TMDX - Disruptor

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The link immediately below is to a formatted version of this summary stored on One Drive. I also copied the text in this post, but I’m not going to take the time to try to format it here - too cumbersome.

I have not gotten much feedback on my posts about this company, so I’ll stop for a while after this one. The next major catalyst will be FDA review of the Heart OCS device - expected to be sometime in Q3.

IMO, if there are no more major COVID related delays, and if they get the Heart OCS FDA approval (as expected), then 2021 and 2022 will be a series of quarter after quarter of 100% revenue growth and improving margins. They just completed a secondary offering and they now have plenty of cash to carry them to profitability. I think now is the optimal time to get in if you are at all interested.

https://urldefense.proofpoint.com/v2/url?u=https-3A__1drv.ms…

Disclaimer – I am not an expert in the field of organ transplant, and I may have gotten some of these facts wrong. I have researched all of this to the best of my ability, but I don’t have contacts in the industry with whom I can validate everything I have written.

If you are not already familiar with the company, I suggest that you first read this overview article:

https://seekingalpha.com/article/4351992-transmedics-medical…

The article linked above provides a great overview of the main product that the company sells. However, it completely misses something that I think is one of the most important aspects of what the company is doing. I am writing this current summary primarily to focus on that overlooked aspect which I think is the biggest long-term catalyst.

TransMedics – what makes it a disruptor? In 2 words - Perfusion Services.

TransMedics (TMDX) has spent 20 years developing and qualifying a revolutionary new technology - the Organ Care System, or OCS. They currently have no direct competitors for heart and lung (there is a competitor for liver), and this type of medical device requires years of testing and trials for FDA approval. Their product is amazing and revolutionary, but that’s not what I think makes them the most disruptive.
The most disruptive thing about them is the recently launched “service” part of their organization called Perfusion Services. In my opinion, this is what is going to solidify the long-term advantage for TMDX in the US market and block out any competitors that might try to enter.

First, some background info on the current process for retrieving donated organs. The current model for retrieving organs from donors is that the hospital performing the transplant has to send out a team of people to wherever the donor is located in order to remove the organ and bring it back to the transplanting hospital. The status quo has several problems inherent in it:

  1. Time Is Short The transplant hospital team collecting the donated organ generally goes out on a private jet, and the distance they can travel is limited by how long the organ can be kept healthy/viable in cold storage (it is placed on ice in a cooler) before it has to be transplanted. So, problem #1 in the status quo is that there is a very limited amount of time for this team to remove the organ from the donor, check it out to make sure it is “healthy”, pack it in ice, race back to their home transplant hospital, then immediately start the transplant operation into the recipient.
    a. TMDX solves this “time” problem through their technology – the Organ Care System (OCS). I’m not going to go into detail on the “device” here because my main focus for this report is on Perfusion Services. The critical thing to know is that the OCS device greatly extends the amount of time that organs can be kept healthy/viable – and because of that, it is now possible to retrieve organs from donors who are located farther away.
    b. Note – The OCS does much more than just extend the time for organ viability, but I am not going to go into the other benefits of the device in this particular summary.

  2. Resources are short The time-extension ability reference in point #1 above is a great technological advancement for the field of organ transplant. This advancement enables retrieval of donated organs from distances far greater than has ever been possible in the past. However, the ability to retrieve organs from distant locations requires that “someone” potentially has to travel further to collect the organ(s). The existing transplant hospital staff would have a hard time doing this because of time/resource constraints. In the status quo, organ collection teams will typically only travel at most a few hours away (for lung and heart) from the home transplant hospital. With the TMDX OCS device, it is now possible to retrieve organs that are in locations 12+ hours away. In 2019, TMDX demonstrated this capability by retrieving 2 sets of donated lungs from Hawaii and transporting them to hospitals in the continental US and transplanting them over 20 hours after they had been removed from the donor. In summary, problem #2 is that it would be very difficult and expensive for the transplanting hospital to send out their own people on these longer-distance organ retrieval trips.
    a. Perfusion Services solves this problem – Through the “Perfusion Services” segment of their business, TMDX will have their own teams of organ retrieval specialists stationed at different points around the United States, and those TMDX teams will go get the organs so the transplant hospital staff does not need to. This will be a tremendous benefit to the transplant hospital staff. I will explain why in more detail later.

