TMDX - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the TransMedics Q3 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Group. Gilmartin Johnston, Brian

ahead, go sir. may You

Brian Johnston

on Earlier Thank for the released available results TransMedics quarter you, press ended is of operator. the copy September financial A website. today, XX, company’s the release XXXX.

provisions this of begin, are or operating Securities make without during relate Any statements. within made XXXX. call the will the pursuant Litigation we in that forward-looking Federal of results of Harbor that statements I remind to this that to examination Before you trends, expectations contained events, All Act performance of predictions or like Securities of Reform potential management meaning limitation, include our including, to call the statements forward-looking Private the forward-looking future statements would statements are Laws, estimates differ Safe and opportunity gross undue assumptions. our future regulatory actual organization, expectations to XXXX based operating should statements. place that and you our commercial which growth are events uncertainties these for include results on in for financial products and and/or our or or guidance material could materially our for involve expectations in and revenue, Accordingly, reimbursement and risks These those approvals by expenses these cause margins anticipated current expectations, not implied forward-looking various statements. reliance from and statements upon which

XX-Q President information intention SEC Annual third TransMedics our of Chief And section X, live Securities required the as March our by uncertainties obligation, report our the time-sensitive any other quarter now information, with filings, business, revise with Commission to conference of on XXXX. new is statements, today, risks turn by on future please filed associated Executive because the Form list Hassanein, whether disclaims any November the to accurate quarterly as XXXX. a XX, and of financial of broadcast to or call Risk description I’ll including supplemented call Exchange of on Officer. or For or Factors contains events the projections the and and Form This only our and for over or forward-looking otherwise. and refer as XXXX, with update Waleed Report that, except law XX-K

Waleed Hassanein

Good welcome to TransMedics Thank everyone, call. quarter afternoon, Brian. earnings you, third and XXXX

Joining lung, and in by gold Chief services to as to front Financial technology solidify turnkey uniquely ultimately Gordon, positioned a transplant is expand new taking today Officer. me are TransMedics and Chief of volumes. and and reiterate and Officer; standard process is and strategy the organ establish kidney the stated, Tamer transplant Stephen goal solution opportunity service to market worldwide. to our minutes to provide significant want in streamline our and to Dr. us. overall capitalize start few plans Khayal, OCS for I Commercial heart, transplants technology liver TransMedics Simply

a this To transplant multi-faceted marketing for in working national regional the are access strategically us leading number OCS leverages initiate States, are service procurement establishes its of potential new clinical broadest OCS our the designed we U.S. the organ across that of We enable to this a U.S. relationship expertise donor United to the in do located organizations. organs the strategy under OCS to a strategy kind that developed a achieve first ecosystem We create this, technology, have national program. with transplants

the in Despite growth for headwinds OCS to implementing footprint we the And be the will new liver pipeline major near us our transport enable approvals macro In for another strategy. and will clinically throughout meaningful we continental catalyst potential few indications opportunity significant months, transplant commercial U.S. to across heart this recipients and are program manage Securing donor organs from transplantation. creating workflow we a over and are anywhere expect the that within markets. for to continue our These addition, and past clinical activities comprehensive have three maximizing to lung, donor of This to and made are long-term paramount grow FDA our the XXXX. TransMedics. progress

We challenges a are the that and let to turn and our confident that and delays, third offering me long-term FDA unrivaled the prospects Q results. backdrop, remain mid frankly posed that our recent by we a With despite strong. COVID pandemic panel have the unique as review that very

net quarter is expectation, while revenue third revenue XX% revenue million, XXXX. year-over-year overall outperforming net Our was U.S. down X% XQ $X.X grew from

QX lung saw volume and steadily heart transplant liver behind lagging COVID In improved due to with terms we transplants recovery, throughout of impact.

