SurModics slips on lowered guidance after Creagh acquisition

SurModics (NSDQ:SRDX) saw shares dip after releasing lowered guidance today for its fiscal year 2016, taking into account its $32 million acquisition of Creagh Medical.

SurModics said it expects to see GAAP revenue figures in the range of $60 to $64 million, with an aggregate $3.5 to $4.5 million coming from newly acquired Creagh. The Eden Prairie, Minn.-based company said it expects GAAP EPS figures between 38¢ and 43¢ per share.

The company expects non-GAAP earnings between 66¢ and 75¢ for the year, which is closer to analysts expectations, who are looking for an adjusted EPS of 73¢ on sales of $59.1 million.

Shares have dropped over 2.5% in mid day trading today, at $18.88 as of 11:44 a.m. EST.

“Our recent acquisition provides the key foundation to accelerate our transformation into a whole products solutions medical device company. With the Creagh Medical acquisition, SurModics plans to develop a robust pipeline of interventional cardiology devices. Integrating Creagh Medical is a top priority for us in fiscal 2016. Moreover, we will advance our drug-coated balloon platform with a first-in-human clinical trial, as we also continue to drive our core medical device and in vitro diagnostics businesses. Our objective is to generate consistent revenue growth in the mid-teens, on a constant currency basis, and EBITDA margins greater than 30% within 3 years. We expect fiscal 2016 to be a pivotal year for us, and we enter it with enthusiasm about SurModics’ prospects and initiatives. Our team is intently focused on evolving into a highly relevant and valued provider of whole product medical device solutions, as well as continuing to grow our global medical device and in vitro diagnostic customer base,” CEO Gary Maharaj said in prepared remarks.

SurModics said it expected its R&D costs to be around mid-30% of its revenue, and general and administrative costs to be mid-20% of revenue.

SurModics picked up Creagh Medical, who develops and manufactures percutaneous transluminal angioplasty balloon catheters for $32 million in November.

The acquisition included an upfront payment of $19 million (€18 million) and a possible $12.8 million (€12 million) based on milestones and revenue achievements. Other terms of the deal were not disclosed.

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