Good afternoon, and welcome to TransMedics Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer 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 Gilmartin Group for a few introductory comments.
Please go ahead.
Thank you, operator. Earlier today, TransMedics released financial results for the quarter ended June 30, 2021. 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 Act of 1995. Any statements contained in this call that relate to expectations or predictions Our 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 in our organization, regulatory approvals and reimbursement And guidance and or expectations for revenue, gross margins and operating expenses in 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 This conference call contains time sensitive information and is accurate only as of Live broadcast today, August 5, 2021. With that, I'll now turn the call over to Walid Hasimitan, President and Chief Executive Officer.
Thank you, Brian. Good afternoon, everyone, and welcome to TransMedics' 2021 Q2 earnings call. Joining me today is Stephen Gordon, our Chief Financial Officer. As expected, 2021 is shaping up to be a transformative year for TransMedics. Building on our momentum from earlier in the year, we achieved another significant regulatory milestone in the Q2 of this year with a very strong panel vote in support of the OCS liver indication.
Given the panel outcome, we are now looking forward to FDA approvals of both OCS heart and liver indications in Q3 and early Q4 respectively. In addition to our success with our product We also saw continued traction commercially. Net revenue for the 2nd quarter was $8,200,000 representing 141% growth compared to 2Q 2020. It is important to note that this growth was achieved without Any liver revenue contribution in 2Q due to completion of the OCS liver cap program. Now let me summarize our progress across our key strategic initiatives.
First, the OCS Heart DVD PMA. Following our positive panel vote in 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 of the DBD heart indication within the next several weeks. 2nd, the OCS Liver PMA. In July, we secured a nearly unanimous positive panel vote supporting the approval of the OCS are confident that we are proceeding towards approval of the OCS liver indication before year end.
Our third initiative is the National OCS program. We're continuing to expand and added 1 new region in Tampa, Florida, bringing the total to 7 initiated regions. We're on track to meet the targeted goal of 10 regions Activation before year end. We had several successful cases from several active regions in Q2 that truly underscored the potential transformative nature of this program. One example is we are 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 OCS National Program. Meanwhile, we're continuing to build the necessary We expect this to continue through early 2022 and as we add new clinical indications after the approval of the OCS heart and liver. As we stated before, we believe that the National OCS program will be an important driver for OCS utilization and revenue growth in the U. S, particularly as we continue to expand our comprehensive portfolio of OCS transplant indications. 4th, we are continuing to advance the OCS Heart DCD indication.
We completed the enrollment of an additional 90 DCD heart transplants And our CAP program in early Q2. We are on track for the top line results readout to be in Q3 of this year, and we're 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 this DCD Heart indication in 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 in the United States.
This gives us a significant competitive advantage to grow our lung business in 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 three OCS product approved by FDA. This will be a tremendous inflection point on our growth trajectory And we'll enable TransMedics to make a significant step forward on our mission to transform organ transplant therapy.
While receiving this approval is of the utmost importance, our current time lines may limit our near term ability to leverage CAP programs Continued access programs to drive revenues in Q3. Specifically, we're not initiating any CAP programs for liver or heart in Q3 given the imminent FDA decision and approval timing. As such, given the current FDA time lines, we will not issue financial guidance for 2021. Finally, from a macro perspective, I'd also like to comment that while COVID delta variant is gaining momentum in the U. S, Transplant activities have generally remained unaffected and currently are at or slightly above What they were pre COVID.
We're cautiously monitoring the situation and hope that any potential negative impact of the Delta variant that will be limited on 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, Waleed. I will now provide some additional details on the Q2 results and other financial information in the quarter the year. For the Q2 of 2021, gross revenue was $8,700,000 and net revenue was 8,200,000 Net revenue increased by 141 percent from the Q2 of 2020. That was a quarter that was highly impacted by the early onset The COVID pandemic. In the U.
S, gross revenue was $6,300,000 and net revenue was 5,800,000 U. S. Net revenue increased 136 percent from the Q2 of 2020. And I would note that this revenue performance did not include any revenue from our OCS Liver product As all clinical activity in that program has concluded while the FDA completes the review. For further detail, the Oregon breakdown on U.