  3. Multiple Teams are Sent (Waste) A single donor can provide multiple organs (heart, liver, lungs, kidneys) that can all go to different recipients. If the donor is matched with multiple recipients, it is possible that there may be teams from 3 or 4 different hospitals coming to retrieve organs from the same donor – all traveling to the donor from different hospitals. Problem #3 is that there is a lot of waste (time and money) associated with sending this many people to one donor.
    a. TMDX Perfusion Services will solve this problem (in the future when all OCS devices are fully approved) by sending a single team to retrieve and package all organs from the donor and ship them all to the locations of the various recipients. This will cut out a lot of extra expense, and it will free up the transplant hospital resources to work on more profitable things – like doing more transplants (which will then lead to a need for more organs - which will then lead to more opportunities for TMDX – a virtuous cycle).

  4. Tired Transplant Surgeons In the status quo, organs sometimes need to be retrieved urgently - depending on the status of the donor. This can require the organ collection team to have to go out in the middle of the night on a moment’s notice when an organ is available. Then, the same surgeon can have to go immediately into performing the actual transplant surgery as soon as they return with the organ because of the time constraints of having the organ stored on ice. Dr. David Weill writes on this issue in one of his blog posts (http://davidweillmd.com/blog/transplant-program-physician-st…). In his blog post he notes that the difficult work life of the transplant surgeon is leading to less young doctors wanting to go into this field of medicine. In summary, problem #4 is that transplant doctors have to push themselves to extremes in their work in order to meet the organ retrieval and transplant timing requirements under the current system.
    a. TMDX Perfusion Services solves problem #4 by completely eliminating the need for the transplant surgeon to go out and collect the donated organ - Perfusion Services does that for them. In addition, the fact that the OCS device can keep the donated organ healthy/viable for a much longer amount of time provides extra flexibility for the transplant hospital staff to schedule the procedure at a time that allows for the medical team to be fully rested and fully prepared.

  5. Sharing is Caring In the status quo, it is not usually possible (due to travel time constraints) for donated organs to be shared across different geographic regions. This can sometimes lead to donated organs not being utilized because there is no good match for them within the region where the donor is located - this is tragic when there are so many people nationwide on waiting lists to receive a transplant.
    a. TMDX Perfusion Services solves problem #5 by being able to travel to any location to retrieve an organ and (because of the new technical capability of the OCS) they can ship the organ to virtually any destination in the continental US. This will help make sure that ALL healthy/viable organs can be utilized, and it will help distribute organs to the best possible match based on blood type/body size/age/sex.

  6. What if the organ is no good? In the status quo, there are many trips made where the organ collection team gets to the donor, removes the organ, and then determines that it is not fit for transplantation. There can be many reasons for this, but I can tell you from personal experience with my dad that it is a real occurrence. My father was a lung transplant recipient, and he had 2 “false alarms” where this exact situation occurred. The hospital told him they had a possible donor organ match for him and that he needed to prepare for the operation, then he was later notified that there was something wrong with the organ after they inspected it, and they canceled the procedure. In summary, problem #6 is that the transplanting hospital has to send out organ collection teams on many trips that end up being a complete waste of their time.
    a. TMDX Perfusion Services solves this problem by eliminating the need for the transplanting hospital to send out any of their own staff to collect the organ. The TMDX team will do their own assessment and determine if they think the organ is usable – and if it is not acceptable, it will not be shipped to the transplanting hospital. When the transplanting hospital receives an organ, they still have the option to reject it if they have any concerns. (In the case of a “rejected organ” there is a nominal fee paid to TMDX for to cover their costs).

