Welcome to XVIVO Q1 report for 2024. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound five on their telephone keypad. Now, I will hand the conference over to CEO Christoffer Rosenblad and CFO Kristoffer Nordström. Please go ahead.
Thank you so much, and welcome to XVIVO's earnings call for the first quarter of 2024. Today, we will start the presentation with the front picture. The slide in front of you right now is a picture of Alex from Australia. She received a heart transplant thanks to XVIVO's heart technology. I think it's important reminder to why we actually are here, and it's to make sure that no one dies waiting for a new organ. And with that, we go to the next slide, which is just today's presenters, and that's me, Christoffer Rosenblad, CEO, and to the left of me today in the same room for once, I have my CFO, Kristoffer Nordström.
Hi, everyone.
With that, we go over to slide three, which is just a quick glance on Q1. I'm both proud and happy to report the strongest quarter in XVIVO's history, and that Q1 shows improvement in all three business areas. Sales came in at a record of SEK 186 million. The gross margins are continuing to show strength, so also in Q1. I again want to highlight the abdominal gross margin, where we are closing in on the 2027 strategic goal of 70% gross margin already now. This quarter, we show 67% for disposable products, which is a slight improvement from 2023 full year margin, which was 66%. We plan to improve abdominal gross margin further when we reach economies of scale in production.
The adjusted EBITDA shows an improvement to 20%, and I will let Kristoffer Nordström, our CFO, get more into the details on sales, gross margin, and profit later in the presentation. Quickly on the growth of thorax is picking up, and that mainly come from higher XPS, XPS activity during the quarter. We have historically seen solid growth in Europe on the XPS, but with more feet on the ground in the US, we see an increasing activity there as well. For example, we have one active XPS customer added during this quarter in the US. The abdominal portfolio continues to grow fast as well. Growth on disposable came in at 46% growth. We also see higher sales quarter-over-quarter, which means that we have enabled higher quantities from production this quarter versus the previous quarter.
Since the limiting factor for high growth in the abdominal segment is production capacity of disposables right now. For longer term, it's also regulatory approval for delivery in the US. As you can see, the production capacity is gradually improving, and we invest to scale up volumes 10 times of today's volume for disposables over time. With that introduction, we go into the highlights, which is slide four, and we go into slide five after that. Of course, we have to start the highlight section with a report from this year's ISHLT conference in Prague, which was a great success for XVIVO. The ISHLT conference is the largest and by far the most important conference for heart and lung transplantation, and XVIVO received a warm welcome from all participants.
As one example, XVIVO was the most selected exhibitor, and the result from the EU study, NIHP 2019, with XVIVO heart technology, was the most selected scientific session in the whole program during the week in, in Prague. The science from the XVIVO heart technology shows there is the potential to change the paradigm of heart transplantation, and it's great to show the transplant community how far we actually have come. XVIVO also held two extremely well-attended industry symposia during the conference. The symposia itself and the abilities for the audience to see what XVIVO-- what the XVIVO technology can accomplish in the perfusion future was very well appreciated by the transplant community.
Many surgeons came up to me afterwards and said that those were the two best parts of the ISHLT because of the good climate for discussion during the industry symposia. We will talk more about the ISHLT on the next slide, which is the slide number six, where we will go into more into the heart trial and the results from it. The presentation by Professor Filip Rega attracted by far the most interest, and I do believe that the fantastic top-line result was the reason it did. There are three key takeaways. Number one, this is, to our knowledge, the first randomized controlled trial with a superiority design in heart and lung transplantation. And this shows the confidence the clinicians have in the XVIVO heart technology.
Number two, the HOPE group, in other words, the one pumped with the XVIVO technology, showed an improvement of 61% for severe PDD versus the control group. This is highly important as an improvement, provided that PDD is the leading cause of early mortality after heart transplantation, and it's accepted that PGD also negatively affects long-term survival. The third key takeaway from this seminar is that all whole parts were deemed transplantable after perfusion. This is important to highlight since cold perfusion offers safety advantage during especially of an organ. And with that news, we go to the next slide, which is slide number seven, which is another groundbreaking result from the heart technology and our heart team. And we did press release this, you heard about it.
