8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 19, 2006

SurModics, Inc.

(Exact name of Registrant as Specified in its Charter)

Minnesota
(State or Other Jurisdiction of Incorporation)

0-23837
(Commission File Number) 41-1356149
(IRS Employer
Identification No.)

9924 West 74^th Street
Eden Prairie, Minnesota 55344
(Address of Principal Executive Offices and Zip Code)

(952) 829-2700
(Registrant’s telephone number, including area code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02 Results of Operations and Financial Condition.
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
Press Release

Item 2.02 Results of Operations and Financial Condition.

     On April 19, 2006, SurModics, Inc. issued a press release announcing the results for the quarter and six months ended March 31, 2006. The copy of the full text of the press release is furnished as Exhibit 99.1 to this report.

Item 9.01 Financial Statements and Exhibits.

     (a) Financial Statements: None.

     (b) Pro forma financial information: None

     (c) Exhibits: 99.1 Press Release dated April 19, 2006.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	SURMODICS, INC.
	By /s/ Philip D. Ankeny
Date: April 19, 2006	Name:	Philip D. Ankeny
	Title:	Chief Financial Officer

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

EXHIBIT INDEX
to
FORM 8-K

SURMODICS, INC.

Date of Report:	Commission File No.:
April 19, 2006	0-23837

Exhibit No.	ITEM
99.1	Press Release dated April 19, 2006.

EX-99.1

Exhibit 99.1

SurModics Reports Second Quarter 2006 Results

Record Revenue and Non-GAAP Earnings

EDEN PRAIRIE, Minnesota — April 19, 2006 — SurModics, Inc. (Nasdaq: SRDX), a leading provider of surface modification and drug delivery technologies to the healthcare industry, today reported financial results for the second fiscal quarter ended March 31, 2006.

Second Quarter Highlights:

• Record revenue of $17.7 million, up 13% year-over-year

• Record Cordis and non-Cordis revenue, with non-Cordis revenue growing faster sequentially than Cordis revenue

• GAAP results:

• Operating income of $9.0 million

• Net income of $1.5 million

• Diluted EPS of $0.08

• Non-GAAP results (excluding non-cash equity compensation expense and a non-cash impairment loss on the Company’s investment in Novocell):

• Record operating income of $10.5 million

• Record net income of $7.2 million

• Record diluted EPS of $0.38

• Seven new licenses signed with SurModics customers

• Record CYPHER sales of $717 million

• 7th consecutive quarter of record non-GAAP net income

• 8th consecutive quarter with non-Cordis revenue exceeding Cordis revenue

“SurModics is pleased to report strong financial and operating results for the second quarter of fiscal year 2006, achieving record revenue and adjusted earnings,” said Bruce Barclay, President and CEO. “We delivered broad-based revenue growth, with all three of our segments — Drug Delivery, Hydrophilic and Other, and Diagnostics and Drug Discovery — achieving growth on both a sequential and a year-over-year basis. The CYPHER® Sirolimus-eluting Coronary Stent from Cordis Corporation, a Johnson & Johnson company, again generated record sales in the quarter. Additionally, we achieved records in both Cordis and non-Cordis revenue, with non-Cordis revenue growing faster than Cordis revenue on a sequential basis.”

“SurModics’ employees also attained several significant operating milestones during the quarter,” continued Barclay. “We completed enrollment in our STRIDE human clinical trial, evaluating the I-vation™ Intravitreal Implant in patients with diabetic macular edema. Working in concert with Donaldson Company, we completed development and made initial sales of the first synthetic extracellular matrix cell culture products containing a coating from SurModics. We also gained access to two new families of biodegradable polymers, bringing to five the number of biodegradable polymer systems we can make available to our customers for site specific drug delivery applications anywhere in the body. In addition, we exited our Bloomington contract manufacturing facility, ahead of schedule. Finally, we added two new officers, as we continue to strengthen our senior management team.”

“We continue to build our business based on our plan for sustainable growth,” remarked Barclay. “SurModics is laying the foundation for potentially significant revenue streams, while continuing to deliver exceptional results in the near term aided in part by our prudent expense management. We continue to broaden the reach of our participation in the drug-eluting stent market, with the recent announcements of multiple licensed customers developing products for this significant market that incorporate SurModics technologies.”

