Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2025
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-23837
Surmodics, Inc.
(Exact name of registrant as specified in its charter)
Minnesota
41-1356149
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
9924 West 74th Street, Eden Prairie, Minnesota 55344
(Address of principal executive offices) (Zip Code)
(952) 500-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.05 par value
SRDX
Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-accelerated filer
Smaller reporting company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s Common Stock, $0.05 par value per share, as of April 25, 2025 was 14,299,266.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1.
Unaudited Condensed Consolidated Financial Statements
3
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
32
Item 4.
Controls and Procedures
PART II. OTHER INFORMATION
Legal Proceedings
33
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
35
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
36
SIGNATURES
37
2
Item 1. Unaudited Condensed Consolidated Financial Statements
Surmodics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
March 31,
September 30,
2025
2024
(In thousands, except per share data)
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents
$
29,183
36,115
Available-for-sale securities
1,965
3,997
Accounts receivable, net of allowances of $193 and $144 as ofMarch 31, 2025 and September 30, 2024, respectively
11,589
13,292
Contract assets
9,697
9,872
Inventories
16,060
15,168
Prepaids and other
3,253
2,860
Total Current Assets
71,747
81,304
Property and equipment, net
23,281
24,956
Intangible assets, net
21,088
23,569
Goodwill
43,660
44,640
Other assets
3,438
4,093
Total Assets
163,214
178,562
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
3,387
2,786
Accrued liabilities:
Compensation
6,259
11,099
Accrued other
3,966
3,795
Deferred revenue
338
1,619
Income tax payable
—
1,244
Total Current Liabilities
13,950
20,543
Long-term debt, net
29,628
29,554
Deferred income taxes
1,607
1,785
Other long-term liabilities
7,783
Total Liabilities
52,968
59,665
Commitments and Contingencies (Note 11)
Stockholders’ Equity:
Series A Preferred stock — $.05 par value, 450 shares authorized; no shares issued and outstanding
Common stock — $.05 par value, 45,000 shares authorized; 14,299 and 14,325 sharesissued and outstanding as of March 31, 2025 and September 30, 2024, respectively
715
716
Additional paid-in capital
46,547
44,594
Accumulated other comprehensive loss
(3,869
)
(2,126
Retained earnings
66,853
75,713
Total Stockholders’ Equity
110,246
118,897
Total Liabilities and Stockholders’ Equity
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Operations
Three Months Ended March 31,
Six Months Ended March 31,
Revenue:
Product sales
14,993
18,099
31,541
36,926
Royalties and license fees
9,907
11,411
20,541
20,590
Research, development and other
3,185
2,448
5,925
4,994
Total revenue
28,085
31,958
58,007
62,510
Operating costs and expenses:
Product costs
7,830
7,101
15,255
15,904
Research and development
8,367
10,229
17,308
18,893
Selling, general and administrative
15,045
13,093
30,219
25,630
Acquired intangible asset amortization
853
876
1,716
1,746
Total operating costs and expenses
32,095
31,299
64,498
62,173
Operating (loss) income
(4,010
659
(6,491
337
Other expense, net:
Interest expense, net
(855
(881
(1,737
(1,777
Foreign exchange loss
(70
(72
(38
(117
Investment income, net
253
460
640
999
Other expense, net
(672
(493
(1,135
(895
(Loss) income before income taxes
(4,682
166
(7,626
(558
Income tax benefit (expense)
(527
81
(1,234
19
Net (loss) income
(5,209
247
(8,860
(539
Basic net (loss) income per share
(0.36
0.02
(0.62
(0.04
Diluted net (loss) income per share
Weighted average number of shares outstanding:
Basic
14,278
14,152
14,255
14,127
Diluted
14,182
4
Condensed Consolidated Statements of Comprehensive (Loss) Income
(In thousands)
Other comprehensive (loss) income:
Derivative instruments:
Unrealized net (loss) gain
(194
426
312
Net gain (loss) reclassified to earnings
(62
(26
(124
Net changes related to available-for-sale securities, net of tax
(4
(6
Foreign currency translation adjustments
2,469
(1,464
(2,025
1,333
Other comprehensive (loss) income
2,274
(1,098
(1,743
1,009
Comprehensive (loss) income
(2,935
(851
(10,603
470
5
Condensed Consolidated Statements of Stockholders’ Equity
Three Months Ended March 31, 2025 and 2024
Accumulated
Additional
Other
Total
Common Stock
Paid-In
Comprehensive
Retained
Stockholders’
Shares
Amount
Capital
Loss
Earnings
Equity
Balance at December 31, 2024
14,294
45,135
(6,143
72,062
111,769
Net loss
Other comprehensive income, net of tax
Issuance of common stock
(2
Common stock options exercised, net
7
62
Purchase of common stock to pay employee taxes
(14
Stock-based compensation
1,364
Balance at March 31, 2025
14,299
Balance at December 31, 2023
14,235
712
37,621
(2,652
86,469
122,150
Net income
Other comprehensive loss, net of tax
1
449
450
6
80
(1
(5
2,126
Balance at March 31, 2024
14,260
713
40,271
(3,750
86,716
123,950
Six Months Ended March 31, 2025 and 2024
Balance at September 30, 2024
14,325
(3
10
168
169
(33
(1,322
(1,324
3,107
Balance at September 30, 2023
14,155
708
36,706
(4,759
87,255
119,910
121
444
13
119
120
(29
(1,092
(1,094
4,094
Condensed Consolidated Statements of Cash Flows
Operating Activities:
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization
4,222
4,429
Noncash lease expense
420
397
Amortization of debt issuance costs
151
144
Provision for credit losses
49
27
Deferred taxes
(121
(189
(268
Change in operating assets and liabilities:
Accounts receivable and contract assets
2,009
(4,337
(892
(565
793
2,740
329
Accrued liabilities
(5,801
(5,007
Income taxes
(1,075
(279
(1,281
(2,028
Net cash (used in) provided by operating activities
(6,945
(1,377
Investing Activities:
Purchases of property and equipment
(621
(1,991
Purchases of available-for-sale securities
(1,961
(13,682
Maturities of available-for-sale securities
4,000
10,000
Net cash (used in) provided by investing activities
1,418
(5,673
Financing Activities:
570
Payments for taxes related to net share settlement of equity awards
(1,093
Payments for acquisition of in-process research and development
(931
Net cash (used in) provided by financing activities
(1,155
(1,454
Effect of exchange rate changes on cash and cash equivalents
(250
115
Net change in cash and cash equivalents
(6,932
(8,389
Cash and Cash Equivalents:
Beginning of period
41,419
End of period
33,030
Supplemental Information:
Cash paid for income taxes
2,331
Cash paid for interest
1,471
1,518
Noncash investing and financing activities:
Acquisition of property and equipment
330
227
Right-of-use assets obtained in exchange for operating lease liabilities
845
Notes to Condensed Consolidated Financial Statements
Period Ended March 31, 2025
1. Organization
Description of Business
Surmodics, Inc. and subsidiaries (referred to as “Surmodics,” the “Company,” “we,” “us,” “our” and other like terms) is a leading provider of performance coating technologies for intravascular medical devices and chemical and biological components for in vitro diagnostic (“IVD”) immunoassay tests and microarrays. Surmodics develops and commercializes highly differentiated vascular intervention medical devices that are designed to address unmet clinical needs and engineered to the most demanding requirements. This key growth strategy leverages the combination of the Company’s expertise in proprietary surface modification and drug-delivery coating technologies, along with its device design, development and manufacturing capabilities. The Company’s mission is to improve the detection and treatment of disease. Surmodics is headquartered in Eden Prairie, Minnesota.
On May 28, 2024, Surmodics entered into a Merger Agreement (the “Merger Agreement”) with BCE Parent, LLC, a Delaware limited liability company (“Parent”), and BCE Merger Sub, Inc., a Minnesota corporation and a wholly owned Subsidiary of Parent (“Merger Sub”), pursuant to which Surmodics will, subject to the terms and conditions thereof, be acquired by Parent for $43.00 per share in cash through the merger of Merger Sub with and into the Company (the “Merger”), with the Company as the surviving corporation and a wholly owned subsidiary of Parent. See Note 13 Merger Agreement for additional information about the Merger Agreement and Note 14 Federal Trade Commission Legal Proceedings for additional information about litigation related to the Merger.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include all accounts and wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). All intercompany transactions have been eliminated. The Company operates on a fiscal year ending on September 30. In accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), the Company has omitted footnote disclosures that would substantially duplicate the disclosures contained in the audited consolidated financial statements of the Company. These unaudited condensed consolidated financial statements should be read together with the audited consolidated financial statements for the fiscal year ended September 30, 2024, and notes thereto included in our Annual Report on Form 10-K as filed with the SEC.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from those estimates. The results of operations for the three and six months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the entire 2025 fiscal year.
