Q2 2021 Transmedics Group Inc Earnings Call
[music].
Good afternoon, and welcome to <unk> medical second quarter, 'twenty, 'twenty, 1 and 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.
I think question. During this session you will need to press star 1 on your telephone 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 the.
Zero margin group for a few introductory comments. Please go ahead.
Thank you operator earlier today trends and the next released financial results for the quarter ended June 32021, 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.
Format of 995.
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 with the potential commercial opportunity for our products and our future financial expectations, which include expectations for growth and our organization and regulatory approvals and.
<unk> and guidance and our expectations for revenue and gross margins and operating expenses and 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-Q filed with the Securities and Exchange Commission on May 7.2021 and.
<unk> disclaims any intention or obligation and 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 5.2031 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 transmit it to 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 transplant.
Building on our momentum from earlier in the year, we achieved another significant regulatory milestone and the second quarter of this year with a very strong panel vote and support of the Ocs liver indications.
Given the panel outcome. We are now looking forward to FDA approvals of both Ocs heart and liver indications and Q3 and and early Q4, respectively.
In addition to our success with our product pipeline.
We also saw continued traction and commercially.
Net revenue for the second quarter was $8.2 million, representing 141% growth compared to <unk> 2020.
It is important to note that this growth was achieved without any liver revenue contribution in <unk> due to completion of the ots glib our cap program.
Now, let me summarize our progress across our key strategic initiatives.
First the Ocs heart DVD PMA.
Following our positive panel vote and 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 the DVD heart indication within the next several weeks.
Second the Ocs liver PMA.
In July we secured and nearly unanimous positive panel vote supporting the approval of the Ocs liver for both DVD and DCD indications.
We're now actively engaged with FDA review team to finalize the labeling and post approval program.
We are confident that we are proceeding towards approval of the ocs liver indication.
Before year end.
Our third initiative is the National Lcs program.
We're continuing to expand and and added 1 new region, and Tampa, Florida, bringing the total to 7 initiated regions.
We're on track to meet the targeted goal of 10 reasons.
Activation before year end.
We had several successful cases from several active regions and Q2 that truly underscores the potential transformative nature of this program.
1 example is we were able to manage surgically procure manage and transport payer of donor lungs from the new England region, all the way to San Francisco region.
This would have never been feasible if it wasn't for the Ots National program.
Meanwhile, we're continuing to build the necessary infrastructure and resources to ensure that the long term success to ensure the long term success of this program.
We expect this to continue through through early 2022, and as we add new clinical indications after FDA approval of the Ocs heart and liver.
As we stated before we believe that the National Lcs program would be an important driver for ots utilization and revenue growth and the U S.
Particularly as we continue to expand our comprehensive portfolio of ots transplant indications.
Fourth we are continuing to advance the Ocs heart DCD indication.
We completed the enrollment of an additional 90, DCD heart transplant and our cap program and 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 the DCD heart indication and 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 and the United States.
And this gives us a significant competitive advantage to grow our lung business and the U S.
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 3 ocs products.
Ocs products approved by FDA.
This will be a tremendous inflection point on.
Our growth trajectory and will enable transmit X to make a significant step forward on our mission to transform organ transplant therapy.
While receiving this approval is of utmost importance our current timeline they limit our near term ability to leverage cap cap programs. Our continued access programs to drive revenues in Q3.
Specifically, we're not initiating any cap programs for liver or heart and Q3, given the imminent FDA decision and approval timing.
And as such given the current FDA timelines, we will not issue financial guidance for 2021.
And finally from a macro perspective I'd also like to comment that while Covid Delta variant is gaining momentum and the U S. Transplant activities have generally remained unaffected and currently.
R.
Are at or slightly above what they were pre COVID-19.
We are cautiously monitoring the situation and hope that any potential negative impact of the delta Varian, but will be limited on the 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 Walid.
I'll now provide some additional details on our Q2 results.
And other financial information and 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-19 the COVID-19 pandemic and.
U S. Gross revenue was $6.3 million and net revenue was $5.8 million.
U S. 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 is also on the clinical activity and that program was completed while the FDA completes overview.
