Xvivo Perfusion AB

STO:XVIVO

Earnings Call Analysis

Xvivo Achieves Record Sales and Strong Earnings in Q2 2024

Xvivo reported a remarkable Q2 2024 with record sales of SEK 210 million, representing an organic growth of 35% in local currencies. Gross margin remained robust at 75%, while EBITDA improved to 24% from 19% last year, demonstrating the scalability and profitability of their business model. Thoracic sales, driven by strong EVLP growth in North America, reached SEK 141 million. Additionally, the company achieved a milestone for Kidney Assist Transplant, preparing for a U.S. launch in Q3 2024. Despite heavy investments, Xvivo's scalable revenue model converted well into gross margin and EBITDA improvements.

Record Performance in Q2

Xvivo has reported its strongest quarter ever, with net sales reaching SEK 210 million, marking a 35% year-over-year growth in local currencies. This robust growth was mirrored by impressive profitability metrics, with EBIT increasing to 16% compared to 10% last year, while EBITDA grew to 24% from 19% in the same period. This performance reflects the company's efficient scalability and operational improvements.

Product Segmentation: Thoracic and Abdominal Gains

In the thoracic segment, sales were SEK 141 million, with a remarkable organic growth of 40% attributed largely to the growing interest in Ex Vivo Lung Perfusion (EVLP) technologies, especially in North America, where year-to-date growth has exceeded 60%. On the abdominal front, sales amounted to SEK 47 million, with disposables growing by 36%. Notably, the inclusion of machines raises this growth figure to 53%. The Liver Assist devices accounted for a substantial portion of abdominal sales.

Outlook for Q3 and Beyond

While Q2 was exceptionally strong, Xvivo cautions investors that Q3 is typically weaker due to seasonal factors, particularly lower site activity during summer. However, the company remains committed to maintaining momentum in its growth trajectory. Guidance for the future includes achieving a gross margin target of 70% by 2027, highlighting the expected efficiency improvements as production scales.

Market Position and Future Innovations

The company continues to invest in both research and commercial infrastructure, indicating a strong underpinning for long-term growth. Xvivo aims to expand its presence in the kidney and liver transplant markets. Notably, the ongoing heart trial in the U.S. is generating considerable interest among clinics, suggesting a positive reception upon future launches.

Clinical Trials and Regulatory Approvals

Xvivo is making strides in clinical trials, with the heart product trial underway and expected milestones coming up. The company has submitted regulatory documentation for the CE mark in Europe, aiming for approval by Q4 2024. Additionally, the Kidney Assist Transport is set for a Q3 U.S. launch, following milestones met in production capacity.

Financial Health and Cash Flow Management

Xvivo reported positive cash flow from operating activities, ending the quarter with a solid cash position of SEK 481 million, despite a net cash outflow due to investments aimed at clinical trials and equipment. The strong cash position provides a buffer for continued investment into growth initiatives.

Long-Term Vision and Market Demand

The demand for transplants remains significantly high, with Xvivo positioned well to capture market share through their innovative machine perfusion technologies. The company anticipates that an increased focus on the DCD (Donation After Circulatory Death) organ pool will drive future growth. They are also exploring new sources of organs, such as xenografts, which could revolutionize transplantation practices.

Earnings Call Transcript 2024-Q2

[Operator]

Welcome to Xvivo Q2 Report for 2024. [Operator Instructions] Now I will hand the conference over to CEO, Christoffer Rosenblad and CFO, Kristoffer Nordstrom. Please go ahead.

[Christoffer Rosenblad, executive]

Thank you so much, and welcome to Xvivo's Earnings Call for the second quarter of 2024. As we see on the first slide, we have today's presenter here. It's me, Christoffer Rosenblad, CEO of Xvivo; and Kristoffer Nordstrom, CFO today calling in from Philadelphia.

If we go to the second slide in the deck, we see Q2 financial at a glance. And I'm proud and happy to report the strongest quarter in Xvivo's history and that Q2 shows improvement on top line as well as EBITDA. More importantly, the Q2 shows that Xvivo has a scalable business model with improving margins with increasing sales, even though we continue and will continue to invest in the organization for future growth.

Sales came in a record SEK 210 million. The gross margins are continuing to show strength. We plan and reported that we plan to improve the abdominal gross margin to 70% at the latest in 2027 or earlier when we reach economies of scale in production, and we see that we continue to produce according to that goal.

The EBITDA shows a strong improvement to 24%; and Kristoffer Nordstrom, our CFO, will get into the details on sales, gross margins and EBITDA later in this presentation. I also want to mention that the growth for thoracic is picking up and mainly come from higher XPS activity during the quarter. We have historically seen solid growth from Europe on the XPS and we now see that growth is coming more and more from the U.S. There's a high interest from new customers start programs and we see that formal low-volume customers are increasing their EVLP activity level.