for clinical the transplantation continue phenomenon pandemic. We expect to COVID throughout this lung

transplant which Our OCS DCD CAP our XX or and program, continued by QX for the to completed OCS enrollment heart OCS recently approval performance trial. as part was accelerate secured patients. us access We an enable to through driven we that DCD additional DCD FDA would Heart protocol of in continued

an in normothermic before have XXXX, are the and PMA orders of that given review Meanwhile, is initiated processes, ongoing. And the on early new Advisory XXXX. the to given remain kind that FDA noted first U.S. for PMA new quarter, this the heart booked Meeting, This U.S. transplant within in perfusion In for track we OCS initiated expect we in for RV we eight our centers. we for assumes Liver with FDA for approval cetera, our its third is Panel We be interactive confident it the from et transplant need indication centers. potential transplant as liver

What’s XX of those transplanted in one QX, progress enabled nicely that As mentioned, its four program OPO or lung centers service out used the transplant had before. three model interesting OCS lung four that our now in continuing transplant. is national In transplant our service OCS new never also is days. to in

the this, We’re this using that national within about shows program. footprint grow to ability our excited because service the U.S.

pipeline of and OPOs several be several the robust confirmed Importantly, initiated we a quarters. new expand in three to OPOs over interest have to to QX next

OCS first Turning indication. now to our Heart

of wait rescheduling Panel relevant to to continue already the FDA all we Meeting, team. material our review submitted FDA we While have

FDA would for given the FDA that been We’ve is panel TransMedics, all to time to that announcing verified by QX new meeting. forward currently of schedule panel exact And net date the as FDA. the the continue a We scheduled data in have we working by that look as believe the notified is is XXXX. our to been meeting positive by soon delay it

robustness FDA to panel OCS Despite or the in to and PMA. positions of extremely this our delay, be – remain quality confident OCS extremely in Heart We and Let relating clinical unforeseen confident data remain our our the from me clinical questions in our crystal PMA. clear. Heart address our ability we

since QX. constraint earlier months, incremental mitigate Now, would this impact are let this to signs seen like we remainder ability U.S. normal capacity second of COVID of in as seen duration we and optimistic see reiterate of the that in year, we while on revenue pandemic strong hospitals our disruption XXXX. transplant to growth of a and me COVID of year, Europe. peak cover have looking transplant operation we’re next cognizant with expectations the and the procedures the several In to recovery the the cautiously potential of of may major for and in Depending flow to I impact, also we’ve the potential on the

said, we we these delay not our for XXXX. restating forward flexible sheet, our of confident revenue impact remain strength balance given to drive in on That FDA our guidance growth. are the ongoing our and the the are COVID uncertainties, to business Given ability despite and

addition we what foreseeing to XXXX, are in for turn me in further FDA let hopefully looking early Now, Heart next for achieving approval, XXXX. XXXX. to OCS And out to year

for are announce next revenues we XXXX. heart expect Heart OCS cover FDA number of year. also to to our regions approval forward catalysts key commercial the we half throughout expect the and the second the to trial Three, have XXXX. PMA donors. OCS results planning DCD Four, to in transplant to to products achieve generating We’re to plan our Two, U.S. expect achieve looking OCS Overall, many XXXX One, of year. of service expect expand and expansion the approved all to model file three to of we national major in second that the OPO milestones we OCS of to a we half our indication DCD access fully that in in the FDA of DCD, we and XXXX. include the in will we Liver

major will turn results expect Finally, With OCS to for clinical several Stephen call scientific review CFO results Gordon, the we the financial to programs I clinical our quarter. reporting next the throughout of our that, and year. publications

Stephen Gordon

third Thank I in additional quarter information will on other financial some the detail results you, the provide Waleed. quarter. and

third the Net $X.X revenue million. breakdown $X.X U.S. was revenue $X was million revenue third by increased of from XX% of the third and down U.S., of liver. XXXX, the quarter of And was almost and For net $X.X million XXXX. revenue And million XXXX. lung, the was million, $X.X quarter revenue revenue The from gross was OCS revenue was from on gross X% quarter ex-U.S. net XX% net and $X $X.X million organ net quarter that’s in revenue all Heart. ex-U.S. U.S. of million of revenue And decreased heart, $X.X the of million. was third XXXX. the

substantial supported COVID-XX and And several quarter, orders transplant driven disrupted and various which mentioned, in was related to by our heart our revenue. As QX the of top business. impact evidenced in we U.S. CAP Heart as A has trends the of trials. initial EXPAND portion strong the in stocking Waleed of our in OCS line orders had the revenue DCD XXXX results, subsequent volumes recovery

ex-U.S. lung, to On recover OCS slower the pre-COVID as have U.S. to hand, levels. the in business been as general well other

the XX% of for third XXXX in up third the QX Our from in was we also of reported gross of up and This XXXX from margin the XX% is quarter quarter XXXX. XX%.

