Notes from TMDX presentation at JP Morgan conference

Here are my rough notes from the presentation this evening. There is nothing revolutionary in this update, but there were some pretty interesting tidbits that they shared. Overall, continued positive and encouraging progress.

JP Morgan 1/11/2023

  • Stated that they never pre-announce earnings. Good to know for the future.
  • “We developed the largest, widest, and deepest moat to surround everything by developing our integrated logistical infrastructure”. Referring to the National OCS Program (NOP).
  • He said there are only 2 other companies that have FDA approval for any organ perfusion system, and TMDX has already displaced the competitors from the US. (I don’t know for sure what companies he is referring to).
    o “No other platform that exists today, or even in development, is portable enough to be able to compete with us in the NOP. More importantly, any company that has the dream to compete with us on a technological basis, they better have the resources to do NOP. It’s not easy. It’s highly cash intense. And it’s built on relationships. It’s built on trust, it’s built on quality of care. We’ve delivered all of that as evidenced by our growth in 2022 and I’m hoping to replicate that in 2023 and 2024.
    o This is a key statement in my opinion. It will be very, very difficult for any potential competitor to disrupt TMDX in this market. Especially as they continue to penetrate further into transplant centers over the next couple of years. Any potential competitor is going to have a huge obstacle to breakthrough the extensive moat TMDX is creating.
  • They have sponsored the largest trials in the history of organ transplant.
  • Good clear explanation of increased utilization of donated organs and improved post-surgical results. They have demonstrated between 43% and 65% reduction in severe post-transplant complications. In liver they demonstrated an 84% reduction in long term biliary complications.
  • “Transmedics is creating the Amazon Prime model for organ transplant under the NOP”.
    o I don’t think this is the best analogy because transplant centers are not paying a yearly membership fee to TMDX. I think it is similar to Amazon in that TMDX is doing all of the logistical work to get organs and deliver them to the customers.
  • Currently at 16 hubs, or launch points, for the NOP. The presentation has a map showing where all of the current hubs are located. They have 13 cardio-thoracic surgeons and 7 abdominal surgeons on staff currently – they supplement that with about 20-30 “contracted” surgeons.
  • Talked about how insurance stakeholders are highly motivated to do more transplants in order to save money – because extremely sick people waiting for a transplant require a lot of medical care that is very expensive. All of the major insurance companies (including Medicaid) are reimbursing TMDX 100%.
  • Current gross margin of 72% - expect “mature” gross margins to be in the mid-70’s.
  • What they have done so far represents about 5% penetration of the existing market – and they think they have the potential to eventually double the existing market.
  • Added 3x production floor footprint. Doubled assembly staff and added new middle management to the operations team. Their capacity constraint is not related to raw materials. New clean room is not being used yet – still going through FDA qualification. Goal is that by summer 2023 the supply constraints will be a thing of the past.
  • All new customers are NOP. They no longer offer “direct acquisition” – meaning customers can’t just buy an OCS device and use it themselves to collect organs. They must use the TMDX NOP service.
  • CEO stated that Duke Medical is now 100% using NOP for heart, lung and liver. I think he might have mis-spoken on this. I doubt Duke is using NOP for every single transplant. I assume he means that Duke used to do their own organ collection using the OCS device and that they don’t do that any more. Any organ that requires the OCS is done by TMDX using the NOP. If Duke really is 100% on NOP for all transplants that would be pretty amazing at this stage.
  • “But what NOP created is a new indication that happened a lot faster than we anticipated. The transplant center is no longer just looking at the clinical indication. What I’m referring to is the logistics and the work/life balance associated with NOP. We are seeing major transplant institutions saying “we are not going to say “No” to any organ. Send the NOP team to get the organ. Bring 1, 2, 3, sometimes 4 organs a night. stagger them overnight. We’ll do the transplants starting at 6 AM in the morning instead of at 1 AM or 2 AM in the morning as historically has been done. We are not going to turn down a single organ because our Operating Room is busy. TransMedics has the staff, they can stay with the organ, and when we are free we will do the transplant.” That is how we are seeing transplant centers that have deep penetration growing their transplants by 30%, 40%, or 50%.
  • Routinely the NOP teams are traveling to Anchorage, Hawaii, Puerto Rico. Those are locations that would have never been able to donate organs in the past because of how far away they are from transplant centers.
  • They don’t have a traditional sales team. The NOP technicians and surgeons are the sales team. “We have an 85 person clinical team that is highly trained and qualified to use the OCS system and that is what is driving our sales growth”
  • “We are going to turn this business cash flow positive based on business in the US alone”.
  • Speaking about reimbursement, he reemphasized the cost savings that insurance companies have with a transplant versus all of the medical care cost associated with keeping someone alive while they are waiting for a transplant. He also said Insurance companies pay for a “procedural cost” of around $800,000 for the transplant itself. In addition, there is a separate budget called “organ acquisition cost center” to pay for organ procurement, preservation, and testing. They separated these 2 budgets because they want to promote more organ transplants. They want to incentivize the centers to be more aggressive and go out for more organs because for them it’s a cost savings procedure.
  • The challenge internationally is that it is a harder fight for reimbursement. Currently 15% of their revenue is coming from outside the US.
  • They give an example of the Netherlands where they trained the local team to set up their own structure similar to NOP and they grew their transplants by 40% last year.

Thanks AnalogKid for a great write-up. It really helped me to understand how valuable they are to the hospitals and the insurance companies.



You are very welcome. If you have not already read it, I recommend this post where I go into more detail on cost/benefit for all stakeholders.



Competition: Xvivo is in Sweden and has a perfusion machine for Lung transplants (only), Organox is in the UK and has a perfusion machine for liver (only) and in 2021 did an equity raise of GBP6.4m (only). Afaik that’s the only competition; that would agree with what the CEO said.