SRDX - Earnings call transcript Q2 2018

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Operator

Ladies and gentlemen, good day and welcome to the Surmodics Second Quarter Fiscal 2018 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Andy LaFrence, Vice President of Finance and Chief Financial Officer. Please go ahead, sir.

Andrew LaFrence

Thank you, David. to XXXX welcome call. quarter and morning Surmodics' second fiscal earnings Good

actual forward-looking statements or we to Harbor Act results statements, not differ Please this XXXX and developments course make events, risks like of historical disclaims I advised provisions financial call, Surmodics' that future to or and statements These you implied in will forward-looking Before that otherwise. Securities would facts. those are or of any from the our and described of update result or new remind the begin, Surmodics revise resulting Litigation could the covered are information, under that other Private stated SEC those during we be include materially certain results filings. our statements. future Safe our duty regarding forward-looking Reform and uncertainties, forward-looking operating by including from of statements statements

website to we This Maharaj. through conference release the Relations to being of non-GAAP table the Investor results. www.surmodics.com. contains GAAP the over audio our We news of be will our and website, is future to webcast archived measures Surmodics a Today's section I'll provide for also A believe call will where useful recording now call the for investors. because Gary the press refer reconciliation our information results issued at webcast is accessible earlier they on and is available also was reference. turn quarterly disclosing release Gary? this morning

Gary Maharaj

for you Thank and you, Andy. thank morning Good joining.

of top as growth our Surmodics progress to team. product we in we results our We're the and on operational During reflect our strategic made even accomplishments quarter of objectives proud excellent the pipeline. new the invest continue performance and line solid second

and diluted to prior loss to guidance prior negative of guidance per Non-GAAP the with today's $X.XX overview $X.XX $X.XX per loss the share GAAP work. strong call, we to compared share. and $X.XX a to now XX share our as updating the with our expectations of a range negative of and financial earnings $X.XX per $X.XX provide of strategic signing second is results and $XX.X XXXX and million the diluted their revenue performance XX up is In million XX result as diluted transaction, to to considerable negative per loss. towards to improved of Andy Our $X.XX hard be guidance compared share take our range million of also your for an I'll loss on On achievements financial performance share previous fiscal our the provide range revenue in quarter of the call turn our our of of updates the then talents we're generated of of review the from XXXX in negative fiscal objectives $X.XX million questions. second to XX the and quarterly we've guidance. our We'll quarter over expected a Based million. Abbott strong then and I'll range progress per detailed more to open $X.XX to and call

may rights you commercialization drug-coated for with worldwide our announced the for As exclusive balloon. February, agreement in we recall Abbott an SurVeil late

our and Abbott below-the-knee approvals the will to we with of Fistula States supply marking development, in agreements obtain activities development. for As collaborate which products, balloon and product drug- Abbott Separately, received pre-clinical on options part regulatory the agreement, to and are balloon AV United drug-coated Europe. trials SurVeil currently coated Abbott negotiate to also the in clinical

as important, parties. post upon potential additional US realize third product certain long a million milestones pre-commercialization and revenue Abbott's sales commercialization to the at cash on resulting and base initial successful Surmodics an approvals, receive to may lead a Abbott from of particular, this Abbott. of million as to $XX initial flows regulatory clinical sales that will part more payment strategic of As relationship with received the for well $XX term an In collaboration completion share Surmodics from and profits of European

We will drug-coated transaction. with towards continue Abbott development balloon the the a and to prioritize ongoing view and of support the meeting with of requirements SurVeil partnership

unique drug tissue is durable includes which As generation formulation drug-coated three built manufactured quite balloon and leadership drug in a a using more a technology effect devices. improve reminder next coating downstream that have shown evenly the uniformity. for to compared surface of proprietary reflects design the and times higher for the concentration, SurVeil Preclinical drug-excipient an to drug-coated balloons. SurVeil balloon industry target of low of as medical on process development The a muscular incidence to is data distributed technology particulates our a five drug durable drug-coated generation earlier

and We worldwide their partnership are marketing and with their excited the deep vascular given sales products in expertise care strength. Abbott

we have to with team and on for ongoing going two is months, past begun exceptionally the During collaborate partnership well. the SurVeil development Abbott the

the year. we I'll beginning outlined three strategic the objectives turn that to at Now, of the

finalize XXXX by these a the at our rigorous least potential in the trial for with below-the-knee pivotal securing third And new TRANSCEND regulatory high reminder, quarter. products it delineate to trial, TRANSCEND trial a advance file manner R&D the of product for through the further efficient quality execute and in whole As progressed products. AV strategy solutions four partners clearances Fistula distribution use to Starting SurVeil, for our to drug-coated fiscal our and commercialization balloon. are our proprietary nicely pipeline human with for first

end all fiscal to by of up and the sites running clinical We XXXX. have US expect

a getting and result. is currently patient are We up running enrollment actively as progressing sites and

upper the XX the leg Europe. in reminder As treatment the States study artery generation DCB trial for next at the sites will agencies the sites Level expected randomized submissions Admiral patients a with trial XXX to approximately In.Pact TRANSCEND compared to balloon. X evaluate SurVeil is for that compare and we our have is drug-coated regulatory the one Europe peripheral process of in XX United drug-coated in available. Mark. enroll In The CE up to This Medtronic's clinical first commercially of to balloon disease a to formal is started amongst

our However, initial we the to obtain timing from feedback will into how the as on and both especially assumptions move the regulations Europe throughout the European the these depend year. in evolving in taking filings We US and and look account further we progress new Union.