Revenue for the second quarter of fiscal 2006 was $17.7 million, an increase of 13% from $15.7 million in the year earlier period. Product sales of $2.9 million were the highest in ten quarters. On a GAAP basis, operating income was $9.0 million; net income was $1.5 million; and diluted earnings per share was $0.08. Results include expensing of stock options, as required by SFAS No. 123(R), and a non-cash impairment loss of $4.7 million on our investment in Novocell.

On a non-GAAP basis, operating income grew 14% to a record $10.5 million, from $9.3 million in the prior-year period. Net income increased 20% to a record $7.2 million, from $6.0 million in the same period last year. Diluted earnings per share was a record $0.38, compared with $0.32 in the second quarter of fiscal 2005. Non-GAAP results exclude non-cash compensation charges and the non-cash impairment loss described above. Please see our financial tables and the footnotes for a detailed explanation and reconciliation of GAAP and non-GAAP figures.

For the first six months of fiscal year 2006, revenue was $34.2 million, an increase of 15% from $29.8 million in the year earlier period. On a GAAP basis, operating income was $17.5 million; net income was $7.7 million; and diluted earnings per share was $0.41. On a non-GAAP basis, operating income grew 13% to a record $20.3 million, from $18.0 million in the prior-year period. Net income increased 22% to a record $13.8 million, from $11.3 million in the same period last year. Diluted earnings per share was a record $0.73, an 18% increase compared with $0.62 for the first six months of fiscal 2005. Non-GAAP results exclude non-cash compensation charges, the non-cash IPR&D charge in connection with the Company’s acquisition of InnoRx, Inc. in January 2005, and the non-cash impairment loss described above. Please see our financial tables and the footnotes for a detailed explanation and reconciliation of GAAP and non-GAAP figures.

SurModics’ portfolio of pipeline projects continues to represent significant potential in the near- and long-term. The company signed seven new licenses in the second quarter, for a total of 11 to date in fiscal year 2006, compared with 10 new licenses in the first half of fiscal year 2005, and well on pace to exceed its goal of 15 for fiscal year 2006. SurModics has 152 potential commercial products in development representing each of the company’s four focus markets — Cardiovascular, Neurology, Ophthalmology and Orthopedics, with potential for both near-term and longer-term revenue growth.

“SurModics remains in excellent financial condition,” said Phil Ankeny, Chief Financial Officer and Vice President, Business Development. “Our balance sheet remains strong, with a cash and investment balance of $87.7 million and no debt as of March 31, 2006. Operating cash flow for the second quarter was $8.3 million. We are pleased with our business development activity during the quarter, and we continue to evaluate opportunities to put our balance sheet to work. In spite of the non-cash impairment loss on our investment in Novocell, we continue to be encouraged by the progress the company is making toward commercialization.”

Live Webcast
SurModics will host a webcast at 5:00 p.m. ET (4:00 p.m. CT) today to discuss the quarterly results. To access the webcast, go to the investor relations portion of the company’s web site, www.surmodics.com, and click on the second quarter webcast icon. A replay of the second quarter conference call will be available by dialing 800-405-2236 and entering conference call ID 11057796. The audio replay will be available beginning at 6:00 p.m. CT on Wednesday, April 19, until 6:00 p.m. CT on Wednesday, April 26.

About SurModics, Inc.
SurModics, Inc. is a leading provider of surface modification technologies in the areas of biocompatibility, site specific drug delivery, biological cell encapsulation, and medical diagnostics. SurModics partners with the world’s foremost medical device, pharmaceutical and life science companies to bring innovation together for better patient outcomes. Recent collaborative efforts include the implementation of SurModics’ Bravo™ drug delivery polymer matrix as a key component of the first-to-market drug-eluting coronary stent. SurModics is also active in the ophthalmology market with a sustained drug delivery system that is currently in human trials for treatment of retinal disease. A significant portion of SurModics’ revenue is generated by royalties earned from the sale of our customers’ commercial products. SurModics is headquartered in Eden Prairie, MN. More information about the company can be found at www.surmodics.com. The content of SurModics’ web site is not part of this release or part of any filings the company makes with the SEC.