at believe to a gross margin toward this we of the goal in While show mid-XXs our our helps steady state. path quarter strength

XXXX, million Our COVID volumes margin a quarter the at also third impact was that’s million ex-U.S. million second of and lower favorably higher as recovering impacted were revenue second of quarter saw XXXX. driven to favorable spending operating margin sequentially third the than we of And average selling higher period. $X.X price. overall the third as down gross Total gross level from we The what the from sales consider XXXX down typical the quarter we mix quarter $X.X $X.X of from compared by U.S. and would also during revenue. quarter expenses higher were have in U.S. by this impact the of production was

spending than and travel items to continue this normal. During areas, including lower several trade discretionary levels period, other show attendance, our in be

generation next resources organ care to two in The growth, incremental and continuing service add and are areas. investment our in critical we our national system. However, program specifically,

quarter $X.X Our XXXX our was for operating XXXX, the XXXX XX, $XX.X million. loss XXXX, third the XXXX. $XXX.X loss quarter third the in million XXXX. of marketable And of $X.X securities to outstanding – million closed the which was the third quarter. $X.X burn third quarter equates cash million of September quarter common in in in for the compared million of the of equivalents million at And of shares quarter weighted in to compared a $X.X Cash, million was as average $X.X of and to quarter net

fourth down are Finally, impact expect DCD cases, revenue current a the Heart slightly the of QX giving the OCS QX, flat to ending while trials for COVID given the in in we guidance not XXXX. of we wave and quarter specific of

So the to over with back I’ll turn Waleed. that, call

Waleed Hassanein

Thank Stephen. you,

significant XXXX our globally. our ability for impacted organ brought challenges, nor care of transplants it has standard solid fundamental to growth goal, in not the become While

to as measure right goal, on Despite over accelerating growth are TransMedics long-term path progress to the the highly achieving that and transplant We this centers few the strategic at confident aimed as our U.S. we and partner are continuing to differentiated past we the initiatives headwinds in are a success. durable driving and we our reliable on months, revenue delays significant make established

on This growth indications. the expect on next us we several significant approvals us deliver questions. on joining Operator? contribution trajectory FDA allow forward we’ll call. for and you put looking when now, TransMedics this forefront to lung, years for up revenue of much a And TransMedics the the business. open the our and line to Thank heart and to for from will XXXX, vision liver the so We’re for have

Operator

And first David your Instructions] question from from comes Lewis [Operator Stanley. Morgan

Cecilia Furlong

percentage in progressed, going cases kind is This QX, Thanks through guess to what about, of ability focused of really how and taking Stephen. Cecilia just for you’re has normalized lung, Waleed questions. of kind just there into how centers Hi, volumes attention, looking with for drive their terms and and with off, David. are I start wanted and QX getting of forward? I back lung, level. QX on I have Waleed, thinking you’ve just our know as really a the but to to have issues seen

Waleed Hassanein

Sure. Thank you, Cecilia.

XX% So fully all the We’ve transplant on as organ UNOS the this XX%. by same pre-COVID level is, XX% between I’m When seen transplant. a is not from transplant the trends down procedure. QX. of this frankly organ roughly organs, public levels recover. information remains transplant of activity, I the It’s to that are or of or will recovering you time questions acquires transplant knowledge to we’re level major major XX% the between, call be ventilation answer activity lung the throughout leading reason with that still XX% peak XX%. their from weekly liver, near on UNOS these centers, went it’s the to graphs dip Based trend important would transplant look or to I UNOS the the the with from also by or volumes however, data recover, lung COVID going the at is to solid transplant of UNOS, prolonged the you the we’re But getting on the in webpage. speaking, last to granular that many lung last and every lung in the say, We’ve published that recover, of from perspective and the – say, to after are organ heart our seeing organ organs – solid zero find seen more would the published of heart for is our share and all see in QX, for on and from already solid to not hovering near followed webpage, liver organ reflected window that significant on the all majority to you the