in We goal in programs of other continue one least well balloon as feasibility XXXX. to programs these the our an early drug-coated advance study of at with commencing fiscal

We progress platform work to through package, data will studies preclinical DCB we'll used and making with AV We clinical the human and to Fistula remain this make on balloon. below-the-knee track data other in made sirolimus-based expect first progress continue with progress to and the drug-coated through continued are developing our also that our program We've for readiness XXXX. determine all be remainder trial. fiscal things the analysis

in the to sets to discussed year. the moving technology Fistula and for fiscal we of of major their will believe As maintenance feasibility preclinical further access We're forward data patency, care. developing to dialysis can frustrations cost are later have and the previously these add patients which address and this renal dramatically program we accelerate determine that undergoing

The coating a support a the develop of clinician use the but microcatheter's FDA diameter interventional together fiscal deliverability, It penetration kink continue and The high second gain extremely of our in is turning focus complex that with microcatheter performance X.X from ranging for our cross months. well microcatheter coating the will quite profile clinician has pipeline, performance Pristyne clearance date, received resistant its to procedures with to has assess in our Surmodics in feedback tough clinical and lubricity calcified quarter offers as to to from delivery for you French composite XXXX. Surmodics's coming lesion continue hydrophilic Early R&D Now This performed lesions. Telemark lesions. non-drug effective positive. peripheral X.X provide support combines Pristyne in coronary Telemark hydrophilic class we actual excellent feedback valuable experience a recall extreme particulates tapered of low crossing. ability to quite microcatheter technology and exceptional and Telemark unmatched shaft to best has

received in Mark .XXX” hydrophilic our catheter, late FDA for for balloon which incorporates in recall we below-theknee Serene angioplasty. CE both use you As clearance coating and also XXXX,

parties. Our strategic .XXX” and PTA catheter balloon Surmodics is undergoing interested evaluation both clinical by

We're quarter been collecting During be the from part and clinical with to we the impressed quite his catheter are of encouraging. continuing target with feedback experience XXXX. and device to initial have balloon this pleased the late user have in product clinicians fiscal from quite revenue generated began initial been the evaluations, the comments and with these

our need incorporates smooth leveraging ultra peripheral received minimally we tool our most using offer Both developing coating catheters coatings to peripheral measurable ensure the which our our crossing entry highly catheters announced invasive balloon with low of particulates. make PTA that our by for treatment FDA for give balloon recently headway these effective superior advanced and deliverable generation exceptional performance. in and to chemistry. that peripheral processes and confident balloon accessing in focus advanced and continue clinicians crossing transition .XXX” our devices complex low next XXX(k) PTA growing We low catheter, combined hydrophilic Serene tip we're artery an These again of for and friction advanced profile hydrophilic. unmatched will disease .XXX” the an lesions. with .XXX” for We versions clearance catheters improve products Again, profiles, new lesion address on crossing demonstrate to products deliverability

for closer to key programs disease. are and regulatory targeting highly a and and relationships discuss time to work at innovator with line customer these performance medical get achievements with here become assets strategic regulatory Surmodics, innovations ongoing and We'll Looking to coupled future development It's device device we to medical as on product top operational combining we solutions to calls are We're vascular in calendar clinical continue technology the ahead, we encouraged our in next of R&D for regulatory their and deliver which our we track XXXX. filings. leading innovative them wave by product our filings progress. in our by enduring exciting XXXX an clearance

call Our calendar by EBITDA margins of long on as term at generating the details turn results fiscal now our we digit of outlook XXXX the Andy second believe goals to through the sites more XXXX. I'll growth give well our our double above top and XXXX generating and as in to over quarter end by attainable. fiscal line fiscal Andy? XXXX or of quite remainder XX%

