Surmodics Inc (SRDX) 2021 Q1 法說會逐字稿

Good day, and welcome to the Surmodics First Quarter Fiscal 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Tim Arens, Senior Vice President of Finance and Chief Financial Officer. Please go ahead.

Thank you, Stephanie. Good morning, and welcome to Surmodics Fiscal 2021 First Quarter Earnings Call. Before we begin, I would like to remind you that during this call, we will make forward-looking statements. These forward-looking statements are covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and include statements regarding Surmodics' future financial and operating results or other statements that are not historical facts.

Please be advised that actual results could differ materially from those stated or implied by our forward-looking statements, resulting from certain risks and uncertainties, including those described in our SEC filings. Surmodics disclaims any duty to update to revise our forward-looking statements as a result of new information, future events, developments or otherwise.

We'll also refer to non-GAAP measures because we believe they provide useful information for our investors. Today's news release contains reconciliation tables to GAAP results.

This conference call is being webcast and is accessible through the Investor Relations section of the Surmodics website, where the audio recording of the webcast will also be archived for future reference. A press release disclosing our quarterly results was issued this morning and is available on our website at surmodics.com.

I will now turn the call over to Gary Maharaj. Gary?

Thank you, Tim. Good morning, and welcome to Surmodics' Fiscal First Quarter 2021 Earnings Call. During our first quarter, I was pleased with our solid financial and operational performance as well as the progress we made on our strategic objectives. My thanks and a huge shout out to the entire Surmodics team. Their dedication, perseverance and grit are admirable by any standard.

During our first quarter, we made important progress on our strategic objectives for fiscal 2021. As a reminder, they are: First, to continue building traction with SurVeil, marching towards the PMA approval beginning with our final submission to the FDA. Second, to accelerate the advancement of our robust product pipeline through product development, regulatory clearances and clinical evaluation and feedback. Third, to optimize cash flow from our IVD and Medical Device coatings offerings to support our strategic growth initiatives.

Starting with SurVeil. On January 25 at the LINC 2021 virtual event, Dr. Ken Rosenfield, a principal investigator of the TRANSCEND study, presented safety and efficacy data of our SurVeil drug-coated balloon. In this late-breaking session, the data demonstrated that SurVeil was noninferior to the IN.PACT Admiral drug-coated balloon in both the primary safety and efficacy endpoints. Despite the fact that the IN.PACT device has 75% more paclitaxel onboard.

In theory, from a benefit-to-risk viewpoint, if a lower dose of a powerful cytotoxic drug can produce similar positive outcomes for a patient as a higher dose of the same powerful cytotoxic drug, then the benefit-to-risk profile favors the low-dose formulation of the drug and may represent a better clinical choice for that patient. This is why we performed the first and still only, as far as I'm aware, pre-market head-to-head pivotal multi-center, multi-geography trial of its kind versus a high-dose device. This has provided strong clinical evidence to support SurVeil as a compelling therapeutic choice in any market where it secures regulatory approval for commercialization.

This is a significant achievement for a small organization. However, we had lots of help. We had many partners along this journey, and I want to thank the entire internal Surmodics SurVeil team and extended large TRANSCEND clinical trial team of physicians, health care providers, clinical research partners and research coordinators for their support and the conduct at a very difficult, but necessary trial in the midst of both the paclitaxel debate and the COVID-19 pandemic. I'd especially like to thank our national principal investigators in the trial steering committee. We are well on our way and on plan. However, we're not yet done.

Regarding the PMA approval process, after several meetings with the FDA, we now have clarity on the required long-term mortality data and the process of submitting these data as part of our PMA submission. As we've discussed on previous calls, to ascertain long-term safety, the FDA is requiring a minimal threshold of mortality, also called vital status, follow-up data for patients at 2 years and 3 years from the time of their treatment. While I can't comment on the specifics of these requirements, I believe we remain on track to receive the PMA for SurVeil by the end of calendar 2021.

You'll recall, there are substantial financial outcomes from our commercialization agreement with Abbott, including $45 million of remaining milestones. We expect payment later this month for the first component of this, a $15 million milestone based on Abbott's receipt and review of the final written clinical report and related materials that demonstrate the primary safety endpoint and the primary efficacy endpoint for the TRANSCEND clinical study were met.

