tmdx-10q_20200930.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission File Number: 001-38891

 

TransMedics Group, Inc.

(Exact name of registrant as specified in its charter)

 

 

Massachusetts

83-2181531

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

200 Minuteman Road

Andover, Massachusetts

01810

(Address of principal executive offices)

(Zip code)

 

(978) 552-0900

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class 

 

Trading Symbol(s) 

 

Name of each exchange on which registered 

Common Stock, No Par Value

 

TMDX

 

The Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of October 31, 2020, the registrant had 27,160,815 shares of common stock, no par value per share, outstanding.

 

 

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “could,” “target,” “predict,” “seek” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referenced in the section titled “Risk Factors,” which could cause actual results to differ materially. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in or implied by any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Some of the key factors that could cause actual results to differ include:

 

that we continue to incur losses;

 

our need to raise additional funding;

 

our existing and any future indebtedness, including our ability to comply with affirmative and negative covenants under our credit agreement to which we will remain subject to until maturity, and our ability to obtain additional financing on favorable terms or at all;

 

the fluctuation of our financial results from quarter to quarter;

 

our ability to use net operating losses and research and development credit carryforwards;

 

our dependence on the success of the Organ Care System, or OCS;

 

the rate and degree of market acceptance of the OCS;

 

our ability to educate patients, surgeons, transplant centers and private payors of benefits offered by the OCS;

 

the impact of the outbreak of the novel strain of coronavirus and associated containment and remediation efforts;

 

our ability to improve the OCS platform;

 

our dependence on a limited number of customers for a significant portion of our net revenue;

 

the timing of and our ability to obtain and maintain regulatory approvals or clearances for our OCS products;

 

our ability to adequately respond to the Food and Drug Administration, or FDA, follow-up inquiries in a timely manner;

 

the performance of our third-party suppliers and manufacturers;

 

the timing or results of clinical trials for the OCS;

 

our manufacturing, sales, marketing and clinical support capabilities and strategy;

 

attacks against our information technology infrastructure;

 

the economic, political and other risks associated with our foreign operations;

 

our ability to attract and retain key personnel;

 

our ability to protect, defend, maintain and enforce our intellectual property rights relating to the OCS and avoid allegations that our products infringe, misappropriate or otherwise violate the intellectual property rights of third parties;

 

our ability to obtain and maintain regulatory approvals or clearance for our OCS products;

 

the pricing of the OCS, as well as the reimbursement coverage for the OCS in the United States and internationally;

i


 

 

regulatory developments in the United States, European Union and other jurisdictions;

 

the extent and success of competing products that are or may become available;

 

the impact of any product recalls or improper use of our products;

 

our use of proceeds from our equity offerings; and

 

our estimates regarding revenues, expenses and needs for additional financing.

The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report. You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or reflect interim developments.

ii


 

TransMedics Group, Inc.

Table of Contents

 

 

 

 

Page

 

PART I—FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

1

 

Consolidated Balance Sheets

 

1

 

Consolidated Statements of Operations

 

2

 

Consolidated Statements of Comprehensive Loss

 

3

 

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

 

4

 

Consolidated Statements of Cash Flows

 

6

 

Notes to Unaudited Consolidated Financial Statements

 

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

37

Item 4.

Controls and Procedures

 

37

 

 

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

38

Item 1A.

Risk Factors

 

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

38

Item 6.

Exhibits

 

39

Signatures

 

40

 

 

 

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

TRANSMEDICS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

 

 

 

September 30,

 

 

December 28,

 

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,397

 

 

$

20,092

 

Marketable securities

 

 

111,317

 

 

 

60,596

 

Accounts receivable

 

 

6,141

 

 

 

6,559

 

Inventory

 

 

12,984

 

 

 

11,216

 

Prepaid expenses and other current assets

 

 

2,287

 

 

 

1,538

 

Total current assets

 

 

154,126

 

 

 

100,001

 

Property and equipment, net

 

 

4,690

 

 

 

4,792

 

Restricted cash

 

 

500

 

 

 

500

 

Other long-term assets

 

 

6

 

 

 

6

 

Total assets

 

$

159,322

 

 

$

105,299

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

778

 

 

$

7,247

 

Accrued expenses and other current liabilities

 

 

11,474

 

 

 

8,332

 

Deferred revenue

 

 

1,347

 

 

 

166

 

Current portion of deferred rent

 

 

25

 

 

 

370

 

Total current liabilities

 

 

13,624

 

 

 

16,115

 

Long-term debt, net of discount and current portion

 

 

34,525

 

 

 

34,146

 

Deferred rent, net of current portion

 

 

1,623

 

 

 

389

 

Total liabilities

 

 

49,772

 

 

 

50,650

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, no par value; 25,000,000 shares authorized; no shares

   issued or outstanding

 

 

 

 

 

 

Common stock, no par value; 150,000,000 shares authorized; 27,159,065

   shares and 21,184,524 shares issued and outstanding at September 30, 2020

   and December 28, 2019, respectively

 

 

501,486

 

 

 

424,134

 

Accumulated other comprehensive loss

 

 

(16

)

 

 

(2

)

Accumulated deficit

 

 

(391,920

)

 

 

(369,483

)

Total stockholders' equity

 

 

109,550

 

 

 

54,649

 

Total liabilities and stockholders' equity

 

$

159,322

 

 

$

105,299

 

 

The accompanying notes are an integral part of these consolidated financial statements.

