And, finally, Transmedics stood out too

For anyone who skimmed through my long end of the month, there were three companies who seemed to me to be standouts. If you didn’t get to read it closely, here’s what I wrote about Transmedics, the last of them.


They reported December quarter and annual results this Wednesday after the close.

The numbersRevenue for the quarter was up 225% (remember that it’s small numbers here). Gross Margin was 66%, down a little due to so much demand that they had to use charter airplanes at times to fulfill. They would have been up even more than 225% except they couldn’t meet demand (they are working like mad to build out infrastructure). While revenue more than tripled, operating expenses were up only 50%, leading to net income margin improving from minus 130% a year ago to minus 21% this quarter. Guidance for next year was revenue up 51% or so [Profound sandbagging: ie. If everything goes wrong, this is what we expect. Look, if they flatlined at this quarter’s revenue for the next 4 quarters, with no growth at all, 2023 revenue would be up 34.3% over 2022! And they guided for revenue up 51%!]

Market reaction – The stock price rose 20.55% the next day, and they are up 27.4% ytd (in just two months).

My reaction – I have added almost every week for the last three months or so. I added a little more after results were announced. It’s now an 8.6% position in 6th place


After listening to their earnings call last week and researching the company fundamentals, I am impressed and will be initiating a position in TMDX.
A question that some of my investing buddies and I have been pondering is what market cap is it reasonable to expect TMDX will eventually grow into? At its current $2.5B market cap, the CEO said they currently have 7% of the TAM for transplants of heart, lung and liver and are currently working towards FDA approval for kidney transplants. We compared the TAMs and market caps of other medical device companies, but admittedly there’s no really great comps out there.
The number we were coming up with was a $10-12B market cap. What are everyone’s thoughts on this? If this turns out to be true, someone who executes a position now could reasonably expect a 4 to 5X return on their investment.
The CEO also said he could see the company capturing a majority of the transplant market share. At a current 7% market share without kidney, if they capture 70% of the transplant market, the company would grow 10X current market cap, and again -that is without kidney.
Plucking a number from air, if the market for kidney transplants is 30 to 50% of the value of heart, lung and liver combined, is it reasonable to assume that’s another 2X to 5X for a total of 6X to 15X from current market cap? Your thoughts if these are reasonable assumptions?

In addition, it would seem to me that the way for TMDX to win before their competitors is to land their machines in as many hospitals as quickly as possible so the hospitals are on board with TMDX’s services before a “competitor” gets in. As the CEO also said during their earnings call, they plan to build out a transportation infrastructure of airplanes, etc. to alleviate the capacity issue they are currently experiencing. Not sure who their competitor(s) are. I’ll check their 10K and respond.


Regarding competition, they have no competition at the present time as follows from their 10K (Annual Report):
“ Only FDA approved, portable, multi-organ, warm perfusion platform
Our Organ Care System is the only portable, warm perfusion device on the market. It is also the only device that has been approved by the FDA for multiple organ indications. Portability is a critical aspect in reducing the injurious ischemic injury to the organ before transplantation, thereby reducing post-transplant complications and allowing the utilization of more organs for transplant. The multi-organ platform allows for the standardization of use across transplant programs.”


Actually it looks like the market for kidney transplants is 500% of the others combined, not 50%. If you click on screen shot below it should bring up a graph. If it doesn’t, please let me know.

Screenshot 2022-11-09 at 11.54.43


I was thrilled with the overall ER of TMDX and I’m up 30% with a 15% allocation.

I was thinking on adding a bit over the next weeks, albeit being already quit a big position. But the quote about the transportation infrastructure worries me a bit.

I do understand that they hired a new SVP SCM & Ops, but still feel, that transportation infrastructure is not really their core business. I know, that they had to charter some planes and therefore had a small decline in Margins this Q. But I’m concerned that building an own infrastructure can be really expensive and inefficient, if not needed at full capacity.

In my opinion, as they are also doing, they should focus and investing in new production capabilities to meet product demand and leave infrastructure to some charter companies for now.

Anyway, beside of that small yellow flag/ or concern of mine, they executing perfectly and I’m happy to have that allocation at the moment.

What are your thoughts on the infrastructure piece?



