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Biotech / Medical SRDX - SurModics - Biotech IPO

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From: Lance Bredvold	11/8/2023 7:29:32 PM
	of 83

Earnings today and stock price jumped about 10% gradually during the day of the conference call. Again, I'm so proud of this company even though no one else seems to even have SRDX on as a subject mark. Management fell all over themselves to be sure no one expected such amazing results next year because this year there was a $27mm one time progress payment from Abbott. They've never counted their chickens before hatched and always made sure we understood that the total special income would be reduced by taxes. Just a whole different and more honest feel than most other managements I run across. But the real positive that they could not cover up was that the one time event above was in the third quarter and they reported fiscal 4th quarter today earning EPS of $.47 but since the royalty gain of 3rd quarter also means regular royalties for the same product would be disregarded (just over $1mm in Q4) would be disregarded and adjusted EPS then becomes $.53. To a newcomer goodwill and inxxxxx (senior moment) would seem way too high and I really don't remember when they acquired it, but I'm not real worried as they always made a profit and never had any debt until this last year as they moved into designing, building, and getting product of their own approved. They also have a new lubricious product which probably carries patents into the 30's or 40's in case the worst happened to the several stents and extractors they already have approved. I've been expecting this and bought a lot up to $30. And I have another 5 puts sold at 35 for which I got $5.70 a few months ago. Really hope the initial enthusiasm wears thin before expiration on Nov 15 and I get those shares as well.

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From: Lance Bredvold	1/6/2024 2:16:22 PM
	of 83

Medtronic (headquartered in Ireland where SRDX does most equip. mfg) was a major customer of ours buying coatings for various stents. I now read a rather casual statement on Value Line indicating that they divested their "slow growth" deep vein thrombosis business though I don't know to whom. I would have expected to know if SRDX had bought it and would have thought that likely because of their relationship and also because SRDX is making a major effort with their POUNCE deep vein tool lineup. I should go to MDT's reports to see what became of that business and to decide whether SRDX is really likely to earn a good return on it's investment there. I think the arterial stents are really the bigger business in their view while tools to extract clots from veins is a nice supplemental business. POUNCE was approved much sooner than Surveil and the other model of arterial stent. It provided something for the new sales force to concentrate on while awaiting further FDA approvals.

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From: Lance Bredvold	2/15/2024 12:25:41 PM
	of 83

Earnings report on Feb 1 was exquisite and as usual Gary made no effort to sugar coat the results. Thus there was a huge drop in stock price to $27.xx which I'd have loved to take advantage of. I caught the downdraft late in the day, placed an order at my maximum level of $30 and did not have a fill. Nuts. Product sales are up roughly 25% through our new sales force which I think sold about $5mm in product. However, that is not near breakeven level for the Irish factory and so profits are not yet available. But easily predictable within a few years if nothing goes wrong. Lot's more overhead costs cause Gary to predict a loss of $1 to $1.40 this year even after a very positive -.06 for the first quarter. I continue to be very comfortable with prospects even though my holdings have increased to about 5% of my portfolio. Wish they were 10%. Although I'm just a little surprised that our CEO is not predicting a higher EPS for full year 2024 given the great first quarter, I assume there are a bunch of new product introductions which will cost significant money to obtain FDA approval. Underpromise and overperform seems to be the mantra at SRDX as it had been in the late 1990's when I first became involved.

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From: Lance Bredvold	5/1/2024 10:21:15 AM
	1 Recommendation of 83

Another earnings report and another positive surprise. Stock up 26% today even though a loss is still predicted for the year. But earnings from Surveil drug coated balloon at a major drug company and also the in house sale of Pounce thrombectomy catheters continue to increase at a pace above predictions. I don't dare recommend this company to the value investors I've been following as my confidence is all based on the CEO and CFO's under promising and over delivering.. They are still losing money, have taken on some debt for the first time ever I believe, and the share count is increasing slightly. Yet there are enough investors like me who have confidence in the ultimate profitability of the company that they can move the price hugely after another promising quarterly report. I have bought up to my limit under $30 and recently investors became scared enough that the price was down to $26 again. I bought at $28, but chickened out as it continued to drop but I still own way more than seems reasonable for this little company. I've visited their facilities, owned stock in them since 2000 or so, made quite a bit on fluctuations in the price, and just held on while that California hot shot bought an Alabama research company unwisely. But that has been painfully divested and they are back to a factory in Ireland plus the Minnesota research and development facility (looks like a converted strip mall) and delivering promising results. Wish I'd bought more at $26.