  7. Some quotes from the TMDX CEO regarding Perfusion Services:
    a. From the 2019 Morgan Stanley Conf Q&A – “We believe there is a huge opportunity for TransMedics to take control of our own destiny, take control of our own adoption curve by providing a turnkey solution (Perfusion Services) where we have retrieval surgeons and clinical adoption specialists to manage the OCS model from donor to recipient. The Hawaii program was to prove that concept – not just to travel longer distances, but to really take the adoption control from the hand of the hospital logistics into a team that is dedicated and knows how to manage these organs on OCS. Frankly speaking, we think this – when applied correctly – this is what is going to move TransMedics from a 300, 400, $500M revenue medical device company to a $1 Billion plus revenue company. That’s our vision, and Hawaii was just the tip of the iceberg. ” ………”It’s another catalyst……”
    i. NOTE - the Hawaii program he refers to is where they retrieved 2 sets of lungs from donors in Hawaii and transported them to transplant hospitals in the continental US where the lungs were successfully transplanted into recipients. This was the original proof of concept that they did in 2019 prior to officially launching Perfusion Services.

b. From the 2020 Cowen conference - Perfusion Services related quotes from CEO:
i. “Transmedics (Perfusion Services) is involved from the source of the organ until it’s actually transplanted”
ii. “We are fixing all the logistical barriers – we are fixing all the supply chain issues that are existing today with increasing the number of organs available for transplant.”
iii. “We don’t want Mass General (Hospital) to go out and procure organs in the middle of the night anymore. We can do that for them and bring (the organs) to them in better condition than if they send their own team.”
iv. “Make no mistake about it – we see this as the future of organ transplant. We see TMDX as involved in every organ transplant that takes place in this country.”
a. Read that again…… ? - That is “Disruption” of the status quo

With it’s large “first mover” advantage, TMDX will be able to put this Perfusion Services organization in place before any competitors have a chance to qualify and launch competing products. Perfusion Services will then be able to dictate which systems they use when collecting organs – (hint….their own OCS devices). This will create a very strong moat.

NOTE - the financials that were provided in the Seeking Alpha article did not provide any revenue contribution from the Perfusion Services side of the business. In fact, unless I missed it, the seeking Alpha article did not even mention Perfusion Services. This service will not be a huge profit generator, but it will contribute some extra revenue and profit because they will be getting paid for this service in addition to the money that they make on the sale of the OCS units. So, I think the Seeking Alpha article understates the revenue potential for TMDX.

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Hey AnalogKid,

Thank you for bringing this company to my attention. I’ll admit, I’m very intrigued, especially with the low valuation, significant catalysts coming up in the next 1-2 years, and market opportunity. The product itself seems revolutionary. I will likely start a small position.

However, I do want to address your description of the Perfusion Services aspect of the business. Full disclosure: I’m a nurse, and in no way involved with transplantation, so my knowledge is somewhat limited. I welcome any other medical personnel to correct me on any points they see as incorrect.

Point number 3: multiple teams are sent – as I understand it, the reason that multiple teams are sent to 1 corpse to harvest organs is not due to a lack of coordination, but because you need surgeons who specialize in those organs to remove them. I don’t believe the cardiothoracic surgeon would remove a kidney, for example. So that means TransMedics would need to employ full surgical teams of a number of different specialties at each TransMedics hub. Say each organ speciality sub-team has 3 staff (2 surgeons and a first assist), and there are 4 sub-teams in each full team, that would mean employing 8 surgeons and 4 first assists at each hub, which would command somewhere in the ballpark of $2.5-4 million in salary.

My numbers here are completely fabricated and some of my assumptions are likely false, but you get my point. The overhead here would be huge.

It doesn’t change my overall opinion of the growth opportunity for this company, simply something to consider.

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Great reply Alkaline - thanks.  As I stated, I don't work in the field, so I could certainly be off in some of the things I wrote.  I've read everything I could find, but there are some items that are hard to get info on.  TMDX has not shared a lot of details yet on the organizational structure for Perfusion Services, so I'm making some assumptions at this time.  

A couple thoughts in response to your post:

1.  On the topic of skills needed to remove organs - I actually already asked this exact question of TMDX Investor relations.  
     My question was - Is a “Transplant Surgeon” required for the Perfusion Service organ collection team?  Or can it be a general surgeon?
     TMDX response was - "An organ retrieval surgeon does not necessarily need to be a transplant surgeon, but, in our case they are all trained transplant surgeons."
     So, according to TMDX, there is some leeway on who can remove a donated organ, and it does not need to be a surgeon who specializes in that specific organ.  