And with that, we go over to YTD financial at a glance and as you see on this Slide 3. We see a similar picture, the first 6 months, as we've seen in the quarter. And the key takeaways for the first 6 months are growth is still mainly coming from increased activity in existing customers and a strong market. We continue to see high interest from new customers, especially as the ISHLT in April, and we see that, that interest start to get converted into active customers.

We can also conclude that sales from products is picking up faster than sales from services, even though we have a fantastic service offering with a very, very good quality and very good customer feedback. And even though we are investing heavily in mainly commercial field force, we can conclude that the revenue model is scalable. In other words, we see that it gets converted to gross margin and EBITDA.

Lastly and most important to mention is that projects are progressing according to plan. The hard project is on time by debt production capacity project, where we invest to scale up, volumes times 10 of today's volumes for disposable are running in line with communicated time lines.

I'm happy to report that the first milestone for the Kidney Assist Transplant is met, and we now will have production volume for U.S. launch in Q3, probably after the vacation period in the U.S.

And as we have reported earlier, the project for full-scale production of disposables for heart, liver and kidneys is estimated to be completed end of Q2 next year, so we still have a year to go.

And with this first 2 glances, we will go over to Q2 highlights on Slide 4 and then we can go directly into Slide 5, where we go with what happened. I know I mentioned the ISHLT last quarter, but some news is needs repetition. So we start with the report from this year's ISHLT Conference in Prague in April. ISHLT is the largest and by far the most important conference for hearts and lungs transplantation. And I want to repeat again that Xvivo was the most selected exhibitor and the results from the EU study with Xvivo heart technology was the most selected scientific session in the whole program.

We also held 2 extremely well attended industries symposia during the conference where we got extremely good feedback from customers of the scientific height. And they said it was even better than most of the original program. And as I said earlier, we can already see in late Q2, the impact of the conference in an increased interest for our lung and heart technologies.

I also again want to mention on Slide 6, the fantastic results from the heart study. It's -- I've never seen such good results before in my life and they are 3 key takeaways from the study. One is, again, to our knowledge, the first randomized controlled trial with the superiority design in heart-lung transplantation, which shows the confidence the clinicians have in the Xvivo technology. Two, the HOPE Group, where HOPE stands for hypothermic oxygenated perfusion, in other words, pumped with Xvivo technology showed an improvement of 61% for severe PGD versus the control group. This is a highly important improvement providers at PGD is the leading cause for early mortality after heart transplantation. And we know that PGD negatively affects long-term survival. Three in the takeaway is that all HOPE parts were deemed transplantable after perfusion. This is important to highlight since co-perfusion offer safety advantage during transplantation.

On top of the NIHP2019 trial percentage in, during ISHLT. I also want to mention the PEGASE trial or PEGASUS in English studied by Professor Lebreton, and it's progressing according to plan. And the study is designed that with transatlantic flight on commercial airlines show that more than 12 hours of transport is safe and is feasible in the practice setting.

We think that even though this trial is comparably small with 7 patients, that this can show and revolutionize how heart transplants logistics are performed. And it's the first proof that our technology can enable both patient benefits and cost benefits for the health care systems around the world.

And with that, we turn to Slide 7, where we also will still stick to heart and some great news around DCD donors and heart trials. Approval has been granted to study DCD direct procurement. Direct procurement means that transplants are made without prior NRP similar. The portion of the donor pool that are coming from DCD is comparably large in some countries, and it's growing very fast. So for example, in the U.S., it's already 36% and in Benelux, it's approximately 58%.

And if we want to substantially increase the number of transplants, we need to prove that DCD hearts can be transplanted in a safe, cost-efficient and practical, feasible way with good patient outcome. And this study is designed to show that. The earlier experience we have from liver and kidney shows with very good clinical outcome that it is possible. So the concept in itself is proven. We have also seen in preclinical settings on heart that use in the XVIVO heart technology on DCD direct procurement shows good results.

And lastly, as we have reported earlier, the DCD study -- or the study in the U.S. for regulatory approval that we also include DCD Heart. The company hopes and believes that we will have good evidence when those 2 studies are concluded.

And with that, we will turn over to another organ and more precisely, the lungs. We have seen in both Q1 and Q2, good results and increased usage. And we can see that the pressure from mainly the American Political System to increase the number of transplant has had a very positive impact on EVLPs for lungs.

We can also see that the hub models we have talked about before or centralized perfusion models help to drive growth. We now have the bridge in Scandinavia active recruiting. And we know Paris has a hub, which now have 3 clinics participating, which all of those hubs enable that we can make more transplants for less resources. I also want to mention in the U.S. that we have deeper collaboration with, for example, lung by engineering that is also showing to be very fruitful.

