##### Table of Contents





SECURITIES AND EXCHANGE
    COMMISSION
 Washington, DC 20549
   Form 10-K
    ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
  For the
    fiscal year ended September 30, 2010
   Commission file number 0-23837
     SURMODICS, INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Minnesota

41-1356149(State or other jurisdiction
    of
    incorporation or organization)

(IRS Employer
    Identification No.)9924 West
    74thStreet
    Eden Prairie, Minnesota(Address of Principal
    Executive Offices)

55344(Zip Code)     (Registrants Telephone Number, Including Area Code)
 (952) 829-2700
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, $0.05 par value

NASDAQ Global Select Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large accelerated
    filer o

Accelerated
    filer þNon-accelerated
    filer o

Smaller reporting
    company o    Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 





Table of
    Contents
   
 PageForward Looking Statements


2Part IItem 1.


Business


3Executive Officers of the Registrant


16Item 1A.


Risk Factors


19Item 1B.


Unresolved Staff Comments


27Item 2.


Properties


27Item 3.


Legal Proceedings


27Item 4.


(Removed and Reserved)


27Part IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


28Item 6.


Selected Financial Data


30Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


30Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


44Item 8.


Financial Statements and Supplementary Data


45Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


45Item 9A.


Controls and Procedures


45Item 9B.


Other Information


47Part IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


47Item 11.


Executive Compensation


47Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


47Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


48Item 14.


Principal Accountant Fees and Services


48Part IVItem 15.


Exhibits and Financial Statement Schedules


49EX-10.17EX-21EX-23EX-31.1EX-32.1    Forward-Looking
    Statements  Form 10-K,
 2




---



##### Table of Contents



ITEM 1.
    BUSINESS.  Overview
  in vitro
  ®
    tm follow-up tm
  ® ®
 3




---



##### Table of Contents



Form 10-K.
  state-of-the-art
  in vitro
    ®
  www.surmodics.com
  Subsequent Events.
  
    Medical Device,comprised of surface modification coating
    technologies to improve access, deliverability, and predictable
    deployment of medical devices, as well as drug delivery coating
    technologies to provide site-specific drug delivery from the
    surface of a medical device. End markets include coronary,
    peripheral, neuro-vascular, and urology, among others.
    Pharmaceuticals,incorporates a broad range of drug
    delivery techniques for injectable therapeutics, including
    microparticles, nanoparticles, and implants. Customers include
    pharmaceutical and biotechnology companies addressing a range of
    clinical applications including ophthalmology, oncology,
    dermatology and neurology, among others. Based in Birmingham,
    Alabama, the Pharmaceuticals business operates the
    Companys cGMP manufacturing facility. 4




---



##### Table of Contents




    In Vitro Diagnostics,consisting of component products
    and technologies for diagnostic test kits and biomedical
    research applications. Products include microarray slide
    technologies, protein stabilization reagents, substrates and
    antigens.  Form 8-K
  Form 8-K
  Drug
    Delivery and Surface Modification Markets
  Medical
    Device Industry
    Pharmaceutical
    and Biotechnology Industries
     5




---



##### Table of Contents



Convergence
    of the Medical Device, Pharmaceutical and Biotechnology
    Industries
    SurModics
    Drug Delivery and Surface Modification Technologies 
    Overview
    Coatings
    for Drug Delivery and Surface Modification
    tm ® ® tm
  ®
 6




---



##### Table of Contents



Systemic
    and Local Drug Delivery Through Injectable Microparticles and
    Implants
       7




---



##### Table of Contents



SurModics
    Drug Delivery and Surface Modification Technologies 
    Clinical Benefits
  
    Drug Delivery.  We provide drug delivery
    polymer technology to enable controlled, site specific or
    systemic delivery of therapeutic agents. Our proprietary polymer
    reagents create coatings, microparticles and implants which
    serve as reservoirs for therapeutic drugs. The drugs can then be
    released on a controlled basis over days, weeks or months. Some
    of our systems can release drugs for over a year. For instance,
    when a drug-eluting stent is implanted into a patient, the drug
    releases from the surface of the stent into the blood vessel
    wall where it can act to inhibit unwanted tissue growth, thereby
    reducing the occurrence of restenosis. Cordis Corporation is
    currently selling throughout the world a drug-eluting stent
    incorporating SurModics technology. In addition to our
    biodurable polymer technologies, we offer a number of
    biodegradable polymer technologies allowing us to deliver both
    large and small molecule drugs and address a wide variety of
    applications.
    Lubricity.  Low friction or lubricious coatings
    reduce the force and time required for insertion, navigation and
    removal of devices in a variety of minimally invasive
    applications. Based on internal and customer evaluations, when
    compared with uncoated surfaces, our PhotoLink coatings have
    reduced the friction on surfaces by more than 90%, depending on
    the surface being coated. Lubricity also reduces tissue
    irritation and damage caused by products such as catheters,
    guidewires and endoscopy devices. Further, lubricious coatings
    can improve deliverability of a medical device, which can
    enhance the physicians ability to place a medical device
    in the intended anatomical site within the patients body.
    Prohealing.  Biologically based extracellular
    matrix (ECM) protein coatings for use in various applications
    are designed to improve and accelerate the healing of the tissue
    at or near the implant site through natures own healing
    mechanisms following procedures involving implantable medical
    devices. Certain ECM proteins, such as collagen and laminin,
    specifically stimulate the migration and proliferation of
    endothelial cells (cells that line blood vessels) to promote
    healing. By covalently attaching the appropriate ECM proteins to
    device surfaces utilizing the PhotoLink coating process, the
    biomimetic surface can signal endothelial cells in the blood and
    vascular wall to form a stable endothelial lining over the
    implant. We believe these prohealing coatings could help prevent
    late stent thrombosis.
    Hemo/biocompatibility.  Hemocompatible/biocompatible
    coatings help reduce adverse reactions that may be created when
    a device is inserted into the body and comes in contact with
    blood. Heparin has been used for decades as an injectable drug
    to reduce blood clotting in patients. PhotoLink reagents can be
    used to immobilize heparin on the surface of medical devices,
    thereby inhibiting blood clotting on the device surface,
    minimizing patient risk and enhancing the performance of the
    device. We have also developed synthetic, non-biological
    coatings that provide medical device surfaces with improved
    blood compatibility without the use of heparin. These coatings
    prevent undesirable cells and proteins that lead to clot
    formation from adhering to the device surface. These coatings
    may also reduce fibrous encapsulation.
    DNA and Protein Immobilization.  Both DNA and
    protein microarrays are useful tools for the pharmaceutical,
    diagnostic and research industries. During a DNA gene analysis,
    typically thousands of different probes need to be placed in a
    pattern on a surface, called a DNA microarray. These microarrays
    are used by the pharmaceutical industry to screen for new drugs,
    by genome mappers to sequence human, animal or plant genomes, or
    by diagnostic companies to search a patient sample for disease
    causing bacteria or viruses. However, DNA does not readily
    adhere to most surfaces. We have developed various surface
    chemistries for both DNA and protein immobilization. In
    September 2008, we re-acquired the rights to our microarray
    slide product line which had previously been marketed by GE
    Healthcare under the
    CodeLink®

    trademark. As part of this transaction, we obtained the right to
    use the
    CodeLink®

    trademark from GE Healthcare in the sale and marketing of the
    product lines we re-acquired. Protein microarrays are used as
    diagnostic and research tools to determine the presence
    and/or
    quantity of proteins in a biological sample. The most common
    type of protein microarray is the antibody microarray, where
    antibodies are spotted onto a surface and used as capture
    molecules for protein detection. 8




---



##### Table of Contents



SurModics
    Drug Delivery and Surface Modification Technologies 
    Applications
    Desired Surface Property andMarket Segment Served

