Okay. Good morning, everyone. Welcome to Wednesday of the J.P. Morgan Healthcare Conference. My name is Allen Gong. I'm on the medical supplies and devices team here at J.P. Morgan, and it is my pleasure to introduce the management team of TransMedics. Leading the remarks today will be President and CEO, Waleed Hassanein, and then joining us for the Q&A will be CFO, Stephen Gordon. If you have any questions, feel free to shoot them over to me through Bloomberg, through email, or just put them into the online portal. With that, I will leave it to Waleed.
Thank you, Allen. Good morning, everybody. Thank you to Allen and the J.P. Morgan team for the opportunity to present at the conference this year. Slide number 2 shows our forward-looking statement. Jumping into slide 3, what does TransMedics do? TransMedics is transforming one of the most important and exciting fields and therapies in medicine, which is solid organ transplant. We'll explain to you why this is very important and exciting therapy. We're doing that by doing two very important things that address the major needs in the field. One, improving post-transplant clinical outcomes, and more importantly, dramatically increasing the supply of available donor organs for transplant. Why is organ transplant important?
Because it happens to be the gold standard of treatment for end-stage organ failure. Slide number four describes that at a high level. End-stage organ failure is one of the most expensive and chronic disease states that afflicts people, and organ transplant is the gold standard. It's the gold standard for treatment because of three main reasons. For payers, it represents the most cost-effective treatment compared to optimum medical therapy or mechanical circulatory devices. For patients, organ transplant represents the longest life expectancy and the best quality of life. Finally, for providers, for hospitals, it is the treatment of choice clinically for treating these very chronic and very debilitating disease conditions, but also, it is important for payer, for hospitals to do organ transplant to meet CMS volume and quality metrics on an annualized basis.
What is the major need in organ transplant? In slide number 5, is this hidden secret in organ transplantation over the last four or five decades, that there is a significant and massive underutilization of donor organs to allow us to do organ transplant. This slide 5 shows just the picture in the United States, and this is replicated everywhere outside of the U.S. On an annualized basis, we lose the vast majority and underutilize the vast majority of the available donors. For example, in the lung, we only transplant 2,500 lungs out of potentially 12,588 lungs. The heart, 3,600 hearts and wasting 8,000 or nearly 9,000 hearts. The same thing for the liver.
This represents a huge opportunity for technology companies like TransMedics to tackle this problem. Why do we underutilize the existing the donor pool and how TransMedics is going to change that? Slide 6 shows the 3 main reasons why we underutilize the donor pool. The primary reason is the old way of preserving organs using cold static storage. Putting the organ in a cold container, literally a blue cooler filled with ice, subjects the organ to 3 major issues or has three major limitations that is the direct cause for why we underutilize the vast majority of the donor pool in the United States.
First, once you take the organ outside of the living body of the donor and putting it on ice, you subject the organ to a time-dependent severe injury or damage called ischemia. The longer the organ spends on ice, the higher the probability that the organ will never function again. Because of that, clinicians and transplant physicians across the world have developed these limitations of time and distance because they're afraid that the longer they keep the organ on ice, the higher the probability that they will end up with a patient in a critical stage that may require a second transplant or may die from these complications. That is a huge limitation.
The second is because when the organ is on ice, it's not living, it's not metabolically active, it's not physiologically active, so there's no way of treating or optimizing these organs from the challenging environment of the donor body. Finally, because the organ is just sitting there in a cold container filled with ice, there's no way of assessing organ viability. You don't know if the organ will function again or not. You rely only on an initial assessment in the body of the donor in midst of a high complicated unnatural environment.
These are the three limitations of cold storage that result in the big underutilization of donor organs today really thrown away on an annualized basis, anywhere between 70%-80% of the available pool. These are the three limitations, especially the ischemic damage. That is directly correlated to the significant post-transplant complications, called primary graft dysfunction. These are the complications that happen when the organ is injured enough because of preservation, and the organ requires several additional days of treatment, mechanical circulatory support, ICU stay and hospital stay, and very expensive medications to try to revive that organ in the body of the recipient. The Organ Care System or TransMedics technology is the complete opposite of that.
