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What changed in TransMedics Group, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of TransMedics Group, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+548 added−434 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-27)

Top changes in TransMedics Group, Inc.'s 2023 10-K

548 paragraphs added · 434 removed · 357 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

103 edited+18 added−9 removed177 unchanged
Biggest changeThe OCS technology platform is equipped with the following core technologies that we designed to comprehensively address the limitations of cold storage and improve transplant outcomes: • proprietary pulsatile blood pump to simulate beating heart perfusion in organs outside of the human body; • proprietary software-controlled titanium blood warmer to maintain blood at body temperature while maximizing portability; • gas exchanger to maintain organ oxygenation outside of the human body; • customized hemodynamics sensors to monitor and assess organ function outside of the human body; • proprietary software-controlled, miniaturized, electromechanical system with universal power supply and hot-swappable batteries to maximize portability and travel distance for organ retrieval; • proprietary wireless monitor and control software to provide an intuitive user interface for monitoring critical organ function; and • customized carbon fiber OCS console structure to reduce the overall weight of the system and maximize portability. 6 Key Advantages of the OCS Platform We believe the OCS platform provides significant benefits relative to cold storage: • Significant reduction in ischemia Decreases current time and distance limitations on organ transport while also increasing the currently limited time period for retrieval during which high quality transplant outcomes can reliably be obtained.
Biggest changeThe OCS technology platform is equipped with the following core technologies that we designed to comprehensively address the limitations of cold storage and improve transplant outcomes: • proprietary pulsatile blood pump to simulate beating heart perfusion in organs outside of the human body; • proprietary software-controlled titanium blood warmer to maintain blood at body temperature while maximizing portability; • gas exchanger to maintain organ oxygenation outside of the human body; • customized hemodynamics sensors to monitor and assess organ function outside of the human body; 6 • proprietary software-controlled, miniaturized, electromechanical system with universal power supply and hot-swappable batteries to maximize portability and travel distance for organ retrieval; • proprietary wireless monitor and control software to provide an intuitive user interface for monitoring critical organ function; and • customized carbon fiber OCS console structure to reduce the overall weight of the system and maximize portability.
The OCS is a portable organ perfusion, optimization and monitoring system that utilizes our proprietary and customized technology to replicate near-physiologic conditions for donor organs outside of the human body.
The OCS is a portable organ perfusion, optimization and monitoring system that utilizes our proprietary and customized technology to replicate near-physiologic conditions for donor organs outside of the human body.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; • labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; • approval of a PMA supplement for certain modifications to PMA-approved devices that affect the safety or effectiveness of the device, or clearance of a new 510(k) premarket notification for modifications to 510(k) cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of the device; • medical device reporting regulations, which require that a manufacturer report to the FDA information that reasonably suggests a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • complying with the federal law and regulations requiring Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database; 15 • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations if the FDA finds that there is a reasonable probability that the device would cause serious, adverse health consequences or death; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These include: • establishment registration and device listing with the FDA; • QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process; 15 • labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; • approval of a PMA supplement for certain modifications to PMA-approved devices that affect the safety or effectiveness of the device, or clearance of a new 510(k) premarket notification for modifications to 510(k) cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of the device; • medical device reporting regulations, which require that a manufacturer report to the FDA information that reasonably suggests a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur; • correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • complying with the federal law and regulations requiring Unique Device Identifiers on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database; • the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations if the FDA finds that there is a reasonable probability that the device would cause serious, adverse health consequences or death; and • post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.
Regulation in Other Countries We are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of: • design, development, manufacturing and testing (including with respect to significant changes to the products); • product standards; • product safety; • product safety reporting; • marketing, sales and distribution; • packaging and storage requirements; • labeling requirements; • content and language of instructions for use; • clinical trials; • record keeping procedures; • advertising and promotion; • recalls and field corrective actions; • post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; • import and export restrictions; 20 • tariff regulations, duties and tax requirements; • registration for reimbursement, agreement of prices with government; and • necessity of testing performed in country by distributors for licensees.
Regulation in Other Countries We are subject to regulations and product registration requirements in many foreign countries in which we may sell our products, including in the areas of: • design, development, manufacturing and testing (including with respect to significant changes to the products); • product standards; • product safety; • product safety reporting; • marketing, sales and distribution; • packaging and storage requirements; • labeling requirements; 20 • content and language of instructions for use; • clinical trials; • record keeping procedures; • advertising and promotion; • recalls and field corrective actions; • post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; • import and export restrictions; • tariff regulations, duties and tax requirements; • registration for reimbursement, agreement of prices with government; and • necessity of testing performed in country by distributors for licensees.
The increased regulation includes the following: • strengthening of the rules on placing devices on the market, by requiring more evidence substantiating safety and efficacy of the device and more detailed content in the technical documentation for each device; • requiring a structured post-market clinical follow-up program for every medical device; • necessitating more thorough post-market surveillance program, with an emphasis on active gathering and analyzing the data; • establishing explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market and new responsibilities for distributors and importers; • improving the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; • setting up a central database into which manufacturers and other economic operators are required to input data with the goal of providing EU competent authorities as well as provide patients, healthcare professionals and the public with comprehensive information on products available in the European Union; and • strengthening rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market.
The increased regulation includes the following: • strengthening of the rules on placing devices on the market, by requiring more evidence substantiating safety and efficacy of the device and more detailed content in the technical documentation for each device; • requiring a structured post-market clinical follow-up program for every medical device; • necessitating more thorough post-market surveillance program, with an emphasis on active gathering and analyzing the data; 17 • establishing explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market and new responsibilities for distributors and importers; • improving the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; • setting up a central database into which manufacturers and other economic operators are required to input data with the goal of providing EU competent authorities as well as provide patients, healthcare professionals and the public with comprehensive information on products available in the European Union; and • strengthening rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market.
Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification demonstrating that the device is “substantially equivalent” to either a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or a device that was reclassified from Class III to Class II or I, or another commercially available device that was cleared through the 510(k) process or that was granted marketing authorization through the de novo classification process under section 513(f)(2) of the FDCA.
Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification demonstrating that the device is “substantially equivalent” to either a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or a device that was reclassified from Class III to Class II or I, or another commercially available device that was cleared through the 510(k) process or that was granted marketing authorization through the de novo classification process under section 513(f)(2) of the FDCA, or a 510(k) exempt device.
The MHRA Enforcement of Medical Device Regulations in the UK 19 To ensure that medical devices placed on the market and put into service in the UK meet applicable regulatory requirements the MHRA perform the following activities: • assess all allegations of non-compliance brought to them, using a risk-based system; • monitor the activity of UK Approved Bodies designated by MHRA to assess the compliance of manufacturers; and • investigate medical devices as a result of adverse incident reports or intelligence indicating a potential problem.
The MHRA Enforcement of Medical Device Regulations in the UK To ensure that medical devices placed on the market and put into service in the UK meet applicable regulatory requirements the MHRA perform the following activities: • assess all allegations of non-compliance brought to them, using a risk-based system; • monitor the activity of UK Approved Bodies designated by MHRA to assess the compliance of manufacturers; and • investigate medical devices as a result of adverse incident reports or intelligence indicating a potential problem.
Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting and many implantable devices, or devices that have been found not substantially equivalent to a legally marketed Class I or Class II predicate device, are placed in Class III, requiring approval of a PMA. 13 Each of our OCS warm perfusion products is a Class III device.
Devices deemed by the FDA to pose the greatest risks, such as life-sustaining, life-supporting and many implantable devices, or devices that have been found not substantially equivalent to a legally marketed Class I or Class II predicate device, are placed in Class III, requiring approval of a PMA. Each of our OCS warm perfusion products is a Class III device.
This further limits utilization of available organs as donor populations worldwide are growing older and have concomitant risk factors that benefit from sophisticated diagnostic evaluation capabilities to predict whether the donor organ is suitable and safe to transplant. Our Technology and Solution We developed the OCS to comprehensively address the major limitations of cold storage.
This further limits utilization of available organs as donor populations worldwide are growing older and have concomitant risk factors that benefit from sophisticated diagnostic evaluation capabilities to predict whether the donor organ is suitable and safe to transplant. 5 Our Technology and Solution We developed the OCS to comprehensively address the major limitations of cold storage.
As such, the OCS represents a paradigm shift that transforms organ preservation for transplantation from a static state to a dynamic environment that enables new capabilities, including organ optimization and assessment. 5 The OCS Technology Platform We developed the OCS, the first and only FDA approved portable, multi-organ, warm perfusion platform, to leverage proprietary core technologies across multiple organs.
As such, the OCS represents a paradigm shift that transforms organ preservation for transplantation from a static state to a dynamic environment that enables new capabilities, including organ optimization and assessment. The OCS Technology Platform We developed the OCS, the first and only FDA approved portable, multi-organ, warm perfusion platform, to leverage proprietary core technologies across multiple organs.
In addition, the GSPRs include (but are not limited to) that the device must achieve the performances intended by the manufacturer, be designed, manufactured and packaged in a suitable manner and the manufacturer must establish, implement, document and maintain a risk management plan. The European Commission has adopted various standards applicable to medical devices, referred to as harmonized 16 standards.
In addition, the GSPRs include (but are not limited to) that the device must achieve the performances intended by the manufacturer, be designed, manufactured and packaged in a suitable manner and the manufacturer must establish, implement, document and maintain a risk management plan. The European Commission has adopted various standards applicable to medical devices, referred to as harmonized standards.
For example, the California Consumer Privacy Act, or 22 CCPA, gives California residents certain rights, including the right to ask covered companies to disclose the types of personal information collected and delete a consumer’s personal information, and imposes several obligations on covered companies to provide notice to California consumers regarding their data processing activities and limitations on covered companies’ ability to sell personal information.
For example, the California Consumer Privacy Act, or CCPA, gives California residents certain rights, including the right to ask covered companies to disclose the types of personal information collected and delete a consumer’s personal information, and imposes several obligations on covered companies to provide notice to California consumers regarding their data processing activities and limitations on covered companies’ ability to sell personal information.
We cannot, however, predict the ultimate content, timing or effect of any healthcare reform legislation or action, or its impact on us, and healthcare reform could increase compliance costs and may adversely affect our future business, operations and financial results. Human Capital Management Our human capital strategy is comprehensive and leverages our work practices and collaborative culture.
We cannot, however, predict the ultimate content, timing or effect of any healthcare reform legislation or action, or its impact on us, and healthcare reform could increase compliance costs and may adversely affect our future business, operations and financial results. 24 Human Capital Management Our human capital strategy is comprehensive and leverages our work practices and collaborative culture.
Sometimes the relevant rules are found in industry guidance rather than legislation—for example, relationships with healthcare professionals in the UK are governed by the code of Association of British Healthcare Industries, or ABHI, and rules may limit or restrict the advertising and promotion of our products to the general public and impose limitations on our promotional activities with healthcare professionals.
Sometimes the relevant rules are found in industry guidance rather than legislation—for example, relationships with healthcare professionals in the UK are governed by the code of Association of British HealthTech Industries, or ABHI, and rules may limit or restrict the advertising and promotion of our products to the general public and impose limitations on our promotional activities with healthcare professionals.
All clinical investigations of investigational devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption, or IDE, regulations that govern investigational device labeling, prohibit promotion of the investigational 14 device, and specify an array of study review and approval, informed consent, recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.
All clinical investigations of investigational devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption, or IDE, regulations that govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of study review and approval, informed consent, recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators.
We cannot assure you that patents will be issued from any of our pending applications or that, if patents are issued, they will be of sufficient scope or strength to provide meaningful protection for our technology. Notwithstanding the scope of the patent protection available to us, a competitor could develop methods or devices that are not covered by our patents.
We cannot assure that patents will be issued from any of our pending applications or that, if patents are issued, they will be of sufficient scope or strength to provide meaningful protection for our technology. Notwithstanding the scope of the patent protection available to us, a competitor could develop methods or devices that are not covered by our patents.