Examples of ApplicationsInterventional Cardiology and Vascular Access

Lubricity: catheters, guidewires, delivery systemsHemocompatibility: vascular stents, catheters, distal
    protection devicesDrug/biologics delivery: vascular stents, cathetersProhealing: vascular stents, vascular graftsCardiac Rhythm Management

Lubricity: pacemaker and defibrillator leads,
    electrophysiology devicesHemocompatibility: electrophysiology devicesProhealing: pacemaker and defibrillator leadsDrug/biologics delivery: pacemaker and defibrillator leadsCardiothoracic Surgery

Prohealing: heart valves, septal defect repair devicesHemocompatibility: minimally invasive bypass devices,
    vascular grafts, ventricular assist devicesIn VitroDiagnostics

Lubricity: microfluidic devicesHemocompatibility: blood/glucose monitoring devices,
    biosensorsBiomolecule immobilization: DNA and protein arrays,
    protein attachment to synthetic extracellular matrix for cell
    culture applicationsInterventional Neurology and Neurosurgery

Lubricity: catheters, guidewiresProhealing: neuroembolic devicesTissue engineering: aneurysm repair devicesUrology and Gynecology

Lubricity: urinary catheters, incontinence devices,
    ureteral stents, fertility devicesDrug/biologics delivery: prostatic stents, microparticle
    injectionsTissue engineering: female sterilization devicesOphthalmology

Drug/biologics delivery: sustained drug delivery implants
    and microparticle injectionsOrthopedics

Cell growth and tissue integration: bone and cartilage
    growthInfection resistance: orthopedic and trauma implantsDrug/biologics delivery: orthopedic and trauma implants
    and microparticle injectionsMetabolic Disease

Drug/biologics delivery: microparticle injectionsTissue engineering: cell encapsulationCentral Nervous System Disorders

Drug/biologics delivery: microparticle injections,
    polymer implantsDermatology

Drug/biologics delivery: polymer implantsTissue engineering: tissue bulking, space filling
    materials  9




---



##### Table of Contents



Licensing
    Arrangements
        and/or
 10




---



##### Table of Contents



In
    Vitro Diagnostics Products
  Stabilization
    Products
  in vitro ready-to-use,
  Substrates
  in vitro
  Recombinant
    Human Antigens
  E. coli
  Microarray
    Slide Products
  ® ®
  Research
    and Development
  in vitro
 11




---



##### Table of Contents



state-of-the-art
        Patents
    and Proprietary Rights
    tm ®
 12




---



##### Table of Contents



®
        Marketing
    and Sales
      in vitro
    Acquisitions
    and Investments
   13




---



##### Table of Contents



Significant
    Customers
    Competition
    time-to-market,
   14




---



##### Table of Contents



Manufacturing
  in vitro
      Government
    Regulation
   15




---



##### Table of Contents



Employees
     EXECUTIVE
    OFFICERS OF THE REGISTRANT    Name

Age

PositionPhilip D. Ankeny


47


Interim Chief Executive Officer, Senior Vice President and Chief
    Financial OfficerTimothy J. Arens


43


General Manager, In Vitro DiagnosticsCharles W. Olson


46


Senior Vice President and General Manager, Medical DeviceBryan K. Phillips


39


Senior Vice President, General Counsel and SecretaryEugene C. Rusch


62


Vice President, ManufacturingJoseph J. Stich


45


Vice President of Marketing, Corporate Development and StrategyArthur J. Tipton, Ph.D.


53


Senior Vice President and General Manager, PharmaceuticalsJan M. Webster


51


Vice President of Human Resources   Philip D. Ankeny
 16




---



##### Table of Contents



Timothy J. Arens
  Charles W. Olson
  Bryan K. Phillips
  Eugene C. Rusch
  Joseph J. Stich
  Arthur J. Tipton, Ph.D.,
 17




---



##### Table of Contents



Jan M. Webster
   18




---



##### Table of Contents



ITEM 1A.
    RISK
    FACTORS.  RISKS
    RELATING TO OUR BUSINESS, STRATEGY AND INDUSTRY
  We are
    subject to changes in general economic conditions that are
    beyond our control including recession and declining consumer
    confidence.
    The
    decrease in available financing for our customers and for new
    ventures that could potentially become our customers can reduce
    our potential opportunities.
  start-up start-up
  The
    loss of, or significant reduction in business from, one or more
    of our major customers could significantly reduce our revenue,
    earnings or other operating results.
  tm
  The
    long-term success of our business may suffer if we are unable to
    expand our licensing base to reduce our reliance upon several
    major customers.
   19




---



##### Table of Contents



Drug
    delivery and surface modification are competitive markets and
    carry the risk of technological obsolescence.
    We
    could face adverse consequences as a result of the actions of a
    major stockholder.
    Failure
    to identify strategic investment and acquisition opportunities
    may limit our growth.
    The
    acquisitions that we have made, or any future acquisitions that
    we undertake could be difficult to integrate, disrupt our
    business, dilute shareholder value, or harm our operating
    results.
    
    an inability to assimilate acquired operations, personnel,
    technology, information systems, and internal control systems
    and products;
    diversion of managements attention, including the need to
    manage several remote locations with a limited management team;
    difficulties and uncertainties in transitioning the customers or
    other business relationships from the acquired entity to
    us; and
    the loss of key employees of acquired companies. 20




---



##### Table of Contents



Goodwill
    or other assets on our balance sheet may become impaired, which
    could have a material adverse effect on our operating
    results.
      Research
    and development costs may adversely affect our operating
    results.
    Our
    failure to expand our management systems and controls to support
    our business and integrate acquisitions could seriously harm our
    operating results and business.
    We
    recognize revenue in accordance with various complex accounting
    standards, and changes in circumstances or interpretations may
    lead to accounting adjustments.
   21




---



##### Table of Contents



RISKS
    RELATING TO OUR OPERATIONS AND RELIANCE ON THIRD
    PARTIES
  We
    rely on third parties to market, distribute and sell most
    products incorporating our technologies, and those third parties
    may not perform or agreements with those parties could be
    terminated.
    tm
    We
    have limited or no redundancy in our manufacturing facilities,
    and we may lose revenue and be unable to maintain our customer
    relationships if we lose our production capacity or are unable
    to successfully manage the transition of our BioFX manufacturing
    operations.
     22




---



##### Table of Contents



We
    have limited experience manufacturing pharmaceutical products,
    and we may be subject to adverse consequences if we fail to
    comply with applicable regulations or contractual
    obligations.
        We may
    face product liability claims related to participation in
    clinical trials, the use or misuse of our products or the
    manufacture and supply of pharmaceutical products.
    Our
    revenue will be harmed if we cannot purchase sufficient reagent
    components we use in our manufacture of reagents.
   23




---



##### Table of Contents



We are
    dependent upon key personnel and may not be able to attract
    qualified personnel in the future.
    RISKS
    RELATING TO OUR INTELLECTUAL PROPERTY
  If we
    cannot adequately protect our technologies and proprietary
    information, we may be unable to sustain a competitive
    advantage.
    We may
    become involved in expensive and unpredictable patent litigation
    or other intellectual property proceedings which could result in
    liability for damages, or impair our development and
    commercialization efforts.
     24




---



##### Table of Contents



If we
    are unable to keep our trade secrets confidential, our
    technology and proprietary information may be used by others to
    compete against us.
    If we
    or any of our licensees breach any of the agreements under which
    we have in-licensed intellectual property from others, we could
    be deprived of important intellectual property rights and future
    revenue.
    RISKS
    RELATING TO CLINICAL AND REGULATORY MATTERS
  Healthcare
    policy changes, including new legislation intended to reform the
    U.S. healthcare system, may have a material adverse effect on
    us.
      Products
    incorporating our technologies are subject to continuing
    regulations and extensive approval or clearance processes. If
    our licensees are unable to obtain or maintain the necessary
    regulatory approvals or clearances for such products, then our
    licensees will not be able to commercialize those products on a
    timely basis, if at all.
   25




