Xvivo Perfusion AB

STO:XVIVO

Earnings Call Analysis

Strong Financial Performance in Q3

Xvivo Perfusion reported an impressive Q3 performance, with net sales reaching SEK 198 million, marking a substantial 41% organic growth compared to the previous year. The EBITDA also improved to 21%, up from 19% in Q3 of the prior year. This growth is primarily driven by increased activity from existing customers, with notable contributions from the Thoracic business, where disposable sales specifically surged by 54%.

Expansion and New Trials Drive Growth

The company is currently focusing on expanding its product offerings, particularly with the U.S. Heart trial generating significant interest, which reflects in the increased sales from heart procedures. Additionally, the successful pace of ongoing clinical projects, such as the Heart project, indicates that Xvivo is adhering to its budget and timelines effectively. The company is also poised for future growth with the anticipated full-scale production completion for heart, liver, and kidney disposables by the end of Q2 2025.

Market Trends Favorable for Lung and Heart Products

The U.S. lung market is a key growth area, with a 110% increase in sales of Ex Vivo Lung Perfusion (EVLP) products compared to last year. The total lung transplants in the U.S. recorded were approximately 2,500 year-to-date, with Xvivo capturing around 20% of the EVLP market. This presentation of strong clinical data bolsters confidence from both clinicians and investors regarding Xvivo's market positioning and competitive advantage.

Focused Commercial Strategy for New Products

In 2025, Xvivo plans significant investments in commercial capabilities to launch the Kidney Assist Transport product in both the U.S. and Europe. The company anticipates positive market reception based on prior clinical results indicating improved outcomes for kidney transport. Furthermore, the launch for heart products in Europe is projected, emphasizing the establishment of a medical reimbursements strategy which seems critical, particularly in France and the Netherlands.

Service Sector Challenges and Improvement Plans

Xvivo's service segment saw a minor decline in Q3, attributed primarily to seasonal variances and loss of two major customers earlier in the year. However, the company plans to reorganize its commercial strategy focusing on the service offerings in the U.S. A newly integrated FlowHawk platform aims to improve these services and provide a more comprehensive package to customers starting in Q4 2024.

Positive Outlook for Q4 and Beyond

Despite a typical seasonal slowdown anticipated in Q4, Xvivo does not predict a downturn similar to last year's due to stronger market drivers. The company reported early signs of recovery in the abdominal business, particularly for liver and kidney activities, indicating potential sales stabilization heading into 2025. The firm maintains an optimistic position for growing the Kidney Assist and leveraging new customer interests from the U.S. clinical settings.

Earnings Call Transcript 2024-Q3

[Operator]

Welcome to Xvivo Q3 Report Presentation 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 Earning Call for the Third Quarter of 2024. On the first slide, today's presentation, sitting in the same room, Christoffer Rosenblad, CEO; and besides me, Kristoffer Nordstrom, CFO of Xvivo Perfusion.

And with that, we turn to Slide 2. The Q3 financials at a glance. And I'm proud and happy to report that Q3 shows improving our top line as well as EBITDA compared to the same quarter last year, even though we have continued and we will continue to invest in the organization for future growth. Sales came in at SEK 191 million, which is a 41% organic growth, and the EBITDA shows an improvement to 21%.

The growth for Thoracic is mainly coming from higher expense activity during the quarter. Another growth driver we see in this quarter is the U.S. Heart trial, where we are seeing very high interest to join the trial, as well as very high activity in the trial during the summer months. And Kristoffer Nordstrom, our CFO, will get into the details on sales, gross margin, EBITDA and the numbers later in the presentation.

So, with that, we go to the next slide, which is Slide 3. And we see a similar picture in the YTD numbers. Key takeaway from the first 9 months are is that growth is still mainly coming from an increased activity in existing customers and the stronger market. For hearts and lungs, we see a very high interest from new customers, especially after ISHLT in April, that we gradually start to see being converted to new sales from new 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 good quality. And regarding EBITDA, even though we have invested heavily in mainly commercial and field force, we can now see that the revenue model is scalable. In other words, sales is converted to economies of scale on gross margin as well as EBITDA level.

Lastly, and most important to mention is that the projects are progressing according to plan. The heart project is on time and budget. The production capacity project where we invest to scale up volumes times 10 of today's volume for disposables are running in line with communicated timelines. The first milestone for Kidney Assist Transport and Liver Assist are completed, and we will have -- and we have production volume to satisfy current market demand. As communicated earlier, the full scale production of disposable for heart, liver and kidney is estimated to be completed at the end of Q2 2025. But as I said, we believe we have enough volumes for that need for the next year.

And with that, we will go into the highlights of the quarter. So first, our business overview on Slide 4, which we can actually turn directly to Slide 5. And we will start with heart and news in heart. This slide shows the summary of the heart trial that was presented at the ISHLT conference in April in Prague this year. And I showed it before. But we start with those key takeaways. And the reason I show it again is that because it's very good data, we want to repeat it.