Andrew LaFrence

you, Gary. Thank

the in We million an second the comparable income in operating quarterly a report quarter. quarter and of whole-product quarter by in well On diluted $X.X tax of fiscal development XXXX. are products, solutions fiscal $X.XX versus totaled compared general fiscal income fiscal that offset was $XX.X announced previously as The per a other of support $X.XX the was in the prior prior Company's On compared second reflects revenue with strategy, We as partially five in in million share in $X.X revenue, expenses. of share the $XX.X as of the of pleased as proprietary delivered as basis with second investments and administrative second and million share favorable the XXXX for including research the basis compared quarter expenses year. quarter gains to quarter earnings the quarter to SurVeil quarter. of increased XXXX DCB last quarter non-GAAP selling, in our in income operating income benefit per with a share increased GAAP year current and current the consideration increase earnings per per in second increased $X.XX $X.XX contingent million XXXX

units, our an of device business period. to as the million, compared XX.X ago Medical of reported now increase Turning with two $XX.X year million revenue

totaled medical specific of generated contingent second the due license current revenue $X.X as the the coatings income strength with device second The quarter increasing fee compared and the in prior of versus unit quarter comparable quarter revenue quarter. of operating fee revenue announced income to and Reduction million royalties fiscal operating the in prior income This increased the the research decreased the quarter. at royalty XXXX. year million second $X.X within license increase areas in $X.X from million operating million in solution Products in Looking as of R&D Abbott quarter development sales. increased income consideration $X.X by in gain. customer from related Medical was increased our offset change from million reflects device prior device, $X million million, $X.X from $X.X device investments, fee costs, customer and and recently million Medical million revenue royalty quarter Medical hydrophilic million $X.X our accrual relationship. the which impacted benefits $X.X comparable license our claim sales whole strategy by of and $X.X as recognized were well product partially transaction Abbott

the product second in prior Substrates benefited operating reduced income improved strong of for of a were in year quarter of Slides. XX.X% to and For was products as Operating up of X.X%. favorable from infrastructure favorable with as million increased in the and BioFX results, compared volumes, scrap with our growth XXXX second The gross gross XX.X% second anticipation the the quarter which sales vitro margins in with the current comparable prior in margin growth. product scale Irish of diagnostic associated XXXX sales medical totaled future fiscal IVD our in versus revenue, quarter $X Product prior product gross and $X.X second quarter quarter gross current combination the of XX.X% Microarray compared compared consists lower year year IVD with in as revenue higher in offset from in as a rates period segment, XXXX. $X.X quarter. current which to device by $X.X quarter more percentage period, due margins more facility reflects of of revenue million million XX.X% IVD than margins fiscal aforementioned quarter an the mix. increase million a margins year cost the a comparable year were

revenue of of XXXX. R&D the quarter XX.X% second R&D was XXXX the period. for up expense X.X in year of million current were fiscal second $XX.X percent expenses ago quarter versus a XX.X% million fiscal from $ As the comparable quarter

investments we we Further noted, accelerate the As support meet drug-coated trials. we anticipate our the and transaction. strategy will our SurVeil before, the balloon including development continue ongoing clinical product stated R&D as solutions of to whole SurVeil DCB advancing XXXX increase expense prioritize fiscal we as will requirements human have of to Gary the Abbott in

expenses $X in fiscal period. XX% versus a due claim range second XX.X% expenses in basis R&D revenue XXXX a forecasts expenses of SG&A quarter fiscal in of dollar to our in XXXX continue in year the to SG&A were the We the of XXX% On XX% revenue. of second the ago. SG&A a accrual of with year their to totaled million accurate X.X million XXXX with $X.X The customer reflects fiscal realities of royalty in quarter expenses million as the compared increase of overpaid in connection reporting. prior

with the based in associated include of Abbott quarter expenses quarter stock compared SG&A same second for Additionally $X.X as fiscal million quarter. $X.X the million expenses with and costs current XXXX increased compensation transaction the the

foreign to US acquisition. our as During $X.X with to related euro, a dollar the the continued Creagh quarter obligation we of on continued million Medical as year weaken realized result loss consideration denominated exchange the compared

of the million. from moving contingent XXXX expense range model $X.X tax operating pieces a gains, for the currency and may to the the as year million $X..X Ireland. tax benefited quarter as to guidance fiscal our tax expected $X.X be are the impact for income million losses We in quarter. record on benefit income non-tax and reform fiscal accretion, periods obligations second marked compared achievement consideration expense given reflect items, tax an realized the based therefore income in of foreign tax of that to value and of of dollar of We million also our XXXX income We and difficult gain the fiscal milestones. million XXXX with $X.X amortization, in it contingent from fair Both we benefit $X provision providing we impact consideration prior losses recorded non-tax

balance Looking at in six million quarter to sheet, million cash operating strong, cash and XXXX. investments, continues generated activities from We totaled be $XX.X our which the $XX.X of fiscal months at end. first of

We Abbott invested fiscal and during operating in investment cash months license the XXXX. equipment Our dollars positively flows and first payment. six were $XX and million the by balances impacted $X plant of million cash

$XX in We million and XXXX. invest fiscal equipment expect to approximately plant in

provide operating capacity flows and and to growth our adequate support corporate cash cash strategic current investment initiatives. Our balances

performance a to and fiscal result and guidance. of Abbott months the transaction, our six the fiscal impact earnings XXXX revenue of of As first revenue in the we have XXXX reflect performance increased