We developed the Organ Care System to comprehensively address the three limitations of cold storage. In the Organ Care System, the organs are never ischemic. They're constantly perfused with oxygenated and nutrient-enriched blood. The organ is metabolically active. The heart is beating, the lung is breathing, the liver is producing bile, the kidney is making urine. That enables us to treat the organ as if we're treating it in the body of the donor. Finally, because the organs are functioning, we can assess their viability, both metabolically and functionally in some cases, to ensure that they are suitable organs for transplant. Based on these three characteristics and benefits of the Organ Care System, we have demonstrated significant improvement in organ utilization for transplant and significant reduction of post-transplant complication.
Now, if you go to slide eight, you will see that the Organ Care System or TransMedics technology is the only FDA-approved platform across three major disease criteria: lung transplant, heart transplant, and liver transplant. There's no other technology in the field of solid organ preservation that has that platform or a stable of technologies to address these needs. Now, let me share with you in the next two slides the summary of all the clinical data that we accumulated that supports everything that I claimed in the previous slides. Slide nine gives you a snapshot of the impact of using TransMedics Organ Care System technology on the big issue of donor organ utilization. These are the results of our FDA pivotal trials that helped us secure the FDA approval for these indications.
On the far left of the slide, you can see that using the OCS, we were able to demonstrate that we can increase the utilization of donor lungs for transplantation from 23%, which is the average using cold storage, to nearly 90% or 87% to be exact. That's a significant increase. That could double or even triple the number of organ, of lung transplantation in the United States. In the case of the heart, we were able to move utilization from 32% in the case of cold storage to 81%. Again, significant increase that could double the rate of organ transplantation. The far right-hand side of the slide nine really shows how the OCS resulted in the development of even a new organ transplant sector called DCD heart transplant.
A DCD heart means it's heart that is that the donor has suffered cardiac arrest or circulatory arrest. The heart has stopped beating for an average period of 30-35 minutes. Complete cardiac standstill. 3 years ago, there was no such thing as a DCD heart transplant because the heart had stopped beating. There's no way of assessing the cardiac function for transplantation. Over the last 2 years, heart transplant in the United States have grown because of the Organ Care System had a trial, a pivotal trial that showed unequivocally that we could take a DCD heart transplant or a DCD heart and make it transplantable 89% of the time or nearly 9 out of every 10 donors. That is starting from a 0 2 years ago.
That PMA is under review by FDA, and we expect that PMA to be issued the second half of this year. We're very excited about these results. Now, slide 10 really shows the impact of the Organ Care System on post-transplant clinical outcomes. We wanted to demonstrate that not only we can double the rate of organ transplant in the United States and around the world, but also we wanted to demonstrate the benefit of improving clinical outcomes using the Organ Care System and the reduction of ischemic damage. We actually have demonstrated that. In the lung, we've demonstrated 50% reduction of the most severe form of primary graft dysfunction after lung transplantation by 50%.
For the heart, we've reduced primary graft dysfunction by 65%, and we demonstrated that we can increase the donor pool to include DCD heart donors that were never used for a heart transplant prior to the Organ Care System. In the liver, we just published in JAMA Surgery the results of our liver trial showing significant reduction of both short and long-term complications in liver transplantation using the Organ Care System compared to standard of care cold storage. These are high transformative results. We're very excited about this, and we are very excited about our position now that we have all these FDA approvals at the end of 2021 to drive commercial and clinical adoption of our technology in the field.
This part of the presentation concludes who we are, our technology, the transformative impact of our technology in the field of organ transplantation. The next part of my presentation will show you how we are leveraging this transformative, disruptive nature of the technology to further increase adoption and transform the entire field of organ transplantation. Before I do that, let me summarize to you in slide 11, how organ transplant works today, even before the OCS. The transplant center where the recipient is really carries the burden of having staff, technology, logistics, transportation to be able to go out and procure the donor organ and bring it back to the transplant center to do the transplant.