And number one is that this is, to our knowledge, the first randomized controlled trial, superiority design in heart and lung transplantation ever performed, which shows the confidence that clinicians have in the Xvivo Heart technology. Two, the HOPE group, in other words, pump with Xvivo technology showed an improvement of PGD with 61% versus the control group, which is highly important provided PGD is the leading cause of early and late mortality in heart transplantation. Three, and also very, very important is that, all HOPE parts were deemed transplanted after perfusion. This is important to highlight since cold perfusion offers safety advantage during transportation.

And with that, we go over to Slide 6, and the news during the quarter for heart that was presented in Lancet during quarter. And we are now, after this publication, we are now more convinced than ever that this product has the ability to change the paradigm of heart transplantation. And I want to highlight 2 key takeaways. And the first one is that when we adjust for minor difference between the 15 trial sites, we saw that the result was even better. We saw that, that primary endpoint had a 49% risk reduction that was well within the statistical significance threshold.

The other very interesting fact we see when we dig into the data is that during the sub-analysis of PGD, we saw that severe PGD showed an even higher risk reduction with 76% for the HOPE Group i.e., pump with Xvivo technology versus the control group. And this is very important and very encouraging since severe PGD is highly linked to mortality after transplantation. Some sources say that severe PGD is associated with nearly eightfold increase in probability of 1 year mortality. So, it is obvious that we would -- this new knowledge, look forward to the 1 year follow-up of the data, including the 1 year survival data point that will be presented during ISHLT in Boston, and that will take place in April in 2025.

And with that, we turn to Slide 7. We have talked about DCD heart before. And now, we will increase our efforts. To start with, we know that the portion of the donor pool that are coming from DCD is comparably large in some countries, and is growing fast. If you want to substantially increase the number of transplants, we need to prove that DCD hearts can be transplanted in a safe, cost efficient and practically feasible way with good patient outcome. And the study we are now running in Benelux, Belgium and Netherlands is decided to show exactly that. The [ earlier ] experience we have from liver and kidney. HOPE shows that -- shows very good clinical outcome. So, the concept is proven. We have also seen in the preclinical settings on hearts that using the Xvivo heart technology on DCD direct procurement shows very good results.

We have now reported or Dr. Rega from Leuven have reported the first 3 DCD cases, and they had very good and encouraging results. So, this study, together with the regulatory study in the U.S., are designed to demonstrate safety and efficacy for DCD hearts. The company hopes and believes that we will have good evidence when the 2 studies are concluded.

Besides this, I also want to mention that PEGASE or PEGASUS in English, study by Professor Lebreton, it's progressing. The study is done with transatlantic flights on commercial airlines to show that more than 12 hours transport is safe and feasible in the practice setting. When this trial is concluded, we believe that it can revolutionize how heart transplant logistics are performed. And this is the first proof that our technology can enable both patient benefits and cost benefits for the health care systems around the world.

With the body of evidence pointing towards the Xvivo heart technology, it'll be gold standard in future. The company works towards that goal. However, until further evidence is presented and accepted the EU launch, we still target approximately 50% of donated hearts that are either [ old moderate donors, ] typically lung transportation types or complicated implant procedures that will mandate the longer out of body time for the donated heart. But that being said, that's the current hypothesis for the EU launch. But we believe over time that this has the ability to become gold standard. In other words, all heart should be transported on the Xvivo device.

And going from heart, we go over to the next slide, which is Slide 8, and we go into lung. And lung MBPS, strong body of evidence and is getting it accepted as a tool to safely increase the number of lung transplants and decrease waitlist mortality. So, without going into details, we cannot conclude that EVLP is a clinically proven accepted method to reduce waiting list mortality with good clinical outcome.

And with that, I go into the next slide, which is the Slide 9, and this is to show that if we have good clinical evidence over time, it is translated to good performance on the market. So we see that the EVLP growth is high, especially in the U.S., where we see a doubling this Q3 versus last. And there are many factors behind the growth. We see, for example, the pressure from the American Political System to increase the number of transplant, has a positive impact on EVLP for lungs. We also see that hub models or centralized perfusion models help to drive growth.

The other trend we see is that with the positive ISHLT and more feet on the ground, we see an increased interest for EVLP. And this interest is directly translated into increased number of lung EVLPs and hence more patient getting a chance of the lung transplant. So key takeaway from the 2 lung slides are that innovative products with good clinical outcome sooner or later translate into increased activity and shorter waiting list for transplantation in need of a new organ.

And with that, we go to Slide #10, where we have even more exciting news and evidence. And this is the liver product we have, Liver Assist, where we see the same level of evidence or almost better, and where we deem our Liver Assist HOPE technology is now clinically proven. During the last year, we have seen more than 20 publications on the Liver Assist technology showing improved patient outcome on both DBD and DCD grafts after transplantation.