$XX up XXXX to the million, $XX million fiscal expect We from to revenue range previous to million expectations $XX in from of million. $XX the range

$X.XX earnings with per $X.XX expect Non-GAAP the $X.XX prior to of range I our is Surmodics of team share outstanding per share of hard diluted in between share. to per $X.XX share per $X.XX share share open are We the of of fiscal in of and guidance as second per and loss to the to with you remarks the compared concludes $X.XX $X.XX pleased to per results. our share. quarter. prepared prior your call questions. loss now as compared a a loss performance diluted guidance now we'd Gary of earnings of Thank like and the this the per Operator, loss entire to range with earnings guidance for $X.XX work to

Operator

Mattson Thank questions. this and first question you. Company. Instructions] from with for open & Mike comes Our your Ladies gentlemen floor the time Needham is [Operator at

Mike Matson

guess us deal. start wondering of Hi, to financial with Abbott the any taking into just I the could questions. I thanks our the for give wanted additional if was deal. aspects I insight you

this to company? profit to us outlook can going initial some through sharing, You the because growth balloons mentioned you supply paid you're for just the of critical is this the but Thanks. walk for get and there's pretty

Andrew LaFrence

What accounting note of might achieve current you we revenue one with to current that additional we can complete those, And XXXX. revenue anticipate, Related Abbott the from to $XX of we the $XX $XX look a been second about which milestones. as Mike, the is next contract up is million sure million that in income X, through our are the as number orders our $XX working fiscal recognizing us. are which the at recorded, quarter XXXX, expect the any for income XXXX of in the fiscal years quarter revenue transaction. current dollars carrying but generated There those milestones time recognize that long for different to Obviously next suggest beginning milestones October make million we of about incur that we we costs our have the months deliverable on are if - balance over working the a the for the so XX and sheet started those tell several the in will that's so we other XXXX are as we we questions. as have a you'll anticipate to is you of earning that $XX that thank you we between recall recording of meeting first of we would upfront for classed that and first deferred how we million estimates over dot period. term, of our changes the from the and be that is now this being you stacked $XX streams payment, team focused through milestones - period is million million revenue

Gary Maharaj

and towards that right milestones. based our further go to to allocation the the capital resources within of view, from we've there, really something those I gone investment scrubbed clearly allocating get given we the want point actually Yeah, milestones shareholder we shareholders said a for and are to revenues right because our ensure that emphasize XX, just want that of Andy through and Surmodics the

regulatory clinical and disclosed imagine with US the haven't actual can European nature, you the clinical progress, they performance on deal While detailed approvals. we and

that as bracket a paid US, be look PMA are those, the to buckets it over sort period those upon little of in you up the and which approval helps, a time of So so at leading those things will hope of more. the

Andrew LaFrence

in price both stream the balloons believe a the components will earning as that And, split. either is this we Abbott as receive plus be Ireland remarks the to manufactured the recognize providing dependent year partner and fiscal part we will we XXXX that you US. is balloons and launch and transfer based then value we truly profit manufacturing then from not there regarding Gary upon received up. to Again to answer the to of from we we're not But we in authorities are at manufacturer US in what have prepared our can earnings sharing they those we've the them. the tell looking is noted that the the feedback upon the the disclosed his we start we later expected that are are that that's on two that - and And from cost regulatory XXXX and in that a what latter well a revenues in path partnership, the I have still

Mike Matson

so from stand or? some the transfer be then and reselling Okay, just And the you'll you get at that recorded be from as to clear, sharing that some I as point get launched, Abbott very thanks, accounting that price, be will sharing. also of will you to revenue balloon guess well an get profit sort once was revenue is profit - Will helpful. you'll

Andrew LaFrence

profit we'll I in then will likely the royalty part so be think will license and correct, recording most our and line. sales product be revenue sharing the of be fee That's line recorded recorded also

Mike Matson

well agreement? Okay, and that to clinical you mean few but got thanks. of of terms another a for an it have so your in some in feedback your to are mentioned sounds proceed Alright with But little being and or I I consistent you continue of using then bit does win you do it's more as months, it you plan received, is it Telemark, you trials. signed comments that like made delayed guess that on mean to that also kind some going some kind

Gary Maharaj

got launch am believe their and they they here. that in mid-summer trying my but force. the be, memory January look I actually it I one of when Caravel, until - No, product it's clearance I 'XX June. to didn't they sales or didn't may the and I it's ASAHI devices their actually with at of consistent, check think But

so is get the typical that not in clearances these as when a - meaning, manufacturing well. of not can feedback, clinical you and that readiness, products turn switch make fact X,XXX also typically And of getting getting and you - it's them

So we're in strategic deal. making breathing sure and this machines then sheet it, we believe believe we that can those that within the and actually we'll are shareholders they and automated helping believe helps the actually I and over better clinicians then cat with tool all of then helps excited the interim, But the our the If our then spec feedback the we get a so in certain be hands here, deal it. the very lesions clinical out case of the key that things is we The to the about lead lab, strategic data. because deal read make part have while with opinion in and tough call who of may it's a hands us with better actually leaders. them in shouldering interesting

