A medical device company that is actively disrupting the status quo whereby their technology can become the new industry standard. As adoption increases they are poised to operate a razor & blade business in a concentrated end market with limited competition. According to their latest 10-K "we are aware of only two other companies providing warm perfusion systems, OrganOx Limited and XVIVO Perfusion AB"

Transporting organs set for transplantation is a difficult, error prone process that results in wasted organs and suboptimal patient outcomes post transplant. The current system is basically just placing an organ into a yeti cooler with ice and sending it on it's way. This places a countdown timer on the organ which in turn limits the total distance the organ can travel. With this current system it's may not be possible to transport an organ from New York to California.

Create a novel technology that circulates blood through the organ to keep it alive and functioning outside the human body.

Partner with top tier hospitals to legitimize the technology in order to have the strongest sales pitch when approach tier 2 and tier 3 hospitals. In 2020 Mass General Hospital was ~14% of their revenue which is a really great sign. Mass General is regarded as a 'teaching hospital' that is associated with Harvard and consistently ranked among the top 5 hospitals in the United States. Having the best and brightest involved with the product is what will bring this product from the nascent stages of commercialization to a new industry standard.

The company relies on FDA approval before hospitals can begin to use the product, without FDA approval the product may have a scrappage value of zero. Hospitals also need to see a favorable ROI in order to adopt Transmedics products, if there is no material difference in patient outcomes then there is little reason to train staff and adopt a more expensive solution.

This is an early stage company that seems like something out of science fiction but it's a solution to a very real problem. It's a high beta way to get exposure to the health care sector but IF the product lives up to it's promise then we have a clear path to a great business. In my opinion the monetary cost of the devices is the lowest hurdle any investor should be concerned about: there is a large enough pool of money between insurance companies, hospitals, Medicare, Medicaid, etc.

Investors should be excited about the market dynamics. In the US 55 of the organ centers have an estimated 70% market share & Transmedics faces little competition. This is a razor & blade business where they sell the devices to hospitals (the razor) & a consumable solution that flows through the organ itself (the blade). This is a market with extremely high switching costs & barriers to entry.

In sum, you have 'a new operating system' for organ transportation, a well capitalized buyer for the product, and favorable industry dynamics. Fund flows can come from biotech, ESG funds, healthcare funds, and technology funds. It's certainly one of the best stories in the market today. Investors need to watch press releases as the KPI's we need to see are new hospital sign ups & increased usage among existing hospitals. It would be a major red flag if a hospital did a trial with the product but decided not to continue usage.