I've chosen to highlight 3 of those publications and they are listed on this slide. And the first one or the top one I would say is the most important where we see 1,200 livers using HOPE in the real-world setting trial. And the results showing 5 year graft survival at 91% in the HOPE group versus 81% in standard of care. In the publications, we state that HOPE treatment now reached a [ IDEAL-D ] Stage 4, which means in more normal English that it's proven in a real-world setting and not only in clinical trials.

And this is the, let's say, the highest level of support, and this supports that implementation of Liver Assist and HOPE could be a routine practice for liver transplantation. And that's something we work with the liver to get to the gold standard position where we have regulatory approval for Liver Assist. Secondly, also very encouraging data on the second one, long-term data. We can conclude that the more marginal donated delivers or the higher need for Liver Assist and HOPE. So published data on extended criteria DBD liver shows that 5 year outcome of 87% organ survival, which is very, very strong in itself. But if compared to, for example, the expected one in the publication above, using standard of care was only 81% for good livers. But the result becomes evident when we compare to 87% graft survival in the Liver Assist group. And we compare it to control group where the result was 52%.

The last publication, I want to highlight to, that is important, if we want to become gold standard within liver transplantation is the recent last publication that shows that liver safely can be perfused up to 20 hours and eliminate the need of nighttime liver transplant. And this is, again, a great example where we can improve graft survival and also improve work life balance for our customers. Lastly, as stated earlier, the production scale up times 10 is progressing according to plan. We reached our first milestone and we deem we have enough production capacity to get back to next year where we will have full scale production running.

And with that, we go to Slide 11, which is the last slide on the quarterly business update. And that's the recent acquisition of FlowHawk, which is an unique communication platform for the transplant process. The background is that with an increased organ offers in the U.S., the complexity for OPOs and transplant center has increased dramatically. To ease that burden, HIPAA-compliant easy-to-use communication tool is needed. And the best solution on the market is FlowHawk.

FlowHawk is already today used by leading transplant clinics. And with combined forces, we'll be strengthening the Xvivo offer to clinics and OPOs in the future. And we will also, over time integrate our product remote monitoring system into FlowHawk for a seamless customer experience. So, we believe this is a very important strategic step for Xvivo to be a provider to -- of easy-to-use products for our customers in the future.

And with that, we will go into our clinical pipeline and we go to Slide 12, and then we can skip right away to Slide 13 for a regulatory review. And again, I will say nothing has changed since last time we met. So, I will repeat what I said in July. 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 clinics into the trial. The interest is very high, I would say, extremely high to be part of the trial and we are doing our utmost to make sure that we can meet that interest from U.S. clinics.

We have approval for up to 26 sites. We have activated 13 sites, and 12 are, as we speak, including patients into the trial. As also mentioned before, in Europe, we have handed in our technical documentation for review according to our time plan. We are aiming for a CE Mark in Europe end of this year. Important to mention is that, we can't fully affect that review time line. The good news is that we have notified body lined up and they've been very responsive even though they have a very high workload under the MDR.

In security, the time that we still face is how fast EMA, European Medical Agency and the Swedish MPA can handle the review. We have really done what we can to hand in our files on time and both when it comes to product and clinic advice with very good quality. But I want to highlight that that's slightly out of our hands. In Australia and New Zealand, we have, as mentioned before, high usage of the product. The regulatory approval will be pending the CE Mark in Europe.

So, then we go over to liver. We have previously reported a Liver Assist have been granted breakthrough device designation by the FDA. And this means that we get a faster route through the FDA PMA process. I also want to say the quality of stamp of the products are innovative and fulfill a need on the market. We have invested in organization to run the study and prepare the FDA documentation. We are in close contact with FDA for their final IDE application that we aim to do before the end of this quarter.

And with the clinical and regulatory review we go over to -- I hand over to my CFO, Kristoffer Nordstrom, who will present the financial performance during the quarter and the year so far.

[Kristoffer Nordstrom, executive]

Yes. Thank you, Christoffer. Yes, so being presented, Q3 was yet another solid quarter for Xvivo. Net sales came in at SEK 198 million, representing an organic growth of 41%. Overall gross margins 75%, that's 2% units better than last year due to product mix.

Continued improvements on EBIT and EBITDA, so EBIT in Q3, adjusted for M&A costs of SEK 5 million was 13% versus 10% last year, mainly driven by increased sales and stronger gross margins from our Thoracic business area. Adjusted EBITDA in Q3, similar adjustments, M&A costs was 21% versus 19% last year. Looking at the year-to-date numbers, we are close to SEK 600 million in sales representing a growth of 36% in local currencies. And a nice trend on EBIT and EBITDA as well. So, EBIT 13% and EBITDA 22%.