Tim will provide more details later in today's call on the fiscal 2021 financial impacts of this $15 million milestone payment. The remaining $30 million milestone payment would be achieved upon approval of our SurVeil DCB by the FDA.

Regarding our product pipeline, we continue to move forward with products in all 3 platforms within our pipeline. The first of these platforms is vascular drug delivery via our drug-coated balloon technologies. After SurVeil, the next product in our DCB pipeline using our proprietary technology is our Sundance sirolimus-coated drug-coated balloon. It's a .014" percutaneous PTA platform. I'm pleased to announce that in January, we completed enrollment in the SWING first-in-human clinical trial for Sundance ahead of schedule.

SWING enrolled 35 patients across 8 sites in Europe, Australia and New Zealand. As a reminder, the primary safety and efficacy endpoints of the trial, a composite freedom from major adverse limb events and perioperative death 30 days and late lumen loss at 6 months, respectively. We anticipate having 6-month results from this trial in early Q1 of fiscal '22. We believe that Sundance has the potential to improve the treatment of arterial blockage below-the-knee, which left untreated, can lead to amputation and eventually death.

Our third DCB product in our pipeline is our AVess AV fistula drug-coated balloon. Six months data from our AVess first-in-human study demonstrated the target lesion patency at 30 days and 6 months was 100% and 90.9%, respectively, and only one reintervention was required within 6 months. The study showed no mortality and no device nor a procedure-related adverse events at 30 days, and all patients maintain functional arteriovenous fistulas, or AVF, for hemodialysis. We're quite pleased with these results, and it strengthens our belief that AVess DCB could be a safe and promising treatment. We plan on using our ongoing learnings from SurVeil to guide us through the best regulatory and clinical strategy for our next steps with AVess.

We're currently completing the development of the full matrix of drug-coated balloon sizes for AVess for use in future clinical trials and regulatory submissions.

The second platform of our product pipeline is our Sublime radial access platform. We have already had our first clinical use of our Sublime guide sheath with excellent positive feedback from the treating physician. We'll continue to expand the clinical use and the product evaluation of the Sublime guide sheath so that we have substantial information on its performance in a broad scope of cases. We have encountered some delays in the scale-up manufacturing validation of our Sublime .014" radial below-the-knee PTA balloon catheter. Our team is working diligently to get back on schedule.

Regarding our follow-on offering, the .018" balloon catheter product, we are making progress in completing this development and expect to file for FDA 510(k) clearance, which we will expect to submit in Q3 of this fiscal year. We believe that developing these first of their kind devices were quite challenging, gives peripheral interventionalists another essential tool treat proximal vessels behind and above-the-knee via radial access for all patients suffering a peripheral artery disease.

Finally, we received many questions about our exciting Pounce thrombectomy platform. As a reminder, we received FDA clearance for our Pounce Thrombus Retrieval System last September, which gives peripheral interventionalists an innovative nonsurgical tool for treating arterial thrombotic occlusions. Our team is working diligently on all of the necessary product and the process validations and early manufacturing builds so that we can have products for clinical use before the end of our fiscal year.

Turning to our IVD and Medical Device businesses, Tim will comment on the detailed financial performance shortly. With regard to our Medical Device business, the dramatic increase in COVID-19 cases and hospitalization in our fiscal Q1 in many large metropolitan areas of the United States and in certain areas of Europe, has forced many hospitals to postpone or even cancel numerous elective procedures. Our Medical Devices team has done a superb job of dealing with all difficult logistical and operational circumstances brought on by the pandemic, even as we continue to support our customers with the ultimate goal of providing essential services to patients.

Our IVD business had a great quarter. Strong demand of our distributed antigen products and our microarray slide surface products led to a 17% year-over-year revenue growth and delivered 53% operating margin.