The other trend we see with a positive ISHLT and more feet on the ground is an increasing interest for EVLP and setting up EVLP programs. And as I mentioned in the beginning, we have seen that some of that interest has returned into more usage of EVLP and some of the interest has resulted in new EVLP program being set up on both -- in both Europe and the U.S. And this is really exciting use and we know that with more EVLP programs, we get more patients, we get a chance of a lung transplant and hence not dying, waiting for a new lung.

And with that, we go straight into the abdominal portfolio. During the last year, we've seen more than 20 publications on the Liver Assist Technology, showing improved patient outcome on both DBD and DCD graft after transplantation. This quarter, long-term survival data was published on extended criteria DBD livers and with very good results, we are very pleased to both read this and very proud of what our technology can accomplish.

And we can see in the study that the 5-year outcome for organ survival is 87% in the Liver Assist Group, which in itself is a very strong result. And I think it gets even more clear if we show when it compared to the controlled group where the result was 52%, which was the standard of care, which is the -- be a cooler type of transport with the [indiscernible] solution.

I have mentioned before also that we -- last quarter, we had a less of publication showing that livers can be safely perfused up to 20 hours, and we can eliminate in if we use this technology, the need of nighttime liver transplant. And I think this, again, is a great example where we can improve that or show that we can get improved gross survival and also improve work-life balance for our customers.

Lastly, as stated earlier, the production scale up times 10 of today's volumes is progressing according to plan. We have reached our first milestone and hence, we're now ready to launch Kidney Assist Transport also in the United States.

And with that, we leave the highlights section, and we turn into our clinical pipeline -- is a divider on Slide 10, and we can go straight actually to Slide 11, where we see the regulatory status and the clinical trials and our tentative time lines. I'm happy to report that nothing has changed since last time we met. So I will repeat what I said in April, in the U.S., the heart trial is progressing according to plan and our clinical team in the U.S. is working very hard to include all things into the trial. The interest is very high to be part of the trial, and we are doing our utmost to make sure that we can meet that interest.

As also mentioned before, in Europe, we have handled in our technical documentation for review according to our time plan. We are aiming for a CE mark in Europe in Q4 2024. Important to mention is that we can't affect the review time to 100%.

The good news is that the notified body has been very responsive and even though they have a high workload under MDR, they've been really working together with us, also the Swedish NPA is responsive and delivering on time. The security we face is that how fast EMA or the European Medical Agency can handle the review. We have done what we can and in other words, handing in product and clinical files with good quality and on time.

In Australia and New Zealand, we have already high usage of the product -- of the heart product in this case. The regulatory approval will be pending the CE Mark in Europe. But we are encouraged to see the continued high usage of approximately 30% of all hearts in Australia going on the Xvivo heart technology on a compassionate use.

And we have also previously reported at the Liver Assist have been granted breakthrough device designation by the FDA. This will mean that we get a faster rule through the FDA PMA process. It is also a quality stamp that the products are innovative and fulfill the need on the market. We have started to invest in an organization to run the study and we are preparing the FDA documentation. The aim is to hand in the IDE application at the end of this year.

And with that, we have concluded the first part of the presentation, and I will hand over to my CFO, Kristoffer Nordstrom, who will present the financial performance of the quarter.

[Kristoffer Nordstrom, executive]

Thank you so much. Yes. As Mr. Rosenblad started off this call, it was -- as you all know, a financially strong quarter. We're very satisfied and happy over that. Basically, we're doing many things right at the moment, and that starts to pace off and we should just continue to deliver on that way, of course.

Sales came in at record levels in Q2. Same did EBIT -- same did EBITDA. But -- last but not least, also our operating cash flow was also strong, which is delighting of course. But -- so to the numbers then, net sales in Q2 came in at SEK 210 million, that is a new record, as Christoffer mentioned, organic growth of 35% in local currencies. Overall, gross margin also prices really 75% same as last year. EBIT in Q2, 16% versus 10% last year. That's mainly driven by our increased sales, although we continue to invest in the organization. But as you know, we have done that in a fairly controlled way so far. EBITDA in Q2, 24% versus 19% last year.

So overall, a good quarter where we continued to sequentially improve both top line and profitability. Also looking at the year-to-date numbers, it looks good. So we reached SEK 396 million in sales and that's a growth of 34% in local currencies. EBIT 13% and EBITDA 22%, and both these measures are significantly better than last year.

Should touch a little bit upon the outlook. When we look ahead into the next quarter, Q3, it is worth mentioning that the third quarter is normally a sequentially weaker quarter than the second quarter. That's our experience. And most often, this is due to things that are a little bit out of our hands, such as summer -- lower activities during the summer at the sites, et cetera. But we will do what we can to keep the momentum, of course, but at least from the past, that has been our learning.