We'll look in a little bit deeper on each business area. So, next slide here, starting with Thoracic. As you know yet another good quarter with sales coming in at SEK 141 million, the same number as the previous quarter actually on the dot, which means that Thoracic kept the train rolling, so to say also during the summer months.

Organic growth for disposables in Q3 was strong, 54%. Main drivers, Christoffer mentioned before, EVLP in the U.S. specifically where we saw EVLP sales growth 110% in value versus last year. So the momentum for EVLP sales during the whole 2024, as you know, has been very comfortable. Year-to-date, we have grown our EVLP business in the U.S., as an example, 80% in terms of sold units versus last year. During the year, we have activated new transplant clinics.

And now most recently in the third quarter in the U.S., a very prominent OPO, which we are very excited for. We also had one XPS sale in Germany in the quarter. On the sales side, also great to share that we continue to see good sales from heart, SEK 19 million in Q3 and this is primarily from the revenue under our U.S. trial where we have CMS reimbursement in place. Gross margin on disposables in Q2, very good at 85% and in line with the previous years.

Moving over to abdominal. Net sales SEK 39 million, which is SEK 8 million less than sales in Q2. As communicated during the Q2 earnings call, we expected somewhat weaker transplant activities over the summer months, especially in Europe, which is still the home turf for our abdominal business area and the weaker sales in abdominal can primarily be explained by the summer effect, so to say. Organic growth in disposables was at 13%.

The mix between liver and kidney, we recognized that ratio from previous quarters as well. So about 1/3 of our sales are kidney related and 2/3s are liver. Kidney sales, Kidney Assist Transport came in again above SEK 10 million and we're up to SEK 35 million year-to-date. Christoffer mentioned it, but I will emphasize. So, in terms of supply on Kidney Assist Transport, we are now in a position where we can meet current customer demand, but also start approaching new customers.

Focus for Q4 and Q5 is to continue to scale up the commercial organization and also to start acquiring clinical data on U.S. patients and donors to continue to build clinical evidence supporting hope in the U.S. In 2024, for example, we've had a good start where there has been presentations by physicians at 2 transplant process and both -- presentations on the U.S., you have data and both presentations indicate improved delayed graft function on extended criteria donors using HOPE versus cold static storage. So, it will be important for us to continue to build clinical evidence also in the U.S. And this will lead us to high market penetration and to establish reimbursement over time. And gross margin, 62% from disposables versus 61% last year.

Moving over to services, our third business area. Sales in Q3 SEK 18 million from 96 recovery cases. This represents a decrease of sales actually minus 7% versus last year. During Q4, sorry, during 2024, if we take the bigger picture, we have reorganized our commercial organization in the U.S., as you know, which together with our significant growth within EVLP have stolen some focus from this business area.

And moving into 2024, we need to start to organize ourselves better around services and in a more focused way. We have continued to strengthen our recovery quality program in 2024. We take a lot of pride in that and we get a lot of good customer feedback. And now, we have an opportunity to integrate our FlowHawk platform into the customer offering starting in Q4. And this will give us an even strong service offering going into 2025, that's for sure.

I also want to mention another initiative that we will look into, and that is to see if we can start to include our service -- our organ recovery service model into our clinical trials, so our heart centers and also eventually our upcoming liver trials. So, I mean, there is a great interest of combining our products with our service model. But of course, we would like to have the sites trying that before the product is commercially launched, hence already within the trial. So, that is something we will investigate moving into 2024 as well -- 2025 as well.

Moving over to my 2 last slides. So, EBITDA 21% in the quarter. I mean, we have continued good positive trend in rolling 12. We're at 20%. So that trend develops nicely. We have stated it before. Our ambition is, of course, to continue improve EBITDA year-on-year. But we really do that step-by-step, of course, we also want to invest heavily in this organization, so we can grasp the market opportunities, but still improve our profitability. I think that is it on that slide.

Moving over to my last one. So cash flow and financial position, Q3 once again cash positive from operating activities plus SEK 23 million. Investments primarily in our U.S. clinical trials amounted to SEK 41 million that leads us to a total cash flow of around minus SEK 21 million. This year, sorry, we ended this quarter with a solid cash position of SEK 450 million.

And this was everything for me. I will hand the word over to Christoffer again and look forward to Q&A when we wrap up.

[Christoffer Rosenblad, executive]

Thank you so much. So the last couple of slides are on the outlook, and as always, I will start with the long-term outlook, because it's important to remember why we're here. The demand for transplant are 10x higher than today supplies. And that's the whole reason for Xvivo being company and existing. It's also interesting to mention that the sales value of machine perfusion versus cold static storage is also around times 10 value components. We're looking at the market that within the future be lot bigger than the one we see today.

Machine perfusion service models have proven to increase the number of organs used for transplantation. I think you've seen a lot of that proof today in this presentation. I also want to mention that Xvivo has unique, innovative and world leading products on the market or in the R&D pipeline, which we want to take to market as soon as we can.

