TransMedics Group (TMDX) is a small-cap MedTech company addressing the unmet market need for more and healthier organs for transplantation, specifically in the heart, lung, and liver markets. It’s not a stock for the faint of heart (no pun intended). But the reward versus risk profile is very attractive, counsels Tyler Laundon, editor of Cabot Small-Cap Confidential.

The company’s revolutionary technology is called the Organ Care System (OCS). OCS replaces a very old standard of care, cold storage, that is too static to meet the dynamic needs of today’s organ transplant market.

The elevator pitch is that the OCS does a better job at preserving organ quality, assessing organ viability prior to transplant, boosting organ utilization and slashing transplant costs. The OCS is also the foundation of TransMedics’ National OCS Program (NOP), a turnkey solution for transplant enters that provides outsourced organ retrieval and OCS organ management.

The goal of the NOP is to streamline delivery of donor organs from anywhere in the US to a transplant center. TransMedics is also seeking to streamline the delivery of organs across the country by integrating an aviation business it recently acquired. This means the company would not only have more control over logistics, but also be able to capture some of the high fees paid to charter flight operators for organ delivery.

Some of these shorter flights generate $25-$30K in revenue, whereas longer ones could provide up to $100K. Since the aviation business is so new, management hasn’t yet issued guidance on revenue and profit margins. But they have said the focus is on growing revenue and margins in the business and that they’re expanding the fleet and staffing to achieve those goals.

In Q3 2023, aviation added just over $2 million in revenue. The company has nine planes, with plans to scale to 20 by the second half of 2024 (to cover the entire US). That’s just the beginning, too. There is also potential to expand internationally, especially to Europe, once reimbursement is secured.

Analysts currently see TransMedics growing 2023 revenue by 145% to around $229 million and delivering an adjusted per-share loss of -$0.93. Looking out into 2024, current consensus points toward revenue growth of 45% ($331 million) and adjusted EPS improvement of 45%, to -$0.51.
If history is any guide, the company will do better. And that will keep TMDX moving higher.

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