I see no-one has posted anything about the fireside chat with Transmedics management at the Cowen 43rd Annual Healthcare Conference in Boston this past Monday (March 6), so I’ll post some of my notes:
National OCS Program (NOP)
Most of the focus of the chat was on the NOP, which is critical for continued revenue growth. CEO Waleed Hassanein views the NOP in three parts:
Supply of finished goods. Strictly speaking, not a part of the NOP, but feeds it. This is production of the OCS module.
They’ve expanded their clean room space, doubled their assembly staff, and changed their leadership (referring to appointment of Nick Corcoran as our Senior Vice President of Supply Chain and Operations).
Surgeons - Currently 85-90. They will continue to increase these numbers. In 2022 they have allowed OPOs to use their own surgeons (not ideal) because they are short-staffed.
Logistical Network - They want to control their charter flights and SUVs. In Waleed’s words, they want to be the Amazon Prime of transplants. No details of their plans given; “all options are on the table”. Whatever the eventual solution, it will be “best in class”. They are aiming to do 7-12K transplants in 5 years. (Note: This is a CAGR of 44% to 60%)
I agree with what sjo said in a post on another thread, that Transmedics is likely to lease their planes like Amazon does as it’s not their core competency. This would also reduce the need for another share issue and consequent dilution.
Working with Transplant Centers
The NOP supplies Transplant Centers, of which in Q4 they have the following (also noted in the earnings call):
Heart - 29 Centers, 12 are repeat/active
Liver - 22 Centers, 12 repeat/active
Lung - 13 Centers, 5 repeat/active
Those Centers that are not “repeat/active” are considered “pipeline”. They are trying the NOP but Transmedics are unable to fully satisfy their demand.
Waleed said they are aiming to have 40 Centers by end-2024. A quick Google search shows that there are over 250 Transplant Centers in the US, however looking at OPTN data for 2022, the top 40 Centers accounted for 49% of all transplants!
Organ Procurement Organisations (OPOs)
Google: OPOs are not-for-profit organizations responsible for recovering organs from deceased donors for transplantation in the U.S. There are 56 OPOs, each mandated by federal law to perform this life-saving mission in their assigned donation service area.
The feeling I got from the chat is that OPOs are inefficient and ripe for disruption. Waleed said they are not relying on OPOs to hit their growth targets. He seemed very dismissive of them. “If the OPOs want to co-operate with us, that’s up to them.”
In fact Waleed shared that Centers for Medicare & Medicaid Services (CMS) wants the OPOs to consolidate. OPOs need to show that they can grow transplant volume. So it seems OPOs are under the gun and Transmedics is in the driver’s seat with their solution. Transmedics already has more than enough volume from OPOs. Their focus is on making inroads with the Transplant Centres.
Not experiencing any issues with reimbursement. Centers are approaching commercial payers for additional reimbursement so that they can use OCS/NOP. So the focus is more on educating transplant administrators.
Originally, DCD was thought to be the low-hanging fruit, but looking at growth in DCD liver/heart in 2022, it was not as large as expected. This speaks to a more broad-based adoption: DCD, DBD, extended criteria organs, high risk recipients, remote retrieval, etc.
Early investors incorrectly focused on DCD vs. DBD probably because of the way the FDA trials were designed, but the reality is that adoption is across the board because it’s not just about cost. There are other factors, such as better management of internal resources by the Transplant Centers, which are staggering organs overnight, and calling surgical teams in in the morning to perform multiple transplants, rather than the middle of the night for a single transplant.
Transplant Centers also have mandate to grow volumes (though not as much as OPOs), and OCS allows them to operate more efficiently and grow those volumes.
Lungs got some special treatment near the end of both this chat and the Q4 earnings call, but I was unclear what the issue is. Certainly covid must have had some impact, but the overall transplant numbers seems to have recovered (8.7% to -1.7% to 5.9% to 3.5% in 2022).
From the Q4 earnings call: “Listen, given the huge negative impact that lung has been suffering from for the last several years, we have to be cautious. We have to assume that our efforts is going to take the full year before we start seeing some tangible progress on or uptake in the lung numbers and the lung activities in the U.S.”
Also in the earning call, Waleed mentioned an event at end-April that is normally a catalyst for heart & lung. The transcript doesn’t record it and all I could make out was “IHSOP”, but I couldn’t find anything.
The fireside chat cast a bit more light on this issue. Apparently a new policy for matching lungs to donors, which has been in the works for 5 years is being implemented: The Lung Continuous Distribution Policy (here). Unfortunately one of the criteria is still the distance between the donor hospital and transplant hospital. As Waleed said, OPTN is still in the ice-age, and this policy is “going backwards”. So I assume they are working closely with OPTN to eventually modify the policy to provide a level playing field to OCS/NOP.
That’s all I have for now. Hope some of you find it useful.