All right. Good morning. Thanks so much for joining us. My name's Matt O'Brien. I'm one of the med tech analysts here at Piper. Extremely fortunate to have the TransMedics team here with us today. From the company we have Waleed, who is the CEO of the company, and then Gerardo, who is the CFO. Gents, thanks so much for coming.
Thank you, Matt.
The one I wanna start with right off the bat is, did you do Bernie Kosar's liver?
No.
Okay.
I don't know. And even if I do.
You probably can't say anyway, yeah.
I can't say.
All right.
So.
All right. I saw that, and I was very curious as to whether or not that was a TransMedics liver. Thanks again for coming. Really do appreciate it. Maybe just to start with, I mean, we can get into that note we put out this morning, which I think I'm kind of curious about, the number of car-related, you know, transportations that you're doing. Maybe just start off on the liver side of things. It's just been such a good business for you.
You know, I think machine perfusion's now about 40% adoption as far as our calculations. Where do you think that can go over time? I guess maybe asked another way is, why can't it be like 60%-70%?
I think we are working very hard to make it even more like 80%-90%. I think machine perfusion and liver transplant, based on the data, I want to be specific. OCS machine perfusion based on 9,000 livers we have done, we are convinced that it should be malpractice if the livers are not put on the OCS. I mean, we are talking about significant survival difference, significant improvement in post-transplant complication rate. As anything in medicine, it takes time. Publication needs to come out. We are working on that pretty aggressively, both in DCD and DBD. We are making good progress towards achieving that goal. We still have ways to go in liver, from a growth perspective.
Got it.
Ways to go.
What kind of data? What, what could we expect to see, some of that data?
We're hoping, we're no longer hoping. We're working very hard with our lead users to make sure that these, major publications from those, you know, tens of, I mean, thousands of liver registry data come out, the first half of 2026.
Oh, wow. Okay. Okay. Got it. And then, you know, the penetration of machine perfusion in DCD liver, roughly 60%. But DBD liver is only about mid-20s, is getting for our calculations. Why has that, that adoption been a little bit slower?
It's the classic approach to any expensive, complicated technology. They use it first in the sort of the, high, risk, high, reward situation like DCD, where, you know, Matt, we need to take a step back and remember that two years ago, there were very little DCD livers being done in this country. If it wasn't for the OCS coming on the scene and NOP coming on the scene, we wouldn't have seen that huge jump in DCD liver adoption. That being said, I wanna make sure that everybody understands that, with that huge growth, we're still utilizing about 24%-30% of DCD livers. There are 70% of the DCD livers being thrown away every year. There is a huge opportunity for growth there for us. DBD, again, the data that's coming out, it's gonna be unequivocal.
We know it because it's coming out of our registry, and it's gonna be unequivocal, showing the same great results that we're achieving with DCD could be achieved in DBD.
Got it.
That is why, that is what gives us the confidence.
How important is DBD liver to get to the 10,000 transplant target that you have?
Listen, the 10,000 transplants was set with the existing dynamic of 2023 now. We feel highly confident that we will get there regardless of any upside of what we're talking about here. Everything we're talking about here is sort of cream on the top and icing on the cake. The 10,000 is, as far as we're concerned, something we are highly confident that we will achieve by 2028. This is to get us from 10,000- 20,000, everything else we talked about.
Got it. Okay. How important is, or how do we think about the growth algorithm? I mean, are you in most of the centers now today?
We are in, we are in the majority of the centers for liver. There are still few centers that are still holding back. Those are opportunities for us for growth. We are, as Tamer highlighted last December, we're not at the same level of adoption curve across all centers. We have three categories.
Of centers. We have the early adopters, and centers that have been using the NOP. They are penetrated at, you know, 80%-90%. You have the middle tier, you know, 40%-60%, and you have the lower tier, which is 20%-40%. Those are the newer centers coming into the NOP family, figuring out reimbursement, you know, updating their Commercial Contracts, etc. Our goal, our plan is to move them from right to left, and our goal is to increase utilization. It is not just a matter of new centers coming on board, but increasing the utilization of organs, increasing the use of newer organs, growing the overall market. These are the two levers of growth for any organ, not just liver.
What is kinda the gating factor for most of them? Is it just figuring out the reimbursement dynamic or?