---



##### Table of Contents



We may
    face liability if we mishandle or improperly dispose of the
    hazardous materials used in some of our research, development
    and manufacturing processes.
      RISKS
    RELATING TO OUR SECURITIES
  Our
    stock price has been volatile and may continue to be
    volatile.
   26




---



##### Table of Contents



ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS.    ITEM 2.
    PROPERTIES.      ITEM 3.
    LEGAL
    PROCEEDINGS.    ITEM 4.
    (REMOVED
    AND RESERVED). 27




---



##### Table of Contents



PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES.    Fiscal Quarter Ended:

High

LowSeptember 30, 2010

$
16.68


$
10.62June 30, 2010


22.25



15.00March 31, 2010


23.31



19.00December 31, 2009


31.00



22.05September 30, 2009


25.14



20.87June 30, 2009


23.40



17.95March 31, 2009


27.42



15.96December 31, 2008


31.69



18.95   
  (800) 937-5449
      Rule 10b-18(a)(3)
  (c)

(d)Total Number

Approximate Dollarof Shares

Value ofPurchased

Shares Thatas Part of

May Yet Be(a)

(b)

Publicly

PurchasedTotal Number

Average

Announced

Under theof Shares

Price Paid

Plans or

Plans orPeriod

Purchased(1)

per Share(1)

Programs

Programs(2)7/1/10  7/31/10


10,769


$
13.28



0


$
5,302,1138/1/10  8/31/10


0



NA



0


$
5,302,1139/1/10  9/30/10


841


$
10.93



0


$
5,302,113Total


11,610


$
13.11



0


$
5,302,113     (1)
    
    The purchases in this column were repurchased by the Company to
    pay the exercise price and/or to satisfy tax withholding
    obligations in connection with so-called stock swap
    exercises related to the vesting of employee restricted
    stock awards.(2)
    
    On November 15, 2007, our Board of Directors announced the
    authorization of the repurchase of $35 million of our
    outstanding common stock. As of September 30, 2010,
    pursuant to this authorization we have repurchased a cumulative
    1,024,181 shares at an average price of $29.00 per share.
    Under the current authorization, the Company has
    $5.3 million available for authorized share repurchases as
    of September 30, 2010. The repurchase authorization does
    not have an expiration date. 28




---



##### Table of Contents



Stock
    Performance Chart
    
 29




---



##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA.  page F-1
  Fiscal Year2010

2009

2008

2007

2006(Dollars in thousands, except per share data)Statements of Operations Data:Total revenue

$
69,898


$
121,534


$
97,051


$
73,164


$
69,884Operating (loss) income


(14,053
)


57,501



27,261



9,899



36,163Net (loss) income


(21,089
)


37,550



14,739



3,347



20,334Diluted net (loss) income per share


(1.21
)


2.15



0.80



0.18



1.09Balance Sheet Data:Cash, short-term and long-term investments

$
56,786


$
47,868


$
71,978


$
70,225


$
106,571Total assets


170,279



185,562



191,028



171,331



157,402Retained earnings


82,900



103,989



66,439



51,620



48,273Total stockholders equity


154,359



172,372



141,806



130,922



145,203Statements of Cash Flows Data:Net cash provided by operating activities

$
22,008


$
31,321


$
39,822


$
50,715


$
35,279   ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS.    Overview
    in vitro
   30




---



##### Table of Contents



in vitro
    tm
    ®
  Critical
    Accounting Policies
   31




---



##### Table of Contents



Revenue recognition.
  30-45 days.
               32




---



##### Table of Contents



Valuation of long-lived assets.
   33




---



##### Table of Contents



Goodwill.
               34




---



##### Table of Contents



Investments. available-for-sale held-to-maturity Available-for-sale other-than-temporary available-for-sale held-to-maturity other-than-temporary held-to-maturity,
  Income tax accruals and valuation
    allowances.
 35




---



##### Table of Contents



36




---



##### Table of Contents



Results
    of Operations
  Years
    Ended September 30, 2010 and 2009
  Fiscal


Fiscal


Increase/(Dollars in thousands)

2010


2009


(Decrease)


% ChangeRevenue:TherapeuticCardiovascular

$
40,155


$
39,841


$
314



1
%Ophthalmology


7,617



52,102



(44,485
)


(85
)%Other Markets


10,932



13,114



(2,182
)


(17
)%Total Therapeutic


58,704



105,057



(46,353
)


(44
)%Diagnostic


11,194



16,477



(5,283
)


(32
)%Total revenue

$
69,898


$
121,534


$
(51,636
)


(42
)%   Revenue.
  Therapeutic.
  ® ® ® ® ® ® ®
  ®
   37




---



##### Table of Contents



Diagnostic.
  Product costs.
  Customer research and development
    expenses.
  Other research and development expenses.
  Selling, general and administrative
    expenses.
  Restructuring charges.
   38




---



##### Table of Contents



Asset impairment charges.
    Goodwill impairment charge.
  Other income (loss), net.
    Income tax expense.
 39




---



##### Table of Contents



Years
    Ended September 30, 2009 and 2008
  Fiscal


Fiscal


Increase/(Dollars in thousands)

2009


2008


(Decrease)


% ChangeRevenue:TherapeuticCardiovascular

$
39,841


$
47,675


$
(7,834
)


(16
)%Ophthalmology


52,102



10,252



41,850



408
%Other Markets


13,114



17,875



(4,761
)


(27
)%Total Therapeutic


105,057



75,802



29,255



39
%Diagnostic


16,477



21,249



(4,772
)


(22
)%Total Revenue

$
121,534


$
97,051


$
24,483



25
%   Revenue.
  Therapeutic.
  ® ®
  ®
        Diagnostic.
 40




---



##### Table of Contents



Product costs.
  Customer research and development
    expenses.
  Other research and development expenses.
  Selling, general and administrative
    expenses.
  Purchased in-process research and
    development.
  Restructuring charges.
    Other income (loss), net.
  Income tax expense.
  Liquidity
    and Capital Resources
  Operating Activities.
 41




---



##### Table of Contents



For the Years Ended September 30,2010


2009(In thousands)Net (loss) income

$
(21,089
)

$
37,550Depreciation and amortization


7,818



5,912Stock-based compensation


5,875



6,853Purchased in-process research and development






3,200Asset impairment charges


4,896



Goodwill impairment charge


13,810



Impairment loss on investments


7,943



Deferred taxes and other net operating activities


774



8,672Net change in deferred revenue


2,632



(36,050
)Net change in other operating assets and liabilities


(651
)


5,184Net cash provided by operating activities

$
22,008


$
31,321   ®
  Investing Activities.
   42




---



##### Table of Contents



other-than-temporarily
          Financing Activities.
 43




---



##### Table of Contents



Off-Balance Sheet Arrangements and Contractual
    Obligations.
  in thousands
  Less than








More thanTotal


1 Year


1-3 Years


3-5 Years


5 YearsOperating Leases

$
515


$
258


$
117


$
124


$
16Other long-term Liabilities(1)


336







187



21



128Total

$
851


$
258


$
304


$
145


$
144     (1)
    
    Other long-term liability contractual obligations primarily
    relate to payments associated with terminated operating leases
    as part of our restructuring activities in fiscal 2009 and 2010.      New Accounting Pronouncements.
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.   44