It's about the truly groundbreaking transatlantic flight that was published in Lancet during the quarter. Professor Lebreton has accomplished the first out of seven patients in the PEGASE trial, and that is designed to investigate very long transport times. This case was amazing, not only because it was the first and historic transatlantic flight of a donated heart, also, the time outside the body of more than 12 hours is truly impressive, since we have to compare this to the generally accepted time on static cold storage, which is approximately four hours. Given that it was a comparably old donor and a comparably old recipient, it makes the achievement even more impressive.
And it's also important to point out what Lebreton said, that the heart regained normal function directly after transplantation, which is a great achievement and testament that the technology really works. Lastly, I want to mention that the fact that the transport was made on a normal commercial flight is also historical and something we will work more on over time. So all in all, last year, the Australian study showed that we can safely increase transport time to eight to nine hours, and all patients in the study showed zero third-day mortality. In animal studies, Aarhus University recently published that the ex vivo heart technology showed good result even after 24 hours. This is—should be mentioned, animal studies. But this body of evidence start to show that safe usage of more hearts at greater distances is possible.
This will also open up for more heart transplants and better matching between donor and recipients, with good patient outcome. As I stated, that the commercial air transport is also important because over time, it will also open up for cost saving for a transplant procedure if you can use standard modes of transportation. That's normal flights, cars, and trains, rather than expensive mode of transportation that we normally see a heart transplant is needed for a heart transplant today. And with that news, we will go over to next slide, which is slide number eight, and the recent abdominal milestones. During the last year, we have seen more than 20 publications on the Liver Assist technology, showing improved patient outcome on both DBD and DCD grafts after transplantation.
Today, I want to highlight and speak to another benefit of this technology, and that is the ability to plan transplants to daytime surgery. The background is that no one really wants to work too many nights in a row, but for a transplant team, that is business as usual. After this publication for liver transplant teams, we believe this could be about to change. The recent Lancet publication from Groningen shows that a liver can safely be perfused up to 20 hours and hence eliminate the need of nighttime liver transplants. By offering a better work-life balance, a transplant team can more easily attract the right competence.
So this is not only good for the fact that we can plan more, plan transplants in a better way, but it's also very important so we can attract the right type of competence to hospitals that perform transplants. The last point is, and we said it before, sales for abdominal products right now are mainly limited by supply constraints, and the production scale-up of 10x is progressing according to plan. We have invested in machinery, and the validation is currently performed. As also stated earlier, and I can mention again, the Kidney Assist Transport is growing fast in the two markets we launched it in. Next launch market is US and as communicated in the last call in January, the target for full launch in the US is during Q4 2024.
If you continue to follow the production scale-up plan as we do now. With that, we turn our attention to the lung business, and 2024 definitely got a great start for lungs. We see high interest from clinics to start EVLP programs with the XPS. In the US we have a new sales force that is gradually picking up and gearing up. And as one example, we have one more active XPS customer, and it was added during the quarter, and the interest from new customers, and the sales pipeline on both sides of the Atlantic is definitely there. So we will keep our sales team busy over the next year and further from that as well. We see high interest from customers to start EVLP programs.
The high interest comes mainly from the ability to safely use more DCD lungs with the XPS, which is something we are truly grateful for. That's what the XPS and solution is designed for. This will enable more organs to be used for transplant. And lastly, we will continue to invest to serve our customers in the best possible way. We will invest mainly in clinical expertise and capacity during this year to increase the utilization of EVLP. The next slide will be the services and the organ recovery service. Kristoffer Nordström will later in this call give you more details on the service development. I will give you the key highlights here on this slide. Number one, all existing ontracts are renewed. Two, I truly wanna highlight this, doctor, during ISHLT, Dr.
Hormuth gave a great speech on the benefits of third-party organ recovery. He was very well received and appreciated by the audience, and I am sure that this will open up business opportunities in the future. Three, we continue to get great feedback from customers regarding quality of the organ recovery service, and the ability that they can grow their programs with great outcome using our service. So that's something we're very grateful for. Four, I wanna state this because this is also important. We every day, we continue to improve our service offering and certain capacity to meet the need on the US market. So now we are having a great service that we are investing behind, and I'm sure we will see great interest in the future for this service.