New Accounting Pronouncements
Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures. This guidance requires disclosure of incremental segment information on an annual and interim basis. This amendment is effective for our fiscal year ending September 30, 2025 and interim periods within our fiscal year ending September 30, 2026. We are currently assessing the impact of this guidance on our disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes: Improvements to Income Tax Disclosures. This guidance requires consistent categories and greater disaggregation of information in the rate reconciliation and disclosures of income taxes paid by jurisdiction. This amendment is effective for our fiscal year ending September 30, 2026 and interim periods within our fiscal year ending September 30, 2027. We are currently assessing the impact of this guidance on our disclosures.
No other new accounting pronouncement issued or effective during our fiscal year ending September 30, 2025, or is expected to have, a material impact on the Company’s condensed consolidated financial statements.
8
2. Revenue
The following table is a disaggregation of revenue within each reportable segment.
Medical Device
7,714
11,100
17,830
23,050
Royalties & license fees – performance coatings
9,642
10,323
19,025
18,531
License fees – SurVeil DCB
265
1,088
1,516
2,059
3,088
2,315
5,619
4,731
Medical Device Revenue
20,709
24,826
43,990
48,371
In Vitro Diagnostics
7,279
6,999
13,711
13,876
97
133
306
263
In Vitro Diagnostics Revenue
7,376
7,132
14,017
14,139
Total Revenue
Contract assets totaled $10.2 million and $10.6 million as of March 31, 2025 and September 30, 2024, respectively, and were reported in contract assets, current and other assets, noncurrent (Note 5) on the condensed consolidated balance sheets. Fluctuations in the balance of contract assets result primarily from (i) fluctuations in the sales volume of performance coating royalties and license fees earned, but not collected, at each balance sheet date due to payment timing and contractual changes in the normal course of business; and (ii) starting in fiscal 2024, sales-based profit-sharing earned, but not collected, related to a collaborative arrangement (Note 3).
Deferred revenue totaled $0.3 million and $1.6 million as of March 31, 2025 and September 30, 2024, respectively, on the condensed consolidated balance sheets and was primarily related to a collaborative arrangement (Note 3). For the six months ended March 31, 2025 and 2024, the total amount of revenue recognized that was included in the respective beginning of fiscal year balances of deferred revenue on the condensed consolidated balance sheets totaled $1.5 million and $2.2 million, respectively.
3. Collaborative Arrangement
On February 26, 2018, the Company entered into an agreement with Abbott Vascular, Inc. (“Abbott”) with respect to one of the device products in our Medical Device reportable segment, the SurVeil™ drug-coated balloon (“DCB”) for treatment of the superficial femoral artery (the “Abbott Agreement”). In June 2023, the SurVeil DCB received U.S. Food and Drug Administration (“FDA”) premarket approval (“PMA”) and may now be marketed and sold in the U.S. by Abbott.
SurVeil DCB License Fees
Under the Abbott Agreement, Surmodics is responsible for conducting all necessary clinical trials, including completion of the ongoing, five-year TRANSCEND pivotal clinical trial of the SurVeil DCB. The Company has received payments totaling $87.8 million for achievement of clinical and regulatory milestones under the Abbott Agreement, which consisted of the following: (i) $25 million upfront fee in fiscal 2018, (ii) $10 million milestone payment in fiscal 2019, (iii) $10.8 million milestone payment in fiscal 2020, (iv) $15 million milestone payment in fiscal 2021, and (v) $27 million milestone payment in the third quarter of fiscal 2023 upon receipt of PMA for the SurVeil DCB from the FDA. There are no remaining contingent or other milestone payments under the Abbott Agreement.
License fee revenue on milestone payments received under the Abbott Agreement was recognized using the cost-to-cost method based on total costs incurred relative to total expected costs for the TRANSCEND pivotal clinical trial. See Note 2 Revenue for SurVeil DCB license fee revenue recognized in our Medical Device reportable segment.
As of March 31, 2025, the Company did not have deferred revenue on the condensed consolidated balance sheets, from upfront and milestone payments received under the Abbott Agreement. The Company completed its remaining performance obligations and recognized the remaining deferred revenue in the second quarter of fiscal 2025 as services, principally the TRANSCEND pivotal clinical trial, were completed.
9
SurVeil DCB Product Sales
Under the Abbott Agreement, we supply commercial units of the SurVeil DCB to Abbott, and Abbott has exclusive worldwide distribution rights. During the first quarter of fiscal 2024, we commenced shipment of commercial units of the SurVeil DCB to Abbott. We recognize revenue from the sale of commercial units of the SurVeil DCB to Abbott at the time of shipment in product sales on the condensed consolidated statements of operations. The amount of SurVeil DCB product sales revenue recognized includes (i) the contractual transfer price per unit and (ii) an estimate of Surmodics’ share of net profits resulting from product sales by Abbott to third parties pursuant to the Abbott Agreement (“estimated SurVeil DCB profit-sharing”). On a quarterly basis, Abbott (i) reports to us its third-party sales of the SurVeil DCB the quarter after those sales occur, which may occur within two years following shipment based on the product’s current shelf life; and (ii) reports to us and pays the actual amount of profit-sharing. Estimated SurVeil DCB profit-sharing represents variable consideration and is recorded in contract assets, current and other assets, noncurrent on the condensed consolidated balance sheets. We estimate variable consideration as the most-likely amount to which we expect to be entitled, and we include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue will not occur when the uncertainty associated with the variable consideration is resolved. Significant judgment is required in estimating the amount of variable consideration to recognize when assessing factors outside of Surmodics’ influence, such as limited availability of third-party information, expected duration of time until resolution, and limited relevant past experience.
4. Fair Value Measurements
Assets and liabilities measured at fair value on a recurring basis by level of the fair value hierarchy were as follows:
March 31, 2025
Quoted Prices in Active Markets for Identical Instruments(Level 1)
Significant OtherObservable Inputs(Level 2)
SignificantUnobservable Inputs(Level 3)
Total Fair Value
Assets
Cash equivalents (1)
22,251
Available-for-sale securities (1)
Total assets
24,216
Liabilities
Interest rate swap (2)
387
Total liabilities
September 30, 2024
Quoted Prices inActive Marketsfor IdenticalInstruments(Level 1)
29,334
33,331
673
5. Supplemental Balance Sheet Information
Investments — Available-for-sale Securities
The amortized cost, unrealized holding gains and losses, and fair value of available-for-sale securities were as follows:
Amortized Cost
Unrealized Gains
Unrealized Losses
Fair Value
Commercial paper and corporate bonds
1,966
Inventories consisted of the following components:
Raw materials
8,407
8,505
Work-in process
2,213
2,476
Finished products
5,440
4,187
Prepaids and Other Assets, Current
Prepaids and other current assets consisted of the following:
Prepaid expenses and other
3,148
2,752
Irish research and development credits receivable
105
108
11
Intangible Assets
Intangible assets consisted of the following:
(Dollars in thousands)
Weighted Average Original Life (Years)
Gross Carrying Amount
Accumulated Amortization
Net
Definite-lived intangible assets:
Customer lists and relationships
9.3
11,517
(10,959
558
Developed technology
11.9
34,563
(15,280
19,283
Patents and other
14.9
2,338
(1,671
667
Total definite-lived intangible assets
48,418
(27,910
20,508
Unamortized intangible assets:
Trademarks and trade names
580
48,998
11,870
(10,844
1,026
35,433
(14,222
21,211
(1,586
752
49,641
(26,652
22,989
50,221
Intangible asset amortization expense was $0.9 million for each of the three months ended March 31, 2025 and 2024 and $1.8 million and $1.9 million for the six months ended March 31, 2025 and 2024, respectively. Based on the intangible assets in service as of March 31, 2025, estimated amortization expense for future fiscal years was as follows:
Remainder of 2025
1,854
2026
2,832
2027
2,582
2028
2,572
2029
2030
2,346
Thereafter
5,750
Definite-lived intangible assets
Future amortization amounts presented above are estimates. Actual future amortization expense may be different as a result of future acquisitions, impairments, changes in amortization periods, foreign currency translation rates, or other factors.