I think for liver specifically, there's, you know, there's a handful, literally a handful of centers that have been entrenched with competing technology, due to some form of consulting and financial arrangements with that competitor. This is only a matter of time, and we'll see the shift there. At least that's what we're counting on. The rest is just a matter of getting comfortable with NOP, getting comfortable that they have the Administrative Horsepower to gain access to reimbursement, additional reimbursement, etc.
Got it. I guess the thing that I always hear is like, "Oh, it's expensive NOP. It's expensive u se NOP." I've seen some data on how much these centers can collect for some of these organs.
How often does price really come up, and how big of a pushback is that for you guys?
Listen, it's the easiest low-hanging fruit, pushback. But, you know, at our annual forums, a few weeks back, we showed them, we showed the entire user group, both liver and heart and lung, that in 2025 alone, we saved the centers close to $50 million. We showed them where these savings came from. Again, we're not standing still. Our price is a fair price given the high value that the technology and NOP is producing.
We feel very strongly, and I've said this before publicly, that we are the most cost-effective way of doing organ transplants in the United States, period, full stop. We can back it with examples. I'll give you one example. There isn't a single technology or a transportation partner in the United States that gives centers a 50% discount if the DCD doesn't progress. It doesn't exist. We do that. Why? Because we are a transplant company. We're not a transportation company. Transportation companies, they focus on just gouging the center no matter what the donor situation is. That's just one concrete example that I can point to.
Got it. Okay. You have, you know, you have these clinical trials starting, and we're obviously very excited about those. Is there any update on enrollment there? Have you started enrollment?
Yeah. We started enrolling in the heart.
Okay.
We've done a handful of cases. We're excited about the early, early momentum there, but it's still too early. You know, we will see that aggregation, hopefully in early next year. The lung, we expect it to start rolling either right before Christmas or early January. We're looking forward to that as well. The heart has already started. We have a handful of cases already done, and we're excited about what we're seeing so far. It's early.
Maybe just talk a little bit about those studies. There's a bunch of different things here I could ask about. Why do you think they're gonna enroll so quickly for starters?
We actually are being fairly conservative, and we're saying it's they're gonna enroll over 12- 18 months. We've seen the DCD heart trial enrolling, completing enrolling the primary cohort in nine months. I think that where we are, we were getting our estimate is the value, the potential value. We wouldn't be doing these trials if we don't think they could add significant incremental value to the community, to the transplant community, and to the patients. We know that Cardiothoracic Surgeons, when they see value, they move fast. That's where it's coming from. We think we're being fairly conservative to assume 12- 18 months.
Got it. Okay. Outside of this frog that's in my throat, what about the clinical benefits, you know, for heart and lung versus liver?
And those trials?
Those trials were, the heart and lung trials, simply stated, were designed to replicate the huge success in liver, which we can do morning-hour transplants or scheduled, scheduled transplants for the first time in history of organ transplant. That was a major catalyst for liver adoption, and we think that's gonna be the same for heart and lung.
Okay.
It has never been experienced in heart and lung, for all the obvious reasons, the concern about ischemic damage. Now we have a mechanism that is gonna be hopefully reproducible and t hat's just one major value that we are, we're looking forward to achieving.
Got it. You are running a superiority study, right?
That adds extra risk to the whole process just because of w hat you're doing there.
Can you talk about maybe some of the prior clinical work that you've done and what gives you the comfort to go ahead and run a superiority study?
Sure.
In both areas?
Sure. I want to be. I want to be very clear. The superiority aspect is only one aspect out of two or three different aspects of these trials achieving for us. The superiority trial is to acquire two things. One, what you started is it's too expensive. It's too expensive compared to what? Compared to a Styrofoam box, with cooling packs. Of course, we have to be expensive. Why? Because we deliver much better value. That Styrofoam box with the cooling packs has never done a prospective clinical trial in their history. Yet they are claiming that they have value. We are saying, "Okay. You have value. Let's compare it head-to-head." We are willing to put our money where our mouth is.
Got it.