And with that, we will come into the last part of, of the highlights and the clinical pipeline. So we go to first slide 11, the clinical pipeline, and then more of to slide 12, where we will see the regulatory review. Nothing has actually changed, or nothing majorly has changed since last time we met, so I will mainly repeat what I said in, in January. But in the S the heart trial is progressing according to plan, and our clinical team in the U.S. is working very, very hard to include all clinics into the trial. At the moment, we have 10 clinics out of 20 that are, are initiated into the trial, and as you can imagine, after ISHLT, the interest is extremely high to be part of this US trial.
In Europe, we have handed in our technical documentation for review, and everything is going according to time plan. We are aiming for CE mark in Europe in Q4 2024. Very important to mention is that we can't affect the review time to 100%. The good news is that the notified body has been very responsive, even though we know they have high workload on them, they are. Also, the Swedish MPA is responsive and delivered on time. The insecurity we face still, as reported last time, is how fast EMA, the European Medicines Agency, can handle their part of the review. But key is that we have done what we can. We handed in the product and clinical files with good quality on time. In Australia and New Zealand, we continue to see high usage of the product.
The regulatory approval will be pending the CE mark in Europe. So from a regulatory view, there is nothing more to add for Australia. But since they use this product regularly, it's the regulatory approval is not the key here. If we turn our attention to the liver in the US we have reported earlier that the Liver Assist had been granted breakthrough device designation by the FDA. This means that we get a faster route through the FDA PMA process, and important to mention, it's also quality stamp, and that the products are innovative and fulfill a need on the market. We have invested and are continuing to invest in the organization to run the study and prepare the FDA documentation, and the aim is to hand in the IDE application at the end of 2024.
With that, I will hand over to our CFO, Kristoffer Nordström, who will present the financial performance during Q1, and we can go, yeah, straight to slide 14.
Which is an overview of the P&L and key group KPIs. So thank you, Christoffer. Yeah, I mean, as Christoffer has emphasized already, we are, of course, very happy over the development in the first quarter. As a recap, sales came in Q1 on SEK 186 million, a new record for us. And more importantly, the organic growth was back on the trajectory and 32% versus last year. We continued to deliver solid growth margins, 73% versus 75% last year. And I will go in a little bit deeper on each business area, as we go here, because the reasons for various gross margins varies depending on product versus service, et cetera. That will come.
EBIT in Q1 was SEK 20 million and 11%, and this was an improvement versus last year with 2% units. EBITDA increased from SEK 25 million- SEK 37 million, which is a record, and represented a strong 20% margin for the quarter. So overall, this gave us a promising start of the year, and we where we continued to improve both top line and profitability. Next slide, please. We'll go into the respective business areas for a while, starting off with Thoracic. Sales came in at SEK 121 million versus 91 last year. Organic growth disposables, 39%. Here, the main driver was EVLP and in the United States, specifically. Global EVLP sales grew 65% versus last year.
So as I stated earlier, 2024 is off to a great start, and good activity at key centers. The strong US sales gave us 68% share of total global sales, which I also think is a record, and machine perfusion achieved a record of 58% share of total sales. This impacts the margin a little bit, as I will go into. Gross margin in Q1 was 82%, which is lower than last year's 86%, and this was primarily a result of the higher portion of EVLP, but also increasing sales. Increasing sales from heart dilute our margin a bit since heart disposables in the US are sold at a reduced price, awaiting regulatory approval, and of course, we are still in low scale production with, you know, minimal economies of scale for now.
Heart sales in the quarter were SEK 12 million, with a 61% gross margin. If we look at the lung disposables, though, the margin was 85%. Next slide, please, Christoffer. Moving into abdominal. On the abdominal side, we continued to grow steadily, quarter by quarter, as a result of our solid position in Europe, where we have a very strong customer offering in place. Net sales was SEK 44 million, which represents another record quarter for us. Organic growth of disposables in Q1 was 46%. Liver stood for 76% of total sales in the quarter and also for the full year last year, the comparison. Kidneys transport sales were SEK 7 million, a 51% increase versus last year. So here we see a result of our gradual ramp up and increased production capacity.