With the recent acquisition of FlowHawk and superior clinical results for our products, we have also started a long-term goal to be sustainable for the community as a whole. We aim to build a sustainable transplant process for patients. In other words, better access to organs at the higher survival rate. We want to offer our customer a sustainable work life balance. That is not always the case right now. We also want to offer sustainable economics for the health care system. And by reducing the use of private jets, we believe we can offer a sustainable future for the planet and environment as well.

And with that, we go over to a little bit shorter outlook, which is 2025 mainly. And the 2 first points are important that we will continue to invest in commercial capability and organization capability that can handle growth and high growth, especially now when we have 2 product launches, Kidney Assist Transport in the United States and Europe, currently ongoing. And then as soon as we have CE Mark product, we will have a launch of heart in Europe.

If we look to the more to the detail per product line, it means that we have seen for lungs, there is a great interest from customers to start Xvivo EVLP programs and we will invest to capture that one, continue to do that. For heart, the 2025 guidance is that we will launch our products in Europe and Pacific. We will actually start to investigate if we can launch them in Canada as well. And we will continue to build the U.S. regulatory clinical file during next year, based on the good and high -- the good data and the high interest we see from the clinical trial in the U.S.

And for liver, we can see that we have and you see that today S-17 data published and we will invest in commercial capabilities to capture the opportunity. We will mainly invest in Europe and we also aim to start the clinical trial in the U.S. next year pending the IDE approval by the FDA. Now, with the kidney production up and running, we will turn our focus to commercial capabilities and to build the U.S. clinical file. And lastly, we will integrate FlowHawk into our offering and continue to improve the service offering that will be very important for our heart launch in the United States.

So with that little bit shorter-term outlook, we will say thank you for listening today and we open up the lines for questions.

[Operator]

[Operator Instructions] The next question comes from Ulrik Trattner from Carnegie.

[Ulrik Trattner, analyst]

Christoffer and Kristoffer, a few questions on my end and perhaps starting off with the extraordinary growth in lung and EVLP in the U.S. and how much of this would you attribute it to the new allocation system in the U.S.? We have seen lung outgrowing rest of organ throughout '24 and just trying to grasp the trend here, as well as where have we moved in terms of EVLP penetration in the U.S. over the year? That would be my first question, please.

[Christoffer Rosenblad, executive]

Thank you for that question, Ulrik. I would also -- I would say we are now at an inflection point when it comes to EVLP. The interest is very high. And I would say the new allocation system is only one part of the pressure the U.S. Congress put on the transplant system in the U.S. That is very positive for us. So we see that we are at an inflection point and there is a couple of factors that coexist and help us here. One, is that the results from EVLP is now accepted, that it's a tool that you can increase the number of transplants in the transplant center.

We also came to a point where there is enough clinics used to actually perform EVLP and how to read the data. So the more standardized the reading of the data becomes, the easier it is to make the decision. And we now see that we reached that point. So it's a couple of factors coexisting that leads to a good both market sentiment and a good uptake for the XPS in the United States right now. I don't have the exact numbers right now on where we are on penetration in the U.S., but it's definitely increasing because EVLP is growing at the factor that is more than times 10 versus the underlying market growth.

[Kristoffer Nordstrom, executive]

I can provide some detail from that. So you have around 2,500 lung transplants in the U.S. year-to-date. And if you look at the number of EVLPs that we have made available by selling, that's around 500. So, it means from that perspective we have made available a penetration of 20%. Not all of those sales have, of course, resulted in a transplant in the end, but that at least provides some guidance on that. We are definitely seeing a market penetration picking up in the U.S.

[Ulrik Trattner, analyst]

Okay. So essentially sort of based on the data, clinical data on the expansion EVLP, that number could easily double in the next 5 years.

[Christoffer Rosenblad, executive]

Yes. It's always hard to predict the future because it's the future. But the market sentiment we feel right now, it's very positive. That's as much as we know. Then it will depend a lot on us, how many feet we can put on the ground, how well trained they are, how fast we can get new clinics up and running, et cetera. So we definitely have to run very fast to capture this market opportunity we see in front of us.

[Ulrik Trattner, analyst]

Yes. Great. And since you mentioned feet on the ground and you also mentioned in the report increased commercial activity in the U.S. and emphasizing expanding in Canada already by Q4. Can you elaborate what this entails, what investments has been done in Q3 and what's up for Q4? I know that you hired Mark during Q3, but beyond that, what type of commercial activities have been scaled up or what's in the plans for the next quarter or 2?

[Christoffer Rosenblad, executive]

We will emphasize a lot of our investments around the United States and Canada during the next year. So we are currently hiring a skilled marketing team. We are scaling up our feet on the ground in the United States, and we are starting to hire our first person into Canada. I would say we have had a successful MDSAP audit which will enable us to apply for market approval by Health Canada, of course, is the giving market approval or not. So we don't have approval to sell in Canada yet, but we will start to invest into Canada already Q4. And then we come back during the next quarterly meeting, how that investment is progressing and turning into sales.