When it comes to EBITDA, the quarter was a record, as mentioned, 24%. This measure can, of course, go up and down a bit quarter by quarter, and we continue to invest and grow our organization, as you know. But I think what we did this quarter was that we clearly demonstrated that this quarter showed that our current business model is scalable and it is profitable already at these lower levels of sales that we are seeing this year and last year.

Moving over to thoracic and back to Q2 again. So a very strong quarter. Sales coming in at SEK 141 million. Organic growth for disposables was 40%. And the main driver, similar to previous quarters is EVLP, which is great and then specifically in the North America. In North America, we saw EVLP growth 40% in Q2 and actually more than 60% year-to-date. So a very strong development and a very good -- we start to see the results now from the reorganization that we did last year. Perfadex sales not forget, grew 12% versus Q2 last year and have grown 12% also year-to-date and that's driven by the increase of number of transplants but also our price increases.

On the sales side, it's also great to share that we had heart sales in Q2 of SEK 19 million, and that comes from a variation of compassionate use supported by the strong evidence presented at ISHLT but also revenue from our U.S. heart trial. So we start to see some good numbers now also on sales, despite the fact that products are not yet approved anywhere. Gross margin disposable Q2 was 85% and that's in line with previous quarters as well.

Moving over to abdominal, net sales amounted to SEK 47 million, which represents another record quarter as well. Organic growth disposables 36%. If you also include machines, which makes a little more sense on the abdominal side because here, it's more frequently that we actually sell Liver Assist devices. If you include machines, the sales growth was actually 53%, which is very strong. Liver stood for 72% of total abdominal sales and kidney sales came in about SEK 10 million, which means that we're close to SEK 20 million year-to-date.

As Christoffer, mentioned, we have increased our production capacity and improve that capacity in Q1, Q2, and we do now have supply so we can start to reengage with customers who has expressed the interest in our technology, which is -- that's what we are waiting for, obviously.

Gross margin disposables came in at 63% versus 70% last year. It's weighted down temporarily by costs associated with our interim solutions for production capacity. And then I think you can expect to see that also in Q3, Q4. We need to put in some extra dollars to ensure that we can continue to provide capacity, as simple as that.

Final business area, we're going over to services. Sales in Q2 came in on SEK 23 million and that came from 126 recovery cases and that represents a modest sales growth 10%, transplant activity at our customers increased in Q2 but we still suffer from lower cases versus last year due to the loss of 2 high-volume centers in 2023. So we have added new customers in Q4 but we have simply not yet recovered and grown our case volumes and that's also reflected in the numbers, of course.

We continue to work to develop our market strategy for organ recovery and we'll focus on that in Q3, Q4. We are also working and looking into expanding our offering, not only offering organ recovery services but we are looking into NRP. We have had a very successful pilot case with a prominent U.S. hospital and there is interest to -- from other hospitals to have us helping them execute on such a program as well.

We are also looking into EVLP perfusion services, hope to see a pilot in the second half of the year there as well. Most of the hospitals, they run their EVLP programs perfectly well because we are training them and we are there for them, so to say. But if there are cases where new centers wants to come on board and they want us to also offer perfusion services. We should absolutely be able to offer that as well. So that we're looking into.

Another initiative, final comment on services is also that we want and we will start to engage our Xvivo services team with our heart trial centers. So centers who wants to learn how -- or I should say, centers today wants to learn how we can help them grow their thoracic transplant programs, not only after the trial but also during the trial. So those are dialogues that we are also having at the moment. So we are carefully optimistic that we should end this year on a high also for services, no doubt about that.

Moving over to EBITDA. Just we have said it all, I think, a solid quarter, 24% rolling 12%. We're at 20% and the trend develops nicely. We have stated it many times before, but our ambition is to continue to improve EBITDA year-on-year, absolutely. We will do this step by step. And what we want to do is to maintain a healthy relationship between sales growth and our ambition to assets growth and profitability. And we showed this quarter that we're definitely on the right track, to say.

Final slide on my side. As always, financial position and cash flow. I mentioned it in the beginning, good quarter here as well. Q1 was cash positive from operating activities, SEK 25 million positive. Investment amounted to SEK 48 million primarily spent on the U.S. clinical trials and investments in machine fleet and that led to total cash flow of minus SEK 27 million. We ended the quarter with a solid cash position of SEK 481 million. And that was everything from me for now.

I'm happy to receive questions. So giving the word over to you again, Christoffer.