---



##### Table of Contents



available-for-sale held-to-maturity
      ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA.  page F-1 Form 10-K.
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE.    ITEM 9A.
    CONTROLS
    AND PROCEDURES.  1.
    Disclosure
    Controls and Procedures.  Rule 13a-15(b)
  2.
    Internal
    Control over Financial Reporting.  a. Managements Report on Internal Control Over
    Financial Reporting. Internal
    Control Integrated Framework Form 10-K,
  b. Attestation Report of the Independent Registered
    Public Accounting Firm.
 45




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      Internal Control  Integrated Framework
        Internal Control  Integrated Framework
    DELOITTE &
    TOUCHE LLP
    46




---



##### Table of Contents



3.
    Changes
    in Internal Controls.  Form 10-K
  ITEM 9B.
    OTHER
    INFORMATION.    PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.  Form 10-K.
  ITEM 11.
    EXECUTIVE
    COMPENSATION.    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS.    Equity
    Compensation Plan Information
   (c)Number of Securities(a)


(b)


Remaining Available forNumber of Securities to


Weighted-Average


Future Issuance Underbe Issued Upon Exercise


Exercise Price of


Equity Compensationof Outstanding Options,


Outstanding Options,


Plans (Excluding SecuritiesPlan Category

Warrants and Rights


Warrants and Rights


Reflected in Column (a))Equity compensation plans approved by shareholders


1,611,333
(1)

$
31.02
(1)


2,001,609
(2)Equity compensation plans not approved by shareholders


0



N/A



0Total


1,611,333


$
31.02



2,001,609     (1)
    
    Excludes shares that may be issued under the Companys
    amended and restated 1999 Employee Stock Purchase Plan, but
    includes amounts reserved for previously-granted restricted
    stock and performance share awards under the 2009 Equity
    Incentive Plan.(2)
    
    Includes 1,818,801 shares available for future issuance
    under the 2009 Equity Incentive Plan. There are
    182,808 shares available under the amended and restated
    1999 Employee Stock Purchase Plan. 47




---



##### Table of Contents



ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE.    ITEM 14.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES.   48




---



##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS AND
    FINANCIAL STATEMENT SCHEDULES.  Financial Statements
    Page (s)Report of Independent Registered Public
    Accounting Firm

F-1Consolidated Balance Sheets

F-2Consolidated Statements of Operations

F-3Consolidated Statements of Stockholders
    Equity

F-4Consolidated Statements of Cash Flows

F-5Notes to Consolidated Financial Statements

F-6 to F-32    Financial Statement Schedules. Form 10-K.
  Listing of Exhibits.
  SurModics,
    Inc.
    Valuation and Qualifying Accounts
  Column B


Column C


Column D


Column EBalance at


Additions


Deductions


Balance atColumn A

Beginning of


Charged to


From


End ofDescription

Period


Expenses


Reserves


PeriodYear Ended September 30, 2008Allowance for doubtful accounts

$
40


$
228


$
133
(a)

$
135Year Ended September 30, 2009Allowance for doubtful accounts

$
135


$
(34
)

$
19
(a)

$
82Restructuring accrual

$



$
1,763


$
808
(b)

$
955Year Ended September 30, 2010Allowance for doubtful accounts

$
82


$
367


$
(12
)(a)

$
461Restructuring accrual

$
955


$
1,306


$
1,078
(b)

$
1,183     (a)
    
    Uncollectible accounts written off and adjustments to the
    allowance.(b)
    
    Adjustments to the accrual account reflect payments or non-cash
    charges associated with the accrual. 49




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Philip
    D. Ankeny          (Power of
    Attorney)
  Form 10-K
  Signature

Title

Date/s/  Philip
    D. AnkenyPhilip
    D. Ankeny

Interim Chief Executive Officer,
    Senior Vice President and
    Chief Financial Officer
    (principal executive and financial officer)

December 14, 2010/s/  Mark
    A. LehmanMark
    A. Lehman

Corporate Controller
    (principal accounting officer)

December 14, 2010/s/  José
    H. BedoyaJosé
    H. Bedoya

Director

December 14, 2010/s/  John
    W. BensonJohn
    W. Benson

Director

December 14, 2010/s/  Mary
    K. BrainerdMary
    K. Brainerd

Director

December 14, 2010/s/  Robert
    C. BuhrmasterRobert
    C. Buhrmaster

Director

December 14, 2010 50




---



##### Table of Contents



Signature

Title

Date/s/  Gerald
    B. FischerGerald
    B. Fischer

Director

December 14, 2010Kenneth
    H. Keller

Director/s/  Susan
    E. KnightSusan
    E. Knight

Director

December 14, 2010/s/  John
    A. MeslowJohn
    A. Meslow

Director

December 14, 2010/s/  Scott
    R. WardScott
    R. Ward

Director

December 14, 2010  51




---



##### Table of Contents



SECURITIES
    AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
  EXHIBIT INDEX TO
    FORM 10-K
  For the Fiscal Year Ended September 30, 2010
  SURMODICS, INC.
  Exhibit2
.1

Agreement of Merger, dated January 18, 2005, with InnoRx,
    Inc.  incorporated by reference to Exhibit 2.1
    to the Companys Current Report on
    Form 8-K
    dated January 18, 2005, SEC File
    No. 0-23837.2
.2

Stock Purchase Agreement, dated July 31, 2007, between
    SurModics, Inc. and Southern Research Institute. 
    incorporated by reference to Exhibit 2.1 to the
    Companys Current Report on
    Form 8-K
    dated July 31, 2007, SEC File
    No. 0-23837.3
.1

Restated Articles of Incorporation, as amended 
    incorporated by reference to Exhibit 3.1 to the
    Companys Quarterly Report on
    Form 10-QSB
    for the quarter ended December 31, 1999,
    SEC File No. 0-23837.3
.2

Restated Bylaws of the Company, as amended 
    incorporated by reference to Exhibit 3.2 to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended September 30, 2009,
    SEC File No. 0-23837.10
.1*

Companys Incentive 1997 Stock Option Plan, including
    specimen of Incentive Stock Option Agreement 
    incorporated by reference to Exhibit 10.3 to the
    Companys Registration Statement on
    form SB-2,
    Reg.
    No. 333-43217.10
.2*

Form of Restricted Stock Agreement under 1997 Plan 
    incorporated by reference to Exhibit 10.4 to the
    Companys Registration Statement on
    form SB-2,
    Reg.
    No. 333-43217.10
.3*

Form of Non-qualified Stock Option Agreement under 1997
    Plan  incorporated by reference to Exhibit 10.5
    to the Companys Registration Statement on
    form SB-2,
    Reg.
    No. 333-43217.10
.4+

Adjusted License Agreement by and between the Company and Cordis
    Corporation effective as of January 1, 2003 
    incorporated by reference to Exhibit 10.11 to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended September 30, 2002, SEC File
    No. 0-23837.10
.5+

Reagent Supply Agreement by and between the Company and Cordis
    Corporation effective as of January 1, 2003 
    incorporated by reference to Exhibit 10.12 to the
    Companys Annual Report on
    Form 10-K
    for the fiscal year ended September 30, 2002, SEC File
    No. 0-23837.10
.6*

Form of officer acceptance regarding
    employment/compensation  incorporated by reference to
    Exhibit 10.9 to the Companys Annual Report on
    Form 10-K
    for the fiscal year ended September 30, 2005, SEC File
    No. 0-23837.10
.7*

2003 Equity Incentive Plan (as amended and restated
    December 13, 2005) (adopted December 13, 2005 by the
    board of directors and approved by the shareholders on
    January 30, 2006)  incorporated by reference to
    Exhibit 10.1 to the Companys
    Form 8-K
    filed February 3, 2006, SEC File
    No. 0-23837.10
.8*