But the North American team were spent a week in Canada last week, and they reported back to me that there is a very high interest for our products in Canada as we speak. And they especially mentioned the Liver Assist and extremely good result they have seen from Europe with that. When you can prove in a real life setting when everybody's tired and working and it's not a controlled environment, then we can prove such extremely good improvement for livers using our technology. I think that has inspired a lot of interest from the regions where it is or can be regulatory pretty soon.

[Ulrik Trattner, analyst]

Okay, great. And then, if we were to look at Kidney Assist Transport and then staying in the U.S., I know that you're ramping up production. I know there's still some production capacity left before you can deliver on OPO contracts. But beyond purely production capacity, is there any further sort of adoptions to the system that you feel is needed for it to go wide in the U.S.? And you mentioned additional trials in the U.S. and if you can elaborate on the necessity of these trials and if there's any major difference between the dynamics of a chain in the U.S. versus Europe?

[Christoffer Rosenblad, executive]

There is no real difference between the kidney in Europe and the U.S., however, that's not how the world works. So a U.S. clinician want to see U.S. data based on U.S. OPO system and U.S. patients to adopt that. They also want to see socioeconomic data that it's -- actually that we can get more kidneys allocated with our Kidney Assist Transport, et cetera. So, that's what we are building up. We had 2 very good presentation during seminars in this quarter -- last quarter Q3.

So we are acquiring that body of data now. But we do also realize that this will take some time to both design and actually run trials and get the data presented. So, that's one thing. We have a few minor tweaks to make the Kidney Assist Transport fit into the U.S. transplant system that we will work on during this and also part of next year. And then, we will also scale up our commercial capabilities in the U.S. towards launching this product.

I believe the team are doing a great job, but I think there are definitely a few learnings here to be really successful, because this is the first quarter they could actually go out and sell the product, and we saw some good early signs, but I think we can be a lot better at selling the kidney in the U.S. as well with training and more experience. So there are few steps still to be done and it's something we work very hard on internally. Something, I'll follow up on a weekly basis, our progress on kidney, especially in the U.S.

[Ulrik Trattner, analyst]

Great. And if we're to stay in the U.S. and we are approaching finalization of the heart trial and it seems like it's been running at really full steam here like close to a year in and we're almost done. So what's the plan here from Q1 onwards? Where are we in terms of planning for aiding trials? Is there any potential for pediatric use or how should we expect the continued use among the already activated sites?

[Christoffer Rosenblad, executive]

That's a great question, and that's something we work together with the FDA right now as we speak. So the interest is very high and the interest for that going in to acquire more data around pediatric DCD, et cetera is extremely high. So we will pursue those efforts and also to have a continuous access protocol for the trial sites. We will also pursue those roads, so to say. And we are in negotiation with the FDA right now and we will come back when we have more to report on that or let's say when the FDA has approved those efforts.

But I believe and I hope they will, because the pressure from clinicians in the U.S. is pretty high to use this -- our products because they are overwhelmed with the good results they see on the heart side when you see it compared to what is available today in the U.S., so it's overwhelming experience for them. So I believe that we will hopefully have some positive news to come back. But right now, we are in discussion and negotiation with FDA. And this, of course, pending that approval, what we can do and not do on the U.S. soil.

[Ulrik Trattner, analyst]

Great. And last question on my end, relating to heart and commercialization hearing in Europe that is coming up soon. Can you give us some timeline on expected reimbursement of the heart device? I'm guessing it will take us like at least 0.5 or 1 year before you get reimbursement. And how will clinics across Europe be able to find some cost cover for the device?

[Christoffer Rosenblad, executive]

Yes, that's a good question. And there are almost as many assets as there are countries in Europe for that. They will be different country-by-country. Some will be quicker and some will be slower. The typical example is that France is normally quite quick and we estimate that the reimbursement process for IBM is approximately 1 year there in France. We've seen that on EVLP, for example, where France was the quickest one.

Also, Benelux or at least Netherlands are quite quick. We know that the U.K. are normally quite slow, so to say. Germany is normally quite slow country. But we got some positive feedback from Germany now. So we might put that one on front burner. So before we have reimbursement, there will be, let's say, separate budgets for where they have to argue for using this technology for a subset of hearts in their transplant programs country-by-country. It will look a little bit different country-by-country.

In some countries, there is more money available for new technology than in others, so to say. So we will focus our European launch on a few 3 to 4 European countries the first year to not, one, spread ourselves in; and two, to not -- we will go where there is money in the health care system during the first year until we have a better picture on the reimbursement.

[Operator]

The next question comes from Jakob Lembke from SEB.