In closing, I'm proud of our continued execution of our critical strategic objectives while protecting our team's health and safety and meeting all of our partners and customers' requirements. While we can't predict when things will be back to a pre-COVID normal, we continue to execute our strategic plan. In the past 9 months, we have received multiple regulatory clearances, announced strong clinical data for 2 exciting new products even as we manage our core businesses, optimize cash and capital allocation during a worldwide pandemic. While there is much yet to be done, I am highly confident that we are well positioned to deliver sustained growth and shareholder value over the long term.

I'll now turn the call over to Tim to provide more details on our fiscal first quarter '21 results. Tim?

Thank you, Gary. During today's call, I will provide an overview of our first quarter operating performance. While we are not providing fiscal 2021 financial guidance at this time, I will provide comments on the revenue impacts associated with our SurVeil drug-coated balloon distribution and development agreement with Abbott Vascular, including the revenue recognition associated with the achievement of the $15 million TRANSCEND clinical report milestone, which we expect to receive later this month.

Revenue for the first quarter of fiscal 2021 declined 1% to $22.3 million compared to $22.6 million in the prior year. Our Medical Device revenue declined 7% to $16.2 million as the business faced continued headwinds from the expiration of our Gen 4 coating patents and COVID-19.

Our In Vitro Diagnostics business grew 17% to $6.1 million, driven by strength in demand for our distributed antigen and microarray slide surface products. Our first quarter royalty and license fee revenue totaled $9.3 million, down $800,000 or 8% from the prior year period, primarily as a result of the impact of the expiration of our fourth-generation hydrophilic coating patents and lower procedure volumes due to COVID-19.

Royalty revenue declined 11% to $7.9 million in the first quarter compared to $8.9 million in the prior year quarter. In the first quarter of fiscal 2021, our royalty revenue experienced unfavorable but expected impacts related to the expiration of our fourth-generation hydrophilic coating patents and COVID-19 of approximately $900,000 and $400,000, respectively, which was partially offset by continued growth in our next-generation Serene coating royalties.

Our SurVeil distribution and development agreement with Abbott Vascular generated license fee revenue of $1.3 million in the first quarter and was flat as compared to the year-ago period.

Product revenue of $10.1 million in the first quarter was up slightly compared to the prior year quarter. In our Medical Device business, product revenue, which was down 9% to $4.6 million, benefited from our recent distribution partnership with Cook Medical for .014" and .018" balloon catheters, which was offset by lower order volume for our coating reagents as our customers manage inventory levels that had been previously increased to minimize potential supply chain disruptions due to COVID-19.

In Vitro Diagnostics product revenue grew 12% to $5.5 million compared to $5 million in the prior year period, driven by increased demand for our distributed antigen products and our microarray slide surface products.

R&D services revenue of $2.9 million was up 15% or $370,000 compared to the prior year period as our IVD business has benefited from increased customer development project opportunities. Revenue from our Medical Device R&D service offerings was consistent with the prior year.

The Medical Device business reported an operating loss of $600,000 in the first quarter compared to an operating loss of $420,000 in the year-ago period. Medical Device operating results were unfavorably impacted by lower gross profit, offset by lower operating expenses, driven primarily by lower TRANSCEND study costs.

The IVD business grew operating income by 24% or $620,000 to $3.2 million in the first quarter. Operating margin grew to 53%, up from the prior year's quarter, 50%, as we benefited from strong topline growth and margin expansion.

Product gross margins were down in the quarter at 63% as compared to 68% in the prior year quarter. Product gross margins were unfavorably impacted by lower Medical Device reagent product revenue, partially offset by favorable leverage on IVD revenue growth. R&D expense, including cost of clinical and regulatory activities, was 49% of revenue for the first quarter as compared with 54% in the year-ago period. R&D expense was $10.9 million for the first quarter, down 10% or $1.3 million as compared with the year-ago period, driven primarily by a decline in SurVeil-related costs, including TRANSCEND.

SG&A expense in the first quarter of fiscal 2021 was $7 million or 32% of revenue compared to 31% of revenue in the prior year period. SG&A expense was essentially flat with the year-ago period.

