Conference Transcript - TMDX 2026-06-02

Ryan Daniels, Analyst — William Blair

Thank you all for coming to the Transmedics presentation. For those of you whom I've not yet met, my name is Ryan Daniels. I'm the group head of the Healthcare Equity Research Team, so very happy to welcome you all to today's presentation in the Growth Stock Conference. A couple quick housekeeping items before my intro. Number one, we will be up in Adler for the Q&A session immediately following this. I'm also required to let everyone know that our disclosures are available at our website at williamblair.com. So with that out of the way, very happy to have transmedics here for the second year A great organization for those of you who were in the audience last year. You may remember I have a bit of a personal story behind this as my dad had liver cancer. Started doing research and found transmedics and quickly realized that that would be the only organ care system that I would let his organ be put on if he was going to go through a transplantation. So started to dig deeper into the model and really came to appreciate the competitive advantages the network effects the strength of the management team and so really excited to have them here today. Waleed Hassanine who is the founder of the company and president CEO is going to present and then the rest of the team will be there for the breakout. It's also a very catalyst rich year for the organization so really good timing to be here to get an update on the story. They're working on next-gen systems are working on the first ever kidney OCS system they're moving internationally they're doing clinical trials so really an amazing growth story and a lot of key catalysts on the horizon here to continue to drive that growth and propel them towards their organ targets, which I'm sure Dr. Hassanine will talk about in a little more detail. So with that, Waleed, I'll ask you to come up and go through the presentation. And again, then we'll go to Adler for the Q&A session. Thanks.

Waleed Hassanein, CEO

Waleed S. I appreciate it.

Ryan Daniels, Analyst — William Blair

Let me make sure I can see my slide.

