Q3 2020 Surmodics Inc Earnings Call
[music].
Thank you Dan good afternoon, and welcome to Surmodics fiscal 2023rd 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 1995, and includes statements regarding Surmodics future financial and operating results for other statements that are not historical facts.
Please be advised that actual results could differ materially from those stated or implied by are forward looking statements, resulting from certain risks and uncertainties.
Putting those described interest SEC filings.
Surmodics disclaims any duty to update or revise our forward looking statements as a result of new information future event development or otherwise.
We'll also refer to non-GAAP measures because we believe they provide useful information for 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 for the audio recording of the webcast will also be archive for future reference.
The press release disclosed in our quarterly results was issued this afternoon and is available on our website at Surmodics Dotcom I will now turn the call over to Gary My garage, Gary. Thank you Tim Good afternoon. Thank you for joining US. We hope you are seeing safe and healthy during this challenging time.
I'm quite pleased by outperformance this quarter. Despite the difficulties post like over 19 as we navigate through this pandemic. We continue all commitment so a strategic objectives for fiscal 2020.
Notably achieving a number of critical milestones I'm continuing to ensure that we remain well positioned financially.
Before we dive into an upbeat and all progress I'll provide some where we fall the topline and Tim will also cover in more detail either.
First total revenue for the third quarter fiscal 2020 grew by 10.4% to $26.9 million as compared to $24.3 million into third quarter fiscal 2029 keep.
Looking at our two business units medical device grew 8% to $20.5 million and Invitro diagnostics grew 18% to $6.4 million into third quarter as compared with the prior year quarter.
Oh medical device business revenue growth was positively affected by increase license fee revenue from all the surveil drug coated balloon agreement with Abbott vascular as a result of the CE Mark for with Surveil DCB.
This license fee revenue more than offset a meaningful decline in coatings royalty revenue, which resulted from the impact of Coolfit 19, and exploration of all fourth generation hydrophilic coating path.
As a reminder, a key component of all medical device business revenues derived from royalty revenue and therefore dependent and our customers sales of devices that use of technology.
The procedures using our coatings and products ranged from urgent two elective procedures and as a result remain largely variable and dependent on the recovery of vascular procedures from this pandemic.
Medical device revenue in Q3 was impacted two significant degree by crew in the virus procedure deferral. However, we were encouraged to hear what resumption of elective procedures and easing of these restrictions in certain geographies as the food quarter progress.
Turning to I'd business, the 18% growth we generated in Q3 over last year was the result of continued momentum in key chemical components and the de any microarrays slides with a small positive impact from Corbett 19, diagnostic and serology test that R&D volatile and by our customers where we.
Hi, a provider of technology.
Tim will discuss Q3 revenue performance in greater detail, but needless to say, we're happy to support our customers who are involved in corporate related research that can result in that a diagnostic and serology test.
Performance in Q3 exemplifies our team's dedication to our mission the diagnosis and treatment of disease. Despite the challenges brought forth by this pandemic, we're committed to making meaningful progress I know initiatives for this fiscal year.
As a reminder, this year, we set out to accomplish the following.
First to ensure the continued success of our surveil DCB, specifically to perform high quality patient follow up for the primary endpoint analysis in the transcend trial to obtained CE, mark and to make substantial progress towards achieving ft approval.
Second to continue to make meaningful advances in product development and the regulatory approvals across our entire product pipeline.
And last to continue to optimize revenue and the cash flow performance from the legacy offerings in our medical device and victory diagnostic businesses that fuel our strategic growth initiatives.
Starting with the Vale as we announced early in June we obtained CE Mark certification, achieving a major milestones in our mission to pioneer devices that improve treatment of peripheral artery disease.
Although we're not forecasting revenue from the sale of surveil drug coated balloon product during the remainder of this fiscal year, we understand that all partner outlets is continuing to evaluate the appropriate timing for European launch, we're pleased to receive the $10.8 million milestone payment as a result of obtaining this fall.
As part of our additional goals for Surveil. We have successfully conducted 12 month follow up visits with more than 70% of to patients and to transcend trial as discussed last quarter. We have observed some patients were unable to complete their schedule 12 month follow up visits as a direct result of corporate 19.
The transcend trial was robustly designed to accommodate a certain number of patients last fall and we're diligently working with the ft on a plan to account for missing for out of window follow ups in the event that they are critical to the statistical power the trial.