Saul, it appears kidney transplants are about 60% of the TAM (by volume).

There were 42,888 organ transplants in the USA in 2022. Over the last 35 years they have grown at about a rate of 3.7% per year, though year to year the variance is quite large (STDEV = 3.4%). One would think that as TMDX’s warm perfusion system becomes the defacto standard, the growth rate would accelerate.

In 2021 the number by organ were:

24,669 kidney transplants (59.7%)
9,236 liver transplants (22.3%)
3,817 heart transplants (9.2%)
3,634 other (lung, spleen, etc.) (8.8%)

2022	42,888	3.7%
2021	41,356	5.9%
2020	39,036	-1.7%
2019	39,719	8.7%
2018	36,530	5.1%
2017	34,770	3.5%
2016	33,610	8.5%
2015	30,974	4.9%
2014	29,540	2.0%
2013	28,956	3.2%
2012	28,059	-1.7%
2011	28,553	-0.4%
2010	28,668	0.7%
2009	28,463	1.8%
2008	27,967	-1.4%
2007	28,366	-2.0%
2006	28,941	2.9%
2005	28,119	4.0%
2004	27,042	6.2%
2003	25,475	2.2%
2002	24,916	2.8%
2001	24,243	4.2%
2000	23,274	5.6%
1999	22,030	2.3%
1998	21,526	6.0%
1997	20,316	2.8%
1996	19,765	1.9%
1995	19,396	6.0%
1994	18,299	3.8%
1993	17,631	9.3%
1992	16,134	2.4%
1991	15,756	5.0%
1990	15,001	14.2%
1989	13,140	4.1%
1988	12,623	

Ignoring organs other than heart/lung/liver/kidney for a moment …

7% of the TAM of heart, lung and liver (which is 40% of the total TAM for all organs) = 2.8% of the total TAM.

If they take 70% of the total TAM that means they grow 70/2.8 = 25x from here.

The 2.8% of the TAM that they have now produced $31.4M in revenue in Q4. Annualised that is $125.6M. 25x that is $3.140B, which for a company with your proposed market cap of $11B (midpoint of your estimate) would be a P/S of 3.5.

Does a PS of 3.5 sound reasonable? They’d be growing around at an average of 3.7% annually at that point (as per my previous post).

*** I haven’t accounted for a significant increase in the organ transplant rate due to a greater utilisation of available organs which OCS makes possible.


Great question HaikiliKona1.

Short answer is this can be leased and expensed at a far lower cost per quarter, vs TMDX having to raise the upfront capital through a secondary stock offering or loan, purchase and own the airplanes as a capital cost (CAPEX).

Longer answer:
The closest thing I could think of is when AMZN built out their air infrastructure, and similar with AMZN’s PPE (buildings).
AMZN does NOT own most of their fleet of 97 airplanes, rather, they lease them from Atlas Air Worldwide Holdings and Air Transport Services Group. AMZN also leases most of their buildings (571,000,000 square feet leased vs 35,000,000 square feet owned).

Here are the CEO’s remarks from earnings call transcript (see CEO’s 2nd & 3rd points below AND the point he re-emphasizes afterwards.
“Let me articulate our strategies to achieve our growth potential. First, starting in 2023 and as soon as we adequately enhance production capacity, we will focus in four areas to grow our U.S. transplant franchise further. Specifically, we will continue to add new transplant programs to the NOP initiative in the U.S. for liver, heart and lung. We will drive deeper penetration with an existing and new transplant programs based on the demonstrated efficiency and clinical outcomes of OCS cases at these programs. Focus on growing the overall transplant volumes at these programs from DCD extended criteria and distance standard donors using the NOP infrastructure. Finally, reinvigorating the OCS lung program through the NOP in the U.S. to contribute additional growth.

Second, we will continue to expand our NOP infrastructure. Specifically, we are expanding our surgical capabilities and clinical support staff across the board and maybe opening new launch points as needed to expand our geographical reach in the U.S. Third, we are developing a best-in-class dedicated air and ground logistics network for organ transplantation in the United States.