Safe Harbor for Forward Looking Statements
Certain statements contained in this press release may be deemed to be forward-looking statements under federal securities laws, and SurModics intends that such forward looking statements be subject to the safe harbor created thereby. SurModics does not undertake an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Contact
Phil Ankeny, Chief Financial Officer and Vice President, Business Development
(952) 829-2700

SurModics, Inc.
Statements of Income
Reconciliation of GAAP to Non-GAAP Amounts
(In thousands, except per share data)
(Unaudited)

	Three Months Ended
	March 31, 2006
				Adjust-			Non-
	GAAP (1)			ments			GAAP(2)
Revenue:
Royalties and license fees	$	13,291					$	13,291
Product sales		2,908						2,908
Research & development		1,508						1,508
Total revenue		17,707						17,707
Operating expenses:
Product		869			(28)	(3)		841
Research & development		5,060			(771)	(3)		4,289
Sales & marketing		380			(40)	(3)		340
General & administrative		2,445			(750)	(3)		1,695
Total operating expenses		8,754			(1,589	)		7,165
Income from operations		8,953			1,589			10,542
Investment income		952						952
Impairment loss on investment		(4,651	)		4,651	(4)		-
Income before income taxes		5,254			6,240			11,494
Income tax provision		(3,789	)		(520)	(5)		(4,309	)
Net income	$	1,465					$	7,185
Basic net income per share	$	0.08					$	0.39
Diluted net income per share	$	0.08					$	0.38
Weighted average shares outstanding
Basic		18,481						18,481
Diluted		18,649						18,911

(1)	Reflects operating results in accordance with U.S. generally accepted accounting principles (or GAAP).
(2)	Non-GAAP figures exclude non-cash compensation charges and the non-cash impairment loss detailed in Note (4).
(3)	Reflects non-cash compensation charges.
(4)	Reflects non-cash impairment loss on the Company’s investment in Novocell, Inc.
(5)	Non-GAAP effective tax rate is 37.5% vs. an assumed GAAP continuing operations effective tax rate of 38.7%. No tax benefit has been recorded for the $4.7 million non-cash impairment loss.

SurModics, Inc.
Statements of Operations
Reconciliation of GAAP to Non-GAAP Amounts
(In thousands, except per share data)
(Unaudited)

	Three Months Ended
	March 31, 2005
				Adjust-			Non-
	GAAP (1)			ments			GAAP(2)
Revenue:
Royalties and license fees	$	12,268					$	12,268
Product sales		2,321						2,321
Research & development		1,116						1,116
Total revenue		15,705						15,705
Operating expenses:
Product		730						730
Research & development		3,890						3,890
Sales & marketing		307						307
General & administrative		1,649			(150)	(3)		1,499
Purchased in-process R&D		30,277			(30,277)	(4)		-
Total operating expenses		36,853			(30,427	)		6,426
Income (loss) from operations		(21,148	)		30,427			9,279
Investment income		315						315
Income (loss) before income taxes		(20,833	)		30,427			9,594
Income tax provision		(3,538	)		60			(3,598	)
Net income (loss)		($24,371	)				$	5,996
Basic net income (loss) per share		($1.34	)				$	0.33
Diluted net income (loss) per share		($1.34	)				$	0.32
Weighted average shares outstanding
Basic		18,135						18,135
Diluted		18,135						18,561

(1)	Reflects operating results in accordance with U.S. generally accepted accounting principles (or GAAP).
(2)	Non-GAAP figures exclude non-cash compensation charges and the non-cash IPR&D charge detailed in Note (4).
(3)	Reflects non-cash compensation charges.
(4)	Reflects non-cash IPR&D charge in connection with the Company’s acquisition of InnoRx, Inc. in January 2005.

SurModics, Inc.
Statements of Income
Reconciliation of GAAP to Non-GAAP Amounts
(In thousands, except per share data)
(Unaudited)

	Six Months Ended
	March 31, 2006
				Adjust-			Non-
	GAAP (1)			ments			GAAP(2)
Revenue:
Royalties and license fees	$	25,566					$	25,566
Product sales		5,255						5,255
Research & development		3,351						3,351
Total revenue		34,172						34,172
Operating expenses:
Product		1,550			(52)	(3)		1,498
Research & development		9,654			(1,224)	(3)		8,430
Sales & marketing		704			(77)	(3)		627
General & administrative		4,731			(1,399)	(3)		3,332
Total operating expenses		16,639			(2,752	)		13,887
Income from operations		17,533			2,752			20,285
Investment income		1,680						1,680
Impairment loss on investment		(4,651	)		4,651	(4)		-
Income before income taxes		14,562			7,403			21,965
Income tax provision		(6,880	)		(1,328)	(5)		(8,208	)
Net income	$	7,682					$	13,757
Basic net income per share	$	0.42					$	0.75
Diluted net income per share	$	0.41					$	0.73
Weighted average shares outstanding
Basic		18,458						18,458
Diluted		18,652						18,922