For further detail the Oregon breakdown on U S. Net revenue was $3.5 million of Ocs loans, and $2.3 million of Ocs heart.
And then outside the U S revenue was $2.4 million and the second quarter of 2021.
This was up 154% or $1.5 million from Q2 and 2020.
And that included $2.3 million of Ocs heart and $1 million, mostly as loans.
The key drivers of our Q2 revenue performance were first strong ocs lung sales and the U S of U S. Lung transplants have recovered and have seen increased use of the ocs through both direct acquisition and our National Lcs program.
Second U S heart sales were also strong as we completed the Ocs Heart DCD Cup trial enrollment.
And finally, we saw some international recovery with revenue this quarter book 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-19 and that's it.
Equivalent of <unk> 68 per cent that we saw last quarter.
Total operating expenses for the quarter were $15.5 million.
This was up 58% from Q2, 2020, which was unusually low due to COVID-19 and it is up 37% from last quarter.
And there were several drivers for our sequential expense growth and addition to a steady increase and commercial sales and national Ocs program investment.
Stock compensation expenses growth significantly from about $1.1 million and Q1 of 2021 to $1.8 million this quarter.
<unk> expenses related to preparing for 2 FDA panels and also to approximately $700000 from the second quarter.
And finally, we had a onetime R&D expense of about $500000 related to solution development.
Having said, but excluding the panel prep or the <unk>.
And our preparation and solution development charge. This higher level of spending is in line with previous communications and we will continue to be close to this level or greater throughout 'twenty 'twenty..1 as we continue to make investments necessary to support all 3 commercial programs and the U S market.
Operating loss was $9.9 million and the second quarter flow 'twenty, 1 compared to $7.9 million and the second quarter of 2020, and our net loss for the second quarter of 2021 was $10.7 million compared to $8.5 million and the second quarter of 2020.
Finally cash cash equivalents in marketable securities were $112.2 million as of June 32021, which equates to a reduction of $5.9 million from the balance at the end of Q1 and 2020.
And weighted average common shares outstanding for the quarter were $27.6 million.
And is it really covenant.
Good.
Current silos, the FDA, whether or not and savings guidance for 2020.1.
So I would like to turn the call back to Waleed for closing from us.
Thank you Steven.
Before closing I'd like to comment once again and how excited we are for the future of transplants.
We're now closer than ever to having all 3 ocs products approved for commercial use and the U S market.
The expected approval of the Ocs heart and Ocs liver indications this year will fundamentally shift our growth trajectory for many years to come.
These approvals will uniquely position <unk> broad product portfolio to drive significant transformation of 3 transplant markets simultaneously and the United States.
This will be a huge advancements to our transplant users surgeons and patients with that I'll now turn the call to the operator for Q&A operator.
As a reminder to ask a question you will need to press star 1 on your telephone.
And we draw your question press the pound key.
Your first question comes from the line of Cecilia furlong of Morgan Stanley.
Hey, good afternoon, and thank you for taking my questions Rohit I wanted to start off just with the recent loan performance.
If you could just talk to kind of what you saw during Q2 as the quarter unfolded in terms of traction and then just simple service model as well and really what.
<unk> been able to see on the ground leveraging that and driving awareness around lung and.
And the platform overall.
Thank you Cecilia.
So the growth and 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.
And as stimulus and a driver not only through more adoption of the national program.
Loans, but also for active lung centers as they become more aware of the capabilities of the Ots and day national.
Lung program to drive adoption there so that's really that combination of both.
The National program that awareness. The successful cases that are starting to accumulate. The addition of Hugh.
Opioid regions.
And the awareness, even within the opioid community starting to spread and.
Nothing nothing drive adoption more than actually seeing the product being delivered and.
And in regions that would have never been delivered to from.
From far distance.
And that created significant momentum for the lung program and.
In Q2 again this is driven by both at the direct acquisition and the National program as we move forward, we expect that momentum to continue and we expect that the national program too.
Continued to increase and that's that's very exciting for us to see.
And that growth and our lung and.
And our lung franchise.
Thank you and if I could just continue with the National program and you talked about building resources.