Form of SurModics, Inc. 2003 Equity Incentive Plan Nonqualified
    Stock Option Agreement  incorporated by reference to
    Exhibit 99.1 to the Companys
    8-K filed
    March 20, 2006,
    SEC File No. 0-23837.10
.9*

Form of SurModics, Inc. 2003 Equity Incentive Plan Incentive
    Stock Option Agreement  incorporated by reference to
    Exhibit 99.2 to the Companys
    8-K filed
    March 20, 2006, SEC File
    No. 0-23837.10
.10*

Form of SurModics, Inc. 2003 Equity Incentive Plan Restricted
    Stock Agreement  incorporated by reference to
    Exhibit 99.3 to the Companys
    8-K filed
    March 20, 2006, SEC File
    No. 0-23837.10
.11*

Form of SurModics, Inc. 2003 Equity Incentive Plan Performance
    Share Award Agreement  incorporated by reference to
    Exhibit 99.4 to the Companys
    8-K filed
    March 20, 2006,
    SEC File No. 0-23837.10
.12*

Form of SurModics, Inc. 2003 Equity Incentive Plan Performance
    Unit Award (cash settled) Agreement  incorporated by
    reference to Exhibit 99.5 to the Companys
    8-K filed
    March 20, 2006, SEC File
    No. 0-23837.10
.13*

Form of SurModics, Inc. 2003 Equity Incentive Plan Restricted
    Stock Unit Agreement  incorporated by reference to
    Exhibit 99.6 to the Companys
    8-K filed
    March 20, 2006, SEC File
    No. 0-23837.10
.14*

Form of SurModics, Inc. 2003 Equity Incentive Plan Stock
    Appreciation Rights (cash settled) Agreement 
    incorporated by reference to Exhibit 99.7 to the
    Companys
    8-K filed
    March 20, 2006, SEC File
    No. 0-23837. 52




---



##### Table of Contents



Exhibit10
.15*

Form of SurModics, Inc. 2003 Equity Incentive Plan Stock
    Appreciation Rights (stock settled) Agreement 
    incorporated by reference to Exhibit 99.8 to the
    Companys
    8-K filed
    March 20, 2006, SEC File
    No. 0-23837.10
.16*

Change in Control Agreement with Philip D. Ankeny, dated
    April 19, 2006  incorporated by reference to
    Exhibit 99.2 to the Companys
    Form 8-K
    filed April 25, 2006, SEC File
    No. 0-23837.10
.17

The Companys Board Compensation Policy, Amended and
    Restated as of February 8, 2010.**10
.18

Credit Agreement dated as of February 27, 2009, by and
    between SurModics, Inc. and Wells Fargo Bank, National
    Association as Sole Lead Arranger and Administrative
    Agent  incorporated by reference to Exhibit 10.1
    to the Companys
    Form 8-K
    filed March 4, 2009, SEC File
    No. 0-23837.10
.19*

Amendment to Change of Control Agreement, dated as of
    December 23, 2008, between SurModics, Inc. and Philip D.
    Ankeny.  incorporated by reference to
    Exhibit 10.28 to the Companys Annual Report on
    Form 10-K
    for the fiscal year ended September 30, 2009, SEC File
    No. 0-23837.10
.20*

Second Amendment to Change of Control Agreement, dated as of
    April 19, 2009, between SurModics, Inc. and Philip D.
    Ankeny.  incorporated by reference to
    Exhibit 10.30 to the Companys Annual Report on
    Form 10-K
    for the fiscal year ended September 30, 2009, SEC File
    No. 0-23837.10
.21+

License and Development Agreement between Genentech, Inc., F.
    Hoffmann-La Roche, Ltd., and SurModics, Inc., dated
    October 5, 2009  incorporated by reference to
    Exhibit 10.1 to the Companys
    Form 10-Q
    filed February 5, 2010, SEC File
    No. 0-23837.10
.22+

Master Services Agreement by and between Genentech, Inc., F.
    Hoffmann-La Roche, Ltd. and SurModics, Inc., dated
    October 5, 2009  incorporated by reference to
    Exhibit 10.2 to the Companys
    Form 10-Q
    filed February 5, 2010, SEC File
    No. 0-23837.10
.23*

SurModics, Inc. 2009 Equity Incentive Plan. 
    incorporated by reference to Exhibit 10.3 to the
    Companys
    Form 10-Q
    filed May 7, 2010, SEC File
    No. 0-23837.10
.24*

SurModics, Inc. 1999 Employee Stock Purchase Plan (as amended
    and restated November 30, 2009).  incorporated
    by reference to Exhibit 10.2 to the Companys
    Form 10-Q
    filed May 7, 2010,
    SEC File No. 0-23837.10
.25*

Form of Incentive Stock Option Agreement for the SurModics, Inc.
    2009 Equity Incentive Plan  incorporated by reference
    to Exhibit 10.4 to the Companys
    Form 10-Q
    filed May 7, 2010, SEC File
    No. 0-
    23837.10
.26*

Form of Non-Statutory Stock Option Agreement for the SurModics,
    Inc. 2009 Equity Incentive Plan  incorporated by
    reference to Exhibit 10.5 to the Companys
    Form 10-Q
    filed May 7, 2010,
    SEC File No. 0-23837.10
.27*

Form of Performance Share Agreement for the SurModics, Inc. 2009
    Equity Incentive Plan  incorporated by reference to
    Exhibit 10.6 to the Companys
    Form 10-Q
    filed May 7, 2010,
    SEC File No. 0-23837.10
.28*

Form of Restricted Stock Agreement for the SurModics, Inc. 2009
    Equity Incentive Plan  incorporated by reference to
    Exhibit 10.7 to the Companys
    Form 10-Q
    filed May 7, 2010, SEC File
    No. 0-23837.21


Subsidiaries of the Registrant.**23


Consent of Deloitte & Touche LLP.**24


Power of Attorney (included on signature page of this
    Form 10-K).**31
.1

Certification of Chief Executive Officer and Chief Financial
    Officer Pursuant to Section 302 of Sarbanes-Oxley Act of
    2002.**32
.1

Certification of Chief Executive Officer and Chief Financial
    Officer Pursuant to Section 906 of Sarbanes-Oxley Act of
    2002.**     *
    
    Management contract or compensatory plan or arrangement  **
    
    Filed herewith+
    
    Confidential treatment requested as to portions of the exhibit.
    Confidential portions omitted and provided separately to the
    Securities and Exchange Commission. 53




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            Internal Control  Integrated Framework
  DELOITTE &
    TOUCHE LLP
    F-1




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Consolidated Balance Sheets
 As of
    September 30
  2010


2009(In thousands, except share data)ASSETSCurrent AssetsCash and cash equivalents

$
11,391


$
11,636Short-term investments


9,105



8,932Accounts receivable, net of allowance for doubtful accounts of
    $461 and $82 as of September 30, 2010 and 2009, respectively


8,987



11,320Inventories


3,047



3,330Deferred tax asset


247



353Prepaids and other


4,701



1,443Total Current Assets


37,478



37,014Property and equipment, net


65,395



66,915Long-term investments


36,290



27,300Deferred tax asset


2,606



2,548Intangible assets, net


15,257



17,458Goodwill


8,010



21,070Other assets, net


5,243



13,257Total Assets

$
170,279


$
185,562LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable

$
3,341


$
3,468Accrued liabilities:Compensation


930



926Accrued income taxes payable






186Accrued other


1,753



1,637Deferred revenue


562



905Other current liabilities


1,061



862Total Current Liabilities


7,647



7,984Deferred revenue, less current portion


3,598



623Other long-term liabilities


4,675



4,583Total Liabilities


15,920



13,190Commitments and Contingencies (Note 9)Stockholders EquitySeries A preferred stock  $.05 par value,
    450,000 shares authorized;no shares issued and outstanding