no levels sure we make So One, that Two, patients. for also on lung they way, two to need prioritize it want applies pressure ventilators activities. donors COVID of to transplant in are several – have been COVID to in tissues. given had QX donors is impacting We healthy. a mainly experience otherwise exposed COVID the environment, lung that firsthand that with our healthy are

they for positive were outright transplant. COVID back tested they However, in May, and rejected

us this dynamic and that’s saw believe we this So lung we COVID results, phenomena why, we saw this these when that throughout will continue pandemic. with

future. the becoming as see I we see second be lung shift different generator to lung during to the to continuing at the we that contribute to answer TransMedics, transplant revenue near me lung look revenue we But I will crisis. behind? of are where in think and will the our question; cannot Let in part lagging continue Overall, potentially expect of a forward, activity, we lung expect to QX – But the see for revenue. liver, we lagging will [indiscernible] we overall, volumes heart the even behind could to COVID predominant and dynamic, – from the least continue see we going certainly

Cecilia Furlong

Really Thank you, you excitement, talk and expanded centers, the PMA out? Great. Thank as DCD in the guess, the from you kind hearing initial the saw little of you’re accelerated turn could that for the what And I opportunity. if you. Heart new And called just just the to well, you I bit then of dynamics centers approval ahead Waleed. enrollment? a quarter, can about heart just indication

Waleed Hassanein

the heart. less momentum Heart itself finished speaks We nine Thank the in the itself. on or DCD in months. you. indication in patient for momentum you, nine trial general I Cecilia. a about for The randomized the speaks Thank XXX and mean, months than

to We this be have approved. indication part before program, first XX centers that up PMA the have signed of is a even

that to that are We we see see expect expect with type results of that we – level of clinically, momentum, momentum. in sync when

Number finishing are trial, from approval days to number we less CAP clinical evidenced as one. original within working XX the secure diligently that’s two, maintain by that our to very a momentum. than So ability and

to while what the review in process the priority, and everything at and bureaucratic been to allow one and to approval throughout goal. of patients have understanding, extremely lifesaving we’ve continue we’re done, number their helped Our that’s technology OCS achieve U.S., with working access and that else, is FDA and partners our to FDA us they

indication achieve first planning the we we’re what that’s PMA heart. So until the to continue, for

Cecilia Furlong

Great. Thank you.

Operator

And question from from your Morgan. next line of Marcus comes the Robbie J.P.

Allen Gong

actually Robbie. is for this on guys, Hey Allen

provide but kind off. target want congrats know to that say you. quarter year-over-year want didn’t seen and highlighted, that given to guidance a of slightly or to it? look continued kind wanted to or on COVID-XX, that kind I to pointed double and the forward assume quarter, first third for call I trend is we’ve to does check, flat start of to you around you wave, the of you quarter-over-quarter, that just flare-ups these second of you fourth of as potential Just hear down whatever as kind you

Stephen Gordon

Hi, is Allen. This Stephen.

at So and Waleed And we’re discussing, COVID for is that to was of over kind what Waleed mentioned. conclude XXXX, and as some recovery, a going QX to some of time. it XXXX activity, lung see flattish seeing just I down, COVID, lot will the We kind is of seeing do impact, we’re it slightly same QX cause recovery means down. exactly what that to

pathway feel like trials are we’ve ongoing, so Our reasonable we a got there.

Waleed Hassanein

from like a the to that what activity. second had no to is said, the what knows Stephen to like disruption third I’d or add we look transplant one Allen, – going And wave to

today programs of key QX. are that and can QX, in However, the recover to that they’re we than in QX. fact aggressively know volume One, was what highly the were describe we to transplant very that is the sensitized, in what transplant is trying different I lost we’re many

and them protocols to number to was established enable continue second we one. limited to We Number – even or – to program hope really in that impact. will familiar and to only going see. every a activities, we pandemic, wait will big one Today have fully visible have beyond not that lung we within that and the is in That’s service extending beginning help we’re So activities, with really seen. materialize? just going transplant to do it to OPO it probably be initiated third United will impact to getting wave. is a one transplant, in our Is in Is OPO? the that that How started. QX, States had be, and remain two; an