We had tenacious and I'll follow up as many patients as we possibly can collect all relevant data for successful trials statistical analysis.
Turning to our second strategic focus our robust product pipeline.
With respect to a best DCB as announced last quarter, we completed data collection in our first in human study.
These results provided important safety data on a vast and directional data on the efficacy of the device as we shared last quarter freedom from Revascularization that six months was greater than 90%. We are equally pleased with the first in human trial results as we continue to seek a forum to present to this important data.
As many of you recall, our surveil drug coated balloons agreement with Abbott vascular includes options to negotiate with agreement for a best and Sundance drug coated balloon products.
I would Pascal has informed us that it has elected to allow the option period for exclusive negotiations of distribution rights for the a best DCB product to expire.
We are excited about a possible clinical giveth benefits that may be provided by all of that drug coated balloon and are currently assessing the next steps in its clinical development and future commercialization opportunities.
Moving to our Sundance are almost coated balloons for below the knee disease.
We have successfully initiated the first in human trial, it's called swing.
During the third quarter and have enrolled several subjects outside of United States, We expect to complete enrollment in this trial in the second half of fiscal 21, barring any unforeseen delays due to covert 19.
This trial is an exciting and important one for us as we test our so relevant drug coated balloon platform in a critical clinical application.
Turning to our non drug delivery pipeline and pounds, our newest advice as part of our unique thrombectomy platform.
As a reminder, we have an active submission for fighting key Clarence with FDA fall through syndication the treatment of clubs and peripheral artery.
Continue to actively responding to the requirements from the agency and are targeting clearance in fiscal 2020.
With respect to our regional platform. We are excited to announce that we receive FDA five tempe clearance for Subline full one for radio balloon catheters. This device can access the vascular chew fire, the radial artery and treat below the knee lesion.
Last year, we reduced the fighting key approval for the Sublime guide sheet to be used in concert with this device.
Our team is continuing to make progress on developing our whole one eight per fully diluted cap so to treat via radio access more proximal vessels behind and above the knee.
As a reminder, both of these balloon catheters can be used to help patients suffering from for for autoimmune disease and they'll end.
Looking forward, we're prepared to both to bring both sublime radio one port Casper and the guy cheap to healthcare settings for clinical evaluations in fiscal 2001.
Finally, so our product portfolio specialty catheters, our hydrophilic PT on 401, eight balloon catheters, which expanded our partnership with Cook medical have now been commercially launch in the US with respect to tell them up coronary microcatheter, we shipped initial use stocking orders to.
Our partner Medtronic in the first half of this fiscal year ended in the third quarter. Another successful achievement, we achieved a CE mark for Telemark and have shipped initial European orders.
Bearing in mind, the challenges of Kubat 19, both partnerships the performing to expectations and have contributed to Q3 in fiscal 2020 DSD product revenue.
Finally, we turn till third objective for this year, our revenue and cash flow performance to drive investments until growth initiatives.
While in many respects Q3 performance was better than anticipated. It is still too early to speak of confidence on the timing and pattern of recovery to Prequaled performance. This is especially true given the recent resurgence of cases and responses continuing to be dynamic and shifting across regions and certain hotspot.
We continue to take steps to effectively manage our operating expenses and liquidity, while continuing to drive our objectives importantly, as our Q3 performance demonstrated our focus has not wavered with respect to ensuring that we continue to invest and successfully execute on our.
Long term growth initiatives.
In summary, our business fundamentals remain strong we continue to make significant progress on our objectives and remain confident in our plan to deliver durable long term growth and profitability.
I want to thank close by thanking our team at Surmodics for their dedication throughout these challenging times I'm proud of our team continues to deliver on our mission. Despite the multiple organizational economic health care and business hurdles, we faced with its pandemic.
I'll now turn the call with attempt to provide more details in our third quarter fiscal 2020 results, including some further perspectives on the impact of the Cooper 19 pandemic is having on our company results Tim.
Thank you Gary during today's call I will provide an overview of our third quarter operating performance as we communicated last quarter due to the uncertainty created by the coated 19 pandemic our full year guidance is suspended.
However, I will provide some commentary to help provide insight into the impact that Kobe 19 on our company as we head into our fourth quarter. These comments there based on circumstances that exist today, which we acknowledge our fluid and subject to change.