2.  This is complete speculation from me, but I have wondered if this might eventually become kind of a "gig" job for retired transplant surgeons - like UBER for organ transplants.  When a job is available a notification goes out to any surgeons within a certain distance and first one to pick it up gets the job.  Again - this is just me dreaming - but if I was a retired surgeon and could earn $10k to go remove an organ, well... sign me up!

3.  Even if TMDX does use transplant surgeons, I think there is plenty of money available to pay them.  If you look at the Seeking Alpha article, there is a chart where they summarize costs for the whole transplant process.  One cost is for "Procurement" - I believe that covers all costs associated with getting the donated organ.  Part goes to the OPO, and part is reimbursement to the retrieval team and travel expenses.  It's around $130k for a heart or lung.   So....I think they can afford the costs for the Dr's - but I doubt there will be a ton of profit in the "Service".  I could be wrong, but I think TMDX will make their main profit from sales of OCS disposable kits, and the service is just a way to maximize and accelerate those sales.

Thanks again for the reply - and please challenge this again if you still disagree.
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I’m not sure what happened - but my first reply looks strange and you can’t see the entire message. So, I’m trying to post again hoping that this one works better.

Great reply Alkaline - thanks. As I stated, I don’t work in the field, so I could certainly be off in some of the things I wrote. I’ve read everything I could find, but there are some items that are hard to get info on. TMDX has not shared a lot of details yet on the organizational structure for Perfusion Services, so I’m making some assumptions at this time.

A couple thoughts in response to your post:

  1. On the topic of skills needed to remove organs - I actually already asked this exact question of TMDX Investor relations.
    My question was - Is a “Transplant Surgeon” required for the Perfusion Service organ collection team? Or can it be a general surgeon?
    TMDX response was - “An organ retrieval surgeon does not necessarily need to be a transplant surgeon, but, in our case they are all trained transplant surgeons.”
    So, according to TMDX, there is some leeway on who can remove a donated organ, and it does not need to be a surgeon who specializes in that specific organ.

  2. This is complete speculation from me, but I have wondered if this might eventually become kind of a “gig” job for retired transplant surgeons - like UBER for organ transplants. When a job is available a notification goes out to any surgeons within a certain distance and first one to pick it up gets the job. Again - this is just me dreaming - but if I was a retired surgeon and could earn $10k to go remove an organ, well… sign me up!

  3. Even if TMDX does use transplant surgeons, I think there is plenty of money available to pay them. If you look at the Seeking Alpha article, there is a chart where they summarize costs for the whole transplant process. One cost is for “Procurement” - I believe that covers all costs associated with getting the donated organ. Part goes to the OPO, and part is reimbursement to the retrieval team and travel expenses. It’s around $130k for a heart or lung. So…I think they can afford the costs for the Dr’s - but I doubt there will be a ton of profit in the “Service”. I could be wrong, but I think TMDX will make their main profit from sales of OCS disposable kits, and the service is just a way to maximize and accelerate those sales.

Thanks again for the reply - and please challenge this again if you still disagree.

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I’m not sure what happened - but my first reply looks strange and you can’t see the entire message.

Looks like monotype?. However, I copied your post from Great reply … Thanks again… and pasted into a text editor and the entire message was there.

George

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This is complete speculation from me, but I have wondered if this might eventually become kind of a “gig” job for retired transplant surgeons - like UBER for organ transplants. When a job is available a notification goes out to any surgeons within a certain distance and first one to pick it up gets the job. Again - this is just me dreaming - but if I was a retired surgeon and could earn $10k to go remove an organ, well… sign me up.

So I looked and you’re on for 14 days 24/7 then off to weeks and likely to heavily travel between hospitals far and wide, plus 20% of travel times goes to going back to Boston area for HQ stuff. They probably eek out a profit on their team and make significant margins on their actual transport system.

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Thanks! May I ask where you found that info?

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Took a quick look - couple comments on TMDX. First, I thought it was a bit odd that I couldn’t find any financials on their investor relations website. I had to go to the SEC to get them. Any comments on these things?