For more information, see “Item 1A. Risk Factors—Risks Related to Our Intellectual Property” in this Annual Report on Form 10-K. Competition Competition in organ preservation for transplantation can be classified into two main segments: (1) cold storage and cold perfusion technologies and (2) warm perfusion technologies.
For more information, see “Item 1A. Risk Factors—Risks Related to Our Intellectual Property” in this Annual Report on Form 10-K. 11 Competition Competition in organ preservation for transplantation can be classified into two main segments: (1) cold storage and cold perfusion technologies and (2) warm perfusion technologies.
Currently, national healthcare systems do not reimburse transplant centers for the use of the OCS and reimbursement in international markets may require us to undertake additional clinical studies. However, international hospitals using the OCS currently pay for the OCS from their 8 hospital budget or charitable funds.
Currently, national healthcare systems do not reimburse transplant centers for the use of the OCS and reimbursement in international markets may require us to undertake additional clinical studies. However, international hospitals using the OCS currently pay for the OCS from their hospital budget or charitable funds.
There are also similar state anti-kickback and false claims laws that apply to activities involving state-funded Medicaid and other healthcare programs as well as to private third-party payers. The Anti-Kickback Statute is particularly relevant because of its broad applicability.
There are also similar state anti-kickback and false claims laws that apply to activities involving state-funded Medicaid and other healthcare programs as well as to private third-party payers. 21 The Anti-Kickback Statute is particularly relevant because of its broad applicability.
We provide advice and best practices to our customers in compliance with laws and regulations. 4 • Strong research and development capabilities and comprehensive intellectual property portfolio We have a long history and broad experience in the development of warm machine perfusion for organ preservation.
We provide advice and best practices to our customers in compliance with laws and regulations. • Strong research and development capabilities and comprehensive intellectual property portfolio We have a long history and broad experience in the development of warm machine perfusion for organ preservation.
The healthcare laws and regulations applicable to us, including those described above, contain ambiguous requirements and are subject to evolving interpretations and enforcement discretion. Manufacturers must adopt reasonable interpretations of 21 requirements if there is ambiguity and those interpretations could be challenged.
The healthcare laws and regulations applicable to us, including those described above, contain ambiguous requirements and are subject to evolving interpretations and enforcement discretion. Manufacturers must adopt reasonable interpretations of requirements if there is ambiguity and those interpretations could be challenged.
All of our products that were previously certified under the EU Medical Devices Directive, including OCS Heart and OCS Lung systems, both of which includes the OCS Console, the OCS disposables, and the OCS solution additives, and the OCS Liver Console and disposables, have now been recertified under the MDR.
All of our products that were previously certified under the EU Medical Devices Directive, including OCS Heart, OCS Lung, and OCS Liver systems, which includes the OCS Console, the OCS disposables, and the OCS solution additives, have now been recertified under the MDR.
The same rules apply to us in the UK under the UK GDPR. The GDPR and UK GDPR also impose potentially onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and privacy policies/notices.
The same rules apply to us in the UK under the UK GDPR. 23 The GDPR and UK GDPR also impose potentially onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and privacy policies/notices.
Private insurers typically have agreements as to how they reimburse for the transplant costs and the organ acquisition costs, which may be through a global payment for both, or a payment for the transplant and a separate mechanism for paying for organ acquisition costs.
Private insurers typically have agreements as to how they reimburse for the transplant costs and the organ acquisition costs, 8 which may be through a global payment for both, or a payment for the transplant and a separate mechanism for paying for organ acquisition costs.
In both cold storage and cold perfusion, the organs are not functioning or metabolically inactive. The characteristics of cold storage and cold perfusion described above significantly limit donor organ utilization and are a primary driver of post-transplant complications.
In both cold storage and cold perfusion, the organs are not functioning and are metabolically inactive. The characteristics of cold storage and cold perfusion described above significantly limit donor organ utilization and are a primary driver of post-transplant complications.
There are exemptions to these data transfer restrictions but these are interpreted narrowly. 23 The July 2020 invalidation by the Court of Justice of the European Union of the EU-U.S.
There are exemptions to these data transfer restrictions but these are interpreted narrowly. The July 2020 invalidation by the Court of Justice of the European Union of the EU-U.S.
These patents, and any patents issued from pending patent applications, are expected to expire in 2036, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable. We have requested patent term extension for one patent relating to the OCS Heart, U.S. Patent No. 7,651,835, which, if granted, would expire in 2032.
These patents, and any patents issued from pending patent applications, are expected to expire in 2038, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable. We have requested patent term extension for one patent relating to the OCS Heart, U.S. Patent No. 7,651,835, which, if granted, would expire in 2032.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 25
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 26
We believe this program has the potential to accelerate adoption of the OCS, maximize utilization of donor organs for transplantation and, by standardizing the quality of use of the OCS, deliver better clinical outcomes. • Develop the next generation OCS technology platform to improve user experience and facilitate our National OCS Program.
We believe this program has the potential to accelerate adoption of the OCS, maximize utilization of donor organs for transplantation and, by standardizing the quality of use of the OCS, deliver better clinical outcomes. • Develop the next generation OCS technology platform to improve user experience and facilitate our NOP.
These patents, and any patents issued from pending patent applications, are expected to expire in 2032, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable. The term of individual patents depends on the legal term for patents in the countries in which they are granted.
These patents, and any patents issued from pending patent applications, are expected to expire in 2035, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable. The term of individual patents depends on the legal term for patents in the countries in which they are granted.
We believe that our principal competitive factors include: • strong clinical evidence from large trials demonstrating safety, effectiveness and clinical benefits; • superior technology; • our NOP; • regulatory approvals for broad clinical indications of use; • ease of integration into current organ retrieval workflow, including system portability across all modes of transportation; 11 • platform capabilities designed to support multiple organ transplant programs; • brand recognition among leading transplant programs worldwide; • established clinical relationships and a core of committed clinical users; • commercial reimbursement; and • sophisticated clinical training and support program to users worldwide.
We believe that our principal competitive factors include: • strong clinical evidence from large trials demonstrating safety, effectiveness and clinical benefits; • superior technology; • our NOP, including clinical service and logistics services; • regulatory approvals for broad clinical indications of use; • ease of integration into current organ retrieval workflow, including system portability across all modes of transportation; • platform capabilities designed to support multiple organ transplant programs; • brand recognition among leading transplant programs worldwide; • established clinical relationships and a core of committed clinical users; • commercial reimbursement; and • sophisticated clinical training and support program to users worldwide.
Research, Development and Clinical Trial Operations Our research, development and clinical trial operations function consists of a dedicated clinical trial team that has trial management, data collection and biostatistics expertise. Our product engineering function consists of a multi-disciplinary engineering team that has electrical, mechanical, systems and software engineering expertise.
Research, Development and Clinical Trial Operations Our research, development and clinical trial operations function consists of a dedicated clinical trial team that has trial management, data collection and biostatistics expertise. Our product engineering function consists of multi-disciplinary engineering teams that have electrical, mechanical, systems and software engineering expertise.
Our business model is characterized by a high level of recurring revenue, which is derived primarily from sales of our single-use, organ-specific disposable sets that are required for each transplant using the OCS and services provided to transplant centers by our NOP.
Our business model is characterized by a high level of recurring revenue, which is derived primarily from sales of our single-use, organ-specific disposable sets that are required for each transplant using the OCS as well as services provided to transplant centers by our NOP.
Issued patents in our portfolio are expected to expire between 2025 and 2036, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable.
Issued patents in our portfolio are expected to expire between 2025 and 2038, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable.
These patents, and any patents issued from pending patent applications, are expected to expire in 2029, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable.
These patents, and any patents issued from pending patent applications, are expected to expire in 2043, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable.
In the European Economic Area, or EEA, as well as in the United Kingdom, or the UK, -post-Brexit, we may be subject to laws relating to our collection, control, processing and other use of personal data, such as data relating to an identified or identifiable living individual.
In the EEA, as well as in the United Kingdom, or the UK, -post-Brexit, we may be subject to laws relating to our collection, control, processing and other use of personal data, such as data relating to an identified or identifiable living individual.
Our patent portfolio includes patents and patent applications that we own or license from third parties. As of December 31, 2022, our owned and licensed patent portfolio consisted of approximately 297 issued patents and pending patent applications worldwide, including in the United States, Australia, Europe, Canada, China, Israel, New Zealand and Japan.
Our patent portfolio includes patents and patent applications that we own or license from third parties. As of December 31, 2023, our owned and licensed patent portfolio consisted of approximately 400 issued patents and pending patent applications worldwide, including in the United States, Australia, Europe, Canada, China, Israel, New Zealand and Japan.
We are focused on driving adoption of the OCS and NOP at leading, high volume transplant programs as well as expanding utilization to medium and smaller centers that can utilize OCS and NOP to provide transplants to more patients. 7 • Grow our National OCS Program, a turnkey solution to provide outsourced organ retrieval and organ management, to provide transplant programs with a more efficient process to procure donor organs with the OCS.
We are focused on driving adoption of the OCS and NOP at leading, high volume transplant programs as well as expanding utilization to medium and smaller centers that can utilize OCS and NOP to provide transplants to more patients. • Grow our NOP, a turnkey solution to provide outsourced organ retrieval, OCS organ management and logistics services, to provide transplant programs with a more efficient process to procure donor organs with the OCS.
The multi-organ platform allows for the standardization of use across transplant programs. • National OCS Program Our National OCS Program was developed to provide a more efficient process to procure donor organs with the OCS.
The multi-organ platform allows for the standardization of use across transplant programs. • National OCS Program We developed our NOP to provide transplant programs with a more efficient process to procure donor organs with the OCS.
Our regulatory function includes a team with both U.S. and international medical device regulatory expertise and is supported by senior FDA regulatory advisors and outside legal counsel. For the years ended December 31, 2022, 2021 and 2020 our research, development and clinical trials expenses were $26.8 million, $22.3 million and $18.8 million, respectively.
Our regulatory function includes a team with both U.S. and international medical device regulatory expertise and is supported by senior FDA regulatory advisors and outside legal counsel. For the years ended December 31, 2023, 2022 and 2021 our research, development and clinical trials expenses were $36.1 million, $26.8 million and $22.3 million, respectively.
These include: • a new route to market and product marking (the UKCA marking) is available for manufacturers wishing to place medical devices on the Great Britain market; • all medical devices, including in vitro diagnostic medical devices, or IVDs, custom-made devices and systems or procedure packs, need to be registered with the MHRA before they are placed on the Great Britain market; • medical device manufacturers based outside the UK who wish to place a device on the Great Britain market need to appoint a single UK Responsible Person for all devices who will act on their behalf to carry out specified tasks, such as registration; • CE marking will continue to be recognized in Great Britain until June 30, 2024; • certificates issued by EU-recognized Notified Bodies will continue to be valid for the Great Britain market until June 30, 2024; • the EU no longer recognizes UK Notified Bodies and UK Notified Bodies are not able to issue CE certificates.
These include: • a new route to market and product marking (the UKCA marking) is available for manufacturers wishing to place medical devices on the Great Britain market; • all medical devices, including in vitro diagnostic medical devices, or IVDs, custom-made devices and systems or procedure packs, need to be registered with the MHRA before they are placed on the Great Britain market; • medical device manufacturers based outside the UK who wish to place a device on the Great Britain market need to appoint a single UK Responsible Person for all devices who will act on their behalf to carry out specified tasks, such as registration; • the EU no longer recognizes UK Notified Bodies and UK Notified Bodies are not able to issue CE certificates.
Since May 26, 2021, the EU Medical Devices Regulation (Regulation 2017/745), or the EU MDR, has applied in EU Member States and Northern Ireland. Further, the In Vitro Diagnostic Medical Devices Regulation (Regulation 2017/746), or the EU IVDR, has applied in EU Member States and Northern Ireland since May 26, 2022.
Further, the In Vitro Diagnostic Medical Devices Regulation (Regulation 2017/746), or the EU IVDR, has applied in EU Member States and Northern Ireland since May 26, 2022.