This is critical. Let me repeat, this is critical to managing our growth potential and controlling our transportation costs and improving our service margins. Importantly, we strongly believe that this initiative would create a significant catalyst for further growing the NOP franchise in the U.S. Importantly, it will create a larger, deeper and wider more around our NOP offering, while uniquely positioning us to more fully transform the standard of care in the United States. Finally, by continuing to invest in our next-gen OCS and next organ programs. This is critical to our long-term growth, importantly, to further distance ourself from any potential competitors on the horizon.


Hi guys,
There were about 16,600 or so combined transplants of heart, lung, liver and other. There were also about about the same number of people on the combined waiting lists, adding them all together.

There were about 24,700 kidney transplants, which is 148% of all the others combined. In other words, getting clearance for those would double and a half the number of current transplants available to Transmedics.

However, what is much more important is that, while the number on the waiting list for the others is relatively small the WAITING LIST for kidney transplants is ENORMOUS, over 90,000, a little less than six times all the other transplants put together, a little less than six times all the other waiting lists put together, a little less than three times all the other transplants plus waiting lists put together!

If Transmedics could get access to those current 24,700 kidney , transplants, and could convert some of those 90,000 on the kidney transplant waiting list to actual transplants, let’s say eventually even just 20,000, it would more than triple and a half the size of Transmedics’ TAM.

That would be a very big deal.



Great discussion here. Based on everything shared so far, it seems like kidney transplants is the big big market. However, it is also more mature of a market. Question is - will kidney transplant be able to benefit from OCS device the same way as heart, lung and liver?
Remember, use of OCS is adding $80K to $100K to cost and so will insurers see the similar value and agree to similar payment?

Or, its a different value, cost and therefore different multiplier to get to the right TAM?

I remember similar questions arising early in the life cycle of Intuiitve Surgical and it took them a lot longer to penetrate the largest volume market than their early success in niche procedures.


@nilvest Agree, it seems way way too premature to assume TMDX will capture the lion’s share of these solid organ transplants…primarily due to the cost. Maybe someone else has done more digging here, but why should we assume that OCS provides significant advantage in kidney transplants to justify the cost? Maybe it’ll be useful in transporting donor kidneys far away but if recipients are nearby - are we so sure the outcomes will be way better than cold storage? Clinical trials to study that will take several years - as I took a brief look on TMDX’s site I see no mention of OCS kidney?

Also not seeing anyone addressing the “competition” to TMDX…which is an interesting dynamic, as normothermic regional perfusion can be used in either instance. Placing DCD organs under NRP can be done with or without the use of OCS. If cold static storage is like literally $80000 cheaper than using OCS, why should a hospital choose to pay $80000 for the same outcome?

What I mean: from an extremely brief search of the data out there, it looks like NRP + CSS might achieve the same outcomes as NRP + OCS.
The implications here are that the only real advantage OCS has is to dominate and expand the market volume of donors not colocated with the recipient patient - so that is certainly not going to be anywhere near the entire heart transplant TAM.

See the table screenshot for the UCSD data vs Papworth.
NRP + CSS had lower rates of primary graft dysfunction requiring ECMO, had slightly higher 30 day survival, and higher rates of 1 year survival than the use of NRP + OCS


thanks jonwayne.

To me, it is also not clear where the market share ceiling is for heart, lungs and liver… for sure it seems much higher than 7% they achieved last year and that OCS being in the market expands the pie as well… However, is it 40%+ or <20% is not easy to discern yet.

What is clear based on tripling revenue in one year and being constrained by supply is that demand for OCS with the 3 organs will rise very fast to its eventual market share ceiling… i.e. unlike SaaS / cloud companies with DBNRR and (relatively) slow but consistent expansion on going for almost a decade, TMDX can multiply revenue much faster but than can come to extreme slow growth rate as it hits ceiling in market share it can achieve

to me that translates to a potential for them to double revenue in 2023… with no judgment on 2024 and beyond.

Therefore risk remains that stock price way overshoots (if not already) with linear expansion mindset and than crashes if / when it is discovered that reality would not match such linear extrapolation.

May be that is a decision for another day… today its just time to enjoy the ride as long as one is prepared to step away quickly when needed.


Saul, I did some more reading of literature related to TMDX today.
I think the assumption that Transmedics could be eventually used in all of the 25000 kidney transplants done last year is way too much of a ‘pie in the sky’ optimism.

