Good afternoon, and welcome to TransMedics Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Mr. Brian Johnston from Gilmartin Group for a few introductory comments. Please go ahead.

Thank you, operator. Earlier today, TransMedics released financial results for the quarter ended June 30, 2021. A copy of the press release is available on the company's website. Before we begin, I'd 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, gross margins, and operating expenses in 2021 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 quarterly report on Form 10-K filed with the Securities and Exchange Commission on May 7, 2021. 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, today, August 5, 2021. With that, I'll now turn the call over to Waleed Hassanein, President and Chief Executive Officer.

Thank you, Brian. Good afternoon, everyone, and welcome to TransMedics 2021 second quarter earnings call. Joining me today is Stephen Gordon, our Chief Financial Officer. As expected, 2021 is shaping up to be a transformative year for TransMedics. Building on our momentum from earlier in the year, we achieved another significant regulatory milestone in the second quarter of this year with a very strong panel vote in support of the OCS Liver indication. Given the panel outcome, we are now looking forward to FDA approvals of both OCS Heart and Liver indications in Q3 and early Q4, respectively. In addition to our success with our product pipeline, we also saw continued traction commercially. Net revenue for the second quarter was $8.2 million, representing 141% growth compared to 2Q 2020. It is important to note that this growth was achieved without any liver revenue contribution in 2Q due to completion of the OCS Liver CAP program. Now let me summarize our progress across our key strategic initiatives. First, the OCS Heart DBD PMA. Following our positive panel vote in April, we're now wrapping up labeling and post-approval program discussions with the review team. Given our current position, we are confident that we are proceeding towards approval of the DBD heart indication within the next several weeks. Second, the OCS Liver PMA. In July, we secured a nearly unanimous positive panel vote supporting the approval of the OCS Liver for both DBD and DCD indications. We're now actively engaged with the FDA review team to finalize the labeling and post-approval program. We are confident that we are proceeding towards approval of the OCS Liver indications before year-end. Our third initiative is the National OCS program. We're continuing to expand and added one new region in Tampa, Florida, bringing the total to seven initiated regions. We're on track to meet the targeted goal of 10 regions activation before year-end. We had several successful cases from several active regions in Q2 that truly underscore the potential transformative nature of this program. One example is we are able to manage, surgically procure, manage and transport a pair of donor lungs from the New England region all the way to the San Francisco region. This would have never been feasible if it wasn't for the OCS National Program. Meanwhile, we're continuing to build the necessary infrastructure and resources to ensure the long-term success of this program. We expect this to continue through early 2022 as we add new clinical indications after FDA approval of the OCS Heart and Liver. As we stated before, we believe that the National OCS Program will be an important driver for OCS utilization and revenue growth in the US, particularly as we continue to expand our comprehensive portfolio of OCS transplant indications. Fourth, we are continuing to advance the OCS Heart DCD indication. We completed the enrollment of an additional 90 DCD heart transplants in our CAP program in early Q2. We are on track for the top line results readout to be in Q3 of this year, and we are now coordinating the filing date of the new DCD PMA supplement with the FDA review team. We are optimistic that this will support FDA approval of this DCD Heart indication in early 2022. Finally, we received FDA clearance of our OCS Lung solution for cold preservation of donor lungs. This enables us to provide the most comprehensive product portfolio for lung transplantation in the United States. This gives us a significant competitive advantage to grow our lung business in the US. Now let me finish with a summary of our expectations and thoughts for the remainder of 2021. We're focused on achieving FDA approvals of both OCS Heart and Liver, and are confident that we will be ending 2021 with all three OCS products approved by the FDA. This will be a tremendous inflection point on our growth trajectory and will enable TransMedics to make a significant step forward on our mission to transform organ transplant therapy. While receiving this approval is of the utmost importance, our current timelines may limit our near-term ability to leverage CAP programs or continued access programs to drive revenues in Q3. Specifically, we're not initiating any CAP programs for liver or heart in Q3 given the imminent FDA decision and approval timing. As such, given the current FDA timelines, we will not issue financial guidance for 2021. Finally, from a macro perspective, I'd also like to comment that while the COVID Delta variant is gaining momentum in the US, transplant activities have generally remained unaffected and currently are at or slightly above what they were pre-COVID. We're cautiously monitoring the situation and hope that any potential negative impact of the Delta variant would be limited on organ transplantation. With that, I will turn the call to Stephen Gordon, our Chief Financial Officer, to review our detailed financial results for the quarter and the full year.

