Advanced coating and drug delivery developer SurModics
Although SurModics has over 80 income-generating product licenses outstanding, Johnson & Johnson's
SurModics occupies a hazy world between biotechnology, pharmaceuticals, and medical devices. Similar to Motley Fool Hidden Gems recommendation FlamelTechnologies
In addition to drug-delivery products like the Cypher stent coating, SurModics develops coatings for devices like catheters, pacemaker leads, and other implanted devices. While some coatings are meant to deliver drugs, other types of coating help add lubricity to devices or reduce the likelihood of producing clots or excess tissue growth.
While the company has historically focused its efforts on developing coatings for large clients like JNJ and Abbott Labs
While SurModics sports an A-list of partners and licensees, it also sports an A-list valuation. Though priced roughly in line with peers like Flamel or Nektar, the stock trades at almost 10 times sales and even the forward P/E is a robust 26.5. Though SurModics has revenue and earnings, it is still more akin to a biotechnology company than it is to a medical device company. While this stock breaks most of the rules regarding valuation, it's neck-deep in a hot space. For aggressive investors who aren't troubled by sky-high valuations, this could be an intriguing way to play the growing integration of drugs and medical devices.
Want to read more about drug delivery? Check out these other Foolish articles:
Fool contributor Stephen Simpson, CFA, owns shares of Johnson & Johnson.