Q2 2022 Transmedics Group Inc Earnings Call
Yeah.
Good afternoon, and welcome to Trans Medical second quarter 2022 earnings Conference call.
At this time all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call.
As a reminder, this call is being recorded for replay purposes, I would now like to turn the call over to Brian Johnston from the Gilmartin group for a few introductory.
Kermit.
Thanks, operator earlier.
Released financial results for the quarter ended June 32022, a copy of the press release 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.
Future events results or performance are forward looking statements all statements, including without limitation, our examination of operating trends the potential commercial opportunity for our product products and our future financial expectations, which include expectations for growth in our organization regulatory approvals and reimbursement and guidance and your expectations for.
<unk> gross margins and operating expenses in 2022 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.
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 Exchange Commission May five 2022 trends medical 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 today August one 2022 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 Inc. Second quarter 2022 earnings call.
As always joining me today is Stephen Gordon, our Chief Financial Officer.
Before discussing <unk> results, let me first briefly highlight our $60 million debt financing agreement with CIBC innovation banking, which was announced earlier today.
The new facility, which was fully funded upon closing enabled us to retire our previous debt arrangement with <unk> and strengthen our balance sheet to provide further financial flexibility.
We greatly appreciate the partnership we have with <unk> and very much look forward to establishing a successful partnership with CIBC in the years to come.
Now, let me shift to our exciting <unk> results.
Through the second quarter, our commercial momentum accelerated with results delivering an unequivocal statement on transmit ex growth potential and our commercial execution post FDA approvals of our Ocs technology for three large transplant markets.
Importantly, our performance in <unk> underscores the importance of MLP or the National Ocs program as the main growth driver for our business in the United States let.
Let me summarize the results.
For the third sequential quarter, we posted a record year over year growth in net revenue net revenue for <unk> was $25 million, representing 151% growth over the same period of Q2 2021.
And approximately 29% sequential growth.
Q1 2022.
Importantly, 88% or $18 1 million of Q2 revenue came from the U S centers.
This represents 215% growth over the same period from 2021.
NOP attributed revenue accounted for approximately 84% of our total U S revenue in Q2 22.
We fully expect that MLP will remain the main driver for our U S business for the foreseeable future.
Stephen will cover the details and Oregon split in his section of the call.
Now, let me discuss some other trends that make us confident in our near and long term growth potential.
First.
For the second sequential quarter liver led the way across our three Oregon markets.
This is indicative of our ability to quickly scale operations and build momentum in the largest of our three addressable markets.
We were also excited to see that liver centers have come quickly a customs have become quickly accustomed to the MLP concept.
Second heart and lung also continued to grow sequentially. Despite overall U S lung transplant volumes remaining below pre COVID-19 rates and a slower than normal June in the U S across Oregon's.
This slowdown was reflected in the U S National <unk> reports and as relatively normal phenomenon in transplantation.
As is the rebound is the rebound in rates in July which we also experience.
Third.
As we highlighted earlier MLP drove a significant portion of our U S revenues in the second quarter validating our expectations that it will become and will continue to do so for the foreseeable future.
As I had stated earlier, 84% of our total U S revenue came from MLP.
On the per Oregon basis lever was approximately 99% MLP lung was approximately 93% NLP and heart was approximately 57% MLP.
As we move forward, we expect to see the percentage of MLP continued to be high and grow across the across the board, especially for the <unk> for heart transplant numbers.
Notably given the high contribution of MLP, our revenue represented impressive growth and actual new cases, and not just stocking orders.
This is one of the most interesting and important features of MLP as it makes our business more linear in terms of revenue growth as we further penetrate transplant programs.
Further it is important to note that <unk> results came from a fairly modest number of transplant centers between six to 12 in each Oregon.
Category.
This is important for two reasons.
It shows that we have a significant greenfield opportunity for commercial growth from adding more U S transplant programs our centers to use our MLP program.
This is a critical area of our growth strategy that I will be touching upon later.
Second it shows that the continued deeper penetration of Ocs within these initial number of centers, who are relying on us to operate their transplant programs.
This is huge from a competitive positioning standpoint.
