What happened

Shares of Surmodics (SRDX 0.10%) were up by 24.1% for the week as of Friday morning, according to data provided by S&P Global Market Intelligence. The medical device company's stock closed last week at $25.08, then rose to as high as $32.04 on Wednesday following a Food and Drug Administration (FDA) approval for a drug-coated balloon (DCB) therapy. The stock is down a little more than 10% this year.

So what

Surmodics makes coatings for medical devices and manufactures chemicals for diagnostic immunoassay tests. On Wednesday morning, before the markets opened, the healthcare company announced that the FDA had approved Surmodics' SurVeil DCB to help treat peripheral artery disease (PAD), which is a blockage of arteries in a limb, usually the leg. The SurVeil DCB is used in a minimally invasive procedure that unblocks arteries. The therapy received CE Mark Certification in the European Union in June 2020.

Now what

It's a key moment for Surmodics, which has been increasing revenue but has not been profitable. Surmodics will make the device, though Abbott Laboratories has commercialization rights. In return, Surmodics will receive revenue from product sales from Abbott and a share of Abbott's third-party sales, in addition to a $27 million milestone payment. Surmodics said it expects to get $24 million to $24.5 million of revenue related to the milestone payment in the third quarter.

Prior to this, the company's chief source of revenue has been its medical device performance coatings and in vitro diagnostic components. However, it sees vascular intervention devices, such as the SurVeil DCB, as providing more opportunity for revenue growth.

The global DCB market is expected to have a compound annual growth rate of 15.1% through 2028, reaching a $1.8 trillion market by that point, according to a report by Zion Market Research.