Now turning to income taxes. We recorded income tax expense of $170,000 in the first quarter compared to income tax benefit of $250,000 in the prior year period. Both periods reflect the impact of taxable income for the full year in the U.S., nontax benefited amortization and operating losses in Ireland. On a GAAP basis, diluted earnings per share was a loss of $0.02 in the first quarter as compared with earnings of $0.01 in the prior year quarter. On a non-GAAP basis, diluted EPS was earnings of $0.02 in the first quarter versus earnings of $0.05 in the prior year quarter.

Moving to the balance sheet. We continue to have a strong cash position and no debt. In the first quarter, we began with $61.1 million of cash and short-term investments and used $4.3 million of cash and operating activities. During the quarter, we paid $1.3 million for capital expenditures. As of December 31, 2020, we had cash and short-term investments totaling $53.9 million. Our current cash and investment balances provide adequate capacity to support our strategic growth initiatives.

Turning now to the revenue impacts associated with our SurVeil drug-coated balloon. As Gary discussed, we successfully achieved the TRANSCEND clinical report milestone under the SurVeil distribution and distribution and development agreement with Abbott Vascular. We estimate the revenue associated with this $15 million milestone payment, which, again, we expect to receive later this month to range between $11.3 million and $11.6 million in fiscal 2021, of which approximately $10.5 million will be recognized in Q2. Furthermore, we estimate the full year fiscal 2021 license fee revenue associated with the SurVeil agreement, including the clinical report milestone, to range between $16 million and $17 million.

Operator, this concludes our prepared remarks. We would now like to open the call to questions.

(Operator Instructions) Our first question comes from Mike Matson with Needham & Company.

I guess, I wanted to start with SurVeil. So I know you gave some timing there around when you think it could be approved. But I guess my question would be, do you expect Abbott to launch this thing kind of immediately upon approval? Or do you expect some kind of lag there in terms of -- between when it's approved and when they ultimately launch the product?

Yes, Mike, thanks for the question. One thing to keep in mind today is, we got this trial to the podium, the results of the podium probably faster than any of the trials. So the LINC presentation was literally just a couple of days after we had seen the breadth of the data. We have seen a high level data earlier than that.

So we have not -- both we and Abbott recent vintage digesting the results and are quite pleased by both partners. And so we have not had any detailed discussion on launch timing yet. I suspect -- I don't know this, but I suspect for competitive reasons, they may want to keep some of that close to their hip. But when we have a better idea of the broad launch window, we may choose to say something at that point, but really, we haven't gone into any detail with the commercial team.

Okay. And then you mentioned with the Pounce thrombectomy product that you expected to be in clinical use before the end of the fiscal year. I would assume that, that's clinical use for the sort of due diligence, both on your part and potential partners part before you sign a deal? Is that right? And does that mean then that it would likely be fiscal '22 before we see any kind of agreement there, distribution deal there for Pounce?

Yes. No, good question. I'll let Tim talk a little bit of the fiscal '22 impact. But the -- typically, and this is just a broad brush. Firstly, last 30-something years, I'd like to see at least 100 clinical users and a broad swath of case types. And then that way, we really have shaken the product down and understanding how it's best to use, what cases it's most successful in. And having that data on our belt, we believe dramatically increases the book value.

When we say here, we've got something, we actually have data to prove it versus merely a regulatory approval and a bunch of night flight. So definitely, however long it takes to get that level of case feedback, I think that bolsters for us the value of the device dramatically. And that will lead us into, I would say, at least the first quarter of fiscal '22 to get the -- that case series done.

Right. Thank you, Gary. Yes, Mike, it's a great question, and I would guide you to fiscal 2022. Just for the benefit of folks listening on the call, this isn't unlike what we did with Telemark, and with the .014" and .018" PTA balloon catheters, which ultimately found distribution agreements signed with Medtronic and Cook. So we're taking a similar page out of the playbook.

Okay. And then just my final question would be on the royalty headwinds. Can you just remind us, is this going to be largely through after fiscal '21? Or is that going to spill into fiscal '22? The royalty headwinds -- sorry, the patent expiration?

Patent expirations, absolutely. So I appreciate the question. The Gen 4 patent expiration, we will work our way through that this fiscal year, 2021, and it will become a tailwind in 2022. Just for folks modeling purposes, as they think through the $3 million headwind that we've communicated with regard to the Gen 4 patent expiration, we have realized about a $900,000 impact here this quarter, I would just say probably a simple way to think about this is the remaining $2.1 million would be pro rata over the next 3 quarters.

