<SUBMISSION>
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<ITEMS>9.01
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<CONFORMED-NAME>SURMODICS INC
<CIK>0000924717
<ASSIGNED-SIC>6794
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<FISCAL-YEAR-END>0930
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<FILE-NUMBER>000-23837
<FILM-NUMBER>041100076
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<BUSINESS-ADDRESS>
<STREET1>9924 W 74TH ST
<CITY>EDEN PRAIRIE
<STATE>MN
<ZIP>55344
<PHONE>6128292700
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<STREET1>9924 WEST 74TH ST
<CITY>EDEN PRAIRIE
<STATE>MN
<ZIP>55344
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<FORMER-CONFORMED-NAME>BSI CORP
<DATE-CHANGED>19970506
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<TYPE>8-K
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<FILENAME>c89134e8vk.htm
<DESCRIPTION>FORM 8-K
<TEXT>
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<P align="center" style="font-size: 14pt"><B>SECURITIES AND EXCHANGE COMMISSION</B>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<P align="center" style="font-size: 18pt"><B>FORM 8-K</B>

<P align="center" style="font-size: 12pt"><B>CURRENT REPORT<BR>
Pursuant to Section&nbsp;13 or 15(d) of the<BR>
Securities Exchange Act of 1934</B>


<P align="center" style="font-size: 10pt">Date of Report (Date of earliest event reported): October&nbsp;27, 2004


<P align="center" style="font-size: 24pt"><B>SurModics, Inc.</B>

<DIV align="center" style="font-size: 10pt">(Exact name of Registrant as Specified in its Charter)</DIV>

<P align="center" style="font-size: 12pt"><B>Minnesota</B>

<DIV align="center" style="font-size: 10pt">(State or Other Jurisdiction of Incorporation)</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD align="center" valign="top">0-23837<BR>
(Commission File Number)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">41-1356149<BR>
(IRS Employer<BR>
Identification No.)</TD>
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<P align="center" style="font-size: 10pt">9924 West 74th Street<BR>
Eden Prairie, Minnesota 55344<BR>
(Address of Principal Executive Offices and Zip Code)



<P align="center" style="font-size: 10pt">(952)&nbsp;829-2700<BR>
(Registrant&#146;s telephone number, including area code)



<P align="center" style="font-size: 10pt">Not Applicable<BR>
(Former Name or Former Address, if Changed Since Last Report)


<P align="left" style="font-size: 10pt">Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


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<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

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<TR><TD></TD><TD colspan="8"><A HREF="#000">Item&nbsp;2.02&nbsp;&nbsp;Results of Operations and Financial Condition.</A></TD></TR>
<TR><TD></TD><TD colspan="8"><A HREF="#001">Item&nbsp;9.01 Financial Statements and Exhibits.</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="c89134exv99w1.htm">Press Release</A></TD></TR>
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<!-- link2 "Item&nbsp;2.02&nbsp;&nbsp;Results of Operations and Financial Condition." -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="left" style="font-size: 10pt"><B>Item&nbsp;2.02</B>&nbsp;&nbsp;<B>Results of Operations and Financial Condition.</B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;27, 2004, SurModics, Inc. issued a press release announcing the
results for the quarter and fiscal year ended September&nbsp;30, 2004. The full
text of the press release is set forth in Exhibit&nbsp;99.1 attached hereto and is
incorporated in this Current Report as if fully set forth herein.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information in this Current Report, including the Exhibit&nbsp;99.1
attached hereto and incorporated herein, shall not be deemed &#147;filed&#148; for
purposes of Section&nbsp;18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liabilities of that Section, and shall not be
incorporated by reference into any registration statement pursuant to the
Securities Act of 1933, as amended. The furnishing of the information in this
Current Report is not intended to, and does not, constitute a representation
that such furnishing is required by Regulation&nbsp;FD or that the information
contained or incorporated herein is material investor information that is not
otherwise publicly available.

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<P align="left" style="font-size: 10pt"><B>Item&nbsp;9.01&nbsp;&nbsp;Financial Statements and Exhibits.</B>



<P>
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    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial statements: None.</TD>
</TR>

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    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pro forma financial information: None.</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Exhibits:</TD>
</TR>

</TABLE>


<P align="left" style="margin-left:6%; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;99.1 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Press Release dated October&nbsp;27, 2004







<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="002"></A></DIV>

<P align="center" style="font-size: 10pt">SIGNATURES



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
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</TR>
<TR>
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    <TD colspan="3">SURMODICS, INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000">By /s/ Philip D. Ankeny
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>Date:  October 27, 2004&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2">Philip D. Ankeny&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

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<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P align="center" style="font-size: 10pt"><B>SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, DC 20549</B>