indication. last to the business always strength – strength TransMedics the TransMedics, a the we’re in track So the relying the of product a single is, make single point said, want or is I as I’ve not on

in a we So had quarter circumstances. QX, saw given we great the

However, by it heart. mainly the was driven

– heart be QX, that the expect because but we CAP, slightly expect the the the We maybe up. lung in of pick to liver to the to and transitioning quieter

that have COVID better. the will even in impact disproportionate the if across if hitting should kind again, – balance and an a So we organs, see heart COVID the the us bit all help little lung a the liver of level, impact but that

Allen Gong

to of how comes has Got of it that that they hospitals for your conversation going offensive, it. to primed are full hospitals, have get on guys. just of or the put financial having centers front? for and conversation now. of kind still a encountering sales challenges entering like kind and a pandemic and the the reps of follow-up, portfolio some Or easy on new you is year, it getting to And it next launch, Thank back then constraints your the kind right given when are really to speak, that so accounts quick on kind

Waleed Hassanein

Thanks, that change listen, phenomenon. I change Allen. Allen, to hope I’m would exaggerating not this nothing nor that

going been true. it pressure and the defensive the The except COVID down it’s not on offensive. nobody’s on hospital. a shutting We never more are of our peak and the defensive during back to We’ve the wasn’t everybody’s is any opposite seeing of

people seeing of and service the pandemic. them the the understanding to having model, of access freedom, the We’re during give them importance better management give logistics, to even

their this a a the on also implications to to institutions. to COVID in versus going and pushback we’ve this and hard teams having these listen, of we relationship do see that open build to – in ears are front. What front. We the model is growth. any out stronger more strong that working pandemic we’re to offensive seen of Net-net, ability not COVID of opposite. have pandemic region. And the what the to in sure we’ve seen make come And is COVID – continue next are And giving we saw to actually several keeping reflect not time to Operator? hope in with the of initiated we a that the has we institutions And lot yet, outside impact seen the that quarters. eyes our we actually this itself wide the commercial sending seen sure during the make interest our not organs we lot the that throughout it’s service very have mature to be during delivered revenue logistical

Operator

line of & the Company. from Oppenheimer comes question next Suraj from Kalia your And

Suraj Kalia

Stephen, Waleed, can you Hey hear me okay?

Waleed Hassanein

Suraj. can we you, Yes, hear

Suraj Kalia

a Perfect. quarter. nice on Congrats

between just around hearts So in forgive order the the Waleed, jumping indicate quotes. quarter? Did it’s stocking you being me, for in

Waleed Hassanein

that mentioned We that initiated in QX. new there institutions eight were were

Suraj Kalia

of I obviously reasons of OCS that panel delay storage? specifics, from DCD I’m reason for any fact physiologically for or why the to but also there we’ve curiosity, are cold out FDA for you valid the don’t lost. been Would Well, expect just be lot any it. Hearts sure lower utilization being being clients the a hearts because would asked different disappointing. data with in OCS heart was And there any discuss What this. rate by on Got reason did be that.

Waleed Hassanein

using clearly can the I OCS any donor in is address and storage sure rate OCS north utilization appropriately. The of the is in in true. current I that XX% CAP. it of data utilization the resulted so is lower So not understood cold XX%. The EXPAND of rate question rate. higher hearts The opposite the The correctly, shows even let resulting me utilization about in Suraj, EXPAND make

higher So cold storage. significantly utilization rate in than OCS arm is

– that don’t addresses ahead, if topic. know not question. there’s I is Suraj. your This So a Go

Suraj Kalia

That’s questions exactly what I have if or for the x everyone at you do just all, organ we why of was What seen and looking trying down some for a Waleed, these taking might are opportunity, because of have figure for, us the again, And that surprised now. a damage Waleed, would long-term delayed. you to How you is years is see COVID. of play you that out Thank How talked if question. about this. with implications lot there’s this TransMedics line? this say my speculation the you see credible right some do