Waleed Hassanein, CEO

Good afternoon everyone. Thank you so much for being here with us today. Ryan, we're grateful for the opportunity to be here in Chicago beautiful city of Chicago this is our disclosure slide to remind you transmedics is in this very unique very exciting very inspiring field of organ transplantation it's a niche market that we happen and privileged to be the one created the area of that market for organ preservation very important background in organ transplant. Organ transplant is the gold standard of treating a very expensive and very chronic end-of-life condition called end-stage organ failure. It's the gold standard because it does two very important things. One, it is life-saving for the patient. It has the longest life expectancy, best quality of life, and it's the most cost-effective treatment for payers, specifically CMS and commercial payers, to treat these very expensive end-stage organ failure conditions. So what are the problems in organ transplant that Transmedix has overcome? The fundamental problem in organ transplantation has always been the ability of the market to do more transplants and utilize more donors and when we looked into this area we found that for 45 years for organ transplant preservation it was limited to cold static storage what we call cold ischemic storage ischemia mean damage that occurs to the organ so what are the problem with cold static storage in organ transplantation and how transmedics revolutionized that entire field first when you take an organ out from from a a body and putting it on cold environment and not being oxygenated and not being perfused you subject the organ to a decay curve called ischemic injury the longer the organ stays on ice the higher the probability of this organ never functioning again or the higher the probability of complications after organ transplant that immediately puts a time and distance limitation of how far can you go to salvage organs from donors across the United States number two when you when you stop an organ from functioning you stop the heart from beating stop the line from breathing the liver from making bile the kidney making urine you have no way of assessing organ viability while you were trying to transplant these organs and make somebody else's life dependent on these organs so you immediately go into this very narrow utilization window where if you are a clinician in organ transplant center you if you have any doubt about the organ knowing that the organ is going to be injured when you put it in cold storage and you have no way of evaluating its functionality you you you would immediately say no even if the organ could be good but you just because you know these two hits you immediately turn down this organ for transplantation further complicating the utilization rate and organ transplant and finally because you have no way of improving enhancing the organ viability outside of the human body you end up with a very very ugly picture in utilization but before we get to utilization this is a very important slide you hear a lot about all these competitors that are trying to compete with transmedics in the space of organ preservation. If any of them is cold, static, or profusion but ischemic, this is a very relevant graph to tell you that they add zero value to organ transplant. This is a graph that is well known to anybody in the field of organ transplantation. The longer the organ spends on cold, static, ischemic storage, the higher the probability that the recipient could actually end up dying. It also adds significant complications that could add significant dollars post-transplant called primary graft dysfunction, primary non-function, or delayed graft function, all of which are directly related to the time the organ spends in these very unnatural, non-physiologic condition of cold storage. But more importantly, this is the ugly picture that we lived with in the United States for the last 45 years. We're only utilizing a fraction of the available precious donor pool for us on an annualized basis. We're utilizing 20 percent of the lung, 27 percent of the heart, 60 percent kidney and liver, leaving the vast majority of the donor pool in the United States completely untapped. Transmedics changed all this. How did we change it? First, we focused on eliminating or minimizing ischemia during preservation. For us to be able to do that we had to develop from scratch a system that mimics human physiology in a medical technology in a device environment and it had to be portable because we wanted the organ to be protected in this physiologic environment in our system from the minute it's removed from the donor body until it is transplanted. Two, we allowed the organ to remain active, the heart is beating, the lung is breathing, the liver is producing bile, the kidney is making urine. We did this not just to evaluate the function but to also give us the opportunity to enhance, improve organ viability, give it medication, antibiotic, pharmacological functional metabolic enhancers. So not only preserve but improve organ viability, chances for the organ to be viable for transplant. In addition, we provide online diagnostics and hemodynamic monitoring of the organ, so we eliminate this guessing game that used to go with cold storage, with cold static storage, where the surgeons and physicians are no longer guessing whether this is an organ that should be transplanted or not. They could evaluate it up to the minute the organ is ready to be transplanted this is our platform the three organs on the right side of the screen lung heart liver these are fully FDA approved and there were commercial across the United States and Europe our new kid in the block is the kidney system which we're extremely excited about it represents the cutting edge of our gen 3 technology which we'll discuss later. I can't underscore how excited we are about the upcoming kidney platform, which will give us significant access to the largest portion of the transplant market in the U.S. and around the world. It's not FDA approved yet. It's actually our next generation technology that we are launching into the clinic early next year. We didn't stop here. we didn't just develop the first physiologic portable platform for organ transplantation. We took it a step further. We developed the first of its kind national-based service organization dedicated 24-7 to procurement, management, and transportation of organs in the United States. We did this because we could see a significant impact on improving the utilization rate, increasing the supply of organs which we had to invest in creating that national network not only to create a bigger deeper wider moat around technology as a business but to increase the overall transplant market I remember when we were going public in 2019 the biggest questions we used to say we used to get is is transmedics cannibalizing the current