Recently, SurModics Inc. (SRDX) inked a licensing deal with Australian company Clinuvel Pharmaceuticals Limited. The deal allows SurModics’ pharmaceuticals unit, which provides proprietary polymer-based drug delivery technologies to companies developing advanced pharmaceutical products, to license some of its biodegradable polymer implant technology to the Melbourne-based company. The technology is used for treating sun-induced skin disorders. The clauses of the deal were undisclosed.

The two companies have been working together to develop Clinuvel’s proprietary sustained release SCENESSE (afamelanotide) implant formulation for many years. The formulation is being developed as a preventive treatment for ultraviolet (UV) and light-related dermatological deficiencies. The implant is being studied for treating a range of dermatological disorders not only in Australia but also in Europe.

SurModics’ biodegradable polymer drug delivery technology permits afamelanotide to be released in a sustained and controlled manner. This encourages melanin to be produced in the skin of the patient, thereby providing protection from UV and light exposure. Melanins refer to insoluble pigments that account for the color of the skin, among other things.

The market opportunity for Clinuvel’s afamelanotide for the UV-related disorders being evaluated by the company is estimated by the Royal Bank of Scotland (RBS) to exceed seven million patients across the globe.

We believe the deal provides further opportunities to Clinuvel to develop additional compounds for the treatment of skin related disorders caused by light exposure. This will broaden the treatment opportunities for patients suffering from such disorders.

SurModics, which provides surface modification and drug delivery technologies to medical device and pharmaceutical companies, competes mainly with Angiotech Pharmaceuticals Inc. (ANPI).

Our Recommendation

Currently, we are Neutral on SurModics with a Zacks #3 Rank. This indicates that the stock is expected to perform in line with the overall US equity market for the next 1-3 months. Our long-term Neutral stance on Surmodics indicates that the stock is expected to replicate its short-term performance, but over 6-12 months. Consequently, we advise the investors to retain the stock over the time-period.

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