TransMedics Group, Inc.

Good afternoon and welcome to Transmedic's second quarter 2022 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 Brian Johnston from the Gilmartin group for a few introductory comments.

Thanks, operator. Earlier today, Medics released financial results for the quarter ended June 30th, 2022. 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 of future events, results, or performance are forward-looking statements. All statements, including without limitation, our examination of operating trends, the potential commercial opportunity for our product 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 2022 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 Form 10-Q filed with the Securities and Exchange Commission on May 5, 2022. Transmedics 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 accurate only as of the live today, August 1st, 2022. With that, I'll now turn the call over to Waleed Hassaneen, President and Chief Executive Officer.

Thank you, Brian. Good afternoon, everyone, and welcome to Transmedic's second quarter 2022 earnings call. As always, joining me today is Stephen Gordon, our Chief Financial Officer. Before discussing two key results, let me first briefly highlight our $60 million debt financing agreement with CIBC Innovation Banking, which was announced earlier today. The new facility, which was fully funded upon closing, enabled us to retire our previous debt arrangement with OrbiMed and strengthen our balance sheet to provide further financial flexibility. We greatly appreciate the partnership we had with OrbiMed and very much look forward to establishing a successful partnership with CIBC in the years to come. Now let me shift to our exciting two key results. Through the second quarter, our commercial momentum accelerated, with results delivering an unequivocal statement on Transmedic's growth potential and our commercial execution post-FDA approvals of our OCS technology for three large transplant markets. Importantly, Our performance in 2Q underscores the importance of NOP, or the National OCS Program, as the main growth driver for our business in the United States. Let me summarize the results. For the third sequential quarter, we post a record year-over-year growth in net revenue. Net revenue for 2Q was 20.5 million, representing 151% growth over the same period of Q2 2021. and approximately 29% sequential growth from Q1 2022. Importantly, 88% or 18.1 million of Q2 revenue came from the US centers. This represents 215% growth over the same period from 2021. NLP attributed revenue accounted for approximately 84% of our total US revenue in Q2 2022. We fully expect that NOP will remain the main driver for our US business for the foreseeable future. Stephen will cover the details and organ split in his section of the call. Now let me discuss some other trends that make us confident in our near and long-term growth potential. First, for the second sequential quarter, liver led the way across our three organ markets. This is indicative of our ability to quickly scale operations and build momentum in the largest of our three addressable markets. We were also excited to see that liver centers have become quickly accustomed to the NOP concept. Second, heart and lung also continue to grow sequentially. Despite overall U.S. lung transplant volumes remaining below pre-COVID rates, and a slower than normal June in the U.S. across organs. This slowdown was reflected in the U.S. national OPTN reports and is relatively normal phenomena in transplantation, as is the rebound in rates in July, which we also experienced. Third, as we highlighted earlier, NOP drove a significant portion of our U.S. revenues in the second quarter, validating our expectations that it will become and will continue to do so for the foreseeable future. As I had stated earlier, 84% of our total U.S. revenue came from NOP. On the per-organ basis, liver was approximately 99% NOP, lung was approximately 93% NOP, and heart was approximately 57% NOP. As we move forward, we expect to see the percentage of NOP continue to be high and grow across the board. especially for heart transplant numbers. Notably, given the high contribution of NOP, our revenue represented impressive growth in actual new cases and not just stocking orders. This is one of the most interesting and important features of NOP as it makes our business more linear in terms of revenue growth as we further penetrate transplant programs. It is important to note that two Q results came from a fairly modest number of transplant centers, between 6 to 12 in each organ category. This is important for two reasons. It shows that we have a significant greenfield opportunity for commercial growth from adding more U.S. transplant programs or centers to use our NLP program. This is a critical area of our growth strategy that I will be touching upon later. Second, it shows that the continued deeper penetration of OCS within these initial number of centers who are relying on us to operate their transplant programs. This is huge from a competitive positioning standpoint. Transmedics NOP is becoming an integral part of many US transplant programs workflow. Lastly, we had a very successful 2022 ISHLT conference in Boston in April. This was the first live meeting since COVID, and we were very