Good afternoon, everyone. Thank you for standing by and welcome to the TransMedics Q2 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. And as a reminder, this conference call is being recorded. And I would now like to hand the conference over to your speaker today, Mr. Brian Johnston.

Thank you, operator. Earlier today, TransMedics released financial results for the quarter ended June 30, 2020. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. All forward-looking statements, including without limitation, our examination of operating trends, the potential commercial opportunity for our products and our future financial expectations, which include expectations for growth in our organization, regulatory approvals and reimbursement and guidance and/or expectations for revenue and gross margins and operating expenses in 2020, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 17th, 2020, supplemented by our other SEC filings, including our quarterly report on Form 10-Q for the second quarter of 2020. TransMedics disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 5th 2020. With that, I'll now turn the call over to Waleed Hassanein, President and Chief Executive Officer.

Thank you so much, Brian. Good afternoon, everyone, and welcome to TransMedics' Second Quarter 2020 Earnings Call. Joining me today is Stephen Gordon, our Chief Financial Officer. I want to start our call by extending my gratitude and well wishes to our TransMedics clinical support team and transplant health care professionals, who have been on the front lines, ensuring that organ transplant procedures are continuing during this COVID pandemic. As we highlighted on our last call, COVID caused significant disruption to the global transplant activities beginning in late March and throughout the second quarter. Similar to medical procedures broadly, transplant activities fell to near zero throughout April and early May. The slowdown caused the waiting list numbers to continue to grow. And ultimately, transplant programs decided to temporarily deactivate a portion of the waiting list in order to allow transplant activities to recover before bringing these patients back in the waiting list and letting that waiting list continue to grow. Despite these challenges posed by the pandemic, we made meaningful progress on our commercial, regulatory and clinical initiatives throughout the second quarter of 2020. Since the trough in April through early May, we've experienced recovery of transplant activities across many regions in the U.S. As we have highlighted previously, resuming transplant activities is a priority for many hospital systems. We're seeing continuing recovery. However, we remain cautiously optimistic given the emergence of new hotspots in key regions in the U.S. where major OCS centers reside. With that context, let me now shift to a review of our Q2 results. Our second quarter net revenue was $3.4 million, which represents a 40% overall decline from the second quarter of 2019. Given our strong first half '20 net revenue was up 6% compared to first half 2019. Through the quarter, we recognized revenue for all three organs, OCS organ programs. OCS Lung was the most heavily impacted by COVID in Q2, given the virus impact on donor lungs, and the new testing mandates that were implemented on lung donors. Our OCS Heart DCD program continued to accelerate and grew in Q2 to a total of 51 transplants, up from 26 at the end of Q1. In June, we filed our OCS Liver PMA to the FDA and the review process is currently underway. We expect to receive a list of review questions and hold our 100-day review meeting with the agency in October to map out the approval process and timeline. We're also continuing to make significant progress with our national service model offering, and in the second quarter conducted significant outreach to major OPOs across the U.S. We are confident that our service model will be active in many regions in the U.S. in the second half of 2020. In May, we successfully closed an equity offering that contributed approximately $75 million in net proceeds to strengthen our balance sheet and give us a long, robust runway to drive our business growth. We are grateful to all new and existing investors who participated in this financing. Now, let me shift to review our key strategic milestones and catalysts for 2020 and 2021. Most significantly, the FDA has informed us that our OCS Heart panel will be held virtually to review our PMA application on October 7th. We are looking forward to that important day, and we are laser focused on securing a strong positive panel vote to support the approval of the OCS Heart system. Assuming a positive panel vote, we would expect approval within three to four months. As mentioned, we remain ahead of schedule for the OCS Liver approval. And following our earlier than expected PMA submission, we continue to expect approval in 2021. As we look ahead, we also expect a continued rebound of OCS Lung programs as hospitals better navigate the balance of managing the COVID crisis while enabling other procedures, particularly transplants. We also expect to benefit from the expansion of our national service initiatives. Specifically, the national service initiative will be initiated across major regions in the U.S. in 2020 and will expand through early 2021 and beyond. OCS Lung will be the main driver through the launch of this initiative and will expand to include OCS Heart and OCS Liver once FDA approvals are in hand. From a clinical perspective, the OCS Heart DCD programs remain on track to complete enrollment in 2020 and for a PMA submission in 2021. Overall, we fully expect that we will have all three OCS products approved and generating commercial revenue in the U.S. in 2021. Turning to our thoughts on the second half of this year. As I mentioned earlier, we are optimistic; however, we are cautious in our optimism. Even though we have seen incremental recovery in transplant procedures, we are concerned that the rebound may not be linear, given the emergence of new hotspots and the resurgence of the COVID virus in regions that had already stabilized. We also continue to keep an eye on the potential for a second peak in the U.S. later in 2020. Given these uncertainties, we are not restating guidance for 2020. That said, we are not pulling back, but actually leaning forward to initiate many key regions in the U.S. with our national service initiative to potentially lessen the impact of any future peaks on transplant activities, if and when they happen. We will also use this as an opportunity to demonstrate the benefits of our OCS service offering to reshape the face of the new standard of care of organ transportation using the OCS technology and the TransMedics service initiatives. Importantly, we're continuing to push our key FDA approvals forward for heart and liver to best position us for 2021, regardless of the near-term impact of COVID. Finally, our strong balance sheet gives us the maximum flexibility to drive the business and weather this current COVID storm. With that, I will turn the call to Stephen Gordon, our CFO, to review our financial results for the quarter.