Business. TDMX essentially makes money selling their OCS (single use disposable unit). Competition is from less efficient transplant units. Lesser revenue from renting consoles which I assume they need to use the OCS units. Their profusion services will be an added service revenue. I assume they lock in their OCS unit sale and add a service fee for procurement. The competition is whether they can provide this service cheaper than the buyer themselves. It will be interesting to see how it plays out. We have no idea what the revenue and costs will be from this, but I’m not convinced that the margins here will be as good as the OCS margins. We don’t know. However, most businesses like to outsource work if they can save money. Hospitals have huge cost savings issues. If this saves them money, they will be all over it. The question will be what is the margin. Finally, even if margins are low, they get to build in their OCS margins.

Revenue. Their quarterly revenue was $7.53 million (up 61% yoy). Their GP is 64.5% (up from 55%). Their SGA expenses are up as well, and they lost $8 million in the quarter. So, it is a small company ($320 million MCap).

Device Segment Revenue: As you stated, they have 3 lines of devices lung, heart and liver. The lung device is the only one currently approved by the FDA, but heart and liver are clinical stages. I think one would need to assumed hat they will be approved.

Heart: $4.131 million (up 115%)
Lung: $2.008 million (up 42.2%)
Liver: 1.391 million (up 3.6%)

Geography: Good to see that they have US and international revenues.

US: $5.208 million (up 76.4%)
INT: $2.322 million (up 34.8%)

Clinical to Commercial Revenues: So, their revenue growth is not just growth in sales. I believe 34% of their revenue growth was a shift from clinical unit pricing to commercial pricing margins. So, their unit sales are not as big as the good revenue growth. With that said, if their heart units are still clinical pricing, then they seem to have a revenue bump available.

New Placement: They have a new offering coming up @ $15/share which will dilute the shares.

Cost of Transplants: The link to the chart of the total “bill” for a transplant is really mind blowing. I think a heart transplant all told is $2 million. Amazing. Now, one question I have is how much of that “billed” amount is actually paid. We know insurance companies agree to pay a much lower amount than actually “billed”. So, TDMX’s margins might see some pressure eventually in that area.

“Selling Organs”: (More of an odd point). I thought about one inroad to margins is someone providing a service to individuals who can earn money if they die by selling their organs. A company like TDMX would then need to pay the middleman for the organs who in turn would pay a portion to pay the individual’s estate/beneficiaries. Is there any business that does this now? To my surprise, I found that selling organs that can be transplanted is illegal under a old Federal law that likely will not be changed anytime soon.

Patents/Moats/Competition: This looks like a good product and maybe the best now. Do they have patent protection to competition? I saw they licensed some things from the VA, but I didn’t see anything where their devices are patented. Did you see anything on this?

Bottom line: Very small company, not a SaaS company, decent revenue growth and margins, big TAM, prefusion services seems interesting, but because of possible lower margins (high expenses for surgeons, and easy to compete with), it might just be a “cost” of locking in OCS revenues. What market share do they have in the transplant unit market?

Thanks,
Mike

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To date, TMDX holds 22 U.S.Patents issued from 6/15/19 thru 1/26/20 covering the basics of their technology. I have no idea about the validity, but at least they are building a moat. Bought a starter position because of the “story”.
Ed

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Reply to Ckelly - great thoughts and questions. I’ll do my best to answer them.

Financials are on the TMDX website - link - https://investors.transmedics.com/sec-filings

“Competition is from less efficient transplant units.”
Competition is and igloo cooler and ice. Really, there is no competition to what TMDX is offering in the OCS IMO.

“Lesser revenue from renting consoles which I assume they need to use the OCS units.”
The CEO recently said they actually give away the base units to hospitals, so no revenue from that. The revenue all comes from the disposables. They charge around $60,000 each (not a misprint) for each heart and lung disposable kit.

" We have no idea what the revenue and costs will be from this, but I’m not convinced that the margins here will be as good as the OCS margins."
I agree - Perfusion Services (PS) will likely not have margins as good as OCS disposables. They are just getting started with PS, so it’s impossible to know right now.

