Drug delivery and pharmaceutical coating technologies firm SurModics will cut jobs and reorganise operations in a bid to reverse falling revenues and tumbling profits.
The firm, which saw operating income and revenue the nine months to September fall 92 and 47 per cent respectively, will lay off 30 employees and form separate medical diagnostics, pharmaceuticals and in vitro diagnostics units.
The move will allow SurModics to pursue grow opportunities in its diagnostics business and will position its pharmaceutical unit, which includes its core delivery technology business, for future growth, according to interim CEO Philip Ankeny.
He predicted that: “Today's actions will bring operating expenses more in line with revenue and enable us to achieve our near- and long-term goals," adding that the move will align SurModics operations more closely customer requirements.
The new restructuring plan, expected to cost between $1.3m and $1.7m, is the second the company has announced since March when it unveiled a scheme to focus operations into separate research, product development and sales and marketing units.
The March plan preceded the departure, in June, of CEO Bruce Barclay who, after taking the reigns in 2005, oversaw an ambitious programme of expansion and acquisition that, after showing initial promise, has faltered in the last few years.
Under Barclay’s tenure SurModics sought to expand its business beyond its focus on cardiovascular diseases, and more specifically beyond its deal drug delivery coating deal with Johnson & Johnson that at the time generate 33 per cent of its revenue.
This expansion saw SurModics attempt to strengthen its delivery and diagnostics offering with the acquisition of Brookwood Pharmaceuticals and BioFX Laboratories and also move into ophthalmology.
And at first the investments seemed to be working with, most significantly in its deal with US drug major Merck & Co in 2007 that earned the firm a $20m upfront license payment.
However, the following year Merck pulled the plug on the collaboration, significantly impacting SuModics revenue in 2008. This decline continued in subsequent years with the firm reporting losses for all but its ophthalmology unit in 2009.
Whether today’s planned restructuring will reverse the decline remains to be seen but SurModics will hope that it is welcome by the markets which have, since October last year, watched the firm’s price fall from $29 to $12 per share