[Christoffer Rosenblad, executive]

Thank you so much, Nordstrom. We will just have 2 quick slides on the outlook. And I will start, as always, on the long-term pictures. We're here for the long game. And it's important to establish the long-term picture. The demand for transplant is still 10x higher than supply today according to the WHO. I also want to mention that the sales value of machine perfusion is approximately times 10 versus steady cold. So there is a large market opportunity and a huge opportunity to improve life for patients with end-stage organ failure.

Machine perfusion and our service models have proven to increase the number of organs to be used for transplantation, especially in the fast-growing DCD organ pool. The main growth driver are superior clinical results for machine perfusion and the fact that service model reduced complexity and time for the transplant clinic.

Hence, machine perfusion and service models are normal and DCD graphs will drive growth in the near to medium-term future. But lastly, to grow all the way to times 10, the number of transplant, the company believes is possible with the current human donors. However, with time, new innovative sources of organs will probably be used, one example is xenografts or grafts from other animals than humans. For both machine perfusion and new sources of organs, Xvivo is a proven product line and this puts Xvivo in a unique position on the market today.

If we go to the next Slide #21. This is more of a near-term outlook where I want to say that we will keep razer sharp focus on our key priorities, which are -- we see that after ISHLT, we will have increased focus and actually spend more resources on both the U.S. Heart trial and launch preparation in Europe and Australia and New Zealand. For the same reason, we will also expand our global market leadership in lung by driving a further EBIT utilization. And here, the investment is mainly in marketing and field force capacity.

I said it many times before, but ramp up production capacity is the most important project we're running right now to meet the increased demand we see for both kidney and liver. So we have -- are focusing on that as well. And lastly, we have a clear focus on our service support for the growing U.S. transplant programs. So we will continue to drive pilots and develop successful product service revenue models to meet logistical needs we see as transplant clinics have today to grow their programs and not burn out their staff.

So with that, I will hand over for questions and remind everyone the reason we are here and is that nobody should die waiting for a new organ. Thank you so much.

[Operator]

[Operator Instructions] The next question comes from Simon Larsson from Danske Bank.

[Simon Larsson, analyst]

Two questions from my side, please. First, maybe on the lung side of the business. So as you said, 2 new XPS accounts that went live here during the quarter. I mean would you say that these have contributed meaningfully to sales in the quarter? Or should we expect them to ramp up further here during the back half of the year and support continued strong growth for thorax segment?

[Christoffer Rosenblad, executive]

Thank you, great questions. When they are active customers, they have contributed already during the quarter. So that's the definition of a new customer that it's a meaningful contribution. So what we're trying to do is build as many active customers as possible for driving EVLP usage.

[Simon Larsson, analyst]

Yes, of course. But I mean, I think -- I guess they are maybe not sort of spending as much as a mature customer yet, right? Or am I wrong?

[Christoffer Rosenblad, executive]

I got the question. Yes, I mean there will be a ramp-up process for sure. It's hard to say right now exactly how that would look like. But yes, we anticipate that to be ramping up over time.

[Simon Larsson, analyst]

Yes. Okay. And maybe I have 2 questions. So my final one. On the production scale-up project, so you're obviously pushing out the time line here a little bit into end of Q2 next year. So I'm just trying to understand the risk of the current time line that you have. So what are the remaining boxes that you have to tick, so to speak, in order to finish this project. Is there any specific critical roadblock that you have to overcome to get to the Factor X in disposable volumes here.

[Christoffer Rosenblad, executive]

I just want to be clear that when last -- June last year, I said it will take all in all, 2 years. So this is the time that we always counting on but the first milestone was due this year to Kidney Assist Transport where we scale up the current, you know what to do that [Technical Difficulty] I think that's operator that's unmuted or something.

Operator please mute, I hope I'm back here. So my -- to answer the question, we are running according to the communicated time plan. The other thing -- the part of the question where the critical components, there are a couple of key ones, which is one investing in production equipment, which we have concluded. Then there is of course, scale-up and validation of all production equipment and making sure we get renotified both FDA, et cetera. But we don't foresee any problems. And we think we have -- do you hear anything?

[Simon Larsson, analyst]

Yes. I think you broke up a little bit but I think I can hear you now.

[Christoffer Rosenblad, executive]

So my point is that we have -- we are -- right now, we have invested in production equipment and we are validating that production equipment and improving the production of the products. But right now, we don't foresee any delays in the project. And we are, as I stated, according to where we should be at this stage. But it's all in all for 3 products, it is unfortunately a 2-year project. It -- that's the time it takes, unfortunately, to scale up this type of sterile production.

[Simon Larsson, analyst]

Yes. Makes sense. Maybe a super quick one for Mr. Nordstrom, maybe on the STEEN Solution. Have you increased prices or anything? Was the price component for the growth of the machine perfusion consumables in the quarter?