“However, most businesses like to outsource work if they can save money. Hospitals have huge cost savings issues. If this saves them money, they will be all over it.”
PS may not save the hospital money, but it will enable the hospital to perform more transplants. Transplant surgeries are one of the biggest profit generators for hospitals - so they will use PS if it helps them do more surgeries (even if PS costs a little more).

Yes, it is a small company. They just got their first product approved by FDA last year (Lung OCS). So, they are just getting started. If they succeed, huge potential for market cap expansion.
Heart OCS was scheduled for FDA review in Q2 before COVID. Latest estimate is for review in Q3 - not sure how long after that to get approval. But note - Heart OCS has been sold commercially in Europe for years with great results. So, FDA approval is expected.

Liver OCS trial results were just released a couple weeks ago. FDA submission is pending. FDA review expected in 1H2022.

Additional trials (Continued Access Protocols) are ongoing for both Heart and Liver. So TMDX is selling some units for those trials until they get FDA approval. There is also a trial in process for Heart using OCS for “marginal” hearts that would not be normally used for transplant. The same type of “marginal” organ trial is pending start for liver (start in Q3). Lung OCS already completed its “marginal” organ trial and it was approved. One of the great stories for OCS is that it helps enable use of many more organs that were previously in the “marginal” category and were thrown away in the past.

Heart and Liver OCS is still being sold only at clinical price in the US. As mentioned above, Heart is commercial in Europe - I’m not sure about liver in Europe. There is a competitor with a liver perfusion device in Europe, so I’m not sure how much TMDX will sell there for liver.

The new placement was announced a couple weeks ago. I believe it already closed. So, yes there was dilution, but it should now be complete and factored in the price.

There is no product like this for Heart and Lung. There is a similar product for liver, but it is not yet FDA approved. They have patents - I believe they are listed on the website if you dig a little.

Their current market share for all transplants is roughly 1%. I made a rough estimate that they sold ~470 total disposables in 2019 for all 3 organs (US + International). There were around 50,000 total transplants last year worldwide for all 3 organs.

Organ transplants have increased by about 4.5% per year for the last 10 years. The biggest hindrance to faster growth rate is lack of organs. TMDX solves that problem and makes many more organs available.

NOTE - even though the OCS disposables are crazy expensive, they actually save money for insurance companies. I can post the breakdown for this if anyone wants to see it. So, insurance companies WANT TMDX to succeed. Hospitals and OPO’s want them to succeed because both will make more money if there are more transplants. Patients want them to succeed because more people will be able to get the transplant they desperately need - and the patient gets a healthier organ than if it was stored on ice.

The OCS product is a benefit for all stakeholders in the transplant chain.
o Donors’ families win because more organs can actually be utilized – and not thrown away.
o Patients win because they get a healthier organ and they have a shorter waiting time to receive a transplant.
o Doctors win because they have better outcomes in surgery and can save more lives.
o Hospitals win because they can make more money by doing more transplants.
o Hospital staff win because more surgeries can be done during the day – not as emergency surgeries during the night.
o Insurance companies win because they actually save money with use of the OCS.
o Organ Procurement Organizations win because they can make more money and help more people by utilizing more donated organs – and meet gov’t goals for more transplants.

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Patents/Moats/Competition: This looks like a good product and maybe the best now. Do they have patent protection to competition? I saw they licensed some things from the VA, but I didn’t see anything where their devices are patented. Did you see anything on this?

Analog the original poster indicated that TMDX has 191 patents.

Rob

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Patents/Moats/Competition: This looks like a good product and maybe the best now. Do they have patent protection to competition? I saw they licensed some things from the VA, but I didn’t see anything where their devices are patented. Did you see anything on this?

Analog the original poster indicated that TMDX has 191 patents.

Rob

NOTE - many of those 191 patents are duplicates for different countries. But yes, that is the number they had in their S-1.

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2. This is complete speculation from me, but I have wondered if this might eventually become kind of a “gig” job for retired transplant surgeons - like UBER for organ transplants. When a job is available a notification goes out to any surgeons within a certain distance and first one to pick it up gets the job. Again - this is just me dreaming - but if I was a retired surgeon and could earn $10k to go remove an organ, well… sign me up!