(1)	Reflects operating results in accordance with U.S. generally accepted accounting principles (or GAAP).
(2)	Non-GAAP figures exclude non-cash compensation charges, the non-cash impairment loss detailed in Note (4), and the tax items detailed in Note (5).
(3)	Reflects non-cash compensation charges.
(4)	Reflects non-cash impairment loss on the Company’s investment in Novocell, Inc.
(5)	Non-GAAP results exclude a $465,000 benefit related to the reversal of a tax accrual resulting from settlement during the first quarter of a state’s prior year tax returns. In addition, no tax benefit has been recorded for the $4.7 million non-cash impairment loss.

SurModics, Inc.
Statements of Operations
Reconciliation of GAAP to Non-GAAP Amounts
(In thousands, except per share data)
(Unaudited)

	Six Months Ended
	March 31, 2005
				Adjust-			Non-
	GAAP (1)			` ments			GAAP(2)
Revenue:
Royalties and license fees	$	22,359					$	22,359
Product sales		4,321						4,321
Research & development		3,094						3,094
Total revenue		29,774						29,774
Operating expenses:
Product		1,349						1,349
Research & development		7,246						7,246
Sales & marketing		569						569
General & administrative		2,843			(244)	(3)		2,599
Purchased in-process R&D		30,277			(30,277)	(4)		-
Total operating expenses		42,284			(30,521	)		11,763
Income (loss) from operations		(12,510	)		30,521			18,011
Investment income		287						287
Income (loss) before income taxes		(12,223	)		30,521			18,298
Income tax provision		(6,911	)		(97	)		(7,008	)
Net income (loss)		($19,134	)				$	11,290
Basic net income (loss) per share		($1.07	)				$	0.63
Diluted net income (loss) per share		($1.07	)				$	0.62
Weighted average shares outstanding
Basic		17,851						17,851
Diluted		17,851						18,241

(1)	Reflects operating results in accordance with U.S. generally accepted accounting principles (or GAAP).
(2)	Non-GAAP figures exclude non-cash compensation charges and the non-cash IPR&D charge detailed in Note (4).
(3)	Reflects non-cash compensation charges.
(4)	Reflects non-cash IPR&D charge in connection with the Company’s acquisition of InnoRx, Inc. in January 2005.

SurModics, Inc.
Condensed Balance Sheets
(In thousands)

	March 31,		September 30,
	2006		2005
	(Unaudited)
Assets
Current assets:
Cash & investments	$	41,052	$	24,445
Accounts receivable		12,148		10,996
Inventories		1,144		1,091
Other current assets		1,455		5,072
Total current assets		55,799		41,604
Property & equipment, net		18,278		14,832
Long-term investments		46,670		48,874
Other assets		15,157		18,915
Total assets	$	135,904	$	124,225
Liabilities & Stockholders’ Equity
Total current liabilities	$	5,704	$	5,123
Other liabilities		3,353		3,521
Total stockholders’ equity		126,847		115,581
Total liabilities & stockholders’ equity	$	135,904	$	124,225

Certain information in this financial release may be considered non-GAAP Financial Information as contemplated by SEC Regulation G. Accordingly, we are providing the preceding tables, which reconcile results to their corresponding GAAP based operating results presented under our Statements of Income and Statements of Operations.

Management believes the presentation of these non-GAAP financial results, in connection with the results of the fiscal quarter ended March 31, 2006, provide useful information to investors regarding our results of operations, as these non-GAAP financial measures allow investors to better evaluate ongoing business performance and factors that influenced performance during the period under report, including when comparing against prior periods. Management also uses these non-GAAP measures internally to monitor performance of the business. These non-GAAP financial measures should be considered in addition to, and not a substitute for, financial measures prepared in accordance with GAAP.