TransMedics Group, Inc. TMDX investors are encountering some short-term losses from the stock of late. Shares of the Andover, MA-based commercial-stage medical technology company providing organ transplant therapy for end-stage organ failure patient have plunged 57.5% in the past three months, underperforming the industry’s 3.6% decline. In the same time frame, the stock underperformed the sector and S&P 500’s 12.9% loss and 8.1% growth, respectively.

Two major developments from TMDX in recent months include the announcement of its third-quarter 2024 results and the appointment of Mr. Gerardo Hernandez as the company's chief financial officer, effective Dec. 2, 2024. The company also narrowed its 2024 financial outlook. 

The company reported robust improvement of the top and bottom lines in the third quarter of 2024. The top-line increase was driven primarily by the uptick in utilization of the Organ Care System (OCS) across all three organs through the National OCS Program (NOP) and additional revenues generated by TransMedics logistics services.

Per management, TMDX remains well on track to reach its stated target of achieving 10,000 OCS transplant cases per year in the United States by 2028, driven by continued progress across each of its growth initiatives through the third quarter.

TMDX Three Months Price Comparison

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Over the past three months, the stock’s performance has remained bleak, similar to that of its peers, like Medtronic plc MDT, GE HealthCare Technologies Inc. GEHC and Abbott Laboratories ABT. MDT, GEHC and ABT’s shares have plunged 8.5%, 6.8% and 3.6%, respectively in the same time frame.

Despite the potential within the organ transplant therapy market driven by a growing addressable market, the downward estimates indicate that the company might not be able to overcome the negative market momentum any time soon.

TransMedics now expects revenues for the full year to be in the range of $428 million-$432 million (representing growth of 77-79% from the comparable 2023 period). This compares to the prior outlook of revenues of $425 million to $445 million (representing growth of 76-84% from the comparable 2023 period). The Zacks Consensus Estimate is currently pegged at $430.6 million, indicating a 78.2% improvement from the comparable 2023 period.

TransMedics’ OCS is a platform that allows it to leverage core technologies across products for multiple organs. To date, the company has developed three OCS products, one for each of heart, lung and liver transplantations, making the OCS the only FDA-approved, portable, multi-organ, warm perfusion technology platform. All three of the products (OCS Heart, OCS Lung and OCS Liver) have received pre-market approval (PMA) from the FDA for both organs donated after brain death and organs donated after circulatory death.

During the third quarter of 2024, TMDX continued to focus on increasing utilization of the OCS across all three organs and its logistics services, and the progress is evident so far. Given this, the stock seems well-positioned to navigate the current macroeconomic climate.  

TMDX's Strong Fundamentals Weigh In

Transporting organs, clinical staff and medical technology in the field of organ transplant is very challenging. Donor organs may become available at almost any hospital at any time. The donor organ must be retrieved and transported to allocated recipients in a timely manner while protecting the organ from ischemic injury. The donor site may not be easily accessible, and the distance from donor to recipient may be very long. The expansion of TransMedics’ NOP to provide its own transportation logistics services, including 100% owned and operated private aircraft dedicated to organ retrieval, improves the efficiency of utilizing the NOP as a complete solution for organ procurement.

Per management, the transplant community is highly concentrated in the leading academic medical centers around the world. TransMedics has been able to develop strong clinical relationships with many of these centers through their participation in the company’s clinical trials and commercial utilization of its products and services.

The OCS has been reimbursed by the Centers for Medicare & Medicaid Services and private insurers during TransMedics’ clinical trials and continues to be reimbursed in the commercial setting. As its customers have been billing for reimbursement for many years, TMDX has been able to develop expertise in the area of transplant reimbursement and appropriate billing of insurers.

TransMedics' Focus on Product Development

To receive FDA approval for TMDX’s PMA products, the company had to conduct many clinical trials with large numbers of patient participants, the results of which were published in leading medical journals. The company also continues to collect clinical data through post-market registries for all its products and plans to continue to provide the scientific results of these registries to the clinical user community.

Per management, TransMedics has a long history and broad experience in the development of warm machine perfusion for organ preservation. During the life of its OCS technology platform, the company has continued to add technological and usability enhancements to its devices. Management also intends to develop newer versions of the technology in the future that will continue to improve the ease of use, portability and capability of the products.

TMDX's Stock Valuation

TransMedics’ forward 12-month P/S of 4.1X is lower than the industry’s average of 4.5X and its five-year median of 9.9X.

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Estimate Movement

Estimates for TransMedics’ 2024 earnings have moved 18% south to $1.00 in the past 60 days.

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Our Final Take

There is no denying that TransMedics sits favorably in terms of core business strength, earnings prowess, robust financial footing and global opportunities. The Zacks Rank #3 (Hold) stock’s strong core growth prospects present a good reason for existing investors to retain shares for future gains despite the current slump in share prices. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For those exploring to make new additions to their portfolios, the valuation indicates superior performance expectations compared with its industry peers. It is still valued lower than the industry, which suggests potential room for growth if it can align more closely with overall market performance. However, if investors are already holding the stock, it would be prudent to hold on to it at present. The favorable Zacks Style Score with a Growth Score of B suggests continued uptrend potential for TMDX.

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