That's not the primary goal of these trials. The primary goal of these trials is to give the community a safe, reproducible way to doing morning-hour heart and lung transplant. If we succeed in that, the superiority will, we might not even finish the superiority trial because the community will shift into, "Who cares about cold anymore? We are, we're just gonna do morning-hour transplant." It's complicated, but we think if the centers give us the chance, we will win the superiority, just because we know the outcome. And we know that the competitive, or the control arm has never done a control study.
We feel very confident in our technology. We feel very confident in our next-gen technology to deliver superior outcomes. We are saying we're putting our money where our mouth is.
Okay. Between the two studies, you know, we looked at the data on the heart side. Like, we're very confident there. Lung seemed like it might be a little bit more of a gray area in terms of really showing the, the benefits of that. Can you maybe talk about lung specifically?
Sure. Sure. Lung, as we all know, lung has been very, very challenged, in general, not just for transplants. It's the lowest number of transplants. It's the lowest number of utilization. And it got hit significantly by COVID. During the recovery phase, there seems to be kind of a sagging interest in lung transplant, not just in the U.S. but across the world. This is our last attempt to kind of invigorate and resurrect this market. We told all the lung transplant experts in the U.S. a few weeks ago at our forums. We basically said, "This is the last chance for lung to leverage machine perfusion."
If you guys are comfortable just using ice by all means, this is the last chance we'll do, and we will prioritize our effort on the kidney. I really think that once they see the true value of machine perfusion and the true value of NOP that has never been experienced in lung transplant in the U.S., we are hoping that that will resurrect that market. If they don't, that's up to them. We can only do so much. We have more initiatives to focus on. We will direct our resources to kidney, for example. I'm hopeful that this will be a huge success and could significantly add to our growth potential.
Got it. Okay. Maybe a question for you, Gerardo. How do we think about the, the cost of running these studies? You know, I know you get to charge for the OCS side of things, but what about on the control arm side? Are you guys paying those expenses? I mean, how do we think about the, the impact to the, the P&L?
Right. For the OCS side, we're gonna charge exactly the same as our current business.
Yep.
For the control arm, we're not charging for the technology because it's not our technology. We are waiving the cost of clinical service, and we are charging for logistics just as any other company will do.
Okay. Maybe a little bit of a hickey on the gross margin side on the service side next year. Is that fair?
We could see some impact there. Yes.
Okay. Got it. And then, how do we think about, I guess just from a profitability perspective, when you guys are trying to, like, balance the growth of the business, which is excellent, versus the profitability side? Do we think about 2026 as a year where you're gonna be investing in the business for a real big bump or step up on the profitability side in 2027? Is that how we should think about it?
Our key focus on profitability is operating margin, right?
That, that's where we are looking to get to, be at or approaching the 30% by 2028. We have three levers, really, that are gonna drive that. The first one is growth. We'll continue to, to expect strong growth over the next years. The second one is our ability to continue to have strong discipline in operating expenses, which is where the vast majority of the leverage will come from. The third one is margin. Margin is not really a big contributor in the overall profitability in our model, right? We are expecting we won't see an increase in operating margin as the one that we saw in 2025. We saw more than we're gonna see a very strong one. We're not gonna go backwards, but we're not gonna get as much as we did in 2025.
Got it.
We are well on track.
Okay. And what about the using the jets more efficiently? How do we think about how that rolls out in 2026? Can you start to use these, you know, these jets 24 hours a day? You know, are you able to get the pilots to be able to, to support that?
That's a great question. Yes, we were able first to hire the pilots. The pilots are being trained. It takes two to three months to train the pilots in our jets. Now we're about to start really double-shifting the pilots. We're expecting to see results during the first half of next year. We're really hopeful that we should capture significant efficiency, which should impact favorably the margins but also should reduce the amount of jets that we will need to buy in the future.
Yeah. I want to comment on that, Matt, if you allow me.
Sure.
The efficiency of running our planes, it starts with increasing the case volume.
Without that, efficiency of running the plane is not gonna be visible, on our, in our print. We expect a significant bump in case volume next year. We're trying to minimize the investment in buying additional planes. If you see us printing and reporting growth without buying planes, this means that the efficiencies are being experienced. We know we need additional planes. The question is, do we buy them in 2026, or will we buy them in 2028 or even 2029? That's the, that's the, 2026 is gonna give us the clue of how much efficiency could we gain.
