SurModics Upped to Neutral - Analyst Blog

We are upgrading SurModics Inc. (SRDX) to ‘Neutral' from ‘Underperform' following the efforts of the company to emerge from the below-par performances delivered over the past few quarters. Our target price on the stock is $13.00.

We are encouraged by the company's move to explore options regarding the Pharma unit, including its potential sale, as the move will enable SurModics to focus on its core business and enhance shareholder value. SurModics has constituted a core group to evaluate options regarding its Pharmaceuticals division.

The company has also brought about a change at its helm to steer it out of the phase of underperformance with Gary R. Maharaj taking over as the President and CEO. Maharaj, a former President and CEO of Arizant Inc., which was sold to 3M Co. (MMM) in October 2010, is also a member of the board of directors at SurModics.

In another move aimed at driving the company back to growth, SurModics, headquartered in Eden Prairie, Minnesota, has revamped its board of directors. Two directors put forward by Ramius LLC (the largest stakeholder at SurModics) have joined the board.

Late last year, SurModics trimmed its work-force by 13% and made certain changes to its organizational structure to streamline operations and increase efficiencies. The move is expected to result in annual savings of approximately $3 million to $3.5 million. Surmodics had reduced its workforce in March 2010 as well.

We upgrade SurModics, a provider of surface modification and drug delivery technologies to the healthcare industry, to Neutral on the expectation that the company's moves will yield the desired results and drive growth.

 
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