SURMODICS REPORTS 23% GROWTH IN NON-CYPHER REVENUE.

SurModics, Inc. (Nasdaq: SRDX), Eden Prairie, Minn., a leading provider of surface modification and drug delivery technologies to the healthcare industry, has reported financial results for the first quarter ended December 31, 2006.

First Quarter Highlights (GAAP):

Revenue of $16.7 million, up 2% year-over-year

Operating income of $8.1 million; operating margin of 48%

Net income of $6.0 million

Diluted EPS of $0.32

Operating cash flow of $11.8 million Non-CYPHER-related revenue increased 23% year-over-year Two new licenses signed with SurModics customers

Four new customer products introduced

Completed the repurchase of $17.5 million of common stock + "SurModics is pleased to report 23% growth in non-CYPHER revenue for the first quarter of fiscal year 2007," said Bruce Barclay, president and CEO. "Our overall performance during the period was negatively impacted by reduced penetration in the drug eluting stent market resulting from the controversy around late stent thrombosis, and as we had expected, lower R&D revenue compared to historical levels. However, we remain pleased with the progress we are making on our strategic plan for sustainable growth, and are confident in our ability to achieve our long-term goals." "SurModics continues to experience strong customer interest in our ophthalmology technologies, and we are making significant progress in driving these projects forward," continued Barclay. "While R&D revenue was $0.8 million in the quarter, down from $1.8 million a year ago, we have recently signed new R&D agreements with various ophthalmology customers totaling more than $2.5 million, with more R&D agreements expected based on current negotiations. Based on these new and expected agreements and meaningful progress on other customer projects across the business, we expect R&D revenue for all of fiscal 2007 to approximate or possibly even exceed last year's near-record R&D revenue of $5.7 million." "Additionally, we continue to have encouraging customer interest in our prohealing and drug delivery polymer technologies," continued Barclay. "Our In Vitro Technologies business had a particularly robust quarter, and our Hydrophilic Technologies business continues to do well." Revenue for the first quarter of fiscal 2007 was $16.7 million, an increase of 2% from $16.5 million in the year earlier period. Operating income was $8.1 million, a 5% decrease from $8.6 million in the prior year period. Net income was $6.0 million, a 4% decrease from $6.2 million in the same period last year. Diluted earnings per share was $0.32, compared with $0.33 in the first quarter of fiscal 2006. Prior year results include a $465,000, or $0.02 per diluted share, benefit related to the reversal of a tax reserve; there was no such benefit in the first quarter of fiscal 2007.

SurModics' pipeline continues to represent significant potential. The company signed two new licenses in the first quarter, with many more potential licenses currently in negotiation. The company has a goal of 18 new licenses for fiscal year 2007, and we remain confident in our ability to achieve that objective. Our customers launched four new products in the marketplace during the quarter, bringing to 14 the number of launches achieved toward our goal of 30 launches between April 2006 and September 2007. As of December 31, 2006, SurModics' customers had 89 licensed product classes generating royalty revenue, up from 80 in the prior-year period; the total number of licensed product classes not yet launched was 80, compared with 74 in the prior-year period; and major non-licensed opportunities totaled 80, compared with 67 a year ago. In total, SurModics now has 160 potential commercial products in development representing each of the company's four focus markets: Cardiovascular, Ophthalmology, Orthopedics and Neurology.

SurModics' cash and investment balance was $99.6 million as of December 31, 2006, and we have no debt. Operating cash flow for the quarter was $11.8 million, a 14% increase from $10.4 million in the prior year period. "SurModics remains in excellent financial condition," said Phil Ankeny, senior vice president and CFO. "We were pleased to complete the repurchase of $17.5 million of stock during the quarter under the $35 million share repurchase program authorized by our Board in September. We continue to manage our expenses responsibly, without compromising our investment in R&D. Furthermore, our business development pipeline continues to grow, as we evaluate potentially compelling opportunities to grow our business and put our balance sheet to work."

About SurModics, Inc.

SurModics, Inc. is a leading provider of surface modification technologies in the areas of biocompatibility, site specific drug delivery, biological cell encapsulation, and medical diagnostics. SurModics partners with the world's foremost medical device, pharmaceutical and life science companies to bring innovation together for better patient outcomes. Recent collaborative efforts include the implementation of SurModics' Bravo drug delivery polymer matrix as a key component of the first-to-market drug-eluting coronary stent. SurModics is also active in the ophthalmology market with a sustained drug delivery system that is currently in human trials for treatment of retinal disease. A significant portion of SurModics' revenue is generated by royalties earned from the sale of our customers' commercial products. SurModics is headquartered in Eden Prairie, MN.

For more information, visit http://www.surmodics.com or call 952/829-2700.