So demonstrate the deal early we with let's of - the exaggerate make that later signing patient to need value point, right that to instead being the to the very are sign product. we deal data a in

Mike Matson

to should a within products XXX just to template to or other just is kind guess? situation somewhat Okay, the it a I mean just the you market unique to and you can mainly of then of they these any kind potential the of forth. be alright, kind transfer sense. going the and are (k) this supply expect price follow - SurVeil other then mean kind at Telemark is distribution some And products. I with of just agreements so potential - SurVeil - payments I or it that regard deal cash and given Abbott with opportunities these we some for product going words of In purchase get makes

Andrew LaFrence

product, of millions. a terms tens our But because the the a comment in high partners. wouldn't the investment SurVeil in very on of mind just forms it's with in of PME deal negotiating I Well, keep is strategic so

in in these investments XXX deals are magnitude developing. nature (k) less as so of trivial an probably well. are these the not the And required and order we regulatory is of than form different in But products But, SurVeil. be clearly clearances will magnitude the

Mike Matson

Okay, it's great.

Andrew LaFrence

go sorry ahead, Go ahead.

Mike Matson

that's saying continue was question, want No, my no last I if add but to it's to something you just fine.

Andrew LaFrence

a change. with partners we in the regulatory - products do part so will applications of ours want clearly will are that partnership be not products putting Well strategic and our part bags we so helping consistent. strategic, that deal filings Surmodics's of - These our and the it their like and that

Mike Matson

a it. thanks appreciate lot, Alright,

Andrew LaFrence

Mike. Thanks

Operator

Our & next question comes from Jim Sidoti Sidoti with Company.

James Sidoti

can Good you me? hear morning,

Andrew LaFrence

Hi, Jim.

James Sidoti

March. Is million correct? what up said quarter ended Hi, in believe that that just clear Andy, X.X recognized revenue can recognizing in you about you the from I Abbott. you the you said

Andrew LaFrence

that, we'll between That be year over period now will over associated with a revenue And trial XXXX. the those have of of but post And including the costs couple clearance period. all that that clinical Jim. we be - correct, the majority still and recognizing behind the revenue is contra tail

James Sidoti

would Okay, then assume month we in in revenue, X.X the million, per near a one that for which to million million term deal you place, work you XX revenue, you the so so had you million more quarter? X recognized have deferred deferred should out also like quarter. in X.X Because said

Andrew LaFrence

revenue with at Abbott. million And would Yeah, XXXX of we guidance million $X XXXX. be for then associated I have think fiscal $X fiscal looking Jim, the to remainder we are the with

James Sidoti

So that's X million to X million per quarter?

Andrew LaFrence

No, X fiscal for million X total to in XXXX. million

James Sidoti

And fiscal for that's fiscal million X remaining for 'XX. to portion million X XXXX. the Okay, of

Andrew LaFrence

that clinical European from trial it you estimate that range. current and because so will be on in tell that that change, falling estimate regulators will but back our there, until I That's to costs correct associated the $X dependent million the we hear with that is not is our million may upon $X

James Sidoti

Okay, full it because be would worth for fiscal of revenue? double year you'd have then that, assume should the and we the 'XX,

Andrew LaFrence

is and revenue year the have and we that at half then fiscal this classification current couldn't latter in three through 'XX of not half to more obviously arrangement, associated half the of that of of Well, recognized $X given on have further the the component in with first we will balance we is anticipate that that March given if to up add - we first four million have XX guidance sheet we revenue the are of providing but that fact remaining in our million be point. could this it we 'XX have XX, 'XX

James Sidoti

then that Okay, the a year now royalty no up number your X.X revenue royalty that longer you even the assume rate we from million quarter and bulk the a recognized was ago. headwind? declined, of Should in that's of anniversary the alright Abbott, and without from that

Andrew LaFrence

Yeah, $X you half about million thirds is in mid as $X.X two the $X.X royalty what we of - the that December more expected million million about now are of talked about and of headwind. actually to that $X.X back in first would to in And at looking be million headwind the the royalty we year.

seen think I our from position I performance think - and some the of financial statements rate royalty less it's in us. of strong FX to many the for line. customers So out terms performance in I you a in for where related and been getting or their there's tell we've there uptick also we that would seen the we've are less to material

that factors driven to been performance. high have recordings number have of there better a So

of be in to for but again you be start X look million, at to So revenue million year. second to this as X.X the expect half headwind to there we year, headwind the diminished wouldn't we the expect

James Sidoti

that of the milestone? your is because one Okay to hit the quarter failed income consideration recognized, and contingent you then in acquisitions the

