TMDX - Earnings Report Monday

I originally mentioned this company almost 2 years ago when the stock was around $18. The last 2 years have been a huge learning experience… The stock dropped to $11 during COVID, then spiked to $48 in the spring of 2021 (around the time they received a key approval), then it dropped all the way back to $13 earlier this year, and has now risen back to $40 as of Friday. It has been absolutely soul crushing at times. I have always believed strongly in the company and the technology, but seeing the stock price fluctuate that much has absolutely shaken my confidence on many occasions. I have increased and decreased the number of shares that I own over the last 2 years - often because I was FOMO buying or panic selling - which turned out to be exactly the wrong thing to do every time I did it. If I had just bought and held, I would be up 120% - an incredible gain for 2 years. Another example of fluctuations in high growth stock prices.

The adoption of their technology, and the progress of their qualifications was severely impacted by COVID. I will not go into all the details, but like many companies I think they would’ve done significantly better if not for COVID. They now have full approval for all 3 of their current products - they recently received the final approval they were waiting for on DCD heart transplants.

Results from the last 4 quarters:

Rev…8,171…5,370*… 9,668… 15,880
YOY Rev change… +141%… -24%… +26.8%… +123%
Gross Margin… 68%… 70%… 72%… 76%

  • 2021 Q3 was low revenue due to the fact that they had to temporarily stop selling one product while they waited for FDA approval.

I will not try to guess what their revenue will be for the latest quarter, but even if they only slightly increase revenue from last quarter it will be +100% YOY. (I will say that I expect it to be much more than that, but it’s impossible to know or estimate based on their very lumpy history).

History has been lumpy due to the fact that they were still going through qualifications for their products over the last 2 years, and they were dealing with significant impact from COVID. That is now behind them, and I expect growth to be much more consistent going forward.

Here are some quotes from the last ER conference call with some input from me:

"First, while our revenue growth was very strong, the bulk of Q1 revenue was driven predominantly by approximately five to seven centers in each organ market. This is important for two reasons. First, it demonstrates the potential of rapid and deep penetration of key high volume transplant programs with the OCS technology. This has always been our focus to go deep first then grow wider.
Two, it shows that we are only scratching the surface of the commercial opportunity across our three organ markets, leaving significant opportunity to drive future growth by potential new transplant programs getting added to the OCS technology."

NOTE - the CEO is not a native English speaker, so sometimes his quotes will be a little bit mis-worded. The implication of this first quote is that they are only just getting started. Last quarter was their second full quarter with all products fully approved. They are also still expanding their support network - which I will explain in one of the following quotes.

"In Q1 approximately 70%, 7-0, of the overall U.S. revenue came from NOP cases, rather than direct acquisition. On the per organ basis, liver was 98% NOP, lung was 78% NOP, and heart was 30% NOP. As we move forward, we expect to see the percentage of revenue from NOP to continue to grow across all three organ platforms.
Importantly, this early momentum with NOP enabled us to repeatedly demonstrate our ability to facilitate more transplant volume at the central level, with reduced operational friction of resources and logistics, while significantly shortening the typical sales cycle for OCS technology.
Let me explain. Historically, via the direct acquisition model, it used to take us 90 to 120 days to go from initial clinical buy-in to the issuance of the first purchase order of any transplant center wanting to adopt the OCS.
From there, it would take somewhere between 30 and 60 additional days, waiting for installation and scheduling of training of their first team to be trained on how to operate OCS. And then once they’re back, it used to take somewhere between 15 and 30 days until we see the first true revenue generating case of this transplant program.
With NOP, it’s the complete opposite. We saw many centers in Q1 going live within few days – literally few days from initial buy-in by the clinician – the clinical and administrative leadership until they did the first case. In fact, the quickest was literally six hours. From there, once the center experienced the simplicity of the NOP model, they kept coming back for more cases."

NOP = National OCS Program. This is something brand-new that never existed before for the transplant system. Historically, transplant centers would mostly have to send out their own teams of surgeons and technicians to collect donated organs. Now TMDX has developed a nationwide network of centers that do this work for the hospitals - and in the process, the TMDX network utilizes the new OCS systems when they collect the organs. In this particular quote, the CEO is highlighting how this model is speeding up the adoption curve in hospitals. Previously, hospitals had to train their own people on the use of the OCS systems and get everything set up from an insurance standpoint within their individual facilities. That process slowed everything down tremendously. Now, TMDX they can literally start using the OCS system for a new hospital within 6 hours of making a decision to do so. This removes almost all the friction for growth in new transplant centers.

"we also expect to benefit from two additional catalysts this year. First, is the recent FDA approval of our DCD heart indication that came in ahead of schedule. This approval will allow us to expand into new centers that were not a part of the original DCD trial. This will ultimately grow our OCS Heart centers in the U.S. and drive case and revenue growth for the OCS platform.
Second, the expansion of the number of active OCS center for each organ market. Our goal is to end 2022 with 10 to 12 centers per organ; lung, heart and liver that are routinely using the OCS for their transplants as we’ve seen in the NOP centers in Q1.",/I

catalysts - #1 is that they recently got the final approval for a specific type of donated heart. This just increases the number of potential organs they can utilize which enables more growth. The 2nd is an estimate on number of transplant centers they expect to deploy in for 2022 (they reported being in 5 to 7 in Q1 - and they are estimating 10 - 12 by EOY.