<unk> MLP is becoming an integral part of many U S transplant programs workflow.
Lastly.
We had a very successful 2022 <unk> conference in Boston in April .
This was the first live meetings since Covid and we were very encouraged to see transmit ex ocs and MLP.
As the clear focus of this meeting.
There were several featured presentation on Ocs heart DCD and expand results.
Long term outcomes of Ocs lung inspiring expand results and the first public presentation of the MLP programs concept.
<unk>, we took this opportunity to publicly launch an aspirational U S initiative to doubling lung and heart transplant numbers over the next five years using the <unk> MLP program.
In all.
We were very encouraged by several trends through Q2, and believe we have positioned transmit X to achieve 100%.
Year over year revenue growth in 'twenty two.
Now, let me discuss our strategies to deliver on this expectation and to extend our momentum.
Into 'twenty three and beyond.
First by expanding our MLP infrastructure.
This is a critical this is critical and will include increasing the number of surgical staff, especially on the liver side <unk>.
Expanding the number of launch points to gain broader geographical coverage in the U S and growing our clinical support staff.
Importantly, we need to grow our transportation and logistical network to drive efficiency in execution and financial performance.
Second by expanding our manufacturing and production capacity.
We are well underway to tripling our production clean room infrastructure by year end, enabling us to meet the significant demand of ocs use across all three Oregon platforms.
We are also expanding our production head count and instituting a second shift.
In addition, we're continuing to buttress, our raw material inventory to meet the growing demand and to mitigate against supply chain risks.
Third by expanding the number of active MLP transplant program in all three Oregon markets.
We have seen a significant impact from a modest number of active transplant programs in the U S. On U S revenue over the past three quarters, we are planning to methodically grow our number of active MLP programs in the U S. Throughout 'twenty, two and into 'twenty three and beyond.
Finally by continuing to invest in our next generation Ocs technology and our next Oregon programs. This is critical to our long term growth and future and further distancing ourselves from any potential competition.
Okay.
In our view the road map.
Forward is clear and we believe strongly that we are operationally well prepare to take these critical next steps.
However, while we believe we are in the early stages of rapid growth trajectory. We also see the current macro environment and rapid increase in demand for our Ocs technology could present, some challenges that may create some level of bumping us in our business.
For clarity, let me provide some perspectives on what we view as potential uncertainties that may negatively impact us in the second half of 'twenty two.
Are the main reasons for us being prudent and cautious in our expectations throughout 'twenty two.
First is the global supply chain issues during during the scalability of our production capacity to meet the growing demand for our Ocs technology.
<unk> results continued to outpace our forecasted demand plans and challenged our finished goods inventory.
Our operations and supply chain team has been doing a phenomenal job to mitigate the risks of any back order situations.
We remain cautious however.
Cause we are in we are concerned that our continued investment to rapidly increase our raw material may be negatively impacted by some unforeseen supply chain issue from one of our vendors or suppliers.
The second is the scaling up MLP infrastructure.
The time to recruit.
Train and certify clinical staff to be able to be fully functional in the field presents a potential time lag while we are rapidly growing our case volume.
We are instituting several initiatives to standardize our clinical training programs for our field team as well as continuing to recruit the recruitment efforts throughout the United States.
Third is the access to charter air transport to maximize coverage and availability.
This is an important area as we are seeing the global conditions limit the availability of charter flights using used for organ transplant support in the U S.
We are actively expanding our network and will aggressively pursue new strategies to minimize this risk on our long term growth potential.
Okay.
Third is the impact Im sorry fourth is the impact of summer vacations and end of year holidays on second half 'twenty to revenue.
It is the norm that August is a fairly slow month for our international transplant activities, given the impact of summer vacations in Europe .
Q4 will also have the impact of Thanksgiving and Christmas holidays, which may negatively impact transplant volumes in the United States.
Finally COVID-19.
We see minimal or no impact of Covid on heart and liver transplant trends. However, as we stated before lung will always be disproportionately impacted by any new COVID-19 waves or variants.
Based on our <unk> and <unk> results.
In balancing these great results with above potential growing headwinds.