Changes in the carrying amount of goodwill by segment were as follows:
In VitroDiagnostics
MedicalDevice
Goodwill as of September 30, 2024
8,010
36,630
Currency translation adjustment
(980
Goodwill as of March 31, 2025
35,650
12
Other Assets, Noncurrent
Other noncurrent assets consisted of the following:
Operating lease right-of-use assets
2,608
3,028
Contract asset (1)
465
689
365
376
Accrued Other Liabilities
Accrued other liabilities consisted of the following:
Accrued professional fees
938
563
Accrued clinical study expense
499
Accrued purchases
962
1,023
Operating lease liabilities, current portion
1,036
1,040
1,030
670
Total accrued other liabilities
Other Long-term Liabilities
Other long-term liabilities consisted of the following:
Deferred consideration (1)
1,677
1,661
Unrecognized tax benefits (2)
3,355
3,176
Operating lease liabilities, less current portion
2,144
2,648
607
298
6. Debt
Debt consisted of the following:
Revolving Credit Facility, Term SOFR + 3.00%, maturing October 1, 2027
5,000
Tranche 1 Term Loans, Term SOFR +5.75%, maturing October 1, 2027
25,000
Long-term debt, gross
30,000
Less: Unamortized debt issuance costs
(372
(446
On October 14, 2022, the Company entered into a secured revolving credit facility and secured term loan facilities pursuant to a Credit, Security and Guaranty Agreement (the “MidCap Credit Agreement”) with Mid Cap Funding IV Trust, as agent, and MidCap Financial Trust, as term loan servicer and the lenders from time to time party thereto. The MidCap Credit Agreement provides for availability under a secured revolving line of credit of up to $25.0 million (the “Revolving Credit Facility”). Availability under the Revolving Credit Facility is subject to a borrowing base.
The MidCap Credit Agreement also provided for up to $75 million in term loans (the “Term Loans”), consisting of a $25.0 million Tranche 1 (“Tranche 1”) and a $50.0 million Tranche 2 (“Tranche 2”), which was available until December 31, 2024. The Company did not draw any amounts under Tranche 2 and the Tranche 2 commitment expired on December 31, 2024. Upon closing, the Company borrowed $25.0 million of Tranche 1, borrowed $5.0 million on the Revolving Credit Facility, and used approximately $10.0 million of the proceeds to repay borrowings under the revolving credit facility with Bridgewater Bank. The Company intends to use the remaining proceeds to fund working capital needs and for other general corporate purposes, as permitted under the MidCap Credit Agreement.
Pursuant to the MidCap Credit Agreement, the Company provided a first priority security interest in all existing and future acquired assets, including intellectual property and real estate, owned by the Company. The MidCap Credit Agreement contains certain covenants that limit the Company’s ability to engage in certain transactions. Subject to certain limited exceptions, these covenants limit the Company’s ability to, among other things:
The MidCap Credit Agreement also contains customary indemnification obligations and customary events of default, including, among other things, (i) non-payment, (ii) breach of warranty, (iii) non-performance of covenants and obligations, (iv) default on other indebtedness, (v) judgments, (vi) change of control, (vii) bankruptcy and insolvency, (viii) impairment of security, (ix) termination of a pension plan, (x) regulatory matters, and (xi) material adverse effect.
In the event of default under the MidCap Credit Agreement, the Company would be required to pay interest on principal and all other due and unpaid obligations at the current rate in effect plus 2%.
Borrowings under the MidCap Credit Agreement bear interest at Term SOFR as published by CME Group Benchmark Administration Limited plus 0.10% (“Adjusted Term SOFR”). The Revolving Credit Facility bears interest at an annual rate equal to 3.00% plus the greater of Adjusted Term SOFR or 1.50%, and the Term Loans bear interest at an annual rate equal to 5.75% plus the greater of Adjusted Term SOFR or 1.50%. The Company is required to make monthly interest payments on the Revolving Credit Facility with the entire principal payment due at maturity. The Company is required to make 48 monthly interest payments on the Term Loans beginning on November 1, 2022 (the “Interest-Only Period”). If the Company is in covenant compliance at the end of the Interest-Only Period, the Company will have the option to extend the Interest-Only Period through maturity with the entire principal payment due at maturity. If the Company is not in covenant compliance at the end of the Interest-Only Period, the Company is required to make 12 months of straight-line amortization payments with the entire principal amount due at maturity.
14
Subject to certain limitations, the Term Loans have a prepayment fee for payments made prior to the maturity date equal to 1.0% of the prepaid principal amount for the third year following the closing date and thereafter. In addition, if the Revolving Credit Facility is terminated in whole or in part prior to the maturity date, the Company must pay a prepayment fee equal to 1.0% of the terminated commitment amount for the third year following the closing date of the MidCap Credit Agreement and thereafter. The Company is also required to pay a full exit fee at the time of maturity or full prepayment event equal to 2.5% of the aggregate principal amount of the Term Loans made pursuant to the MidCap Credit Agreement and a partial exit fee at the time of any partial prepayment event equal to 2.5% of the amount prepaid. This exit fee is accreted over the remaining term of the Term Loans. The Company also is obligated to pay customary origination fees at the time of each funding of the Term Loans and a customary annual administrative fee based on the amount borrowed under the Term Loan, due on an annual basis. The customary fees on the Revolving Credit Facility include (i) an origination fee based on the commitment amount, which was paid on the closing date, (ii) an annual collateral management fee of 0.50% per annum based on the outstanding balance of the Revolving Credit Facility, payable monthly in arrears and (iii) an unused line fee of 0.50% per annum based on the average unused portion of the Revolving Credit Facility, payable monthly in arrears. The Company must also maintain a minimum balance of no less than 20% of availability under the Revolving Credit Facility or a minimum balance fee applies of 0.50% per annum. Expenses recognized for fees for the Revolving Credit Facility and Term Loans are reported in interest expense, net on the condensed consolidated statements of operations.
7. Derivative Financial Instruments
As of March 31, 2025 and September 30, 2024, derivative financial instruments on the condensed consolidated balance sheets consisted of a fixed-to-variable interest rate swap to mitigate exposure to interest rate increases related to our Term Loans (“interest rate swap”). The interest rate swap has been designated as a cash flow hedge. See Note 6 Debt for further information on our financing arrangements. The net fair value of designated hedge derivatives subject to master netting arrangements reported on the condensed consolidated balance sheets was as follows:
Asset (Liability)
Gross Recognized Amount
Gross Offset Amount
Net Amount Presented
Cash Collateral Receivable
Net Amount Reported
Balance Sheet Location
Interest rate swap
(387
94
(293
(673
625
(48
The pretax amounts recognized in accumulated other comprehensive loss (“AOCL”) for designated hedge derivative instruments were as follows:
Beginning unrealized net (loss) gain in AOCL
(196
(499
183
Net gain (loss) recognized in other comprehensive (loss) income
Net gain (loss) reclassified into interest expense
Ending unrealized (loss) gain in AOCL
(135
15
8. Stock-based Compensation Plans
The Company has stock-based compensation plans approved by its shareholders under which it grants stock options, restricted stock awards, restricted stock units and deferred stock units to officers, directors and key employees. Stock-based compensation expense was reported as follows in the condensed consolidated statements of operations:
44
70
103
142
389
548
759
1,073
1,667
2,456
3,193
As of March 31, 2025, unrecognized compensation costs related to non-vested awards totaled approximately $7.7 million, which is expected to be recognized over a weighted average period of approximately 1.8 years.
Stock Option Awards
The Company awards stock options to officers, directors and key employees and uses the Black-Scholes option pricing model to determine the fair value of stock options as of the date of each grant. Stock option grant activity was as follows:
Stock option grant activity:
Stock options granted
-
281,000
Weighted average grant date fair value
15.70
Weighted average exercise price
33.40
Restricted Stock Awards
During the six months ended March 31, 2025, the Company did not award any shares of restricted stock. During the six months ended March 31, 2024 the Company awarded 102,000 restricted stock shares to certain key employees and directors with a weighted average grant date fair value per share of $33.53. Restricted Stock is valued based on the market value of the shares as of the date of grant.
Restricted Stock Unit Awards
During the six months ended March 31, 2025, the Company did not award any restricted stocks (“RSU’s”). During the six months ended March 31, 2024, the Company awarded 14,000 RSU’s to directors and key employees in foreign jurisdictions with a weighted average grant date fair value per unit of $32.49. RSUs are valued based on the market value of the shares as of the date of grant.
Employee Stock Purchase Plan
Our U.S. employees are eligible to participate in the amended 1999 Employee Stock Purchase Plan (“ESPP”) approved by our shareholders. New ESPP purchase periods have been suspended under the Merger Agreement since the date of that agreement. During each of the six months ended March 31, 2025 no shares were issued under the ESPP. During the six months ended March 31, 2024, 16,000 shares were issued under the ESPP program.
9. Net Income (Loss) Per Share Data
Basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common and common equivalent shares outstanding during the period. The Company’s potentially dilutive common shares are those that result from dilutive common stock options and non-vested stock relating to restricted stock awards and restricted stock units.