[Operator]

The next question comes from Jakob Lembke from SEB.

[Jakob Lembke, analyst]

My first question is on the lung machine perfusion. Obviously, very strong here in Q2. My sense is that this is mainly driven by increased utilization at existing customers. So when you discuss with these customers, do you have any insight as to why -- what is driving this sort of sudden large increase in utilization?

[Christoffer Rosenblad, executive]

Thank you for your question. I think they are mainly 2 reasons. One is the pressure and this is mainly in the United States. One is mainly the pressure from American Political System at the beginning, but now the transplant system that put pressure on more volumes for transplants and that increased than the interest for doing an EVLP, which is exactly the aim of an EVLP to get more organs available.

The other thing that drives a lot of interest, I think, is what we do, especially after ISHLT. We have seen a huge interest for this technology that you save can transplant more organs that would previously not be used for transplantation. So those 2 main reasons we see for increased usage. And then I think running in EVLPs is, of course, takes some extra headcount, et cetera. So the hub model helps to reduce the workload and reduce workload will over time translate to higher usage.

[Jakob Lembke, analyst]

Okay. And then just a short follow-up on that one. I mean given that it seems like it's mostly external factors driving this, and you only recently did this reorganization in the U.S., is it fair to assume that the growth perhaps could be even higher here going forward when you sort of start to push it more and gain new accounts and so on?

[Christoffer Rosenblad, executive]

Very hard to speculate on that one. We are very happy to see the progress in our sales team, especially in the U.S. where we have made a real turnaround. We see that we now can cater to the higher interest. And we, of course, hope for the best but it's hard to speculate where we see this going in the future. But we see a good momentum. We will continue to work hard and we see where we end up.

[Jakob Lembke, analyst]

Okay. Fair enough. And then moving on to kidney. When should we expect contribution from new customers now that you are able to take on those?

[Christoffer Rosenblad, executive]

We believe that we will have the highest interest after Labor Day in September because from now on, there will be a certain amount of holidays in the U.S. on our customer side, which is starting up new programs. So I think contribution as of September is good to catering.

[Jakob Lembke, analyst]

Okay. And finally, I have a few questions on heart. Maybe first on the revenue side here this quarter. Should we expect the Q2 revenues to be sort of the new normal? Or should it sort of come down a bit once recruitment in the U.S. trial has finished.

[Christoffer Rosenblad, executive]

From now until the trial is finished, we can probably conclude this level. And then when the trial is finished, it depends on the continuous protocol that is something we are in a dialogue with the FDA, how that continues protocol and what number of transplants that will be -- so that -- so when the trial is finished in what we think in end of March next year, it's hard to speculate at this moment on what the level will look like. But up until then, I would assume the same level, yes.

[Jakob Lembke, analyst]

Okay. But just looking at the revenue number here in Q2, if you continue at this pace, you will probably finish recruitment before March next year, right?

[Christoffer Rosenblad, executive]

Yes. We had a high level definitely now. I always -- I want to stick to the time line we have, so to say, because it's you never know what happens in the trial. But I agree, there is a high interest. And right now, the inclusion of the trial is very dependent on how hard we work actually and what resources we put to include new trial centers into the study. But so far, the team has done a fantastic job. I'm truly proud of them.

[Jakob Lembke, analyst]

Okay. And if we move to Europe for heart, how is the discussion with potential European customers and sort of -- do you have any new insights to what expectations we should have for heart in Europe once you have launched it?

[Christoffer Rosenblad, executive]

We are preparing our launch plan right now. I will come back in Q3 and Q4 with more insights. But the good news and you saw the trial on starting now on direct procurement, DCD, for example, we have reported earlier on the PEGASE or the going over the Atlantic in a commercial flight trial et cetera. The interest from the European trial centers and the European heart transplant community is very, very high for use in this product.

So that is definitely what we see right now and they want to push the boundaries and see what this technology really can accomplish. We are in that work right now to conclude how the launch plan will look like and to give you more insights, but I need to come back in Q3, Q4 with a more precise answer on expectation on activity level, et cetera.

[Jakob Lembke, analyst]

Okay. And finally, just a short one on this new DCD Heart trial. Will there be any additional costs for that trial? And will you earn any revenue from the consumables in the trial?

[Christoffer Rosenblad, executive]

Prior to CE Marks, we won't earn any revenue on it. There will be some additional costs but they are in relation to the other trial costs in U.S., et cetera, they are handable and modest.

[Operator]

The next question comes from Maria Vara from Bryan Garnier.

[Maria Vara Fernández, analyst]

First of all, congratulations on the results and a very strong quarter. I just wanted to touch a bit on the service business. I think it's great these new initiatives you're looking into. But I was just wondering how we see this actually impacting revenue and, of course, gross margin. If you can give some color on this, please?