The organ procurement organization or OPO, they are responsible for managing the donor and allocating the donor organs. They don't do much else beyond that. The full burden of logistics, complexity, management of resources, staffing, training on new technologies lies heavily on the shoulder of the transplant program. We saw that as a potential impediment or a potential inertia in the system to broad adoption of the Organ Care System. We wanted to do more. We know we developed a disruptive technology. Now we wanted to do more to maximize the clinical benefit of this technology in the field of solid organ transplant.
For the past year, we have launched what we are calling the National OCS Program, which we are extremely bullish on because we believe this will transform the entire transplant space. The National OCS Program is summarized in slide 12. Think of three major goals for that program. First, we're leveraging technology and services to provide end-to-end solution to manage organ transplant from donor until it arrives to the transplant center. The goal for that is to maximize donor organ utilization while minimizing the logistical burden on the transplant program and their teams.
Number 2, we are partnering with both transplant programs and OPOs in a current workflow to ensure that this is fitting right into the current workflow and does not disrupt or displace anything that is going on now other than efficientizing the process and minimizing the logistical burden of organ procurement on the transplant program. The goal of this is to create an efficient and scalable model to drive broader adoption of the Organ Care System technology and to increase the transplant volumes in the United States. That's our goal of the National OCS Program.
Putting it in graphic form in slide 13, the goal is for TransMedics to become a key stakeholder, sitting right at the same level of the transplant program and the OPO, to be in charge of everything related to organ procurement, OCS technology management, clinical assessment, and logistics delivery of donor organs from donor to arrive to the transplant program. This will take significant burden off the transplant center, resources to enable them to do more transplant without carrying the burden of increasing their their logistical burden of organ procurement, and gives TransMedics a significant unique position in the field of organ transplantation. Slide 14 really gives you the five major reason why TransMedics is uniquely positioned to deliver on these results for the national program.
First, the technology that we developed is the first of its kind, and it's the only multi-organ technology platform that exists on planet Earth today. The significant global clinical experience that we developed over the last decade supports every claim and every position that we can leverage into the national program. We have a dedicated team of 70 clinically oriented professionals in TransMedics that have been supporting clinical deployment of the technology throughout the years as a part of the clinical trial. They have full experience and deep experience in managing organs ex vivo on our platform. We have established great relationship with major transplant programs across the United States as a part of our pivotal trials.
Finally, we have the dedication, the vision, and the capability to deliver not only the transformative technology which we delivered in the form of the Organ Care System, but also to work with the current stakeholders to transform the field even further and maximize the use of this technology to truly make a huge impact on the field of organ transplantation. Because we are committed to this, we put together a fairly robust infrastructure that is summarized on slide 15, that really gives us the breadth of capability to be able to deliver on our goal of delivering an end-to-end solution.
These capabilities include on screening donors, screening recipient, logistical partnership across the United States, and a digital ecosystem to enable the communication of HIPAA-regulated information between our team that is managing the organ and the transplant center that is accepting the organ, and really be an integral partner to the transplant community in the United States to drive significant growth and clinical success. We started last year with 2 or 3 active regions in the United States. We ended the year with 10 active region, which is the goal that we set for ourselves. Every one of these red circles on slide 16 represent a hub, an OCS TransMedics hub, that includes technology, personnel, clinical personnel, clinical specialists, surgical expertise that can go out and procure the organ.
The goal is to leverage these 10 active regions and expand upon them, but leverage those as a hub for initiating national program cases across the United States to cover coast to coast, and we're looking into expanding into Hawaii and Puerto Rico in 2022. We're high excited about where we ended the year. We're more excited about 2022 and our ability to truly flex our capabilities and demonstrate significant growth now that we have the FDA approvals in the U.S. Slide 17 shows you the case examples over the last 6 months. This map continues to get busier, and I'm hoping one day that this map will be completely covered with missions.
