Here's Why You Should Add Surmodics to Your Portfolio Now

Surmodics, Inc. SRDX is gaining on regulatory clearances and acquisitions. Consistent R&D efforts have also been contributing to growth.

The company, with a market capitalization of $526.8 million, is a leading provider of medical device and In Vitro Diagnostics (IVD) technologies to the healthcare industry. The company’s earnings are expected to improve 10% over the next five years. Also, this Zacks Rank #2 (Buy) company has a trailing four-quarter earnings surprise of 140.6%, on average.

In the past six months, the stock has gained 74.7% compared with the 34.1% growth of its industry.

Let’s delve deeper into the factors working in favor of the company.

Consistent Efforts to Boost R&D: Surmodics’ solid efforts to improve R&D have been a key growth driver. Its whole product solutions pipeline and Sirolimus-based below-the-knee DCB program deserve a mention here. The company continues to make significant progress when it comes to its other radial access therapeutic devices, including the 0.18 transradial PTA balloon catheter.

With respect to its Avess DCB, as announced earlier, the company completed data collection in its first in-human study in the fiscal third quarter. These results provide important safety data on Avess and directional data on the efficiency of the device.

Regulatory Approvals: During first-quarter fiscal 2020, the company’s Sirolimus-coated balloon, Sundance, was granted breakthrough device designation by the FDA. The company’s radial artery access and thrombectomy platforms have also been showing good progress. With regard to Sundance sirolimus-coated balloon for below-the-knee disease, the company has successfully begun the first in-human trial, called SWING, in the fiscal third quarter and anticipates to complete enrollment in this trial in the second half of fiscal 2021 (with the exception of any unexpected delays caused by COVID-19).

Notably, the company has an active submission for the 510(k) FDA clearance. Moreover, the company continues to actively respond to the requirements from the agency and targets regulatory clearance for POUNCE in fiscal 2020.

In June 2020, the company attained a CE Mark Certification in the European Union for its SurVeil DCB.

In August, management announced that the company received the FDA 510(k) clearance for its Sublime Radial Access 0.014 Rapid Exchange (RX) Percutaneous Transluminal Angioplasty (PTA) Dilatation Catheter. Looking forward, it is preparing to bring both the Sublime radial 0.014" catheter and the guide sheath to healthcare settings for clinical evaluations in fiscal 2021.

Acquisitions and Partnerships: Surmodics has made several acquisitions over the last few years, which have not only diversified its revenue base but also expanded its customer base.Management is upbeat about the recently-inked partnership with Cook Medical for commercialization of .014” and .018” low-profile PTA balloon catheters.

This deal is expected to bolster Surmodics’ capability to support key projects and strengthen the technical and business management teams.

Estimates Trend

The company is witnessing a positive estimate revision trend for fiscal 2020 earnings. Over the past 60 days, the Zacks Consensus Estimate for the same has risen to 31 cents per share from 20 cents per share.

The Zacks Consensus Estimate for fourth-quarter fiscal 2020 revenues is pegged at $21.7 million, suggesting a 29.7% fall from the year-ago reported number.

Other Key Picks

A few other top-ranked stocks from the broader medical space include NextGen Healthcare NXGN, OPKO Health OPK and Merit Medical Systems MMSI.

NextGen’s long-term earnings growth rate is estimated at 8%. The company presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

OPKO Health’s long-term earnings growth rate is estimated at 12%. The company presently carries a Zacks Rank #2.

Merit Medical Systems’ long-term earnings growth rate is estimated at 11.9%. It currently carries a Zacks Rank #2.

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