First - transmedics products would never be used in the case of live donors. There is no transportation issue here, you just simply have the live donor walk over to lay down next to the recipient in the next door operating room.
So subtract the over 6000 live donors last year from the kidney market.

Next - I surmise there is a good reason TMDX did not attack the kidney transplant market first. If there are so many more kidney transplants than other solid organs combined - then why the heck did TMDX instead started on a path of 3 other solid organs - heart, lung, liver?? That’s 3 separate organ challenges, 3 separate types of clinical trials needed. When you could instead focus all your initial energies on 1 organ, the kidney - which is the largest market!


Probably, because the acceptable cold ischemia time for kidneys is up to 24 hours!
Meanwhile, it’s 4 hours for heart, 6 hours for lung, 12 hours for liver.
If an organ is already thought to be able to withstand transport in cold storage for long periods of time - what benefit would TMDX add here??
Taking a plane ride from one coast of the United States to the other coast is not going to take more than 6 or so hours. Total transport time including ambulance is not really going to ever exceed 24 hours. Why would OCS be used in most kidney cases if this is true?

Now let’s say TMDX did eventually try for OCS kidney. They will need to withstand clinical trials comparing them to existing standards. This alone will take several years.

Let’s say they still manage to do trials - and let’s say they show they have some benefit in extending the donor pool with their product on edge cases - what I mean are the kidneys that would have been discarded because they donor was pretty sick to begin with.
But what about the bulk of the kidney market - the kidneys already from healthier donors?
They will then need to prove enough data that they can exceed existing cold storage standards to the point that they can justify their cost in this realm. I think it’s a stretch to assume they can charge $80000 over existing cold storage costs of a few hundred bucks, especially in the face of competition from the growing use of normothermic regional perfusion (NRP) - which is basically cardiopulmonary bypass performed on a brain dead or circulatory dead donor. Cardiopulmonary bypass techniques aren’t a new thing - you hear about it with CABG for coronary artery disease cases, or ECMO saving people with COVID or flu.

If the use of NRP provides enough benefit in an organ donation case - and cold storage is used in conjunction - and it yields identical outcomes as those cases where TMDX’s OCS is used (with or without NRP)…then TMDX could never break into the majority of the kidney transplant market - at least not by charging $80000 each. You’ll need to severely reduce the revenue/profit assumptions that could be claimed.

To put in more plain english: let’s say, you need “100 points” to show satisfactory outcomes in a transplant. Achieving more than 100 points doesn’t improve the outcome - the physical tangible outcomes are completely plateaued at that level of 100 points.

Let’s say, TMDX contributes “30 points”.
Using cold storage (CSS) contributes “10 points”. However, NRP comes along and this tool can offer “95 points” alone!

Now what combo would you choose?
NRP + CSS = 95 + 10 which is 105
NRP + TMDX = 95 + 30 = 125
Why pay for 125 points, when 105 points is already equivalent in outcome? And especially if TMDX costs way more?

Here is a fantastic publication detailing NRP vs TMDX’s OCS in the case of heart transplants that detail the concerns I have:

I’m going to paste some quotes:

“Although NRP is resource-intensive and will cost an additional $4000 for each heart assessed for equipment and personnel, compared to OCS, it is more feasible. The OCS cost includes console costs of about $275,000 USD and the single-use components cost about $38,000-$55,000 USD. In addition, the system requires a maintenance service that will cost about $20,000 (2016 dollars) over a 10-year period.”

“Studies demonstrate that 100% of hearts from NRP donors have been used once they have been assessed and accepted for transplantation, compared to 17% of DPP hearts that were turned down for transplantation after perfusion on the OCS at a potential cost of $114,000 each. The rate of turndown is consistent in several studies.”

That’s huge.
Look at the cost - NRP alone is $4000 each transplant. OCS is like $80000 per use.
AND - using OCS alone without NRP yielded inferior outcomes to NRP usage!! Look, 0% of NRP hearts are turned down, while OCS alone (without NRP use) has 17% turn down rate while costing a ridiculous $114000 each time.