Andrew LaFrence

consideration Well we evaluate every the quarter. milestones contingent

the in different seen associated focused we of with had revenue it's so gains operationally mostly there's you've our also focused. past a - those are that So that, number are and milestones

as in the milestones, So the change revenues And as looked why achieved, the of probabilities future change. those as that's the those we with transaction. had milestones we we indeed we well consideration one we believe the reasons calibrate as contingent they transactions embedded can associated that at

both well strategy acquisitions in were we strategy to executing that contribute good generated that combination two focused milestones those these had. are that do and a the what very together. revenues is of So that on and what acquisitions those from businesses whole feel really that as I would our tell being as the product you businesses products in they And new historical about integration legacy in we and solution

James Sidoti

just so you've Okay, acquisitions recognized revenue? assume negative those because we about anything shouldn't its

Andrew LaFrence

is would anticipate the that That gain. would if for approximately we about $XXX of think we full worth and million you have year, correct

but year right in We for accretion a total half it year, the will be of terms of have second somewhere should of the the modeling $X around fiscal in expense gain million.

James Sidoti

tell contingent and just you income can in that can or the the us was or benefit reform that tax the related to Okay, consideration quarter to is then that related what tax be?

Andrew LaFrence

Yeah do Jim, so on that to projection the where has at. of are income what pieces are many really there is with we moving and the and it

why just things were very it's you position really we that's forth and the still X go of because start entire getting whether the at got half carry can and to quarter. profits you thinking in gave in and back we a call of end close kind As the a number neutral an EBITDA we complex see of the have year, bags and million, for to to million year about we the–

on just moving would focus again numbers because total I of is So, lot there pieces there. a the

James Sidoti

I around Okay, cash believe correct? balance and XX now that then last thing, is is the million

Andrew LaFrence

correct. is That

James Sidoti

back buy shares? to plans Any

Andrew LaFrence

attention Abbott facility; adequate our and about this meet million the first to the foremost If the obligations the We've making that equipment, year we to is sure where first are moving of invest that's completing then $XX proper few CapEx about and and includes capital we ago, under given solutions out. plant allocation, our make a transaction. premises got we minutes as are a strategy And we've sure attention. think that focus on also Gary and have we mentioned talked product and former ones facility is to leased our our whole primary

where our eventually product capital delivery will complex we of be. new We are development are are whole technology with a to moving that facility solutions, in drug and

a hydrophilic be facility. coatings will separate that and So IVD from facility

would our I capital say allocation. really component is second that So

opportunities be focused development any Jim on - excuse out there. then component business third me Our or incremental products would R&D

the Ireland We continue it products to facility that on new for can we looking put develop. focus in or to either that new continue in products to

would our and will our So last say in this development be business not would fourth I I do third. at radar And repurchases, time. which be share on have the point

XX.X looking we think our million, are XX.X repurchases So which contemplate does million in or about shares. not of the somewhere added at if for like year you shares

James Sidoti

cash; a your lot you Gary. of keep that's eye better on, Alright,

Andrew LaFrence

We each an other. keep on eye

James Sidoti

you. Thank

Andrew LaFrence

Jim. Thanks

Operator

O'Neil comes Markets. Capital question with Brooks next Lake from Street Our

Brooks O'Neil

Abbott your what little I morning, was involvement Good they might Is development of elaborate view you from it just are you a in from doing? kind just have you seen the and significant or monitoring involvement on them product in level hoping testing. of guys bit

Gary Maharaj

operating I've hits of collaborative you post level the of I've level than to the in am really and suggestions –one high tell has many me us it's guide clinical's been helping And, very been it deal things issues. more like giving their through mark pathways. very the and with fairly and the of of terms some appropriate impressed and run They'll the regulatory impressed clinical I knowledge. I'll committees their so hope involvement. team for first many, Abbott, been us is, here of sharing on knowledge we the all it in been complex of that the the dealing with

it's answer been it, and actually short collaborative my I I'm what hoped not for, So a about gushing environment. very

Brooks O'Neil

involvement, about their with your you've the any what's any just reaction sounds Gary talk going existing out products there customers could other deal seen and related bit small a you That from products on of with etcetera? to good, big little Abbott, also

Gary Maharaj

is so I I not have in much our you Yeah, of we heard it. customers, team didn't was think probably we This - I we had SurVeil of - legacy what our are All doing. any more see dilutes and well for come now our serve business development opportunity deal. a that. them will negotiate businesses reaction to that towards that my that hope - anyone the had

I like and I'll haven't so back over you. it people turn don't any wasn't out it to I blow and kept of it Andy, So think we

Andrew LaFrence

hydrophilic Brooks example I'll for a normal you be cadence Yeah license what cadence. the tell coatings business that of, in on seen continues is to new

that we in away things two. And any the believe is controls make would no to we appropriate is, have We of signals so that place us about hydrophilic any coatings. there cause clearly external strongly talked between are contamination business concern the of we physical and sure not from that cross the think separation I one doing the there's

out significant So think are sure there. I of we issues are there customers that no

