And welcome to Transmavix First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Lynn Lewis from the Gilmartin Group for a few introductory comments.
Thank you. Earlier today, TransMedics released financial results for the quarter ended March 31, 2021. A copy of the press release is available on the company's website. Before we begin, I'd 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 The expectations of future events, results or performance are forward looking statements.
All forward looking statements, including without limitation, Our examination of operating trends, the potential commercial opportunity for our products and our future financial expectation, which include expectations for growth in our organization, Regulatory approvals and reimbursement and guidance and our 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 purely 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 annual report on Form 10 ks filed with Securities and Exchange Commission on March 11, 2021. TransMedix disclaims any intention or obligation except as required by law To update or revise any financial projections or forward looking statements, whether because of new information, future events or otherwise, this conference call contains time sensitive information and is only as of the live broadcast today, May 4, 2021.
And with that, I'll now turn the call over to Waleed Hosseini, President and Chief Executive Officer.
Thank you very much, Lynn, and sorry, everyone, for the technical difficulties early on. Good afternoon, everyone, and welcome to the TransMedics 2021 First Quarter Earnings Call. Joining me today is Stephen Gordon, our Chief Financial Officer. As we stated in our last call, we are expecting several catalysts in 2021, which we believe will set a strong foundation for long term growth for TransMedix. The positive FDA panel vote to approve our heart DBD PMA indication was the first catalyst On our call, first, a summary of our financial results for the quarter.
2nd, the progress achieved across our key strategic initiatives. 3rd, commentary on our OCS Heart Panel meeting results. 4th, a status update on the coming catalysts in 2021 and their potential impact on our business. And then finally, I will discuss expectations for the remainder of 2021. Starting with the first topic.
Net revenue for the Q1 was $7,100,000 while Our overall revenue declined roughly 6% year over year. It is important to recognize that our U. S. Business grew 11% despite minimal Contribution from OCS Liver due to the completion of the CAP enrollment. We are encouraged by the growth in our U.
S. Business and The continued recovery in the U. S. Transplant activities. All revenues continue to struggle due to the COVID impact on TransVac numbers and the overall disruptions throughout the European hospitals.
We are laser focused on our key strategic initiatives We outlined for 2021 to help drive growth for our business, which leads me to the 2nd major topic
to discuss.
In the Q1, we made meaningful progress across all strategic and operational initiatives for TransPennix. Let me start by describing the status of the National OCS program. We continue we are continuing to build and leverage Financial benefits amongst key national transplant stakeholders. In Q1, we expanded and initiated clinical activities in 2 new regions, In North Carolina and Arizona, bringing the total to 6 initiated regions in the U. S.
We're actively engaged with several new OPLs To meet our stated goal of being active in 10 regions by year end. We also held 3 webinars targeting One transplant programs across the U. S. To market this national OCS program. We will continue to hold these webinars throughout the year We're continuing to build the necessary infrastructure and resources to ensure the long term success of this important program.
We expect this to continue throughout 2021 and into early 2022 as we add additional organs and new service capabilities and new clinical indications. As we stated previously, we strongly believe that the National OCS program will be an important mid- and long term driver For OTS utilization and revenue growth in the United States. Moving now to our second initiative, the OTS Liver PMA. We've been actively engaged with FDA on this important PMA and we look forward to holding our OTS Liver Advisory panel in mid July. Given the proximity of the panel date, the FDA is now questioning the Timing of approving the second tranche of the OCS liver cap.
We're actively discussing this issue with FDA and hope to reach a resolution In Q2, this is really a bittersweet situation where in one hand, we are thrilled to have the panel date set soon. However, it seems to be negatively impacting the CAF approval and its associated revenue in Q2. That said, our focus has always been and remains on long term success, which will benefit from current panel timing that increases confidence in the potential approval before year end. Our 3rd strategic initiative was advancing the OCS Heart DCD indication. As you know, we've completed our 180 patient randomized OCS DCD heart trial in 2020 With 90 of those 180 patients were transplanted using BCG Heart on OCS.