market or you truly have an impact on growing the market we've proven that we can do the latter and this is one of the key unique attributes that enabled us to do that at a fast double digit number today we operate out of 19 hubs across the united states strategically located to allow us to be at the donor hospital procuring an organ using our surgeons with our clinical staff with our technology within two hours from notification that gives us maximum flexibility we didn't stop here we added a vertical integration of our logistics network when i stated this in 2020 early 2023 i said we have to be involved in logistics people didn't understand how important this is today 82 percent of our nop volume is done on our own fleet we run one of the most efficient aircrafts in the planet phenom 300e 110 dedicated to organ transplant mission there's no high net worth individual flying in our jets it's 100 dedicated to transplants we did this because in 2023 we were losing 25 to 30 percent of our potential volume of cases that are coming to our NLP hotline because we could not find a third-party aircraft to transport these organs more importantly we saw a national problem that CMS and HRSA have been focusing on which is fair and equitable access across the United States for patients in the south for patients in the midwest where they're not getting transplanted the same rate as if you are in the east coast or the northeast or or the west coast of the united states with a transmetics logistics uh transplant logistics network we're able to guarantee that every organ that we in our in our care will reach to the target recipient no matter where that recipient is across the united states today we operate 22 dedicated aircraft 140 pilots and as I said covering 82 to 83 percent of the national volume of NOP volume in our service. To make all that work in unison we had to develop a proprietary digital ecosystem that gives maximum transparency and control and allow us to scale. When we started the NOP the first year of NOP we did 900 transplant last year we did nearly 30% of the United States total transplant volume for heart lung and liver we're talking about nearly 9,000 missions last year for that to happen to be able to scale we had to create a digital ecosystem that one gives us ability to scale but more importantly transparency to the clinical stakeholders transplant programs coordinators organ procurement organization that goes all the way from establishing a command center that runs all of our NOP logistics NOP the dispatch but also communication with the transplant program we're very very excited about this and it's it's one of our unique attributes that giving the users full control and full visibility to what we're doing so let me talk to you about um where does that all mean and and and what the future looks like for transmedics this is to show you transmedics and nop were responsible for 26 percent of the united states transplant volume last year for that to happen we did about 30 percent of the mission for the entire country running through our network but we're not stopping here we have publicly stated that we are and this amounted to about 5,200 transplants roughly speaking. We publicly stated that our goal is to do 10,000 U.S. transplant by 2028 and we are standing by that goal. We also upped that and we said by 2030 we envision doing 20,000 U.S. transplant in the NOP network when we add the kidney to that and by 2032 we're committing to approximately 30,000 global transplants to be done on our NOP network but let me show you another impact remember that question that I told you we used to be asked during the IPO timeframe can transmedics really impact the national volume or it's nothing but cannibalizing the existing market here's the data to prove to you that transmedics not only can but transmedics was solely responsible for growing the national transplant volume in the United States. This is the national transplant volume with OCS NOP volume reaching 25% growth over the last three years. The same national transplant volume without the OCS NOP cases would have declined by nearly 1%. That's a proof of what the impact of the network of NOP and OCS and transmedics is doing on the national transplant volume this is why we are actively engaged with HRSA with CMS with major organ procurement organizations around the country with major transplant institution around the country to talk about what's next what's coming how can transmedics do more to expand the utilization of donor organs across the United States when we talk about utilization you cannot ignore this slide the OCS our technology and the NOP has the highest reported utilization rate of donated organs on planet earth period full stop no other technology service combination thereof come even close to that the highest we've heard from some of the competing platforms out there is 50 to 55 percent there's significant advantage to utilizing more organs there's significant advantage to saving more lives and and and saving health care dollars in the US and around the globe that's the magnitude of what transmedics can do but we're not stopping here this is our growth strategy over the next three years the next 2026 and 2027 is an investment our investment heavy years to really tee up the growth for this business as we see it you know it 26 and early 27 it's all about our gen 2 technology for heart and lung to generate more adoption in heart transplants in the United States, moving away from just preservation into enhancing cardiac function outside of the human body, moving into daytime scheduled heart and lung procedures, and revving up the lung market that has been a sleeping giant for us. Into 27, we introduced the Kidney Platform. As I stated, Kidney Platform is one of the most exciting new product introduction transmedics has ever been involved with. It gives us an overnight access to nearly 25,000 deceased kidney transplants in the United States and another 25,000 to 30,000 deceased kidney transplants in Europe. But more importantly, in the U.S. last year alone, 9,000 kidneys were wasted because of ischemic time. We can change all that. This is why CMS has been extremely supportive of Transmedix mission and supportive of our technology. We are going to get the next-gen heart and lung approved sometime in 27. We're expanding internationally. We're expanding internationally because the global transplant market is 55% US, 40% Europe and 15% rest of the world. Europe is a very important long-term growth opportunity for transmedics and as we sit here the success of US NOP is generating significant momentum in Europe to the point that they're coming to us asking us to replicate the NOP models in Europe and we believe that this is a very important long-term growth strategies now let me leave you with one of the most exciting things that we're working on that we're investing heavily