Gross margin level, 67%, which is good, as Christoffer mentioned, 2% units higher than last year. Moving over to services, final business area. Sales in Q1 were SEK 21 million, which represents a growth of 11%. The customer base from where we ended 2023 remains, and all current contracts have, have been renewed with increased profitability. This comes from a new revenue model that we put in place in the middle of last year, 2023, where we charge customer per case and not for our provided days of availability, which was earlier the case. As previously communicated, 2023, that was the year where we put high focus on integration and strengthening our organization and partnerships.
As Christoffer mentioned, we continued to strengthen our offering in this quarter, and I really think we can take pride in a high-quality service program that has been developed in collaboration with our customers, and that is of utmost importance to mention, actually. The gross margin dropped from 65% last year to 36% in this quarter, and this is a result from a mix of lower recovery case volumes in the quarter, and increased surgeon capacity from additional recruitment in the quarter. That said, we really have an organization in place now that is ready for growth, and with new contracts, also, the gross margins will increase. Next slide, Christoffer. Leaving sales a bit to move over to EBITDA and profitability.
EBITDA came in on 20% for the quarter, isolated, and as you can see here on the slide, also, the rolling 12-month trend continues to develop positively. It was a busy quarter for us, from an operational standpoint, and we had spending on conferences such as ISHLT, market activities, and we also continued to grow our organization with increased profitability. So with that said, we're happy to see that our focus pays off, not only in growth of sales, but also contributes to increased profitability. As many times stated before, our ambition is to continue to improve our EBITDA year on year, to meet our ambition to achieve 30% in 2027. Final slide for me before I hand over to Christoffer Rosenblad again. Cash flow, financial position.
Q1 was cash positive from operating activities, SEK 2 million , despite the busy operations, as I mentioned before. Investments amounted to SEK 42 million , primarily spending on US clinical trial and investments into our machine fleet. We ended the year with a solid cash... Sorry, not the year, but we ended the quarter with a solid cash position of SEK 511 million . So that was all for me, Christoffer.
Thank you. We're gonna go into two pictures of outlook and then into questions, but we can turn to the-
... First to the long-term outlook, which I believe is slide 21. The long-term outlook is important in order to establish the long-term picture, and that remains the same, that demand for transplant is still 10x the supply of organs today, according to WHO. The sales value of machine perfusion is also approximately 10 x versus static cold perfusion, which is typically a beer cooler or a picnic cooler box with ice and a solution. So we see a great market opportunity in front of us. And machine perfusion and our service models have proven to increase the number of organs to be used for transportation, especially in the fast-growing DCD organ pool.
The main growth driver are superior clinical results from machine perfusion, and the fact that service models reduce complexity and time for the transplant clinic. Hence, machine perfusion and service models on normal, and extended criteria or DCD grafts will drive growth in the near future. Lastly, to grow all the way to 10, 10 in number of transplants, the company believe is possible with the current human donor pool. However, over time, new innovative sources of organs will probably be used, for example, xenografts or printed grafts, et cetera. For both machine perfusion, new sources of organs, XVIVO has a proven product line. This puts XVIVO in a unique position on the market today. And with that, we zoom in a little bit more near term to 2024 and our outlook.
One, it's important to mention again, we keep a razor-sharp focus on our key priorities. Two, after the ISHLT, we realize, and we will increase the focus and resources on both the US heart trial and the EU heart launch. In parallel, for lungs, there is a great interest from customers to start an XVIVO program, and we will invest to capture that interest and increase utilization of EVLP on the XPS with their solution. Number four, we will increase production capacity by at least 10 x to meet the increased demand we see for abdominal products. Lastly, support US growing clinical program with service models to reduce the complexity in the transplant process.
During the year, we will also develop a successful product service revenue model to meet transplant clinics' logistical need, which we know is there, and we don't have a good enough offering today, so that will be developed through the year. With that, that was the outlook for long term and the year. With our vision in mind that nobody should die waiting for a new organ, we open up for questions. Thank you so much for-
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Simon Larsson from Danske Bank. Please go ahead.
Yes, good afternoon, gentlemen. Two questions from my end, please. First on, I mean, a very impressive print from, from the lung franchise this quarter. If I'm not mistaken, you know, machine perfusion, part of the consumables grew some 70% year-over-year. So were any one loss in the quarter, I mean, thinking orders pushed from Q4 into Q1, something else, or just a very good underlying demand? So any, any more flavor here will be helpful.