Our next question comes from Brooks O'Neil with Lake Street Capital Markets.

Can you hear me okay?

Hear you loud and clear, Brooks.

Great. So the only thing going faster than your product development efforts are -- is the speed at which Tim reads a script on this call. So congratulations on your progress. I have a couple of questions. First, I'm just curious, if the FDA shows any sensitivity to the reality that they're leaving Medtronic Admiral on the market to spread paclitaxel wantedly while you have a superior product with 75% less paclitaxel, which seemed to be something that threw all doctors and investigators into a tizzy last year?

Yes. First of all, the IN.PACT device clinically, we've not seen any clinical outcome-based safety issues. The paclitaxel, debate obviously is a broader issue in terms of long-term mortality signals showing up between -- sometime between years 2 and year 3 after treatment. But my point is less is more if you're getting to see in impact It's not IN.PACT, it's a impact.

So these doses of the paclitaxel on these drug-coated balloons are not oncology type doses, but frankly, if it were me, if I can get the same -- similar outcomes with a lower dose of such a powerful drug, I think that's always better. But I'd stop short of saying or implying that the IN.PACT device is not safe. It's just the therapeutic window of having a low dose drug to me just makes sense to be better.

And the way we think about it, too, is technology development always builds on the prior generations, right? So we're glad to see devices like the first-generation DCBs in Europe, devices like the IN.PACT Admiral and the Stellarex and Lutonix devices come to market and even the Boston Scientific Ranger, because then it gives us the ability to build upon their technology base and continue to improve the device.

The FDA usually -- when I've dealt with them, you stand alone on your safety. Safety is something that you could look comparatively, but their keen interest as it should be is about your devices safety pretty much by itself.

I know I haven't answered your question, but at least give some context.

No, no. Yes. I understand and I appreciate all that context. It makes total sense to me. So here's another questions. I'm obviously tremendously impressed with your pipeline of products and opportunities that you've laid out. And I was hoping you might handicap for us the 1 or 2 or 3 that you think maybe beyond SurVeil offer the greatest long-term opportunities for Surmodics.

That's a good and a challenging question. The 3 platforms have different reaches and time and impact. And so the PMAs are just long-term cannonballs, as we call them, right? I mean, you have to have the patients to get through it. I think what's particularly pleasing is the base technology platform of our drug delivery really appears to work -- and work well for a lower dose of the drug.

So what that means for Avess is exciting. AV fistulae remains one of the -- keeping the patency of the AV fistula for renal dialysis remains one of the biggest headaches from an economic viewpoint in the United States for Medicaid because the amount of retreatment you need just to dialyze these patients. So I think it helps us feel even better about our AVess platform. We're quite excited about Sundance.

Our clinical team, kudos to them, finishing that enrollment earlier than planned, and so we're excited to unwrap how Sundance performs. And that -- again, it's safety, but you get some mild indication of efficacy, especially since we're doing a follow-up angiogram on these patients. So that will be exciting because critical limb ischemia is -- I mean nothing really works and having more devices or technologies that can actually help those patients, we think is pretty exciting. So those are 2 very large and addressable markets right there.

The radial access platform is a bit of a sleeper. I mean, it's a suite of products that will take some time to develop. But if you have the vision that within the next 5 years, let's say -- and this is just a vision, right, every OBL will have better patient care, better patient satisfaction and much better economics, if they did the majority of the procedures via radial.

So while the adoption curve may take some time, those products have a positioning for us. When that adoption does occur, we're well positioned with a suite of products that help that. And then Pounce, the market has been really favorable towards thrombectomy devices. By the way, it's not why we're doing it. We think the current generation of devices continue to improve, but there are still some pretty big gaps to close in thrombectomy, notwithstanding the current devices. So my short answer is -- and it's a good thing to look at perspective of Surmodics.

