May 1, 2019 | 3:26 PM by Jay Kunstman | jkunstman@jaguaranalytics.com

IPO Watch – TransMedics Group (TMDX)

Set to debut tomorrow, TransMedics is a commercial-stage medical technology company who is addressing the need for healthier organs for transplantation.

Organ transplantation is the treatment of choice for addressing end-stage organ failure due to its positive clinical outcomes and favorable health economics. However, transplant volumes have been significantly restricted by the limitations of cold storage, the standard of care for organ transplantation.

According to the S-1 filing, cold storage is a rudimentary approach to organ preservation in which a donor organ is flushed with cold pharmaceutical solutions, placed in a plastic bag on top of ice and transported in a cooler. Cold storage subjects organs to significant injury due to a lack of oxygenated blood supply, or ischemia. Time-dependent ischemic injury has been shown to result in short- and long-term post-transplant clinical complications and, together with the inability to assess or optimize organs, contributes to the severe underutilization of donor organs. While there are approximately 67,000 potential donors annually in the United States, Canada, the European Union and Australia, which TransMedics refers to as their key geographies, the majority of lungs and hearts donated after brain death, or DBD, go unutilized, and almost no available lungs and hearts donated after circulatory death, or DCD, are utilized.

To combat this problem, TransMedics developed the Organ Care System, or OCS, to provide donor organs with warm, oxygenated, nutrient-enriched blood, while maintaining the organs in a living, functioning state. Because the OCS significantly reduces injurious ischemic time on donor organs as compared to cold storage and enables the optimization and assessment of donor organs, it has demonstrated improved clinical outcomes relative to cold storage and offers the potential to significantly improve donor organ utilization.

Based on the utilization rates in their clinical trials and their commercial experience outside the United States, they estimate the potential annual addressable commercial opportunity for the OCS to be approximately $8 billion for lung, heart and liver transplantation combined.

According to the SEC filings, the company’s net revenue from customers in the United States was $6.5 million in the fiscal year ended December 29th, 2018, an increase of ~$3.8 million in the fiscal year compared to the fiscal year ended December 30th, 2017. The increase in net revenue was primarily due to the sale of OCS Lung disposable sets sold to customers for use in their OCS Lung EXPAND II Trial and commercial sales of OCS Lung products.

Meanwhile, net revenue from customers outside the U.S. was $6.5 million in the fiscal year ended December 29th, 2018, an increased of $1.5 million compared to the prior year. The increase here was primarily due to an increase of $1.7 million from sales of OCS Heart disposable sets from increased utilization by new and existing customers, partially offset by a $0.2 million unfavorable impact of foreign currency rates.

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