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New SurModics CEO looks to focus on a 'secret sauce' after Ramius drama

The drama appears to have passed. Now comes the soul searching.

Eden Prairie-based SurModics (NASDAQ:SRDX) on Wednesday hosted its first earnings call since naming a new CEO in December and resolving a brief standoff with activist shareholder, Ramius LLC.

SurModics, which produces drug-delivery and surface-modification technologies for medical devices, reported a net loss of $377,000 for its 2011 first quarter, an improvement compared to the $21.7 million it lost in the fourth quarter.

The loss was expected, and the earnings call instead centered on the newly appointed CEO Gary Maharaj, who spoke about a need to identify and refocus on the company’s efforts on a “well-defined core.” What exactly that core is, however, is yet to be defined.

“I’m narrowing in very early on: what is the secret sauce at SurModics?” Maharaj said. “And to be honest, I’m still in the discovery mode.”

Maharaj said the ability to modify surfaces has ubiquitous uses in healthcare. The key for the company will be to identify technologies in its pipeline that can bring value to customers products within the next couple of years.

It still appears that “well-defined core” will not include pharmaceuticals. The company said last month that it had hired investment bank Piper Jaffray to explore “strategic alternatives,” including a sale, for its pharmaceutical unit.

“There’s really not a lot we can share at this point,” Chief Financial Officer Phil Ankeny said when asked for an update. “We’ve been pleased with how the process is unfolding, but it’s really too early to give any indications on where we are and exactly how much time we expect it to take.”

Ankeny said the company expects to lose $10 million this year operating its year-old pharmaceutical facility in Birmingham, Alabama.

Other financial numbers for the quarter: Revenue was down 13 percent year-over-year to $15.2 million, in part due to declining royalties from Johnson & Johnson’s Cypher drug-eluting stents, which use SurModic technology. Product sales actually ticked up to $4.7 million from $4.5 million a year ago.

Ankeny and Maharaj also spoke about the possibility of using cash flow for targeted investments in the business, but when pressed for specifics could not yet provide them.

Said Maharaj: “If it were simple, at this point we’d already be there.”

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