I finally had time to read the transcript and have a few more thoughts.
I did confirm that the CEO said he did not expect much expansion for Lung OCS in the near term. Here is his exact quote - “The lung, until we have a new clinical program in lung, it’s going to be few centers doing the lung.” If it is a new clinical trial, it will probably take months or years to set it up, and I think they are changing their technology prior to starting that hypothetical trial. Then the trial itself will take months or a year. So, that is going to limit growth for a while.
Competition from DCD donations using Normothermic Regional Perfusion (NRP). This is going to get a little nerdy, so skip if you are not interested.
DBD = donation after brain death.
This is the way most organs have been taken for transplants. A patient is brain-dead, but is kept artificially alive until transplant teams can arrive to procure the organs. The patient is taken off life support, the patient is already pronounced dead, and the organs are then quickly removed.
DCD = donation after circulatory death. This has not been used as much historically. In this case, a patient’s brain is still functioning correctly, however it has been determined that they will not be able to survive on their own after life-support is removed and there is no hope for survival. In this case, the life-support is removed, and the patient is allowed to die naturally – which can take some amount of time. If the death occurs within 27 minutes from the time that life-support is removed, then the organs can be utilized. If the death occurs after 27 minutes, then the organs are not taken. On some of the TMDX calls they refer to this as a “dry run”. The TMDX NOP team is alerted that there is a patient in this condition, the NOP team travels to the hospital to be present so that they can procure the organs if the patient meets the criteria, but if the patient does not pass away within the time limit then TMDX does not obtain any organs from that trip. It is basically wasted time.
TMDX OCS vs NRP
With the OCS system, when a DCD patient passes away within the 27 minute window, the organs are immediately removed from the patient and placed in the OCS system where they are resuscitated outside of the body and checked for proper function. The OCS system enables much higher utilization of DCD organs for this reason.
NRP is a process where the organ is kept in the patient’s body after they have passed away and the organ is resuscitated within the patient’s body using machinery to pump blood. After the organ is resuscitated, there are tests that are done to evaluate the function of the organ while it is still in the donor’s body, then if it is acceptable is removed and put in cold storage for transport to the transplant hospital. There are some obvious ethical concerns with doing this.
For DCD hearts, the TMDX CEO stated that NRP has around 30% of the market and OCS has 70%. He said that many transplant centers that were using NRP are now returning to TMDX because of the ethical issues associated with the NRP process. He also said that people erroneously thought that NRP was cheaper than OCS, but that TMDX has evidence to the contrary.
So, based on all this I would expect TMDX to increase the number of DCD heart transplants over time. There is a competitor in trials for a system similar to the OCS, so that could be a source of competition at some point in the future.
- There was nothing said about Kidney OCS. I have not heard anything said about it in a while, so I assume it’s on hold.
- There has been almost no increase in international sales. That is discouraging, but it could be a positive for future growth potential if it eventually picks up. I have no idea why it is not used more internationally - but I assume it is the extremely high price of the OCS system.
I am keeping all the shares I still have, but I am not buying more at this time. While this quarter, and really all of 2023, have been stellar, I personally think the stock will fall further. I think the CEO will give a very sand-bagged 2024 forecast at the next ER and I think the stock will drop after that and that will be lead to investor capitulation in Q1. There are other reasons I think the stock will go lower, but I’m not allowed to discuss them here. I could be wrong, and that is why I’m keeping the shares I do own.
I believe this will be a great company for 10 or 20 years and I plan to keep owning it. I’m just trying to be selective in when I scale back up. Time will tell if I’m right or wrong.