Around that program to the back half from here, but can you just walk to and Youre planning and investment key areas of investment to back half of this year and really what you incorporated and your Opex outlook that you walked group. Thank you.
And.
Thank you Cecilia so the investments, we're making is primarily.
And in support teams.
And 3 and 3 major verticals.
Surgical capabilities for cardio thoracic procurement surgeon capabilities.
Across the United States and clinical support capabilities that are regionally specific to support that each active region as well as <unk>.
Coordinators clinical coordinators transplant coordinators that are monitoring managing.
Screening every day on our Oregon, and communicating and quarter backing the logistics for all the missions that are involved in the Oregon.
<unk> Ocs program.
At a high level debt fee verticals that we're investing in.
Thank you.
Next question comes from the line of Josh Jennings of Cowen.
Hi, good afternoon, and thanks for taking the questions.
I was hoping to just.
Better understand the setup for the <unk> and <unk>.
<unk> indication launches and 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.
And why it is set up is either similar or different.
Sure. Thank you Josh.
We expect it to 2.
And we hope and we expect not to make it resemble the lung launch and any way shape or form and.
And you'd be clear why do I say that.
And when we launched along we didn't have a single active lung center and the United States with the Ocs products for at least 14% to 16 months.
And the case of the heart and liver, we have $20 and 25 centers that literally up to few months ago, we're actively using the heart and deliver products and the cap programs for BCD and they cap programs will deliver and protect.
So thats number 1 number 2.
And then lung post approval registry was was a very complex design that we understood. The recent rationale for it and it took several months if you remember Josh to get through different IRB and local IRB at the centers and the like our design of the post approval.
Registries for both heart and liver and.
And <unk> incorporated.
Numerous changes to facilitate.
Rapid deployment of the product into the clinic.
While capturing the data in a streamlined fashion that doesn't require significant upfront time commitment.
Get the registry setup.
These are the 2 major differences that we are.
Focusing on and then to add on top of that.
A whole new initiatives and international program that is completely new.
And that didn't exist and the lung.
And to start with <unk>.
7 active regions, probably by the time to heart and delivers approved.
You would have more active regions that gives us significant leverage.
Towards ending the year on a very strong position on the launches.
Both heart and.
And while we continue to grow the loan.
Great. Thanks.
And through brokers and vacations for for Us and.
And you mentioned the number of investigator sites.
And active and both liver and heart and then Youre not.
And all of the 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.
And any more color on on how low that hanging fruit actually is great. Thanks for taking my questions.
Thank you Josh.
Actually I'll give you an indication of sites that are not even and that.
And the user group.
As I mentioned and the previous call we have anywhere between.
10 to 15 centers additional centers and the heart and 10 to 15 additional centers and deliver that earn net pipeline waiting to be initiated once that product is approved.
And over and above that 25 heart centers that are active or was active with the DCD and the 2020 liver centers debt.
Debt just finished the debt.
Cap.
On the interest is very high.
I had never surgeons and liver centers call us after the panel date to congratulate us and and said can we can we start using the ocs again, so and again.
Again, and we take this.
Momentum with high degree of responsibility and and we are working with our centers to make them as prepared as we can prior to the approval. So once that approval orders in hand, we can move.
Quickly, but in an organized fashion and a.
Smoothed fashion to initiate them commercially and get get the product and get the program back on track.
Great. Thanks for those answers.
Next question comes from the line of John <unk> from Canaccord.
Yes helpful. Dominic here so.
Thanks for taking my questions. The first question.
And I'm, sorry, and kind of Miss.
But can you remind us the U S and O U S loan number for the quarter net.
The U S lung number was $3.5 billion.
<unk> was just 1 on 100000 and our U S.
Okay, and as we think about kind of Q3, obviously without the DPP COVID-19.
And for liver or hired basically we've seen nothing and the us and and hard if we don't get the approval and obviously liver is what it'll be.
And just confirming that rate.
That's correct Bill.
Okay, and then on the hard label.
Thank you for the granularity in terms of the FDA discussions I think thats very helpful.
And we sit there and think about label because that would be the net and a data point is there anything and the discussions that different from what we would have heard from the panel or the original.