Thank you, Waleed. I will now provide some additional details on the Q2 results and other financial information in the quarter and the year. For the second quarter of 2021, gross revenue was $8.7 million and net revenue was $8.2 million. Net revenue increased by 141% from the second quarter of 2020. That was a quarter that was highly impacted by the early onset of the COVID pandemic. In the US, gross revenue was $6.3 million and net revenue was $5.8 million. US net revenue increased 136% from the second quarter of 2020. And I would note that this revenue performance did not include any revenue from our OCS Liver product as all clinical activity in that program has concluded while the FDA completes its overview. For further detail, the organ breakdown on US net revenue was $3.5 million of OCS Lung and $2.3 million of OCS Heart. And outside the US, revenue was $2.4 million in the second quarter of 2021. This is up 154% or $1.5 million from Q2 of 2020, and that included $2.3 million of OCS Heart and $0.1 million of OCS Lung. The key drivers of our Q2 revenue performance were first, strong OCS Lung sales in the US. As US lung transplants have recovered, we have seen increased use of the OCS through both direct acquisition and our National OCS Program. Second, US heart sales were also strong as we completed the OCS Heart-DCD CAP trial enrollment. And finally, we saw some international recovery with revenue this quarter back to levels similar to pre-COVID. Gross margin for the second quarter of 2021 was 68% compared to 56% for Q2 of 2020, which was during COVID, and it's equivalent to the 68% that we saw last quarter. Total operating expenses for the quarter were $15.5 million. This is up 58% from Q2 of 2020, which was unusually low due to COVID, and it is up 37% from last quarter. There were several drivers for our sequential expense growth in addition to our steady increase in commercial sales and National OCS program investment. First, stock compensation expense has grown significantly from about $1.1 million in Q1 of 2021 to $1.8 million this quarter. Secondly, expenses related to preparing for two FDA panels amounted to approximately $700,000 in the second quarter. Finally, we had a one-time R&D expense of about $500,000 related to solution development. Having said that, excluding the panel prep, the panel preparation and solution development charge, this higher level of spending is in line with previous communication, and we will continue to be close to this level or greater throughout 2021 as we continue to make investments necessary to support all three commercial programs in the US market. Operating loss was $9.9 million in the second quarter of 2021 compared to $7.9 million in the second quarter of 2020, and our net loss for the second quarter of 2021 was $10.7 million, compared to $8.5 million in the second quarter of 2020. Finally, cash, cash equivalents and marketable securities were $112.2 million as of June 30, 2021, which equates to a reduction of $5.9 million from the balance at the end of Q1 2020. Weighted average common shares outstanding for the quarter were $27.6 million. As Waleed commented, due to current timelines of the FDA, we are not stating guidance for 2021. Now I would like to turn the call back to Waleed for closing comments.

Thank you, Stephen. Before closing, I'd like to comment once again on how excited we are for the future of TransMedics. We're now closer than ever to having all three OCS products approved for commercial use in the US market. The expected approval of OCS Heart and the OCS Liver indication this year will fundamentally shift our growth trajectory for many years to come. These approvals will uniquely position TransMedics' broad product portfolio to drive significant transformation of three transplant markets simultaneously in the United States. This will be a huge advancement for our transplant users, surgeons, and patients. With that, I'll now turn the call to the operator for Q&A. Operator?

Your first question comes from the line of Cecilia Furlong of Morgan Stanley.

Great. Good afternoon. Thank you for taking the questions. Waleed, I wanted to start off just with the recent lung performance in the U.S. If you could just talk through, kind of, what you saw during Q2 as the quarter unfolded in terms of traction? And then just with the service model as well, really what you've been able to see on the ground leveraging that and driving awareness around lung and the platform overall?