Every one of these lines represent an OCS case that could not have been done if it wasn't for the national program because, as you can see, we're expanding the radius of travel. We're expanding the time and distance between donor and recipient lungs are staying on our system for 25+ hours on routine basis, which again, is unheard of when you're using cold storage. We're high excited about this, and we're looking forward to expanding the national program in 2022 to include heart and liver.
We are starting 2022 with a commercial offering for TransMedics that includes both direct acquisition, which is the center acquiring the technology and using the technology with their own team without any support from TransMedics, or a national program which the TransMedics mobilize the team, the technology, and we bill the center for the technology cost, which is the same cost they would pay if they are acquiring the technology directly, as well as a service cost associated with that for us to be able to help them with the surgical procurement and management. 2021 has been a great year for TransMedics. We've achieved on every major regulatory milestone that we set for ourselves. We obtained two FDA PMA approvals to give us access to the heart and liver transplant indications.
We have achieved FDA clearance of our OCS Lung Solution. We reported a positive top-line result for the DCD heart trial, and we submitted a PMA supplement to give us access to the DCD indication. We reported the OCS liver results, positive results, and the results have been published earlier this year in JAMA Surgery. 2022 is a year that we're more excited about than 2021. We think 2022 is going to be even a more defining year for TransMedics.
Not only we have significant data readout coming out in the ISHLT or International Society for Heart and Lung Transplantation meeting in April 2022 here in Boston, where we're reporting the full results of the DCD trial, the long-term result of the EXPAND Heart trial and the long-term result of the EXPAND Lung trial. We're looking forward to expanding the National OCS Program to include heart and liver. We're looking forward to the FDA DCD heart indication approval and that to drive significant commercial growth in the United States. Slide 21 summarizes our near-term and long-term growth strategy the goal near term is very clear. It's to drive significant growth now that we have FDA approval behind us.
Long term, we're looking to expand our product offering to include kidney transplant, which will significantly increase our TAM. We're looking forward to achieving OUS reimbursement to grow our business internationally, and we are beginning the next generation program that will take our technology and drive future growth that we are looking forward to expanding our indication and our technology platform. Slide 22 shows our very unique competitive position. We think we're in a very unique position that really created a very wide moat between us and any potential competitor. We're very proud of this position, and we continue to distance ourselves from our competitive technologies out there.
finally as I've always said, we look at TransMedics as a significant growth opportunity. It's an opportunity that is fueled by a very disruptive technology that creates a multi-organ platform that has a multi-billion-dollar addressable market. Our business model is disposable driven. Even with the service model, the primary driver and the high margins of disposables is what drive the pricing on the service model. We have established U.S. reimbursement. We have achieved all the FDA approvals that we needed to get launching across the three organ platforms, and we expect the final PMA for the DCD heart indication in the second half of this year.
We are high excited about where we are, and we're looking forward at that over the next two years, to become the next standard of care in solid organ transplant across heart, lung, and liver transplantation. With that, I thank you so much for your attention and again, thank you, Allen, for the kind invitation to present at the conference.
Okay. Thanks so much for that, Waleed. Just to kick it off, right, I think it's pretty clear that we're entering 2022 with TransMedics in a like a very different position. Like, as you mentioned, you got your two approvals for heart and liver alongside your existing approval for lungs, you're finally going to market with kind of a full portfolio, if you will. Not to say that there aren't other opportunities ahead of you as well. When we think about the performance of those organs, fourth quarter was, I think, we could probably think of it as like the first clean quarter, notwithstanding some impacts from Delta and Omicron. How has uptake really been on those organs? How quickly have you been able to get those trial centers converted over to commercial?
Thank you, Allen. As , we did not preannounce results you're right. You're absolutely right. Q4 was the first clean commercial quarter for the business, and we're looking forward to discussing those results in our earnings call as you said, and as I stated in my presentation, we're looking forward to a very strong 2022, because it is the year where we now have all the approvals in hand, and we're looking forward to our execution to speak for itself across all three organ platforms.