Thank you, sir, Simon. Yeah, to give some flavor, we had a comparably weak Q4 last year, so we cannot, how do you say, take away the fact that probably some quarters ended up on one side of this quarter or some orders on this quarter rather than the last one. But we do see a high interest, and we do see an increased activity on EVLP during this quarter that we certainly hope will continue, but that is nothing we know for sure. But we will at least do our best with our sales force to meet that interest.
Yeah, so you think, is this like a plausible level of sales that we should expect going forward, or should we expect this to come down a bit here sequentially and further into the year?
I think that's a great question. I think what we should remember is also that compare between Q1 and Q4 last year or were comparably lower quarters to Q2 and Q3 comparables. I think that is also important to keep in mind. It's always hard. This is one quarter. I think we need to see at least three, four quarters of continued growth before we should adjust too much in our model, so to say.
Yeah, yeah, makes sense. And the final one from my end, you mentioned one new customer that went live with the XPS here in the US during the quarter. I mean, it will be super helpful, like, roughly, if you can give us some estimate to what a customer like that could actually sort of bring in per year when up and running with the XPS fully in terms of sales for you.
I mean, a very good, let's say, a larger program could easily do 50 to 60 EVLPs on the XPS per year, when they're fully up and running.
Yeah. Okay, cool. Thanks. That's, that's all from, from my end. Thanks so much.
Thank you.
The next question comes from Jacob Lembke, from SEB. Please go ahead.
Hi, and good afternoon. I have a few questions, and I'll take them one by one. Starting on lung and EVLP. I mean, you sound a bit more positive on the sort of customer demand or customer interest here than recently. Would you say that you're seeing some sort of tipping point where you move towards more like inbound interest rather than you pushing this?
That's a great question. Again, I have to say, we—this is something we need a couple of quarters to answer with full confidence. We do see the interest there, and we do see that our sales force is gearing up and are getting better at meeting that interest every day. I would say still early days, and I would definitely wait a couple of quarters before I say something with 100% confidence. But I—in terms of interest, I can confirm that it's there.
Okay. And then on kidney, I mean, it seems like the production movement and improvements are moving according to plan. I think it would be interesting to hear you talk a bit more about the demand situation, such as if there's already, like, firm orders in place that you can start to deliver on once production improves.
Right now, we have had two successful launches, but very limited, one in Netherlands and one in Italy, and there we see that that use is picking up, and that is great. When now we turn our focus to the US and we have done a pre-launch activity where we do see that they are using the Kidney Assist Transports. So, but we don't dare to, let's say, fully launch until we know we have enough products on the shelf.
But I believe that we so we don't have any confirmed orders yet, but we have a very high interest for the product, and it meets a need that is there, not only on the US market, but on the global market, that there is a high need for a better kidney product that can take care of all DCD grafts for transplantation with good patient outcome. So we are confident that there will be a good launch in US.
Okay, and then, just on services, you mentioned that all customers are on a new contract model here. And I noticed the prices was a bit-- or average revenue per case was a bit higher here in Q1. Is this the level we should expect going forward?
Yes. This is definitely a model where we make more money per contract because we were taking on a lot of risk with the older model. So I think the numbers you will see from now on, in relation to the cases, should will reflect the correct ASP, and that could be used as a guidance.
Okay, great. And then just finally, it would be interesting to hear, you know, you talk a bit more on the heart products, maybe, you know, how the customer reception has been following the very strong results here, and now that you are only a few quarters away from launching this in Europe.
No, I can do that. I mean, it was overwhelming, the reception we got at the ISHLT, where all the world's key opinion leaders and I was gonna say all transplant surgeons, but probably some were home and making or doing transplants as well. But, I mean, the reception was just fantastic, and the interest is through the roof. I think everybody start to realize now what this technology can accomplish, not only in terms of better donor matching, longer distances. We can take care of organs that we could not do. We can do cases we just couldn't do before.
So that's something we definitely will both invest more into and have a higher focus on going forward, because I believe we sit on a technology that's gonna just change how transplants are made in terms of hearts.