Gary Maharaj

has acquire. Yeah, a they and that high really having anything, Abbott on for and look if standards products at reputation

technology So credentialized, is further Surmodics partners. if our strategic anything to content

if the .XXX” balloons, they like - sudden. - I have even the at look of Surmodics all if anything it's where partners our think you like things not Telemark of So a the offerings or premium X.XX” it out did the these and come weeds strategic

longer a technologies customers think take I we offering. to it's to the at for deeper look our actually more alluded are

positive anything. been I So think if it's

Brooks O'Neil

those their They interested in the and It's products. at genuinely real as the BTK Fistula great, pretty AV seem well. in about would you comment all interest

Gary Maharaj

I from portfolio, to they the strategic you these cost you but program. I a powerful landscape and AV patients. can't can and Fistulas the think or yes Yes, remarkably we imagine inconvenience and have know portfolio, of the you good big all problem place interventional speak the for favor reserve up how blow start a are - still an And issues vascular the if and a the medicine below-the-knees is with unsolved superficial

they and still their would portfolio time if they interests the see that love is in negotiate these their see is So data surprising. they interest products, think From data see I view like first. at to opportunity that's not their to the clinical point data, and they'd earlier clinical

So very line those that gave strategic, given that products in on two we interesting with to had clearly was but we partnership thought the appropriate first SurVeil. are and many Abbott we

Brooks O'Neil

smaller of products, lot you sense. makes I'm interested mind but don't that think expect interest seeing products the the that of curious is comment your the guessing about you're strategic partners level in you could I Last identify those we're and true? thing you Abbott expected just finding XXX whether as the True, in in products obviously you for about, people talking (k) I'm about beyond distribution

Gary Maharaj

.XXX”, and Abbott .XXX”, best the world's interested. do these as consider these I category this them especially balloons think can would - - beyond is companies extreme balloons this certainly .XXX”, may on be Yes, you who well, not fill , a we the above Telemark the bias and I see products different but excluding the strategic and - with products, I Abbott, gaps coating microcatheter But are in .XXX” a gaps, also new the cut clearly Pristyne portfolio. almost and fill the technology. where it These

not the be not if a are better perform have as than balloon but you hands if So a want good product might in product be that, as a what's only it's or reasonably you so and a at question may harder, balloon strategic so you if strategic sucks, need .XXX” you performance, balloon ours of .XXX” and .XXX” doesn't that in even incrementally more clinician, .XXX” it ours the of way. though But, the the gap might it's just either doesn't look your to have are put much. let's that balloon well, longer a

hard You may take want a that. at long to look

given the So, quite performance strategic product who's is important, coming and has but to gaps important strategic is fit the the actually table.

Brooks O'Neil

money to money, hope you'll make forward I and say, That I'm are job looking to a I would doing me, the spend spending great all I you sense of the continue to future. guys just the think

Gary Maharaj

Appreciate Brooks. you thank comment. you, the thank Well,

Operator

next Our with Research. Petusky Barrington comes Mike question from

Michael Petusky

morning good Hey guys.

Gary Maharaj

Good morning Mike.

Michael Petusky

guys. morning good Hey,

Andrew LaFrence

Good Mike. morning,

Michael Petusky

on all the Congratulations progress.

to have of or I timeline how success of upside you in terms that the of Does how of look terms and invest below-the-knee are So going any move the any how AV initiatives, in into matter I on going might and back those of you of Abbott's determine that you kind guess. indicated Fistula, we potential guys forward? each in giving efforts, are account we guess - view on any to just those in taking the data is you ahead feedback past, or those you taking are does they the

Gary Maharaj

from for eyes the now speak and like and right detail CE for the focus great partnership speaking on enrollment, in the all SurVeil view view. Mark really I the the are partnership now say that's point TRANSCEND their the any prime I'll But can't on things partnership.

interest. think of early type I for them be clinical through working we'll those to terms we be maximize what data as stages, the in with clearly will of move them important

want I human wanted match trial to in secondary Surmodics with what to - points up do wouldn't over what So and they see. on don't go first and see end is, independently their

in really that terms that So I to with that's clearly preclinical a the the later. portfolio day because at work run first decision that's the not through, set, we partners the of them demonstrate will partnership to strategic we'll human in strategy really share to and to ours data regulatory think Abbott in together but compelling interested able that that all of the data end potentially want be them has on of and they're the

Michael Petusky

clearance you really of I'm XXX I would of mean some question helpful. correct And this this, view? you be said but when on think partnerships for partnership, wrong to that If XX I free you regulatory timeframe feel put level to a to (k) generally around products I over be jumping still and six is that maybe after struck. your timeline struck, sort me, of the that's think partnerships previously to reasonable then months Yeah, just maybe

