Dive Brief:

• Surmodics said Tuesday it has won Food and Drug Administration approval for the SurVeil drug-coated balloon to treat peripheral arterial disease, clearing the way for the company to receive a $27 million milestone payment from partner Abbott.
• The development comes after Surmodics was forced to lay off 13% of its workforce, or about 60 employees, earlier this year in a bid to conserve cash as its timeline for bringing the device to market was extended due to a lengthier-than-anticipated approval process. 
• Surmodics expects to recognize about $24 million to $24.5 million of revenue related to the milestone payment from Abbott in the third quarter of its fiscal 2023, the company said in a statement Tuesday.

Dive Insight:

In a research note Tuesday, Needham analyst Mike Matson said he expects the SurVeil balloon to be a “meaningful” growth driver for Surmodics, estimating the global market for drug-coated balloons at $400 million in 2023.

Before gaining the FDA’s approval, Eden Prairie, Minn.-based Surmodics said in March that it needed to submit an amended premarket approval application for the device after receiving additional feedback from the agency. 

The company is gearing up to challenge Medtronic’s IN.PACT Admiral balloon with a device that is coated with a lower dose of paclitaxel, a drug used to prevent cell growth and which has raised safety concerns.

FDA approval for Surmodics’ device was supported by results of a head-to-head pivotal study that compared the balloon to the IN.PACT Admiral device. The SurVeil balloon showed non-inferior safety and effectiveness at two years post-treatment with a lower drug dose.

"Obtaining FDA approval for our SurVeil DCB is one of the most important achievements in Surmodics’ history," CEO Gary Maharaj said in the statement. "It represents a major milestone in our efforts to develop next-generation products to help millions of people affected by peripheral artery disease and the physicians that treat them."

The device may now be marketed in the U.S. to physicians for percutaneous angioplasty of lesions in femoral and popliteal arteries with vessel diameters of 4 mm to 7 mm. 

Abbott has exclusive worldwide commercialization rights for the SurVeil balloon. Surmodics will manufacture and supply the device and realize revenue from product sales to Abbott as well as a share of profits from Abbott’s third-party sales.

Needham’s Matson estimated Abbott can generate $18 million in sales from the device in fiscal 2024, with $9 million going to Surmodics. He predicted sales could rise to $59 million for Abbott in fiscal 2027, with $29 million going to Surmodics. 

“We expect SurVeil to add an average of (about) 6% to SRDX's revenue growth rate from FY24E through FY27E. And we value the SurVeil FDA at $9.00 per share based on our sales estimates and the milestone payment,” Matson wrote.

The Surmodics device gained CE mark certification in the European Union in June 2020.

Shares in Surmodics were up 12%, or $3.00, to $28.08 in late morning trading on Tuesday.