Okay, thank you very much. That's all for me.
Thank you so much.
The next question comes from Ulrik Trattner from Carnegie. Please go ahead.
Thank you very much. And potentially going back to a few questions already been asked, but exceptionally strong EVLP growth here in the US, and I know you were a bit muted at the Q4 call, and you were talking about it takes time to train your expanded sales force. Should we see this as a sign of that process being ahead of your expectation, or is this purely due to a superior underlying demand... in EVLP?
I think the main reason is definitely that the underlying demand is higher than we anticipated. That's the main reason, but that said, I also must say that I'm proud of the sales force that is very new, what they have accomplished in a short time and the steep learning curve they have. To add an active customer that quick is a true accomplishment that I'm truly proud of. So it's both, but yes, the main reason is definitely the high interest and the high underlying growth from existing customers driving EVLP right now. It's not so much new customers.
Okay, great. And you also talked about expanding your service offering in the US and I'm guessing what you're trying here is to replicate more of that of Transmedics, giving your product portfolio and their service offering would be a good match. And also note that one of your head of marketing in the US Kelly, was previously part of Transmedics. So what does that bring to the table? What should be expected from service offering from the US here in the coming quarters? They're heading up towards full-scale kidney assist launch in the US as well as building up to heart and liver potentially being approved in the market here in a few years.
That's a great question. I will let Kristoffer Nordström answer your question more in depth. But before that, I wanna mention that we do see, and I've seen a long time, the need for a good service product offering. And the reason is that a transplant process take longer and longer time, and a heart on average, 29 hours. And if we're gonna do 10 x more transplants in the near future, the transplant teams won't grow that fast, times 10 in terms of resources. So we need to support them with the first 24 hours, and better technology in order for them to do 10 x more transplants on the US market.
So that is the reason behind we believe so much in this strategy, and that we believe that it will be a winner over time. That's why we work so hard on improving quality, improving communication, improving the customer offering, et cetera, because we wanna nail it when we go large scale. Last thing I want to mention also is that I think definitely when we come into transportable devices, that our product service offering will fit better. So if we think kidney and heart, that's a plug-and-play model, which is easier. But we believe already with the XPS and later with the liver, which is more back to base type of machines, that a service model will be advantage and drive a lot of growth for us.
For example, liver perfusion in Italy is five times higher than any comparable country in Europe, very much due to a service offering model on the perfusion side, on the liver device. So we have seen it works. We believe it will work in the future, and actually believe it will be a must for the future. But to the expectation next couple of quarters, I will let Nordström answer that question more.
Yeah, no, I think you know we see it as two phases where we are now in an interim phase of where we are strengthening and developing our currently the recovering business in the US. The end stage is, of course, when we have our, you know, both our transportable products, kidney and heart, on the market, and where we really can see synergies of integrating service into our product offering. But up until then, you know, we have a platform for growth now, we have continuously improved, and we will—I think our aim target is to ensure that we learn more and more and more about the customer's needs, add more customers, so we have a robust position and organization when we finally have our regulatory approval, approvals in place.
And I think we can expect a gradual growth from where we are today, and we will try to do our best to also have, you know, continuously have the service capacity in place so that always goes hand in hand.
Great. And just the follow-up on that, as you have recruited here in quite recent time, Kelly, from—that's been part of Transmedics. Can she bring some additional clarity on how you should, like, perform this?
Absolutely. She is on board now, great ideas and a very valuable addition to not only the US team, but also the global team. So she's still, she's one of them who has not been here that long, but I think we can already see that she brings a lot to the table, especially on the service side, of course.
Great.
Great question.
And if I were to move to abdominal and exceptional growth again, and especially for liver in Europe, but out of curiosity, which markets are growing? I'm guessing Italy and the Netherlands are fairly well penetrated markets, so this must mean that you're experiencing quite a strong growth outside of these two key markets.
Yes, is the answer to that question. That being mentioned, there's a lot of penetration and growth still to be done in both Netherlands and Italy. But definitely we see more of a wider growth everywhere in Europe right now. We had a couple of success stories a year ago with reimbursement in France, for example, for liver, which really helped growth there. As I mentioned earlier, we have had 20 really good publications on liver just in the last 12 months, showing superior outcomes, both on DBD, on extended catheter grafts, on DCD grafts. So we see that that has sparked a lot of interest together with better reimbursement. We see a wide growth all over Europe right now.