First let me speak to the impacted cobot 19 during our third quarter.
During the quarter, our operating results were impacted by the krona virus pandemic in four primary areas.
First our medical device coating royalties were impacted by the deferral of elective endovascular procedures.
Second our legacy Ireland medical device product revenue was impacted at certain customers reduced for cold purchase orders.
Third medical device R&D revenues from coating services was moderately impacted by reductions and customer orders.
Apart from royalty revenue, we've been pleased to see the resilience of our medical device business to the impacts of Kobe 19.
Product revenue from reagent manufacturing has remained steady.
Finally, our endometrial diagnostics business has benefited from customers utilizing our chemical component as they work on corporate related research and antibody test.
Overall, we estimate that call that related impact to our third quarter revenue was in excess of 3 million.
We understand procedure volume declined sharply in April with modest recovery in May and June while we are hopeful that our third quarter saw the peak of the krona virus impact. The recent increase in cases in hospitalizations across several states suggested that timing and trajectory of procedure recovery to pre Kobe.
Cobot levels remained uncertain and difficult to predict with confidence.
Looking forward since the end of June within our medical device revenue streams, we are seeing a pickup in customer demand across several of our offerings, including our legacy Ireland balloon catheters and our coating reagents.
Anecdotally, we are hearing that several of our customers have seen steady increases and procedure volume through June and into July which may climbed to a sequential recovery in our Q4 royalty revenue.
Moving to financial results for the quarter revenue for the third quarter of fiscal 2020 grew 10.4% to 26.9 million as compared with 24.3 million in the third quarter of 2019.
Looking at our two business units medical device grew 8% to $20.5 million and in vitro diagnostics grew 18% to 6.4 million in the third quarter as compared with the prior year quarter.
Our third quarter royalty and license fee revenue totaled 12.4 million up 770000 or 7% from the prior year period as revenue recognized from the achievement of the $10.8 million Surveil CE, Mark milestone payment offset the impacts related to Corona buyers procedure deferrals.
And the expiration of our fourth generation hydrophilic coating Pan.
Our surveil distribution and development agreements with added vascular generated revenue of 7.6 million in the third quarter up 5.6 million compared to the year ago period.
We benefited from the recognition of $6.7 million and added license fee revenue on the CE Mark milestone payment.
Royalty revenue declined 4.8 million in the third quarter as compared to 9.6 million in the prior year quarter, which I'll remind you saw a 1 million dollar onetime benefit related to an extension of an existing hydrophilic coating technology license.
During the third quarter, we estimate that cobot 19 related procedure deferrals impacted royalty revenue in excess of $2 million, while the expiration of our fourth generation hydrophilic coating patents created an expected headwind of approximately 1.8 million compared to the prior year quarter.
For the third quarter, we estimated that coded impact to royalty revenue to be approximately 30% reduction to pre coded levels.
As a reminder, our third quarter royalty revenue is an estimate of the royalty will be well earned on our customer sales of devices utilizing our coatings. During the April to June period in excess of any contractual minimums.
Product sales of $12 million, where a bright spot during the third quarter and increased 2.1 million or 21% compared with a year ago period.
Our in vitro diagnostics business showed double digit growth as it also did last quarter.
Our third quarter IDBD performance was broad based as we saw expanding demand across our product portfolio. Our growth was also impacted modestly by demand for chemical components to support coded research ensure allergy test.
And our medical device business, we saw revenue generated from our recent distribution partnerships for Telemark in all on foreign on April in catheters more than offset holdings related declines in our legacy Ireland balloon catheter products.
Through the third quarter, we have shipped the majority of initial orders to support the launch of these recently commercialized products.
R&D services revenue of 2.5 million was down 350000 as compared with the prior year period, our coating services customers have reduced their demand in response to the coded pandemic.
The medical device business reported operating income of 530000 in the third quarter compared to operating income of 750000 in a year ago period, which benefited from the previously mentioned onetime coating license extension.
Medical device operating results benefited from increased revenue, which was offset by operating expenses, which increased 650000 and higher product costs as compared to the same prior year period.
I believe revenue of 6.4 million in the third quarter was 1 million or 18% compared with the prior year quarter.
Third quarter growth was driven by continued demand for micro array DNA slide products as well as group by growth of our protein stabilizers and biotech substrate products.
