Catalyst Watch – TransMedics Group (TMDX)
TransMedics Group (TMDX), a name we haven’t covered in some time (Last post can be found HERE), is a commercial-stage medtech company transforming organ transplant therapy for end-stage organ failure patients across multiple disease states. They have developed the Organ Care System, or OCS, to replace a decades-old standard of care that they believe is significantly limiting access to life-saving transplant therapy for hundreds of thousands of patients worldwide.
Earlier this week, the company reported its Q4 earnings results:
-EPS of ($0.23) vs ($0.25) estimate – Beat
-Revenue of $7.63M vs $6.04M estimate – Beat
-Net Revenue increased 26% Y/Y
-U.S. Organ Breakdown (2.5M for Lung, $2.1M for Liver, and $1.1M for Heart)
CEO Waleed Hassanein remarked, “Our overall growth was driven by approximately 18% growth in our U.S. business, primarily attributable to having all of our 3 OCS platforms contributing to our U.S. revenue throughout the year. Specifically, we had OCS DCD Heart and OCS Liver programs active throughout 2020 as well as a recovery of our OCS Lung commercial activities in the fourth quarter of 2020.”
JPMorgan analyst Robbie Marcus highlighted that COVID-19 is expected to continue to weigh on results, particularly outside the U.S. as Europe has seen continued disruption. In addition, while Heart and Liver have fully recovered, Lung volumes remain below normal levels, partly since transplants have shown signs of COVID-19 infection despite producing negative serology tests. Looking ahead, Q1 is expected to be choppy as the Liver CAP (mentioned later) transitions from the first to the second tranche, which should result in Q1 sales flat to down, slightly below the Street’s prior expectation for Q1 sales of $8.2M, followed by sequential growth over the balance of the year.
The company is now focused on leveraging the growth foundation they’ve established in 2020 and pairing that with upcoming 2021 catalysts to accelerate future growth such as:
OCS Heart DBD PMA – This, unfortunately, is the initiative that suffered critical delays due to the COVID pandemic. However, management said they were pleased and relieved to finally report that the FDA has completed the review process of the CAP data, and the OCS Heart panel meeting (first major catalyst for this year) is now scheduled on April 6th. “We’re excited and anxiously awaiting this important date and remain confident in our results, in our trial data and our ability to articulate the clinical value of the OCS Heart system. Importantly, we’re extremely confident in our ability to address any FDA’s question to TransMedics or to the panelists.”
Oppenheimer analyst Suraj Kalia, in his post-earnings note wrote, “We believe the OCS Heart Briefing docket will highlight clinical data that is more nuanced. This is a complex space; and similar to LVAD’s in the yesteryears, we believe the FDA will provide PMA approval for the Heart indication, with a possible post-approval study requirement. We continue to view the OCS as a paradigm shift in the solid organ transplant space.”
National OCS Program – In 2020, TMDX launched and expanded their National OCS Program, which is designed to help the company realize their vision to be the national exclusive provider for all OCS-related organ retrieval and clinical management activities for transplant centers in the U.S. “We started with the OCS Lungs and expanding it into Heart and Livers once FDA approvals are achieved. We started 2020 with one active region in the Chicago area, and we ended 2020 with 4 active regions across the U.S., adding New England, Atlanta and Dallas to the initial Chicago region. We plan to continue growing our regional coverage of the U.S. throughout 2021.”
Management noted the expansion of the OCS National Program is to cover at least 10 major regions in the U.S. and expanding it to cover, not just the Lung, but Heart and Liver indications once FDA approval is secured.
OCS Liver PMA – Another major initiative for the company is their OCS Liver PMA, which they completed the data analysis for and filed their PMA back in Q2. “We have since addressed and submitted all of our responses to the FDA’s questions…and we’re currently working with the FDA to schedule the advisory panel meeting for the Liver PMA, which will hopefully happen in the next several months.” Building on the clinical momentum of the OCS Liver PROTECT trial, it completed the first tranche of OCS Liver CAP late in Q4. And they are now in active discussions with FDA to initiate the second tranche of the OCS Liver CAP, which hopefully will start in Q2 2021.
OCS Heart DCD – The company is also advancing their OCS Heart DCD indication. It completed 180-patient OCS DCD trials in 2020. They are now awaiting the completion of the follow-up period for the primary effectiveness endpoint of 6 months patient and graft survival post-transplant. “We expect the top line readout of this important program in Q3 2021. As I mentioned earlier, to continue to drive clinical momentum in this important program, we secured FDA approval for a CAP program in 25 U.S. major transplant centers in the third quarter and formally initiated the DCD CAP enrollment in December of 2020. Currently, this CAP is actively enrolling and ongoing.”
Medical Journals – The final potential catalyst in 2021 is the publications of OCS Liver, OCS DBD and OCS Heart DCD trial data in high-impact medical journals. These will be critical drivers for broader clinical adoption of the OCS technology and the transformation of the clinical standard of care globally.