Thank you, Cecilia. So the growth in the lung business in Q2 was really driven by both the direct acquisition and the national program. As we stated before, we expect the national program to be a stimulus and a driver, not only through more adoption of the national program lungs, but also for active lung centers as they become more aware of the capabilities of the OCS and the national lung program to drive adoption there. So that's really the combination of both, the national program, the awareness, the successful cases that are starting to accumulate, the addition of new OPO regions, and the awareness even within the OPO community starting to spread. Nothing drives adoption more than actually seeing the product being delivered in regions that would have never been delivered from far distance, and that created significant momentum for the lung program in Q2. Again, this is driven by both direct acquisition and the national program. As we move forward, we expect that momentum to continue, and we expect the national program to continue to increase, and that's very exciting for us to see that growth in our lung franchise.

Great. Thank you. And if I could just continue as well with the national program, you talked about building resources around that program for the back half of the year. But can you just walk through your planned investment, key areas of investment through the back half of this year and really what you've incorporated in your OpEx outlook that you walked through as well? Thank you.

Thank you, Cecilia. So the investments we're making are primarily in support teams in three major verticals; surgical capabilities for cardiothoracic procurement, surgeons' capabilities across the United States, and clinical support capabilities that are regionally specific to support each active region, as well as coordinators, clinical coordinators, and transplant coordinators that are monitoring, managing, screening every donor organ and communicating and quarterbacking the logistics for all the missions that are involved in the National OCS Program. That's at a high level, the three verticals that we're investing in.

Okay. Thank you.

Next question comes from the line of Josh Jennings of Cowen.

Hi. Good afternoon. Thanks for taking my questions. Waleed, I was hoping to just better understand the setup for the Heart and Liver indication launches in the U.S. If you could just help us think through why or why they wouldn't resemble the launch of the lung indication previously? And why that is either similar or different?

Thank you, Josh. We expect the Heart and Liver launches to be quite different from the Lung launch. When we introduced the Lung, there were no active lung centers in the U.S. with the OCS product for 14 to 16 months. In contrast, we currently have 20 and 25 centers that were actively using the heart and liver products in the CAP programs up to a few months ago. Additionally, the Lung's post-approval registry was complex and took several months to navigate through various IRBs. Our design for the Heart and Liver post-approval registries incorporates several changes to enable quicker deployment into clinics, while still capturing data efficiently without requiring a significant upfront time commitment. These are the primary differences we're focusing on. Furthermore, the new initiative with the National Program did not exist during the Lung launch. We’re starting with seven active regions and expect to have more by the time we approve the Heart and Liver, which will give us considerable leverage for strong launches of both while we continue to grow the Lung.

Great. Thanks for walking through both those indications for us. You mentioned the number of investigator sites that have been active in both Liver and Heart markets, OCS Heart, OCS Liver, prior to approval. Can you give us a sense of indications of interest or demand levels from investigator sites? And maybe more color on how low that hanging fruit actually is? Thanks for taking my questions.

Thank you, Josh. Actually, I'll give you an indication of sites that are not even in the user group. As I mentioned in the previous call, we have anywhere between 10 to 15 centers, additional centers, in the Heart and 10 to 15 additional centers in the Liver that are in the pipeline waiting to be initiated once the product is approved. In addition to the 25 heart centers that are active or were active with the DCD and the 20 liver centers that just finished the CAP. The interest is very high. I had liver surgeons and liver centers call us after the panel date to congratulate us and said, 'Can we start using the OCS again?' So again, we take this momentum with a high degree of responsibility. We are working with our centers to ensure they are as prepared as possible prior to the approval. Once the approval order is in hand, we can move quickly, but in an organized fashion to initiate them commercially and get the product and program back on track.

Great. Thanks for those answers.

Next question comes from the line of John Plovanic from Canaccord.

Yes, Bill Plovanic here. So, thanks for taking my questions. First question is, Stephen, I'm sorry, I kind of missed this, but can you remind us of the U.S. and OUS Lung number for the quarter, net?

