Transmedics Group Inc

NASDAQ:TMDX

Earnings Call Transcript 2020-Q4

[Operator]

Ladies and gentlemen, thank you for standing by and welcome to TransMedics Q4 2020 Earnings Conference. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's call is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Ms. Lynn Lewis. Please go ahead, ma'am.

[Lynn Lewis, Investor Relations]

Thank you. Earlier today, TransMedics released financials results for the quarter and full year ended December 31, 2020. 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 expectations or predictions 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 expectations, 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 2020, 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 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 17, 2020, as supplemented by our other SEC filings, including our quarterly report on Form 10-Q for the third quarter of 2020.

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 broadcast, today, March 2, 2021.

And with that, I'll turn the call over to Waleed Hassanein, President and Chief Executive Officer. Waleed?

[Waleed Hassanein, President and Chief Executive Officer]

Thank you so much, Lynn. Good afternoon everyone and welcome to TransMedics fourth quarter and full year 2020 earnings call. Joining me today is Stephen Gordon, our Chief Financial Officer.

I think we can all agree that 2020 was one of the most challenging year on many fronts, and many of us were very delighted to see it end. Despite the significant challenges we faced in 2020 due to the global COVID pandemic, TransMedics made significant progress on many of our key strategic initiatives. And we ended the year in a strong position to capitalize on several of the upcoming catalyst in 2021.

I would like to cover the following four major topics on our call today. First, I will review our financial results for the quarter and the full year. Second, I will review the progress achieved on our key strategic initiatives in 2020. Third, I will preview the upcoming catalyst in 2021 and their potential impact on our business. Fourth and finally, I would like to provide an overview of our strategy for 2021.

Let me start by summarizing our financial results for 4Q and FY2020, Stephen will cover the detailed financial performance in his section of this call. Our 4Q net revenue was $7.6 million, which outperformed expectations and represent 26% year-over-year growth. For the full year 2020, our net revenue was $25.6 million, representing 9% growth over 2019 revenue.

Our overall growth was driven by approximately 18% growth in our U.S. business, primarily attributable to having all of our three OCS platforms contributing to our U.S. revenue throughout the year. Specifically, we had OCS DCD Heart and OCS Liver programs active throughout 2020, as well as a recovery of our OCS Lung commercial activities in the fourth quarter of 2020.

Overall, we're encouraged that despite COVID-related challenges throughout the year and the significant slowing of the transplant procedures in Q2 and early Q3, our Lung business largely recovered in Q4. And we ended the year on an encouraging trajectory. We are now focused on leveraging the growth foundation that we've established in 2020, and pairing that with the upcoming 2021 catalyst to accelerate our future growth in 2022 and beyond.

Let me turn to the second topic and provide a summary of the progress achieved in our 2020 five key strategic operational initiatives that we believe represent a solid foundation for future growth. First, the National OCS Program. In 2020, we launched and expanded our National OCS Program, which is designed to help TransMedics realize our vision to be the national exclusive provider for all OCS-related organ retrieval and clinical management activities for transplant centers in the U.S.

We started with the OCS Lungs and expanding it into heart and liver once FDA approvals are achieved. We started 2020 with one active region in the Chicago area, and we ended 2020 with four active regions across the U.S., adding New England, Atlanta, and Dallas to the initial Chicago region. We plan to continue growing our regional coverage of the U.S. throughout 2021. In addition to the regional expansion last year, we also successfully established a scalable foundation to help operationalize and scale the National OCS Program.

Let me share a few examples. First, we developed a new process for standardizing, screening potential donors for suitability for OCS Lung perfusion and management. We have established a 24/7 digital screening ecosystem supported by clinical expertise to screen every potential donor for transplantation in the regions that we're currently active in. This process enables us to be involved early and hopefully facilitate clinical decision-making downstream.

The ultimate goal is to maximize donor lung utilization for transplantation using the OCS platform. Second, we established a national network of surgical expertise that are contracted directly by TransMedics, thereby supplementing our team surgical capabilities. This was done to ensure adequate coverage of every potential donor lung retrieval on the OCS platform, while standardizing the quality of care and the OCS surgical management.