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To: Lance Bredvold who wrote (75)	7/1/2024 12:22:15 PM
From: Lance Bredvold	of 83

I'm going to post the announcement of the company's purchase even though it's a month late. Now second half of 24 when the transaction is to conclude at $43. Stock is hanging around $42 and I suppose that is due to fears that the transaction won't occur after all. Often I see speculators guessing on perhaps a higher bid, but in this case the company is so small and the board has unanimously agreed to the purchase, so I guess only the possibility of the deal falling through is having an effect. For my own purposes there is no sense in selling at $42 since I'd still have a huge capital gain and I really expect to get $43 in a few months. 2%+ for 3 months is worth waiting for. As expected, no options activity since 6/18 though a couple of curious transactions then reported in Yahoo. Spurious and I suppose just some order someone forgot to cancel when the news came out. I am disappointed in this action by the board as SRDX was a company I was invested heavily in. Good news could have spiked the shares back up near $70 even though that would probably be a speculative frenzy. I'll probably vote against approval but have little hope the deal won't go through. Here's the announcement from SRDX. EDEN PRAIRIE, Minn., May 29, 2024--( BUSINESS WIRE)--Surmodics, Inc. (Nasdaq: SRDX), a provider of medical device and in vitro diagnostic technologies to the healthcare industry, today announced that it has entered into a definitive agreement to be acquired by GTCR, a leading private equity firm with a long track record of investment expertise across healthcare and healthcare technology. Under the terms of the agreement, affiliates of GTCR will acquire all outstanding shares of Surmodics. Surmodics shareholders will receive $43.00 per share in cash, for a total equity valuation of approximately $627 million. The per-share acquisition price represents a 41.1% premium to Surmodics’ 30-trading day volume-weighted average closing price through May 28, 2024. Surmodics’ Board of Directors has unanimously approved the transaction and resolved to recommend that stockholders vote in favor of the transaction. "We are pleased to announce this transaction, which enables Surmodics shareholders to realize immediate value creation with a substantial premium, reflecting the significant progress and important achievements made by our employees," said Gary Maharaj, President and CEO of Surmodics, Inc. "GTCR is an ideal partner for Surmodics, given its extensive history and deep domain expertise in the Healthcare sector, and I am con?dent that this transaction will position the company to continue to deliver compelling benefits for physicians, patients and customers going forward." "With its longstanding, blue chip customer relationships and a rich history of developing medical technologies that deliver enhanced performance and improved clinical outcomes, Surmodics is well-positioned for attractive, long-term growth and value creation," said Sean Cunningham, Managing Director and Head of Healthcare at GTCR. "We look forward to partnering with the Surmodics team to continue to expand the company’s offering and broaden its reach." The transaction is expected to close in the second half of calendar year 2024, subject to customary closing conditions, including approval by Surmodics shareholders and required regulatory approval. It will be financed through a combination of committed equity from funds affiliated with GTCR and committed debt financing. Upon completion of the transaction, Surmodics will be a privately held company and its common stock will no longer be listed on The Nasdaq Stock Exchange.