Regulation of Medical Devices in the European Union In the European Union, our products are regulated as medical devices. Regulation of our medical devices in the European Union is harmonized through Regulation (EU) 2017/745, or the MDR, which repealed and replaced the Medical Devices Directive (93/42/EEC) with effect from May 26, 2021.
Regulation of our medical devices in the European Union is harmonized through Regulation (EU) 2017/745, or the MDR, which repealed and replaced the Medical Devices Directive (93/42/EEC) with effect from May 26, 2021.
This team is focused on the following research, development and clinical trial activities: • developing the next generation OCS; • expanding the body of clinical evidence supporting the use of the OCS platform through pre-market clinical trials, post-market registries and scientific publications; • improving incrementally the technology and manufacturing efficiency of our current platform; and • conducting research to investigate new clinical applications and uses for the OCS platform.
This team is focused on the following research, development and clinical trial activities: • developing the next generation OCS; • developing applications to expand the access and use of the data generated from the OCS; • expanding the body of clinical evidence supporting the use of the OCS platform through pre-market clinical trials, post-market registries and scientific publications; • improving incrementally the technology and manufacturing efficiency of our current platform; and 12 • conducting research to investigate new clinical applications and uses for the OCS platform.
As of December 31, 2022, our patent portfolio relating to the OCS Liver includes a family of issued and pending patent applications with claims that are generally directed to certain systems, including perfusion circuits for perfusing a liver ex vivo.
As of December 31, 2023, our patent portfolio relating to the OCS Liver or liver transplantation technology includes a family of issued and pending patent applications with claims that are generally directed to certain systems, including perfusion circuits for perfusing a liver ex vivo.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for approvals of PMAs of new products or modified products; • withdrawing a PMA approval that has already been granted; • refusal to grant export or import approvals for our products; or • criminal prosecution.
If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions: • warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; • recalls, withdrawals, or administrative detention or seizure of our products; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying requests for approvals of PMAs of new products or modified products; • withdrawing a PMA approval that has already been granted; • refusal to grant export permits or certificates for our products; or • criminal prosecution. 16 Regulation of Medical Devices in the European Union In the European Union, our products are regulated as medical devices.
Post-marketing Requirements Once a medical device has been placed on the UK market, the manufacturer is required to submit vigilance reports to the MHRA when certain incidents occur in the UK that involve their device. They must also take appropriate safety action when required.
The manufacturer must also obtain ethics committee approval for the investigation. Post-marketing Requirements Once a medical device has been placed on the UK market, the manufacturer is required to submit vigilance reports to the MHRA when certain incidents occur in the UK that involve their device. They must also take appropriate safety action when required.
We have also initiated post-market registries for all of our products and plan to continue to provide the scientific results of these registries to the clinical user community. • Strong relationship with the clinical transplant community The transplant community is highly concentrated in the leading academic medical centers around the world.
We also continue to collect clinical data through post-market registries for all of our products and plan to continue to provide the scientific results of these registries to the clinical user community. 4 • Strong relationship with the clinical transplant community The transplant community is highly concentrated in the leading academic medical centers around the world.
Our agreement with Fresenius for the supply of OCS Lung Solution was originally through April 2022 and was automatically extended for 24 months through April 2024.
Our agreement with Fresenius for the supply of OCS Lung Solution was previously through April 2024 and was automatically extended for 24 months through April 2026.
We are committed to creating and maintaining an inclusive workplace in which all employees have an opportunity 24 contribute to the success of the business. This commitment is embedded in our company policies and human capital management practices.
We believe that our diversity is one of our greatest strengths. We are committed to creating and maintaining an inclusive workplace in which all employees have an opportunity contribute to the success of the business. This commitment is embedded in our company policies and human capital management practices.
As of December 31, 2022, our patent portfolio relating to the OCS Heart includes a family comprised of patents and patent applications with claims that are generally directed to certain methods and systems for preserving a heart ex vivo.
As of December 31, 2023, our patent portfolio relating to the OCS Heart or heart transplantation technology includes families comprised of patents and patent applications with claims that are generally directed to certain methods and systems for preserving a heart ex vivo.
We received 510(k) clearance for the OCS Lung Solution for cold flush, storage and transportation of donor lungs in July 2021, and for the OCS Lung Donor Flush Set in November 2022.
We received 510(k) clearance for the OCS Lung Solution for cold flush, storage and transportation of donor lungs in July 2021, for the OCS Lung Donor Flush Set in November 2022, and for the OCS Heart Leukocyte Reducing Filter in October 2023.
It is the responsibility of the manufacturer both to notify the MHRA and to submit the documentation required by the UK MDR 2002 to the MHRA. The clinical investigator will normally have no direct contact with the MHRA.
The MHRA will reach a decision aided by a number of expert assessors. It is the responsibility of the manufacturer both to notify the MHRA and to submit the documentation required by the UK MDR 2002 to the MHRA. The clinical investigator will normally have no direct contact with the MHRA.
The time required to obtain clearance by foreign countries may be longer or shorter than that for FDA clearance, and requirements for licensing a product in a foreign country may differ significantly from FDA requirements. Adverse events and potential adverse events are monitored closely by regulatory authorities.
The time required to obtain clearance by foreign countries may be longer or shorter than that for FDA clearance, and requirements for licensing a product in a foreign country may differ significantly from FDA requirements.
We have developed strong clinical relationships with many of these centers through their participation in our clinical trials.
We have developed strong clinical relationships with many of these centers through their participation in our clinical trials and their commercial utilization of our products and services.
Our owned portfolio includes patents and applications related to one or more of the OCS Lung, OCS Heart, OCS Liver and solutions. In the United States, our owned portfolio includes about 29 issued patents and 10 pending applications. Outside the United States, our owned portfolio includes about 209 issued patents and 49 pending applications.
Our owned portfolio includes patents and applications related to one or more of the OCS Lung, OCS Heart, OCS Liver and solutions. In the United States, our owned portfolio includes about 45 issued patents and 13 pending applications. Outside the United States, our owned portfolio includes about 288 issued patents and 54 pending applications.
In the United Kingdom medical devices are regulated under the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) (UK MDR 2002) which give effect in UK law to the directives listed below (which have now been repealed and replaced in the European Union by the EU MDR and EU IVDR): • Directive 90/385/EEC on active implantable medical devices (EU AIMDD) • Directive 93/42/EEC on medical devices (EU MDD) • Directive 98/79/EC on in vitro diagnostic medical devices (EU IVDD) This means that the Great Britain route to market is based on the requirements derived from the above EU legislation and is thus different to the route to market for the European Union. 18 Since January 1, 2021 (when the Brexit transition period ended), there have been a number of changes, introduced through secondary legislation, on how medical devices are placed on the market in Great Britain (England, Wales and Scotland).
In the United Kingdom medical devices are regulated under the Medical Devices Regulations 2002 (SI 2002 No 618, as amended) (UK MDR 2002) which give effect in UK law to the directives listed below (which have now been repealed and replaced in the European Union by the EU MDR and EU IVDR): • Directive 90/385/EEC on active implantable medical devices (EU AIMDD) • Directive 93/42/EEC on medical devices (EU MDD) • Directive 98/79/EC on in vitro diagnostic medical devices (EU IVDD) This means that the Great Britain route to market is based on the requirements derived from the above EU legislation and is thus different to the route to market for the European Union.
As of December 31, 2022, our patent portfolio relating to the OCS Solutions includes a family comprised of patents and patent applications with claims that are generally directed to compositions of certain perfusion fluids.
As of December 31, 2023, our patent portfolio relating to the OCS Solutions or other solutions for transplantation systems includes families comprised of patents and patent applications with claims that are generally directed to compositions of certain perfusion fluids.
Our Culture We strive to foster an inclusive, engaging, and safe work environment where employees want to grow their careers. We promote understanding of our mission, vision, and values and create strong relationships with our employees through various engagement and career development initiatives.
As of December 31, 2023, we employed 584 people globally, most of whom were full-time employees. Our Culture We strive to foster an inclusive, engaging, and safe work environment where employees want to grow their careers. We promote understanding of our mission, vision, and values and create strong relationships with our employees through various engagement and career development initiatives.
We have also developed our National OCS Program, or NOP, an innovative turnkey solution to provide outsourced organ retrieval and OCS organ management, to provide transplant programs in the United States with a more efficient process to procure donor organs with the OCS.
We have also developed our NOP, an innovative turnkey solution to provide outsourced organ retrieval, OCS organ management and logistics services, to provide transplant programs in the United States with a more efficient process to procure donor organs with the OCS. Our logistics services include aviation transportation, ground transportation, and other coordination activity.
To date, we have 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 our products, OCS Heart, OCS Lung and OCS Liver, have received Pre-Market Approval, or PMA, from the Food and Drug Administration, or FDA.
To date, we have 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.
We have also applied for and expect to receive the CE Mark for the OCS Liver combined with our solution additives under the MDR within the next 12 months. Clinical Investigations 17 Clinical evidence is required for most medium and high risk devices. In some cases, a clinical study may be required to support the CE marking of a device.
We received the CE Mark for the OCS Liver combined with our solution additives under the MDR in May 2023, with an effective date of April 2023. Clinical Investigations Clinical evidence is required for most medium and high risk devices. In some cases, a clinical study may be required to support the CE marking of a device.
The second mechanism involves a separate payment, in addition to the MS-DRG-based payment, for organ acquisition costs, which include organ preservation and transportation costs. Medicare reimburses hospitals for allowable organ acquisition costs on a reasonable cost basis. The OCS is reimbursed under this second mechanism.
The payment for this stay is determined by the Medicare Severity-Diagnosis Related Group, or MS-DRG, into which the case is assigned. The second mechanism involves a separate payment, in addition to the MS-DRG-based payment, for organ acquisition costs, which include organ preservation and transportation costs. Medicare reimburses hospitals for allowable organ acquisition costs on a reasonable cost basis.
Diversity, Equity, and Inclusion: The keystone of our diversity strategy is mutual respect – we want everyone to feel welcome and comfortable at our organization. Our workforce consists of individuals from countries all over the world, representing many different faiths, languages, backgrounds, and cultures. We believe that our diversity is one of our greatest strengths.
Diversity, Equity, and Inclusion: The keystone of our diversity strategy is mutual respect and fostering a sense of belonging – we want everyone to feel welcome and comfortable in our organization and feel that they are supported in growing their career. Our workforce consists of individuals from countries all over the world, representing many different faiths, languages, backgrounds, and cultures.
These protections will be expanded by California Privacy Rights Act of 2020, or CPRA, which will be operational in most key respects in 2023, along with new privacy laws in Virginia, Colorado, Utah and Connecticut. We expect additional federal and state legislative and regulatory efforts to regulate consumer privacy in the future.
These protections have been expanded by California Privacy Rights Act of 2020, or CPRA, along with new privacy laws in Virginia, Colorado and several other states. We expect additional federal and state legislative and regulatory efforts to regulate consumer privacy in the future.
Our operations team includes production and test employees, manufacturing engineers and field service technicians. 12 Regulation Our OCS products and our operations are subject to extensive regulation by the FDA and other federal and state authorities in the United States, as well as comparable authorities in the European Union and other countries.
Product Regulation Our OCS products and our operations are subject to extensive regulation by the FDA and other federal and state authorities in the United States, as well as comparable authorities in the European Union and other countries.
Manufacturing, Supply and Operations We design and assemble our OCS Consoles and disposable OCS Perfusion Sets at our facility in Andover, Massachusetts. We have recently increased the size of our manufacturing facility at the Andover site and expect this to be certified by the FDA in the near future.
Manufacturing and Supply Chain Operations We design and assemble our OCS Consoles and disposable OCS Perfusion Sets at our facility in Andover, Massachusetts. We have recently increased the size of our manufacturing facility at the Andover site to increase our manufacturing capacity to meet current and future demand.
Our OCS products and NOP services are reimbursed in the United States through existing, standard commercial transplant billing mechanisms. The Medicare program and private payors had been providing reimbursement for the OCS Lung, OCS Heart and OCS Liver during the U.S. pivotal trials and have continued providing reimbursement for our products and services following FDA approval.