Third, in 2020, we also launched a broad awareness campaign focused on educating every stakeholder within the U.S. transplant community. Specifically, we target transplant programs, both clinical and administrative leadership, organ procurement organization, administration, and clinical leadership, payers, both commercial payers and CMS. And finally, the organ procurement and transplant network, or OPTN. OPTN is the federal contract entity that manages the overall administration of organ transplantation in the U.S. We believe that the National OCS Program is going to be a significant driver of our U.S. growth going forward.

The second major initiative is the OCS Liver PMA. As a reminder, we completed the data analysis and filed our Liver PMA back in Q2 2020. We have since addressed and submitted all of our responses to the FDA's questions. And as I will discuss shortly, we're currently working with FDA to schedule the advisory panel meeting for the Liver PMA, which will hopefully happen in the next several months.

Building on the clinical momentum of the OCS Liver PROTECT trial, we've completed the first tranche of OCS Liver CAP late in Q4 2020. And we are now in active discussions with FDA to initiate the second tranche of the OCS Liver CAP, which hopefully will start in Q2 2021.

Our third key 2020 initiative was advancing the OCS Heart DCD indication. We completed 180 patient OCS DCD trial in 2020. We are now awaiting the completion of the follow-up period for the primary effectiveness endpoint of six months patient and graft survival post-transplant.

We expect the top line readout of this important program in Q3 2021. As I mentioned earlier, to continue to drive clinical momentum in this important program, we secured FDA approval for a CAP program in 25 U.S. major transplant centers in the third quarter and formally initiated the DCD CAP enrollment in December of 2020. Currently, this CAP is actively enrolling and ongoing.

Our fourth initiative was the OCS Heart DBD PMA. This is the initiative that suffered critical delays due to COVID pandemic. I'm pleased and relieved to finally report that the FDA has completed the review process of the CAP data and the OCS Heart panel meeting is now scheduled on April 6, 2021. We're excited and anxiously awaiting this important date and remain confident in our results, in our trial data and our ability to articulate the clinical value of the OCS Heart system.

Importantly, we're extremely confident in our ability to address any FDA's question to TransMedics or to the panelist. Lastly, our fifth and final key initiative for 2020 was to maintain laser-focus on OCS product quality and supply in the midst of a global pandemic. Despite the unprecedented challenges due to the COVID pandemic, the TransMedics team did a phenomenal job throughout the year and continuing to build and supply OCS life-sustaining products across the world.

Importantly, we passed all quality system management and international regulatory audits and maintained our certifications without any major issues. This is a true testament to the quality of our team and they're laser focused on supporting our OCS product quality to help patients and clinical users worldwide.

Now, let me turn to 2021 and the five major catalysts in front of us this year. Importantly, I want to highlight the potential impact of these catalysts on our overall growth trajectory over the long-term. There's no doubt that 2021 is a defining year to lay a strong foundation for TransMedics to have an accelerated growth trajectory for the foreseeable future. The first expected catalyst is the OCS Heart DBD panel meeting, which is now scheduled on April 6, 2021.

We're actively preparing for the commercial launch of the OCS Heart, pending FDA approval of course. As a part of these preparation efforts, we are engaged with all 25 heart transplant centers that are currently active in our DCD CAP program, given their clinical experience with the OCS during the CAP program.

We're planning and preparing to leverage our scalable infrastructure of the National OCS Program to add OCS Heart to our National OCS Program in the regions we're currently active in, once the FDA approval is secured. Finally, we're actively expanding our commercial and regional clinical coverage to accommodate potential increase in clinical uptake with the addition of the OCS Heart retrievals. Overall, what excited about where we are and hope that the next time we are in this call, we’ll be reporting a positive panel outcome supporting OCS Heart FDA approval.

The second potential catalyst in front of us is the OCS Liver panel meeting. We're looking forward to the OCS Liver panel meeting and assuming reasonable FDA timeline, we're planning for OCS Liver commercial launch in late 2021. Specifically, similar to what we're doing for the heart, we're actively engaged with the OCS Liver transplant centers that are involved in the PROTECT and the PROTECT CAP programs. We're also planning to add the OCS Liver to our active national OCS Program regions, once FDA approvals is in hand, of course.