Thank you, Waleed. I will provide some additional detail on the second quarter results and other financial information in the quarter. For the second quarter of 2020, gross revenue was $3.9 million and net revenue was $3.4 million. Our net revenue decreased by 40% from the second quarter of 2019. In the U.S., gross revenue was $3 million and net revenue was $2.4 million. U.S. net revenue was down 43% from the second quarter of 2019. The organ breakdown on U.S. net revenue was; $0.4 million of OCS Lung, $1.3 million of OCS Heart, and $0.7 million of OCS Liver. Outside the U.S., net revenue was $1 million, all of which was OCS Heart. As we mentioned in previous communications, the substantial impact of the global COVID-19 pandemic on organ transplants significantly reduced our revenue from our earlier expected growth trajectory. The most significant impact was in the month of April, which had really almost no revenue, but we did recover somewhat in May and June to get to the $3.4 million, although we're obviously not back to pre-COVID levels. Our gross margin for the second quarter of 2020 was 56%. That's down from 59% in the second quarter of 2019 and down from the 65% that we were at in the first quarter of 2020. The lower gross margin is also a result of the lower volume in the quarter. Our total operating expenses were $9.8 million in the second quarter of 2020, that's down $1.3 million from the second quarter of 2019, and it's down $3.1 million from the first quarter of 2020. This reduction in operating expenses was a result of specific cost reduction actions that we took to preserve cash during the pandemic as well as certain areas that were naturally reduced, like travel and trade shows, which were on hiatus during this time. Our operating loss was $7.9 million in the second quarter of 2020 compared to $7.7 million in the second quarter of 2019 and compared to $8 million in the first quarter of 2020. Our net loss for the second quarter of 2020 was $8.5 million compared to $9.2 million in the second quarter of 2019, and compared to $8.9 million in the first quarter of 2020. As Waleed mentioned, we raised an additional net cash of $75 million in a public stock offering in the quarter, and this allowed cash, cash equivalents and marketable securities to end at $139.4 million as of June 30th, 2020 providing a very long runway for the Company to weather the COVID-19 storm and continue to maintain investment in our commercial growth, as planned. Finally, weighted-average common shares outstanding for the quarter was 23.3 million. And with that, I will turn the call back over to Waleed.