From a goal perspective, that's exactly our goal. The planes, our planes should run like Delta, like American, like United. They should be running 24/7. Now we need to generate the case volume to do that. To do that, we need enough pilots to do double-shifting per plane.
Can you do that from a logistical perspective? Because you just don't know when the organs are gonna become available.
That's exactly true. That's exactly my point. The difference between United and Delta and TransMedics is we don't know when the organs will become available. So we need to have a, a, on standby, shift of crew ready to take the plane when a case is scheduled. Today, we're limited by FAA regulations, which is basically any crew that we have has to be off for 12 hours, which i s something we take very seriously. Now the plane is uncovered for 12 hours.
Yep.
That's the opportunity of double-shifting would minimize that. Maybe not necessarily 24 hours, but maybe 10 hours of those could be flying.
Right.
That's the goal.
Right.
It starts with increased volume. Once we have increased demand, now the efficiency is gonna roll nicely, and it will impact the profitability and also the leverage on the asset.
Okay. Is the increased volume on the liver side, or do you need heart to kick in as well?
No.
Or is it?
Increased volume. When we talk volume, we talk about all three organs.
All three organs.
In 2027, guys, we're adding a new kid in the block called kidney.
Yeah.
That volume alone is one and a half times the heart, lung, and liver combined.
Right.
23,000 kidneys transplanted last year in the United States, deceased. On top of that, there's 10,000 kidneys that were rejected for transplant because of prolonged ischemic time. All of this will become accessible through OCS and NOP. That's a huge volume that TransMedics has never experienced before. That's what we're setting up in 2026 to accommodate in 2027.
Okay. Can we start, you know, talk about kidney for a second?
Sure.
I mean, I could go on liver and heart and lung for a while, but I mean, 33,000, you know,
You know, potential organs available. What is the benefit of OCS for a kidney?
It's very, very, very, very important question. Two major things in kidney. One, kidney complications that after transplant requiring the patient to go back in dialysis today is at all-time high rate of 55%-60%. 55%-60% of patients go in dialysis for a month to eight weeks, sometimes more, because the kidney doesn't function. At huge cost to CMS, and obviously comorbidities to the patient.
Yeah.
Two, the kidney utilization rate today is at all-time low at only 60%-65%. When I started TransMedics in 1998, kidney utilization was at 93%-94%. These two have a huge financial ramification for CMS. That is why CMS is asking us, "When are you coming with kidney?" You know, I am hopeful. I am not putting any words in CMS's mouth, but I am hopeful that CMS will be as supportive as they were with heart, lung, and liver because kidney is a huge money drain for CMS today. TransMedics and OCS could reduce these complication rates by at least half, and I am being super conservative, and we can dramatically improve the supply of kidneys in the United States.
Okay.
These two are huge direct impact on CMS bottom line or CMS budget. That's what we are excited about kidneys for.
With liver, we know with OCS, the liver is making bile. Like, we know that.
We know the graft benefits on the heart side. What is it with the kidney?
Making urine and you're clearing creatinine.
You're clearing creatinine?
Yes.
Okay.
Clearing creatinine and making urine.
Okay.
Protecting it from ischemia.
Yeah.
I forget the, forget the 23,000 kidney transplanted last year. If we just focus on 10,000 kidneys that are thrown away because of ischemic time.
Right.
That's huge gap.
Yep. Got it. Okay. What about, some of the, the you've got a new heart and, and lung system coming out, I think, actually, a new OCS?
That's the part that's a part of the trial.
Okay.
That's Gen2. There is Gen3, which is a complete revamp of the entire system to accommodate, to be prepared for that huge jump in utilization on numbers for 2028 and beyond. That is called Gen3 OCS. That is completely automated, significantly improved cost of goods, and part counts, high, high reliability, remote control, remote monitoring. It is really geared for 20,000-30,000 transplants. That is how we get to that level with the Gen3 technology.
Got it. Okay. I don't wanna get your competitive juices going too much, Waleed, but I have to ask this question. You know, we've seen a competitor get taken out by a bigger one. How do we think about the competitive dynamic, especially now that that one competitor's got more resource?
How do we think about that dynamic plus pricing?
Sure.
'Cause those are things that I always hear, like, "Oh, pricing's gonna create a huge because of this."