16
The calculation of diluted loss per share excluded 0.1 million or less in weighted-average shares for the three months ended March 31, 2025 and 0.1 million or less in weighted average shares for each of the six months ended March 31, 2025 and 2024, as their effect was anti-dilutive. Basic and diluted weighted average shares outstanding were as follows:
Basic weighted average shares outstanding
Dilutive effect of outstanding stock options, non-vested restricted stock, and non-vested restricted stock units
30
Diluted weighted average shares outstanding
10. Income Taxes
For interim income tax reporting, the Company estimates its full-year effective tax rate and applies it to fiscal year-to-date pretax income (loss), excluding unusual or infrequently occurring discrete items. Tax jurisdictions with losses for which tax benefits cannot be realized are excluded. The Company reported income tax expense of $(0.5) million and income tax benefit of $0.1 million for the three months ended March 31, 2025 and 2024, respectively, and income tax expense of $(1.2) million and income tax benefit of less than $0.1 million for the six months ended March 31, 2025 and 2024, respectively.
A valuation allowance is required to be recognized against deferred tax assets if, based on the available evidence, it is more likely than not (defined as a likelihood of more than 50%) that all or a portion of such assets will not be realized. We apply judgment to consider the relative impact of negative and positive evidence, and the weight given to negative and positive evidence is commensurate with the extent to which such evidence can be objectively verified. Objective historical evidence, such as cumulative three-year pre-tax losses adjusted for permanent adjustments, is given greater weight than subjective positive evidence, such as forecasts of future earnings. The more objective negative evidence that exists limits our ability to consider other, potentially positive, subjective evidence, such as our future earnings projections. Based on our evaluation of all available positive and negative evidence, and by placing greater weight on the objectively verifiable evidence, we determined, as of March 31, 2025 and September 30, 2024, that it is more likely than not that our net U.S. deferred tax assets will not be realized. Due to significant estimates used to establish the valuation allowance and the potential for changes in facts and circumstances, it is reasonably possible that we will be required to record additional adjustments to the valuation allowance in future reporting periods that could have a material effect on our results of operations.
Discrete tax benefits related to stock-based compensation awards vested, expired, canceled and exercised was $0.1 million or less for each of the three months ended March 31, 2025 and 2024 and $0.1 million or less for each of the six months ended March 31, 2025 and 2024. The total amount of unrecognized tax benefits, excluding interest and penalties that, if recognized, would affect the effective tax rate was $3.2 million and $2.8 million as of March 31, 2025 and September 30, 2024, respectively. Interest and penalties related to unrecognized tax benefits are recorded in income tax benefit (expense).
17
The Company files income tax returns, including returns for its subsidiaries, in the U.S. federal jurisdiction and in various state jurisdictions, as well as several non-U.S. jurisdictions. Uncertain tax positions are related to tax years that remain subject to examination. The Internal Revenue Service commenced an examination of the Company’s fiscal 2019 U.S. federal tax return in fiscal 2022; the examination has been completed. U.S. federal income tax returns for years prior to fiscal 2020 are no longer subject to examination by federal tax authorities. For tax returns for U.S. state and local jurisdictions, the Company is no longer subject to examination for tax years generally before fiscal 2015. For tax returns for non-U.S. jurisdictions, the Company is no longer subject to income tax examination for years prior to 2020. Additionally, the Company has been indemnified of liability for any taxes relating to the fiscal 2021 acquisition of Vetex Medical Limited (“Vetex”) and the fiscal 2016 acquisitions of Creagh Medical, Ltd and NorMedix, Inc. for periods prior to the respective acquisition dates, pursuant to the terms of the related share purchase agreements. There were no undistributed earnings in foreign subsidiaries as of March 31, 2025 and September 30, 2024.
11. Commitments and Contingencies
Asset Acquisition. In fiscal 2018, the Company acquired certain intellectual property assets of Embolitech, LLC (the “Embolitech Transaction”). As part of the Embolitech Transaction, the Company paid the sellers $5.0 million in fiscal 2018, $1.0 million in fiscal 2020, $1.0 million in fiscal 2021, $0.5 million in fiscal 2022, $1.0 million in fiscal 2023, and $0.9 million in fiscal 2024. An additional $1.0 million payment is contingent upon the achievement of a certain regulatory milestone within a contingency period ending in 2033.
Vetex Acquisition. In fiscal 2021, Surmodics acquired all of the outstanding shares of Vetex with an upfront cash payment of $39.9 million. The Company paid the sellers $1.8 million in the fourth quarter of fiscal 2024. The Company is obligated to pay an additional installment of $1.8 million in fiscal 2027. An additional $3.5 million in payments is contingent upon the achievement of certain product development and regulatory milestones within a contingency period ending in fiscal 2027.
12. Segment Information
Segment revenue, operating income (loss), and depreciation and amortization were as follows:
Operating (loss) income:
(1,865
302
(1,704
78
3,337
3,356
6,480
Total segment operating income
1,472
3,658
4,555
6,558
Corporate
(5,482
(2,999
(11,046
(6,221
Total operating (loss) income
Depreciation and amortization:
1,925
1,916
3,849
3,970
96
194
193
111
84
179
266
Total depreciation and amortization
2,139
2,096
The Corporate category includes expenses that are not fully allocated to the Medical Device and In Vitro Diagnostics segments. These Corporate costs are related to administrative corporate functions, such as executive management, corporate accounting, information technology, legal, human resources and Board of Directors. Corporate may also include expenses, such as acquisition-related costs and litigation, which are not specific to a segment and thus not allocated to the reportable segments.
Asset information by segment is not presented because the Company does not provide its chief operating decision maker assets by segment, as the data is not readily available.
18
13. Merger Agreement
On May 28, 2024, Surmodics entered into the Merger Agreement with Parent and Merger Sub (Note 1). Pursuant to the Merger Agreement, and subject to the terms and conditions thereof, Merger Sub will merge (the “Merger”) with and into the Company, with the Company as the surviving corporation and a wholly owned subsidiary of Parent. At the effective time of the Merger (the “Effective Time”), each share of common stock of the Company then outstanding (other than (1) those shares owned by Merger Sub, Parent, the Company, or any direct or indirect wholly owned subsidiary of Parent or the Company (which will be cancelled without any consideration), (2) any shares outstanding immediately prior to the Effective Time and held of record or beneficially by a Person who has not voted in favor of approval of the Agreement and who is entitled to demand and properly demands and perfects such holder’s dissenter’s rights with respect to such shares, and (3) any shares that have been issued as a restricted stock award pursuant to any of the Stock Incentive Plans (as defined in the Merger Agreement) and that remains unvested and subject to forfeiture thereunder (“Restricted Shares”) (which will be treated as described below)) will be converted into the right to receive $43.00 in cash, without interest (the “Merger Consideration”). The Merger is not subject to a financing condition. If the Merger is consummated, shares of our common stock will be delisted from The Nasdaq Stock Market and deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
During the three and six months ended March 31, 2025, we incurred a total of $2.5 million and $4.8 million, respectively, in charges related to the Merger and the litigation described in Note 14 below, which we reported within selling, general and administrative expenses on the condensed consolidated statements of operations.
Merger Consideration
The Merger Agreement provides that, at the Effective Time, each of the Company’s then outstanding equity awards will be treated as follows: (1) each restricted stock unit or deferred stock unit that has been issued pursuant to any of the Stock Incentive Plans will be cancelled in exchange for an amount in cash equal to the Merger Consideration net of any taxes withheld pursuant to the Merger Agreement; (2) each Restricted Share will be cancelled in exchange for an amount in cash equal to the Merger Consideration, net of any taxes withheld pursuant to the Merger Agreement; and (3) each unexercised option to acquire Company common stock will be (i) if the Merger Consideration for such option is equal to or greater than the exercise price per share of Company common stock subject to such option, cancelled in exchange for an amount in cash equal to the excess, if any, of the Merger Consideration over the exercise price per share of Company common stock subject to such option multiplied by the number of shares of Company common stock subject to such option, and (ii) if the Merger Consideration for such option is less than the exercise price per share of Company common stock subject to such option, cancelled for no consideration.
Conditions
The obligations of the parties to consummate the Merger are subject to the satisfaction or waiver of closing conditions set forth in the Merger Agreement, including (1) the approval of the Company’s shareholders, (2) the expiration or termination of any waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (3) the absence of a “Company Material Adverse Effect” (as defined in the Merger Agreement) with respect to the Company and (4) other customary closing conditions, including the absence of any injunction or other legal restraint or prohibition that would prevent or prohibit the consummation of the Merger.
The Merger was approved by Surmodics’ shareholders at a special meeting on August 13, 2024. On March 6, 2025, the U.S. Federal Trade Commission (“FTC”) voted to issue an administrative complaint and authorized its staff to seek to block the Merger in federal court (collectively, the “FTC Litigation”). See Note 14, below for a further description of the FTC Litigation.