[Christoffer Rosenblad, executive]

Thank you Maria, great question. We have a very high-quality service where we have almost had a bit higher hope on the revenue side. We think it's definitely worth that. It's a good one. Where we will work very hard is to incorporate it more into product service revenue where we think it place is better and we will generate more revenue. We will start that work. And we have actually already started that work. So I hope to see a result of that soon.

In terms of gross margin, the -- how we report right now, I think the gross margin we see is reasonable to think that we will keep over time. I hope that answers your question.

[Maria Vara Fernández, analyst]

Yes. Perfect. And just a bit on the heart trial recruitment process, if I remember correctly from the last quarter, you mentioned that 10 out of 20 clinics already initiated the trial. Do you have any update on these numbers and any initial experiences or something you want to share?

[Christoffer Rosenblad, executive]

Yes. Thank you. Yes, I can share, we are halfway on -- we have halftime and halfway in terms of enrollment, and we have included more trial center. I don't know exact number right now today. But we have -- we are continuing to include trial centers and actually as fast as we can because it takes some time to get all the paperwork down, ethical done and get all the training done. So the team is working really hard.

The other part of the question, I mean, the initial feedback has been almost overwhelming from the users. How easy the product is to use, how it basically fits -- it's not much bigger than the beer cooler, we used before and it doesn't need much more work actually. It's a bit back table when you -- before you go on the airplane. So far, the feedback on the product from both Europe and Australia and the United States has been almost overwhelming.

So we have high hope that this will translate into a successful launch on all continents over time.

[Operator]

The next question comes from Johan Unnerus from Red Eye.

[Johan Unnerus, analyst]

Congratulations on yet another strong quarter, to start off with a few questions then. And -- on the software side, earlier, the previous quarter, I remember you referred to somewhat soft conversion of the pipeline in the services and this seems to continue in Q2 to some extent.

[Christoffer Rosenblad, executive]

Yes. I mean selling in a service takes a slightly longer time. And as you remember, we did a reorganization of the sales team in late Q4 last year. And we see earlier results on products basically than we see on services. But I'm confident that we will see good results over time for all our segments or areas. But definitely, it is true that selling a service takes a slightly longer time than selling a product, which is more instant.

[Johan Unnerus, analyst]

And should we expect more support from the services side in terms of pipeline conversion and effect of the reorganization fairly soon or -- is that something that will happen more into '25 perhaps?

[Christoffer Rosenblad, executive]

I think we will see a gradual improvement during Q3 and Q4 that the long-term effect of better product service revenue, I think we would need to look into -- more into 2025 or later. And I think that also to -- when we talk about service to remember where I think the real holy grail, so to say, is definitely with -- together with heart project -- or the heart product when we launch that. So that will be the real litmus test to the service organization, where I know that if we're going to scale up the number of heart transplants dramatically in the U.S., what I hear when I talk to customers is that then we need to have a very good service attached to it. But that being said, we are still expecting to see a gradual improvement over time.

[Johan Unnerus, analyst]

And already now in the Q2, you had another quarter which was very strong overall sales and to some extent, this is somewhat ahead of scaling up the commercial structure. And I suspect that we should expect to see more OpEx growth and reflecting the commercial U.S. efforts perhaps already in Q3. Could you provide a bit flavor on what to expect on that side?

[Christoffer Rosenblad, executive]

Yes, definitely. Thank you, Johan. Yes, definitely. We have the bigger picture first, is that we have, as I said, a huge market potential, which we want to invest into where we believe the market is in units 10 times bigger over time than what we see today and in value a lot more. So that's what -- of course, what we weight towards the EBITDA, 30%, 2027 goal. So we always have a trade-off there.

In terms of the scale-up of field force, we have 2 big milestones coming up. One is, of course, the kidney launch in the U.S., where we will invest heavy towards and the other one is a heart launch in Europe. So we will see definitely phase of investment into field force capabilities to make sure that we have a good launch for those 2 products in those 2 regions.

[Johan Unnerus, analyst]

That's helpful. And also regarding the discussions in the communication with the FDA regarding continuous protocol and you are in discussions, obviously. And what should -- can we expect feedback from that before the study concludes in perhaps in March? Or is it difficult to put a time table on that?

[Christoffer Rosenblad, executive]

Yes, it's difficult to put a time table on it. While from experience, it's -- we will probably know when we near or are at the end of the study.

[Johan Unnerus, analyst]

Yes, it seems reasonable. And what about in Europe? Sometimes, I mean, you have a very good study results. The initial interest in heart seems to be very strong but Europe can sometimes be a tricky market to launch in. What's your take an approach in terms of key countries and type of centers?

