Biocoatings: Not Just the Icing on the Cake

Ten years ago, SurModics Inc. , one of the few sizeable "pure play" companies in the biocoating field with revenues of just abut $5 million after 15 years in business, was regarded as one of those rather prosaic industrial service kinds of company, providing chemistry services to the medical device industry. But in the past five years, the company has gone public, raising $17.25 million in 1998 [See Deal], and has enjoyed exponential sales and profitability growth. Sales have risen from $13.5 million in 1999 to $43 million in 2003. What happened? SurModics was the manufacturer of the coating for the first drug-eluting stent to hit the market—the Cypher stent of Johnson & Johnson 's Cordis Corp. division.

The clinical success of drug-eluting stents—it's tough to beat zero percent restenosis—has translated into business success. Johnson & Johnson was able to capture market share, command premium pricing for its drug-coated version of an older product, and even get premium reimbursement. Now, no stent company wants to be without a program in drug-eluting stents, and that goal has driven a spate of dealmaking around what was formerly the little-recognized biocoating segment of the medical device industry. Medical device companies that once either turned to their in-house R&D departments to tinker with biocompatibility, or for specialized applications went to the four bigger players in the field (which, besides SurModics, include Biocompatibles International PLC,Carmeda AB and AST Products Inc. ) have been increasingly turning to small companies with specialized expertise in coatings that can serve as an interface between devices and drugs. In less than a year, Guidant Corp. has spent more than $84 million to acquire the everolimus-eluting stent assets from Sun Biomedical Ltd. 's Biosensor International Pte. Ltd