Sure. No, listen, as I stated numerous times, you know, we are very happy for that acquisition. We're very happy for the team at OrganOx, and we congratulated them on this great deal. Actually, we welcome competition. Competition keeps the market honest, keeps us honest. You know, listen, TransMedics is the little engine that could. We're sitting on nearly $500 million of balance sheet. We're gonna invest it in TransMedics. We're gonna invest it in our business. You know, these big conglomerates, yes, they could have a much better balance sheet, but they're not gonna put it all on transplant. We welcome that. We welcome competition. Again, we want our data, our execution, speaks for itself.
Yeah.
I think this is a great thing for transplantation. And, you know, we're looking forward at what that acquisition is gonna actually mean. 'Cause right now, we don't see much impact in the market.
Okay.
So.
Okay. Gerardo, just real quick, you've talked about, you know, getting your operating margins to 30% by 2028. You've got a lot of investments you're making in the core business plus international. Why the confidence you can get to 30% in 2028?
I mentioned that it's at 2028 or approaching 2028, approaching 30% by 2028. As I've mentioned before, the confidence comes from three things, and these are the three key pillars that we have there. One is growth. We have strong confidence in the growth path. We have strong confidence in our ability to control operating expenses, which is where we will really gain operating leverage. And the margin. We will protect the margin. Really, the first two are the ones that are gonna drive the increase. We are very confident there.
Okay. Understood. I think I've kept us over a little bit, so I have to cap it there. Thank you so much for all the feedback.
Thank you. Thank you, Matt.
Appreciate it.
Appreciate it. All right. Good morning, everybody. Thanks for joining us. My name is Matt O'Brien. I'm one of the med tech analysts here at Piper. Next up on the agenda is AtriCure, which is a fantastic cardio company. From the company, we have Mike, who is the CEO of the company, and then Angie, who is the CFO. Thank you so much for coming out.
Thanks for having us.
Do appreciate it. Maybe talk, Mike, for starters, on the clip side of the business. That growth that we saw in Q3, it was, you know, it was 18.5%. You had a tough comp on a two-year stack. It was 18.5%. That's an acceleration versus the previous six quarters. I don't think people quite understand. What drove that acceleration on the clip side?
FLEX-Mini in particular. I mean, we came out with a new product in the fourth quarter of last year. FLEX-Mini is 60% smaller than any products that are on the market today. As we all know, there was a competitor that came into the space. This product is 60% smaller than theirs and our V clip that was out there. It is easier to use, easier to put in place, a lot better visibility with it. People are basically wanting to get it in and wanting it in their system. We are in almost over 30% of the systems right now.
Across the country. That has really been the big driver for growth for us in the U.S..
Okay. Let my, you know, for the, the layman that I am.
Right? You've got the left atrial appendage. You're trying to clip it off. Why is smaller better to, you know, in that situation? What is it that's easier for the clinician, generally speaking? You know, with your existing competitor or others that are coming, how difficult would it be for them to try to replicate what you're doing with a, a mini-type product?
First, why do you want something smaller? Because you're putting an implant in. The first thing is that you want visibility. By having it smaller, you get a lot more visibility about all the structures around it. You're working in really tight spaces. Think about the box that you've got when you're going into cardiac surgery. Having a smaller device to be able to manipulate it around, to be able to know that you've got complete coverage, you're going down to the base of the appendage, that visibility is absolutely critical. The smaller that device is, the much easier it is to do that and to manipulate it. Two, is that by being smaller, you know that you're not gonna be impacting or impinging on any of the external or other structures around it.
It just gives them more confidence when they're doing it. It's so much easier to place. Thirdly, as I mentioned, getting down to the base, you get really good visualization of what that looks like from that standpoint. Incredibly difficult for any competitor to come out with a product that would compete against this at this point. We spent many years actually recreating and doing new designs so that, with this clip. The spring mechanism in this clip was something we worked on for over three years just to get to this point. If you look at the clips that are coming out from existing or even oncoming competitors, almost all of them are going after our V clip technology. They're like copycats of that technology, which is great technology. It works incredibly well.
We've got great closure, a 100% closure with that, that you see with it. It is a great device, but it's a little bit bigger, and for them to come out with something smaller, they'd have to kind of.