We remain on track for the top line readout of this important program in Q3 2021. At end of Q1 or Specifically on April 1, we have enrolled 46 new additional DCD heart transplants, cases using the OCS system in the DCD heart Continued access protocol. Finally, our 4th strategic initiative was the OCS hard DBE PMA. We finally completed this important milestone with a strong favorable panel vote for approval of the OTS Heart DBD indication. Now we are focused on turning this success into an approval decision in 2021.
Please allow me this opportunity to cover the 3rd major topic and clarify and discuss few observations from the panel meeting. First, the key theme of the panel discussions were fully expected and were not a surprise for TransMedics. Importantly, We were prepared to address every major topic raised by FDA. 2nd, many of the comments that seemed controversial Came from panelists with limited or no heart transplant experience. So the ultimate impact may not be as relevant as one would think.
3rd, related to the label, we believe that the data and the clinical evidence from Xpand and CAP Support an appropriate label for the OTS Heart DBD indication if approved by FDA. Importantly, we must remember That the OTS label language in our PMAs are never static and they are typically evolved given the fluid nature of our multiple concurrent Indications in the same organ transplant market. For example, the label language We'll have to be updated with the DCD heart indication approval in 2021 I'm sorry, in 2022. And with the results of our post approval study for the DBD heart indication. 4th, the post approval study, which we proposed In order to continue to build evidence in the real world setting and enable the potential expansion of our indications To support our leading market position, we're supported by leading U.
S. Academic heart failure cardiologists Finally, I'd like to clarify and reiterate that TransMedics conducted an extensive preclinical testing program With tens of animal studies supporting the safety of the OGS heart system. Importantly, we need to remember That we have transplanted more than 1100 human hearts across the globe, both from DVD and DCD human donors with excellent clinical results. Now let me move to the 4th major topic that I would like to cover and provide a status update on Our 5 major catalysts for 2021. Importantly, I want to highlight the potential impact of these catalysts On our overall growth trajectory for the foreseeable future.
The first catalyst we Expect its FDA approval of the OCS Heart DBD indication. We're actively engaged with FDA to hopefully The OCS Heart pending the FDA approval, of course. Specifically, we are engaged with the 25 Heart transplant centers that are currently active in our DCD cap program given their clinical experience with OCS Heart in the DCD program. We're planning and preparing to leverage our infrastructure to add the OCS Heart to our national OCS program in the regions where we're active In once the FDA approval is in hand. And finally, we're working with our KOLs to design a robust post approval registry that is practical to implement and to scale.
The second potential catalyst is the OCS Liver Panel Meeting and subsequent FDA approval. We are looking forward to conducting our OCS Liver Panel meeting in mid July, which would position us Well, for potential approval and launch in Q4, 2021. Similar to the OCS Heart, We're actively engaged with our liver centers in the U. S. To prepare for this potential approval later in 2021.
We're also planning to add the OCS liver to our national OCS program regions once the FDA approval is enhanced. On another note, the full OCS PROTECT trial results with 1 year follow-up will be presented as a plenary session presentation at the upcoming American Transplant Congress in early June. We will announce the exact date and time once the program is finalized. The 3rd potential catalyst is the readout of the top line data from OCS Heart DCD and the filing of the PMA supplement. This has been targeted for Q3 2021 And we believe that we are on track to achieve this milestone.
This clinical indication will be Filed under a breakthrough designation and we are optimistic that it will support FDA approval in 2022. The 4th potential catalyst is the expansion of the OCS national program to cover at least 10 major regions in the U. S. And expanding its coverage for heart and liver. We are on track to meet this milestone by year end.
The 5th and final potential catalyst is the publication of the OCS Liver and OCS DVD and DCD trials data in high impact medical journals. Again, we're on track to achieve this milestone. These publications will be critical These publications will be a critical driver for broader clinical adoption of the OCS technology and the transformation of the Now let me finish with a summary of our expectations and thoughts for the remainder of 2021. COVID and its new variants remain a threat to transplant activities normalization in the near term. Today, we see this impact more pronounced internationally and specifically in Europe in terms of transplant volumes.