This is not to say that TMDX has no benefit - obviously not - it’s clear that OCS is great for when:

  1. donor is located very long distance away from recipient
  2. donor falls into the ‘expanded criteria’ use case; the donor 's bodily health was not as pristine as the usual donor criteria. Rather than discard the organ, TMDX could help improve chances of success.
  3. the surgical case is highly complicated and requires time intensive dissection of the recipient’s anatomical space in question. TMDX’s product could keep the donor organ safely on the sidelines for a much longer period than cold storage techniques, until the surgeon is finished with the preparing the recipient on the operating table.

I think the areas that TMDX would encounter significant problems:

  1. Live donor (literally no extra benefit to use TMDX here)
  2. DBD cases that are not long distance, and especially competing with the use of NRP + CSS
  3. DCD with use of NRP. Again - the use of cardiopulmonary bypass to solve the problem of warm ischemic injury times really does compete against TMDX.

Of course OCS will have tremendous value in Kidney transplant cause 24 hours cold ischemia time is far from ideal! See this article:

" There was a significant proportional increase in the risk of graft failure for each additional hour of cold ischemia time (hazard ratio, 1.013). As an example, a patient who received a kidney with a cold ischemia time of 30 h presented a risk of graft failure near 40% higher than a patient with a cold ischemia time of 6 h. Moreover, we found that the risk of death also proportionally increased for each additional hour of cold ischemia time (hazard ratio, 1.018). Thus, every additional hour of cold ischemia time must be taken into account in order to increase graft and patient survival."



Unfortunately, the world of medicine is not as simple as following common sense. (I’m not a transplant surgeon but I’ve learned enough over the years in clinical practice and training to pick up that idea)

Does increasing cold ischemic time affect kidney transplant function?
Yes! Of course! This makes sense, this is fact, this is obvious - if you transplanted a kidney that has been in cold storage for, say, an extreme of 1000 hours, well heck yeah that will likely have a poorer measured outcome compared to a kidney in cold storage for only 4 hours.

But…here is the key question. Does CIT really make a real, clinically meaningful difference when we talk about 4 hours versus 8 hours versus 12 hours versus 16 hours and so on? Yes, a kidney that has a CIT of 4 hours will probably have better measured functioning in the short term versus a kidney at 8 hours…but does it cause enough morbidity or mortality in the long run to justify a supposed payment of $80000 for OCS kidney?
For example, let’s say if we could run a perfect experiment and found that creatinine levels measured at 1 year from transplanation, for CIT 8 hours is only 0.1 higher compared to CIT at 4 hours, but all other outcomes are identical such as graft survival and mortality, is that considered clinically meaningful? Nope!

A quick literature search on cold ischemic times in kidney transplants will yield you an incredibly contentious debate. You can find me multiple studies saying CIT is a big enough deal, and I can easily find you multiple studies saying it’s not. It’s clear that the issue of CIT in kidneys is not as simple as 2+2 = 4.

The only real way to know for sure is to have clinical trials on OCS kidney. And this is what I’m pointing out again - it is not anywhere, anywhere near a guarantee that future OCS kidney produces enough benefit over cold storage (and let’s not even talk about comparisons against the use of competing NRP!!).

I’m going to now give some quite strong evidence as to why reducing cold ischemic time may not be meaningful enough to justify a large OCS kidney expense:

  1. There was an instance where 27 kidneys were discarded as “unusable” by US centers, but Japan accepted them. 13 of these kidneys had average cold ischemic times of 42 (FORTY-TWO) HOURS, while the other 14 kidneys had average cold ischemic times of 65 (SIXTY-FIVE) HOURS. But guess what happened? The overall long term graft survival at TEN YEARS was still 72%!
    Kidneys are just much more resilient in long term cold storage than other solid organs.

  2. Another study was done looking at the “best” kind of deceased donors: 14,783 kidneys taken from deceased head trauma donors were compared to those from live donors. In this study, that means you’re comparing the outcome of graft survival at the 3 year mark between kidneys that had average 18.3 hours of cold ischemic time versus living donors that only had 2.4 hours of ischemia. Guess what? Graft survival rates were no different between them! Pretty incredible that 18 hours of cold storage didn’t cause higher rates of failure by 3 years later!

