EDEN PRAIRIE, Minn.—SurModics Inc., in late July, acquired Brookwood Pharmaceuticals Inc. in a move that combines two portfolios of drug delivery technologies rooted in polymers and makes Brookwood a wholly owned subsidiary of SurModics.
"The Brookwood business on its own is a terrific business," says Bruce Barclay, president and CEO of SurModics. "I think what really excited me, my management team and our board, was the ability to create a situation where two plus two equals five." Barclay believes combining the companies should bring faster growth and better performance because of products like SurModics's Eureka family of polysaccharides, currently used as coatings and devices. "We're very optimistic that that is something the Brookwood team can use to make new pharmaceutical formulations," he says.
SurModics purchased Brookwood from Southern Research Institute (SRI) for $40 million cash at closing and up to an additional $22 million cash upon successful achievement of certain revenue targets and milestones. In 2005, Brookwood spun out from SRI, a nonprofit research center that has seen six cancer drugs win FDA approval. Brookwood is led by Art Tipton, who will remain with Brookwood as president while also serving as vice president at SurModics. Brookwood and its 75 employees will remain in Birmingham, Ala.
Keeping Brookwood in Birmingham was important to Jack Secrist, SRI's president and CEO. "One of the things that we said to SurModics all along was we want to first of all do well by the employees. We wanted the opportunity to remain in the Birmingham area. We were pretty much committed to that." Beyond staying in the local economy, Brookwood will maintain ties with SRI, as well as local university professors who have been a source of new technology. "It is an important piece," says Secrist.
Brookwood's technologies, which include injectable microparticles, have led to roughly 30 projects with a client base that differs from SurModics's, creating new market reach in areas including diabetes, oncology, and ophthalmology. "[The projects] will be staying," says Barclay, "That was again an important part of what we saw when we evaluated the company. They have existing customers primarily in the pharma industry, but not exclusively."
As a public company, SurModics has access to capital markets, and, though Barclay says it will not blindly spend money, SurModics is prepared to invest in projects or programs that benefit both companies. SurModics is already evaluating the potential for increasing the Brookwood facility.
Although Secrist says Brookwood tripled its employees and began to stand on its own after the spin-off from SRI, Brookwood's equipment-intensive business and need for capital was a crucial factor in concluding the transaction: "As we've gone through the years, we've felt that for it to grow to its potential, it would probably need capital beyond what SRI could readily provide."
Barclay likes Brookwood's technical side because he sees opportunities for continued R&D. "They have a total of 12 Ph.Ds, which, again, I think is a fairly high number for a small company, and that supports the innovative technical focus that they have had." The science has also led to a good business, says Barclay. "Brookwood is profitable. They are cash flow positive. They have done a really good job creating the business to this point."
