Eden Prairie's Surmodics receives FDA approval of device, unlocking a $27M payment

After delays that had financial implications for Surmodics, the Food and Drug Administration approved a key device for the Eden Prairie company.

The company has been developing the SurVeil drug-coated balloon to treat people with peripheral artery issues.

"Obtaining FDA approval for our SurVeil DCB is one of the most important achievements in Surmodics' history," said Gary Maharaj, the company's chief executive, in a news release. "It represents a major milestone in our efforts to develop next-generation products to help millions of people."

FDA approval for the devices also ensured Surmodics would receive $27 million in milestone payments for a development and commercialization agreement it had signed with Abbott Laboratories.

After the FDA asked for more information about the application on Jan. 19, Surmodics' stock dropped 19% that day and about two weeks later the company announced a 13% cut to its employee base to preserve cash.

Surmodics has been running clinical trials on the device for years . Under its development and commercialization deal with Abbott, the company would have earned a $30 million milestone payment had the device received FDA approval by Jan. 1. The milestone payment could have dropped to $24 million if FDA approval came after June 30.

Surmodics had already received regulatory approval for SurVeil in the European Union, and analysts who follow Surmodics expected the company to make quick adjustments to its application and eventually gain FDA approval.

"We expect SurVeil to be a meaningful growth driver for Surmodics," wrote Mike Matson, an analyst who covers for Needham & Co., prior to the FDA approval.

With FDA approval now in hand, Sumodics will start making the devices and supplying them to Abbott for commercialization. Surmodics will get a cut of future sales, and the milestone payment will show up in its third quarter financial statement.

"Building on our recent progress, Surmodics remains focused on supporting Abbott and its exclusive worldwide commercialization rights for the SurVeil DCB," Maharaj said in the release. "We'll discuss details on the developments and update our fiscal year 2023 financial guidance during our third quarter earnings call."

Abbott has been investing in other parts of its medical device portfolio. In April it completed at $730 million acquisition of New Brighton-based Cardiovascular Systems.

Shares of Surmodics closed up 16% Tuesday at $29.12.