The third potential catalyst is the readout of the top line data from our OCS Heard DCD trial and the filing of the PMA supplement. This milestone or this catalyst is targeted for Q3 2021. This clinical indication will be filed under a breakthrough FDA designation, and we are optimistic that it was supported in FDA approval in 2022. The fourth potential catalyst is the expansion of the OCS National Program to cover at least 10 major regions in the U.S. and expanding it to cover not just the lung, but OCS Heart and OCS Liver indications once FDA approval secure.

Our strategy is to leverage the infrastructure of the National OCS Program, we initiated for the OCS Lung to drive efficient and more streamlined launch of the OCS Heart and Liver across the U.S. We have begun the ramp up of the internal and external resources to enable us to capitalize in this strategy. We plan to maintain maximum flexibility by continuing to drive adoption of the OCS platform through two major commercial channels. First, the direct center acquisition and use model, in this case, the center would purchase the OCS technology directly from trans TransMedics, and they will be responsible for managing donor organ retrievals with the OCS system.

The second channel is through the national OCS program. This case the transplant center would accept the OCS perfused organs that were received and managed by the TransMedics process, then the center will pay for the cost of the OCS technology plus additional service charges to TransMedics process directly. We're extremely enthusiastic about this program, as it enables TransMedics process to be more integrated in the entire process of donor and potentially even recipient screening to facilitate maximum utilization of donor organs for transplant, while maintaining a very high clinical quality of care.

The fifth and final potential catalyst in 2021 is the publications of OCS Liver, OCS DBD and the OCS Heart DCD trial data in high impact medical journals. These will be critical drivers for broader clinical adoption of the OCS technology and the transformation of the clinical standard of care globally.

Now, let me turn to the final topic I would like to cover on this call, which is our plans for 2021, based on all the clinical and scientific facts we're aware of today, we remain convinced that COVID and its new variance will remain a threat to transplant activity normalizations in the near-term. Today, we see that impact being more negative on international and specifically European transplant volumes. We're monitoring the U.S. transplant activities carefully and we expect that the transplant activities in the U.S. to continue to recover, that's of course barring another major peak or a new variant outbreak in the U.S.

Given the timing of initiating the second tranche of our OCS Liver CAP, which is now expected in Q2 2021, and the potential commercial launch of OCS Heart and OCS Liver later this year, we expect incrementally improving revenue performance as the year progresses. We remain confident that we could end 2021 with all three OCS major transplant indications, i.e., lung, heart and liver transplant indications approved by FDA, which will be the primary driver of meaningful revenue growth in 2022 and beyond.

We're enthusiastic about the National OCS Program and its potential to position TransMedics as a critical trusted national partner to manage all lung, heart and liver retrievals and OCS clinical management in the U.S. TransMedics is uniquely positioned to capitalize in this opportunity to redefining and establishing the new ecosystem of organ transplantation in the U.S. Given the uncertainty about COVID impact and the many FDA driven catalysts in front of us, we will not be issuing financial guidance for 2021 at this time with that.

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. Steven?

[Stephen Gordon, Chief Financial Officer]

Thank you, Waleed. I will now provide some additional detail on the Q4 results and other financial information for the quarter and the year. For the fourth quarter of 2020, gross revenue was $8.2 million and net revenue was $7.6 million. Net revenue increased by 26% from the fourth quarter of 2019. In the U.S., gross revenue was $6.3 million and net revenue was $5.7 million. U.S. net revenue increased 22% from the fourth quarter of 2019. The organ breakdown on U.S. net revenue was as follows; $2.5 million was OCS Lung, $1.1 million was OCS Heart, and $2.1 million was OCS Liver and ex-U.S. revenue was $1.9 million, that's up 39% from Q4 of 2019 and included $0.6 million of OCS Lung, and 1.3 million of OCS Heart.

A few of the key drivers of Q4 revenue performance were, first, a strong recovery of OCS Lung sales in the U.S. after two consecutive quarters that were very negatively impacted by the COVID pandemic. The development of our National OCS Program added momentum to this recovery. Secondly, we had a strong quarter in U.S. OCS Liver sales as we completed the first phase of the OCS PROTECT CAP. With the lung and liver sequential improvements offset the lower OCS Heart revenue due to the stocking orders that we saw in Q3 2020. Also outside of the U.S., we initiated clinical use of the OCS Lung and Heart in Taiwan, which had a favorable impact as well.