Common stock  $.05 par value,
    45,000,000 shares authorized; 17,423,601 and
    17,471,472 shares issued and outstanding


871



874Additional paid-in capital


69,702



66,005Accumulated other comprehensive income


886



1,504Retained earnings


82,900



103,989Total Stockholders Equity


154,359



172,372Total Liabilities and Stockholders Equity

$
170,279


$
185,562    F-2




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Consolidated Statements of Operations
 For the
    Years Ended September 30
  2010


2009


2008(In thousands, except netincome (loss) per share)RevenueRoyalties and license fees

$
34,277


$
75,464


$
51,788Product sales


20,184



19,333



20,052Research and development


15,437



26,737



25,211Total revenue


69,898



121,534



97,051Operating costs and expensesProduct


9,425



7,508



8,476Customer research and development


18,147



13,183



19,187Other research and development


17,916



21,179



21,311Selling, general and administrative


18,451



17,200



20,816Purchased in-process research and development






3,200



Restructuring charges


1,306



1,763



Asset impairment charges


4,896







Goodwill impairment charge


13,810







Total operating costs and expenses


83,951



64,033



69,790(Loss) income from operations


(14,053
)


57,501



27,261Other (loss) incomeInvestment income, net


1,023



1,839



3,329Impairment loss on investments


(7,943
)






(4,314
)Other income, net


314



184



616Other (loss) income, net


(6,606
)


2,023



(369
)(Loss) income before income taxes


(20,659
)


59,524



26,892Income tax provision


(430
)


(21,974
)


(12,153
)Net (loss) income

$
(21,089
)

$
37,550


$
14,739Basic net (loss) income per share

$
(1.21
)

$
2.15


$
0.82Diluted net (loss) income per share

$
(1.21
)

$
2.15


$
0.80Weighted average shares outstandingBasic


17,372



17,435



18,026Dilutive effect of outstanding stock options and non-vested stock






34



304Diluted


17,372



17,469



18,330    F-3




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Consolidated Statements of Stockholders
    Equity
 For
    the Years Ended September 30, 2010, 2009 and
    2008
  AccumulatedAdditional


Other





TotalCommon Stock


Paid-In


Comprehensive


Retained


StockholdersShares


Amount


Capital


Income (Loss)


Earnings


Equity(In thousands)Balance September 30, 2007


18,165


$
909


$
76,670


$
1,723


$
51,620


$
130,922Components of comprehensive income, net of tax:Net income


















14,739



14,739Unrealized holding losses on available-for-sale securities
    arising during the period














(5,882
)






(5,882
)Add reclassification for losses included in net income, net of
    tax provision of $167














4,052







4,052Comprehensive income






















12,909Issuance of common stock


16



1



516











517Common stock repurchased


(342
)


(17
)


(13,954
)










(13,971
)Common stock options exercised, net


114



4



2,514











2,518Purchase of common stock to pay employee taxes


77



4



(1,678
)










(1,674
)Excess tax benefit from stock-based compensation plans










1,081











1,081Stock-based compensation










9,652











9,652Other










(228
)










(228
)Accounting change for income taxes


















80



80Balance September 30, 2008


18,030



901



74,573



(107
)


66,439



141,806Components of comprehensive income,net of tax:Net income


















37,550



37,550Unrealized holding gains on available-for-sale securities
    arising during the period














2,123







2,123Add reclassification for gains included in net income, net of
    tax provision of $299














(512
)






(512
)Comprehensive income






















39,161Issuance of common stock


40



2



611











613Common stock repurchased


(624
)


(31
)


(14,967
)










(14,998
)Common stock options exercised, net


15



1



65











66Purchase of common stock to pay employee taxes


10



1



(569
)










(568
)Excess tax benefit from stock-based compensation plans










(366
)










(366
)Stock-based compensation










6,853











6,853Other










(195
)










(195
)Balance September 30, 2009


17,471



874



66,005



1,504



103,989



172,372Components of comprehensive loss,net of tax:Net loss


















(21,089
)


(21,089
)Unrealized holding losses on available-for-sale securities
    arising during the period














(437
)






(437
)Add reclassification for gains included in net loss, net of tax
    benefit of $118














(181
)






(181
)Comprehensive loss






















(21,707
)Issuance of common stock


40



2



608











610Common stock repurchased


(102
)


(6
)


(2,026
)










(2,032
)Common stock options exercised, net


14



1



281











282Purchase of common stock to pay employee taxes


1







(545
)










(545
)Excess tax benefit from stock-based compensation plans










(496
)










(496
)Stock-based compensation










5,875











5,875Balance September 30, 2010


17,424


$
871


$
69,702


$
886


$
82,900


$
154,359    F-4




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Consolidated Statements of Cash Flows
 For the
    Years Ended September 30
  2010


2009


2008(In thousands)Operating ActivitiesNet (loss) income

$
(21,089
)

$
37,550


$
14,739Adjustments to reconcile net (loss) income to net cash provided
    byoperating activities:Depreciation and amortization


7,818



5,912



6,071(Gain) loss on equity method investments and sales of investments


(299
)


(103
)


415Amortization of premium on investments


128



139



70Impairment loss on investments


7,943







4,314Stock-based compensation


5,875



6,853



9,652Purchased in-process research & development






3,200



Asset impairment charges


4,896







Goodwill impairment charge


13,810







Deferred tax


446



8,229



(3,428
)Excess tax benefit from stock-based compensation plans


496



366



(1,081
)Loss on disposals of property and equipment


3



291



78Other






(250
)


Change in operating assets and liabilities:Accounts receivable


2,333



3,269



1,548Inventories


284



(679
)


(154
)Accounts payable and accrued liabilities


1,135



(624
)


(264
)Income taxes


(4,121
)


2,656



(5,003
)Deferred revenue


2,632



(36,050
)


11,452Prepaids and other


(282
)


562



1,413Net cash provided by operating activities


22,008



31,321



39,822Investing ActivitiesPurchases of property and equipment


(9,679
)


(29,364
)


(23,866
)Sales of property and equipment










32Purchases of
    available-for-sale
    investments


(34,919
)


(33,568
)


(22,857
)Sales/maturities of investments


25,986



55,263



29,258Purchases of
    held-to-maturity
    investments










(6,485
)Investment in other strategic assets


(500
)


(2,500
)


(2,562
)Purchase of licenses and patents


(210
)


(631
)


(2,452
)Acquisitions, net of cash acquired


(750
)


(8,585
)


(3,219
)Repayment of notes receivable










5,870Other investing activities






(187
)


(228
)Net cash used in investing activities


(20,072
)


(19,572
)


(26,509
)Financing ActivitiesExcess tax benefit from stock-based compensation plans


(496
)


(366
)


1,081Issuance of common stock


892



679



3,037Repurchase of common stock


(2,032
)


(14,998
)


(13,971
)Purchase of common stock to pay employee taxes


(545
)


(568
)


(1,674
)Repayment of notes payable






(236
)


(222
)Net cash used in financing activities


(2,181
)


(15,489
)


(11,749
)Net change in cash and cash equivalents


(245
)


(3,740
)


1,564Cash and Cash EquivalentsBeginning of year


11,636



15,376



13,812End of year

$
11,391


$
11,636


$
15,376Supplemental InformationCash paid for income taxes

$
4,105


$
11,285


$
21,058Noncash transaction  acquisition of property,plant, and equipment on account