Termination Rights & Fees
The Merger Agreement may be terminated with the mutual written consent of Parent and the Company and also contains termination rights for each of Parent and the Company, including, among others, (1) if the Merger has not been consummated by February 28, 2025 (which date may be extended one or more times, for up to nine additional months in total, under specified circumstances), (2) if a final and non-appealable judgment or law makes consummation of the Merger illegal or prevents the consummation of the Merger, (3) if the required approval of the Company’s shareholders is not obtained, or (4) in the case of a material uncured breach by the other party, in each case as further described in, and subject to the terms and conditions of, the Merger Agreement. Parent may terminate the Merger Agreement in certain circumstances generally related to an adverse change in the Company’s board of directors’ recommendation in favor of the Merger and, as further described below, the Company may terminate the Merger Agreement to accept a Superior Proposal, as further described in, and subject to the terms and conditions of, the Merger Agreement.
Upon termination of the Merger Agreement under specified circumstances, generally relating to alternative acquisition proposals or an adverse change in the Company’s board of directors’ recommendation in favor of the Merger, the Company would be required to pay Parent a termination fee of $20.4 million. Upon termination of the Merger Agreement under specified circumstances, generally relating to a failure of the Merger to be completed due to certain regulatory impediments, Parent would be required to pay the Company a reverse termination fee of $50.2 million. In certain other circumstances, generally related to a failure by Parent to consummate the Merger when required to do so pursuant to the terms of the Merger Agreement, Parent would be required to pay the Company a reverse termination fee of $47.0 million. The Merger Agreement also contains restrictions on the Company’s ability to seek specific performance of Parent’s obligation to consummate the Merger and generally limits the aggregate liability of Parent for a breach of the Merger Agreement to the amount of the termination fee payable by Parent to the Company.
The foregoing description of the Merger and the Merger Agreement does not purport to be and is not complete and is subject to and qualified in its entirety by reference to the full text of the Merger Agreement.
14. Federal Trade Commission Legal Proceedings
On March 6, 2025, the U.S. Federal Trade Commission (“FTC”) filed an administrative complaint, styled In the Matter of GTCR BC Holdings, LLC and Surmodics, Inc. (the “Administrative Complaint”), seeking to block the Merger and alleging that the Merger if fully consummated, may substantially lessen competition in the purported market for outsourced hydrophilic coatings throughout the country in violation of Section 7 of the Clayton Act, and Section 5 of the Federal Trade Commission Act (the “FTC Act”). On the same day, the FTC filed a parallel complaint against GTCR BC Holdings, LLC (“Holdings”) and the Company in the United States District Court for the Northern District of Illinois (the “Federal Complaint”) seeking a temporary restraining order and a preliminary injunction enjoining the Merger pursuant to Section 13(b) of the FTC Act.
On March 12, 2025, the District Court entered a Stipulated Order for a Temporary Restraining Order, mutually agreed upon by the parties to the Federal Complaint, that prevents Parent and the Company from consummating the Merger until 11:59 p.m. Eastern Time on (a) November 11, 2025, or (b) the third business day after the District Court rules on the FTC’s motion for a preliminary injunction pursuant to Section 13(b) of the FTC Act, whichever occurs earlier. On March 12, 2025 and March 18, 2025, Parent and the Company, respectively, each filed their Answer and Defenses to the Administrative Complaint generally denying the allegations and asserting several defenses. On March 27, 2025, Parent and the Company separately filed their Answers, Defenses, and Counterclaims to the Federal Complaint generally denying the allegations and asserting several defenses. Parent and the Company also asserted counterclaims against the FTC seeking declaratory and injunctive relief alleging violations of Parent’s and the Company’s constitutional rights. On April 16, 2025, the FTC, the State of Illinois and the State of Minnesota filed an amended Federal Complaint against GTCR, LLC, Holdings, and the Company reiterating the original Federal Complaint and adding the State of Illinois and the State of Minnesota as plaintiffs and GTCR, LLC as a defendant. The Company cannot predict the outcome of the FTC Litigation or whether or when the Company will be able to successfully consummate the Merger.
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information management believes is useful in understanding the operating results, cash flows and financial condition of Surmodics. The discussion should be read in conjunction with both the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, each included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024. This discussion contains various “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statement entitled “Forward-Looking Statements” located at the end of this Item 2.
Overview
Surmodics, Inc. (referred to as “Surmodics,” the “Company,” “we,” “us,” “our” and other like terms) is a leading provider of performance coating technologies for intravascular medical devices and chemical and biological components for in vitro diagnostic (“IVD”) immunoassay tests and microarrays. Surmodics develops and commercializes highly differentiated vascular intervention medical devices that are designed to address unmet clinical needs and engineered to the most demanding requirements. This key growth strategy leverages the combination of the Company’s expertise in proprietary surface modification and drug-delivery coating technologies, along with its device design, development and manufacturing capabilities. The Company’s mission is to improve the detection and treatment of disease. Surmodics is headquartered in Eden Prairie, Minnesota.
Merger Agreement
As described more fully under Part I, Item 1, Note 13 Merger Agreement, on May 28, 2024, we entered into a Merger Agreement with BCE Parent, LLC, a Delaware limited liability company (“Parent”), and BCE Merger Sub, Inc., a Minnesota corporation and a wholly owned Subsidiary of Parent (“Merger Sub”), pursuant to which we will, subject to the terms and conditions of the Merger Agreement, be acquired by Parent for $43.00 per share in cash through the merger of Merger Sub with and into us (the “Merger”), with Surmodics as the surviving corporation and a wholly owned subsidiary of Parent. The Merger remains subject to the resolution of litigation with the U.S. Federal Trade Commission (the “FTC”) and customary closing conditions, including required regulatory approval. If the Merger is consummated, shares of our common stock will be delisted from The Nasdaq Stock Market and deregistered under the Exchange Act.
During the three and six months ended March 31, 2025, we incurred a total of $2.5 million and $4.8 million in merger-related charges, respectively, which we reported within selling, general and administrative expense on the condensed consolidated statements of operations.
Vascular Intervention Medical Device Platforms
Within our Medical Device segment, we develop and manufacture our own proprietary vascular intervention medical device products, which leverage our expertise in performance coating technologies, product design and engineering capabilities. We believe our strategy of developing our own medical device products has increased, and will continue to increase, our relevance in the medical device industry. This strategy is key to our future growth and profitability, providing us with the opportunity to capture more revenue and operating margin with vascular intervention device products than we would by licensing our device-enabling technologies.
Highlighted below are select medical device products within our development pipeline that are our focus for commercialization and development efforts. For our drug-coated balloon (“DCB") platform, we commercialized our SurVeil™ DCB through a distribution arrangement with Abbott Vascular, Inc. (“Abbott”). For both our thrombectomy and radial access platforms, we are pursuing commercialization via a direct sales strategy leveraging a small team of experienced sales professionals and clinical specialists.
Drug-coated Balloon Platform
Surmodics’ DCBs are designed for vascular interventions to treat peripheral arterial disease (“PAD”), a condition that causes a narrowing of the blood vessels supplying the extremities.
In the first quarter of fiscal 2024, we completed shipment of Abbott’s initial stocking order of commercial units of the SurVeil DCB, resulting in the initial recognition of sales revenue for the product. Beginning in January 2024, the SurVeil DCB is a commercial product available in the U.S. through Abbott. Throughout fiscal 2024 and the first six months of fiscal 2025, we continued to manufacture and ship commercial units to Abbott in support of Abbott’s commercialization of the product. Upon our sales of SurVeil DCB products to Abbott we recognize revenue that includes both (i) the contractual transfer pries, and (ii) an estimate of Surmodics’ share of net profits resulting from product sales by Abbott to third parties.
Thrombectomy Systems
We have successfully developed, internally and through acquisitions, multiple FDA 510(k)-cleared mechanical thrombectomy devices, which require no capital equipment, for the non-surgical removal of thrombi and emboli (clots) from the peripheral arterial and venous vasculatures, while minimizing the need for thrombolytics. We believe that the ease of use, intuitive design, and performance of our thrombectomy systems make these products attractive first-line treatment options for interventionalists.
The original Pounce (mid profile) Thrombectomy System is indicated for use in peripheral arterial vessels 3.5 mm to 6 mm in diameter, such as those found above the knee. Commercial sales of the Pounce Thrombectomy System began in fiscal 2022.
The Pounce LP (Low Profile) Thrombectomy System is indicated for use in peripheral arterial vessels 2 mm to 4 mm in diameter, such as those found below the knee. The Pounce LP Thrombectomy System received FDA 510(k) regulatory clearance in fiscal 2023, and we began limited market evaluations of the product in the first quarter of fiscal 2024. In the third quarter of fiscal 2024, we completed limited market evaluations for the Pounce LP Thrombectomy System, and the product was commercially launched.
