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Surmodics (SRDX) Gains From Consistent Efforts to Boost R&D

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Surmodics, Inc. (SRDX - Free Report) is one of the top-performing stocks in the MedTech space. Apart from the growing Medical Device and IVD businesses, the company’s consistent focus on research and development (R&D) activities have been driving growth.

The stock has surged 109% in a year’s time compared with the industry’s rise of 13.7% and the S&P 500 index’s return of 13.5%. The stock has a market cap of $669.5 million.

Let’s find out whether the company can maintain the positive trend.

Surmodics’ efforts to improve its R&D stature have been a key growth driver. The company’s whole product solutions pipeline and sirolimus-based below-the-knee DCB program are noteworthy. Surmodics has been making progress on the back of its internally developed .014 balloon platform.

The company has been working through the preclinical studies for the data package. It expects to make consistent progress in the rest of fiscal 2018. Surmodics has advanced significantly in the development of its AV fistula drug-coated balloon.

Surmodics, Inc. Price and Consensus


In the non-drug delivery R&D pipeline, Surmodics recently got the FDA clearance for its Telemark support microcatheter. The Telemark support microcatheter offers solutions for complex coronary and peripheral lesions.

This microcatheter combined Surmodics' extreme composite shaft technology with a high performance pristine hydrophilic coating that provides exceptional deliverability, kink resistance and complex lesion crossing. 

Surmodics' pristine hydrophilic coating offers best in class lubricity and low particulates and is available only in its proprietary products.

Coming to the expenditure front, R&D expenses in the second quarter of fiscal 2018 were 56.5% of net sales, higher than 46.5% of net sales in the year-ago quarter.

The company anticipates R&D expense to increase in fiscal 2018, thanks to the company’s whole product solution strategy investments, advancing the TRANSCEND drug coater balloon human clinical trial, preclinical work on below-the-knee platform and AV fistula drug-coated balloon projects.

Considering the company’s strength in the R&D prospects, it has long-term goals of generating double-digit top line growth by the end of calendar 2019 and generating EBITDA margins at or above 30% by fiscal 2021.

Zacks Rank & Key Picks

Surmidics holds a Zacks Rank #2 (Buy), which indicates at possibilities of outperformance in the near term. The company delivered an average earnings surprise of 1000% in the trailing four quarters. Also, the expected long-term earnings growth of 10% looks promising.

A few other top-ranked stocks in the broader medical space are Abiomed, Inc (ABMD - Free Report) , Genomic Health Inc (GHDX - Free Report) and Varian Medical Systems, Inc (VAR - Free Report) .

Abiomed has a long-term earnings growth rate of 27%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Genomic Health has an expected earnings growth rate of 187.5% and a Zacks Rank #1.

Varian Medical has a projected long-term earnings growth rate of 8%. The stock carries a Zacks Rank #2.

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