$
565


$
1,247


$
1,745Noncash transaction  acquisition of intangibles on
    account

$



$
210


$
    F-5




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes
    to Consolidated Financial Statements
 September 30,
    2010 and 2009
  1.
    Description  in vitro
  Basis
    of Presentation
    Subsequent
    Events
          Form 8-K
  Form 8-K
 F-6




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  2.
    Summary
    of Significant Accounting Policies and Select Balance Sheet
    Information  Cash
    and Cash Equivalents
    Investments
  available-for-sale held-to-maturity Available-for-sale other-than-temporary other-than-temporary available-for-sale, held-to-maturity other-than-temporary held-to-maturity,
  available-for-sale (in
    thousands):
  2010Original Cost


Unrealized Gains


Unrealized Losses


Fair ValueU.S. government obligations

$
25,968


$
395


$
(34
)

$
26,329Mortgage-backed securities


4,711



164



(48
)


4,827Municipal bonds


3,079



72







3,151Asset-backed securities


1,146



8



(42
)


1,112Corporate bonds


5,828



24







5,852Total

$
40,732


$
663


$
(124
)

$
41,271   2009Original Cost


Unrealized Gains


Unrealized Losses


Fair ValueU.S. government obligations

$
10,837


$
253


$



$
11,090Mortgage-backed securities


7,938



177



(106
)


8,009Municipal bonds


7,210



232







7,442Asset-backed securities


2,334



65



(143
)


2,256Corporate bonds


1,181



3







1,184Total

$
29,500


$
730


$
(249
)

$
29,981  F-7




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (in
    thousands):
  Amortized Cost


Fair ValueDebt securities due within:One year

$
8,075


$
8,092One to five years


27,046



27,541Five years or more


5,611



5,638Total

$
40,732


$
41,271   available-for-sale (in thousands):
  2010

2009

2008Proceeds from sales

$
23,986


$
55,263


$
29,258Gross realized gains

$
302


$
823


$
454Gross realized losses

$
(3
)

$
(12
)

$
(26
)   held-to-maturity held-to-maturity held-to-maturity
  Inventories
  (in thousands):
  2010


2009Raw materials

$
1,140


$
1,287Finished products


1,907



2,043Total

$
3,047


$
3,330   Property
    and Equipment
    construction-in-progress construction-in-progress
   F-8




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Construction-in-progress
  (in thousands):
  Useful Life


2010


2009(In years)Land





$
6,886


$
7,409Laboratory fixtures and equipment


3 to 12



25,958



19,549Building and improvements


1 to 39



47,084



15,911Office furniture and equipment


3 to 10



5,879



4,550Construction-in-progress






4,386



40,210Less accumulated depreciation






(24,798
)


(20,714
)Property and equipment, net





$
65,395


$
66,915   Other
    Assets
    (in thousands):
  2010


2009Investment in OctoPlus

$
2,624


$
3,700Investment in Nexeon MedSystems


285



5,651Investment in ThermopeutiX


1,185



1,185Investment in ViaCyte (formerly Novocell)


559



559Other


590



2,162Other assets, net

$
5,243


$
13,257   available-for-sale Available-for-sale other-than-temporary
   F-9




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    other-than-temporary.
  tm other-than-temporarily
      Intangible
    Assets
     F-10




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (in thousands):
  Useful Life


2010


2009(In years)Customer lists


9-11


$
8,657


$
8,657Core technology


8-18



8,330



8,330Patents and other


2-20



2,376



3,076Trademarks






600



600Less accumulated amortization






(4,706
)


(3,205
)Intangible assets, net





$
15,257


$
17,458   in thousands
  2011

$
1,5462012


1,5442013


1,5442014


1,5442015


1,533   Goodwill
  (in thousands)
  Balance at October 1, 2008

$
18,001Acquisitions


3,016Adjustment


53Balance at September 30, 2009


21,070Acquisitions


750Goodwill Impairment


(13,810
)Balance at September 30, 2010

$
8,010        F-11




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
             F-12




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Impairment
    of Long-Lived Assets
    Revenue
    Recognition
        Royalties and licenses fees.
  Milestone payments.
  
    The milestone payment is non-refundable;
    The milestone involved a significant degree of risk, and was not
    reasonably assured at the inception of the arrangement;
    Accomplishment of the milestone involved substantial past
    effort/performance;
    The amount of the milestone payment is commensurate with the
    related effort and risk;
    The milestone payment is reasonable in comparison to all of the
    deliverables and payment terms in the arrangement; and
    A reasonable amount of time passed between the initial license
    payment and the first and subsequent milestone payments. F-13




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
     Product sales. 30-45 days.
  Research and development.
  Arrangements with multiple deliverables.
             F-14




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
          in thousands
  Pro Forma Basis as if thePrevious AccountingAs Reported


Guidance Were in EffectTotal multiple element arrangement revenue

$
4,232


$
378      F-15




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Merck Agreement. out-of-pocket
      Deferred
    Revenue
      Research
    and Development
      Use of
    Estimates
   F-16




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  New
    Accounting Pronouncements
    3.
    Fair
    Value Measurements    Fair
    Value Hierarchy
                   F-17




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Assets
    and Liabilities Measured at Fair Value on a Recurring
    Basis
  (in thousands)
  Quoted Pricesin Active


SignificantMarkets for


Other


Significant


Total FairIdentical


Observable


Unobservable


Value as ofInstruments


Inputs


Inputs


September 30,(Level 1)


(Level 2)


(Level 3)


2010Assets:Cash equivalents

$



$
10,128


$



$
10,128Available for sale debt securitiesUS government obligations






25,626



704



26,330Mortgage backed securities






4,757



69



4,826Municipal bonds






3,150







3,150Asset backed securities






1,113







1,113Corporate bonds






5,852







5,852Other assets


2,624











2,624Total assets measured at fair value

$
2,624


$
50,626


$
773


$
54,023   held-to-maturity Held-to-maturity
  (in
    thousands)
  Quoted Pricesin Active


SignificantMarkets for


Other


Significant


Total FairIdentical


Observable


Unobservable


Value as ofInstruments


Inputs


Inputs


September 30,(Level 1)


(Level 2)


(Level 3)


2009Assets:Cash equivalents

$



$
9,108


$



$
9,108Available for sale debt securitiesUS government obligations






9,960



1,130



11,090Mortgage backed securities






7,935



73



8,008Municipal bonds






7,443







7,443Asset backed securities






2,256







2,256Corporate bonds






1,184







1,184Other assets


3,700











3,700Total assets measured at fair value

$
3,700


$
37,886


$
1,203


$
42,789  F-18




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Changes
    in Level 3 Instruments Measured at Fair Value on a
    Recurring Basis
  in thousands
  Fair Value Measurements Using Significant Unobservable Inputs
    (Level 3)For the Year Ended September 30, 2010Available-for-Sale Debt SecuritiesU.S. Government


MortgageObligations


Backed


TotalBalance, September 30, 2009

$
1,130


$
73


$
1,203Transfers into Level 3






148



148Transfers out of Level 3


(36
)


(145
)


(181
)Total realized and unrealized gains (losses):Included in other comprehensive (loss) income


(33
)


3



(30
)Purchases, issuances, sales and settlements, net


(357
)


(10
)


(367
)Balance, September 30, 2010

$
704


$
69


$
773   Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)For the Year Ended September 30, 2009Available-for-Sale Debt SecuritiesU.S. Government





MortgageObligations


Corporate


Backed


TotalBalance, September 30, 2008

$
74


$
190


$



$
264Transfers into Level 3


1,273







79



1,352Transfers out of Level 3


(581
)


(199
)






(780
)Total realized and unrealized gains (losses):Included in other comprehensive income (loss)


15



9



1



25Purchases, issuances, sales and settlements, net


349







(7
)