So far, U. S. Transplant activities continue to recover with lung being the final organ to recover from volume perspective. We're still at least in Q1 anywhere between 2% to 3% below last year's volumes. We expect and hope that this recovery will continue barring any new peaks emerging in the United States.
We view the timelines for major FDA regulatory decision on OCS Heart and OCS Liver as potentially limiting our ability to leverage 2nd tranche approval due to the imminent panel date may negatively impact our ability to generate revenue from the liver cap In Q2, we remain laser focused, however, on our fundamental goal of ending 2021 with All three major transplant indications approved by FDA, which will be a huge driver for revenue growth and streamlines our revenue trajectory for the future. Given the current uncertainties and imminent FDA Key timelines, we will not issue financial guidance for 2021. 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 detail on the Q4 results and other financial information for the quarter. For the Q1 of 2021, gross revenue was $7,600,000 and net revenue was 7,100,000 Net revenue decreased by 6% from the Q1 of 2020. However, in the U. S, gross revenue was $6,300,000 and net revenue was $5,800,000 And U.
S. Net revenue increased 11% from the Q1 of 2020. The Oregon breakdown on U. S. Net revenue was Ex U.
S. Revenue was $1,300,000 that's down $1,000,000 from Q1 of 2020 and included $100,000 of OCS Lung and $1,200,000 of The key driver of Q1 revenue performance was strong OCS Lung and OCS Heart sales in the U. Reflecting the continued recovery in U. S. Transplant activity.
But the completion of the OCS Liver Protect cap and the lower transplant activity outside of the U. Gross margin for the Q1 of 2021 was 68% compared to 65% q1 last year and 63% last quarter and in line with our stated expectation of increasing gross margin. Total operating expenses for the quarter were $11,300,000 which was down 12% from Q1 of 2020 and up 6% from the Q4 of 2020. While limited travel and other spending due to COVID are still impacting our We have continued to invest in growing our national OCS program. Our operating loss was $6,500,000 in the Q1 of 2021 compared to $8,000,000 in the Q1 of 2020.
And our net loss for the Q1 of 2021 was $7,900,000 compared to $8,900,000 in the Q1 of 2020. Finally, cash, cash equivalents and marketable securities were $118,100,000 as of March 31, 2021, Which equates to a reduction of $7,500,000 from the balance at the end of 2020. And weighted average common shares outstanding for the quarter were 27,400,000. And just confirming Waleed's comments that due to current uncertainty, we are not providing guidance for 2021 at this time. Now, I would like to turn the call back to Ali for closing comments.
Thank you, Stephen. While revenue is expected to continue to be impacted in the near term by the Cadence of clinical trials and FDA review timelines, we're optimistic and confident in our long term prospects given our progress across all growth catalysts in 2021. We are advancing rapidly towards 2 major regulatory decisions on our OCS Heart and OCS Liver indications that will have Significant commercial ramifications in our business and will fundamentally alter our growth trajectory long term. The ultimate goal remains that we end 2021 with 3 approved transplant market indications in the U. S.
And we remain confident that this goal is attainable. I'm excited about and confident in the future of our business As we continue to transform the field of organ transplantation globally using our OCS technology platform. With that, I'll now turn the call to the operator for Q and A. Operator?
Your first question comes From the line of Robbie Marcus from JPMorgan. Your line is now open.
Hi, thanks. You've got Saran on here for Robbie. So firstly, on the hard panel, I understood your commentary there, but help me understand a little better, What's your sense of when it's to happen or what you expect the label to look like from the panel outcome And what you'd need in terms of the additional trial you mentioned to potentially get to the expanded criteria. Just help me kind of talk through some of the puts and takes here.
I think our label We don't at this point, we don't expect to do additional trials to be able to get the label for extended criteria. The trial I was referring to It's a post approval registry. That's a part of the post market program that we have proposed to the FDA all along. I just want to clarify, the label we are thinking of and speaking about Should be able to cover all the expanded criteria parts that were studied in the Xpand trial.