During the quarter our growth was partially benefited from coded research and antibody test strong revenue growth and improving product gross margins drove IBT operating margin expansion in third quarter to 51% as compared with 46% in the prior year quarter.
Product gross margins were down in the quarter at 63% as compared with 66% in the prior year quarter product gross margins were primarily impacted by an unfavorable shift in our medical device product mix.
This decrease was offset in part by the favourable impact of product gross margins from in vitro diagnostics driven by both product mix and leverage on higher revenue volume.
R&D expense, including costs of clinical and regulatory activities was 50% of revenue for the third quarter as compared with 55% in the year ago period.
R&D expense was $13.3 million for the quarter and was essentially flat with a year ago period.
In the third quarter clinical study costs decline for transcend and other clinical studies offsetting increased product development investments and costs associated with the initiation of our first in human clinical study for our Sundance blows in these thrombus drug coated balloons.
SGN a expenses in third quarter fiscal 2020 were 7.4 million or 28% of revenue compared to 24% of revenue in the prior year period, as Gionee expenses increased 25% compared with a year ago period.
Personnel and other investments to support product development and our strategic initiatives contributed to the expected increase.
Now turning to income taxes.
We recorded income tax benefit of 1.2 million in the third quarter as compared with an income tax benefit of 260000 in the prior year period.
Both periods reflect the impact of Nontax benefited amortization in operating losses in Ireland.
On a GAAP basis, our diluted earnings per share for 18 cents in the third quarter as compared with 11 cents in the prior year quarter.
On a non-GAAP basis, our earnings per share were 21 cents in the third quarter fiscal 2020 versus 15 cents in the prior year quarter.
Moving to the balance sheet, we continue to have a strong cash position and no debt.
In the third quarter, we began with $48.4 million of cash and short term investments and generated 11.4 million of cash from operating activities.
During the quarter, we received the previously mentioned 10.89 Abbott milestone payment and we also paid approximately 300000 for capital expenditures.
As of June Thirtyth, 2020, we had cash and short term investments totaling 60.6 million.
From a liquidity perspective, we are in a solid financial position for both our near term and future needs.
Operator. This concludes our prepared remarks, we would now like to open the call two question.
At this time for questions.
I would like to ask your question. Please signaled by pressing star one on your telephone keypad, if you're using the speaker phone. Please make sure. Your mute function is turned off to a lot of your signal to reach our equipment like in press star one if you'd like to cure for question.
And we'll pause for just a moment to allow everyone an opportunity to signal for questions.
We'll take our first question in queue comes from Jim Sidoti Sidoti and company. Please go ahead.
Good afternoon can you hear me.
Hi, Jim Hi, Jim we hear you while.
Alright, great great glad everybody well there.
I just want to be clear that 10.8 million payments now that weve.
We recorded by 10.8 million in the quarter or something less than that in turn on the income statement.
Yes, it's a recorded less on the income statement, we reported 6.7 million of that 10.8 million on the Q3 income statement.
Okay, and then the rest will be spread out over the next couple of quarters.
Yes, it will be it will go out.
Through the five year follow up period of the transcend study so I will be treated the in the same manner that the upfront license fees being treated as well as he added that first milestone payment the completion of the part and 46 patient enrollment in the study.
It has added indicated Q1, they planned to launch the once the device in Europe.
As a partner they then assessing the situation with the cool bit pandemic and also as you know.
The Paclitaxel issue one thing to keep in mind, Jim is the transcend data it could be seen is right around the corner potentially later in this calendar year. So in terms of marketing against the very crowded European.
Field that may be a relevant.
Dataset that they may need as well so.
One continue to work for them our job is to make sure we're able to.
Supply them on the decision to go with a full launch.
Okay, and you indicated that because the cobot follow up has become a little more challenging.
Thank God delays dilutive this data.
Well, we've been continuous discussions with the half the and the agency has been eminently practical above that so clearly the cohorts of patients were treating also the cause of patients who suffer so much of which consequences of catching call that so there has been in.
In some cases has been a reluctance to go in sort of hospital or the clinic and in some cases the hospital clinic was not able to accommodate them within window. So.
Yes, so we have lost some.
But we're continuing to followed by the said I think we'll have a 70% of the entire cohort that have had and when they will follow up is that remained up that 30%. We're doing everything we can including the ones that we still have left.