"And importantly, with excellent post-transplant clinical results, the trial reported one and two-year survival results of 93% in the DCD or OCS, both at one year and two years, compared to 86% and 83%, respectively, in the DCD control arm of standard criteria heart transplanted using cold storage.
These seminal results are going to be instrumental in significantly expanding the utilization of DCD heart – donor hearts for transplantation in the U.S., thus providing access to more patients with heart failure to receive the lifesaving heart transplant procedure."

They have had very good clinical results with all of their products. This one specific data point highlights recent reported results from extended evaluations. I’m not a doctor, but the fact that they can use DCD hearts (which were previously not utilized at all in the US) and achieve survival rates greater than standard criteria is significant. It opens the door way for much higher utilization of donated organs - many of which are currently thrown away.

"On the Lung front, the five year OCS Lung expand trial results were also presented by the lead investigator. The results showed that the use of OCS Lung in extended criteria DBD and DCD donor lungs resulted in a five-year survival of 68% compared to the US national average or the U.S. five year’s lung transplant outcome of 59% from routine lung transplantation based on the UNOS/OPTN national data.
This is clinically powerful to show that we can expand the lung transplant volume in the U.S. from extended criteria lungs and have good post-transplant clinical outcomes that compares favorably to routine lung transplant outcomes in the U.S"

Another example of their technology making it possible to utilize more donated organs and simultaneously achieve better outcomes than current standard of care. “Extended criteria” means lungs that previously could not be used for transplant - now with OCS, they are able to utilize them and they are getting higher survival rates. FYI - My dad was a lung transplant recipient - part of my reason for following and reporting on this company.

“They’re also focusing on how can they do more liver procedures with the limited staff they have, here comes the NOP to solve both problems. We can provide them confidence that we can ship livers to them, supported by our clinical staff that babysits these liver for them until they’re ready to do the procedure with their staff being at home base rested, and in many cases, schedule – scheduling the liver transplant procedure in the morning.”,/i>

3 problems mentioned in this quote that OCS is solving. 1. Transplant centers want to do more transplants but they are limited by the number of organs available - OCS greatly increases the number of organs that can be utilized. 2. All transplant centers struggle with resources/staffing - the TMDX NOP reduces this problem because TMDX can now do a big chunk of the work for them that they used to have to do themselves - collecting and delivering donated organs. 3. A big issue for transplant centers is that right now organs need to be transplanted ASAP because the health of the organ deteriorates rapidly when they are stored on ice. The OCS device makes it possible to safely store organs for a longer amount of time and still keep them healthy. This enables hospitals to now receive an organ during the night and hold it until the morning so that they can schedule the operations to always be done in the morning. This is a huge improvement for quality of life for all of the people in the operating room. I don’t have data to prove this, but I have to believe that the quality of the operations is going to be better if people are well rested when they are performing the surgeries.

"representatives of the UK transplant community, NHS representative came to us and wanting invited us to go and negotiate or discuss seriously with NHS, the possibility of replicating the NOP in the UK transplant community. "

there is a lot of opportunity for international expansion. Hardly any of their revenue currently comes from international sources. This is one example of a possibility being explored.

“one example anecdote from the quarter. The largest liver transplant center in the United States, it belongs to one major health system that is headquartered in Rochester, Minnesota, has never used OCS in a trial, or any of our trials for liver or heart or lungs. They became one of the highest users of OCS Liver NOP they became they – in Q1. They are now scheduling their liver transplant procedures. They’re staggering liver transplant procedures, many nights we have two livers on OCS – on two different OCS is coming from two different parts of the country through NOP and they’re staggering them so they can do them first thing in the morning and the likes.”

“Another anecdote is one of the key centers in some of the competing technology trials, they became – again, they never touched OCS, they became one of the major users of the technology, OCS Liver technology in NOP in Q1, and we expect them to grow with us throughout 2022.”

A couple anecdotes about adoption.

That’s it. Hope it is useful to some of you. I will comment on the ER results (good or bad), but maybe not until next weekend.



I’ve been holding since you first put it on my radar, and have added a few times with a cost basis of $26. (so thanks !)

I think a few hundred percent over the next few years is totally reasonable. Cheers!

* 2021 Q3 was low revenue due to the fact that they had to temporarily stop selling one product while they waited for FDA approval. – Analog

This is confusing to me.

Are you saying they were selling a product WITHOUT approval from the FDA… even though they needed it? Or did the FDA come around late and say that a product already for sale needed approval despite previously not needing it?

One choice is alarming with respect to management and the risk profile.

The other choice is just the FDA being late.

Or is there another explanation?

Former RB and BL Home Fool, Supernova Portfolio Contributor & Maintenance Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.


TMF Rob,

Institutions which were paying to use the TMDX devices in FDA approved trials did not renew their use in the brief window prior to the FDA decision. They did not want to be be exposed to the risk of possibly using a device if the FDA came out and said ‘this thing is not safe’. However, that wasn’t the case, and revenues (and the trial partners) quickly took up the device again.



Thanks, aj!

And it’s X, not T these days. Don’t want anybody thinking I’m misrepresenting myself. :slight_smile:

Former RB and BL Home Fool, Supernova Portfolio Contributor & Maintenance Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.