1


 

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Fiscal Three Months Ended

 

 

Fiscal Nine Months Ended

 

 

 

September 30, 2020

 

 

September 28, 2019

 

 

September 30, 2020

 

 

September 28, 2019

 

Net revenue

 

$

7,091

 

 

$

7,205

 

 

$

18,012

 

 

$

17,547

 

Cost of revenue

 

 

2,053

 

 

 

2,989

 

 

 

6,205

 

 

 

7,425

 

Gross profit

 

 

5,038

 

 

 

4,216

 

 

 

11,807

 

 

 

10,122

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research, development and clinical trials

 

 

4,155

 

 

 

4,939

 

 

 

14,283

 

 

 

13,608

 

Selling, general and administrative

 

 

5,493

 

 

 

6,519

 

 

 

18,012

 

 

 

17,423

 

Total operating expenses

 

 

9,648

 

 

 

11,458

 

 

 

32,295

 

 

 

31,031

 

Loss from operations

 

 

(4,610

)

 

 

(7,242

)

 

 

(20,488

)

 

 

(20,909

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(971

)

 

 

(1,084

)

 

 

(3,014

)

 

 

(3,290

)

Change in fair value of preferred stock warrant

   liability

 

 

 

 

 

 

 

 

 

 

 

(341

)

Other income (expense), net

 

 

499

 

 

 

56

 

 

 

1,087

 

 

 

200

 

Total other expense, net

 

 

(472

)

 

 

(1,028

)

 

 

(1,927

)

 

 

(3,431

)

Loss before income taxes

 

 

(5,082

)

 

 

(8,270

)

 

 

(22,415

)

 

 

(24,340

)

Provision for income taxes

 

 

(6

)

 

 

(10

)

 

 

(22

)

 

 

(30

)

Net loss

 

$

(5,088

)

 

$

(8,280

)

 

$

(22,437

)

 

$

(24,370

)

Net loss per share attributable to common stockholders,

   basic and diluted

 

$

(0.19

)

 

$

(0.39

)

 

$

(0.94

)

 

$

(2.05

)

Weighted average common shares outstanding,

   basic and diluted

 

 

27,156,135

 

 

 

21,131,618

 

 

 

23,885,517

 

 

 

11,882,626

 

 

The accompanying notes are an integral part of these consolidated financial statements.

2


 

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

 

 

 

Fiscal Three Months Ended

 

 

Fiscal Nine Months Ended

 

 

 

September 30, 2020

 

 

September 28, 2019

 

 

September 30, 2020

 

 

September 28, 2019

 

Net loss

 

$

(5,088

)

 

$

(8,280

)

 

$

(22,437

)

 

$

(24,370

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

16

 

 

 

56

 

 

 

(10

)

 

 

69

 

Unrealized gains (losses) on marketable securities,

   net of tax of $0

 

 

(68

)

 

 

22

 

 

 

(4

)

 

 

52

 

Total other comprehensive income (loss)

 

 

(52

)

 

 

78

 

 

 

(14

)

 

 

121

 

Comprehensive loss

 

$

(5,140

)

 

$

(8,202

)

 

$

(22,451

)

 

$

(24,249

)

 

The accompanying notes are an integral part of these consolidated financial statements.

3


 

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehen-

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

 

Common Stock

 

 

Paid-in

 

 

sive Income

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Deficit

 

 

Equity

 

Balances at

   December 28, 2019

 

 

 

 

$

 

 

 

 

21,184,524

 

 

$

424,134

 

 

$

 

 

$

(2

)

 

$

(369,483

)

 

$

54,649

 

Issuance of common stock

   upon the exercise of

   common stock options

 

 

 

 

 

 

 

 

 

146,793

 

 

 

75

 

 

 

 

 

 

 

 

 

 

 

 

75

 

Issuance of common stock in

   connection with employee

   stock purchase plan

 

 

 

 

 

 

 

 

 

12,163

 

 

 

197

 

 

 

 

 

 

 

 

 

 

 

 

197

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

385

 

 

 

 

 

 

 

 

 

 

 

 

385

 

Foreign currency translation

   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16

 

 

 

 

 

 

16

 

Unrealized gains on

   marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

213

 

 

 

 

 

 

213

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,852

)

 

 

(8,852

)

Balances at March 31, 2020

 

 

 

 

 

 

 

 

 

21,343,480

 

 

 

424,791

 

 

 

 

 

 

227

 

 

 

(378,335

)

 

 

46,683

 

Issuance of common stock

   upon the exercise of

   common stock options

 

 

 

 

 

 

 

 

 

