SurModics acquires drug delivery assets of PR Pharmaceuticals

Nov 4 2008

SurModics, Inc. announced today that it has acquired a portfolio of intellectual property and collaborative drug delivery projects from PR Pharmaceuticals, Inc., a drug delivery company specializing in injectable, biodegradable sustained release formulations.

SurModics paid $3 million in cash at closing and may pay up to an additional $6 million in cash upon the successful achievement of certain milestones. The acquisition is expected to be accretive to SurModics' fiscal 2009 earnings, excluding any one-time charges related to the acquisition.

Anticipated Acquisition Benefits

• Broadens SurModics' proprietary technology portfolio in systemic drug delivery, including protein delivery
• Enables delivery of injectable microparticles through smaller gauge needles
• Expands SurModics' customer base to incorporate several new pharmaceutical and biotech companies
• Immediately adds new sources of revenue and is expected to be accretive to SurModics fiscal 2009 earnings

"The proprietary technologies and existing business we are acquiring from PR Pharmaceuticals are a perfect fit for SurModics," said Bruce Barclay, president and CEO of SurModics. "The proprietary technologies complement and enhance the existing portfolio of drug delivery capabilities available from SurModics and Brookwood. A broader toolkit for protein delivery and the ability to use smaller gauge needles for microparticle injections make an even more compelling offering for both current and future SurModics customers. The multiple customer development programs we are assuming in this transaction are a strong fit with the diversified portfolio of customer projects at Brookwood and will further leverage the investment we are making in cGMP manufacturing facilities in Birmingham. Further, with the addition of these new technologies, SurModics is poised to drive customer programs and long-term revenue even more effectively."

The proprietary technologies acquired from PR Pharmaceuticals have broad applicability and address key needs, enabling the delivery of injectable drugs, including proteins, using biodegradable microparticles through smaller diameter needles compared to competing technologies. The use of smaller diameter needles for microparticle injection is particularly relevant in ophthalmology applications. Also, the use of smaller needles is an advantage in many other applications requiring subcutaneous or intra-muscular injections, and in particular where patient self-administration is desired. Proteins and other large molecule therapeutics are of strategic interest to many biotechnology and pharmaceutical companies, but pose significant challenges for drug delivery. The PR Pharmaceuticals technologies will complement those of SurModics and its Brookwood Pharmaceuticals business unit and broaden the overall technology portfolio for the benefit of current and future customer projects.

In addition to the intellectual property being acquired, SurModics will be assuming responsibility for several customer-paid development projects currently in progress with pharmaceutical and biotechnology companies, including Jerini Ophthalmic. Finally, SurModics will be the paid development partner for PR Pharmaceuticals' proprietary product called InsuLAR™, a once-a-week sustained release formulation of basal insulin for the diabetes marketplace. The market for injectable basal insulin is estimated at approximately $4 billion worldwide.

"We are pleased to consummate this important transaction, and look forward to a long and successful association with SurModics," said Steve R. Howe, chairman and CEO of PR Pharmaceuticals. "First, we along with Brookwood are committed to providing a smooth transition for current PR Pharmaceuticals customers to Brookwood. Second, the transaction will significantly advance the development of InsuLAR. Collaboration with the technical team and the cGMP manufacturing infrastructure at Brookwood will help ensure successful development and commercialization of InsuLAR as well as provide for a smooth transition for current PR Pharmaceuticals customers. Third, continuation by SurModics of the multiple customer development programs allows PR Pharmaceuticals to focus on developing our own internal programs, products and technologies. While our immediate focus is commercialization of InsuLAR, we anticipate working with SurModics on other collaborative programs in the future."

"Brookwood Pharmaceuticals gains several attractive assets by virtue of this transaction, which strengthens our portfolio of drug delivery technologies and will greatly benefit our customer development programs," said Arthur J. Tipton, Ph.D., vice president of SurModics and president of Brookwood. "In particular, the ability to use smaller gauge needles for injections is of significant interest to customers in ophthalmology and several other clinical areas. In addition, partnering with PR Pharmaceuticals on the development of InsuLAR adds another promising development program in diabetes to our broad portfolio of customer programs. Today, PR Pharmaceuticals is already a customer of Brookwood for biodegradable polymer, which it uses in support of current development programs. We look forward to aiding PR Pharmaceuticals in the manufacturing scale-up and in the production of both clinical trial materials and final product for InsuLAR."

"The combined drug delivery expertise of SurModics, Brookwood, and PR Pharmaceuticals is exceptional," said Anthony P. Adamis, M.D., president and CEO of Jerini Ophthalmic, Inc. "We are very pleased to be working together and look forward to our continued relationship."