SURMODICS REPORTS 2ND QTR '06 RECORD REVENUE OF $17.7 MIL.

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

Second Quarter Highlights:

-- Record revenue of $17.7 million, up 13% year-over-year

-- Record Cordis and non-Cordis revenue, with non-Cordis revenue growing faster sequentially than Cordis revenue

-- GAAP results:

-- Operating income of $9.0 million

-- Net income of $1.5 million

-- Diluted EPS of $0.08

-- Non-GAAP results (excluding non-cash equity compensation expense and a non-cash impairment loss on the company's investment in Novocell):

-- Record operating income of $10.5 million

-- Record net income of $7.2 million

-- Record diluted EPS of $0.38

-- Seven new licenses signed with SurModics customers

-- Record CYPHER sales of $717 million

-- 7th consecutive quarter of record non-GAAP net income

-- 8th consecutive quarter with non-Cordis revenue exceeding Cordis revenue

"SurModics is pleased to report strong financial and operating results for the second quarter of fiscal year 2006, achieving record revenue and adjusted earnings," said Bruce Barclay, president and CEO. "We delivered broad-based revenue growth, with all three of our segments - Drug Delivery, Hydrophilic and Other, and Diagnostics and Drug Discovery - achieving growth on both a sequential and a year-over-year basis. The CYPHER(R) Sirolimus-eluting Coronary Stent from Cordis Corporation, a Johnson & Johnson company, again generated record sales in the quarter. Additionally, we achieved records in both Cordis and non-Cordis revenue, with non-Cordis revenue growing faster than Cordis revenue on a sequential basis."

"SurModics' employees also attained several significant operating milestones during the quarter," continued Barclay. "We completed enrollment in our STRIDE human clinical trial, evaluating the I-vation(TM) Intravitreal Implant in patients with diabetic macular edema. Working in concert with Donaldson company, we completed development and made initial sales of the first synthetic extracellular matrix cell culture products containing a coating from SurModics. We also gained access to two new families of biodegradable polymers, bringing to five the number of biodegradable polymer systems we can make available to our customers for site specific drug delivery applications anywhere in the body. In addition, we exited our Bloomington contract manufacturing facility, ahead of schedule. Finally, we added two new officers, as we continue to strengthen our senior management team."

"We continue to build our business based on our plan for sustainable growth," remarked Barclay. "SurModics is laying the foundation for potentially significant revenue streams, while continuing to deliver exceptional results in the near term aided in part by our prudent expense management. We continue to broaden the reach of our participation in the drug-eluting stent market, with the recent announcements of multiple licensed customers developing products for this significant market that incorporate SurModics technologies."

Revenue for the second quarter of fiscal 2006 was $17.7 million, an increase of 13% from $15.7 million in the year earlier period. Product sales of $2.9 million were the highest in ten quarters. On a GAAP basis, operating income was $9.0 million; net income was $1.5 million; and diluted earnings per share was $0.08. Results include expensing of stock options, as required by SFAS No. 123(R), and a non-cash impairment loss of $4.7 million on our investment in Novocell.

On a non-GAAP basis, operating income grew 14% to a record $10.5 million, from $9.3 million in the prior-year period. Net income increased 20% to a record $7.2 million, from $6.0 million in the same period last year. Diluted earnings per share was a record $0.38, compared with $0.32 in the second quarter of fiscal 2005. Non-GAAP results exclude non-cash compensation charges and the non-cash impairment loss described above. Please see our financial tables and the footnotes for a detailed explanation and reconciliation of GAAP and non-GAAP figures. For the first six months of fiscal year 2006, revenue was $34.2 million, an increase of 15% from $29.8 million in the year earlier period. On a GAAP basis, operating income was $17.5 million; net income was $7.7 million; and diluted earnings per share was $0.41. On a non-GAAP basis, operating income grew 13% to a record $20.3 million, from $18.0 million in the prior-year period. Net income increased 22% to a record $13.8 million, from $11.3 million in the same period last year. Diluted earnings per share was a record $0.73, an 18% increase compared with $0.62 for the first six months of fiscal 2005. Non-GAAP results exclude non-cash compensation charges, the non-cash IPR&D charge in connection with the company's acquisition of InnoRx, Inc. in January 2005, and the non-cash impairment loss described above. Please see our financial tables and the footnotes for a detailed explanation and reconciliation of GAAP and non-GAAP figures. SurModics' portfolio of pipeline projects continues to represent significant potential in the near- and long-term. The company signed seven new licenses in the second quarter, for a total of 11 to date in fiscal year 2006, compared with 10 new licenses in the first half of fiscal year 2005, and well on pace to exceed its goal of 15 for fiscal year 2006. SurModics has 152 potential commercial products in development representing each of the company's four focus markets - Cardiovascular, Neurology, Ophthalmology and Orthopedics, with potential for both near-term and longer-term revenue growth.

"SurModics remains in excellent financial condition," said Phil Ankeny, CFO and vice president, Business Development. "Our balance sheet remains strong, with a cash and investment balance of $87.7 million and no debt as of March 31, 2006. Operating cash flow for the second quarter was $8.3 million. We are pleased with our business development activity during the quarter, and we continue to evaluate opportunities to put our balance sheet to work. In spite of the non-cash impairment loss on our investment in Novocell, we continue to be encouraged by the progress the company is making toward commercialization."

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(TM) 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.