If we have one product of one of these products, I think people would be like, wow, you've got something special. Counterintuitively -- sometimes only have 3 really amazing platforms, it seems to psychologically dilute people to say, okay, they got 3 things. So no one of them could be good. I would say, any company would give their right arm to have one of our platform. So I'm excited about all 3 for different reasons in the portfolio.

That's really helpful, Gary. I really appreciate that. So let me ask one last question. So I know I'm not asking you to agree with this or disagree with this, but my own personal view is that as SurVeil gets launched and some of these other things get launched that the revenue growth rate is going to accelerate dramatically at Surmodics. So my question is, philosophically, as that happens, should we expect you to continue to invest 30%, 40%, 50% of revenue in R&D? Or do you think the R&D levels will either stay flat or begin to shrink as some of these things come through the pipeline?

Sure. The way I look at the percentage of is a derivative of what work needs to be done in product development, and right now because high revenue ramp hasn't started in some of these pipeline activities. So I would expect it to go down just because the absolute number of things we can work on is not intended, obviously. And so therefore, that ratio, that percentage clearly would go down, but I want to bring back to one thing. If we have an opportunity to start on other aspects of those platforms or I should say, if we have an opportunity to accelerate with our experience curve in some of these platforms, we wouldn't hold back because of a ratio or percentage number. Tim will release the funds so that we can do it, but I don't see it staying on that very frankly. It'd be very hard to maintain that rate with the revenue we expected.

Yes. Brooks, it's a great question, and Gary is precisely right on this one. Look, we will continue to fund the appropriate opportunities. And what really increases the percentage of the R&D spend compared to revenue is the funding of pivotal clinical studies that we've seen for SurVeil. There is potential in our future where we may be finding pivotal studies for AVess and for Sundance. That yet remains to be determined. But remember, in the case of SurVeil, we found ourselves in a position where we're able to secure significant upfront license fees and milestone payments for the technology, and that makes good business sense.

Gary and I, pre-pandemic, had established kind of a point of view in terms of what investors could expect longer term, and we commented on an EBITDA margin of 25% or greater. And I think we commented on that beginning in fiscal 2022. We haven't changed that perspective. Clearly, the pandemic, it creates a little bit of fogginess with regard to that, but I think what folks can expect from us is that we're going to be delivering double-digit topline revenue growth over time, and we're going to be expanding the margins. We think these technologies -- high-value technologies and products and expanding margins can lead to significant long-term shareholder value creation, and we'll fund those things that we think believe provide the greatest opportunity to help us with that endeavor.

Absolutely. Makes sense. Will you send us a copy of your prepared remarks so we know what the heck you said?

Absolutely.

(Operator Instructions) Our next question comes from Jim Sidoti with Sidoti & Company.

Can you hear me?

Loud and clear, Jim.

Great. So it's been about 2 years since the meta analysis from a Dr. Katsanos came out and kind of turned the world upside down for you guys. I mean, looking back now, do you think that this is actually going to be a positive for you going forward because of the data that you presented last month?

The safety issues really, Jim, are long-term versus just more drug. And even without the paclitaxel, the debate and the concerns of a long-term mortality, we still believe less is more when it comes to drugs like paclitaxel. But as far as the safety issues, I think you all saw that the FDA -- the SwePaD data was published, I guess, earlier this year, and the SwePaD data, they looked at the 2 -- I think the average fall off was 2.49 years on that trial.

And really, the hazard ratio, the difference between non-drug and drug didn't show any statistical significance, and the FDA actually responded publicly in a letter to the editor in the New England Journal. I think it was early January to that publication. Andrew Farb -- Dr. Andrew Farb, Bill Maisel and Misti Malone responded to that.

And as far as the paclitaxel debate, the FDA was pretty clear. They said a couple of things. One is current products going through the approval process will have to bring long-term data. That's us an example. But they also said they will be looking to carefully monitoring the data as these data, the vintage of the data gets from 2.5 years to 3.5 years. I believe that data, I don't know this, will demonstrate no statistical different signals, and will give the FDA an ability to unwind this process.