For the second sequential quarter, we are raising our annual revenue guidance for the full year 'twenty two to between 67% to $75 million.
Up from 59% to $65 million for the same period.
This represents a solid 121% to 148% growth over 2021.
We take guidance very seriously and we wanted to make sure that we are being prudent and reflecting the realities of the potential growing pains.
With that let me turn the call to Stephen to cover the detailed financial results for the quarter.
Thank you Ali I'll now provide some additional detail on our second quarter results.
And other financial information for the quarter.
For the second quarter of 2022, our net revenue was $25 million. This was an increase of 151% from the second quarter of 2021.
A sequential increase of 29% from last quarter.
In the U S. Net revenue was $18 1 million or 215% growth over the second quarter of 2021.
The Oregon breakdown is as follows on U S. Net on U S. Net revenue was $9 6 million of Ocs liver $5 $9 million of Ocs heart and $2 6 million of Ocs lung.
I'll repeat those numbers again for the folks listening $9 6 million of Ocs liver $5 9 million of Ocs heart.
And $2 6 million of Ocs lung.
All Oregon products grew sequentially from the first quarter of 2022.
Outside of the U S. Our revenue grew 9% on a constant currency basis, however, taking into consideration unfavorable currency movement.
<unk> revenue was $2 4 million down 1% from Q2 of 2021 and included $2 2 million of Ocs heart and <unk>.
$2 million, we will see a slow.
The key driver of Q2 revenue performance was further utilization of the ocs across all organs and particular, our national Ocs program continues to be the critical commercial vehicle for further customer adoption in the U S.
Gross margin for the second quarter of 2022 was 70% that's up from 68% for the second quarter of 2021 and down sequentially from 76% reported in Q1 2020 to the.
The improvement in gross margin from Q2 of 2021 as a result of the higher revenue and fully commercial revenue.
In the U S. The sequential reduction in gross margin as a result of the higher mix of MLP related revenue.
We expect gross margin to improve in the future as we move out of the early phase of the MLP and improve its efficiency.
Total operating expenses were $24 1 million in Q2, 2022, a 56% increase.
Over Q2 2021 operating expenses.
The significant increase in expenses was again driven by the growth in our commercialization effort in the U S and our <unk>.
In particular this represents our continued investment in our regional resources and infrastructure to allow us to access more national program transplant cases across all origins and all regions.
We also saw growth in R&D, primarily related to development of our next generation Ocs.
However, we just as we described last quarter R&D spending was sequentially lower in Q2 2022 due to less nexgen development activity this quarter compared to last quarter.
Operating loss was $9 7 million in the first quarter of 2022 compared to $9 9 million for the second quarter of 2021.
Our net loss for the quarter of 2022 was $11 5 million compared to $10 7 million in the second quarter of 2021.
Cash cash equivalents in marketable securities were $58 1 million.
And as of June 32022, which equates to a reduction of $13 9 million.
From the balance at the end of Q1 2022.
Weighted average common shares outstanding for the quarter were 20 798 million shares.
Finally, as Waleed mentioned earlier, we took an important step.
To provide additional financial flexibility in July of 2022 by refinancing our existing debt.
With a new $60 million term loan loan with CIBC innovation Bank.
A portion of the new loan was used to pay off the balance of our prior low with orbit and.
And the new loan added approximately $23 million of new cash to our balance sheet.
And as I, usually do before returning the culture will lead I will just reconfirm the increase in our revenue guidance for 2022.
67 million to $75 million for the fiscal year and this represents a range of 121% to 148% growth over 2021.
Now I would like to turn the call back to Lee for closing comments.
Thank you Steven.
In summary.
We're very pleased with our <unk> performance.
The transplanted NOP integrated approach has clearly proved its unique ability to streamline the transplant process for transplant centers and drive significant growth.
Our demonstrated ability to execute on rapidly scaling the MLP to include liver and heart over the past two quarters and launching new initiatives leaves us more confident than ever in our ability to continue to drive significant commercial growth throughout 'twenty two and beyond.
As we stated before we believe we are still fairly early on our growth trajectory and we are laser focused on continuing to build on our commercial momentum for the future.
