Surmodics, Inc. SRDX is well-poised for growth in the coming quarters, courtesy of its solid prospects in the thrombectomy business over the past few months. The optimism led by a solid second-quarter performance and consistent efforts to boost research and development (R&D) are expected to contribute further. Yet, concerns regarding regulatory headwinds and reliance on third parties persist.
So far this year, this current Zacks Rank #3 (Hold) company has declined 4.8% against the industry’s 4.2% rise and the S&P 500’s 11.6% growth.
The renowned medical device and in-vitro diagnostics technology provider has a market capitalization of $493.68 million. Surmodics projects 97.2% growth for fiscal 2025 and expects to maintain its strong performance. SRDX’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average earnings surprise being 165.93%.
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Let’s delve deeper.
Consistent Efforts to Boost R&D: Surmodics’ solid efforts to improve its R&D stature have been a key growth driver, which raises our optimism. The company’s pipeline of vascular intervention medical device products under development and recently commercialized include primary platforms like DCBs, Mechanical thrombectomy devices and Radial access devices. In addition to these primary platforms, Surmodics’ device manufacturing operations include Specialty catheters.
In the second quarter, Surmodics’ R&D expenses were 27.6% of total revenues. Medical Device R&D and other revenues increased 1.4% in the fiscal second quarter compared with the prior-year quarter, driven by increased volume of performance coating services.
Thrombectomy Prospects Bright: Surmodics’ aim to leverage its proprietary Pounce thrombectomy platform technology to develop products raises our optimism. The company announced the completion of limited market evaluation and commercial launch of two new mechanical thrombectomy systems for the peripheral venous and arterial vasculatures, the Pounce Venous Thrombectomy System and the Pounce LP (Low Profile) Thrombectomy System during the fiscal second quarter.
In January, Surmodics announced the successful early clinical use of the Pounce LP Thrombectomy System.
Strong Q2 Results: Surmodics registered a solid uptick in the overall top and bottom lines in the second quarter. Product sales growth in the Medical Device segment was driven primarily by the fulfillment of the initial stocking order for the SurVeil DCB from Abbott and continued sales growth from the Pounce thrombectomy device platform.
Downsides
Regulatory Headwinds: Surmodics’ facilities and procedures are subject to periodic inspections by the FDA to determine compliance with the latter’s requirements. On account of non-compliance with applicable laws or regulations, the FDA could ban such medical devices. Any adverse regulatory action can potentially hurt Surmodics' business practices and operations.
Reliance on Third Parties: A principal element of Surmodics’ business strategy is to enter into licensing arrangements with medical devices and other companies that manufacture products incorporating its technologies. The company’s revenues from such arrangements depend upon its ability or its licensees’ ability to successfully develop, obtain regulatory approval for manufacture (if applicable), and market and sell products incorporating Surmodics’ technologies. Any failure to meet these requirements could have an adverse effect on its business.
Estimate Trend
Surmodics is witnessing a positive estimate revision trend for fiscal 2024. In the past 30 days, the Zacks Consensus Estimate for its loss per share has narrowed from 90 cents to 72 cents.
The consensus estimate for the company’s third-quarter fiscal revenues is pegged at $30.3 million, suggesting a 42.2% decline from the year-ago reported number. Loss for the period is estimated to widen 157.7% year over year to 30 cents per share.
Surmodics, Inc. Price
Surmodics, Inc. Price
Surmodics, Inc. price | Surmodics, Inc. Quote
Key Picks
Some better-ranked stocks in the broader medical space are DaVita Inc. DVA, Align Technology ALGN and Medpace MEDP.
DaVita, sporting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 13.6%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 29.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
DaVita’s shares have risen 33.4% compared with the industry’s 11.2% growth year to date.
Medpace, sporting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 17.9%. Its earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 12.8%.
Medpace’s shares have risen 28.3% year to date compared with the industry’s 4.9% growth.
Align Technology, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 6.9%. Its earnings surpassed estimates in three of the trailing four quarters and missed the same in one quarter, delivering an average surprise of 5.9%.
ALGN’s shares have declined 0.9% year to date against the industry’s 2.8% growth.
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