Thank you, Stephen. Despite the challenges posed by the pandemic, we are extremely confident in TransMedics' mid and long-term prospects and durability to COVID's disruption. Here are the facts supporting our position. Organ transplant procedures are emergent, non-elective, and life-saving procedures. Despite the COVID impact, we expect that transplant procedures would recover as COVID cases start trending down. As we stated earlier, we don't expect the recovery to be exactly linear due to the ups and downs of the new hotspots throughout the U.S. There is a built-up pent-up demand in the form of the national waiting list that continues to grow even during the COVID crisis. Organ transplant procedures are high-margin, high-revenue procedures that many hospitals rely on for their financial stability. And relating to key FDA approvals, we're looking forward to the October OCS Heart panel meeting and OCS Liver PMA is already under review, both of which should be approved in 2021. Our balance sheet is strong to allow us to weather this COVID storm and FDA delayed panel, as well as invest in our platform and growth initiatives. Thank you so much for joining us in this call and now we will open up the line for questions, operator?

And the first question comes from Robbie Marcus at J.P. Morgan. Robbie, your line is now open.

Hi, everyone. This is Allen filling in for Robbie. I have a few quick questions. As we look toward the second half of the year, I was hoping you could provide more insight into the recovery trend. I understand that April saw a significant decline. However, reaching $3.5 million indicates a strong recovery in May and June. As we consider Q3 and Q4, how should we anticipate the continuation of this recovery? Should we expect a more gradual increase despite some resurgence in key regions, and what are your thoughts on returning to last year’s levels versus potentially exceeding them?

Thank you, Allen. In terms of our trajectory, it's not a straight line. While we have seen continual improvement, the emergence of hotspots in the South, Southwest, and West has somewhat dampened that recovery. We anticipate sequential progress, but it's not a linear recovery. This is why we remain cautiously optimistic. Are we seeing a recovery? Yes, we are seeing one, but these hotspots in significant regions of the U.S., which are major OCS areas, may hinder recovery for a time before it potentially rebounds once the situation improves. What we do know is that institutions, hospitals, and centers are now better equipped than they were back in March and April. Once a hotspot starts to ease, transplant activities tend to return more quickly than before. However, during peak times, progress slows. Regarding the second part of your question, I expect we will reach last year's levels by the end of this year. It may take us through Q3 and possibly into Q4 before we start to see growth beyond last year's numbers, based on the information we have at this moment. Stephen?

Yes, I would agree with that. I would agree with that assessment.

Got it. And I guess just another quick follow-up, on the clinical trial pipeline. It sounds like you guys have managed to maintain your timelines there a little bit better than maybe some other peers within the Medical Device Group. I guess like how confident are you in that? And I guess, since you've managed to make it through the worst of it, guessing you're pretty confident, but why have you been able to sustain your clinical trial pipeline a little bit better than some of your peers?

I cannot say for certain, but it goes back to our discussion about organ transplantation. We have kept both of our clinical programs, the Liver Continued Access and the DCD Heart, as essential during the peak of COVID, and we anticipate this will continue. We've nearly doubled our enrollment rate in Q2 for the DCD Heart. So, we are very confident that even with the resurgence and new hotspots, we will keep advancing our clinical programs. The most time-sensitive one is the DCD Heart breakthrough program, which we expect to complete in 2020, regardless of any new hotspots or peaks. Fortunately, the leading heart centers have not been significantly impacted and some have even taken patients from areas that were affected, allowing for transplants using OCS from other regions. We believe the timelines for the DCD Heart program will be maintained, and we expect to finish the enrollment of the DCD program in 2020.

Thank you so much. And next question comes from the line of David Lewis from Morgan Stanley. David, your line is now open.

Hi, thanks for taking the question. This is Calvin on for David. Stephen or Waleed, just kind of a follow-up on the trends question that Allen asked. Can you please comment on what you're seeing in terms of the resurgence regions' impact on your business at the end of the quarter or coming out of the quarter in July and how that's impacted monthly trends sort of by organ and how those are perhaps translating into June or July kind of exit rates? And I have a quick follow-up.