  3. Finally, the absolute best piece of evidence comes from a study done by Kayler et al in 2011, on much, much higher quality data than the 2015 study by Debout et al which you linked above.
    Why is it higher quality data? Because the analysis by Kayler was conducted on mate kidneys.
    They included 18,164 mate kidneys (while your study only had 3,839 mix of non-mate kidneys).
    That’s right - the only kidneys studied by Kayler, were comparing the one kidney from the same donor to its very own other kidney, but each had different cold ischemia times. That strips out way, way more confounding factors than the 2015 Debout study - all the kidneys being compared to each other came from the same donor. And what did they find? the same hypothesis that I outlined above! - that yes, while there is definitely a higher rate of delayed graft function (the transplanted kidney takes a bit more time to start functioning completely properly) if CIT is longer, the overall rate of graft survival was still completely similar.

To put it simply: there is solid evidence out there that cold ischemic times likely have an impact on the measured numbers, but not enough overall truly clinically meaningful impact within that 24 hour time frame.

I also want to circle back to the question I raised earlier in the previous post reply:

I think part of the answer lies in the evidence that already exists in the literature about cold ischemic times. TMDX may have done research concluding that it’s not a sure-shot that an OCS product can help in kidneys versus other solid organs.


  1. Transplantation of kidneys donated from the USA: long-term results and viability testing using 31P-MRS - PubMed
  2. Paired kidney donation by shipment of living donor kidneys - PubMed
  3. Influence of CIT-Induced DGF on Kidney Transplant Outcomes - American Journal of Transplantation

They don’t need to get them all !

Transmedics total TAM now is 16,600 combined transplants of heart, lung, liver, and other, plus however many they could add because of OCS, and the same number on a waiting list…

There were 24,700 kidney transplants, and 90,000 on the waiting list, so roughly 115,000 total. If they could just consider 30% of them as their TAM of possibles, it would double their TAM.

And remember that the insurance companies have been eager to pay because waiting care is more expensive than the OCS plus the transplant.

And something is making them able to triple their revenue yoy, even when held back by capacity constraints…



IF TMDX wants to become the one-stop-shop for organ collection and transportation, they need to have a kidney product. I think it’s a false assumption to think they are going to try to charge $80k for a kidney OCS. It will be much, much less for kidney OCS IMO. However, if they are building a nationwide network of medical staff to collect, package, and manage organs - and if they are going to build a nationwide network of air and ground transportation - and if they aspire to take over the role currently filled by the OPOs, then Kidney OCS will have a part to play. I doubt OCS will be used for a majority of kidneys, but even if it is used for 30% it is meaningful - when combined with what they will potentially earn for them when combined with NOP service for each, and when combined with OPO fees for each. Kidney helps build the network, the moat and economies of scale.


After having read this long and interesting thread I’m surprised that no one mentioned that so far Transmedics only has FDA approvals. In other words, there’s the entire international market available for expansion along with additional organs.

There is a great deal of discussion about the kidney market, and as already noted, they currently have approvals for liver, lung and heart. So, is that it? Is this technology amenable to eyes? And I must admit that I am terribly ignorant about which organs are transplantable, but are there others, like the pancreas for example?


Fabulous series of comments. I will throw one upcoming threat to TMDX in the heart-transplant field. LVAD’s (Left Ventricular Assist Devices) are implantable devices that are surgically placed in a failing heart to assist circulation. Prior generations were subject to limited long term use due to heat generation that caused red cell destruction, among other things. The latest generation of LVAD dispenses with the ballbearings that cause most of the heat and now use small magnets to support their impellers. The upshot is reduced heat withbetter safety and toleration by the patient. A cardiac surgeon who addressed our group of cardiologists and intensivists mentioned that several patients who went from LVAD as a bridge to final heart transplantation regretted their decision as they were now subject to extensive immunosuppressant agents, while their LVADs were effective and comfortable. Eventually there will be ongoing reports in the literature as to the safety of long-term LVAD against transplant. It will be interesting to watch.


There are many risks of competing products in future years. Mechanical devices is one. Bio-engineered pig hearts is another. Cheaper competing perfusion devices a third. 3D printed organs is another (extremely long-shot IMO). All companies have competitive risks. That is why (for me personally) I do not put more than about 5% of my net worth into any single company. As much as I love TMDX, I can not handle the mental stress that comes with higher allocations.