Gross margin for the fourth quarter of 2020 was 63% in line with our expectations at this level of revenue. Total operating expenses for the quarter were $10.7 million, which was 14% below our spending in the fourth quarter of 2019. This reduction was primarily a result of limitations related to the COVID pandemic. We did see a sequential increase in operating expenses from $9.6 million in Q3 2020, as we have continued to invest in our National OCS Program commercial initiative.

Operating loss was $5.9 million in the fourth quarter of 2020, compared to $8.7 million in the fourth quarter of 2019. And our net loss for the fourth quarter of 2020 was $6.3 million, compared to $9.2 million in the fourth quarter of 2019. Finally cash equivalents and marketable securities were $125.6 million as of December 31, 2020, which equates to a reduction of $7.1 million from the balance at the end of Q3 2020. And the weighted average common shares outstanding for the quarter were 27.2 million.

Now let me share some details on the full fiscal year 2020 results. For the full year net revenue was $25.6 million, a 9% increase over the prior year. The detail for the annual revenue is as follows; U.S. net revenue was $19.2 million and grew by 18% over fiscal 2019. By organ, the U.S. annual net revenue broke down as $5.4 million for lung, $8.6 million for heart, and $5.2 million for liver. Outside the U.S. annual revenue was – for 2020 was $6.4 million, which was down 13% from 2019. Of course margin for the full year 2020 was 65% compared to 59% in 2019, and total operating expenses were $43 million for the full year 2020, essentially flat from the $43.5 million in 2019.

Operating loss was $26.4 million for the full year compared to $29.6 million in 2019, and net loss was $28.7 million in 2020, compared to $33.5 million in 2019. Overall, while 2020 was an extremely challenging year due primarily to the COVID pandemic and the havoc it caused both in transplant activity, as well as our regulatory timeline, we're extremely proud of the manner in which we managed to be here and we are confident in our ability to progress the business forward.

Looking ahead, we are optimistic about our prospects for meaningful revenue growth as a result of the upcoming FDA approvals. For 2021 as Waleed mentioned we are not providing formal financial guidance at this time. We believe that in the current COVID environment, there still exists a high level of uncertainty on the COVID impact on our business, as well as FDA timelines. And therefore, we will defer reinstating guidance and so some of that uncertainty is mitigated. I will share, however that we do expect to continue to increase our spending level throughout 2021 to achieve further critical mass in our National OCS Program, commercial infrastructure, as well as progress or next generation OCS platform development. We believe 2021 is a year to accelerate our strategy, and we're not going to hold back on these critical investments.

Now, I’d like to turn the call back to Waleed for closing comments.

[Waleed Hassanein, President and Chief Executive Officer]

Thank you, Stephen. Despite the unprecedented challenges in 2020, our team made significant progress across many strategic initiatives. We've build a strong platform and we're well positioned to leverage this foundation for long-term success. To that end, we're focused on executing on the many catalysts we outlined earlier, and for 2021 to be a truly transformative year for TransMedics. With our OCS Heart panel scheduled five short weeks from now, the clinical and regulatory timelines related to OCS Liver and Heart DCD coming to a head in the upcoming months and the scalable foundation of the National OCS Program taking shape, we believe that TransMedics is uniquely position to become the national partner for all transplant stakeholders and that in few short years, the vast majority of organ transplanted in U.S. will be preserved and managed on the OCS technology platform. I am humbly extremely excited for the months and years ahead of us.

With that, I will now turn the call to the operator for Q&A. Operator?

[Operator]

And your first question comes from David Lewis from Morgan Stanley.

[David Lewis, Morgan Stanley]

Good afternoon, and thanks for taking the question and a nice quarter in a challenging environment. So a few for me, maybe Stephen, really to just start with you and I appreciate tough environment, we're not going to get guidance. But I hope that you could just tell us mirror or at least comment about the business improving performance across the year. If you could maybe just level set us where to begin sort of the first quarter, is it safe to assume revenues can be flat sequentially or sort of more in line with sort of the consensus range, which is sort of six to seven for the first quarter in revenue benchmark us on the first quarter? I just want to confirm that what leaves you, is that – things should get better sequentially across the quarters. And I got a couple of follow-ups. Hello?

[Waleed Hassanein, President and Chief Executive Officer]

Operator?