We are inspired and excited for the future of transmit X as we continue to transform the global organ transplant across geographies and cement our global leading position in transplant therapy with that I will now turn the call to the operator for Q&A operator.
Thank you.
I'd like to ask a question. Please press star followed by one on your telephone keypad.
Any reason you would like to remove that question. Please press star followed by two again to ask a question press star one as.
As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.
We will pause here briefly ask questions are registering.
Our first question comes from the line of Bill <unk> with Canaccord you May proceed.
Great. Thanks, Good evening couple of questions first on guidance.
I believe at Torrey I have to ask this but you are 67% to 75, you did $36 million in the first half.
Range would be about 35 to $38 five in the second half of the year, which would contemplate down in the second half first first.
How many of these issues that you said there are potential headwinds are you seeing or experiencing to date or is it more of a concern. So I'm just trying to understand what's embedded in that range.
Thank you Bill.
And the guidance, we're giving is the guidance we standby.
The growing.
That rapid growth and acceleration in utilizing our finished good inventory have really put a lot of challenges in our ability to continue to beef up that inventory. So that is something we're experiencing today.
The other thing that we're experiencing today is the.
Our ability to.
I.
Cover many cases.
Finding enough air transport charter flights to be able to cover many cases in the same evening.
Others are more cautionary.
Just understanding the dynamic in understanding the.
What would it take to scale up the MLP and the training programs et cetera. So we wanted to be prudent we wanted to be cautious we want it to be.
Thoughtful and are.
In our estimates.
But that's that's as we see it today we.
We will continue to look at the guidance, we will continue to refine the guidance as we continue to execute throughout this year.
Excellent Thanks, and then.
What do you see as the greatest impediment for a transplant center for adopting your technology I mean, one of the the comments regarding the kind of concentrated success you've seen so what's been the impediment in getting to some of the other senators to adopt at this point.
I don't I don't see it as an impediment bill we have been engaged with fairly broad number of centers. It just the time it takes to wrap their heads around the MLP, we all know that transplant.
Community is in a Super Conservative group.
They've been doing it one way for the past 50 years and here.
Here, we come transforming that completely into a more.
Streamline process that is managed by third party. So we just want to we want to be prudent we want to be.
We want to we want them to get to where we are on their own time, we don't want to force anything and it just the time it takes for them to wrap their head around the MLP that's really it.
We.
As a part of that is understanding that any service costs. In addition to our product cost is coming from the organ acquisition cost Center.
Seeing the outcomes that are being <unk>.
<unk> delivered using MLP compared to outcomes.
Through the direct acquisition.
This is really yet and we are we are growing.
And we're proud of the number of centers that have adopted and op, but we don't see major impediments. It's just the time it will take to convert that.
Bulk of the market to MLP and we have to be.
Careful to not to rush things, let things mature in the appropriate an appropriate pace because with transforming the standard of care and everybody knows that transforming the standard of care doesn't happen overnight.
And we are laying a solid growth foundation for 'twenty, three and 'twenty four not just 'twenty. Two so this is why we're being prudent and we're being.
Very careful to allow centers the time, they need to get their head around the MLP concept.
And then last question was there was an article in the post today.
<unk>.
The real question is how would a breakup of <unk>.
Impacts you, especially given that.
It's overseas.
Okay.
And then.
I think they have the Wednesday send adhering Finance Committee meeting.
Yes, yes.
As I've said.
Publicly numerous times we are not.
We don't have a.
Ah.
Any interest in commenting on any legislative or.
Federal mandates to breakup you and also I don't think Cumulus is going to be broken up.
Anytime soon.
We have to continue to play within the construct of the federal.
Structure of organ transplant, what we present.
Into this argument is something that is very positive something that presents a solution not pointing to an antiquated part of that of that system, we're pointing that the ocs.
And the results achieved by Ocs represents the highest rate of solid organ utilization in the history of organ transplant in the United States.
Number two that for the last 18 months. The MLP has demonstrated significant success in growing transplant programs volume in accessing new donor pools like DCD donors and extended criteria DVD donors.
And that transmits managing that.
<unk> successfully to do more cases in the case numbers growing quarter over quarter month over month.
