Transmedics Investor & Analyst Day
Transorming Standards of Care.
I went through the entire TransMedics Investor Day yesterday to build up on my (already strong) convictions for this company. And I honestly wasn’t disappointed.
Just before we start, we gotta give some praise to Waleed, the company’s CEO for his passion, engagement & confidence. Rarely seen someone that excited & intense in a presentation, made him look like A. Karp sometimes - for its good part.
Here is the presentation, which contains tons of data which I won’t share here because it would make this write-up too long, feel free to go through it and verify sources & data yourself if you wish.
https://investors.transmedics.com/presentations/
Anyway, here’s a recap of the important things.
Where Tranmedics is.
The presentation started by a recap of the company’s business, what they offer & why their products & services are valuable. I already talked about most of what was said in the investment case here so I will skip the basics.
As a very rapid summary, their first products are called Organ Care Systems, portable devices where harvested organs can be stored in a functioning state before transplant.
One of the thing which sets the OCS apart is that it allows Donations after Circulatory Death, as circulation will be artificially maintained, while most transplants systems usually need brain death, meaning a dead body still functionning.
As you know or can imagine, DBD is a very specific state while DCD is much more common, being able to harvest those organs would largely increase the transplant pools worldwide, and that is one thing TransMedics focuses on.
Besides the harvest itself, the OCS also allows a longer transplant timeframe as the organs are conserved in a functioning state, which results in safer & often better transplant conditions - more on this later.
Globally, according to management & their published studies, the outcome of transplants using TransMedics are better than other standards, resulting in less waste of organs, better outcomes, efficiency and cost savings.
Their second product is an end-to-end transplant service, including harvesting, transportation & transplant which is called the National OCS Program. You’ll find their latest video explaining how it works here.
https://x.com/EventuallyWLTHY/status/1866512383780295017
The best 6 min you can spend to understand TransMedics & how valuable the company is.
Where Transmedics is going in 2025.
The company released its multi-year plan and provided some detail about the most important components, with the goal to reach 10,000 transplants by 2028.
The Gear 1 is the growth stage which TransMedics judged to be completed. Gear 2 is already in place for some components we will discuss, and Gear 3 is the long-term view, up to 2029.
Lungs Transplant.
Lungs are the smallest portion of transplants realized by TransMedics for different reasons, the main one being a lack of trust in the OCS from practitioners, who would rather use old & known methods until being proven that OCS is better.
One of the problems with lung transplants is a condition called edema, which is the accumulation of liquid in the alveoli, the part of the lungs responsible for transferring oxygen to the blood. This situation is very known & practicioners are used to it with cold storage, hence their refusal to change methods.
That is why the company is focused on two things right now: Firstly, improving its OCS to reduce the risks to a minimum - already done according to their studies. Secondly, to engage in many clinical studies & written articles to prove that the OCS is a much better solution than cold storage for lung transplants - this is underway and first publications & more clinical tests should come duing the next semester.
This will, of course, take time but the lungs sector is now a priority for the team and holds huge potential for long-term growth.
Heart Transplant.
The same applies for heart transplants with different constraints, the main one being the necessity to realize them around 4h to 6h after harvesting. The OCS allows better conservation and a longer period before transplant, but TransMedics is adapting its new lung technology to hearts as well, to extend even more the duration between harvest & transplant.
As for lungs, the hardware is already being tested and first data is very promising, with more clinical studies/publications underway and expected next semester.
Day Time Transplants.
This is the long-term goal of TransMedics, to allow constant day-time transplants through its OCS, which will result in better outcomes & cost savings.
At the moment, transplants are done in emergency as time is a constant pressure. The harvest, transportation & transplant have to be done as soon as possible to have the highest chances of success. The longer organs are preserved in cold storage, the more damaged they are, and the less likely it is that the transplant is successful or that the patient has no post-transplant issues.
Besides organ preservation, it also means there is a 24/7/365 need for surgeons, transports & infrastructure in case organs are available, which often results in much higher costs - due to lower availabilities, and less competent professionals at some ungodly hours.
TransMedics aims to change that with its OCS, which conserves the organs in perfect state up to 24h after harvest. This is already the case with liver transplants, the biggest part of their business - because trusted by practitioners.
It allows transportation & surgery teams to be more organized, with a calmer transplant schedule as organs are warmly waiting in the OCS until competent teams start their shifts at 9AM or whenever. This results in better & less costly procedures, better outcomes for the patient & fewer organs wasted.
As said, it already is the case for livers and should be the case for hearts & lungs during 2025, once practitioners trust the OCS enough.
Where Transmedics is Going Afterward.
Everything shared up to here was meant to happen in 2025 according to management. Now we think about after 2025.
Here is the timeline shared by management.
Kidney OCS.
Development is starting this year, it will take time between the tests, the production, FDA approvals, clinical studies & publications, commercialization etc… But the process is already started and the team expect it to be commercialized by 2029.
Next Gen OCS.
This isn’t an amelioration for a specific organ, but a renewal of the OCS case to make it automated & connected, to optimize the conservation of the organ & reduce human errors and share valuable & live information with the involved parties.
Outside of U.S. NOP.
This speaks for itself, but we shouldn’t have to wait until 2029 to have more news as the team is already working with some European countries to implement a NOP there. It’s a wait & see situation, but this will certainly happen if the company continues to prove that their products are valuable for the global healthcare system.
And the potential market is really big.
Investor PoV.
Besides the company’s fundamentals, we’re here to talk about investments. This presentation brought three important points.
First, we do not talk about it, but TransMedics is also a manufacturer, as they produce themselves the OCS & the perfusion sets. They talked about future optimizations in their factories, mostly through better automation which would reduce costs & human error, hence increase production output.
Second, the new CFO shared its FY-25 guidance at the end of the presentation, which won’t please the market as he talked about a 20% to 25% YoY growth compared to FY-24 midpoint guidance, which would bring the company to a minimum of $490M in revenue by FY-25.
Third, the old CFO considered it “conservative” - with his own words, to grow around 30% CAGR until FY-28, assuming a growing usage of DCD organs, growing confidence in their lungs & hearts OCS and more day-time transplant - which are all things only permitted by the OCS, plus international expansion.
As usual with growth stocks, it is impossible to do an estimation, but if we were just to take those numbers, here’s what would be the forward ratios of the company.
Paying a 5x F.P/S for such a company, proposing unique services in one of the most crucial sectors, doesn’t seem crazy at all, as long as they are able to prove their value to practitioners around the world.
That is all I had to share today!