[David Lewis, Morgan Stanley]

Hello.

[Operator]

Yes, I am here. I don't know why the lines are not – why they're not speaking. It looks like they may have disconnected. Hold on one moment, okay. The speakers’ lines are having a disconnection problem, please continue to hold.

[Stephen Gordon, Chief Financial Officer]

Hi everyone, I apologize, we had some technical difficulty. So David, are you still on the call?

[David Lewis, Morgan Stanley]

Sure. I'm here. Can you hear me?

[Stephen Gordon, Chief Financial Officer]

I can.

[David Lewis, Morgan Stanley]

Great. Did you hear my question? Should I repeat my question?

[Stephen Gordon, Chief Financial Officer]

I heard your question about the sequential growth. What we said is that Q1 is going to be a little bit choppy. I would expect the potential to have flattish from Q4 to Q1 and see growth starting after that.

[David Lewis, Morgan Stanley]

Okay.

[Stephen Gordon, Chief Financial Officer]

Yes, the main reason is that this kind of transition to the Liver CAP from the first tranche to the second tranche, we'll see kind of a gap out in Q1.

[David Lewis, Morgan Stanley]

Okay. Very helpful. We can work with that. And just a couple of other questions here, I guess the Waleed, the first question would just be that the lung performance sequentially was very solid. You just sort of walk through some of the commercial dynamics there? And then I'll ask my second question as well, which is just heart penal conference, you can't predict the outcome of the FDA panel, but you sound incrementally more confident about the data with which you've submitted to the panel and just kind of help us understand what's underpinning that confidence? And if there's been any dialogue with the agency here during the CAP submission process? Thanks so much.

[Waleed Hassanein, President and Chief Executive Officer]

Sure. Thank you, David. So the first question related to the lung recovery. I think it's a good – solid recovery in Q4, obviously we're working hard to even accelerate that recovery even further. I think three things contributed to the lung recovery in Q4. One, that the transplant volume came back and the pent-up demand that we were hoping to see at the end of the year was actually there. So that's number one. Number two, the awareness campaign that the team has been doing about the availability of the National OCS Program resonated and began the process of resonating with some of their institutions that are doing lung transplant, whether or not their original OCS center, and three, of course, the momentum that was generated by having four regions active in Q4.

We hope that we can carry that momentum forward in 2021 and continue to build on that momentum, continue to expand that awareness, continue to open up new territories and hopefully that will get us to where we need to be with the lung business. Relating to the Heart panel meeting, as I've said numerous time, no one here and certainly I never will predict what FDA decisions would be or what the outcome of a panel meeting is. My comments are primarily focused on our ability, our confidence in our data and our confidence in the results. And now seeing the FDA comments or at least getting a better feel for the FDA comments, we feel that we have our arms around these important questions that the FDA raises to the panel, and we have solid data to support our position.

That's where our confidence is coming from, but we never can predict what the outcome is, but we're very hopeful and very confident in our ability to meet those questions and that's what gives us the confidence that we hopefully will be successful in this mission.

[David Lewis, Morgan Stanley]

Okay, very helpful. And then maybe just last one for me. And I'll jump back in queue is just, we’re not predicting the timing of the approval, once approved, if you are approved for heart, how soon after can we consider full commercial launch? Is that a one month, three months, just help us out with that? Thanks so much.

[Waleed Hassanein, President and Chief Executive Officer]

Sure. That's an important question, David, and thank you for asking it. I think realistically speaking, it's not going to be a flip of a switch, but we expect it to be significantly more streamlined than the lung. So the lung took us anywhere between 90 days to 120 days to see any uplift in the commercialization in the lung, we expect heart to be somewhere between 30 days to 60 days. And we attribute that to the one to the effort that Tamer and his team have been doing and preparing for that, launch in the educational campaign that are ongoing, but more importantly, the National Program as well is going to help streamline that process. So that, based on these, we feel that it's going to be a much more streamlined across us from approval to starting seeing some meaningful impact in our revenue.

[David Lewis, Morgan Stanley]

Great. Thanks so much. Nice quarter.

[Waleed Hassanein, President and Chief Executive Officer]

Thank you, David.

[Operator]

And your next question comes from Robbie Marcus from JP Morgan.