Submission for Hart.
Bill as you know, we do not comment on our active discussions with FDA specific tier on label, but I am.
Optimistic that the label will will meet.
We'll be reasonable or meet our expectation and it will be data driven.
And it may not resemble and some of the discussions we have heard on the on the.
Panel date.
Great and I know that it's tough to answer those questions, especially as you are and those discussions.
And if I could switch over and ask 2 more questions on low and then ill jump on 1 is just what is the percentage and the upcoming and that was a very strong low number what's the U S.
And kind of non cash business and of the non cash whats kind of the spread between ocs and non ocs kind of business if youre willing to share debt and then my my My last question is what can you help us understand the significance of the Ocs lung solution for cold preservation alone.
And just help walk us through why that matters. Thanks for taking my questions.
Thank you Bill so I'm not sure I understood. The first question.
But on.
Are you talking about how much of that $3.5 million, where cap capital equipment versus disposables or you said cap.
Oh, yes, I'm, sorry, the U S wouldn't be Caf I apologize, so how much and <unk>.
Yes. It is.
And have you as long as driven by Ocs versus non ocs.
At all of the $3.5 million, our Ocs revenue Theres, no non ots revenue and net numbers.
And.
Sure.
Yes on the national property and I'm sorry.
I think the National program is somewhere between 15% and 20% the bulk is direct acquisition.
And we expect that.
To be the case and the next 2 quarters I think we will start seeing and national program kind of.
And increasing early 2022 and throughout 2022, but the <unk>.
<unk> of the National program is creating and catalyst for the direct acquisition and as we ramp up our resources as we add up you reason as we staff the new region, we're going to start team and <unk>.
<unk> program number growing up that's our expectations.
And as far as the negative question.
Second question around the <unk>.
<unk> lung.
Solution for coal preservation.
Look at we look at that Bill and.
And 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 filling in the gap.
Between a center that is completely not easing the ots today until we turn the center into 100% ocs or or fully integrated Ots Center and we.
And can drive revenue from sales of cold solution. It also gives us a strategic competitive advantage and and existing centers are using ots.
Leveraging that and increasing our ots volume through.
And our unified call.
Call point for everything related to lung preservation, and I think and I'm addressing your question Bill Clinton from Roth.
And that was perfect. Thank you.
As a reminder to ask a question. Please press Star then the number 1 on your telephone keypad.
Your next question comes from the line of Mike on that.
Of Oppenheimer.
So raj today, a lot of our questions have already been answered, but 1 more maybe on.
Deliver protect data presented at panel last month curious if you can expand any more on the physician reaction to that liver data.
Jamie positive.
And I think deliver data reaction and actually we saw that Mike at the.
The American transplant Congress, where liver data 1 of the most impactful presentation out of more than 25000 abstracts and presentations so that at 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 reusing the ocs again and that obviously debt.
That's on the case, but it just shows the momentum and excitement and now we're excited about where we are to drive that into an approval and.
And.
Move on throughout the end of this year and into 2022% to 3 approved products heart lung and liver.
Excellent that's great to hear and realized while you're limited on what you can say with the <unk>.
Ongoing FDA discussions on labeling, but can you just say if they are kind of tracking to your expectations. So far.
And I think Mike I think again I want to be very cautious.
Wanted to respect our relationship and collaboration with FDA and I don't like to comment on those but I am I am optimistic and confident that it will be data driven it will be.
It will be supportive of the results achieved both trials. So I am I am optimistic and I am confident but that's all I can say.
Okay. That's perfect. Thanks, so much.
And again Thats a question. Please press Star then the number 1 on your telephone keypad.
Okay.
And I don't see any questions at this time.
And then it over back to <unk> for any closing remarks.
Thank you so much operator again, thank you very much for joining us on this call and we're looking forward to our next quarter earnings report and thank you and have a wonderful afternoon.
This concludes today's conference call. Thank you for participating you may now disconnect.
Ladies and gentlemen.
Yes.
Yes.
[music].
And.
And.
And.
And.
And on.
Good day.
Alright.
And.
And.
Okay.
And.
Sure.
[music].
And.