(SRDX) SurModics Incorporated – Bull of the Day

In June 2011, SurModics, Inc. (SRDX) received a blow when Johnson & Johnson announced that it will stop manufacturing Cypher stents by year end, as SurModics receives royalties on sales of the product. However, we believe the impact of the blow will not be very severe, and that the current price represents an attractive entry point for long-term investors.

We have increased our fiscal 2011 earnings estimate by $0.14 per share to $0.16. This is within the guidance range of $0.13-$0.26 provided by the company. We have also upped our fiscal 2012 estimates to $0.41 from $0.20. We believe that if the company continues to deliver strong results in the coming quarters then the increased projection will be achieved easily.

We believe that investors should be more concerned about the outcome of the measures taken by SurModics to revive itself (work-force reduction, change in management and operating segments), rather than on the loss of Cypher stent revenues. We maintain our long-term Outperform recommendation on the stock.

SURMODICS (SRDX): Free Stock Analysis Report

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