The Pounce XL Thrombectomy System is indicated for use in peripheral arterial vessels 5.5 mm to 10 mm in diameter, making it suitable for iliac, femoral, and other arteries within this range. The Pounce XL Thrombectomy System received FDA 510(k) regulatory clearance in the fourth quarter of fiscal 2024. We conducted limited market evaluations to obtain physician feedback of the product in the first half of fiscal 2025. Early in the third quarter of fiscal 2025 we commenced the commercial launch of the product.
Sublime Radial Access Platform
We have successfully developed and received FDA 510(k) regulatory clearance for a suite of devices designed to access and treat stenosed (narrowed) arteries from the thigh to the foot via radial (wrist) access. Our Sublime radial access platform provides a unique combination of length, profile and deliverability, allowing physicians to access and treat lesions previously inaccessible via radial access. Commercial sales of the Sublime guide sheath and RX PTA dilatation catheter devices began in fiscal 2022.
22
Performance Coatings – Preside™ Hydrophilic Coatings
In October 2023, we announced the commercial launch of our most advanced hydrophilic medical device coating technology, Preside hydrophilic coatings. Preside hydrophilic coatings complement our existing Serene™ hydrophilic coatings by providing customers with a unique low-friction and low-particulate generation coating to further enhance distal access for neuro-vascular applications, as well as improved crossing for challenging coronary lesions or chronic total occlusions. Preside hydrophilic coatings are specifically formulated to meet the challenge of achieving the right balance of enhanced lubricity (reduction in friction) and excellent coating durability (resulting in low particulates) for the next-generation of neurovascular, coronary and peripheral vascular devices. Our Preside and Serene hydrophilic coatings both allow customers to leverage their existing coating process to apply these innovative surface treatments.
For more information regarding our vascular intervention medical devices, see Part I, Item 1 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.
Results of Operations
Three and Six Months Ended March 31, 2025 and 2024
Revenue. Revenue in the second quarter of fiscal 2025 was $28.1 million, a $(3.9) million or (12)% decrease compared to the prior-year quarter. Revenue in the first six months of fiscal 2025 was $58.0 million , a $(4.5) million or (7)% decrease compared to the same prior-year period. The following is a summary of revenue streams within each reportable segment.
Increase/(Decrease)
(3,386
(31
)%
(5,220
(23
(681
(7
494
%
(823
(76
(543
R&D and other
773
888
(4,117
(17
(4,381
(9
280
(165
(36
(27
43
244
(122
(3,873
(12
(4,503
Medical Device. Revenue in our Medical Device segment was $20.7 million in the second quarter of fiscal 2025, a $(4.1) million decrease from $24.8 million in the prior-year quarter. For the first six months of fiscal 2025, revenue in our Medical Device segment was $44.0 million, a (9)% decrease from $48.4 million in the same prior-year period.
Based on forecasts that we have received from Abbott for purchases of SurVeil DCB products, we expect product revenue for our SurVeil DCB products to decline by approximately $7.0 million in fiscal 2025 from their fiscal 2024 level. We do not expect any increases in sales from our Pounce thrombectomy device platform to fully offset that decrease.
23
The TRANSCEND pivotal clinical trial was completed in the six months ended of fiscal 2025. Consequently, we expect SurVeil DCB license fee revenue to decline by $3.6 million in fiscal 2025, compared to fiscal 2024, with no further recognition of SurVeil DCB license fee revenue subsequent to March 31, 2025.
In Vitro Diagnostics. Revenue in our In Vitro Diagnostics (“IVD”) segment was $7.4 million in second quarter of fiscal 2025, a 3% increase from $7.1 million in the prior-year quarter. For the first six months of fiscal 2025, revenue in our IVD segment was $14.0 million, a (1)% decrease from $14.1 million in the same prior-year period.
Operating Costs and Expenses. Product sales, product costs, product gross profit, product gross margin, and operating costs were as follows:
(3,106
(5,385
(15
729
(649
Product gross profit (1)
7,163
10,998
(3,835
(35
16,286
21,022
(4,736
% Product gross margin (2)
47.8
60.8
(13.00
ppt
51.6
56.9
(5.30
R&D expense
(1,862
(18
(1,585
(8
% Total revenue
29.8
32.0
30.2
SG&A expense
1,952
4,589
53.6
41.0
52.1
(30
24
Product Gross Profit and Product Gross Margins. Product gross profit decreased $(3.8) million, or (35)%, in the second quarter of fiscal 2025, compared to the prior-year quarter, and decreased $(4.7) million, or (23)%, in the first six months of fiscal 2025, compared to the same prior-year period. Product gross margins were 47.8% and 60.8% in the second quarter of fiscal 2025 and 2024, respectively, and 51.6% and 56.9% in the first six months of fiscal 2025 and 2024, respectively. The decrease in product gross margins was primarily driven by declining SurVeil DCB gross profit of $2.8 million and $4.5 million in the second quarter and first six months of fiscal 2025, respectively, resulting in under absorption and production inefficiencies associated with below-scale production and the expiration and potential expiration of raw material inventory. The decrease in gross margins was also driven by a decrease in gross profit of performance coating reagents, to a lesser extent, as a result of active management of inventory levels by certain customers. The decrease was offset by continued gross margin growth of the Pounce thrombectomy device platform.
For the remainder of fiscal 2025, we expect product gross profit and product gross margin to decline, compared to their fiscal 2024 levels, primarily due to the expected decline in fiscal 2025 SurVeil DCB product revenue resulting in under-absorption and production inefficiencies associated with below-scale production, including potential expiration of inventory. We do not expect any increases in product gross profit from our Pounce thrombectomy device platform to fully offset that decrease.
R&D Expense. R&D expense declined (18)%, or $(1.9) million, in the second quarter of fiscal 2025, compared to the prior-year quarter. For the first six months of fiscal 2025, R&D expense declined (8)%, or $(1.6) million, compared to the same prior-year period. R&D expense as a percentage of revenue was 29.8% and 32.0% in the second quarter of fiscal 2025 and 2024, respectively, and 29.8% and 30.2% in the first six months of fiscal 2025 and 2024, respectively. The decrease in R&D expense was driven by reduced development costs associated with our Pounce thrombectomy and Sublime radial access platforms, and reduced clinical activity associated with the completion of the TRANSCEND pivotal clinical trial, offset by increases in performance coating commercial development projects.
Selling, General and Administrative (“SG&A”) Expense. SG&A expense increased 15%, or $2.0 million in the second quarter of fiscal 2025 compared to the prior-year quarter. For the first six months of fiscal 2025, SG&A expense increased 18% or $4.6 million, compared to the same prior-year period. SG&A expense as a percentage of revenue was 53.6% and 41.0% in the second quarter of fiscal 2025 and 2024, respectively, and 52.1% and 41.0% in the first six months of fiscal 2025 and 2024, respectively. The increase in SG&A expense was primarily driven by $2.5 million and $4.8 million in merger-related charges incurred during the second quarter and the six months ended March 31, 2025.
Acquired Intangible Asset Amortization. We have previously acquired certain intangible assets through business combinations, which are amortized over periods ranging from 7 to 14 years.
Other Expense. Major classifications of other expense were as follows:
26
40
79
(68
(207
(45
(359
(179
(240
Interest expense, net remained flat in the second quarter and the six months ended March 31, 2025, compared to the same prior-year periods. Refer to “Liquidity and Capital Resources” for further discussion of financing arrangements and expectations for fiscal 2025 interest expense. Foreign currency exchange losses result primarily from the impact of U.S. dollar to Euro exchange rate fluctuations on certain intercompany transactions and balances. Investment income, net decreased $(0.2) million and $(0.4) million in the second quarter and the six months ended March 31, 2025, respectively, compared to the same prior-year periods, due to decreased investments in available-for-sale securities and lower interest rates.
Income Taxes. Income taxes and our effective tax rate were as follows:
Effective tax rate
(11
(49
(16
25
Several factors impacted income taxes and our effective tax rate:
Segment Operating Results
Operating results for each of our reportable segments were as follows:
$ Change
(2,167
(1,782
(19
(221
(2,186
(2,003
(2,483
(4,825
(4,669
(6,828
Medical Device. Our Medical Device business reported an operating loss of $(1.9) million in the second quarter of fiscal 2025, compared to an operating income of $0.3 million in the prior-year quarter, representing (9)% and 1% of revenue, respectively. For the first six months of fiscal 2025, our Medical Device business reported an operating loss of $(1.7) million, compared to an operating income of $0.1 million in the same prior-year period, representing (4)% and 0% of revenue, respectively.
R&D expenditures in our Medical Device segment decreased $(2.0) million and $(1.9) million year-over-year in the second quarter of fiscal 2025 and in the six months ended March 31, 2025, respectively. The decrease in R&D expense was driven by reduced development costs associated with our Pounce thrombectomy and Sublime radial access platforms, reduced clinical activity associated with the completion of the TRANSCEND pivotal clinical trial, offset by increases in performance coating commercial development projects.