Got it. then I know that you guys haven't preannounced, aren't really going to be providing guidance today, but COVID-19 is still with us, as I mentioned. As everyone knows, we've seen that the impact, even on a very life-saving procedure such as organ transplant, was very profound back in 2020 and even through 2021. Relative to the trends that we've seen historically, how has Delta really played out in the fourth quarter? And now with Omicron on top of that, how did that impact December? How are you seeing that impact January?
Sure. That's a very important question, Allen, and thank you for asking it. As I stated publicly numerous times we never assumed COVID is going to leave us quickly here at TransMedics. We've been following a very strict and more conservative approach to one, to protect our critical employees that are involved in the building of the technology, so we can continue to supply our life-saving technology to the market. Overall, the macro impact of COVID and organ transplant, as I've stated publicly, will always disproportionately negatively impact the lungs. I think the perfect validation of that is the UNOS data that just came out a couple of days ago and showed clearly that heart and liver numbers in 2021 have actually grown.
We know that the primary driver for heart transplant numbers growing in 2021 was the use of OCS for DCD heart transplants. The lungs are the only numbers that actually went down. What do we make out of that? As I've stated in 3Q earnings call, we look at TransMedics now that we have approval for heart and liver as a more resilient, robust business against COVID impact, where before every COVID peak resulted in significant drop of our ability to commercialize lung and just because the number of lung transplant was negatively impacted. Again, where we are, but having access to multiple organs like heart and liver that are less impacted by COVID gives us a little bit more flexibility and against COVID.
Internally, we have been, following this very conservative approach to protect our team ultimately, COVID will have a negative impact. I'm not saying that we're completely immune from COVID impact, but we're trying to minimize that to a level that doesn't really impact our results on a quarterly basis. So far, we believe that we are in a decent shape.
Shifting over to the National Service Program, I think most view that as probably one of the biggest upside drivers of the story today the slide where you showed the kinds of transplants that you're enabling with that with that and OCS that really just weren't performed before definitely seems like a big opportunity for TransMedics to kind of establish itself as a middleman here you've talked about how many territories you've expanded to, but ultimately, like how much of this business should we expect will be represented by the National Service Program?
Sure.
How do we really track the progress that you're making here?
Sure. Allen, that's another important question. I think, let me give you our perspective, in the intermediate term. We're looking forward to the national program to contribute approximately 50% of our numbers in 2023, and we look at 2022 as the beginning of that transformation. Over the next two years, we're going to be tracking that and aiming for the national program to deliver approximately 50% of our revenue in 2023. I say that because we believe that for us to really double or aim to double organ transplant, we have to do a different process to minimize the logistical burden and the burden that is on the shoulders of the transplant program.
It's an area of strong focus and excitement both at TransMedics and in our discussion with the transplant community, both on the transplant center side and the organ procurement side. We're looking forward to reporting these. We think we'll start reporting the percentage differences towards the end of 2022, just because to give us some more data points that we can feel comfortable sharing with the market. Definitely we're aiming to be at the 50% mark by end of 2023.
Got it. Just like a little bit of a housekeeping question, I guess it does seem like you are taking the middleman role, and on paper it seems like you are taking quite a big load off of the transplant centers and off of the opos I think I know the answer to this, but has there been any pushback on TransMedics working to establish itself as the middleman? Are many parties on either side of the equation maybe a little, do they have any issues with kind of this new system that you are trying to set up?
Yeah. I mean, Allen, we're not displacing anybody in a negative way. As , when you transform an industry that hasn't seen innovation in four decades, it's never an easy task. Yes, there was a little bit of a shock to the system. As , when we believe in something and we're we don't keep it to ourselves. We have been broadly communicating across the entire stakeholdership of organ transplant in the United States, from CMS to HRSA, to commercial payers, to OPOs, to transplant program, to make sure that we educate them on our goal. So far there's an overwhelming receptivity.