Okay, great. Thank you. And then switching to the lung, I know you saw in the previous Quarter, some pent up demand and some backlog to work through. What are some of the commercial dynamics you've seen Progressing through the quarter, I think we've seen recoveries in broader medtech, is that something you've been seeing in the lung franchise? And what do you expect going forward from here?
We expect the lung to continue to recover. It's still lagging out of the 3 organs, It's coming close and we expect to see that recovery to continue, as long as we don't get another, COVID peak. The thing that we've been noticing more transparently Recently is there are more and more patients being transplanted after they've been suffering with COVID. The younger patient profiles that are coming to the transplant waiting list in an acute situation and getting a lung transplant Because they had suffered from COVID and COVID ended up completely destroying the lung function. So That's something that we are keeping our eyes on because that could create another wave of pent up demand that could Stay with us long term, but that's the only thing that's the only new dynamic that we witnessed in Q1.
More and more patients, Younger patients, not traditional lung failure patients are coming for a lung transplant because they had COVID last year.
Great. Thank you.
Your next question comes from the line of Cecilia Furlong from Morgan Stanley. Your line is now open.
Great. Thanks, Waleed and Stephen for taking our questions. I guess I just wanted to start with the service model. Could you talk a little bit more about the traction you've seen in Q1, COVID kind of disrupted to a certain extent Pathway, so I guess just the value proposition right now in a world recovering from COVID of the service model. And then as you're thinking about commercialization or heart.
Just how you roll that out between your active centers in the comp versus, rolling heart into the service model?
Sure. Thank you, Cecilia, for the question. So the first one, relating to the national program, We are as we stated before, we're excited about this program. We are we think this program is going to have a significant impact Sort of mid and long term on the adoption of our technology. What we have done in Q1 is Broadly disseminated the value proposition both clinically, economically, financially And even work life balance wise and COVID related impact wise To all the lung transplant programs, we're seeing the traction starting to build.
We Expect that traction to continue to build into Q2 and to Q3. Really, I'm looking towards the end of this year to really have A palpable momentum that is generated from this program. It's going to as anything, given the COVID Environment, everything is going to take a little bit longer than what we wanted to. So Q1 was An early win for us to see that momentum starting to build. We need to be patient and we need to continue to Reiterate the value proposition throughout the next two quarters and hopefully by year end, we'll see tangible Evidence of that momentum building up and hopefully be reflected in our revenue.
Relating to the heart commercialization, Caesarea and frankly even With the liver commercialization, we're going to follow the same path. We start with the active programs that have experience with OCS, whether through the cap Expand or whether or add to them the 25 DCD programs given the fact that, yes, they have been active only with DCD, But now they understand the value proposition of an OCS card, and we focus on those first. And then on top of that, we layer adoption of our technology through the direct acquisition and the national program at least throughout 2021 and into mid-twenty 22, Where one or both will declare themselves as we have to continue that way. So we're staying flexible. We're enabling both Mechanisms to drive adoption, we don't want to disrupt the adoption curve early on, but we think this is going to be different than the lung for all the reasons we stated several times before.
Great. Thanks, Walid. And I guess, 2, just OCS DCD Heart performance in the Q1, could you just talk about the trends you saw as And Just on liver as well, when we could hear a bit more clarity on if this second tranche goes through or if you just progress to the panel? And thank you.
Sure. Sure. Thank you, Cecilia. So we're very bullish on the DCD Heart program for 2 reasons. 1, the numbers that the Pace of enrollment is still at all time high compared to any program we've conducted in the past.
But what we've seen in Q1 that It gives us even more confidence and more excitement is that now we're not we're no longer Limiting or we're no longer limited or focused or concentrated enrollment in the hands of the top 3 or 4 leading centers. Now we're seeing And we're seeing centers that are sort of medium volume transplant programs really doing quite a number of cases in Q1 to That would meaningfully impact their total volume. And when you look at At a macro level, we track this on a quarterly basis. In the U. S, in Q1, there was approximately 65 or 70 new Hearts were additional heart transplanted compared to last year Q1.
Of those, 45 were in OCS Because they were DCD hearts. These are new hearts that otherwise would not have been transplanted. So the OCS contributed to 50% or 60% of the growth of heart transplant in Q1. So that's very exciting for us. We expect this to We hope and we expect this trajectory to continue on the heart front.