SG&A expense in our Medical Device segment decreased $(0.4) million and $(0.2) million year-over-year in the second quarter of fiscal 2025 and in the six months ended March 31, 2025, respectively. The decline in spending is primarily driven by lower compensation expenses.
In Vitro Diagnostics. Our In Vitro Diagnostics business reported operating income of $3.3 million and $3.4 million in the second quarter of fiscal 2025 and 2024, respectively, representing 45.2% and 47.1% of revenue, respectively. For the six months ended March 31, 2025, our In Vitro Diagnostics business reported operating income of $6.3 million and $6.5 million in the six months ended March 31, 2025 and 2024, respectively, representing 44.7% and 45.8% of revenue, respectively.
Corporate. The Corporate category includes expenses for administrative corporate functions, such as executive management, corporate accounting, information technology, legal, human resources and Board of Directors related fees and expenses, which we do not fully allocate to the Medical Device and IVD segments. Corporate also includes expenses, such as acquisition-related costs and litigation, which are not specific to a segment and thus not allocated to our reportable segments. The unallocated Corporate expense operating loss was $(5.5) million and $(3.0) million in the three months ended March 31, 2025 and 2024, respectively, and $(11.0) million and $(6.2) million in the six months ended March 31, 2025 and 2024, respectively. The increase in Corporate operating loss was primarily driven by $2.5 million and $4.8 million in merger-related charges incurred during the second quarter and the six months ended March 31, 2025, respectively.
Cash Flow Operating Results
The following is a summary of cash flow results:
Cash (used in) provided by:
Operating activities
Investing activities
Financing activities
Operating Activities. Cash (used in) provided by operating activities was $(6.9) million in the six months ended March 31, 2025, compared to cash used of $(1.4) million in the same prior-year period. Net loss was $(8.9) million in the six months ended March 31, 2025, compared to $(0.5) million in the same prior-year period. Net changes in operating assets and liabilities reduced cash flows from operating activities by $(3.6) million in six months ended March 31, 2025. Significant changes in operating assets and liabilities affecting cash flows during these periods included:
Investing Activities. Cash provided by investing activities totaled $1.4 million in the six months ended March 31, 2025, compared to cash used of $(5.7) million in the same prior-year period.
Financing Activities. Cash (used in) provided by financing activities totaled $(1.2) million and $(1.5) million in the six months ended March 31, 2025 and 2024, respectively.
Liquidity and Capital Resources
As of March 31, 2025, working capital totaled $57.8 million, a decrease of $(3.0) million from $60.8 million as of September 30, 2024. We define working capital as current assets minus current liabilities. Cash and cash equivalents and available-for-sale investments totaled $31.1 million as of March 31, 2025, a decrease of $(9.0) million from $40.1 million as of September 30, 2024.
The Company proactively manages its access to capital to support liquidity and continued growth. On October 14, 2022, Surmodics entered into a new, five-year secured credit agreement with MidCap, which consisted of up to $100 million in term loans ($25 million of which was at the sole discretion of MidCap and $50 million of which was an additional loan commitment that expired undrawn by the Company on December 31, 2024) and a $25 million revolving credit facility. At close, the Company drew $25 million on the term loan and $5 million on the revolving credit facility. These proceeds were partially used to retire the Company’s then existing $25 million revolving credit facility with Bridgewater Bank, of which $10 million was outstanding. Upon closing in October 2022, the Company’s cash balance increased by $19.3 million. In fiscal 2025, the Company expects total interest expense under the credit agreement with MidCap to be approximately $3.5 million.
As of March 31, 2025, the Company’s shelf registration statement with the SEC allows the Company to offer potentially up to $200 million in debt securities, common stock, preferred stock, warrants, and other securities or any such combination of such securities in amounts, at prices, and on terms announced if and when the securities are ever offered. This shelf registration statement expires in May 2026.
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In fiscal 2025, we anticipate SG&A and R&D expenses will continue to be significant, primarily related to medical device sales and product development, including continued investment in our Pounce and Sublime product platforms. We believe that our existing cash and cash equivalents and available-for-sale investments, which totaled $31.1 million as of March 31, 2025, together with cash flow from operations and our revolving credit facility, will provide liquidity sufficient to meet our cash needs and fund our operations and planned capital expenditures for fiscal 2025. There can be no assurance, however, that our business will continue to generate cash flows at historic levels.
Beyond fiscal 2025, our cash requirements will depend extensively on the timing of market introduction and extent of market acceptance of products in our medical device product portfolio, including the SurVeil DCB distributed by Abbott, our exclusive distribution partner for the product. Our long-term cash requirements also will be significantly impacted by the level of our investment in commercialization of our vascular intervention device products and whether we make future corporate transactions. We cannot accurately predict our long-term cash requirements at this time. We may seek additional sources of liquidity and capital resources, including through borrowing, debt or equity financing or corporate transactions to generate cashflow. There can be no assurance that such transactions will be available to us on favorable terms, if at all.
Customer Concentrations
We have agreements with a diverse base of customers and certain customers have multiple products using our technology. Abbott and Medtronic are our largest customers, comprising 16% and 12%, respectively, of our consolidated revenue for fiscal 2024. Abbott and Medtronic each comprised approximately 13% and 9%, respectively, of our consolidated revenue for the six months ended March 31, 2025.
Critical Accounting Policies and Significant Estimates
Critical accounting policies are those policies that require the application of management’s most challenging subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Critical accounting policies involve judgments and uncertainties that are sufficiently likely to result in materially different results under different assumptions and conditions. For the six months ended March 31, 2025, there were no significant changes in our critical accounting policies. For a detailed description of our other critical accounting policies and significant estimates, see Management’s Discussion and Analysis of Financial Condition and Results of Operations under Item 7 in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.
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Forward-looking Statements
This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, our strategies for growth and profitability; statements about the Merger and its effects; promising signals of potential performance of our Sundance DCB; plans to evaluate our strategy for further clinical investment in the Sundance DCB; expected product revenue from SurVeil DCB products; growing revenue associated with the adoption, utilization and sales of our Pounce and Sublime platform products; any increase in Pounce thrombectomy platform product sales revenues or gross profits; future gross profits and gross margins and the reasons for their expected decline from fiscal 2024 to fiscal 2025; future revenue growth, our longer-term valuation-creation strategy, and our future potential; information about our product pipeline; future operating expenses, and capital expenditures; estimated future amortization expense; the period over which unrecognized compensation costs is expected to be recognized; the expected decline in SurVeil DCB license fee revenue from fiscal 2024 to 2025; that we will recognize no further deferred revenue related to the Abbott Agreement; that we will proactively manage our access to capital to support liquidity and continued growth; anticipated cash requirements; the intended use of remaining proceeds of our borrowing under the MidCap Credit Agreement; future cash flows and sources of funding, and their ability together with existing cash, and cash equivalents, to provide liquidity sufficient to meet our cash needs and fund our operations and planned capital expenditures for fiscal 2025; statements regarding cash requirements beyond fiscal 2025; expectations regarding capital available under our secured revolving credit facility; expectations regarding the maturity of debt; future impacts of our interest rate swap transactions; our expected interest expense in fiscal 2025 under the MidCap Credit Agreement; our ability to issue securities under our shelf registration statement; the impact of potential lawsuits or claims; the potential impact of interest rate fluctuations on our results of operations and cash flows; the impact of potential change in raw material prices; the potential impact on the Company of currency fluctuations; future income tax (expense) benefit; expected income tax expense and cash taxes to be paid; the likelihood that we will realize the benefits of our deferred tax assets; and the impact of the adoption of new accounting pronouncements. Without limiting the foregoing, words or phrases such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “project,” “will” and similar terminology, generally identify forward-looking statements. Forward-looking statements may also represent challenging goals for us. These statements, which represent our expectations or beliefs concerning various future events, are based on current expectations that involve a number of risks and uncertainties that could cause actual results to differ materially from those of such forward-looking statements. We caution that undue reliance should not be placed on such forward-looking statements, which speak only as of the date made. Some of the factors which could cause results to differ from those expressed in any forward-looking statement are set forth under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024. We disclaim any intent or obligation to update publicly these forward-looking statements, whether because of new information, future events or otherwise.
Although it is not possible to create a comprehensive list of all factors that may cause actual results to differ from our forward-looking statements, such factors include, among others:
Many of these factors are outside our control and knowledge and could result in increased volatility in period-to-period results. Investors are advised not to place undue reliance upon our forward-looking statements and to consult any further disclosures by us on this subject in our filings with the Securities and Exchange Commission.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our investment policy requires investments with high credit quality issuers and limits the amount of credit exposure to any one issuer. Our investments consist principally of interest-bearing corporate debt securities with varying maturity dates, which generally are less than one year. Because of the credit criteria of our investment policies, the primary market risk associated with these investments is interest rate risk. As of March 31, 2025, we held $2.0 million in available-for-sale securities. Therefore, interest rate fluctuations relating to investments would have an insignificant impact on our results of operations or cash flows. Our policy also allows the Company to hold a substantial portion of funds in cash and cash equivalents, which are defined as financial instruments with original maturities of three months or less and may include money market instruments, certificates of deposit, repurchase agreements and commercial paper instruments.