encouraged to see transmedics, OCS, and NOP as the clear focus of this meeting. There were several featured presentations on OCS heart TCD and EXPAND results, long-term outcomes of OCS lung INSPIRE and EXPAND results, and the first public presentation of the NLP programs concept. Importantly, we took this opportunity to publicly launch an aspirational US initiative to doubling lung and heart transplant numbers over the next five years using the Transmedics NLP program. In all, we were very encouraged by several trends through Q2 and believe we have positioned Transmedics to achieve 100% year-over-year revenue growth in 2022. Now let me discuss our strategies to deliver on this expectation and to extend our momentum into 2023 and beyond. First, by expanding our NOP infrastructure. This is critical and will include increasing the number of surgical staff, especially on the liver side, expanding the number of launch points to gain broader geographical coverage in the U.S., and growing our clinical support staff. Importantly, we need to grow our transportation and logistical network to drive efficiency in execution and financial performance. Second, by expanding our manufacturing and production capacity. We are well underway to tripling our production clean room infrastructure by year end, enabling us to meet the significant demand of OCS use across all three Oregon platforms. We are also expanding our production headcount and instituting a second shift. In addition, we're continuing to buttress our raw material inventory to meet the growing demand and to mitigate against supply chain risks. Third, by expanding the number of active NOP transplant programs in all three organ markets. We have seen the significant impact from a modest number of active transplant programs in the U.S. on U.S. revenue over the past three quarters. We are planning to methodically grow our number of active NOP programs in the U.S. throughout 22 and into 23 and beyond. Finally, by continuing to invest in our next generation OCS technology and our next organ programs. This is critical to our long-term growth and further distancing ourselves from any potential competition. In our view, the roadmap forward is clear and we believe strongly that we are operationally well prepared to take these critical next steps. However, while we believe we are in the early stages of rapid growth trajectory, we also see the current macro environment and rapid increase in demand for our OCS technology could present some challenges that may create some level of bumpiness in our business. For clarity, let me provide some perspectives on what we view as potential uncertainties that may negatively impact us in the second half of 22. These are the main reasons for us being prudent and cautious in our expectations throughout 22. First is the global supply chain issues during the scalability of our production capacity to meet the growing demand for our OCS technology. Two Q results continued to outpace our forecasted demand plans and challenged our finished goods inventory. Our operations and supply chain team has been doing a phenomenal job to mitigate the risks of any backorder situation. We remain cautious, however, because we are concerned that our continued investment to rapidly increase our raw material may be negatively impacted by some unforeseen supply chain issue from one of our vendors or suppliers. The second is the scaling up NOP infrastructure. The time to recruit, train, and certify clinical staff to be able to be fully functional in the field presents a potential time lag while we are rapidly growing our case volume. We are instituting several initiatives to standardize our clinical training programs for our field team. as well as continuing to recruit the recruitment efforts throughout the United States. Third is the access to charter air transport to maximize coverage and availability. This is an important area as we are seeing the global conditions limit the availability of chartered flights used for organ transplant support in the US. We are actively expanding our network and will aggressively pursue new strategies to minimize this risk on our long-term growth potential. Fourth is the impact of summer vacations and end of year holidays on second half 22 revenue. It is the norm that August is a fairly slow month for our international transplant activities given the impact of summer vacations in Europe. Q4 will also have the impact of Thanksgiving and Christmas holidays which may negatively impact transplant volumes in the United States. Finally, COVID. We see minimal or no impact of COVID on heart and liver transplant trends. However, as we stated before, lung will always be disproportionately impacted by any new COVID waves or variants. Based on our 2Q and H1 results and balancing these great results with above-potential growing headwinds, For the second sequential quarter, we are raising our annual revenue guidance for the full year 22 to between 67 to 75 million, up from 59 to 65 million for the same period. This represents a solid 121% to 148% growth over 2021. We take guidance very seriously. and we wanted to make sure that we are being prudent and reflecting the realities of the potential growing pains. With that, let me turn the call to Stephen to cover the detailed financial results for the quarter.