42,882

 

 

 

92

 

 

 

 

 

 

 

 

 

 

 

 

92

 

Issuance of common stock

   in public offering, net of

   discounts and issuance

   costs of $628

 

 

 

 

 

 

 

 

 

5,750,000

 

 

 

75,042

 

 

 

 

 

 

 

 

 

 

 

 

75,042

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

631

 

 

 

 

 

 

 

 

 

 

 

 

631

 

Foreign currency

   translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42

)

 

 

 

 

 

(42

)

Unrealized losses on

   marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(149

)

 

 

 

 

 

(149

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,497

)

 

 

(8,497

)

Balances at June 30, 2020

 

 

 

 

 

 

 

 

 

27,136,362

 

 

 

500,556

 

 

 

 

 

 

36

 

 

 

(386,832

)

 

 

113,760

 

Issuance of common stock

   upon the exercise of

   common stock options

 

 

 

 

 

 

 

 

 

12,169

 

 

 

27

 

 

 

 

 

 

 

 

 

 

 

 

27

 

Issuance of common stock in

   connection with employee

   stock purchase plan

 

 

 

 

 

 

 

 

 

10,534

 

 

 

160

 

 

 

 

 

 

 

 

 

 

 

 

160

 

Reversal of estimated

   offering costs

 

 

 

 

 

 

 

 

 

 

 

 

43

 

 

 

 

 

 

 

 

 

 

 

 

43

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

700

 

 

 

 

 

 

 

 

 

 

 

 

700

 

Foreign currency

   translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16

 

 

 

 

 

 

16

 

Unrealized losses on

   marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(68

)

 

 

 

 

 

(68

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,088

)

 

 

(5,088

)

Balances at

   September 30, 2020

 

 

 

 

$

 

 

 

 

27,159,065

 

 

$

501,486

 

 

$

 

 

$

(16

)

 

$

(391,920

)

 

$

109,550

 

 

The accompanying notes are an integral part of these consolidated financial statements.

4


 

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Comprehen-

 

 

 

 

 

 

Stockholders'

 

 

 

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Paid-in

 

 

sive Income

 

 

Accumulated

 

 

Equity

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Deficit

 

 

(Deficit)

 

Balances at

   December 29, 2018

 

 

50,404,140

 

 

$

186,519

 

 

 

 

1,397,493

 

 

$

1

 

 

$

143,794

 

 

$

(101

)

 

$

(335,936

)

 

$

(192,242

)

Issuance of common stock

   upon the exercise of

  common stock options

 

 

 

 

 

 

 

 

 

29,180

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57

 

 

 

 

 

 

 

 

 

57

 

Foreign currency translation

   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34

 

 

 

 

 

 

34

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,895

)

 

 

(6,895

)

Balances at March 30, 2019

 

 

50,404,140

 

 

 

186,519

 

 

 

 

1,426,673

 

 

 

1

 

 

 

143,859

 

 

 

(67

)

 

 

(342,831

)

 

 

(199,038

)

Conversion of convertible

   preferred stock into

   common stock upon

   initial public offering

 

 

(50,404,140

)

 

 

(186,519

)

 

 

 

13,119,424

 

 

 

186,519

 

 

 

 

 

 

 

 

 

 

 

 

186,519

 

Conversion of TransMedics'

   common stock into

   TransMedics Group's

   common stock upon

   corporate reorganization

 

 

 

 

 

 

 

 

 

 

 

 

143,859

 

 

 

(143,859

)

 

 

 

 

 

 

 

 

 

Conversion of preferred

   stock warrants into

   common stock warrants

   upon initial public

   offering

 

 

 

 

 

 

 

 

 

 

 

 

1,239

 

 

 

 

 

 

 

 

 

 

 

 

1,239

 

Issuance of common stock in

   initial public offering, net

   of discounts and issuance

   costs of $5,966

 

 

 

 

 

 

 

 

 

6,543,500

 

 

 

91,401

 

 

 

 

 

 

 

 

 

 

 

 

91,401

 

Issuance of common stock

   upon the exercise of

   common stock options

 

 

 

 

 

 

 

 

 

8,771

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Stock-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

220

 

 

 

 

 

 

 

 

 

 

 

 

220

 

Foreign currency translation

   adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21

)

 

 

 

 

 

(21

)

Unrealized gains on

   marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

30

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,195

)

 

 

(9,195

)

Balances at June 29, 2019

 

 

 

 

 

 

 

 

 

21,098,368

 

 

 

423,245

 

 

 

 

 

 

(58

)

 

 

(352,026

)

 

 

71,161

 

Issuance of common stock

   upon the exercise of

   common stock options

 

 

 

 

 

 

 

 

 

63,065

 

 

 

94

 

 

 

 

 

 

 

 

 

 

 

 

94

 

Settlement of accrued

   financing fee

 

 

 

 

 

 

 

 

 

 

 

 

124

 

 

 

 

 

 

 

 

 

 

 

 

124

 

Stock-based compensation

&nb