The Medicare program and private payors had been providing reimbursement for the OCS Lung, OCS Heart and OCS Liver during the U.S. pivotal trials and have continued providing reimbursement for our products and services following FDA approval. We are in the process of seeking long-term reimbursement for our products outside of the United States.
The MHRA performs market surveillance of medical devices on the UK market and is able to take decisions over the marketing and supply of devices in the UK. The MHRA is also responsible for the designation and monitoring of UK approved bodies (the equivalent of EU notified bodies).
The MHRA performs market surveillance of medical devices on the UK market and is able to take decisions over the marketing and supply of devices in the UK.
We hold quarterly Town Hall meetings with all employees to provide them with an open forum to ask questions, voice any concerns, and provide input on our corporate goals and vision for the future. We also host in-person events at our headquarters in Andover, Massachusetts, and invite employees from around the world to participate.
For example, we hold quarterly Town Hall meetings with all employees to provide them with an open forum to ask questions, voice any concerns, and provide input on our corporate goals and vision for the future.
Cold storage is a rudimentary approach to organ preservation in which a donor organ is flushed with cold pharmaceutical solutions, placed in a plastic bag on top of ice and transported in a cooler.
However, transplant volumes have been significantly restricted by the limitations of cold storage, the standard of care for solid organ transplantation. Cold storage is a rudimentary approach to organ preservation in which a donor organ is flushed with cold pharmaceutical solutions, placed in a plastic bag on top of ice and transported in a cooler.
Data Privacy and Security Laws We are, and in the future may become, subject to various U.S. federal and state as well as foreign laws that protect the confidentiality of certain patient health information, including patient medical records, and restrict the use and disclosure of patient health information by healthcare providers.
Data Privacy and Security Laws We are, and in the future may become, subject to various U.S. federal and state as well as foreign laws that protect the confidentiality of certain patient health information, including patient medical records, and restrict the use and disclosure of patient health information by healthcare providers. 22 The Health Insurance Portability and Accountability Act of 1996, or HIPAA, governs the conduct of certain electronic healthcare transactions and requires certain entities, called covered entities, to handle and protect, among other things, the privacy and security of protected health information, or PHI, in certain ways.
For Medicaid transplant recipients, reimbursement to a transplant hospital for the incurred cost of the OCS is determined based on the applicable state Medicaid program. Some states establish a global payment for the transplant and organ acquisition costs, and some states have separate payments for the inpatient stay based on the MS-DRG system and for organ acquisition costs.
Some states establish a global payment for the transplant and organ acquisition costs, and some states have separate payments for the inpatient stay based on the MS-DRG system and for organ acquisition costs.
As of December 31, 2022, we employed 212 people globally, most of whom were full-time employees. We generated $93.5 million, $30.3 million and $25.6 million of total revenue during the years ended December 31, 2022, 2021 and 2020, respectively, representing year-over-year growth of 208.8% and 18.0% in 2022 and 2021, respectively.
We generated $241.6 million, $93.5 million and $30.3 million of total revenue during the years ended December 31, 2023, 2022 and 2021, respectively, representing year-over-year growth of 158.5% and 208.8% in 2023 and 2022, respectively.
Our principal executive offices are located at 200 Minuteman Road, Andover, Massachusetts 01810, and our telephone number at that address is (978) 552-0900. Available Information Our Internet address is www.transmedics.com.
TransMedics, Inc., an operating company and wholly-owned subsidiary of TransMedics Group, Inc., was incorporated in the State of Delaware in August 1998. Our principal executive offices are located at 200 Minuteman Road, Andover, Massachusetts 01810, and our telephone number at that address is (978) 552-0900. 25 Available Information Our Internet address is www.transmedics.com.
Our offering allows the transplant center to focus their internal resources on the transplant surgery and patient care. Utilizing our NOP saves the transplant center from investing in additional resources to support higher volumes and longer distance retrievals. Since the launch of the NOP, our sales of the OCS have primarily been through the NOP.
Utilizing our NOP saves the transplant center from investing in additional resources to support higher volumes and longer distance retrievals. Since the launch of the NOP, our sales of the OCS have primarily been through the NOP. Our direct acquisition model is provided to transplant centers to train their own teams for retrieval and organ management on the OCS.
This patent and any patents issued from pending patent applications 10 are expected to expire in 2035, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable. We have requested patent term extension for one patent relating to the OCS Liver, U.S. Patent No. 10,076,112, which, if granted, would expire in 2035.
We have requested patent term extension for one patent relating to the OCS Liver, U.S. Patent No. 10,076,112, which, if granted, would expire in 2035.
For each OCS product, we supplement the platform with organ-specific, customized and proprietary technologies. To date, we have developed three OCS products, one for each of lung, heart and liver transplantation. OCS products for additional organs are under development.
For each OCS product, we supplement the platform with organ-specific, customized and proprietary technologies. To date, we have developed three OCS products, one for each of lung, heart and liver transplantation. We have initiated the development of the next generation multi-organ platform to improve the usability, incorporate new technology and automation, and facilitate the use of OCS in our NOP.
Our Strategy We are committed to our goal of transforming organ transplantation with our OCS platform by establishing the OCS as the standard of care for solid organ transplantation and thereby increasing the utilization of donor organs and improving clinical outcomes.
We believe the OCS will enable payors to benefit from these favorable health economics and limit their exposure to the high cost of severe post-transplantation complications and extended hospital stays. 7 Our Strategy We are committed to our goal of transforming organ transplantation with our OCS platform by establishing the OCS as the standard of care for solid organ transplantation and thereby increasing the utilization of donor organs and improving clinical outcomes.
FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, approval of a PMA or issuance of a de novo classification order.
The authorization/approval processes for devices outside the European Union will vary from country to country and the time may be longer or shorter than that required for FDA clearance or approval or EU CE marking. 13 FDA Premarket Clearance and Approval Requirements Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, approval of a PMA or issuance of a de novo classification order.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor example, three post-approval studies must be completed for OCS Lung including, the OCS Lung INSPIRE Continuation PAS, which is a two-arm observational study intended to evaluate long-term outcomes of the OCS Lung INSPIRE Trial patients, the OCS Lung EXPAND Continuation PAS, which is a single arm study intended to evaluate long-term outcomes of the OCS Lung EXPAND Trial patients, and our OCS Lung TOP Registry, which is a prospective, single-arm, multi-center, observational study designed to evaluate short- and long-term safety and effectiveness of the OCS Lung for both donor lungs currently utilized and unutilized for transplantation.
Biggest changeFor example, the OCS Lung TOP Registry must be completed, which is a prospective, single-arm, multi-center, observational study designed to evaluate short- and long-term safety and effectiveness of the OCS Lung for both donor lungs currently utilized and unutilized for transplantation. Our TOP Registry entails submission of regular reports to the FDA.
If the FDA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, or that the materials or training are false or misleading, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violations that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties.
If the FDA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, or that the materials or training are false or misleading, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of a warning letter, an untitled letter (which is used for violations that do not necessitate a warning letter), injunction, seizure, civil fine or criminal penalties.
Some of the factors that may cause the market price of our common stock to fluctuate include: • price and volume fluctuations in the overall stock market; • volatility in the market price and trading volume of comparable companies; • actual or anticipated changes in our earnings or fluctuations in our operating results or in the expectations of securities analysts; • results of post-approval studies or clinical trials relating to next generation products for the OCS or competing products; • failure or discontinuation of any of our product development and research programs; • regulatory or legal developments in the United States and other countries, including changes in the healthcare payment systems; • results or changes in the status of, or developments relating to, applications for regulatory approvals or clearances for the OCS or competing products; • our announcements or our competitors’ announcements of new products, procedures or therapies; • departure of key personnel; • litigation involving us or that may be perceived as having an adverse effect on our business; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • market conditions in the medical device and biotechnology sectors; • changes in general economic, industry and market conditions and trends; • investors’ general perception of us; and • sales of large blocks of our stock.
Some of the factors that may cause the market price of our common stock to fluctuate include: • price and volume fluctuations in the overall stock market; • volatility in the market price and trading volume of comparable companies; • actual or anticipated changes in our earnings or fluctuations in our operating results or in the expectations of securities analysts; • results of post-approval studies or clinical trials relating to next generation products for the OCS or competing products; • failure or discontinuation of any of our product development and research programs; • regulatory or legal developments in the United States and other countries, including changes in the healthcare payment systems; • results or changes in the status of, or developments relating to, applications for regulatory approvals or clearances for the OCS or competing products; • our announcements or our competitors’ announcements of new products, procedures or therapies; • departure of key personnel; • litigation involving us or that may be perceived as having an adverse effect on our business; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • market conditions in the medical device and biotechnology sectors; 61 • changes in general economic, industry and market conditions and trends; • investors’ general perception of us; and • sales of large blocks of our stock.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; • the federal Physician Sunshine Act under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively referred to as the Affordable Care Act, which require certain applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to CMS information related to payments and other transfers of value to physicians and teaching hospitals.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; 57 • the federal Physician Sunshine Act under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively referred to as the Affordable Care Act, which require certain applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to CMS information related to payments and other transfers of value to physicians and teaching hospitals.
Accordingly, our results of operations could be harmed by a variety of factors, including: • changes in a country’s or region’s political or economic conditions; • longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions; • different or changing regulatory or insurance practices regarding reimbursement for transplant procedures; • difficulties in developing effective marketing campaigns in unfamiliar foreign countries; • trade protection measures, import or export licensing requirements or customs clearance and shipping delays; • fluctuations in foreign currency exchange rates; • differing tax laws and changes in those laws in the countries in which we are subject to tax, or potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; • changes in international legislation or regulations governing the approval or clearance process for the OCS or ongoing compliance requirements; • differing business practices associated with foreign operations; • difficulties in staffing and managing our international operations; • political, social, and economic instability abroad, terrorist attacks, and security concerns in general; 37 • the burdens of complying with a wide variety of foreign laws and different legal standards, such as anti-bribery laws, including the FCPA, and UK Bribery Act of 2010, or the Bribery Act, data privacy requirements, labor laws and anti-competition regulations; • differing protection of intellectual property; and • increased financial accounting and reporting burdens and complexities.
Accordingly, our results of operations could be harmed by a variety of factors, including: • changes in a country’s or region’s political or economic conditions; • longer payment cycles of foreign customers and difficulty of collecting receivables in foreign jurisdictions; • different or changing regulatory or insurance practices regarding reimbursement for transplant procedures; • difficulties in developing effective marketing campaigns in unfamiliar foreign countries; • trade protection measures, import or export licensing requirements or customs clearance and shipping delays; • fluctuations in foreign currency exchange rates; 43 • differing tax laws and changes in those laws in the countries in which we are subject to tax, or potentially adverse tax consequences, including the complexities of foreign value-added tax systems, tax inefficiencies related to our corporate structure, and restrictions on the repatriation of earnings; • changes in international legislation or regulations governing the approval or clearance process for the OCS or ongoing compliance requirements; • differing business practices associated with foreign operations; • difficulties in staffing and managing our international operations; • political, social, and economic instability abroad, terrorist attacks, and security concerns in general; • the burdens of complying with a wide variety of foreign laws and different legal standards, such as anti-bribery laws, including the FCPA, and UK Bribery Act of 2010, or the Bribery Act, data privacy requirements, labor laws and anti-competition regulations; • differing protection of intellectual property; and • increased financial accounting and reporting burdens and complexities.
If we identify any material weaknesses in our internal controls over financial reporting or we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the 56 effectiveness of our internal control over financial reporting in future periods, investors may lose confidence in the accuracy and completeness of our financial reports.
If we identify any material weaknesses in our internal controls over financial reporting or we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting in future periods, investors may lose confidence in the accuracy and completeness of our financial reports.
Under these laws and regulations, as well as other anti-corruption laws, anti-money laundering laws, export control laws, customs laws, sanctions laws and other laws governing our operations, various government agencies 52 may require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs, which may increase compliance costs, and may subject us to fines, penalties and other sanctions.