On daily basis.
So that's what we present, we present a positive solution to this very complicated problem, we will operate within any federal structure, whether it's <unk> or in another structure.
We don't see that as.
Something that we should be too concerned about but.
But we want to make sure that our voice and our data and our technology and our MLP is factored into all of these.
National discussions across III.
Around revamping the organ transplant system in the United States.
Great. Thanks for taking my questions.
Yes.
Thank you.
Question comes from the line of Cecilia furlong with Morgan Stanley . Your line is now open.
Thanks. This is calvin on for <unk>. Thanks for taking the questions two from me.
First I wanted to ask more on heart traction within the MLP. So it sounds like heart NLP next stepping up from 30% to about 57%, which is a very positive update to hear so I'm, just curious where do you see that level trending exiting 2022.
But also just what hasn't worked or what have been some of the learnings as <unk> been ramping up education for these cardio thoracic surgeons towards adopting ocs.
Thank you Kelvin.
Sure.
Where do we see the trend up we're working very hard to make sure that the trend.
Continues to grow up.
And heart and.
Matched the other two organs.
What's the biggest learning the biggest learning is to focus on.
Quality of the clinical management of the Oregon and deliver a better Oregon, then in Oregon. That's managed by the institution staff that is the this is the laser focus of our team.
Without that it's <unk>.
Going to become very difficult to convince people to leave.
Leave control to our team and that's that's what I said to Bill's earlier question, we understand that very well, we know that the cardio thoracic.
Surgical mindset is.
Very focused on outcome.
They have been trained to be the ones managing their own Oregon's for many many decades and it's just going to it's going to take the time it takes but for US we lead with data, we need we need or we convinced them by showing them that if we are managing these organs for them the outcomes will be better than if they're team are managing these organs for them.
Got it great.
Second question really is on.
Kind of ramping of accounts. So I was wondering if you could talk a little bit more about push backs or discussions you've seen as new centers contemplate the cost for MLP.
What ultimately gets them comfortable and really how long is this process taking currently.
And also really just what's baked into your guidance around navigating the initial account acquisition process and timing associated with it. Thanks so much.
Thank you Kelvin.
As I stated earlier.
The two key.
Things that we spend.
Frankly, all of our time on to sign up a new MLP center is to make sure they understand that.
How it works how easy it is to implement so just to get their head around the workflow the process workflow and that it is different but it's not really that much different and that they will always have control over the clinical <unk>.
Decision to accept or decline disorder.
Two is to just make sure they understand that every every penny.
That is involved in the service portion not the technology portion.
Part of the organ acquisition cost center, that's really it.
How much is baked into our guidance.
And we as I stated earlier.
We know that we're going to double that revenue in 2022, our focus right now has shifted to 'twenty three 'twenty four we want to establish for the rest of this year establish a very solid foundation for growth into 'twenty, three and 'twenty four and for that we need to be.
Ah patients we need to give the centers. The time the next wave of centers the time, they need and convinced convert these centers to be a long term partner like the ones. We've converted already not just to have one case a quarter and then the disappear so it's fully baked into our guidance.
And what's baked into our guidance as our original.
The expectation that we will end the year with somewhere between 10 to 12 centers per Oregon, and when I say that it is not it is not 10 to 12 centers that ordered once it's 10% to 12 centers that use that technology in a minimum of twice per month throughout the quarter.
So that number is.
We're still we're still far away from that.
Or in some oregon's compared to others and our goal is to too.
To end the year at these numbers and Thats whats baked into the guidance.
Got it very clear thanks, so much.
Thank you.
Our next question comes from the line of Josh Jennings with Cowen. Your line is now open.
Hi, good evening, Thanks, gentlemen, congratulations on another strong quarter.
I wanted to just ask initially on guidance. Another guidance question I apologize, but just wanted to make sure I was clear that the top end of your guidance.
Does not imply that you have a patent on it.
No observations you shared about about some of the market conditions.
Not implying that there is a capacity constraint, where where youre current MLP infrastructure and also some of the supply constraints that may come as you are ramping and growth. There is not a limitation of $75 million isn't a ceiling for for 2022 is just a prudent outlook for for the business for the back half of the year.