S. Net revenue was $3,500,000 of OCS Lung and $2,300,000 of OCS Heart. And outside the U. S, revenue was $2,400,000 in the This was up 154 percent or $1,500,000 from Q2 of 2020 And that included $2,300,000 of OCS Heart and $100,000 of OCS Lung. The key drivers of our Q2 revenue performance were first, Strong OCS Lung sales in the U.
S. As U. S. Lung transplants have recovered, we have seen increased use of the OCS through both Direct acquisition and our national OCS program. 2nd, U.
S. Heart sales were also strong as we completed the OCS Heart DCD CAP trial And finally, we saw some international recovery with revenue this quarter back to levels similar to pre COVID. Gross margin for the Q2 of 2021 was 68% compared to 56% for Q2 of 2020, which was during COVID and it's equivalent of 68% that we saw last quarter. Total operating expenses for quarter were $15,500,000 This is up 58% from Q2 2020, which was unusual. It was up 37% from last quarter.
And there were several drivers for our sequential expense growth in addition to our steady increase in commercial sales and National OCS Program 1st, stock secondly, expenses related to preparing for 2 FDA panels amounted to approximately $700,000 in the 2nd quarter. And finally, we had a one time R and D expense of about $500,000 This higher level of spending is in line with previous communication And we will continue to be close to this level or greater throughout 2021 as we continue to make investments necessary to support all three commercial programs to $7,900,000 in the Q2 of 2020 and our net loss for the Q2 of 2021 was $10,700,000 compared to $8,500,000 in the Q2 of 2020. Finally, cash as of June 30, 2021, which equates to a reduction of $5,900,000 from the balance at the end of Q1 2020. And weighted average common shares outstanding for the quarter were 27,600,000, new guidance for 2021. Now I would like to turn the call back to Waleed for closing comments.
Thank you, Stephen. Before closing, I'd like to comment once again on TransMedics. We're now closer than ever to having all three OCS products approved for commercial use in the U. S. Market.
The expected approval of the OCS of 3 transplant markets simultaneously in the United States. With that, I'll now turn the call to the operator for Q and A. Operator?
Your first question comes from the line of Cecilia Furlong of Morgan Stanley.
Great. Good afternoon. Thank you for taking the questions. Walid, I wanted to start off just with the recent loan performance in the U. S.
If you could just talk through kind of what you saw during Q2 as the quarter unfolded?
Thank you, Cecilia. So the growth in the lung business in Q2 was really driven by both the direct acquisition and the national program. As we stated before, that's a driver, not only through more adoption of the national program Lungs, but also for active lung centers as they become more aware of the capability to drive adoption there. So that's really the combination of both, the national program, the awareness, The successful cases that are starting to accumulate, again, nothing drive adoption more than actually seeing The product being delivered in regions that would have never been delivered to from far distance, And that created significant momentum for the lung program in Q2. Again, this is driven by both As we move forward, we expect that momentum to continue and we expect the national program to Continue to increase and that's very exciting for us.
Great. Thank you. And if I
could just continue as well with The national program, you talked about building resources around that program for the back half of the year. But can you just walk through your planned investment, key areas of investment through the back half of this year and really what you incorporated in your OpEx outlook that you walked through as well? Thank you.
Thank you, Cecilia. In support teams, in 3 major verticals, Surgical capabilities for cardiothoracic procurement surgeon, clinical support capabilities that are regionally specific To support each active region as well as coordinators, clinical coordinators, transplant coordinators that are Screening every donor organ and communicating and quarterbacking the logistics for all the missions that are involved In the Oregon the National OCS Program. That's
Josh Jennings of Cowen.
Hi, good afternoon. Thanks for taking the questions. Well, yes, I was hoping to just better understand The setup for VERT indication launches in 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 why the setup is either similar or different?
Sure. Thank you, Josh. We expect it to we hope and we expect not To make it resemble the lung launch in any way, shape or form. Let me be clear, why do I say that? When we launched the lung, we didn't have a single active lung center in the United States with the OCS product for at least 14 to 16 months.