Loans under the Midcap Credit Agreement bear interest at floating rates tied to Term SOFR. As a result, changes in Term SOFR can affect our results of operations and cash flows to the extent we do not have effective interest rate swap arrangements in place. On October 14, 2022, we entered into a five-year interest rate swap transaction with Wells Fargo Bank, N.A. with respect to $25.0 million of notional value of the term loans funded under the MidCap Credit Agreement. The interest rate swap transaction fixes at 4.455% the one-month Term SOFR portion of interest rate under the $25.0 million term loan such that the interest rate on $25.0 million of the term loan will be 10.205% through its maturity. We have no other swap arrangements in place for any other loans under the Midcap Credit Agreement.
Management believes that a reasonable change in raw material prices would not have a material impact on future earnings or cash flows because the Company’s inventory exposure is not material.
We are exposed to increasing Euro currency risk with respect to our manufacturing operations in Ireland. In addition, the contractual transfer price paid by Abbott for commercial units of our SurVeil DCB product is denominated in Euros. In a period where the U.S. dollar is strengthening or weakening relative to the Euro, our revenue and expenses denominated in Euro currency are translated into U.S. dollars at a lower or higher value than they would be in an otherwise constant currency exchange rate environment. All sales transactions are denominated in U.S. dollars or Euros. We generate royalties revenue from the sale of customer products in foreign jurisdictions. Royalties generated in foreign jurisdictions by customers are converted and paid in U.S. dollars per contractual terms. Substantially all of our purchasing transactions are denominated in U.S. dollars or Euros. To date, we have not entered into any foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company’s management, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, referred to collectively herein as the “Certifying Officers,” carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2025. Based on that evaluation, the Company’s Certifying Officers concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) were effective to ensure that information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Certifying Officers, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
See Note 14 Federal Trade Commission Legal Proceedings for information about litigation related to the pending acquisition of the Company by an affiliate of GTCR LLC.
From time to time, the Company has been involved in various legal actions involving its operations, products and technologies, including intellectual property and employment disputes.
Item 1A. Risk Factors
The information presented below updates, and should be read in conjunction with, the risk factors identified in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the Securities and Exchange Commission on November 20, 2024, under Part I, Item 1A, “Risk Factors.” Such risks could affect our financial performance and could cause our actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this Quarterly Report on Form 10-Q. Except as presented below, there were no other significant changes in our risk factors during the quarter ended March 31, 2025.
The completion of the Merger is subject to the resolution of litigation initiated by the U.S. Federal Trade Commission (“FTC”) and a number of closing conditions, many of which are largely outside of the parties’ control, and, if such FTC Litigation is not successfully resolved, and such closing conditions are not satisfied or waived on a timely basis, the Merger Agreement may be terminated and the Merger may not be completed.
On March 6, 2025, the FTC issued an administrative complaint, styled In the Matter of GTCR BC Holdings, LLC and Surmodics, Inc. (the “Administrative Complaint”), seeking to block the Merger and alleging that the Merger if fully consummated, may substantially lessen competition in the purported market for outsourced hydrophilic coatings throughout the country in violation of Section 7 of the Clayton Act, and Section 5 of the Federal Trade Commission Act (the “FTC Act”). On the same day, the FTC filed a parallel complaint in the United States District Court for the Northern District of Illinois (the “Federal Complaint”) seeking a temporary restraining order and a preliminary injunction enjoining the Merger pursuant to Section 13(b) of the FTC Act.
In addition, the Merger is subject to various closing conditions that remain open, including:
The failure to successfully resolve the FTC Litigation, or to satisfy all of the required conditions, could delay the completion of the Merger by a significant period of time or prevent it from closing. Any delay in completing the Merger could cause the parties to not realize some or all of the benefits that are expected to be achieved if the Merger is successfully completed within the expected timeframe. There can be no assurance that the FTC Litigation will be resolved successfully, or that the conditions to the closing of the Merger will be satisfied or waived or that the Merger will be completed within the expected timeframe, or at all.
We have incurred and will continue to incur substantial transaction fees and costs in connection with the Merger that could adversely affect our business and operations if the Merger is not completed.
We have incurred and will incur significant non-recurring transaction fees, which include legal and advisory fees and substantial costs associated with completing the Merger, including costs related to the FTC Litigation and any divestitures required to obtain regulatory approvals, and which could adversely affect our business operations and cash position if the Merger is not completed.
Changing conditions and uncertainty in global markets including the impact of tariffs, sanctions, quotas, import restrictions, and other trade actions may adversely affect our operations and financial results.
A substantial portion of our business is impacted by international trade. Many customers for our performance coating business manufacture their products that utilize our coatings outside the U.S. and then ship those products for distribution within the U.S. and abroad. Other customers manufacture their products that utilize our coatings in the U.S. for domestic and international sale. A significant portion of our sales of In Vitro Diagnostics products are to international customers, including customers in China. In addition, we are the exclusive distributor in the U.S., Canada and Puerto Rico (and non-exclusive distributor in Japan) of the BBI Solutions’ DIARECT™ line of antigens and antibodies, which are imported from Germany. We manufacture medical device products and components at our facility in Ballinasloe, Ireland. Those products and components include (i) vascular intention products that we sell directly to physician in the U.S., and (ii) the balloon catheter component used in our SurVeil™ drug-coated balloons (“DCBs”).
Since February 1, 2025, the Trump administration, through executive order and other executive actions, has threatened, announced, or implemented a broad spectrum of tariffs on goods imported into the U.S. from a wide range of countries. From time to time, various of those tariffs have been paused, suspended, or rescinded. Limited exemptions have been announced to certain recent tariffs, although the scope of any exemption is not always clear. In response, other countries, including notably China, have threatened or imposed tariffs or other trade sanctions on products manufactured in the U.S. The system of U.S. and international tariffs, trade sanctions, quotas, import restrictions, and other trade actions and is fluid and unpredictable.
International trade actions announced, threatened or implemented by the U.S. or other countries, and uncertainty related to such trade actions, could have material adverse impacts on our operations and financial results, including the following, among others:
Given the uncertainty regarding the scope and duration of trade actions by the U.S. and other countries, their potential adverse impact on our operations and financial results is difficult to quantify, but could be material.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table presents the information with respect to purchases made by or on behalf of Surmodics, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of our common stock during the three months ended March 31, 2025.
Total Number of Shares Purchased (1)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Programs
Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs
Period:
January 1 – 31, 2025
25,300,000
February 1 – 28, 2025
445
34.05
March 1 – 31, 2025
The Company has an aggregate of $25.3 million available for future common stock purchases under the current authorizations. The MidCap credit agreement restricts our ability to repurchase our common stock.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the six months ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).
Item 6. Exhibits
EXHIBIT INDEX
Exhibit
Description
2.1
Stock Purchase Agreement, dated January 8, 2016, among Surmodics, Inc. and the shareholders of NorMedix, Inc. and Gregg Sutton as Seller’s Agent — incorporated by reference to Exhibit 2.1 to the Company’s Form Current Report on Form 8-K filed on January 13, 2016.
2.2
Share Purchase Agreement by and among Surmodics, Inc., SurModics MD, LLC, and the shareholders of Vetex Medical Limited named therein dated as of July 2, 2021 — incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated July 2, 2021.
2.3
Put and Call Option Agreement by and among SurModics MD, LLC and the shareholders of Vetex Medical Limited named therein dated as of July 2, 2021 — incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K dated July 2, 2021.
2.4
Merger Agreement, dated as of May 28, 2024, by and among Surmodics, Inc., BCE Parent, LLC and BCE Merger Sub, Inc. — incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K dated May 28, 2024
3.1
Restated Articles of Incorporation, as amended — incorporated by reference to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q filed on July 29, 2016.
3.2
Restated Bylaws of Surmodics, Inc., as amended August 27, 2024 – incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on July 31, 2024.
31.1*
Certification of Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Chief Executive Officer pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Chief Financial Officer pursuant to 18 U.S.C. Sec. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document.
101.SCH*
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104*
Cover page formatted as Inline XBRL and contained in Exhibit 101.
* Filed herewith
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
April 30, 2025
By:
/s/ Timothy J. Arens
Timothy J. Arens
Senior Vice President of Finance and Chief Financial Officer
(duly authorized signatory and principal financial officer)