Revenue (and YoY growth %) from last 6 ER:
2021 – Q4 - $9,668 (26%) - this was the first Q after Heart OCS received FDA approval
2022 – Q1 - $15,880 (123%)
2022 – Q2 - $20,521 (151%)
2022 – Q3 - $24,300 (352%) - the year ago Q was very low, so this % is deceptive
2022 – Q4 - $31,400 (224%)
2023 – Q1 - $41,600 (162%)
My estimate for the upcoming ER for 2Q23:
2023 – Q2 - $59,455 (189%) - (see below for my assumptions)
Assumptions for 2Q2023 Revenue:
- From the 9/12/22 Morgan Stanley Conference – the CEO stated that the selling price of the OCS consumable was $65k to $70k per patient, and that the NOP service adds an incremental $15k to $20k over the cost of the OCS disposable. These prices were from 10 months ago, so they are probably higher today. For my 2Q estimates I assume that total price for liver is $70k, and that total price for heart and lung are $90k per patient.
- From my July 12 post of transplant numbers for this year (based on publicly available transplant volumes) I estimate that:
- Q2 Liver transplants exceeded Q1 by 172
- Q2 Heart transplants exceeded Q1 by 137
- Q2 Lung transplants exceeded Q1 by 126
- We do not know if all of the increase is attributable to TMDX. If I assume 50% of the additional Q2 transplants were provided by TMDX, and using the price estimates from the first bullet above, the additional Q2 revenue for TMDX should be ~ $17.8M. Based on those estimates, the Q2 total Revenue would be $59.4M, or 189% growth YoY.
- If I assume they grow revenue by another $7M in Q3, then the YoY growth for Q3 will be ~ 173%. (This obviously assumes that my Q2 estimate is accurate).
I could be wrong in my estimates, so don’t invest just based on my guesses. Do your own work.
Last quarter they had gross margin of 69%, and they were almost breakeven. It’s possible they could be profitable this quarter.
OCS for lung transplants has been a laggard for the last year. After thinking about this more, I bet that TMDX was intentionally not trying to expand in Lung because of their manufacturing capacity constraints. They were sold out just in heart and liver, so that is probably a big part of why lung looked like it was not growing. Now that the capacity constraint is gone, I think it’s possible we see a big jump in lung numbers starting this quarter.
International sales have also been lagging in the last year. It’s possible the reason is the same as I said above for US lung – TMDX was sold out just in the US, so why push for international expansion? They have all the growth they can handle right now just in the US market. So, we could also see some higher international numbers in the next couple of quarters.
Future Growth Potential:
- I think TMDX stated that they did ~ 10%-15% of the total heart/lung/liver transplants in the US last year. There is a lot of room for expansion just with the existing products and the existing quantity of transplants.
- In addition, the total number of transplants will continue to increase because of TMDX being able to provide more “usable” organs. The limiting factor for number of transplants in the past has been the number of organs available. TMDX OCS technology significantly expands the number of organs that can be used.
- There will also be continued growth from the TMDX “National OCS Program” – NOP. This is the service that TMDX provides to collect and deliver organs. They are continuing to expand this to additional launch sites in the US and they earn additional revenue from this service.
- NOTE - right now, they are only offering NOP on organs where they can utilize the OCS device. Once they reach a critical mass, I think it is possible that they could also offer this service to collect and deliver other organs.
- They are planning to develop their own delivery network in the US. There will be costs associated with this, and it will probably be lower margin, but it will add to the overall revenue growth – and strengthen their moat.
- OCS device for kidneys. They have said that they plan to start working on this in the second half of 2023.
- International growth - right now they have almost no revenue from international sources. This is a very big opportunity for the future.
- There is currently a governmental organization that oversees allocation of donated organs. There are a lot of issues with that organization. There has been discussion that TMDX could eventually take over all the responsibilities of that governmental organization.
- The first ever robotic assisted minimally invasive lung transplant was done in the last few months. It’s very possible that in the future we will see more techniques like that used for transplants which might help increase the demand further for organs.
- People are living longer, so there may be more opportunities for transplants in the future. In the past, candidates for transplant were limited because there were so few organs that could be used. TMDX changes the paradigm and could open entire new patient cohorts to be considered for transplants.
I heard on a recent Rule Breaker podcast that one of the things the RB team looks for is a company that offers a “Win-Win” scenario for itself and its customers. I think TMDX is one of the best win-win examples you will find. I have said this many times in the past, but I’ll repeat it here for any that did not see previously:
- Win / Win / Win / Win / Win / Win / Win / Win: The TransMedics OCS product is a benefit for all stakeholders in the transplant chain:
- Donors’ families win because more organs can actually be utilized – and not thrown away.
- Patients win because they get a healthier organ, and they have a shorter waiting time to receive a transplant.
- Transplant Doctors win because they have better outcomes in surgery and can save more lives.
- Transplant Doctors and staff win because they no longer have to go on trips in the middle of the night to collect donated organs.
- Hospitals win because they can make more money by doing more transplants.
- Hospital staff win because more surgeries can be done during the day – not as emergency surgeries during the night.
- Insurance companies win because they actually save money with use of the OCS (compared to the cost of extended hospitalizations for people waiting for transplants).
- Organ Procurement Organizations win because they can make more money and help more people by utilizing more donated organs – and meet government goals to increase the number of transplants.
- Relatively little insider selling.
- 94% of shares are held by institutions (according to Yahoo Finance).
- Founder led. The founder started the company over 20 years ago and he led them through all the extensive trials and FDA approval process – which was a challenge.
- Very strong moat – which I have discussed in another recent post.
Chart (presented without comment):