Sure. This is Stephen, and I'm happy to respond. I want to be cautious about suggesting a linear trend because we don't believe that's the right approach. As I mentioned, April was quite low, with revenue around $500,000 to $600,000. May and June were more similar and balanced out the shortfall from April. We didn’t observe a significant difference between May and June; they were fairly comparable. However, July appears to be performing slightly better than both May and June, indicating an upward trend that we hope will persist into August. That said, we remain cautious due to the uncertainty in the market. I typically wouldn’t break it down by organ, but we’re seeing the same pattern across organs. The Lung program has been the most affected, while our Heart program is performing well, and the Liver program is somewhat lagging behind the Heart.

Thanks, very helpful. And just a quick follow-up, could you just provide an update on timings for some of your key accounts, you kind of touched on this. One is just on the OCS Liver data publication, when is that expected? Are we still tracking for around this quarter or later? And then, for the Heart panel timing, you had mentioned that the approval timing would be three of four months following the panel. Is that kind of on track with your expectation or is it maybe a little delayed from what you have expected before? Thanks.

Calvin, regarding the publication of the Liver data, we are on schedule. We previously mentioned that it would be published in the second half of 2020, and we plan to submit it to a major peer-reviewed journal in the third quarter. The review process will take the necessary time, and we are confident that it will still align with the second half timeframe. As for the Heart approval, our outlook remains unchanged. We have consistently stated that we expect the approval to take two to four months after the panel date. The panel date has been pushed back by six months from April 16 to October 7, but we still anticipate the same time frame for final approval following the panel. The only change is the revised panel date as we await the FDA to provide us with that schedule.

And next question comes from the line of Suraj Kalia of Oppenheimer & Company. Suraj, your line is now open.

Sure. Good afternoon, Waleed. Good afternoon, Stephen. Can you hear me all right?

We can hear you just fine, Suraj.

Thank you, Waleed and Stephen, for the update regarding the timeline as you progress through Q2. Waleed, considering the two to four months you mentioned for approval following the panel, can we assume that the FDA will not request additional data, such as a specific number of implants from the ongoing DCD program?

Suraj, we never predict or assume to predict what the FDA will and will not do. We have not heard a request like that. So that's all I can comment. But we have not been told or hinted to about a linkage between the DCD program and the ongoing PMA review. They're two completely different indications. So that's all I can answer, Suraj. We're not aware of any linkage between the two programs.

Understood. One recurring topic in our discussions with repeat clients is moving beyond just the technology argument. The next question is how to stimulate growth in the post-COVID environment. Specifically, how do you engage these centers to address the disparity between the demand and supply of solid organs? I would appreciate your insights on the strategic approach for the future beyond COVID. Are you focusing on developing guidelines post-approval, training, or other critical components? What do you believe are the essential factors that will aid in facilitating growth for OCS across different indications such as Heart, Lung, or Liver? A comprehensive overview would be very helpful. Thank you for addressing my questions.

Thank you, Suraj. That's an excellent question. We have been very open about our enthusiasm for our national service initiative and our commitment to eliminating logistical barriers to adoption. We're actively addressing the challenges posed by the COVID pandemic, and I want to acknowledge our clinical support team for their frontline efforts in supporting patients during this time and continuing to do so. This is crucial not only for regaining growth but also for establishing ourselves as a dependable partner throughout and after the pandemic. As you know, we are redefining the standard of care. We believe the COVID pandemic highlights the significant need for improved methods of organ retrieval for transplantation, and we see our national service initiative as key to this change. This is a fundamental part of our growth strategy.

And next question comes from Josh Jennings from Cowen. Josh, your line is now open.

