surmodics will manufacture the device and supply Abbott with it and will receive revenue based on product sales, as well as profits from third-party sales.
Now what
Surmodics could use the boost. In the second quarter, the company said it grew revenue by 4% year over year to $27.2 million. However, it also reported an earnings per share (EPS) loss of $0.55, compared to an EPS loss of $0.29 in the same period a year ago.
The process to get an approval for SurVeil hasn't been smooth. The FDA initially did not grant approval to the company's premarket approval (PMA) application. Surmodics then submitted a Submission Issue Request as part of the FDA's Q-Submission Program, and in March, said it got positive feedback. Surmodics now says it plans to submit an amended PMA application in the third quarter, with the goal of receiving a PMA in the fourth quarter.