in. Today, for the NOP to work, we have to have technology, we have to have surgeons, we have to have clinical specialists, especially the army of dedicated, highly dedicated, world-class clinical specialists we have in transmedics. They live and babysit every organ from the minute the organ leaves the human body until it arrives to the recipient and they could even stay with the organ overnight until the surgeon is ready to transplant that organ. This is, you know, highly appreciated mission and commitment by our team and we couldn't stand here without the commitment of our team. But we need to think efficiently of how to scale that to go to 10,000 to 20,000 to 30,000 transplant from 5200 transplant i cannot hire enough and train enough human beings to to take care of these organs so what are we doing about it we are building the first class three fda life-sustaining medical technology that is remotely monitored and controlled using cloud-based computing run from a command center from our headquarters in Boston, Massachusetts. OCS Gen3 is not only going to give us significant operating scalability leverage, but it's also designed from the ground up to give us significant operating leverage by lower part count, automated assembly lower bomb and you know I can't tell you how how important that platform is for our long-term aspiration by 2029 we'll have the kidney approved in the United States and then you know that that's going to be a huge catalyst for our growth both in the US and internationally so we have a robust growth runway in front of us we've already generated profitability last year as we sit here today our focus on capitalizing on these growth initiatives investing heavily in getting to these major major catalyst to our growth we people may think that we've arrived and we're now focusing on just EPS EPS will focus on when when it's the appropriate time our top focus is generating the growth to get from 605 million to two and a half to three billion dollar top line over the next four to five years that's our focus doing that in an efficient and operating leverage discipline so to that point let me just share with you how excited we are about the near-term catalyst which is ongoing today, increasing our adoption in heart and lung transplants through the enhanced heart and de novo lung. What is the vision for these two programs? The vision for these two programs is to increase our footprint in cardiothoracic transplantation and replicate the success that we have in liver by shifting the narrative from preservation into enhancement, by shifting an immersion procedure that has to happen in the middle of the night that cost the system significant amount of dollars into a more scheduled or semi-scheduled procedure and demonstrating superiority over any ischemic preservation method whether cold perfusion or cold storage that's that that's the vision of these two programs to that end some of the competition panicked when we launched enhanced and de novo and they said there's no way you can compare our cold static a device to transmedics we don't feel comfortable comparing ourselves to them and we said no problem we developed the chops that controlled hypothermic organ preservation system what does the chops do the chops provide a well-controlled temperature for cold ischemic storage so you said well you just talked to us about this is not good for the organ I I agree, it is not good for the organ. But there is a segment of the market right here in blue that transmedics doesn't have indication for today. Any heart transplant coming from a DBD donor that's preserved less than four hours, we are not operating in that market segment. We're operating in the DCD market segment and the DBD greater than four hours. So why leave that portion of the pie completely untackled? especially when we give them a chance to compare to our if they're really believing in it compare themselves to our to to ocs so this is why chops was developed so it gives us two two shots a goal to tackle that new market segment that as of 2025 we had zero revenue coming from that market segment some people said well lead you're cannibalizing your existing market the complete opposite is true I am adding a new market segment and heart transplant that I have not been able to tackle for the last three years intentionally meaning we staged this so we're very very excited about what's coming on chops again I say all this with you know standing on our track record this is our financial performance both from a top-line revenue growth over the last three or four years you know profitability and operating margin and operational margin trend and we're standing here with a stated guidance of another 20 to 25 year a 20 to 25 percent growth expectation for 2026. so you say well if you're that confident why the heck is your stock is in the 60s i tell you it's a buying opportunity i bought three million dollars worth of our stock last year. I wish I could do more. The bottom line is here, guys, we're not letting the stock being in the mid-60s distract us. We know that if we execute on that growth strategy, the stock will take care of itself. Our focus is to continue to deliver, to continue to execute, to continue to put points on the board while being financially disciplined, and we need to do a better job articulating why it is important for us to continue to invest in the business because we're not done yet the growth is still ahead of us to go from six hundred and five million to two and a half to three billion that's a real opportunity and we are not gonna let it slip through our fingers so to summarize we believe Transmedix is a one-of-a-kind growth opportunity it built on fundamentally game-changing technology surrounded by a state-of-the-art creative service platform called the NOP the vertical integration of logistics very robust pipeline of innovations that could scale this opportunity in a very cost-effective way the clinical outcomes are the are the best in the industry we set the bar by others that should be measured with we are committed to continuing to set the bar based on level one evidence we're not the ones who are getting 510k approval without clinical we're the ones who are doing the largest size largest volume clinical trial for a reason it's not like we like to interact with FDA we love the FDA and we work with them very closely but it's about building a higher level of evidence to give us the maximum runway in that market space that we created from whole cloth and we're every member of our team is is focused on one thing and one thing only what's best for the transplant patient if we keep reminding our team if we keep the patient dead center on our screen we'll never make a bad decision operationally and we we let our track record speak for itself. Again I'm grateful for the opportunity to to be here Ryan and I appreciate you all taking the time to be here today.