That's exactly correct Josh.
As I said to Bill we are not we are not experiencing any.
Or we don't we're not aware of any definitive headwind or.
A negative situation other than that demand is ramping up and far outpacing R.
Our original forecast and update the forecast that's it that's all I know, we because of that I want to be prudent and want to be cautious and I want to be.
Conservative.
Because again, we take guidance very seriously and.
I want to reiterate that.
75 is not the absolute ceiling for 'twenty two it's the it's the prudent number that we standby to make sure that as we are scaling up and we're growing that we're not.
Not inadvertently.
Causing any disruption or any.
Issues that may negatively impact our growth.
Ability in 'twenty three.
Again, our laser focus right now is to be able to be in the same situation in 2003.
So that's why we are being very deliberate and very cautious in giving the centers. The time do you need to make sure that we have the solid foundation exiting 2022.
Excellent.
Thank you and then just my follow up on just the drive by CMS HHS too.
To reform U S transplant network, but also to grow volumes.
I think there was a great data point.
Arizona.
<unk>, Arizona shared in terms of their liver transplant volume growth in <unk>. After adopting MLP are there any other anecdotal.
Cases, you can share just in terms of high volume transplant centers in any organ indication, where they've seen that type of growth I mean, it seems like.
Thats occurring and then Arizona Mayo Romeo Amazon is not a one off thanks for taking the questions.
Thank you Josh.
I think rather than naming individual centers I think.
Ill reiterate what Ive discussed.
Publicly before based.
Based on what we see based on the results of the first half of the year. We are almost certain that we will see an overall increase in the number of heart and liver transplants in 'twenty to over 21.
Driven primarily by.
Extensive use of DCD.
Livers and DCD Hearts using.
Using the Ocs and the MLP program.
So there is more than Mayo, Arizona Theres, several large liver transplant program that are becoming significant.
One dependent on the MLP and integrating the MLP into their workflow, but also theyre growing their volume by accessing distance.
<unk>, whether DVD or DCD, but definitely the DCD utilization in the United States is at all time high throughout the first half of this year.
Just looking at the Ocs data and <unk> data that we have.
Great. Thank you.
Thank you.
Question comes from the line of Suraj Kalia with Oppenheimer Your.
Your line is now open.
Good afternoon Waleed, Stephen can you hear me all right.
Can hear you just fine suraj.
Perfect Congrats gentlemen on a nice quarter, so really two questions. The first one multi part question.
How many sites, we're doing multiple oregon's and utilizing MLP.
What would predisposed to use NLP for one, Oregon and not another and maybe.
See some could jump in and just give us some guidepost on.
The number of sites each Oregon, so that we can just.
Somehow triangulate that utilization aspect.
Sure So suraj.
Approximately in Q2, there were a total of 15.
Centers that have multiple MLP programs within them that use ocs.
<unk> total across all three organs.
The majority of the multi program we are at least used in two out of the three if not three out of the three programs.
What precludes us sometimes.
Inherent center.
<unk> for example, one center.
That we were working with them to heart.
It's been taking them four months to recruit additional lung transplant surgeons to get their lung transplant.
Program back again I'll put in seat so thats delaying them. It's just sometimes things that are out of our own control.
But we're confident that by year end, we will be able to.
With the initiatives that were.
We're working on that we'll be able to get more and more centers to adopt MLP.
So that's question number one the second part which is the.
The macro number of centers that we're after over the next two years is the same number we discussed previously.
Anywhere between 30.
33% to 40 transplant programs in each Oregon category drive, 80% of the volume of that transplant.
Market.
And Thats what were going after but over the next 24 months right now were warning exit 'twenty to between 10 and 12 of those 30 to 40 programs converted to MLP and.
Regularly using ocs as him as a part of their routine practice throughout the quarter.
Yes suraj.
By origin, what I would say as we talked about six to 12.
The high end is on the heart, we have a lot of heart centers, because we've dealt with a lot of heart centers. Historically in the low end is on the loan which is kind of the challenged market with COVID-19 and liver somewhere in the middle So without being specific just to give me a sense of where we're at.