Within window and that will be through the middle of September so.
There is a possibility we may wait for some lead commas altice when they'll.
Just because we're in discussions with agency, they're going to look at the completed cases and ones that have done according to protocol, but they also interested as we are in the totality of the data. So the question is if there is some.
Straggling cases that come and outside of September October or November will have to make that decision as we will file we don't envision that right now, but it's not altered around with possibility. Nonetheless, the work to lock the database cleanup and all that stuff is ongoing so we're not waiting for.
Every and co lineup to do that the team will be actively scrubbing unlocking so that if we do lead for some lead follow up it's not as much on the critical apart.
Okay and with regards to supply you have the balloon and move the Guy Chief approved I assume that.
Those will go to the same partner.
Yes, I will first we wanted to do we started in a bit wrong side right, we havent guided to be able to access the guy cheese and in many respects. It's a road so nowhere because our guide sheet.
I just I believe we still have the smallest sheets compatible into five French version, that's on the market and.
That has Clarence and now we have I think our team Factcheck. This.
Simply the longest balloon that's ever been created this is a 2.5 meta working lengths advice as always do if we could treat people up tim's height with it trend along.
Thanks Bill.
So now we have the sort of a critical mass complimentary devices to evaluate them. It's no sense of your life reevaluating the sheets without the therapeutic we device and without a therapeutic device.
Without achieved the therapeutic vice whenever that may lag. So the first step as usual is we want to make sure Paul.
The those devices perform clinically as expected and we're going to take our time to do that.
Because the they quite unique devices and it's a quite unique approach for radio to the per free so.
Partners may be interested at this time, but we want to get our this part of the job done first before we we talked to them about it.
Okay, and then last one from me on Baby access.
No it sounds like since Abbott past.
Youre for other options is one of those options to start to trial on euro.
Yes so.
Recall during the.
Contract negotiations with severe.
Advertising wanted.
To have the value of an option and we say negotiation, there's some value assigned to that option and they they got the option I would categorize it as allowing to the option to expire.
Is not unexpected from all viewpoint.
Keep in mind again.
The transcends study.
Results, probably a few months off right three to five months lets say off and if if it's the same technology NFS that's in surveillance.
Could you imagine if it's a comparison with Medtronic and Medtronic has good reason results in the space.
So you could see if the transcend data looks good favorable for surveil with respect to Medtronic you could somehow translate that's a different vazculep at an easy is not identical is not totally financing, but you can make a much.
Less risky that to that point and so I think of that time.
We will continue just as we didn't surveil.
The clinical and product development behind the vessels, we have to fill out the matrix is big Blue Diamond is in subsea, there's a lot of work to do.
Before we contemplate.
During the next stage of clinical and by the time with finish that were will also have the trends and data available I think that will help us understand the value the residual risk in the value what we have to be so next clinical development, but as usual.
When we believe in something partners May come partners May go, but as we continue to fill this out as we believe its could create more value for better deal down the road.
Okay, and I guess I do have one more the in vitro diagnostics business.
Sounds like you.
You saw our actually.
Uptick in that food news, because you called it.
Is that a trend you expect continues through the west.
Fiscal two.
Yes, let Tim talked to that said, we want to be very careful about I mean that that was a nice small benefit I mean intrinsic momentum of the business as early drove it but it's really hard to predict in early research. These STEMI on us and Jim. It's a very good question. So just to remind folks IBT.
The diagnostics business grew.
18% and bought a million dollars year on year and just on that growth will.
We're talking a pretty modest amount of that growth well less than 50% in probably maybe say you wouldn't be wrong thinking it might be closer to 25% of that growth was coming from at Cobiz related activities as well as Gary mentioned, it's way too early and we have multiple partners that are working on things.
And you just don't know.
How long it will take to get into markets and get adoption.
But we're pleased with what we're seeing and clearly at this point here, we're happy to provide our customers who are working on kobin related activities with our chemical components to help them.
Develop the best possible sure allergy tests, and and help us with the pandemic.
Alright. Thank you that's it for me.
Thank you Jim.
We'll take our next question in queue comes from Brooks O'neil Lake Street Capital markets. Please go ahead.
Good afternoon, I'm going to try to ask him to many questions. It's Jim did see if I can get answers there, but my first one is.
You talked quite a bit about ex the patent expiration that gen floor and just curious if you could share what sort of your outlook for that business going forward and how you stand with.