[Jakob Lembke, analyst]

Starting with abdominal and zooming in on liver here in Q3, it seems like growth decelerated a bit compared to recent quarters. Is there anything behind this other than the summer effect?

[Christoffer Rosenblad, executive]

To our knowledge, no. We had a very slow summer on abdominal. It's mainly explained by Southern Europe where we still to be truly honest about very slow liver and kidney activities, abdominal activity in Europe. We can see early signs that it is picking up now in, let's say, from mid-September and onwards now in October. So we, of course, have to see a full Q4 and maybe a bit into Q1 to fully answer that question. But what I heard from the sales team was that it was a very, very slow summer so to say, so they're very surprised themselves how slow it was. And we hope that early signs we see now in the last 4 to 5 weeks will continue into the rest of the quarter.

[Jakob Lembke, analyst]

Okay. And just a follow up on an earlier question on kidney, is it possible to get some sort of guidance on what growth expectations we should have here in Q4 and also into next year?

[Christoffer Rosenblad, executive]

I'm sitting right now with the team, both the team in the U.S. and the team in Europe to really nail down activities we need to do and get that. We will be finished in mid-November with that exercise. And after that, I will have a better picture on what we can expect and can give more of a fair guidance than I can do right now. So, I have to wait. Maybe we can take that question in January and I will have a better picture.

[Jakob Lembke, analyst]

Okay. But this is still fair to assume that it should grow here since you are able to produce more now or how should we...

[Christoffer Rosenblad, executive]

Absolutely. I mean, to be truly honest, there is no excuse if we don't grow very fast in kidney. Absolutely. I mean, we know we have a couple of hurdles especially in the U.S. to when it comes to clinical data acquired on U.S. soil and scaling up and get the feet on the ground, get them ready. So definitely, there are a couple of challenges here. But yes, this is not the growth rate we want to see from kidney with full scale production or with enough production so to say to satisfy current demand. We want to see higher growth rates.

[Jakob Lembke, analyst]

Okay. And moving on then to a question more directed on online. I mean, last year, you talked about transplant activities sort of slowing down towards the end of the year. And I guess my question is still based on what you're seeing now and what you're hearing from customers, do you expect to see a sort of similar pattern this year or do you expect to see more full throttle throughout the end of the year?

[Christoffer Rosenblad, executive]

The answer is very straight. We don't expect to see the same slowdown we saw last year. However, Q4 is always tricky because it depends on a few factors. And what happened last year was that OPTN had a goal, which they have already realized they reached that one in -- already after Q3. And I assume the guessing from my side that a few of the centers took a little bit longer Thanksgiving and Christmas holiday, when they could actually still reach the goals. I know that OPTN has the higher goal this year, and therefore, I don't expect the same downturn at least not for the same reason. We haven't seen any signs of slowdown so far versus the activity we have seen. But it's not until we get into, let's say, holiday seasons here in the United States, we will have a better picture on that one. But we don't expect it. But it's always -- Q4 is always tricky in that sense. You never really know.

[Jakob Lembke, analyst]

Okay. But I guess then it's still fair to assume that we see the sort of usual historical sales pattern with Q4 being the clearly strongest quarter for you.

[Christoffer Rosenblad, executive]

That's our expectation right now. Historically as always said, last year was a bit of an outlier in terms of Q4. The other 11 years I worked here has -- Q4 has been the strongest, but yes, hard to speculate on that one. But if we should follow the normal pattern, it should be stronger, yes.

[Jakob Lembke, analyst]

Okay. And then on services, I mean, given the sequential decline here in volumes in Q3, I'm wondering if you have lost any customers and also when do you expect services to sort of return to meaningful growth?

[Kristoffer Nordstrom, executive]

Yes. We touched upon this in the beginning of the year in one of the calls that we lost 2 customers in 2023, which was high volume, and we still suffer from that loss, so to say. The reason for the decline in this quarter was due to lower volumes at the current centers over the summer months. And it's not -- we have a few customers, and if a few of them decrease their volumes, there is an impact on the numbers.

Same thing here. As for kidney, I mean, we have all the reasons to expect this business to grow. We have an excellent platform built and we strengthened it now, as we mentioned with FlowHawk. We continue to improve our communication and our integration with our customers. So, we should expect an increase. However, I would say that the kind of inflection point here and the real booster will be when we have a transportable device to combine with our service offering and that is the Heart Box. So that is when I think the real synergies will come from this long-term strategic acquisition that we did.

[Jakob Lembke, analyst]

Okay. Very clear. And then just finally, it was a bit unclear earlier, but did you say that you will get continued access protocol on heart or you're working on getting that? And also, if you get that, what sort of volumes would that be like in line with what you do today in the study or anything would be helpful?