Fair enough.
I will just add.
One additional question.
So I believe.
And really the key driver.
Obviously, when you look at all U S I'd love to.
You compare and contrast.
Tell us what would it take for all U S. Obviously, there's a huge tam in the U S. We get it but just kind of compare and contrast or U S. If you could and I did not hear you mentioned the shortages in the market of Dobutamine and dopamine.
<unk>, that's not having an impact on you, but just love any additional color gentlemen, congrats again and thank you for taking my questions.
Thank you Suraj.
I think the biggest.
Macro difference between <unk> and U S. As it comes to implementing MLP are two things one the lack of national or national reimbursement in all U S markets.
That.
That is a huge impediment. The second is some of the European regulations.
Regulations are very very different than U S regulations, when it come to organ transplant.
For example in Italy, It is illegal that any member of any other.
Medical center to be accompanying donor, Oregon, and the charter flight back to the transplant program some esoteric accruals like that.
Could make MLP.
Difficult outside of the U S. However, we have positive experiences with replicating MLP in the Netherlands.
The only difference is the MLP in model in the Netherlands that we.
We worked with them to establish is fully managed and funded by the National Health care authorities in the Netherlands, and they've grown their heart transplant volume by nearly 40% last year using the ocs.
<unk> of MLP in the Netherlands, where three devices with the three train team covered the entire.
Heart transplant programs in the Netherlands, and they are doing great.
As I stated in my previous call. There is an interest from the U K NHS BT.
<unk> to try to explore.
Replicating the MLP.
From our experience in the MLP to transmit to implemented in the U K again.
Dealing with NHS and industry CBT takes a long time, so we're working closely with them and.
We will continue to pursue this we're also pursuing.
Hybrid MLP models in Germany, and in Italy, but.
These are the initiatives that we have.
Planted to drive.
To continue to drive growth or U S.
Until national reimbursement is achieved.
Thank you. Our next question comes from the line of Allen Gong with JP Morgan. Your line is now open.
Thanks, Congrats on the great quarter.
Alright, again to touch on guidance, but.
I guess just to kind of like put it a different way you've highlighted that.
There is a healthy amount of conservatism they put into your guidance, which I think we can all agree is really prudent given continued macro challenges.
But with Sommer, representing a bit of a challenge in the third quarter and the holidays are presenting a bit of a child in fourth quarter. How should we really think about the cadence of growth from second quarter to third quarter, and then fourth quarter. It does the middle range of guidance assume essentially flattish trends or should we think of maybe a little bit of a softer third quarter on a step up in.
The fourth quarter.
Hey, Al This is Steven I would think of it as a flattish trend.
Well, we mentioned we saw a rebound in July so we have some some indication that.
At least July was decent so I would think of it as flattish over Q3 and Q4.
Yes, I agree on.
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We just want it to be as realistic and prudent as we can.
We don't we don't we hope that we don't see a down trend.
But we expect it.
One of these things impact us it would be more of a flat quarter over quarter.
Got it and then how should we think about operating expense growth I think relative to our own forecast that came in a little bit higher than we were expecting in the quarter, which makes sense given all the investments you're doing and the momentum you have commercially but I think the last time, we got a guide from you as I think about fourth quarter.
<unk> of last year, where your point is the 25% to 30% expense growth.
Since you are getting so much momentum met investing into that probably makes sense should we think about that as at least being at the higher end of that or maybe even being even higher than 25% to 30%.
Thanks, Mark Thanks Alan.
Good question, because we did.
So you're a little bit of higher spending then.
Than planned due to the really.
Supporting the growth that we're seeing in getting ahead of it.
I think at the last call I talked about expense growth at about a third of the rate of revenue, we probably need to tick that up a little bit so like from third to maybe 40% at least for the next few quarters.
Thank you.
There are no additional questions waiting at this time, so I'll pass the conference over to the management team for additional remarks.
Thank you all very much for taking the time to be in this call. We're looking forward to to.
To the next call have a great evening.
That concludes the transmit ex second.
Quarter, two 2022 earnings conference call. Thank you for your participation you may now disconnect your lines.
Yeah.