Great, thank you. And last question on my end. Obviously, Kidney Assist Transport is a great product, would have a lot of support clinically, could also be fairly easy to implement, but given the sort of the commercial success of liver in Europe, I believe it would be of high importance for you to get the liver device on the US market. And you touched upon IDE for liver, but can you just give us some clarification on what's left to start up the liver study?
I mean, to start the liver study, you need to agree on the FDA, on an IDE, and we are currently designing the study, and we will meet quite shortly with the FDA for a proposed study design. That will be a negotiation, of course. There is also product documentation that need to be approved, where even though it's a commercial product in Europe, there could be product gaps between our CE mark and what the FDA would like. So that's also discussion to be had with the FDA, regarding if there are any gaps in terms of annual testing or other product related issues.
Then out of experience, I know that the FDA always want to have a usability test done on US soil with US users, as a quality measure from the FDA side. So there's a few steps still to be taken on the liver side before we can get an IDE.
Okay, great. Last question on my end. Heart sales in the quarter, how much of the reported heart sale is related to Australia and New Zealand compassionate use, and how much is related to reimbursed sales out of the US clinical study?
I think I would need to come back to you on that one, Ulrik.
Fair enough. Fair enough. Thank you. Well, congratulations, again, on this other quarter, and, as for answering my questions. Thanks.
Thank you.
The next question comes from Jonatan Andersson from DNB Markets. Please go ahead.
Hey, guys, and congratulations to, to a great quarter. I have a couple of questions. I think that I will begin with abdominals. So when entering and ramping up the Kidney Assist Transport in, in the US, how, how will the commercial setup look during late Q2 and going forward? You can say anything on that would be helpful.
With commercial setup, do you mean, our field force for launch?
Yes, exactly.
Yes. Okay, great, great. We have, if you call it field force with mainly three competencies. One is, of course, sales, where we have three persons to start with, a head of, and then one for West and one for East. And then we have a clinical force that we will gradually need to grow the more customers we include in the launch, that we'll make sure that they use the product right and be there for the customers. And then we will have a technical service department that we will also gradually grow with the number of machines we have on the market. The more technical issues you will have and the more you have to do service on them.
So, that's pretty much what the team will look like right now. Then we will support from both the US marketing team and here in headquarters, with support with clinical trials, support with if there are any investigator-driven clinical trials that they want to be done, we support with health economic studies and reimbursement support, going forward. So that's how the organization for the launch look like right now.
Clear. And just looking at the potential launch here in Q4 for the Heart Assist Transport in Europe. On the back of the supply issues with the kidney, what lessons have you learned, and are you confident in not reaching that, to some extent, supply issues when launching this product?
That's a great question. We have to start with learned a lot, and we have been able to scale the production of heart, actually faster than kidney, already. And given the interest we've got during ISSAT, we have, one, included the heart products into the production scale-up project. And two, we are running a program to increase production, with the current production setup, which is, fortunately, more scalable than the production setup we saw for Kidney Assist Transport. So we learned a lot from that experience, and we are taking earlier actions, and we are taking more decisive actions on heart already now.
Great. And lastly, this might be a bigger picture and long, long term, but, given your clinical data and market position and the underlying market demand, do you feel hampered about, your, your profitability target? If you do not have any sales growth financial target as of today, would it make sense to, to switch towards a more growth-focused and oriented target going forward?
That is a great question, and to give you a straight answer, no, we don't feel hampered. It's more of a guidance that we should if we do something, we should do it with efficiency, and we should do it to ensure long-term profitability and make sure we don't take any, let's say, crazy bets in the market. So it's more of a guiding target we have to make sure that we if we do something, we do it with respect to the shareholders' money that they, you guys, borrowed us. So we don't feel any constraints in that way.
But that being said, then we might come to a launch where we feel we need to overinvest for a quarter or two, and the nice straight line from here to 30% might get a bump up or down from time to time. And we do feel that that would be communicated early enough if we see that need, so everybody would be aware of it. But no, we don't feel hampered in any way. We invest at a healthy level.