Because the signal seems to show up between years 2 and 3, I believe that he's looking for data that's now beyond 3 years to demonstrate that these devices are safe. So I -- as far as being a benefit in the marketplace, I think we have that with or without paclitaxel debate, but it ends up being the psychology in the mind of the customer who are the treating physicians of whether less is more because of the paclitaxel debate. Does it make any sense?

Yes. Yes, I agree. All right. And you commented that the royalty revenue was off in the December quarter in part due to the slowdown in procedures. I know it's still early in the March quarter, but now that the vaccine is out and cases seem to be on the downswing, have you heard any anecdotal data that procedures have started to come back?

So Jim, we're actually not hearing a whole lot right now in terms of any significant changes from what's happened here in December. We're going to stay tuned. Obviously, it's pretty important. But I just tell you the nature of this virus, it seems like sometimes we might have it under control, and then all of a sudden, we get these spikes, and it can influence the ability to perform procedures and treat these patients. Some of the things that we have heard are that certain regions of the country tend to be more impacted than others. I guess, like the rest of the world, we're all waiting to see kind of the effect of the vaccinations and how it can help economies recover and as well as allow patients to seek treatment and then be in a position to be treated by their physicians in the proper care setting. So we'll be talking more about this, unfortunately, I think, as we go through the year.

Okay. And then on the income statement, SG&A was actually down from the December quarter, pretty much flat from year-over-year. I was a little bit surprised by that. I thought that you'd increased spending. Is that something that you expect to happen in the back half of fiscal 2021?

Yes. I think there are clearly a couple of things that impacted the SG&A spend here in Q1. Notably, it was more on the comp side of things. And so -- and timing of some of the hiring activities. I would expect that we'll probably kind of ramp up here Q3 and 4, perhaps a bit here in Q2. I would remind folks that back in November highlighted that we expected somewhere in the low double-digit expense growth on the SG&A line. I wouldn't lock that back quite yet. I think it will be somewhere around there. So that's where I would guide you.

Okay. And then last one for me. With another very strong quarter for the IVD business. Is that due to COVID testing? And is that sustainable?

It absolutely is not as a result of serology tests or COVID testing. And I think, Gary and I have been pretty vocal over the last few years about what a gem of that business that is, and how it's been punching its way, growing at a multiple to the market. The market for immunoassays grow about 3% annually. You'll notice that the IVD business throughout the course of rolling 4 quarters are going to have a couple of quarters that are exceptionally strong and then a couple of quarters that perhaps are more modest. I will guide you and continue to guide you until otherwise that it's a business that we expect mid- to high-single-digit revenue growth.

(Operator Instructions) Our next question comes from Mike Petusky with Barrington Research.

Can you speak to just what you see as sort of the -- and I don't know if the right way to address this is sort of total addressable market or like some kind of term like true market opportunity. But when you think about what you guys are trying to do in radial access and thrombectomy, is there a way to size up what you guys feel are the opportunities for both of those platforms?

Yes, absolutely. Why don't we start with Pounce and arterial. The way to think about this market here is to think about the number of patients that present with clots and are treated either medically or with endovascular procedures. And I think, in the U.S., it's approaching 200,000 patients annually. And from what I understand on the endovascular side, there is probably somewhere around about 100,000 cases in which patients are treated either with catheter-directed thrombolysis or with a mechanical or aspiration-type technology to remove the clots.

And these devices range anywhere from maybe 1,700 to about 3,000. I think somewhere around the 2,500 range is probably not a bad way to think about it. So that gets you to a total addressable market of about $400 million on a global basis. So I'm giving you some numbers at our U.S. and just, in essence, multiplying by 2 to get to a global view. So it's a very interesting and a market that we view as being sizable and having the potential to grow because of penetration and bringing new technologies to the market. So one that's very exciting.

I'll tell you that with regard to other clot removal technologies, notably for deep vein thrombosis or pulmonary embolisms, you'll find that the market has much higher selling prices for those devices, anywhere from $6,000 to $11,000. And you'll see, in terms of the number of cases, it's -- they can be larger than what you'll find on the arterial side. So really, really strong addressable markets in other indications, and we like what we see with the addressable market with regard to arterial clots.