342Balance, September 30, 2009

$
1,130


$



$
73


$
1,203   available-for-sale
  Assets
    and Liabilities Measured at Fair Value on a Non-Recurring
    Basis
  held-to-maturity other-than-temporarily other-than-temporary, and/or
 F-19




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  other-than-temporarily
        4.
    Acquisitions  PR Pharmaceuticals, Inc. (in thousands)
  Core technology

$
1,400Customer relationships


900In-process research and development


3,200Trade names


20Non-compete agreements


50Total purchase price

$
5,570    F-20




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    5.
    Revolving
    Credit Facility    6.
    Stockholders
    Equity  (in thousands):
  2010


2009


2008Product

$
139


$
87


$
161Customer research and development


772



815



1,794Other research and development


2,399



2,806



1,999Selling, general and administrative


2,565



3,145



5,698Total

$
5,875


$
6,853


$
9,652    F-21




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Stock
    Option Plans
    2010

2009

2008Risk-free interest rates


1.95
%


2.30
%


2.80
%Expected life


4.8 years



4.8 years



4.6 yearsExpected volatility


41
%


40
%


37
%Dividend yield


0
%


0
%


0
%       F-22




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  WeightedNumber of


AverageShares


Exercise PriceOutstanding at September 30, 2007


1,401,420


$
31.29Granted


392,917



41.86Exercised


(163,297
)


27.45Forfeited


(108,250
)


33.59Outstanding at September 30, 2008


1,522,790


$
34.26Granted


268,700



24.06Exercised


(17,600
)


8.82Forfeited


(104,320
)


35.33Outstanding at September 30, 2009


1,669,570


$
32.82Granted


388,635



22.88Exercised


(20,350
)


20.74Forfeited


(545,534
)


30.58Outstanding at September 30, 2010


1,492,321


$
31.22Exercisable at September 30, 2010


843,112


$
33.10   Restricted
    Stock Awards
    WeightedNumber of


AverageShares


Grant PriceBalance at September 30, 2007


206,191


$
35.89Granted


12,383



42.18Vested


(40,336
)


38.76Forfeited


(21,109
)


32.83Balance at September 30, 2008


157,129


$
36.06Granted


7,700



23.93Vested


(59,047
)


34.44Forfeited


(4,887
)


41.91Balance at September 30, 2009


100,895


$
35.80Granted


30,440



18.49Vested


(83,195
)


36.32Forfeited


(7,068
)


33.39Balance at September 30, 2010


41,072


$
22.33  F-23




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Performance
    Share Awards
    1999
    Employee Stock Purchase Plan
    7.
    Restructuring
    Charges         F-24




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
      (in thousands)
  Employee


Facility-Severance


Relatedand Benefits


Costs


TotalBalance at September 30, 2008

$



$



$
Accruals during the year


513



1,250



1,763Cash payments


(513
)


(295
)


(808
)Balance at September 30, 2009

$



$
955


$
955Accruals during the year


818



488



1,306Cash payments


(814
)


(264
)


(1,078
)Balance at September 30, 2010

$
4


$
1,179


$
1,183    F-25




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  8.
    Income
    Taxes    (in thousands):
  2010


2009


2008Current provision:Federal

$
(331
)

$
12,257


$
13,534State and foreign


277



1,362



1,516Total current provision


(54
)


13,619



15,050Deferred provision (benefit):Federal


1,019



7,483



(2,832
)State


(535
)


872



(65
)Total deferred provision (benefit)


484



8,355



(2,897
)Total provision

$
430


$
21,974


$
12,153   (in thousands):
  2010


2009


2008Amount at statutory federal income tax rate

$
(7,231
)

$
20,833


$
9,387Change because of the following items:State taxes


(209
)


1,206



715Other


(20
)


(481
)


223Stock-based compensation


276



416



239Valuation allowance


2,780







1,589Goodwill impairment


4,834







Income tax provision

$
430


$
21,974


$
12,153  F-26




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  (in thousands):
  2010


2009Depreciable assets

$
(5,795
)

$
(2,951
)Deferred revenue


1,666



261Accruals and reserves


780



526Stock options


5,947



5,258Impaired investments


6,130



3,264Unrealized losses on investments


(563
)


(962
)Other


1,211



844Valuation allowance


(6,523
)


(3,339
)Total deferred tax asset


2,853



2,901Less current deferred tax asset


(247
)


(353
)Noncurrent deferred tax asset

$
2,606


$
2,548     (in
    thousands):
  2010


2009


2008Beginning of fiscal year

$
2,042


$
1,540


$
1,120Increase in tax positions for prior years






280



194Decrease in tax positions for prior years


(104
)


(7
)


Increases in tax positions for current year


92



260



237Settlements with taxing authorities










Lapse of the statute of limitations


(82
)


(31
)


(11
)End of fiscal year

$
1,948


$
2,042


$
1,540      F-27




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    9.
    Commitments
    and Contingencies  Litigation.
  SRI Litigation.
  InnoRx, Inc.
  BioFX Laboratories, Inc. in vitro
  SurModics Pharmaceuticals, Inc.
  Alabama Jobs Commitment.
 F-28




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Operating Leases.
  Year Ended September 30,2011

$
258,0002012


57,0002013


60,0002014


62,0002015


62,000Thereafter


16,000Total minimum lease payments

$
515,000   10.
    Defined
    Contribution Plans    11.
    Operating
    Segments    in vitro
   F-29




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  in
    thousands
  2010


2009


2008TherapeuticCardiovascular

$
40,155


$
39,841


$
47,675Ophthalmology


7,617



52,102



10,252Other Markets


10,932



13,114



17,875Total Therapeutic


58,704



105,057



75,802Diagnostic


11,194



16,477



21,249Total revenue

$
69,898


$
121,534


$
97,051   Major
    Customers
    2010


2009


2008Johnson & Johnson


17
%


11
%


20
%Medtronic, Inc.


14
%


**



**Merck & Company


**



37
%


**Abbott Laboratories


**



**



10
%     **
    
    - less than ten percent    Geographic
    Revenue
    2010

2009

2008Domestic


78
%


84
%


79
%Foreign


22
%


16
%


21
%  F-30




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
  12.
    Quarterly
    Financial Data (Unaudited)  (in thousands, except per share data)
  First


Second


Third


FourthQuarter


Quarter


Quarter


QuarterFiscal 2010Revenue

$
17,381


$
18,360


$
18,608


$
15,549Income (loss) from operations


2,768



(952
)


2,220



(18,089
)Net income (loss)


1,917



(427
)


(916
)


(21,663
)Net income (loss) per share(1):Basic


0.11



(0.02
)


(0.05
)


(1.25
)Diluted


0.11



(0.02
)


(0.05
)


(1.25
)Fiscal 2009Revenue

$
63,216


$
20,925


$
18,186


$
19,207Income from operations


42,667



6,200



4,661



3,973Net income


27,085



4,216



3,539



2,710Net income per share(1):Basic


1.53



0.24



0.20



0.16Diluted


1.53



0.24



0.20



0.16Fiscal 2008Revenue

$
23,829


$
25,707


$
24,276


$
23,239Income from operations


7,571



7,181



7,184



5,325Net income (loss)


5,646



5,107



4,800



(814
)Net income (loss) per share(1):Basic


0.31



0.28



0.27



(0.05
)Diluted


0.31



0.28



0.26



(0.05
)     (1)
    
    The sum of the quarterly earnings per share may not equal the
    annual earnings per share because of changes in the average
    shares outstanding.       F-31




---



##### Table of Contents



SurModics,
    Inc. and Subsidiaries
  Notes to
    Consolidated Financial
    Statements  (Continued)
       F-32