Relating to the liver Cap. I think, Cecilia, we're really cutting it very close here. We are doing our best trying to convince the FDA that the cap is important. But also when you look at it from their perspective, the panel is scheduled in mid July. And by the time we get approval, it will be probably sort of Early June, mid June.
So I think it will be very clear during Q2 whether or not We will have a second tranche in the capital. We're just going to drive through to the panel and then just drive it to approval from there. So hopefully, we'll have that visibility within the next 60 days or so.
Great. Thank you.
Your next question comes from the line of Josh Jennings from Cowen. Your line is now open.
Hi. This is Brian here for Josh. Thank you for taking the question. I just wanted to start with a clarification on your Comment on the liver cap. So I understand the view that approvals clearly outweigh the CapEx activity terms of priority for the company, but what is the rationale you've gotten specifically for not increasing the cap given that The data we've seen have been very favorable and don't raise any concerns about safety or efficacy.
Brian, that's an excellent question. Unfortunately, I can't comment specifically, but at a very, very, very, very High level, the feedback we received is we're so close to the panel. 1, we just go through a panel and get that approval. So we're going back with some of the arguments you highlighted and we hope that we will prevail and We'll wait and see in the next 60 days, but we completely agree with your sentiment. But also, We see where they're coming from.
So but there's nothing there that we're aware of that gives us any pause or concern The data is very strong. We are as confused by that feedback You are, but also we understand how close we are to the timeline for the panel.
Okay. Thank you. And maybe changing gears to OUS, can you just share the month to month progression of the trends you've experienced Recently and just whether you see that getting better or sort of staying the same over the next couple of months?
Yes, Brian, this is Steven. Yes, so if we look at kind of where we are in April, we're definitely seeing some uptick in international Business, it's slow and steady. I don't think it's a trend yet, but we definitely are seeing that come back from where it was
Hello? Hello? Operator?
Okay. Next question comes from the line of Bill Plavanyk from Canaccord. Your line is now open.
Great. Thanks. Good evening. Two questions. Just first is clarification on The heart approval, do you have any FDA audits remaining to gain that approval?
Hi, Bill. No, we passed all the audits with flying colors a while back.
Okay. And then in terms of in the discussion on the label, have you completed the label discussion? Is that pushed on for approval and then same question for the
post approval study? Kind of where are you exactly in those Discussions? Right. So Bill, that's a great question. No, at this point, we are focused on awaiting On them making the final decision and once that the decision is made, we the 2 remaining profits It's the PAS design and the final label language.
So that these are the two things that we're waiting for.
Okay. And then, have they provided a timeframe or do you have a timeframe, which you would expect to get that kind of final decision before you move on to the Labeling and PAS?
I think the timeframes overall timeframes are the same that we're communicating pre panel, which is 3 to 4 months from panel date and I believe these are the same time frames that will hold given our recent discussions with the FDA. Okay.
And just again, it was in your prepared remarks Mark, to confirm that we're not going to ask you to go back and do any more animal testing or anything of that nature as A requirement for the approval? I don't even know if they can, but I just want
to ask. I can. So So Bill, listen, I cannot predict what the FDA is going to ask for. My remarks were and the remarks Samid, on the panel date, is this a significant mischaracterization here? There are tens of animals of data, Really, closing to hundreds of animal data that was submitted.
For some reason, it was not reflected in the panel discussion and we have So that's one aspect of the answer. The second aspect of the answer is, as we all know, the FDA always human data over any preclinical testing. So we feel very confident that whatever misunderstanding or Characterization, we can clarify given the data that we have access to. And That was really the comment and or the remark I was trying to get across that we feel very confident in our With our preclinical program, with our preclinical data that would help address any open or remaining questions by FDA and the fact That statement at the time date was not accurate or correct given the significant number of animal studies that were presented and submitted in this PMA.
Okay. That's really helpful. Thanks. And then second question is just on the OTO Graham, you've provided a lot of granularity. Thank you.