Under these laws and regulations, as well as other anti-corruption laws, anti-money laundering laws, export control laws, customs laws, sanctions laws and other laws governing our operations, various government agencies may require export licenses, may seek to impose modifications to business practices, including cessation of business activities in sanctioned countries or with sanctioned persons or entities and modifications to compliance programs, which may increase compliance costs, and may subject us to fines, penalties and other sanctions.
The following could adversely affect the costs, timing or successful completion of any clinical trial: • we have been required and, prior to collecting clinical data in the future to support new PMA applications, may be required again to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials, and the FDA may reject our IDE application and notify us that we may not begin investigational trials; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • regulators and/or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site; • we may not reach agreement on acceptable terms with prospective clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different trial sites; • clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; • the number of subjects or patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; • our third-party contractors, including those manufacturing or sterilizing our products, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner or at all; • we might have to suspend or terminate clinical trials for various reasons, including a finding that the subjects are being exposed to unacceptable health risks; • we may have to amend clinical trial protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB and/or regulatory authorities for re-examination; • regulators, IRBs or other reviewing bodies may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements; • the cost of clinical trials may be greater than we anticipate; • we may be unable to recruit a sufficient number of clinical trial sites; • regulators, IRBs or other reviewing bodies may fail to approve or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical trials may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; 35 • approval policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval; and • our current or future products may have undesirable side effects or other unexpected characteristics.
The following could adversely affect the costs, timing or successful completion of any clinical trial: • we have been required and, prior to collecting clinical data in the future to support new PMA applications, may be required again to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials, and the FDA may reject our IDE application and notify us that we may not begin investigational trials; • regulators and other comparable foreign regulatory authorities may disagree as to the design or implementation of our clinical trials; • regulators and/or IRBs, or other reviewing bodies may not authorize us or our investigators to commence a clinical trial, or to conduct or continue a clinical trial at a prospective or specific trial site; • we may not reach agreement on acceptable terms with prospective clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different trial sites; • clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; • the number of subjects or patients required for clinical trials may be larger than we anticipate, enrollment in these clinical trials may be insufficient or slower than we anticipate, and the number of clinical trials being conducted at any given time may be high and result in fewer available patients for any given clinical trial, or patients may drop out of these clinical trials at a higher rate than we anticipate; • our third-party contractors, including those manufacturing or sterilizing our products, may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner or at all; • we might have to suspend or terminate clinical trials for various reasons, including a finding that the subjects are being exposed to unacceptable health risks; 37 • we may have to amend clinical trial protocols or conduct additional studies to reflect changes in regulatory requirements or guidance, which we may be required to submit to an IRB and/or regulatory authorities for re-examination; • regulators, IRBs or other reviewing bodies may require or recommend that we or our investigators suspend or terminate clinical research for various reasons, including safety signals or noncompliance with regulatory requirements; • the cost of clinical trials may be greater than we anticipate; • we may be unable to recruit a sufficient number of clinical trial sites; • regulators or other reviewing bodies may fail to accept as satisfactory, fail to approve, or subsequently find fault with our manufacturing processes or facilities of third-party manufacturers with which we enter into agreement for clinical and commercial supplies, the supply of devices or other materials necessary to conduct clinical trials may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; • approval policies or regulations of FDA or applicable foreign regulatory agencies may change in a manner rendering our clinical data insufficient for approval; and • our current or future products may have undesirable side effects or other unexpected characteristics.
Our failure to comply with applicable regulatory requirements could result in enforcement actions by the FDA or state agencies, which may include any of the following sanctions: • untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • recall, suspension or termination of distribution, administrative detention, injunction or seizure of organ-specific OCS Consoles or disposable sets; 43 • customer notifications or repair, replacement or refunds; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying our requests for premarket approval of new products or for modifications to existing products, and refusing or delaying our requests for PMAs for new intended uses of the OCS; • withdrawing or suspending PMA approvals that have already been granted, resulting in prohibitions on sales of our products; • FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and • criminal prosecution.
Our failure to comply with applicable regulatory requirements could result in enforcement actions by the FDA or state agencies, which may include any of the following sanctions: • untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; • recall, suspension or termination of distribution, administrative detention, injunction or seizure of organ-specific OCS Consoles or disposable sets; • customer notifications or repair, replacement or refunds; • operating restrictions or partial suspension or total shutdown of production; • refusing or delaying our requests for premarket approval of new products or for modifications to existing products, and refusing or delaying our requests for PMAs for new intended uses of the OCS; 49 • withdrawing or suspending PMA approvals that have already been granted, resulting in prohibitions on sales of our products; • FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; and • criminal prosecution.
In addition, regardless of the level of insurance coverage, damage 29 to our facilities or any disruption that impedes our ability to manufacture the OCS in a timely manner could materially and adversely affect our business, financial condition, operating results, cash flows and prospects. We rely on third-party vendors to sterilize our disposable sets prior to sale.
In addition, regardless of the level of insurance coverage, damage to our facilities or any disruption that impedes our ability to manufacture the OCS in a timely manner could materially and adversely affect our business, financial condition, operating results, cash flows and prospects. We rely on third-party vendors to sterilize our disposable sets prior to sale.
New and expanding threats to our information systems, including computer viruses, ransomware and phishing attacks and more sophisticated and targeted cyber-related attacks, as well as cybersecurity failures resulting from human error and technological errors, pose a risk to the security of our systems and the systems of our customers, business partners and suppliers, as well the confidentiality, availability and integrity of the data we process.
New and expanding threats to our information systems, including computer viruses, ransomware and phishing attacks, insider attacks, and more sophisticated and targeted cyber-related attacks, as well as cybersecurity failures resulting from human error and technological errors, pose a risk to the security of our systems and the systems of our customers, business partners and suppliers, as well the confidentiality, availability and integrity of the data we process.
We also have agreements with our employees, consultants and third parties that obligate them to assign inventions made 42 in the course of their work for us to us, however these agreements may not be self-executing, not all employees or consultants may enter into such agreements, or employees or consultants may breach or violate the terms of these agreements, and we may not have adequate remedies for any such breach or violation.
We also have agreements with our employees, consultants and third parties that obligate them to assign inventions made in the course of their work for us to us, however these agreements may not be self-executing, not all employees or consultants may enter into such agreements, or employees or consultants may breach or violate the terms of these agreements, and we may not have adequate remedies for any such breach or violation.
We train our commercial team to not promote the OCS for uses outside of the approved 49 indications for use/intended purpose, known as “off-label uses.” We cannot, however, prevent a surgeon from using the OCS off-label, when in the surgeon’s independent professional medical judgment he or she deems it appropriate.
We train our commercial team to not promote the OCS for uses outside of the approved indications for use/intended purpose, known as “off-label uses.” We cannot, however, prevent a surgeon from using the OCS off-label, when in the surgeon’s independent professional medical judgment he or she deems it appropriate.
Risks Related to Our Operations and Business Failure to maintain an ethical and inclusive corporate culture, or damage to our reputation, could have a material adverse effect on our business. We strive to create a culture in which our employees act with integrity, treat each other with respect and consider themselves empowered to report suspected misconduct.
Risks Related to Our Business Failure to maintain an ethical and inclusive corporate culture, or damage to our reputation, could have a material adverse effect on our business. We strive to create a culture in which our employees act with integrity, treat each other with respect and consider themselves empowered to report suspected misconduct.
We might not be able to continue to place the devices on the market in the European Union and/or United Kingdom for any current use of the OCS if we are not able to maintain certifications of our products for their current use under the MDR and/or obtain certification under the UK MD0R 2002 when required.
We might not be able to continue to place the devices on the market in the European Union and/or United Kingdom for any current use of the OCS if we are not able to maintain certifications of our products for their current use under the MDR and/or obtain certification under the UK MDR 2002 when required.
Moreover, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model or our stock performance, or if our operating results fail to meet the expectations of the investor community, one or more of 55 the analysts who cover our company may change their recommendations regarding our company, and our stock price could decline.
Moreover, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model or our stock performance, or if our operating results fail to meet the expectations of the investor community, one or more of the analysts who cover our company may change their recommendations regarding our company, and our stock price could decline.
While we have manufacturing and supply agreements with certain of our suppliers, for most of our suppliers, we place purchase orders on an 32 as-needed basis. Our suppliers could discontinue the manufacturing or supply of these components at any time. We do not carry a significant inventory of some of these components.
While we have manufacturing and supply agreements with certain of our suppliers, for most of our suppliers, we place purchase orders on an as-needed basis. Our suppliers could discontinue the manufacturing or supply of these components at any time. We do not carry a significant inventory of some of these components.
We may choose or, if we are found to infringe a third party’s patent rights and we are unsuccessful in demonstrating that such patents are invalid or unenforceable, we could be required to 39 obtain a license from such third party to continue developing, manufacturing, and marketing any of our products.
We may choose or, if we are found to infringe a third party’s patent rights and we are unsuccessful in demonstrating that such patents are invalid or unenforceable, we could be required to obtain a license from such third party to continue developing, manufacturing, and marketing any of our products.
Companies are required to maintain records of recalls, even if they are not reportable to the FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, we could be required to report those actions as 44 recalls.
Companies are required to maintain records of recalls, even if they are not reportable to the FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, we could be required to report those actions as recalls.
These reimbursement arrangements are subject to complex rules and regulations at the national and regional levels that can vary between member states of the European Union 46 and may require that we perform additional clinical studies to demonstrate that the OCS is superior to existing preservation methods.
These reimbursement arrangements are subject to complex rules and regulations at the national and regional levels that can vary between member states of the European Union and may require that we perform additional clinical studies to demonstrate that the OCS is superior to existing preservation methods.
The success of any new product offering or product enhancements to our OCS platform will depend on several factors, including our ability to: • properly identify and anticipate surgeon and patient needs; • develop and introduce new products and product modifications in a timely manner; • avoid infringing upon, misappropriating or otherwise violating the intellectual property rights of third parties; • demonstrate the safety and efficacy of new products and product modifications; • obtain necessary regulatory clearances or approvals; • comply with regulations regarding the marketing of new products or product modifications; 31 • provide adequate training to potential users of our products; • receive adequate coverage and reimbursement for procedures performed with our products; and • develop an effective commercialization effort.
The success of any new product offering or product enhancements to our OCS platform will depend on several factors, including our ability to: • properly identify and anticipate surgeon and patient needs; • develop and introduce new products and product modifications in a timely manner; • avoid infringing upon, misappropriating or otherwise violating the intellectual property rights of third parties; • demonstrate the safety and efficacy of new products and product modifications; • obtain necessary regulatory clearances or approvals; • comply with regulations regarding the marketing of new products or product modifications; 33 • provide adequate training to potential users of our products; • receive adequate coverage and reimbursement for procedures performed with our products; and • develop an effective commercialization effort.
We also may elect to raise additional funds sooner because we believe market conditions are attractive or as a risk mitigation measure. Additional capital might not be available when we need it, and our actual cash requirements might be greater than anticipated.
We also may elect to raise additional funds because we believe market conditions are attractive or as a risk mitigation measure. Additional capital might not be available when we need it, and our actual cash requirements might be greater than anticipated.
If we cannot continue to attract and retain, on acceptable terms, the qualified personnel necessary for the continued development of our business, we might not be able to sustain our operations or become profitable. The failure to manage our growth effectively could harm our business.
If we cannot continue to attract and retain, on acceptable terms, the qualified personnel necessary for the continued development of our business, we might not be able to sustain our operations or become profitable. 44 The failure to manage our growth effectively could harm our business.
In order to recruit and retain such highly qualified employees, we also may need to increase the level, or change the form or composition, of the compensation that we pay to them, which would increase our expenses.
In order to recruit, train and retain such highly qualified employees, we also may need to increase the level, or change the form or composition, of the compensation that we pay to them, which would increase our expenses.
Any decline in the amount that payors reimburse our customers for OCS Products could make it difficult for customers to continue using, or to adopt, our products and could create additional pricing pressure for us.