I don’t know anything about the rest of this company, just wanted to respond to this point. A surgeon can’t just show up and operate on a patient because they saw an alert on an app. Assuming the patient is at a hospital, you need privileges to work there, and that often requires a certain number of procedures in the past few years.

That said, the actual harvesting of organs is not really going to be an issue. Most surgeons in that field (general surgeons for the liver, urologists for the kidneys, cardiothoracic surgeons for the heart/lungs) can harvest an organ; many could probably harvest organs not even in their field (the pancreas and other uncommonly transplanted organs would be different). They just presumably need someone to train the surgeons on how to package (for lack of a better word) into their devices which probably doesn’t require a transplant surgeon’s skills either. So any community hospital could be signed up as long as their surgeons were trained. Presumably, any urgent organ harvests would just be done by the surgeon on call and any non-urgent ones can be done by whoever is on call or on the case during the day.

I will point out that this is all highly dependent on reimbursement rates from insurance companies and/or the government. There’s usually a specific zone where something can be very lucrative yet not lucrative enough for reimbursement cuts. I don’t know who pays the harvesting surgeon in these cases (I presume the recipient) so you just need enough to make it worth the surgeon’s time, but probably not that much because there’s a pretty low risk of malpractice and no real follow up.

Might be interesting if this can allow for storage of organs in some kind of repository for a certain period of time while waiting for a matching recipient. I’m not sure if their technology could make this financially viable.

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Replying to IRdoc

Thanks for your input.

“A surgeon can’t just show up and operate on a patient because they saw an alert on an app. Assuming the patient is at a hospital, you need privileges to work there, and that often requires a certain number of procedures in the past few years.”
TMDX is already doing this, so I assume they have worked through any restrictions. Also, they are not operating on a live patient, so I think the requirements may be different in this case.

I agree that a transplant surgeon is not required for organ harvesting - and TMDX has also confirmed that. I had a statement from them on this topic in an earlier post.

“So any community hospital could be signed up as long as their surgeons were trained. Presumably, any urgent organ harvests would just be done by the surgeon on call and any non-urgent ones can be done by whoever is on call or on the case during the day.”
At some point in the future this might be possible, but not immediately. People have to go through several days of training on the use of the OCS, and I don’t think most hospitals are going to pay for that and have trained personnel on call. TMDX has a trained technician handle the management of the organ in the OCS device after the surgeon removes the organ from the donor - I do not think the doctor who did the organ removal is involved in the OCS management aspect. I’m not 100% sure about this point, but this is my understanding based on what I’ve heard so far from the company in various presentations.

Reimbursement - I am not exactly sure how this works for Perfusion Services. Here is a statement from TMDX Investor Relations that is somewhat related to this topic:
“While we sell the perfusion service either to the transplant center or the OPO, the cost is reimbursed by the transplant patient’s insurance, whether Medicare or private insurance. I would note that the transplant center would incur the cost of organ retrieval and perfusion management regardless if they pay TransMedics or if they utilize their own resources.”

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TMDX is already doing this, so I assume they have worked through any restrictions. Also, they are not operating on a live patient, so I think the requirements may be different in this case.

On a small enough scale with their own surgeons, a company can credential their doctors at numerous hospitals though it takes a fair amount of effort. And it’s possible that Transmedics will negotiate with hospitals for more lenient credentialling on the basis that the donor patient is already considered to be deceased, although there are also issues of working with the hospital’s OR staff, etc. that might prevent a hospital from simply allowing anyone who says they’re a surgeon (having had no opportunity to verify credentials) to walk in and perform surgery, even on a dead patient. So I was just saying that an “Uber” for organ harvest is not really feasible; if it got to that kind of scale that made it worthwhile, the company would just have to retain the services of a select number of surgeons in each area and do all the paperwork beforehand. TMDX lists certain hospitals on their web sites, but it’s not clear to me whether those are the hospitals where they both harvest and transplant or only where they transplant.