So Mike, moving on to radial access. There is over 600 -- almost 650,000 cases that are performed annually above the knee, where .035" or an .018" PTA balloon catheter are often used. And the vast majority of these cases are done, they're conducted using the femoral access approach. Going radial is a very small penetrated opportunity today. You're looking probably low single digits in terms of penetration.

I'll just -- I'll remind folks that on the coronary side, it's about 40-ish percent of cases in the U.S. today to treat coronary vascular disease are done through a radial access approach. So the thinking here, there is a lot of advantages, as Gary was describing. There is patient safety, less loss of blood, lower rate of infection.

For the patient, it's more comfortable procedure. They get discharged earlier. They get to go home quicker. For the health care setting, it's better economically, especially in an OBL sitting, they can get the patients through the procedure and get them discharged and continue to treat additional patients. So there is benefits all around, and we're in the early stages -- innings of this baseball game, if you will. So it's quite attractive. As Gary mentioned, it's probably a little bit longer term. It's going to be probably 5 years to build out that penetration and will require additional devices to really be able to capture more penetration. So those are things that we're working through at Surmodics, but both markets are quite attractive and quite large.

Okay. And these are my words, not your words, but it's not unreasonable to think that incremental revenues from both of these platforms could start as early as fiscal '22, correct?

That's how we're thinking about it, Mike. I would say those are our words.

Yes.

Okay. It's fair enough. Even better.

Yes.

And then I may have missed this or you may not have spoken to it, but is there any commercial progress to relate in terms of the -- some of the earliest 510(k) approvals. I guess I'm talking mostly about the balloon catheters on Telemark. I mean, is there anything to say there in terms of actual revenue generation? Or any progress you can talk about there?

Absolutely. In my prepared remarks, which notably maybe spoke a little too quickly, so I might have been missed, but I did call out within the product revenue. One of the drivers in the med device business was, in fact, the sales of our .014", .018" PTA balloon catheters to Cook. Both Cook and Medtronic are still in the process of bringing those products to market, and we like what we're seeing.

I'll tell you that back in -- about a year ago at this time, I think we kind of commented that the expectation for the first full year of launch could be somewhere between $0.5 million and $1 million per product.

Unfortunately, we saw ourselves in the midst of the pandemic as there are customers who are looking to launch products. I would probably suggest that it's probably not a bad idea to look at the potential for this fiscal year as being somewhat similar to what I previously commented. I do see, however, longer term that these products could be looking at somewhere between maybe $1 million and $1.5 million or maybe north, depending on the product in terms of revenue to Surmodics on an annual basis.

So again, we need a little bit more time and traction with regard to the partnerships to get a better perspective in terms of how longer term and how sticky the performance will remain, but we like what we see today.

Okay. Great. And then was there any temptation on your guys part to try to put some guidance out there, given that there is definitely a feeling that between the vaccine and cases falling off that maybe this is more understandable going forward and more of a positive outlook. Is there any chance, I guess, say, next conference call where you guys say, we sort of got our arms around what we think is the lay of the land here, and we're going to initiate sort of more formal guidance?

Yes that would be ideal, Mike. I certainly can't promise anything, but what I will tell you is, I believe that we've provided some pretty clear color in terms of how to think about the business, both from a royalty perspective as well as the SurVeil license fees revenue that we recognize each quarter and also on expenses.

So I think there is enough color on the expense side and then some of the larger revenue streams to help folks appreciate and understand how to think about the business this fiscal year. But like you, I certainly hope that we'll be in the position here to provide guidance at some point in fiscal 2021.

Yes. For us, usually when you have multiple revenue streams, it gives you a smoothing function to provide guidance. In Surmodics' case, our revenue streams are so distinct so they don't smooth each other. They actually increase the variability. So that's one of the reasons we chose not to give guidance now. But our bias would be when Tim and I have that clarity to provide you.

Fair enough. All right. Well, guys, congratulations on all the progress.

There are no additional questions at this time. I'd like to now turn it back to our presenters for closing remarks.

Well, thank you, and thanks for joining us on our first quarter earnings call. And please stay safe everyone and until the next time. Thank you.

Thank you. Ladies and gentlemen, this concludes today's presentation. You may now disconnect.