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We came across a bullish thesis on TransMedics Group, Inc. (TMDX) on Substack by Oliver | MMMT Wealth. In this article, we will summarize the bulls’ thesis on TMDX. TransMedics Group, Inc. (TMDX)'s share was trading at $95.81 as of May 7th. TMDX’s trailing and forward P/E were 89.54 and 63.29 respectively according to Yahoo Finance.
A doctor performing a living donor kidney transplant in a hospital operating room, emphasizing the importance of medical advancements.
TransMedics (TMDX), founded by cardiothoracic surgeon Dr. Waleed Hassanein, is revolutionizing the field of organ transplantation with its proprietary warm perfusion technology. Dr. Hassanein identified a critical flaw in the traditional approach of cold organ storage, which keeps organs in a dormant state and significantly limits their viability, repair potential, and transplant suitability. In contrast, TransMedics’ Organ Care System enables organs to remain alive and functioning outside the human body, supplied with oxygen and nutrients in a warm environment. This breakthrough allows for better organ assessment, extended preservation time, and even organ improvement prior to transplant. Competing firms like Sweden’s XVIVO Perfusion and the UK’s OrganOx are the only other significant players in the warm storage space, but the overall competitive landscape remains sparse due to the immense technological, logistical, and regulatory hurdles involved. These barriers have helped TransMedics build a robust competitive moat.
The company’s impact is especially vital considering the underwhelming organ utilization rates in the U.S.: kidneys are discarded 28% of the time, and over 70% of hearts and lungs go unused. Cold storage’s inability to preserve donation after circulatory death and donation after brain death organs compounds this problem. TMDX’s OCS technology directly addresses this issue, enhancing transplant viability for these previously challenging donor types. The company has further integrated this technology with its National OCS Program, an end-to-end service for organ transplant logistics and execution. In 2023, TMDX executed 3,715 OCS cases, with long-term goals of 10,000 annually and eventual targets of 20,000–30,000 as it expands into international markets and kidney transplants. Notably, OCS product sales now represent about 61% of company revenue, with the remainder coming from services tied to transplantation logistics.
TMDX has experienced explosive growth, with revenues growing at 90–200% annually in recent years. Despite this, the stock has pulled back significantly from its all-time highs around $180, now trading near $95—a 47% decline. This reset in valuation has created a highly attractive entry point for investors, especially with the company already achieving profitability in Q4 2023 and gross margins around 60%. However, net margins have yet to scale materially due to early-stage investments, including the expansion of their aviation fleet, which plays a central role in logistics and introduces short-term variability in margins.