Great. Good afternoon. Thanks for taking the questions. Just two from our team. On the Heart submission and panel, are there any post-panel steps that need to be completed? And also, could you provide an update on how you'll manage the access program between now and when the system is formally approved for the Heart indication? I just have one follow-up.

Sure. Thanks, Josh. The only follow-up after the panel involves finalizing the post-approval, post-market registry. We have a strong design in place. There were several questions exchanged with the FDA that we believe need to be concluded along with finalizing the labeling language. These are typically the two main topics that require completion. This will be our third post-approval, post-market registry program. We have utilized our experience from the previous two to reduce the back and forth, and we feel optimistic about our current position, which the FDA also seems to recognize. The second part of the question was...

Just an update on how you manage the Continued Access Program between now and when the system is formally approved.

So, the DCD program is active, the CAP is active and we expect that to continue to be active even once we enroll the DCD program, we will file a Continued Access Program. So we'll have all the heart centers involved in some OCS activities until hopefully that PMA approval order is in hand.

Excellent. And then just a follow-up on the Liver submission. Can you just share your expectations in terms of the timeline for the review? And is it a fair assumption based on the data in prior panels for OCS technology, this review will not involve an ad-com panel?

To be honest with you, Josh, we are assuming an ad-com panel conservatively because we always assume that conservatively. We've highlighted in our submission a strong argument why this application may not require an ad-com panel given the superiority in outcome. But obviously, we're always going to assume the conservative assumption that it will take 12 to 14 months, because we assume an ad-com meeting. We have to wait and see where the FDA is at during our October meeting and we'll ask the question explicitly. But, so far, we have not received any indication, one way or another, whether it's going to be subject to an ad-com or not.

Understood. And with the ad-com panel assumption, any guidance you can provide just in terms of the submission and the review timeline and when we could potentially see an approval? Obviously, we saw with the Heart filing that there is the COVID pandemic that threw things off, but assuming there's nothing disruptive to that, to that degree?

That's a great question, Josh. The 12 to 14 months timeframe assumes an advisory committee meeting. If the FDA agrees with our analysis and our recommendation to skip the advisory committee, the timeline should be shorter. However, we prefer to take a conservative approach, which is why we mention the 12 to 14 months including an advisory committee meeting. Regarding COVID-19, I believe the FDA is now better prepared and more comfortable with virtual meetings, especially for devices. The OCS Heart panel will be the first panel for approval in the Center for Devices and Radiological Health that was conducted virtually, and we are setting a precedent with that. There are a few more panels scheduled to follow ours. If we need a virtual panel for the Liver, I don’t think it will take the FDA much time to make a decision, as they have accepted virtual panels as part of their new way of operating.

Great. Thanks for those insights. Appreciate it.

Thanks, Josh.

And next question comes from the line of William Goldstein of Alpha. William, your line is now open.

Thank you for taking my call. I would like to ask if you could provide more details about your service offering. Can I assume that you will have teams that will go out to harvest the organs and then receive reimbursements from payers and from CMS?

I believe the service offering is a way for us to continue providing the same support for transplant programs that we do currently. The core of this offering revolves around the technology, and the associated costs remain unchanged. We're simply adding extra logistical support and management of the perfusion service to enhance the use of this technology in the field. The reimbursement process will be the same, with no differences. Overall, the service model will operate as previously described, with no changes to the billing or reimbursement mechanisms. Our role is to support the utilization of the technology.

So the transplant centers will send out their own team of surgeons or practitioners to harvest the organ, and you'll just continue to provide support. However, the company won't actually be integrating into the actual process of taking the organ.

We cannot do that. That's not the service model we are discussing. We are only supporting the management of the organ technology for an organ allocated to a transplant program in a standard allocation and transplant manner.

Okay, thank you. I understand it now.

And there are no further questions at this time. Presenters, you may continue.

We want to thank everybody for participating on the call, and we're looking forward to our next call.

Thank you so much for our presenters and to everyone who participated. This concludes today's conference call. You may now disconnect.