Now it's up to us to go and execute and turn that receptivity into actual results. We believe if we succeed in doing that, I think everybody of those stakeholders would actually be extremely supportive because what we're doing fits and delivers on every strategic vision of each one of these stakeholders. CMS issued a final ruling in 2020 saying that they need to increase organ utilization in the United States by 70%. There's no way that goal could be achieved without technologies like the Organ Care System. Transplant programs are under a lot of pressure to increase their volume and maintain or improve their outcomes. There's no way they can do that without using technologies like the Organ Care System. Now, the national program comes in as an efficient way to deliver these results without increasing the burden on the transplant program.
Got it. Moving on to some of the approvals that you got last year and starting with heart. I would say the heart panel, for those who didn't watch it, ultimately wound up as a great outcome for you guys. You had a very broad label. But I would say the panel itself was a little more contentious than those we've seen in the past, right? Didn't stop you from getting approval, just because I feel like the unmet need and the data ultimately does show that OCS heart has an important role here. But just because, like, optically, the panel was a bit more contentious, has that been an impact on adoption at all?
When an approval for, I believe, DCD heart in the back half of next year, how important will that be for adoption?
Sure. Allen, thank you for asking that question. For us, the heart panel, we were expecting a contentious panel. We told everybody to expect a contentious panel, but that doesn't concern us, because we know our data, and we've stated that publicly before and after the panel. As you said, the ultimate outcome was strongly positive for TransMedics. We know where the issues were. We had the data to prove that our view of the data is the right view, and I think that panned out with the panelists. That event ended on that day. Since that day, our relationship with the FDA, especially the cardiovascular division, has been nothing but extremely positive. We hold the FDA team in very high regards.
We have a tremendous amount of respect for them, and I think we're building strong bridges and strong collaborative relationship with that division, and we're very proud of that. That will speak for itself when we release the results of Q4, as well as we're hoping once we have the formal feedback on the DCD PMA supplement. Whatever contentiousness that took place ended on that day, and it was one of those things that we moved far from, and we're well past it both internally and in our relationship with the cardiovascular division at FDA. We don't see that impacting our adoption at all. The DCD heart indication will come in 2022. We're waiting to hear whether or not there will be a panel meeting.
We're preparing for one in case FDA decides to have one, and we're confident in our ability to win that panel, even if we go to panel the transplant numbers, if you look at UNOS, will tell you that there are DCD heart transplants being done in OCS today. But that's obviously not promoted by TransMedics, and we're looking forward to achieve that important milestone in 2022 to give us more flexibility to commercialize DCD heart transplant in the U.S. and grow DCD heart transplant numbers in the U.S.
You touched upon it in your presentation, but moving on to kind of the pipeline, what kind of timeline would we expect for OCS Kidney? I don't want to put words in your mouth, but I think for some reason, I remember hearing that we could be starting to see maybe the initiation of some trials this year. When it comes to your next gen OCS system, what are the kind of areas of improvement that you would be really trying to hit with such a console?
Sure, on the kidney side of things, we are hoping to have to publicize our strategy and our regulatory path for a kidney platform by the end of this year, beginning of 2023. And then followed by a clinical program that will take our clinical programs on average take anywhere between three to four years to fruition. This will be a large clinical program. For us, Allen, we have 3 major opportunities, commercial opportunities in the near term. For me, I want to build a solid commercial foundation with the heart, lung, and liver, and then the kidney will be there no doubt. I'm not trying to distract our team right now from the commercial task.
I want to get that done end 2022 with an unequivocal statement on our commercial success, and kidney will be there very soon after. As far as the next generation program, think more automated, lighter, smaller, highly optimized for a national program that is fully deployed. Remote access both to the centers and TransMedics to give us maximum leverage in managing organs remotely think drone technology. We're high excited about this. It's a long-term goal. It's going to probably have additional clinical trials and maybe leveraging that to expand our indication if we see an opportunity. This is for us, the long-term vision.
We are focusing on leveraging our current platform to get us to cash flow breakeven.
Got it. Okay. With that, we are at the end of the presentation period. Thank you so much for speaking with us today, and thank you to everyone for joining us on the call.
Thank you, Allen.