I think no matter how large they grow, the company would provide the clinical support staff to package and transport the organ. Again, they can hire clinical support to be on site at various locations, it would only take one or two teams even in the largest cities. The surgeon would just need to learn what is required for transport (e.g. amount and size of vessels harvested) and maybe how to connect the necessary tubes and wires to keep the organ alive.

Regarding reimbursement, the good thing is that most transplant centers might run their transplant surgeries at a loss just to maintain volume and the ancillary services. It’s possible that regardless of reimbursement, the amount of money paid for TMDX to keep an organ viable is worth the additional volume that it allows (minimum numbers of transplants per year are required, which is an issue at some sites).

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IRdoc,
Thanks again for the reply - sounds like you have some direct experience in these things (I should have guessed from your name). Details are a little fuzzy on some of the finer points, but I think we are agreeing on the high level potential for the company. We should get more clarity on Perfusion Services structure and profitability in the next couple ERs. And really, I don’t care much if PS is a big profit generator or not - the main thing for me is that it accelerates adoption and use of the OCS.

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TMDX is providing devices and services which increase the time available between organ retrieval and transplant. This is extremely important for the transplant community because time is the enemy of viability. Please note that except for some very specific circumstances, organs are procured after a patient is declared brain dead - they have not been declared legally dead. If the heart stops in an uncontrolled environment none of the organs are viable. Without devices like what TMDX provides, organ viability varies by organ type but isn’t very long (only hours) in the scheme of things. That’s what makes TMDX a compelling story - they have a device that could fulfill a need for a market that exists - they provide more time.

There’s a lot a lot more to organ donation. Having worked in the industry (note - I am not a medical professional) I can understand where misconceptions come from over how the process works. The organ procurement organization I worked for covered the second largest territory outside of Alaska, with about the middle of the population statistics for all of the OPO’s in the US. Suffice it to say for every OPO the most critical piece in this whole chain is the generosity of those who choose to be considered as a donor. Choose to give, and let your wishes be known by your family so that time is not wasted debating what you may have wanted if that time comes and your voice can no longer be heard. Let the system decide if what you offer can be of benefit to someone else. Your current age or health doesn’t matter; what matters is that your decision to give is understood. The OPO professionals will handle the details when the time comes, determining what will benefit another; they will make every effort to fulfill your directives. I’ll get off my soapbox - my apologies if this is deemed off topic.

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And it’s possible that Transmedics will negotiate with hospitals for more lenient credentialing on the basis that the donor patient is already considered to be deceased, although there are also issues of working with the hospital’s OR staff, etc. that might prevent a hospital from simply allowing anyone who says they’re a surgeon (having had no opportunity to verify credentials) to walk in and perform surgery, even on a dead patient. So I was just saying that an “Uber” for organ harvest is not really feasible; if it got to that kind of scale that made it worthwhile, the company would just have to retain the services of a select number of surgeons in each area and do all the paperwork beforehand.

That sounds like it could be a bit of a Moat to me. Limited supply of surgeons and doing all the paperwork in multiple locations. I imagine that most of the big cities would be covered.

Mike

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replying to jclaypool

"Please note that except for some very specific circumstances, organs are procured after a patient is declared brain dead - they have not been declared legally dead. If the heart stops in an uncontrolled environment none of the organs are viable. "

What you said is the way it used to be. The OCS device changes that paradigm. The OCS Lung device has been fully tested and approved for both DBD (Donor after Brain Death) and DCD (Donor after Circulatory Death) organs. THAT is one of several quantum leaps the OCS device enables.

There is a trial ongoing for OCS heart for DCD organs. Here is a link to the news report when they did the first DCD heart transplant in the US back in December:
https://seekingalpha.com/news/3523652-transmedics-up-3-prema…
Also, OCS Heart has been used for DCD organs for several years in Europe.

Finally, the recently completed trial for OCS Liver was conducted on both DBD and DCD organs. There is another Liver trial that will start next quarter that is targeted at testing on DCD liver donations that are even more “marginal” than what was tested in the first trial.

The goal of all this is to enable the broad use of DCD organs, which exponentially expands the pool of viable organs that can be used for transplant - because there are a lot more circulatory deaths than brain deaths.

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