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From: Lance Bredvold	8/19/2024 9:57:43 AM
	of 83

Still another opportunity in SRDX after I assumed we would be locked into the $43 bid from an investment firm less time value of funds. The company announced the the FTC was asking for more information about the acquisition and both firms were speedily assembling information. But there would be a delay in the actual consummation of the deal to probably Q1-25. Last week I was able to buy more shares at $39.50 for a presumed return of $43/$39.50 of 8.9% over about 6 months. And I've written elsewhere that my preference had been that this deal never happen despite the likelihood of a sudden decline in share price if it were cancelled. I believe current management can successfully market it's slate of products profitably and develop new ones resulting in a price higher than $43 within 5 years. This morning the quoted price was $40.09 and that would reward me 7.25% to $43 in around 6 months. Still worth doing though I'm over my budgeted purchases for this month already. In fact, I prefer moving the gain from H2-24 to Q1-25 since I've harvested so many unusual gains this year from nearly all my holdings and next year may have none--at least I don't know that there will be many. I think I'll offer $39.75 for another batch and if it comes I'll be content.

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From: Lance Bredvold	11/6/2024 11:21:14 AM
	of 83

Another fine quarterly report with sales increasing nicely. I've continued to buy as the price declined to $37.50 assuming the FTC will approve the purchase of SRDX at $43 in the first quarter of 2025. Assuming that happens as predicted (by me) I'll earn $43/$37.70=14% for less than 6 months of the cash being tied up. Alternatively, if the FTC nixes the purchase I expect the price will drop significantly to perhaps $30 but recover as prospects for Pounce and the other products begin to show a profit. One surprise to me in reading through the entire SEC filing was to learn that SRDX had solicited a buyout and had evaluated several potential acquirers at lower prices before settling on GT??. I had assumed an acquirer had approached them with perhaps even a hostile offer. So another potential offer is unlikely. I'd thought it an unlikely happening, but that there would be a possibility. There are penalties on both sides for failing to follow through (roughly $20mm for SRDX, $50mm for GT??). May be my last post on this board.

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To: Lance Bredvold who wrote (78)	12/13/2024 8:46:57 AM
From: Lance Bredvold	of 83

It wasn't my last post. Got to wondering why the board would want that SRDX be bought. For me, in my last year or two of life, it works out better but they certainly were not thinking of me. What is more likely is that they learned that developing the business was going to cost a whole lot more than they'd originally expected. The choice then became whether to try to sell individual stockholders like me on a few more years of losses on the likelihood of a full transition to a large medical products company. Or would it be easier and better to get some body with a lot of money and sell them on their prospects. Plus it means our CEO would not have to put on shows every quarter making promises which he normally would make every effort to keep. I really have to realize that I've been loyal to this investment largely based on faith in quality CEO's, boards and employees,(with one exception). But I've not made a lot of money with them. It's been OK since I bought at appropriate times (often on puts) and sold at highs with calls. Wait! Looking over the history now I see that I sold in my taxable accounts but never in the logical place--my IRA's. What the heck. My early buys in 03 and 06 only returned 2 to 3.5%. No dividends or splits. But then later buys look good at a presumed $43. I sold off those early buys in the taxable account for minor gains in 2016 and 18. Today I guess I should feel lucky if I get out at $43. Many recent shares will return 30 to 50% for a couple of years. And I might even be smart to escape at the $41 which looks like the current price.

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From: Lance Bredvold	12/31/2024 10:18:22 AM
	of 83

Now a bit more nervous since it's been revealed that more than one valued employee left due to the pending privatization of SRDX. That could damage the desire of purchasers to follow through and possibly even be considered a violation of terms of the agreement. I had expected all were on board the change but apparently it was a more desperate move than I'd appreciated.

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From: Lance Bredvold	1/13/2025 12:04:33 PM
	of 83

And today down 5%. Lawsuits from stockholders in NY? I wonder why since I and I expect most others have had only gains recently. Some may have bought high and think $43 is not enough because the price was quite high in '21 and very high a couple of years earlier. I guess if I was worried enough I could look up those lawsuits which seem to be over the proxy for the company sale. I was sort of surprised by the sudden approval by shareholders when I knew the date but saw nothing asking for my vote. And I was surprised that management wanted to go private in the first place as I was willing to invest on the eventual return to profitability. So maybe those guys prefer that also, but the process mgmt went through trying to locate a buyer led me to believe they got a fair price. Maybe not?

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