Waleed Hassanein

seen But think is or for like no higher that we a want We liver to don’t damage. QX, lung COVID organ in We lung who there sure. lung is to lung certainly, wish damage I it’s we to on be in completely damage. frankly there that anybody. certainly you, was ex-COVID COVID that one, The If and transplant. question position we’ve patients from patients big by pan be for now know open their know in will that several becoming there is Well, end need is heart Suraj. only and and damaged are and open question patients justified. transplant. of expect endothelial clearer it would clinically ever The a required they Thank damage out, now, rate results damage that

failure. will news. means healthier, wish uptake to endothelial on transplant. liver be case. of Again, pans potential a result who to the need we what they What don’t into is for out an of probably in that’s that liver patients heart and If be and in that that publicly – and younger, failure I nationally translates impact the think seen these covered the how we damage heart

clinical and of a I potentially an that think have healthier a and it market certainly will we for potential from have will certainly, patients patients, and number an opportunity organ robust potential the business impact COVID cohort but a of transplant. pathophysiologically, increase who need without

Operator

next Josh comes your from Jennings Cowen. question the line from of And

Brian Kennedy

Brian questions Heart my is this questions. Thank for here on Hi, DCD To I start two it, Josh. for you the taking have program.

just that is around And confirm And the does the can we middle the is, first from endpoint may longest in six then data that duration secondly, trial include see next the survival of study months you for is data plan The the endpoint? your well mean the data? CAP as share the filing you from if study sometime DCD the to as year? can the

Waleed Hassanein

Brian. you, Thank

to So outcome. six file PMA primary longest the have months the endpoint that is we to meet

So to are the endpoint that that is longest we – the PMA. we have meet to file

even setting, – that’s maybe DCD the that’s to year transplant, the hopefully longer. post-market PMA filing. But going dictate to one the up Heart not the in post all of patients However, we’re for following timing in

resources final first see to submit The we sort PMA expect the be yes, second internal of the half question, towards the part driving year. team results are the And of of to to XXXX. of that we able and in the our sometime middle

– supplemental go data XX It normal for depending or to FDA. everything months for third for in timing be to CAP. on time original give the approval. to on to final a XX ready six and are you will we to timing and match Just in timeline, answer is not for PMA the the verified streamlined timing to the that data the the of part of all To months with it’s for may data question, go be the depends and additional submission But timeline extended not need a and review, see. CAP. many streamlined, how indication. submitted But more remember, if expedited will there PMA. requirement the frankly a PMA on to submit in and months, CAP. requirement to we a the patients have of Depending this is to will more wait We than and timing more a traditional But it hope have the accumulated much the the study, timing, from did if that breakthrough for will the

Brian Kennedy

you. Criteria talk either company’s about U.S. of for or are the question Okay, the commercial the And next respect of, – launch potentially thank and we timelines helpful. U.S. there my overlap say Heart is with these two readiness guess launch ahead should can That’s mindful a liver simultaneous you launch to launches? or should really, be ahead I Extended year? support, manufacturing, constraints in

Waleed Hassanein

We be know We’ve long any headwinds for clinical sit to even that don’t time, today, in we organization. hoping logistics, we a launch want it overlap. timelines relating to From will expect this overlap. or been to position inventory Brian. We where

In program, working we’re national have approval when hand. very FDA is are our fact, we the indications, once plug-ins in in to for parallel, additional streamlining hard,

a and said leverage what this news, that the be not actually doing foundational frankly of lung. doing experienced in than So nine what is his it that what we’ve Tamer and have team this months, will in with been the in will lung we’ve lung, pace, doing is the that the able the and we’re the heart for and ramp, last we the service accelerate is before, in faster launch for lot program and to we’ve for been that work the all fundamental liver, this nature,

Operator

questions no there are time. further And at this

Waleed Hassanein

Thank operator. Great. you,

Operator

any turn final back to call the now the remarks. leaders over I’ll for

Waleed Hassanein

again looking our in to your evening, next earnings for call. wonderful speaking a forward everybody you, time. Have Thank and

Operator

conference for Thank joining you today’s call.

You disconnect. now may

TransMedics (TMDX) 4 Nov 202020 Q3 Earnings call transcript