Just any kind of color around the first site that signed up, The first and second sites signed up, kind of what you're seeing in terms of traction. I appreciate that you're now up But it's really stickiness I'm kind of looking for, okay, those first one or 2, what has this done
for their business? Have they doubled what they're doing? Have they tripled? Or are they just getting going? I'm just trying
to kind of get a feeling for maybe what this can do once you get this Expanded to more players and what the timing for that is?
Sure. I think, Bill, that's a great question. I think what I can share publicly is the following. That of those 6, I think the older 4 All right. I would say 4 out of the 6 have seen the value of OCS with real cases that otherwise they would have never transplanted.
And obviously, with the various magnitude, meaning one OPO did 5 cases, another The 2 one did one just because of the vintage of them joining the program. But I can assure you that 4 out of the 6 have seen the value in their own Sphere, in their own business, of what OCS can do to get more lungs transplanted. 1 of the other 2 have seen it, but it was it hasn't materialized, has seen the value of taking lungs at LCS, It hasn't materialized yet to transplant because this is one of the new the 2 new OPOs That we're working with. And one is remaining to see a successful case given just the most recent one. So We expect that to continue and that's why I'm targeting year end where we hopefully can have a critical mass that we can report to and Maybe even begin a trend going forward into 2022 about how we're going to attract this.
But right now, I need to protect this Program allows the time to mature and allow more OPOs critical mass of OPOs to be involved in so we can really See the aggregation results and track it that way by year end.
Okay, great. Okay. Thanks, Waleed. Appreciate taking the questions.
Thank you.
Your next question comes From the line of Suraj Kala from Oppenheimer. Your line is now open.
Good afternoon, Waleed, Stephen. Can you hear me all right?
Can you hear me just fine, Suresh? Perfect.
So, Walid, a few questions. Let me start out with the DCD trial. Wally, to remind me, it's a non inferiority trial and there is no hierarchical analysis for superiority relative to cold storage, right?
Not
So Suraj, this is a DCE trial.
So we're comparing apples and bananas, Right. And meaning cold storage standard click here at hearts. So the design It's always an Yes. It's highly unlikely. I would stop here.
So that's the design. We actually Question the validity of doing a randomized trial for this indication, and we wait and see what the result shows. But our expectation is that we the design is what it is, which is an amyloid trial. I don't remember, Suraj, if we have a testing for superiority or not. Usually, when we have a non inferiority, when we meet the non inferiority, we test for superiority, but I don't have the answer to that.
I need to I'll follow-up with you offline to give you the exact And so based on the protocol.
Got it. So Walid, in terms of liver, We have seen the top line data on liver. And just following up on the heart panel, I was wondering if you could walk us through, is there something in the data below the top line? The PMA was filed, Correct me if I'm wrong, Q2 of 2020. So FDA has been looking at this data for a long period of time.
Is this In your view, that could again be a hiccup for the FDA on the liver side?
Suraj, I cannot predict what could be a hiccup for FDA on any of their applications. All I can assert is the following. Our liver data is the cleanest and the highest number of statistical superiority endpoints that we've ever achieved in any trial we've conducted in the history of TransMedics. I'm sure the FDA could pick on something that they see relevant. But It's the cleanest, it's the highest rate of endpoints achieving statistical superiority in any trial we've conducted.
Got it. And Waleed, one final question and I'll hop back
in queue. Post the panel, the heart panel, I'm just trying to get a practical assessment The feedback you're getting from the ground, post the heart panel, how many new centers do you all expect To add in the U. S. Heart centers in the U. S.
And OUS once you'll get, DVD approval Thank you for taking my question.
Thank you, Suraj. I think once FDA approval is in hand, I think we are targeting anywhere between 25 to 30 heart launching sites. These are the 25 DCD Heart sites plus the 5 that were involved in expanding That would be our sort of the low hanging fruit.
Okay. I don't see any question at this time. I will turn it over back to Waleed for any closing remarks.
Thank you, operator. Thank you everybody for joining us on this call and we look forward to our next call. Have a wonderful afternoon. Bye bye.
This concludes today's conference call. Thank you for participating. You may now disconnect.