<P align="center" style="font-size: 10pt"><B>EXHIBIT INDEX<BR>
to<BR>
FORM 8-K</B>



<P align="center" style="font-size: 10pt"><B>SURMODICS, INC.<br></B><BR>
&nbsp;


<DIV align="center">
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    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Exhibit&nbsp;No.</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>Description</B></TD>
</TR>

<TR style="font-size: 1px">
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<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Press Release dated October&nbsp;27, 2004</TD>
</TR>

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<P align="right" style="font-size: 10pt">Exhibit 99.1


<P align="left" style="font-size: 10pt">SurModics Fourth Quarter 2004 Results<BR>
Page 1




<P align="left" style="font-size: 10pt"><B><u>FOR IMMEDIATE RELEASE</u></B>



<P align="left" style="font-size: 10pt"><B>SurModics, Inc. Reports Fourth Quarter and Fiscal Year 2004 Results</B><BR>
<B><I>Record Quarterly and Fiscal Year Revenue; Record Quarterly Earnings</I></B>

<P align="left" style="font-size: 10pt">EDEN PRAIRIE, Minnesota &#151; October&nbsp;27, 2004 &#151; <B>SurModics, Inc. </B>(Nasdaq: SRDX), a
leading provider of surface modification and drug delivery solutions to the
medical device industry, today reported financial results for the fourth
quarter and fiscal year ended September&nbsp;30, 2004.

<P align="left" style="font-size: 10pt"><u>Fourth Quarter and Fiscal Year 2004 Highlights:</u>


<P>
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<TD width="2%" nowrap align="left"><font face="wingdings">&#167;</font></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Record Revenue for Fiscal Year 2004 of $49.7&nbsp;million and Fourth Quarter of $13.5&nbsp;million</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><font face="wingdings">&#167;</font></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Non-Cordis Revenue Growth for Third Consecutive Quarter</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><font face="wingdings">&#167;</font></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Operating Income for Fourth Quarter 2004 of $8.3&nbsp;million; Operating Margin of 62%</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><font face="wingdings">&#167;</font></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fourth Quarter 2004 Diluted EPS of $.31</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><font face="wingdings">&#167;</font></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fiscal Year 2004 Diluted EPS of $.42; Comparative (excluding asset impairment charge) Diluted EPS a Record $1.00</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><font face="wingdings">&#167;</font></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Record Number of New Licenses; Record Number of New Products
Launched by Our Customers for the Year</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><font face="wingdings">&#167;</font></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>R&#038;D Revenue Growth for Third Consecutive Quarter</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><i>-more-</i>




<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="font-size: 10pt">SurModics Fourth Quarter 2004 Results<BR>
Page 2


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;SurModics is pleased to report record revenue for both the fourth quarter
and the full fiscal year 2004. This achievement marks the sixth consecutive
year of revenue growth since our IPO in 1998,&#148; said Dale Olseth, Chairman and
CEO. &#147;Our continued success is a testament to our ability to provide
innovative technologies to our customers in key focus markets.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fiscal year 2004 revenue was $49.7&nbsp;million, a 15% increase over fiscal
year 2003 revenue of $43.2&nbsp;million. The company recorded a one-time impairment
charge in the third quarter of fiscal year 2004. The non-cash impairment
charge totaled $16.5&nbsp;million and was recorded against the company&#146;s contract
manufacturing facility in Bloomington, Minnesota. In March, SurModics
announced its plans to sell the facility. Including this impairment charge,
income from operations was $10.5&nbsp;million, compared with $20.6&nbsp;million in the
prior-year period. Net income was $7.4&nbsp;million, or $.42 per diluted share,
compared with $13.9&nbsp;million in fiscal year 2003 net income, or $.78 per diluted
share. Excluding the charge, net income and diluted earnings per share for the
year would have been $17.8&nbsp;million and $1.00 per share, respectively.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue for the fourth quarter of fiscal 2004 was a record $13.5&nbsp;million,
an increase of 7% from the $12.6&nbsp;million recorded in the fourth quarter of
fiscal 2003. Operating income grew 21% to a record $8.3&nbsp;million, from $6.8
million in the prior-year period. Net income increased 22% to $5.4&nbsp;million,
from $4.4&nbsp;million in the same period last year. Diluted earnings per share was
$.31, compared with $.25 in fiscal 2003. Royalties and license fees benefited
from an approximate $1.0&nbsp;million in back royalties paid on several prior
quarters of product sales by one of our 69 licensed customers, as well as a
$250,000 milestone license
fee from GE Healthcare (formerly Amersham Biosciences) for achievement of
a technical milestone.