Any decline in the amount that payors reimburse our customers for OCS products or services could make it difficult for customers to continue using, or to adopt, our products and could create additional pricing pressure for us.
In addition, the FDA may not approve our products for any future indications that are desirable for commercialization or could require clinical trials to support any modification to the device or 47 any modified indications or claims.
In addition, the FDA may not approve our products for any future indications that are desirable for commercialization or could require clinical trials to support any modification to the device or any modified indications or claims.
If we fail to comply with applicable foreign regulations, we could face substantial penalties and our business, financial condition, operating results, cash flows and prospects could be adversely affected. 48 We could face product liability suits or regulatory delays due to defects in the OCS, which could be expensive and time-consuming and result in substantial damages payable by us and increases in our insurance rates.
If we fail to comply with applicable foreign regulations, we could face substantial penalties and our business, financial condition, operating results, cash flows and prospects could be adversely affected. 54 We could face product liability suits or regulatory delays due to defects in the OCS, which could be expensive and time-consuming and result in substantial damages payable by us and increases in our insurance rates.
This is particularly important in the context of bribery offences, 51 which in the UK and in the United States include the offence of bribing a foreign public official.
This is particularly important in the context of bribery offences, which in the UK and in the United States include the offence of bribing a foreign public official.
Our failure to compete effectively will harm our business and operating results. The clinical trial process required to obtain future regulatory approvals is lengthy and expensive, with uncertain outcomes. Clinical trials are necessary to support PMA applications and may be necessary to support future PMA supplements for modified versions of our marketed device products.
Our failure to compete effectively will harm our business and operating results. 36 The clinical trial process that may be required to obtain future regulatory approvals is lengthy and expensive, with uncertain outcomes. Clinical trials are necessary to support PMA applications and may be necessary to support future PMA supplements for modified versions of our marketed device products.
In addition, our expected growth will require us to hire a significant number of qualified personnel, including clinical development, regulatory, sales, marketing, engineering, scientific, clinical support and administrative personnel. There is intense competition from other companies and research and academic institutions for qualified personnel in the areas of our activities.
In addition, our expected growth will require us to hire a significant number of qualified personnel, including clinical development, regulatory, sales, marketing, engineering, scientific, clinical, logistics and aviation support and administrative personnel. There is intense competition from other companies and research and academic institutions for qualified personnel in the areas of our activities.
If we raise additional funds through the issuance of equity or convertible securities, the issuance of these securities could dilute your percentage ownership in our company. Furthermore, newly issued securities may have rights, preferences or privileges senior to those of common shareholders.
If we raise additional funds through the issuance of equity or convertible securities, the issuance of these securities could dilute shareholders' percentage ownership in our company. Furthermore, newly issued securities may have rights, preferences or privileges senior to those of common shareholders.
Our long-term growth depends on our ability to improve the OCS platform, including by expanding into new indications and developing the next generation of our products. Our business plan contemplates that we will continue to improve the OCS platform, including by expanding into additional organs and developing the next generation of our products.
Our long-term growth depends on our ability to improve the OCS platform, including by developing the next generation of our products or expanding into new indications. Our business plan contemplates that we will continue to improve the OCS platform, including by developing the next generation of our products or expanding into additional organs.
An important part of our commercialization efforts is to educate transplant center program directors and other surgeons on the relative merits of the OCS. Our success depends, in large part, on effectively marketing and educating program directors and other surgeons about the benefits of the OCS and our National OCS Program.
An important part of our commercialization efforts is to educate transplant center program directors and other surgeons on the relative merits of the OCS. Our success depends, in large part, on effectively marketing and educating program directors and other surgeons about the benefits of the OCS and our NOP.
However, this customer or any of our other customers may not continue to utilize our products at current levels, pricing, or at all, and our revenue could fluctuate significantly due to changes in economic conditions, the use of other methods for organ preservation, such as cold storage, or the loss of, reduction of business with, or less favorable terms with any of our largest customers.
However, our customers may not continue to utilize our products or services at current levels, pricing, or at all, and our revenue could fluctuate significantly due to changes in economic conditions, the use of other methods for organ preservation, such as cold storage, or the loss of, reduction of business with, or less favorable terms with any of our largest customers.
Acceptance of the OCS also depends on educating program directors, other surgeons and private and public payors as to the distinctive characteristics, perceived medical and economic benefits, safety, ease of use and cost-effectiveness of the OCS and our National OCS Program.
Acceptance of the OCS also depends on educating program directors, other surgeons and private and public payors as to the distinctive characteristics, perceived medical and economic benefits, safety, ease of use and cost-effectiveness of the OCS and our NOP.
A cybersecurity incident could also impact our brand, harm our reputation and adversely impact our relationship with our customers, employees and stockholders. Economic, political and other risks associated with foreign operations could adversely affect our international sales and our results of operations.
Any cybersecurity incident could also impact our brand, harm our reputation and adversely impact our relationship with our customers, employees and stockholders. Economic, political and other risks associated with foreign operations could adversely affect our international sales and our results of operations.
If we fail to maintain the CE Mark in the European Union, Northern Ireland and the UKCA mark (as applicable) in Great Britain, we will not be able to commercially sell and market the OCS in the EU.
If we fail to maintain the CE Mark in the European Union, Northern Ireland and the UKCA mark (as applicable) in Great Britain, we will not be able to commercially sell and market the OCS in the EU or UK.
Conversely, if we underestimate customer demand for our products or our own requirements for components, subassemblies and materials, our manufacturing partners and suppliers may not be able to deliver components, sub-assemblies and materials to meet our requirements and our manufacturing may be affected by the impact of COVID-19, general impacts of inflation and labor shortages on our suppliers, which could result in inadequate inventory levels or interruptions, delays or cancellations of deliveries to our customers, any of which would damage our reputation, customer relationships and business.
Conversely, if we underestimate customer demand for our products or our own requirements for components, subassemblies and materials, our manufacturing partners and suppliers may not be able to deliver components, sub-assemblies and materials to meet our requirements and our manufacturing may be affected by the impact of inflation and labor shortages on our suppliers, which could result in inadequate inventory levels or interruptions, delays or cancellations of deliveries to our customers, any of which would damage our reputation, customer relationships and business.
Changes in accounting pronouncements or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported or expected financial performance. 57 Item 1B. Unresolved Staff Comments. None.
Changes in accounting pronouncements or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported or expected financial performance. 63 Item 1B. Unresolved Staff Comments. None.
If transplant centers and hospitals cannot obtain adequate reimbursement or funding from governments or third-party payors for purchases of the OCS and additional disposable sets and for costs associated with procedures that use the OCS and the National OCS Program, our prospects for generating revenue and achieving profitability will suffer materially.
If transplant centers and hospitals cannot obtain adequate reimbursement or funding from governments or third-party payors for purchases of the OCS and additional disposable sets and for costs associated with procedures that use the OCS and the NOP, our prospects for generating revenue and achieving profitability will suffer materially.
Certain modifications to a PMA-approved device require approval of a new PMA or a PMA supplement, while other modifications can be reported in an annual report or through a 30-day Notice. The FDA may not agree with our decisions regarding whether a new PMA or PMA supplement is necessary.
Certain modifications to a PMA-approved device or to its manufacturing processes require approval of a new PMA or a PMA supplement, while other modifications can be reported in an annual report or through a 30-day Notice. The FDA may not agree with our decisions regarding whether a new PMA or PMA supplement is necessary.
We may not be able to recruit and retain surgeons and other qualified personnel, including due to demand for their capabilities and competitive compensation offered by other employers.
We may not be able to recruit, train and retain surgeons, pilots and other qualified personnel, including due to demand for their capabilities and competitive compensation offered by other employers.
If program directors, other surgeons and private and public payors do not find our body of published clinical evidence and data compelling or wish to wait for additional studies, they may choose not to use or provide coverage and reimbursement for our products and National OCS Program Services.
If program directors, other surgeons and private and public payors do not find our body of published clinical evidence and data compelling or wish to wait for additional studies, they may choose not to use or provide coverage and reimbursement for our products and NOP Services.
Our financial results may fluctuate from quarter to quarter due to a number of factors, including the availability of donor organs for transplantation, which is unpredictable and could impact the volume of transplant procedures performed at transplant centers using the OCS and demand for our National OCS Program.
Our financial results may fluctuate from quarter to quarter due to a number of factors, including the availability of donor organs for transplantation, which is unpredictable and could impact the volume of transplant procedures performed at transplant centers using the OCS and demand for our NOP.
We have developed a National OCS Program, an innovative turnkey solution to provide outsourced organ retrieval and OCS organ management, to provide transplant programs with a more efficient process to procure donor organs with the OCS. We believe the National OCS Program will continue to expand access and use of the OCS.
We have developed the NOP, an innovative turnkey solution to provide outsourced organ retrieval and OCS organ management, to provide transplant programs with a more efficient process to procure donor organs with the OCS. We believe the NOP will continue to expand access and use of the OCS.
In addition, our international customers and some U.S. customers use a direct acquisition model pursuant to which transplant centers train their own teams for retrieval and organ management using the OCS rather than utilizing our National OCS Program.
In addition, our international customers and some U.S. customers use a direct acquisition model pursuant to which transplant centers train their own teams for retrieval and organ management using the OCS rather than utilizing our NOP.
Our NOP depends on the use of a third-party network of private aircraft to transport medical personnel to retrieve donor organs and deliver donor organs to patients for transplantation. Reliance on private aircraft is subject to various risks, including those associated with change in fuel prices, work stoppages and weather-related operating hazards.
In addition to our aviation transportation services, our NOP depends on the use of a third-party network of private aircraft to transport medical personnel to retrieve donor organs and deliver donor organs to patients for transplantation. Reliance on private aircraft is subject to various risks, including those associated with change in fuel prices, work stoppages and weather-related operating hazards.
In addition, as the National OCS Program expands access to the OCS, transplant surgeons may increasingly rely on clinical data regarding the organ provided to them by our clinical specialists and surgeons. We are responsible for the clinical data regarding the organ that is provided to transplant surgeons who participate in the National OCS Program.
In addition, as the NOP expands access to the OCS, transplant surgeons may increasingly rely on clinical data regarding the organ provided to them by our clinical specialists and surgeons. We are responsible for the clinical data regarding the organ that is provided to transplant surgeons who participate in the NOP.
Healthcare reform initiatives could harm our business, financial condition and results of operations. In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. There have been and will likely continue to be ongoing healthcare reform efforts.
Healthcare reform initiatives could harm our business, financial condition and results of operations. In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs and improve access to transplantation. There have been and will likely continue to be ongoing healthcare reform efforts.
These flight costs represent a significant part of the cost structure for our NOP, and although the cost of flights is paid by our customers, a substantial increase in the cost of flight services, due to prolonged increases in fuel prices, lack of availability of aircraft or otherwise, may require us to incur additional costs to identify and obtain alternative flights or rebalance our inventory by shipping products to locations for which flight costs are less expensive or from which flights are more readily available, and customers may be unwilling or unable to incur higher costs of flights and therefore forgo use of our services and products for the retrieval of donor organs despite availability.
Although the cost of flights is paid by our customers, a substantial increase in the cost of flight services, due to prolonged increases in fuel prices, lack of availability of aircraft or otherwise, may require us to incur additional costs to identify and obtain alternative flights or rebalance our inventory by shipping products to locations for which flight costs are less expensive or from which flights are more readily available, and customers may be unwilling or unable to incur higher costs of flights and therefore forgo use of our services and products for the retrieval of donor organs despite availability.
Our prospects for generating revenue and achieving profitability depend heavily upon the availability of adequate reimbursement or funding in both the United States and other markets for purchases of the OCS and for organ transplant procedures that use the OCS and the National OCS Program.
Our prospects for generating revenue and achieving profitability depend heavily upon the availability of adequate reimbursement or funding in both the United States and other markets for purchases of the OCS and for organ transplant procedures that use the OCS and the NOP.
While we attempt to mitigate these risks by employing a number of measures, including employee training and maintenance of protective systems, such measures may not prove adequate to prevent cyberattacks, and we remain potentially vulnerable to additional known or unknown threats. The impact from such threats could be material.