Gen five in what's going on there and whatnot.
Sure. It Greg question, you know Brooks, we'd characterize Gen. Four previously in fact back in November as we are entering into fiscal 2020 kind of what we expected the impact to be and at that point, we highlighted a five to five and a half million dollar headwind and I'll tell you. We continue to think that's the case so.
I would suspect that Q4 is probably going to be slightly larger headwind than what we saw here in Q3, the 1.8 million.
And I did articulate previously that with regard to fiscal 2021, we'll continue to see some impact from patent expirations, but it will probably be about half of the amount that we're anticipating here for fiscal 2020, so somewhere two and a half to 3 million.
Probably one should probably think the impact will be in fiscal 2021, Amgen five actually was probably the best performing of our hydrophilic coating.
Generations.
Came in flat for the quarter.
Fortunately other other generations.
Impacted not only by Corbett, which I think overall reduced our portfolio by about 30% versus what we would have seen on without it. So.
So we're pleased with Gen five and I think once we get out of this environment with coded we're going to see some really robust growth from gen. Five.
Great and then.
Jim asked you about the best product.
I'm not sure I understand sort of what the commercial outlook is for Sundance. So could you just talk a little bit about that.
Yes.
We're really pleased to get that trial.
Up and running and sought enrolling patients.
I guess I can say this no we had hoped so we actually had a teed up full launch and then.
Some of the Western European countries that we are about to start on actually had really massive covidien, including a one of the principal investigators at the sequester so by the time.
She was able to get back we couldn't really stop the trial so really.
Spectacular executional team to get it started.
And at least in Western Europe, we have.
Seven sites that we are targeting to get this trial enrolling and this is on though on fall below the knee platform, where are we using sir olimus with the simile technology and excipient that we use so we were quite excited about this because.
It will tell us how well.
This device and the technology sales can perform the idea is to be able to finish and rolling this trial.
Sometime in fiscal 21, and it's a six month follow up. So then we will be able to go after that follow up assess.
The viability of that device to see it's really a safety study, but you will get some directional efficacy data as well, but also has the option right remaining with respect to the.
On that product as well so but.
We don't know I don't believe is any us approved the BT key device.
At this point, but keep in mind. We also got the breakthrough technology designation from the FD of this product I thought it was last year, we able to get that so.
Quite excited but the job is to really and roll. This trial is high quality.
Even in light of coal bid and follow up those patients within the next year.
Great and then my last one I was only joking about Jim.
My last question is.
Lastly year spending.
50% plus revenue on R&D today.
And it Barry tremendous fruit, we're really excited about it but.
Curious if you could share sort of your early thinking.
About how you might handled the R&D spending as we get into that period, where the revenue growth.
Starts to take off some of these old products watch.
So.
Tim could comment a little more into details, but when we talk a little R&D right now what's really.
We are doing pipeline development.
And pipeline develop means you have to have a pipeline intrinsic value of what we have really that pipeline. So we're still building a pipeline and we're not been steady state what I call product development, yet and that steady state you know really comes by with the returns from things coming out of the.
Hi, flying stopped offsetting the investments going into the pipeline right now that is completely out of balance because we have to invest in the pipeline for long term future.
The other thing to consider is that the.
Combination products like DCB.
Effort, so a pretty heavy hit it right. So we're committed to surveilled until we see this data.
Transcend the there will also help us how to think about vest and then we have in the next six plus quarters, we'll see how Sundance does so really if you're in for this you have to be in for that that time period. The the non drug products like the sublime pounds from back to.
The and supply that those will start returning probably earlier than the second to DCB. So sometime into 23 to 24 period I will say hopefully closer to 23 will start to see what I have closed dynamic equolibrium with investments in the pipeline.
Now being somewhat offset by the returns from them.
I want to be clear, Oh, R&D as a 50% of revenues that could be say going to be like that forever, but the thing we want to make sure as we wanted them because of the denominator of revenue.
It is going up.
So that's what's really going to teach out ratio.
Yes, let me, let me provide a little bit mark contacts and color for you as well drugs I think.
It's a little bit probably early and premature to fully appreciate what the clinical study funding might be and who it might be coming from as it pertains to our below the knee drug coated balloon as well as the access drug coated balloon, but what I would tell you is.
