10-Q
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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

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 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;

i


 

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.

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 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.

1


 

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.

2


 

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.

3


 

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.

 

4


 

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

 

Stock-based compensation expense

 

 

8,879

 

 

 

4,626

 

Non-cash interest expense and end of term accretion expense

 

 

593

 

 

 

278

 

Non-cash lease expense

 

 

423

 

 

 

352

 

Net amortization of premiums on marketable securities

 

 

 

 

 

369

 

Unrealized foreign currency transaction (gains) losses

 

 

(150

)

 

 

1,034

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(19,862

)

 

 

(7,131

)

Inventory