While we attempt to mitigate these risks by employing a number of measures, including employee training and maintenance of protective systems, such measures did not prevent the infiltration described above and may not prove adequate to prevent cyberattacks, and we remain potentially vulnerable to additional known or unknown threats. The impact from such threats could be material.
Item 1A. Risk Factors. An investment in our common stock involves risks. You should consider carefully the following risks and all of the other information contained in this Annual Report on Form 10-K before investing in our common stock. The risks described below are those that we believe are the material risks that we face.
Item 1A. Risk Factors. An investment in our common stock involves risks. The following risks and all of the other information contained in this Annual Report on Form 10-K should be considered carefully before investing in our common stock. The risks described below are those that we believe are the material risks that we face.
We cannot assure you, however, that our policies and procedures are or will be sufficient or that directors, officers, employees, representatives, consultants and agents have not engaged and will not engage in conduct for which we may be held responsible, nor can we assure you that our business partners have not engaged and will not engage in conduct that could materially affect their ability to perform their contractual obligations to us or even result in our being held liable for such conduct.
We cannot be certain, however, that our policies and procedures are or will be sufficient or that directors, officers, employees, representatives, consultants and agents have not engaged and will not engage in conduct for which we may be held responsible, nor can we provide assurance that our business partners have not engaged and will not engage in conduct that could materially affect their ability to perform their contractual obligations to us or even result in our being held liable for such conduct.
If any of these relationships are interrupted or terminated, or if one or more partners are unable or unwilling to fulfill their obligations for any reason, National OCS Program services to our customers may be interrupted. We also may not be able to identify or negotiate with additional partners on terms that are commercially reasonable to us.
If any of these relationships are interrupted or terminated, or if one or more partners are unable or unwilling to fulfill their obligations for any reason, NOP services to our customers may be interrupted. We also may not be able to identify or negotiate with additional partners on terms that are commercially reasonable to us.
If any of the following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, the trading price of our common stock could decline and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face.
If any of the following risks actually occurs, our business, prospects, operating results and financial condition could suffer materially, the trading price of our common stock could decline and investors could lose all or part of their investment. The risks and uncertainties described below are not the only ones we face.
The loss of any of these key members of our management team and, in particular, Dr. Hassanein, could impede our achievement of our research, development and commercialization objectives. We maintain $1.0 million of “key person” insurance policy on the life of Dr. Hassanein, but we do not maintain such insurance on any of our other employees.
The loss of any of these key members of our management team and, in particular, Dr. Hassanein, could impede our achievement of our research, development and commercialization objectives. We maintain a “key person” insurance policy on the life of Dr. Hassanein, but we do not maintain such insurance on any of our other employees.
To be placed on the market in Great Britain after this date, medical devices must have undergone a conformity assessment in accordance with UK legislation and have the UKCA mark affixed.
To be placed on the market in Great Britain after this date, medical devices must have undergone a conformity assessment in accordance with the UK MDR 2002 and have the UKCA mark affixed.
Hassanein, our founder and President and Chief Executive Officer, and other members of our management team are important to the success of our operations and to our efforts to develop and commercialize the OCS. All of these key employees, including Dr. Hassanein, are at-will employees and can terminate their employment with us at any time.
Hassanein, our founder and President and Chief Executive Officer, and other members of our management team are important to the success of our operations. All of these key employees, including Dr. Hassanein, are at-will employees and can terminate their employment with us at any time.
Our outstanding indebtedness and any future indebtedness, combined with our other financial obligations, could increase our vulnerability to adverse changes in general economic, industry and market conditions, limit our flexibility in planning for, or reacting to, changes in our business and the industry and impose a competitive disadvantage compared to our competitors that have less debt or better debt servicing options.
Our outstanding indebtedness, combined with our other financial obligations, could increase our vulnerability to adverse changes in general economic, industry and market conditions, limit our flexibility in planning for, or reacting to, changes in our business and the industry and impose a competitive disadvantage compared to our competitors that have less debt or better debt servicing options. See “Item 7.
If we are forced to lower the price we charge for our 33 products, our gross margins will decrease, which will adversely affect our ability to invest in and grow our business.
If we are forced to lower the price we charge for our products or services, our gross margins will decrease, which will adversely affect our ability to invest in and grow our business.
Although we have received PMAs from the FDA for each of our three OCS products, we might not successfully commercialize the OCS for these approved indications or obtain approvals for additional indications or in additional jurisdictions on our planned timing or at all.
Although we have received PMAs from the FDA for each of our three OCS products, we might not be able to continue to successfully commercialize the OCS for these approved indications or obtain approvals for additional indications or in additional jurisdictions on our planned timing or at all.
During the years ended December 31, 2022, 2021 and 2020, 10%, 28% and 25%, respectively, of our revenue was generated from customers located outside of the United States. We anticipate that international sales will continue to represent a meaningful portion of our total sales. In addition, some of our employees and suppliers are located outside of the United States.
During the years ended December 31, 2023, 2022 and 2021, 6%, 10% and 28%, respectively, of our revenue was generated from customers located outside of the United States. We anticipate that international sales will continue to represent a portion of our total sales. In addition, some of our employees and suppliers are located outside of the United States.
The failure of either our or our service providers’ information technology could disrupt our entire operation or result in decreased sales, increased overhead costs and product shortages, all of which could materially and adversely affect our business, financial condition, operating results, cash flows and prospects.
The failure of either our or our service providers’ information technology could disrupt our entire operation or result in decreased sales, increased overhead costs and product shortages, all of which could materially and adversely affect our business, financial condition, operating results, reputation, regulatory compliance, litigation exposure, cash flows and prospects.
Post-Brexit the MDR applies in Northern Ireland in accordance with the Northern Ireland Protocol but does not apply in Great Britain (England, Wales and Scotland). The UK Medicines and Healthcare products Regulatory Agency (MHRA) has provided a transitional period under which the UK will recognize EU CE marks until June 30, 2024.
Post-Brexit the MDR applies in Northern Ireland in accordance with the Northern Ireland Protocol but does not apply in Great Britain (England, Wales and Scotland). The UK Medicines and Healthcare products Regulatory Agency (MHRA) has provided a transitional period under which the UK will recognize EU CE marks until June 30, 2030 (subject to certain conditions).
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: • any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect the OCS; • any of our pending patent applications will issue as patents; • we will be able to successfully commercialize our products on a substantial scale, if approved, before any relevant patents we may have expire; • we were the first to make the inventions covered by each of our patents and pending patent applications; • we were the first to file patent applications for these inventions; • others will not develop similar or alternative technologies that do not infringe our patents; any of our patents will be found to ultimately be valid and enforceable; • any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties; 41 • we will develop additional proprietary technologies or products that are separately patentable; or • our commercial activities or products will not infringe upon the patents of others.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: • any of our patents, or any of our pending patent applications, if issued, will include claims having a scope sufficient to protect the OCS; • any of our pending patent applications will issue as patents; • we will be able to successfully commercialize our products on a substantial scale, if approved, before any relevant patents we may have expire; • we were the first to make the inventions covered by each of our patents and pending patent applications; • we were the first to file patent applications for these inventions; • others will not develop similar or alternative technologies that do not infringe our patents; any of our patents will be found to ultimately be valid and enforceable; • any patents issued to us will provide a basis for an exclusive market for our commercially viable products, will provide us with any competitive advantages or will not be challenged by third parties; • we will develop additional proprietary technologies or products that are separately patentable; or • our commercial activities or products will not infringe upon the patents of others. 47 If we are unable to obtain patent term extension under the Hatch-Waxman Act, our business may be materially harmed.
Our information technology systems are vulnerable to damage or interruption from earthquakes, fires, floods and other natural disasters; terrorist attacks; cyber-based attacks; attacks by computer viruses or hackers; power losses, computer system or data network failures; security breaches and data corruption.
However, our information technology systems are vulnerable to damage or interruption, including from earthquakes, fires, floods and other natural disasters; terrorist attacks; cyber-based attacks; attacks by computer viruses or hackers; insider sabotage; ransomware; power losses, computer system or data network failures; security breaches and data corruption.
Manufacturers of medical devices have a history of price competition, and we can give no assurance that we will be able to achieve satisfactory prices for our products or maintain prices at the levels we have historically achieved.
We may not be able to achieve or maintain satisfactory pricing and margins for our products or services. Manufacturers of medical devices have a history of price competition, and we can give no assurance that we will be able to achieve satisfactory prices for our products or maintain prices at the levels we have historically achieved.
The FDA enforces the QSR through periodic inspections and unannounced “for cause” inspections. We are subject to periodic FDA inspections to determine compliance with QSR and pursuant to the Bioresearch Monitoring Program, which have in the past and may in the future result in the FDA issuing Form 483s, including during the conduct of clinical trials.
We are subject to periodic FDA inspections to determine compliance with QSR and pursuant to the Bioresearch Monitoring Program, which have in the past and may in the future result in the FDA issuing Form 483s, including during the conduct of clinical trials.
In addition to our own surgical and clinical personnel, we utilize a network with a limited number of partners for organ retrieval, organ preservation and transportation services offered through our National OCS Program.
In addition to our own surgical and clinical personnel, we utilize a network with a limited number of partners for organ retrieval, organ preservation and transportation services offered through our NOP.
The timing and amount of our operating and capital expenditures will depend on many factors, including: • the amount of net product revenue generated by sales of our OCS Consoles, OCS Perfusion Sets and OCS Solutions and other products that may be approved in the United States and select non-U.S. markets, revenue generated by our services, and expansion of the NOP; • the costs and expenses of expanding our U.S. and non-U.S. commercial infrastructure and our manufacturing operations; • the extent to which our OCS products are adopted by the transplant community; • the ability of our customers to obtain adequate reimbursement from third-party payors for procedures performed using the OCS products; • the costs incurred in our efforts to expand our National OCS Program; • the costs and timing of research and development of the next generation of OCS products; • the degree of success we experience in commercializing our OCS products for additional indications; • the costs, timing and outcomes of any future clinical studies and regulatory reviews, including to seek and obtain approvals for the next generation of OCS products or for new indications for our OCS products; • the emergence of competing or complementary technologies; • the number and types of future products we develop and commercialize; 26 • the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; and • the level of our selling, general and administrative expenses.
The timing and amount of our operating and capital expenditures will depend on many factors, including: • the amount of product revenue generated by sales of our OCS Consoles, OCS Perfusion Sets and OCS Solutions and other products that may be approved in the United States and select non-U.S. markets, revenue generated by our services, and growth of the NOP; • the costs and expenses of expanding our U.S. and non-U.S. commercial infrastructure and our manufacturing operations; • the extent to which our OCS products are adopted by the transplant community; • the ability of our customers to obtain adequate reimbursement from third-party payors for procedures performed using the OCS products; • the costs incurred in our efforts to operate and grow our NOP, including the costs and timing of growing our logistics capabilities, inclusive of acquiring additional aircraft for our aviation transportation services; • the costs and timing of research and development of the next generation of OCS products; • the degree of success we experience in commercializing our OCS products for additional indications; • the costs, timing and outcomes of any future clinical studies and regulatory reviews, including to seek and obtain approvals for the next generation of OCS products or for new indications for our OCS products; • the emergence of competing or complementary technologies; • the number and types of future products we develop and commercialize; 27 • the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; and • the level of our selling, general and administrative expenses.
These policies, which include a code of business conduct and ethics, an insider trading policy, a Regulation FD policy, a sexual harassment policy, a regulated fraternization policy, and a whistleblower policy, are a component of our effort to minimize employee misconduct as well as activities that frequently result in allegations of misconduct, but our employees may fail to abide by these policies.
These policies, which include a code of business conduct and ethics, an insider trading policy, a Regulation FD policy, a sexual harassment policy, a regulated fraternization policy, and a whistleblower policy, are a component of our effort to minimize employee misconduct as well as activities that frequently result in allegations of misconduct.