Even if surmodics word to fund pivotal studies for both of those technologies I don't see our overall aggregate dollars Stan being much different than what we've spent last year, perhaps even this year, which is to remind you somewhere you know on that low fiftys kind of range.
If you were not finding that then it's going to be significantly lower and I'll just to put in context I think last year. We spent it could have been somewhere right around 11 million, maybe a little bit lot more north of 11 million on transcend and the Avi.
First in human study, so ill give it a little sense of the context of what we're spending annually on that in and put put that put it in and into context here.
If you think about the remaining span for transcend it's coming down like I think this year, it's maybe going to be 7 million ish.
Relative to what we spent last year. So as you kind of go through the the gestation period of these clinical studies, you actually do see lower spend but it depends on when the other things are going to be coming online, but without providing any long term guidance I just want to frame up I think it would be there would have to be something extraordinary.
In terms of interest and excitement for us to go above that kind of level that we've been spending over the last two years.
And as Gary was describing as the revenue streams come online youre going to be looking at it R&D as a percentage of revenue, it's going to be dropping significantly from where we're at I would I would probably direct you to think back to the pre whole product solutions area, where we're spending somewhere around 30, 35%.
R&D as a percentage of revenue, so probably not a bad place to think longer term, but.
When we have a few more think solidified we'll be able to provide a lot more clarity in color for you.
Great. This is very helpful. Thank you very much.
Sure.
As a reminder to queue up for questions do so by pressing star one.
When they occur will make our next question in queue comes from Mike Matson Needham. Please go ahead.
Yeah, Hi, Gary and Tim.
David on for Mike Thanks for question and.
Yes, I'll say, how many questions I can ask.
I understood it.
No, but I've been hopping between calls so I apologize if you've got than me a bit in your ear scripts, but I guess just one on first on the Ivy business I understand that it.
Between 20, and 25 and 50% is from co good related projects.
If there was do you really take off do you have any capacity constraints at all.
And now it's something that we talk about a lot around here and then if it really really took off and would be a good problem to have but one that I think we could probably sorrow, but.
But we do have capacity and we can always look at adding shifts or aligned so at the present time I feel we we've got that covered and I think our team wouldn't be overly shy about having to tackle that that problem quote unquote problem. If it were to take off.
And we had an opportunity to provide a lot of chemical components to support these tests.
Okay. Appreciate the color and then just on the Thrombectomy Thrombectomy project I.
Forget the name of it now, but I take it will be in arterial indication.
Is that right and they can you talk about pathway to other indications and.
Taking into being a product.
Sure I'll leave it at the tail so yes.
It is going to be initially and arterial indication that 12 pounds and we're in front of the agency right now quite a lot of learning and Ontario indication with the back and forth with ft. So that will be very helpful. As we choose the next indication I think the first thing is pounds as we get it out there.
The.
Devices like this as as you all know a heavy hitters I mean, if the complete therapeutics solutions that we're providing here. So we want to make sure that concept works well and we're very confident as it will work on the material the issue of where we go next in fact, we've been discussing that clearly.
The Venus indication is an adjacency can go from Adrienne the veins and then as PE is true I highly doubt will go straight into stroke, that's up pretty.
A longer term potentially pmeight type and we've got a handful widow fairly the pmeight type devices right now, but clearly between DVT and PE. We believe it has legs, we've got to decide.
Where is the best not just market opportunity, but one of the things we want to optimize is the learnings from the arterial.
May play easier intravenous I do very different veins veins move around their soft the blood slowing I will say the wrong direction, but much going back to they'll Houghton lungs, so the extensibility or the platform.
What we learn from a material Ics period.
And the market size. So it's a multi factorial thing. It is easy just use market sites to determine these but I think we want to move quickly into the next indication so.
So I guess one vote on the team but.
Michael into the get to the indication thats easy to extend and get into play.
So I know I have mentioned your question, but I think it's going to come down between Venus and B.
Okay great.
Thanks, so much for the question.
Great. Thank you David.
This concludes do any I will now turn it over to management for any closing remarks.
Thank you.
We want to close by expressing our sincere appreciation to those on the front line, who remain dedicated to supporting patients under keeping all communities running.
Please stay safe and everyone be well until our next quarterly earnings call. Thanks, everybody.
Thank you ladies and gentlemen, this concludes todays presentation you may now disconnect.
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