[Robbie Marcus, JP Morgan]

Great. Thanks for taking the questions. Waleed hoping you could spend a minute and just walk us through some of the learnings you had from the lung launch and what you'll apply to the heart and liver to better transition from a clinical to a commercial setting. And then second, if you could walk us through, if you have any metrics on what utilization looks like before you put in the program where you managed the account versus just selling the OCS system in, if there is any early data statistics you could point to and increase volumes?

[Waleed Hassanein, President and Chief Executive Officer]

Sure. Thank you, Robbie. So on the first question, I think the learnings in the lung as you’ve stated them before, it was stating in public before, but I think the biggest learning that I think negatively impact our lung early commercialization is the hiatus between conducting the pivotal trial and the length of FDA review cycle without any continued access protocol to keep the clinical momentum and the awareness of the technology benefits going, that was a huge learning and resulted – and that’s really starting from ground zero, because it took 14 months to 18 months from finishing the last patient in the cloud to getting the first approval.

So that's something we avoided throughout the heart and deliver our program, so that's number one. Second is really the active engagement on planning for commercialization, resources planning for resources, training, active business discussion with administration, integration discussion, how are they going to scale? How could we be helpful? Again, in the lung we started from scratch after the FDA approval, here we're engaged with the centers, given our position, given our relationship, given our active participation on ongoing programs within same institutions that gives us huge leverage.

And then finally, and I think that frankly the one that could be truly transformative is the foundation that we spent and that we developed for the National Program, that is going to be potentially a huge game-changer for both heart and liver. As far as the next part of the question or the second question, Robbie, I want to wait a little bit until we have more data and points on the board to try to metric the growth. We certainly saw growth. We saw significant awareness and we're monitoring that carefully, but I think we're too early to try to metric and extrapolate that.

We need a couple more – two or three more quarters under our belt to be able to comfortably share that data publicly. But we're monitoring it very carefully and we're excited about what we're seeing, and we hope that by adding the heart and subsequently the liver, we are going to – my goal is within a year or so from now that this is going to be a key point that we're highlighting every earnings call to point about the percentage of our revenue coming from the direct acquisition model versus the National Program.

[Robbie Marcus, JP Morgan]

Right. And then maybe just one last one, Stephen, you mentioned increased spending in 2021. I realized we're not getting revenue guidance, but can you qualitatively or quantitatively help steer us in the direction of increased spending?

[Stephen Gordon, Chief Financial Officer]

Yes, Robbie. Sure. I think I would look at Q1 2020 as kind of a base, which I think we were spending close to $13 million in that quarter. We're going to get back to that level and we're going to grow sequentially from there. So I would use that as a base. We're going to be aggressively ramping up this National Program.

[Robbie Marcus, JP Morgan]

And you're going to get there in first quarter or at some point in the year.

[Stephen Gordon, Chief Financial Officer]

I think we'll get pretty close in the first quarter.

[Robbie Marcus, JP Morgan]

Okay, great. Thanks for taking the questions.

[Waleed Hassanein, President and Chief Executive Officer]

Thank you, Robbie.

[Operator]

[Operator Instructions] And the next question is from Suraj Kalia from Oppenheimer & Company.

[Suraj Kalia, Oppenheimer & Company]

Good afternoon, Waleed and Stephen, can you hear me all right?

[Waleed Hassanein, President and Chief Executive Officer]

We can hear you just fine. Hi, Suraj.

[Suraj Kalia, Oppenheimer & Company]

So gentlemen, congrats on the quarter. So Waleed, regarding the OCS Heart panel, obviously, the panel is going to make a set of recommendations in the risk reward, and you guys seem to be pretty confident. Is there anything in the discussions with the FDA so far that gives you the same level of comfort from a labeling perspective?

[Waleed Hassanein, President and Chief Executive Officer]

Suraj, thank you for the question. We never discussed any discussions related to the labeling. I think we'll be putting the cart before the horse. Our focus is to get a strong, positive full. We trust the FDA leadership to do the right thing on the labeling. However, I don't see any controversial topic so far at all related to labeling, I think the key foundation is to go through the panel, discuss the issues in hand and hopefully end up in a positive outcome. I believe the process will be, hopefully streamline from there.