[Christoffer Rosenblad, executive]

Hard to speculate on the volume. I -- of course, we have not approved that, we are in negotiation with the FDA. But if you follow the history, how the FDA have treated other trials such as ours, they have granted a continuous access protocol, the volume or the number of cases they have granted has typically been 2/3 of the -- I'm sorry, 3/4s of the trial volume. So that's the best estimate I can give today.

[Operator]

The next question comes from Johan Unnerus from Redeye.

[Johan Unnerus, analyst]

Only a few mainly follow-up type of questions. On the heart study and the centers involved, it looks hopeful that you will sort of succeed to get a continuous access and support in place. FDA has been very supportive and rather proactive earlier on this side for you. Any reason why they should be slower in this case?

[Christoffer Rosenblad, executive]

No, actually there is no reason. It's just that the dealing with the FDA. The FDA is, how do you say, sets the rules. So I'm always very humble and cautious when I talk about the FDA, because at the end of the day, they decide. I have no reason to believe that we should not get a positive treatment, so to say. But it's always good to be humble and make sure you do your homework when you're dealing with the FDA.

[Johan Unnerus, analyst]

Yes. And you are benefiting from some sales support related to the use of your solutions already at the trial stage. Is it possible to give a flavor of that level of support, for example, during Q3?

[Christoffer Rosenblad, executive]

You mean in terms of number?

[Johan Unnerus, analyst]

Yes.

[Christoffer Rosenblad, executive]

We won't -- no, we won't go out with detailed numbers during the trial, but we know that the cost recovery is USD32,000 and we know that the majority of our sales came from the U.S. in Q3, but we won't -- because it's a clinical trial, we won't go out to the exact numbers, how many were performed in each quarter. There is a high level of, let's say, high level of patients say that we should keep that in mind. So we don't comment exactly on the trial, but we do see very good progress during the third quarter.

[Johan Unnerus, analyst]

Yes, that's useful. And on the services side, which has obviously underperformed now for some quarters, should we expect any sort of organizational changes or anything like that? And what about -- can you provide us any flavor of the sort of pipeline of new accounts or transactions?

[Kristoffer Nordstrom, executive]

Yes. So I would say organizational, no, we are overall strengthening. We continue to strengthen our U.S. organization. And with Mark Reade on board, we will work diligently on our U.S. service strategy that will be a hyperextension for us in 2025. But, I mean, the foundation is there with excellent skilled surgeons. We have turned this company profitable last year, that was the main purpose.

In terms of customers, yes, I mean, there is a pipeline we're working on that. We will also look into other types of services as well. It's early days, but we know that there is a big interest in perfusion services at hospitals as well. That's one thing we will look into, for example. As we have mentioned before, we have started 1 or 2 pilot projects within NRP with centers as well. So, there are -- we need to define maybe a bit clearer our strategy, but there are definitely a lot of market opportunities.

[Christoffer Rosenblad, executive]

Yes, and I can just mention on that. I mean, we're not happy at all with the progress in services, and of course, we will integrate FlowHawk and during that integration, we will also try to understand what more feet on the ground would do for the integrated, let's say, digital and service business. So there might be more resources needed in our go-to market model because we have a good service that is obviously not taking off. So we are doing something wrong when it comes to go-to market and we need to fix that.

[Johan Unnerus, analyst]

Yes, I mean it's, of course, important to support with integrated services, even if the absolute numbers are still modest. And now the reflection is that some of these launch processes takes a bit longer to get up fully to speed. Q3 is perhaps a good example of that what you -- that you can still achieve very good growth indeed. But you will also be more sort of exposed to and rely on the -- well some of the core existing solutions like [ lung Thoracic ] what about outlook can you expect sort of healthy good support during this time ahead of the launch of other solutions?

[Christoffer Rosenblad, executive]

I mean, we are in an interesting inflection point as a company where we have, of course, succeeded with Perfadex before lung and now we succeed with EVLP. And now we want to take those learning and to succeed in heart in Europe and liver. We want to take the learnings to our combined service digital offering in the U.S. and the learnings to our Kidney Assist Transport launch here in the U.S. So definitely there is an interesting point where we have to be fast and learn fast. So definitely it's there. I don't want to be rude, but we have another meeting right now, both me and Kristoffer, and I see there are 2 written questions. I will read them and answer them.

The first one is, could you give some more color on the possible Canadian launch? Is that based on U.S. data or EU data?

The Canadian launch will be based on European regulatory approvals, and therefore, mainly European data to answer that question.

The next question is, in short, has there been any notable slowdown in volume so far this quarter due to recent, the recent hurricanes that hit the United States, especially in the Southern regions around Florida and Georgia and South Carolina?

And to my knowledge, there has been a few canceled transplants because you can't fly in a hurricane. But so far, there has been no huge impact on the overall numbers of transplants in the United States to my knowledge.

So, with that, I want to say thank you to everyone listening in, and I hope to see you back end of January when we report the full year of 2024. And until then, have a nice day.