Gary Maharaj

view. our that's so Yes,

Our that. about say more is XXX R&D of seeing wouldn't XXX to product would probably get would clinical team minimum uses a feedback. and of I want I me me you appreciate better, but say the uses. to for marketing But

there's what if hearing a good, stable You've any database the - you're bad and right. call of I ugly, the got

far design, ugly - able by important product clearly demonstrate there's then want So any so we way. those the to for no be the address if to us we we improve to issue but it's But either ugly, to these be own their in in know it. they doctors who'll with are where we're will - of lab the strategies analysis, the cat using mind be doing and the some strategics independent doing not keep that

given the what we painfully - or might and that hope the three the and investors our believe be it's in want other, XXX our I to similar deal and kind and able be the be don't long this to went patients want patient so the we covering customers it to quarters get say to all develop patient I but one's patients so say (k) to but vein it run in to with wait a to point. deal the nature it thinking. it I through So want Abbott that is for of for In product, [ph] exclusively a good will four that's deals for the be same the to of worth genre of

Michael Petusky

Okay, alright, great.

you'd the So and you the but of from up by running I I up fiscal call. US sites of that 'XX, in not but give distracted guys and running of you number this the clinical mentioned you? could that have missed heard may Did guys end momentarily and how say close, are I terms or or I any many patient if now enrollment. you did hear have

Gary Maharaj

running. rest I up up tell probably are we track team data. hope preclinical so - No, enrollment not the even even sites but and in on running, half will you, it's the mad will saying have to typically typically to this, the give we and history be at of me we're get and

year, a the so have very nice Germany enrollment, and and of the fiscal by I'll also in end majority fiscal US and sites lot get little track. specific it I our longer investigators in wait. think you get regulatory they're the what's so selected sites of Europe, I of up sites we said excited I in in - Charring country usually we've at the take quite there running, the with week in to to the tell worth a team but approvals hope by you European to going the end up London and and the the are were sites the Cross But get sites, with sites on do takes clinical German to so those those last was longer. - may running also bit the clearly year, time

site struck business actually and side example, what untrivial what trivial, is up they're because budgeting think me me is, is. and utilities the an is it's I contracting, struck contractor every they're internally how of we've getting hiring up running stashed site that the not as of

happy. we're that So progress I'll the that year. fiscal with we end hit pleased the of If be by

Michael Petusky

get on open I which come some everything is this of details up going in you just then really to or last cost this I model give mean probably are you of can plus Okay, - we're and so as But detail sort more the that understand in the around investors terms of of we're of out. analysts say, opposed is I a think of is clearances terms this. terms there okay, point helpful you've not you in number of partnership detail - and a say, given what guys this in or at or give interested the timeframe where kind going kind want around these And one, of you've a and given is great. okay, Abbott, you regulatory this to there some milestones sort of agreement. they we're

Gary Maharaj

point. as under think can so and still revenue. to lumpy you be starting issue that. of standards that straight Andy What it's I captured US complicated will that explaining these we pathway that's in because of million (k) the be, approval at being might think all amounts, how to so is of of we is, US I contemplate seeing revenue about the The line a things, recognition not and recognition and that the the me about say about than milestones one by bucket, the you be think or can those how whether XX of you incorporate speak that on basis different what about at those if Right, of is revenue critical, will if but some type little think can should activities. if terms can't be SurVeil look XX a October that you a of think you're the of also that more two conditions you to CE you achieving Mark, if recognize getting enrollment broad new XXXX of that million we of X But according approval, then

Andrew LaFrence

the of color go have on we cannot if that and milestones four through talked is reversed. in that. get And you four when to the of or is perspectives of actually is around judgments bit threshold to to concept big our has while in next things past analysis revenue accounting on like. the different right a about Gary the generally could be of enrollment we milestones little also do milestones Nabulus point talked related of big and be the that one advisors. development in approvals then firms these achievement with to That revenue external that Mike two are here the some talking have recognizing like think as I a that month The to start in And we get and concurrence terms reversal in you order that revenue meet as all their to

we've for and million tell will filled So those to opaque you just approval we'll to through majority to make allocate including don't can about, the of all we're need the that actions this but the lines quarter taken period $XX get and the we've we milestones we that positions. that trying that XX what is that here the to I received upon be capital that sure recognized we've know, that do FDA based anticipate those be probably swim during

in in end, So shareholder which point it's near the is sales an of splits. it both get just going to view earn very the milestones and to we're revenue excited our not is which then our part term as value the we opportunity product about, an be important but back and the to profit

Michael Petusky

good, Very thanks Really appreciate guys. alright. it. Okay,

Andrew LaFrence

Thanks Mike.

Operator

time no we back I'd questions. to further have management like comments. turn for this to it closing At

Gary Maharaj

progress your all whole results pleased you forward strategy solution look to on for enjoyed them. you on our call. earnings we We're Thanks with third everyone. and thank and answering questions. our We quarter our product speaking with of quarter second Well,

Operator

and Ladies concludes morning's this presentation. that gentlemen

thank for us phone your lines morning. disconnect and you may joining You this

Surmodics (SRDX) 2 May 182018 Q2 Earnings call transcript