<P align="center" style="font-size: 10pt"><i>-more-</i>



<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="font-size: 10pt">SurModics Fourth Quarter 2004 Results<BR>
Page 3


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;We continue to make meaningful progress in executing our strategic plan
and focusing the company on our customers,&#148; said Bruce Barclay, President and
COO. &#147;We are working hard to increase the diversification of our business
across technologies and customers, and we are pleased with the results to date.
In particular, the fact that non-Cordis revenue has grown sequentially for
three consecutive quarters demonstrates the growing value of our broad product
portfolio.&#148; Total revenue from Cordis in the fourth quarter declined modestly
from the third quarter and has declined more significantly from the first and
second quarters.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;We are also pleased with the growth in research and development revenue
this quarter &#151; the third consecutive quarter of sequential growth,&#148; Barclay
continued. &#147;We believe the strength of R&#038;D revenue underscores the quality and
quantity of the growing pipeline of potential future products and our
commitment to providing value-added technologies to our customers.&#148;


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, SurModics&#146; pipeline continues to expand. The Company signed
a record 7 new licenses in the fourth quarter, bringing the total for the full
year to 17, also a record. At September&nbsp;30, SurModics&#146; customers had 77 coated
products generating royalty revenue, compared with 69 in the prior-year period;
the total number of licensed products not yet launched rose to 64, from 61 a
year ago; and major non-licensed opportunities increased to 73, from 24 a year
ago. In total, the Company now has 137 potential commercial products in
development with opportunities in each of the company&#146;s four focus markets.


<P align="center" style="font-size: 10pt"><i>-more-</i>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P align="left" style="font-size: 10pt">SurModics Fourth Quarter 2004 Results<BR>
Page 4


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SurModics continues to exert fiscal discipline in its operations.
Operating expenses for the fourth quarter 2004 declined 13% from the fourth
quarter of last year and also declined 10% sequentially from the third quarter
of this year, to the lowest level since the fourth quarter of fiscal 2002.
Despite the reduction in total operating expenses, investment in R&#038;D remains a
priority. R&#038;D expense in the quarter was essentially flat compared with the
prior-year period. On an annual basis, R&#038;D expense increased 7% from fiscal
year 2003.


<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;We are in excellent financial condition,&#148; said Phil Ankeny, CFO and Vice
President of Business Development. &#147;Our balance sheet remains strong, with a
cash and investment balance of $63.3&nbsp;million and no debt.&#148;


<P align="left" style="font-size: 10pt"><B><u>Live Webcast</u></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SurModics will host a Webcast at 5:00 p.m. ET (4:00 p.m. CT) today to
discuss the quarterly results. To access the Webcast, go to the investor
relations portion of the company&#146;s web site, <u>www.surmodics.com</u>, and click on
the fourth quarter webcast icon. If you do not have access to the Internet and
want to listen to an audio replay of the fourth quarter conference call, dial
800-405-2236 and enter conference call ID # 11012343. The audio replay will be
available beginning at 6:00 p.m. CT on Wednesday, October&nbsp;27, until 5:00 p.m.
CT on Wednesday, November 3.


<P align="left" style="font-size: 10pt"><B><u>About SurModics, Inc.</u></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SurModics, Inc., a leading provider of surface modification and drug
delivery solutions, licenses its proprietary technologies to medical device,
diagnostics, and biotechnology companies around the world. A significant
portion of SurModics&#146; revenue is generated
through royalties on the sale of coated products. SurModics&#146; Internet
address is <u>www.surmodics.com</u>.


<P align="center" style="font-size: 10pt"><i>-more-</i>


<P align="center" style="font-size: 10pt">&nbsp;
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<P align="left" style="font-size: 10pt">SurModics Fourth Quarter 2004 Results<BR>
Page 5


<P align="left" style="font-size: 10pt"><B><u>Forward-Looking Statements</u></B>



<P align="left" style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain statements contained in this press release may be deemed to be
forward-looking statements under federal securities laws, and SurModics intends
that such forward looking statements be subject to the safe harbor created
thereby. Factors that may cause actual results to differ from the
forward-looking statements include those described in the &#147;Risk Factors&#148; and
other sections of SurModics&#146; filings with the Securities and Exchange
Commission. SurModics does not undertake an obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.