In the case of the heart and liver, we have 2025 centers that literally up to few months ago were To leak the liver products in the CAP programs for DTE and the CAP program for the liver PROTECT. So that's number 1. Number 2, the long and post approval, very complex design That we understood the rationale for it. And it took several months, if you remember, Josh, to get through different IRBs and local IRBs are designed of the post approval registries for both heart and liver, have 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 to get the registry set up. These are the 2 major differences that we are Focusing on and then to add on top of that, the whole new initiative with the national program, that is completely new That didn't exist in the lung.
And to start with 7 active regions, probably by the time the heart and the liver is approved, We have more active regions that gives us significant leverage towards ending the year in a very strong Position on the launches of both heart and liver, while we continue to grow the line.
It's for us. And you mentioned the number of investigator sites that have been active in both liver and heart. And then you're not all It's OCS, hard OCS, indications of interest or demand levels from investigator sites and any more color on How low that Haggen Crude actually is? Thanks for taking the questions.
Thanks, Carl. We have anywhere between 10 to 15 centers additional centers in the heart and 10 to 15 additional centers in the liver, the product is approved. In over and above, the 25 heart centers that are active or was active with the DCD and the 20 liver centers that are judging. I had liver surgeons and liver centers Call us after the panel date to congratulate us and Seth, can we start using OCS again? Momentum with high degree of responsibility and we are working with our centers To make them as prepared as we can, proactive approval.
So once that's in a smooth fashion to initiate them commercially and Get the product and get the program back on track.
Great. Thanks for those answers.
So thanks for taking my questions. First question is, Stephen, I'm sorry, Can you remind us the U. S. And OUS loan number for the quarter that okay. And as we think about kind of Q3, Yes.
Obviously, without the DCP, the caps for liver or how the U. S. In heart,
If we don't get the approval and obviously liver is what it
will be. Just confirming that, right?
That's correct, Bill. That's very
helpful. As we sit there and think about label because that would be the next kind of data point, Is there anything in the discussions that's different from what we wish in for Hart?
Bill, as you know, we do not comment on our active discussions with FDA specifically around label, but I am Optimistic that the label will meet will be reasonable, We'll meet our expectation and it will be data driven, heard on the panel day.
Great. And I know that it's tough to answer those questions, especially as you're in those discussions. If I could, 2 more questions on lung and then I'll jump off. One is just what is the percent in the U. S, I mean that was a very What's the U.
S. Kind of MOCS kind of business, if you're willing to share that? And then My last question is, what can you help us understand the significance of the OCS Lung solution and why that matters? Thanks for taking my
Thank you, Bill. So I'm not sure I understood the first question, but Are you talking about how much of that $3,500,000
Yes. It's kind of U. S. Loan is driven by OCS versus non OCS.
All the $3,500,000 are all OCS.
Yes, the national program. I'm sorry.
I think the national program is somewhere between 15% 20 The bulk is directors. I think we will start seeing the national program kind of increasing early 2022 and Throughout 2022. But the presence of the national program is we add up new region, as we staff the new region, we're going to start seeing The national program number growing up. That's our expectations. And as far as the next question the second question around The OTS Lung solution for coke preservation.
We look at that bill as significant, but Having that lever is a huge strategic and competitive advantage to enable us to fill in the gap Between a center that is completely not using the OCF rated OCF center, we can drive revenue from sale of Cold solution. It also give us a strategic competitive advantage in existing centers that are using OCS, Call point for everything related to lung preservation. And I think I'm addressing your question, Bill. Please let me if I'm wrong.
That was perfect. Thank you.
Your next question comes from the line of Mike Ott of Oppenheimer.
Suraj today, a lot of our deliver protect data I presented a panel last month. Curious if you can expand any more on the physician reaction to that liver data?
Extremely positive. The American Transplant Congress, where the liver data won the most impactful Presentation out of more than 25,000 abstracts and presentations. So that's That's not 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, hard on yumlibra.
Excellent. That's great to hear. And realize while you're limited in what you can say With the ongoing FDA discussions on labeling, but can you just say if
the relationship and collaboration with FDA And I don't like to comment on those, but I am optimistic and confident That it will be data driven. It will be supportive of the results achieved in both trials. So I'm optimistic and I'm confident, but that's all I can say.
Okay, that's perfect. Thanks so much.
Okay. I don't see any question at this time. I will turn it over back to Waleed 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. You and have a wonderful afternoon.
This concludes today's conference call. Thank you for participating. You may now disconnect.