[Christoffer Rosenblad, executive]

You're right. Europe is probably the trickiest market to launch in with numerous different countries, numerous different systems, reimbursement being different in every country. So you're absolutely right. We will have selected approach where we will launch almost center by center because we have done the trial in 8 countries. So we have a pretty good geographic footprint or spread already on heart and experience on heart in Europe, but we will have a very targeted approach when we launched the heart in Europe due to the difference in systems and reimbursement country by country.

So -- but we have a few target countries like, for example, France and Belgium, where we have very high interest. And we also know in Germany, and we now start to see high interest in U.K. So we will make sure that we target enough and have a very clear focus when we launched the heart product.

[Operator]

The next question comes from Ulrik Trattner from Carnegie.

[Ulrik Trattner, analyst]

A lot of my questions have already been answered, but I have a few additional ones. Abdominal and we can see, obviously, the sequential production improvement and deliveries and obviously, customers out there really want to buy your technology and you're scaling up production. But are you -- as you mentioned that you are hitting your first milestone right now, does that mean that you're ready to deliver on large OPO contracts from the second half of this year? Or should we expect it to be more reasonable to assume that it should be tilted towards 2025 when you have clear all obstacles in terms of production.

[Christoffer Rosenblad, executive]

Thank you. That was a very good and clarifying customers. The quick answer is that we should expect it at Q2 next year. And the reason is twofold. One is we have increased with the current production, we have increased quite dramatically but not as much as we can go straight to the OPO. So we're not there yet. There might be a couple of pilots.

The second reason is that we want to collect more clinical data on U.S. ground on kidneys and that is best done in the clinical setting hands at the clinics. So those are the 2 main reasons why I would expect that maybe in a year rather than now.

[Ulrik Trattner, analyst]

And a follow-up question on the commercial launch of Kidney Assist Transport in the U.S. and expanding your service offering. Is there more meaning for service organization to expand within thoracic rather than in abdominal. Are there similarities where you have high synergies, especially for the cath machine. I think it's obvious if we look in hindsight on how you have delivered in Italy that a perfusion service is a good way to get attachment but is it as important for the cath machine as it is for the rest of the products?

[Christoffer Rosenblad, executive]

That is a great question. I believe that due to the OPO system, that they are fairly used to pump kidney. But that being said, all OPOs are not providing pump services and all kidneys don't go through OPOs. So I believe over time that will be important as well. We are today, as I said before, we are focusing on scaling up the launch and gather more and more clinical data on U.S. soil, which looks very promising so far presented at the ATC from one center. So this will not be our focus in the launch phase. What we will focus though on the Italian model of perfusion future model is on the lung side where we will pilot that in the U.S. But to answer your question more straight, we will not do it the next year for kidney, but we believe over time that, that will be an important component also on the Kidney Assist Transport launch.

[Ulrik Trattner, analyst]

Okay. Great. And last question on my end would relate to liver and the thing IDE, liver being an important product in the U.S. market being a huge commercial potential here. So what's left for you to submit an IDE.

[Christoffer Rosenblad, executive]

There are a couple of tweaks on the product and the documentation to fit the FDA better that we need to do. One example being that the Liver Assist you have in Europe can do both hypo and normothermia -- if we -- what we plan to do, where we have the best clinical result is on hypothermia we need to, for example, limit the software, so it can't go over certain degrees. So there is a couple of reworks on the product and a couple of clarification on the documentation to be done before we can hand in the IDE.

[Operator]

[Operator Instructions] The next question comes from Filip Wiberg from Pareto Securities.

[Filip Wiberg, analyst]

Just 2 questions then and here. So one is around the European centers that you talked about that you're going to focus on initially with the heart box. In these 8 countries. So what kind of volumes do you have any rough estimate of what kind of volume that you have, how many heart transplants they perform?

[Christoffer Rosenblad, executive]

I don't have it right now, but that's a great question. The centers are high-volume centers in Europe. The exact number and the portion of the total European heart transplants, I need to come back with that at next call, so we clarify that.

[Filip Wiberg, analyst]

All right. All right. And just the other one if there were any sort of one-offs or extraordinary revenues in the quarter that we should keep in mind now going forward. So [indiscernible] orders that were pushed or other things like that.

[Christoffer Rosenblad, executive]

I know there were no such orders. The only thing of extra that performed a little bit better than we thought was, of course, the heart trial in the U.S. where we have the cost recovery model and charge, if that could be considered extra. But that was the only thing that we're out of what we thought.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Christoffer Rosenblad, executive]

I want to thank everyone for listening into this call. And remind everyone that on October '24, we come back with the Q3 report. We hope to have you all there listening to us then. And with that, I wish you all a great summer. Thank you so much.