[Suraj Kalia, Oppenheimer & Company]

Fair enough. Waleed, in terms of National OCS Program, I can see how y'all are trying to alleviate some of the staff and logistical constraints that transplant centers have, agree with the – at least the approach that you all are trying. What are the incremental revenues per case, Waleed, that on a normalized basis? You can see such a program pull through because in fact, you are helping offset some of the costs of the centers, but how does the math work for y'all on a normalized basis?

[Waleed Hassanein, President and Chief Executive Officer]

I think the only thing we can say at this point, Suraj is, as I've said, numerous times, the National Program is nothing but a mechanism to streamline the process of adoption of the OCS with the main revenue stream at scale, the primarily disposable revenue. And we have the ability to do that. So far it's again, early innings, but it's exactly the vision is maturing in that fashion. And definitely, from a cost benefit to the transplant program is huge on many fronts. It's logistical cost, infrastructure cost, it's time cost, it's life-work balance cost. And for again, I don't want to be too forward on my skis here but we believe in this, we think there's a significant – it's a significant win-win approach for everybody involved. And we hope to be able to continue to prove that throughout 2021 and beyond.

[Suraj Kalia, Oppenheimer & Company]

Fair enough. And Waleed, final question, forgive me if I missed this. The 90 patients for DCD CAP, Heart CAP, did you all give a timeline on when y'all think that could be enrolled? Thank you for taking my questions.

[Waleed Hassanein, President and Chief Executive Officer]

Thank you. Thank you, Suraj. I think realistically speaking, we see the 90 patient CAP, pretty much wrapping up by year-end. However in our discussions with FDA and given the broad publicity about the success of the OCS DCD Heart program in the U.S. and internationally, I think the FDA is very keen and aware of the positive patient impact. So I'm hopeful that collaboratively we can work with FDA to potentially expand that CAP, if the approval is not in hand by that time.

So I'm not worried about when do we finish it as much as I’m more focusing on getting the data, getting the PMA supplement filed in a timely fashion to make sure that we're shortening the time gaps between transitioning from CAP into a potential extension to the CAP and the like.

[Operator]

And your last question comes from the line of Josh Jennings from Cowen & Company.

[Brian Kennedy, Cowen & Company]

Hi, this is Brian here for Josh. Thanks for taking my questions. I have two regulatory ones. The first is just on the liver PMA. Are you planning to supplement the filing with data from the CAP program? And I guess my question is just has this possibility been discussed with the FDA already? And do you feel you now have a definitive stance from the agency on whether the CAP data should be added to the filing?

[Waleed Hassanein, President and Chief Executive Officer]

Brian, thank you for the question. In every PMA we file, we always supplement data with CAP and we expect to do so. We have done that already, shared data with FDA on the first few cases in the CAP and we expect as we march towards the panel, that the CAP will be discussed. Is it going to play the role that the CAP played in the heart? I doubt it but it's not an option or a nuance thing. Every PMA you have to report the latest set of data that you have and we plan to do so. And in this case, we've already submitted that data to FDA.

[Brian Kennedy, Cowen & Company]

Okay. That's helpful. And then on DCD Heart, I believe you included the DCD Heart U.S. filing in 3Q of this year, in addition to releasing the data. So can you clarify when in 2022, we could see an approval just given that the submission I believe is a supplement and you have breakthrough status. Would you expect a panel as part of this review, or just how are you thinking about just the approval timeline for next year?

[Waleed Hassanein, President and Chief Executive Officer]

Yes, that's an excellent question, Brian. Again, we can predict what FDA decisions will be. I think all we can predict is if the data is strong, as we hope it is that FDA will honor the breakthrough designation and there will be a streamlined review process. If there's any questions in the data or depending on the outcome of the upcoming panel, FDA may or may not hold another panel. The facts are DCD is a first of its kind indication. Yes, it has a breakthrough designation. But these are all bridges, we have to cross after we finished the heart panel and after we see the data. But roughly speaking, it's not out of the ordinary to assume nine to 12 months in a PMA supplement so that's what we're assuming.

[Operator]

And I have no further questions at this time. I'll turn the call back over to the speakers for any final remarks.

[Waleed Hassanein, President and Chief Executive Officer]

Thank you, operator. Thank you everybody for your time this afternoon. And we're looking forward to our next call. We appreciate your time. Thank you very much.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.