Second Time May Be a Charm: Analyst Is Bullish As Surmodics Resubmits SurVeil DCB Application

In an investor presentation, Surmodics Inc SRDX said it submitted its amended SurVeil drug-coated balloon premarket approval (PMA) application in May – with no new testing required. 

The presentation noted that the "ongoing interactive review of the amended application has progressed as expected with constructive alignment on all issues."

In January, the FDA indicated that the application is not currently approvable while providing specific guidance on a path forward. 

Needham upgraded the stock from Hold to Buy with a price target of $36.

Also Read: Abbott-Cardiovascular Systems Acquisition Could Further Add Uncertainty Over Surmodics' Product: Analyst Downgrades Stock.

The analyst notes that several positive developments mean that SurVeil drug-coated balloon (DCB) will likely be approved by the FDA sooner than previously thought.

The analyst notes that Surmodics was able to address the FDA's concerns on prior biocompatibility studies and includes revisions to the proposed labeling. 

Needham estimates the global DCB market will be ~$400 million in FY23E with ~10% annual growth, with Abbott Laboratories ABT can generate $18 million of sales in FY24E, with $9 million of this going to SRDX.

SurVeil is expected to have strong growth for the next few years, but by the time it begins to slow, Sublime and Pounce should be more meaningful growth drivers.

SurVeil is expected to add an average of ~6% to SRDX's revenue growth rate from FY24E through FY27E.

Price Action: SRDX shares are up 16.9% at $26.52 on the last check Tuesday.