Makes sense. Then maybe one, just one more question. You have done some really rational M&A activities for the last years. Do you see any M&A opportunities down the road, maybe in service business area, or how's the market looking like, and what's your view on that?
The view is that we are always open to M&A if it adds value for the company and is strategically the right move, and we constantly look for M&A opportunities that fits our purpose. Especially if we would take, let's say, a strategic step where we believe it's much more efficient to buy a company rather than develop that competence or market position or what we want to achieve. So to say, if it's quicker to buy it or better to buy it and makes economically sense, then we would buy it rather than do it ourselves. It's always we always have the choice to do it ourselves. We could always partner with someone, we could always license, or we could always acquire something.
So we always ask us those questions: what does make more sense for this purpose, for what we want to achieve?
Cool. Great. And, once again, congratulations on a great quarter.
Thank you.
The next question comes from Johan Unnérus from Redeye. Please go ahead.
Great. Thanks for taking our questions, and yet again, congratulations on a good quarter, a very good quarter. Some nitty-gritty questions. You alluded to if you were to invest more intensively, you are currently investing in capacity and commercially, Q1, OpEx-wise, came in, at least in our view, a bit on the low side. What to expect there? You are targeting the US market, increasing the commercial activity capacity. That might not always end up in OpEx, but you're doing several things.
Yeah. Thank you, Johan. I think, you know, overall, as a little bit of a guidance here, if you look at our OpEx, so where we will grow, as we go, is primarily on the marketing and sales side. That is where we have the quickest return on investment. Then I also think by saying that, that if we expand our OpEx on commercial, we also that will also be followed by kind of a quick growth as well. So I do not foresee that that would dilute our margins with the caveat that Christoffer said that, you know, it could be one or two quarters where we take a deliberate decision to do extended investments.
But that's where we will invest gradually as we grow. Admin and research will be, I think, the levels we saw in this quarter is probably, you know, represented for the next quarter or so as well.
Great. Thank you. Also, smaller part, but critically important, as you explained earlier on the services side, it's obviously important to secure additional contracts. Anything more on contract pipeline, and perhaps you can do more to conclude this pipeline in the commercial sales process?
Yeah. No, I mean, with our strong offering that we have developed, we're optimistic. We also got the chance to truly in an international setting, but with high attendance from US stakeholders, we were able to present it as well as ISHLT. So I think we have a good momentum now. We have learned, I mean, there are the cycles of selling in a contract, it takes a few months, but there is a pipeline of interesting customers at the moment. Absolutely.
Yeah. And on the heart solution, you have published a great deal of achievements, and we're looking forward to the US study. Anything to be said about the initial centers, your 10 are active, and the prospects of any of them sort of concluding their part on the second half of the year?
I mean, what to be said on the, on the US trial, is mainly that... I mean, we got the best of the best centers right now, because we are in the comfortable situation of almost being able to choose, which doesn't happen that often. There is a huge interest, both from the ones who are in the trial and from the centers who want to get into the trial. Then it's always when you run the clinical trial, you run it at the highest pace you can, but you also want to make sure that you keep your inclusion, exclusion criteria, et cetera.
But we have a very high pace, and we are running according to plan, so we will definitely and most probably see a couple of the bigger ones concluding their portion during this year. Yeah.
Great. And, yeah, it's obviously important to get the traction from the centers. And also you mentioned that interest from centers not actively participating. Is there any way to activate these centers ahead of the approval?
The straight answer to that is yes. Right now, I order the teams to have 100% focus on the current trial, because that is needed to not drop the ball on the trial. But the answer is yes, and we are in the planning phase to see what other trials we can do on US soil that would increase the confidence, both from a regulatory approval view from the FDA, that they would be interested in, also to build knowledge on US soil around the technology. I think the key takeaway also from ISHLT was how US clinician was quite impressed with the confidence the European clinicians had around technology. But there is a difference. I mean, most US clinics use technology for four months versus four years in Europe.
So of course, that gives a greater confidence to use technology for a longer time. But I think that definitely spiral interest to take the technology to the next level also in the US So we are planning for that.
Great. Thanks for answering the questions.
Thank you so much.