<P align="center" style="font-size: 10pt"><i>-more-</i>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<P align="left" style="font-size: 10pt">SurModics Fourth Quarter 2004 Results<BR>
Page 6


<P align="center" style="font-size: 10pt"><B>SurModics, Inc.<BR>
Income Statements<BR>
(In thousands, except per share data)</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Year Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>September 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(Unaudited)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Revenue:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Royalties and license fees</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>34,836</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>25,833</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>9,758</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>8,523</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Product sales</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,478</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,804</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,268</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,048</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Research &#038; development</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,424</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,595</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,443</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,052</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px"><B>Total revenue</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>49,738</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43,232</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,469</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,623</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Operating expenses:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Product</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,035</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,649</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>735</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>696</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Research &#038; development</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,633</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,790</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,087</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,127</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Sales &#038; marketing</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,683</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,224</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>283</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>521</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>General &#038; administrative</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,416</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,929</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,069</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,444</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Asset impairment charge</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>16,497</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-10px"><B>Total operating expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>39,264</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22,592</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,174</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,789</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Income from operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,474</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,640</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,295</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,834</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Investment income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,372</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,859</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>353</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>336</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Income before income taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,846</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>22,499</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,648</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,170</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Income tax provision</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(4,410</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(8,563</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,205</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,726</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Net income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>7,436</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>13,936</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>5,443</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>4,444</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Basic net income per share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.42</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.80</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.25</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Diluted net income per share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.42</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.78</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.25</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Weighted average shares outstanding<br>
Basic</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,501</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,363</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,530</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,436</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Diluted</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,800</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,837</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,836</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,852</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><i>-more-</i>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<P align="left" style="font-size: 10pt">SurModics Fourth Quarter 2004 Results<BR>
Page 7


<P align="center" style="font-size: 10pt"><B>SurModics, Inc.<BR>
Comparative Analysis of Earnings<BR>
(In thousands, except per share data)</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Year Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>September 30,</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>September 30,</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(Unaudited)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>(Unaudited)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Income from operations (GAAP)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>10,474</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>20,640</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>8,295</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>6,834</B></TD>
    <TD>&nbsp;</TD>
</TR>

<tr><td>&nbsp;</td></tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Add: Asset impairment charge</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>16,497</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Comparative income from operations</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>26,971</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>20,640</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>8,295</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>6,834</B></TD>
    <TD>&nbsp;</TD>
</TR>

<tr><td>&nbsp;</td></tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Diluted net income per share (GAAP)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.42</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.78</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.25</B></TD>
    <TD>&nbsp;</TD>
</TR>

<tr><td>&nbsp;</td></tr>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Add: Net impact of asset impairment</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>.58</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Comparative diluted net income per share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.78</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.31</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.25</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<P align="left" style="font-size: 10pt">Certain information in the attached financial release may be considered
non-GAAP Financial Information as contemplated by SEC Regulation&nbsp;G.
Accordingly, we are providing the preceding table, which reconciles results to
their corresponding GAAP based operating results presented in our Income
Statements, in the accompanying press release.

<P align="left" style="font-size: 10pt">Management believes the presentation of these non-GAAP financial results, in
connection with the results of the fiscal quarter and year ended September&nbsp;30,
2004, provide useful information to investors regarding our results of
operations, as these non-GAAP financial measures allow investors to better
evaluate ongoing business performance and factors that influenced performance
during the period under report. Management also uses these non-GAAP measures
internally to monitor performance of the business. These non-GAAP financial
measures should be considered in addition to, and not a substitute for,
financial measures prepared in accordance with GAAP.


<P align="center" style="font-size: 10pt"><I>-more-</I>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<P align="left" style="font-size: 10pt">SurModics Fourth Quarter 2004 Results<BR>
Page 8


<P align="center" style="font-size: 10pt"><B>SurModics, Inc.<BR>
Condensed Balance Sheets<BR>
(in thousands)</B>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>September 30,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2004</B><HR size="1" noshade></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2003</B><HR size="1" noshade></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B><u>Assets</u><br></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Current assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Cash &#038; investments</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>19,215</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>6,647</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Accounts receivable</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,130</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,145</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Inventories</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,040</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>863</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Other current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,184</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,104</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:30px; text-indent:-10px"><B>Total current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,569</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,759</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Property &#038; equipment, net</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,738</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33,936</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Long-term investments</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44,088</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>39,164</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Other assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>20,386</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,949</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Total assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>109,781</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>97,808</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B><u>Liabilities &#038; Stockholders&#146; Equity</u><br></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<tr><td>&nbsp;</td></tr>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Total current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>11,789</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>10,027</B></TD>
    <TD>&nbsp;</TD>
</TR>

<tr><td>&nbsp;</td></tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Other liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,488</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,667</B></TD>
    <TD>&nbsp;</TD>
</TR>

<tr><td>&nbsp;</td></tr>

<TR valign="bottom" style="background: #eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><B>Total stockholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>94,504</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>86,114</B></TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="1" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:20px; text-indent:-10px"><B>Total liabilities &#038; stockholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>109,781</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>97,808</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:20px; text-indent:-10px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><HR size="4" noshade>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



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