The U.S. Lung number was $3.5 million, while the OUS was $100,000.

Okay. And as we think about Q3, obviously, without the DCD, the CAPs for Liver or Heart basically, we see nothing in the U.S. in Heart if we don't get the approval. And obviously, Liver is what it will be. Just confirming that, right?

That's correct, Bill.

Okay. And then on the Heart label, thank you for the granularity in terms of the FDA discussions. I think that's very helpful. As we sit there and think about label, is there anything in the discussions that's different from what we would have heard from the panel or the original submission for Heart?

Bill, as you know, we do not comment on our active discussions with the FDA, specifically around label. But I am optimistic that the label will meet our expectations. It will be data-driven, and it may not resemble some of the discussions we've heard on the panel date.

Great. And I know it's tough to answer those questions, especially as you're in those discussions. If I could switch over and ask two more questions on Lung and then, I'll jump off. One is, just what is the percent in the U.S.? I mean, that was a very strong Lung number. What's the U.S. kind of non-CAP business? And of the non-CAP, what's kind of the spread between OCS and non-OCS kind of business, if you're willing to share that? And then my last question is, can you help us understand the significance of the OCS Lung solution for cold preservation of lungs? Just help walk us through why that matters. Thanks for taking my questions.

Thank you, Bill. I'm not sure I fully understood your first question. Are you asking about the breakdown of the $3.5 million between capital equipment and disposables?

Yes. I'm sorry. Yes, the U.S. wouldn't be CAP, I apologize. So how much is U.S. Lung driven by OCS versus non-OCS?

All the $3.5 million are all OCS revenue. There's no non-OCS revenue in that number. The National Program is somewhere between 15% and 20%. The bulk is direct acquisition. We expect that to be the case in the next two quarters. I think we will start seeing the National Program kind of increasing in early 2022 and throughout 2022. But the presence of the National Program is creating a catalyst for the direct acquisition. As we ramp up our resources and add new regions, as we staff the new region, we're going to start seeing the National Program number growing. That's our expectations. As far as the second question around the OCS Lung solution for cold preservation, we look at that, Bill, as a significant competitive advantage. It's not that we are changing our business to cold preservation, but having that lever is a huge strategic and competitive advantage to enable us to fill in the gap between a center that is completely not using the OCS today. Until we turn a center into a fully integrated OCS Center, we can drive revenue from the sale of cold solutions. It also gives us a strategic competitive advantage in existing centers that are using OCS, leveraging that and increasing our OCS volume through having a unified call point for everything related to lung preservation. I think I'm addressing your question though, please correct me if I'm wrong.

That was perfect. Thank you.

Your next question comes from the line of Mike Ott of Oppenheimer.

Suraj, today. Many of our questions have already been addressed, but I have one more regarding the Liver PROTECT data that was presented at the panel last month. Could you provide more insights on the physician reactions to that Liver data?

It's extremely positive. I think the Liver data reaction, actually, we saw that, Mike, at the American Transplant Congress, where the Liver data won the most impactful presentation out of more than 25,000 abstracts and presentations. So that says it all. So extremely positive. As I said, some of the congratulatory calls we got the next day after the panel, people thought that they could start using the OCS again. Obviously, that's not the case, but it just shows the momentum and excitement. Now we're excited about where we are to drive that into an approval and move on throughout the end of this year and into 2022 with three approved products: Heart, Lung, and Liver.

Excellent. That's great to hear. Realize while you're limited in what you can say with the ongoing FDA discussions on labeling, but can you just say if they're kind of tracking to your expectations so far?

I want to be very cautious and respectful of our relationship and collaboration with the FDA, so I prefer not to comment on that. However, I am optimistic and confident that it will be data-driven and supportive of the results achieved in both trials. That's all I can say.

Okay. That’s perfect. Thanks so much.

I don't see any questions at this time. I will turn it over back to Waleed for any closing remarks.

Thank you so much, operator. Again, thank you very much for joining us in this call, and we're looking forward to our next quarter earnings report. Thank you, and have a wonderful afternoon.

This concludes today's conference call. Thank you for participating. You may now disconnect.