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10-Q

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 June 30, 2023

☐ 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 July 31, 2023, the registrant had 32,630,386 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, including our acquisitions, joint ventures or strategic investments, 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. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives, and financial needs. 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.

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.

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

•

that we continue to incur losses;

•

our ability to attract and retain key personnel;

•

our existing and any future indebtedness, including our ability to comply with affirmative and negative covenants under our credit agreements to which we will remain subject until maturity;

•

the fluctuation of our financial results from quarter to quarter;

•

our need to raise additional funding and our ability to obtain it on favorable terms, or at all;

•

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

•

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

•

our ability to expand access to the OCS through our National OCS Program;

•

our ability to scale our manufacturing and sterilization capabilities to meet increasing demand for our products;

•

the rate and degree of market acceptance of the OCS;

•

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

•

our ability to improve the OCS platform and develop the next generation of the OCS products;

•

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

•

our ability to maintain regulatory approvals or clearances for our OCS products in the United States and European Union;

•

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;

•

our use of third parties to transport donor organs and medical personnel for our National OCS Program and our ability to establish and grow our aviation operations to support our National OCS Program to reduce dependence on third party transportation, including by means of the acquisition of fixed-wing aircraft or other acquisitions, joint ventures or strategic investments;

•

price increases of the components of our products;

•

the timing or results of post-approval studies and any 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 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;

•

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

•

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

•

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

•

our ability to service our 1.50% convertible senior notes, due 2028;

•

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

•

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

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 Stockholders’ Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signatures		36

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

TRANSMEDICS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)


	June 30,			December 31,
	2023			2022
Assets
Current assets:
Cash	$	582,210		$	201,182
Accounts receivable		47,524			27,611
Inventory		30,545			20,605
Prepaid expenses and other current assets		2,376			2,896
Total current assets		662,655			252,294
Property and equipment, net		19,965			19,223
Restricted cash		750			500
Operating lease right-of-use assets		6,929			5,130
Other non-current assets		59			—
Total assets	$	690,358		$	277,147
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	7,031		$	3,341
Accrued expenses and other current liabilities		22,862			18,635
Deferred revenue		244			241
Operating lease liabilities		1,880			1,444
Total current liabilities		32,017			23,661
Convertible senior notes, net		445,761			—
Long-term debt, net		58,908			58,696
Operating lease liabilities, net of current portion		8,459			7,415
Total liabilities		545,145			89,772
Commitments and contingencies (Note 8)
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; 32,582,933 shares and 32,141,368 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		627,747			666,277
Accumulated other comprehensive loss		(220	)		(225	)
Accumulated deficit		(482,314	)		(478,677	)
Total stockholders' equity		145,213			187,375
Total liabilities and stockholders' equity	$	690,358		$	277,147

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

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenue:
Net product revenue	$	42,462		$	17,922		$	76,455		$	32,861
Service revenue		10,003			2,599		$	17,564			3,540
Total revenue		52,465			20,521			94,019			36,401
Cost of revenue:
Cost of net product revenue		8,558			4,080			15,864			7,458
Cost of service revenue		7,166			2,091			12,648			2,489
Total cost of revenue		15,724			6,171			28,512			9,947
Gross profit		36,741			14,350			65,507			26,454
Operating expenses:
Research, development and clinical trials		8,291			6,714			14,162			14,248
Selling, general and administrative		29,356			17,381			54,340			31,320
Total operating expenses		37,647			24,095			68,502			45,568
Loss from operations		(906	)		(9,745	)		(2,995	)		(19,114	)
Other income (expense):
Interest expense		(2,505	)		(972	)		(3,596	)		(1,932	)
Other income (expense), net		2,431			(784	)		2,986			(1,011	)
Total other expense, net		(74	)		(1,756	)		(610	)		(2,943	)
Loss before income taxes		(980	)		(11,501	)		(3,605	)		(22,057	)
Provision for income taxes		(21	)		(22	)		(32	)		(28	)
Net loss	$	(1,001	)	$	(11,523	)	$	(3,637	)	$	(22,085	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.03	)	$	(0.41	)	$	(0.11	)	$	(0.79	)
Weighted average common shares outstanding, basic and diluted		32,545,352			27,983,629			32,403,597			27,967,072

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

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net loss	$	(1,001	)	$	(11,523	)	$	(3,637	)	$	(22,085	)
Other comprehensive income (loss):
Foreign currency translation adjustment		(2	)		(30	)		5			(54	)
Unrealized gains (losses) on marketable securities, net of tax of $0		—			9			—			(64	)
Total other comprehensive income (loss)		(2	)		(21	)		5			(118	)
Comprehensive loss	$	(1,003	)	$	(11,544	)	$	(3,632	)	$	(22,203	)

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

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)


						Accumulated
						Other						Total
	Common Stock					Comprehen-			Accumulated			Stockholders'
	Shares		Amount			sive Loss			Deficit			Equity
Balances at December 31, 2022		32,141,368	$	666,277		$	(225	)	$	(478,677	)	$	187,375
Issuance of common stock upon the exercise of common stock options		378,500		3,574			—			—			3,574
Issuance of common stock in connection with employee stock purchase plan		14,135		384			—			—			384
Stock-based compensation expense		—		3,921			—			—			3,921
Foreign currency translation adjustment		—		—			7			—			7
Net loss		—		—			—			(2,636	)		(2,636	)
Balances at March 31, 2023		32,534,003		674,156			(218	)		(481,313	)		192,625
Issuance of common stock upon the exercise of common stock options		39,158		705			—			—			705
Stock-based compensation expense		—		4,958			—			—			4,958
Purchases of capped calls related to convertible senior notes		—		(52,072	)		—			—			(52,072	)
Issuance of restricted common stock		9,772		—			—			—			—
Foreign currency translation adjustment		—		—			(2	)		—			(2	)
Net loss		—		—			—			(1,001	)		(1,001	)
Balances at June 30, 2023		32,582,933	$	627,747		$	(220	)	$	(482,314	)	$	145,213


					Accumulated
					Other						Total
	Common Stock				Comprehen-			Accumulated			Stockholders'
	Shares		Amount		sive Loss			Deficit			Equity
Balances at December 31, 2021		27,791,615	$	510,488	$	(188	)	$	(442,446	)	$	67,854
Issuance of common stock upon the exercise of common stock options		164,503		202		—			—			202
Issuance of common stock in connection with employee stock purchase plan		12,465		203		—			—			203
Stock-based compensation expense		—		2,310		—			—			2,310
Foreign currency translation adjustment		—		—		(24	)		—			(24	)
Unrealized losses on marketable securities		—		—		(73	)		—			(73	)
Net loss		—		—		—			(10,562	)		(10,562	)
Balances at March 31, 2022		27,968,583		513,203		(285	)		(453,008	)		59,910
Issuance of common stock upon the exercise of common stock options		31,592		237		—			—			237
Stock-based compensation expense		—		2,316		—			—			2,316
Issuance of restricted common stock		23,120		—		—			—			—
Foreign currency translation adjustment		—		—		(30	)		—			(30	)
Unrealized gains on marketable securities		—		—		9			—			9
Net loss		—		—		—			(11,523	)		(11,523	)
Balances at June 30, 2022		28,023,295	$	515,756	$	(306	)	$	(464,531	)	$	50,919

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

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities:
Net loss	$	(3,637	)	$	(22,085	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		2,679			1,302