Despite our efforts to safeguard this facility, including acquiring insurance on commercially reasonable terms, adopting environmental health and safety protocols and utilizing off-site storage of computer data, a number of factors could damage or destroy our manufacturing equipment or our inventory of component supplies or finished goods, cause substantial delays in our operations, result in the loss of key information, and cause us to incur additional expenses, including: • operating restrictions, partial suspension or total shutdown of production imposed by regulatory authorities; • equipment malfunctions or failures; • technology malfunctions; • work stoppages; • damage to or destruction of the facility due to natural disasters or other events; or • regional or local power shortages.
Despite our efforts to safeguard this facility, including acquiring insurance on commercially reasonable terms, adopting environmental health and safety protocols and utilizing off-site storage of computer data, a number of factors could damage or destroy our manufacturing equipment or our inventory of component supplies or finished goods, cause substantial delays in our operations, result in the loss of key information, and cause us to incur additional expenses, including: • operating restrictions, partial suspension or total shutdown of production imposed by regulatory authorities; • equipment malfunctions or failures; • technology malfunctions; • work stoppages; • damage to or destruction of the facility due to natural disasters or other events; or • regional or local power shortages. 31 Our insurance may not cover our losses in any particular case, or insurance may not be available on commercially reasonable terms to cover certain of these catastrophic events.
We have invested all of our efforts and financial resources in the development of the OCS, educating surgeons, transplant centers, Organ Procurement Organizations and private and public payors of the benefits of the OCS, providing services related to the OCS and launching our National OCS Program.
We have invested substantial efforts and financial resources in the development of the OCS, educating surgeons, transplant centers, Organ Procurement Organizations and private and public payors of the benefits of the OCS, providing services related to the OCS and launching our NOP.
Our success and ability to compete depend in part upon our ability to establish and maintain intellectual property rights covering the OCS in the United States and other countries. We own or have an exclusive license under several patents and patent applications in the United States and corresponding patents and patent applications in a number of foreign jurisdictions.
Our success and ability to compete depend in part upon our ability to establish and maintain intellectual property rights covering the OCS in the United States and other countries. We own several patents and patent applications in the United States and corresponding patents and patent applications in a number of foreign jurisdictions.
We depend heavily on the success of the OCS and it achieving market acceptance. If we are unable to successfully commercialize the OCS, our business may fail.
We depend heavily on the success of the OCS and it gaining additional market acceptance. If we are unable to continue to successfully commercialize the OCS, our business may fail.
However, we may not be successful in the continued development of our National OCS Program, which will depend on recruiting and retaining qualified surgeons and establishing and maintaining effective coordination with transplant centers and regional Organ Procurement Organizations 28 to locate donor organs and recipients.
However, we may not be successful in the continued development of our NOP, which will depend on recruiting, training and retaining qualified surgeons and pilots and establishing and maintaining effective coordination with transplant centers and regional Organ Procurement Organizations to locate donor organs and recipients.
We generated revenue of $93.5 million, $30.3 million and $25.6 million for the years ended December 31, 2022, 2021 and 2020, respectively, and incurred net losses of $36.2 million, $44.2 million and $28.7 million for these same years. As of December 31, 2022, we had an accumulated deficit of $478.7 million.
We generated revenue of $241.6 million, $93.5 million and $30.3 million for the years ended December 31, 2023, 2022 and 2021, respectively, and incurred net losses of $25.0 million, $36.2 million and $44.2 million for these same years. As of December 31, 2023, we had an accumulated deficit of $503.7 million.
As of December 31, 2022, we had state net operating loss carryforwards of $321.2 million, which may be available to offset future taxable income and expire at various dates beginning in 2030.
As of December 31, 2023, we had state net operating loss carryforwards of $328.8 million, which may be available to offset future taxable income and expire at various dates beginning in 2030.
Adoption of our products in the European Union may be hindered if they impede our customer’s compliance with the requirements of Directive 2010/53/EU (formerly Directive 2010/45/EU), and the Quality and Safety of Organs Intended for Transplantation Regulations 2012 (Statutory Instrument (SI) 2012 No. 1501) (the Regulations) in the United Kingdom which imposes certain standards on procurement, preservation and transport of organs intended for transplantation.
Alternatively, we may be required to enter into risk sharing arrangements with payers. 52 Adoption of our products in the European Union may be hindered if they impede our customer’s compliance with the requirements of Directive 2010/53/EU (formerly Directive 2010/45/EU), and the Quality and Safety of Organs Intended for Transplantation Regulations 2012 (Statutory Instrument (SI) 2012 No. 1501) (the Regulations) in the United Kingdom which imposes certain standards on procurement, preservation and transport of organs intended for transplantation.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe leases for these facilities expire on December 31, 2027 with an option to extend the term beyond the expiration date for one additional period of five years. We believe that our current facilities are adequate to meet our current needs, although we may seek to negotiate new leases or evaluate additional or alternate space for our operations.
Biggest changeWe believe that our current facilities are adequate to meet our current needs, although we may seek to negotiate new leases or evaluate additional or alternate space for our operations. We believe appropriate alternative space would be readily available on commercially reasonable terms.
Item 2. Properties. Our corporate headquarters and manufacturing and clinical training facilities are located in Andover, Massachusetts, where we lease 105,894 square feet of space, including a 10,500 square foot laboratory and training facility and a 7,900 square foot class 10,000 re-configurable cleanroom facility.
Item 2. Properties. Our corporate headquarters and manufacturing and clinical training facilities are located in Andover, Massachusetts, where we lease 135,199 square feet of space, including a 10,500 square foot laboratory and training facility and a 7,900 square foot class 10,000 cleanroom facility.
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We believe appropriate alternative space would be readily available on commercially reasonable terms.
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The leases for these facilities expire on December 31, 2027 with an option to extend the term beyond the expiration date for one additional period of five years. We also lease office space at various locations in the United States for our NOP and hangar space for our aircraft, all under short-term leases.
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We are constructing a commercial aircraft hangar at Bozeman Yellowstone International Airport in Bozeman, Montana, which we will use for our flight school aircraft and office space for personnel located in Bozeman.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. We are not currently subject to any material legal proceedings. From time to time, we may be involved in legal proceedings or investigations, which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. Item 4. Mine Safety Disclosures. Not applicable.
Biggest changeItem 3. Legal Proceedings. We are not currently subject to any material legal proceedings. From time to time, we may be involved in legal proceedings or investigations, which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. Item 4. Mine Safety Disclosures.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(1) This performance graph shall not be deemed to be "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed incorporated by reference into any filings of TransMedics Group, Inc. under the Securities Act of 1933, as amended.
Biggest changeCOMPARISON OF 56 MONTH CUMULATIVE TOTAL RETURN Among TransMedics Group, Inc., the NASDAQ Composite Index and the NASDAQ Healthcare Index (1) This performance graph shall not be deemed to be "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed incorporated by reference into any filings of TransMedics Group, Inc. under the Securities Act of 1933, as amended.
Recent Sales of Unregistered Equity Securities None. 59 Issuer Purchases of Equity Securities We did not purchase any of our registered equity securities during the period from September 30, 2022 to December 31, 2022. Dividends We have never declared or paid any dividends on our capital stock.
Recent Sales of Unregistered Equity Securities None. Issuer Purchases of Equity Securities We did not purchase any of our registered equity securities during the period from September 30, 2023 to December 31, 2023. Dividends We have never declared or paid any dividends on our capital stock.
In addition, our Credit Agreement contains covenants that restrict our ability to pay cash dividends. Item 6. Reserved 60
In addition, our CIBC Credit Agreement contains covenants that restrict our ability to pay cash dividends. Item 6. Reserved 66
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Certain Information Regarding the Trading of Our Common Stock Our common stock trades under the symbol “TMDX” on the Nasdaq Global Market and has been publicly traded since May 2, 2019.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Certain Information Regarding the Trading of Our Common Stock Our common stock trades under the symbol “TMDX” on the Nasdaq Global Market and has been publicly traded since May 2, 2019. Prior to this time, there was no public market for our common stock.
Prior to this time, there was no public market for our common stock. 58 Stock Performance Graph (1) The following graph shows a comparison from May 2, 2019 (the first date on which shares of our common stock were publicly traded) through December 31, 2022 of cumulative total return on assumed investments of $100.00 in cash in each of our common stock, the NASDAQ Composite Index and the NASDAQ Healthcare Index.
Stock Performance Graph (1) The following graph shows a comparison from May 2, 2019 (the first date on which shares of our common stock were publicly traded) through December 31, 2023 of cumulative total return on assumed investments of $100.00 in cash in each of our common stock, the NASDAQ Composite Index and the NASDAQ Healthcare Index.
Securities authorized for issuance under equity compensation plans Information about our equity compensation plans will be included in our definitive proxy statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.
These amounts do not include stockholders for whom shares are held in “nominee” or “street” name. 65 Securities authorized for issuance under equity compensation plans Information about our equity compensation plans will be included in our definitive proxy statement to be filed with the SEC with respect to our 2024 Annual Meeting of Stockholders and is incorporated herein by reference.
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Holders of Our Common Stock As of February 15, 2023, there were approximately 27 holders of record of shares of our common stock. These amounts do not include stockholders for whom shares are held in “nominee” or “street” name.
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Holders of Our Common Stock As of January 31, 2024, there were approximately 26 holders of record of shares of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of the Years Ended December 31, 2022, 2021 and 2020 The following table summarizes our results of operations for the years ended December 31, 2022, 2021 and 2020: Year Ended December 31, 2022 2021 2020 (in thousands) Revenue: Net product revenue $ 79,234 $ 29,657 $ 25,092 Service revenue 14,225 605 547 Total revenue 93,459 30,262 25,639 Cost of revenue: Cost of net product revenue 16,970 9,031 8,961 Cost of service revenue 11,217 72 43 Total cost of revenue 28,187 9,103 9,004 Gross profit 65,272 21,159 16,635 Operating expenses: Research, development and clinical trials 26,812 22,304 18,831 Selling, general and administrative 69,897 38,283 24,188 Total operating expenses 96,709 60,587 43,019 Loss from operations (31,437 ) (39,428 ) (26,384 ) Other income (expense): Interest expense (3,726 ) (3,874 ) (3,985 ) Other income (expense), net (1,002 ) (877 ) 1,653 Total other expense, net (4,728 ) (4,751 ) (2,332 ) Loss before income taxes (36,165 ) (44,179 ) (28,716 ) Provision for income taxes (66 ) (36 ) (32 ) Net loss $ (36,231 ) $ (44,215 ) $ (28,748 ) 65 Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, 2022 2021 Change Revenue by country by organ: United States Lung total revenue $ 7,967 $ 9,843 $ (1,876 ) Heart total revenue 29,902 10,103 19,799 Liver total revenue 46,169 1,915 44,254 Total United States revenue 84,038 21,861 62,177 All other countries Lung revenue 880 822 58 Heart revenue 8,451 7,579 872 Liver revenue 90 — 90 Total all other countries revenue 9,421 8,401 1,020 Total revenue $ 93,459 $ 30,262 $ 63,197 Revenue from customers in the United States was $84.0 million in the year ended December 31, 2022 and increased by $62.2 million compared to the year ended December 31, 2021, primarily due to higher sales volumes of our OCS Liver and OCS Heart disposable sets, partially offset by lower sales volumes of our OCS Lung disposable sets.
Biggest changeResults of Operations Comparison of the Years Ended December 31, 2023, 2022 and 2021 The following table summarizes our results of operations for the Years Ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (in thousands) Revenue: Net product revenue $ 176,069 $ 79,234 $ 29,657 Service revenue 65,554 14,225 605 Total revenue 241,623 93,459 30,262 Cost of revenue: Cost of net product revenue 41,015 16,970 9,031 Cost of service revenue 46,515 11,217 72 Total cost of revenue 87,530 28,187 9,103 Gross profit 154,093 65,272 21,159 Operating expenses: Research, development and clinical trials 36,055 26,812 22,304 Acquired in-process research and development expenses 27,212 — — Selling, general and administrative 119,553 69,897 38,283 Total operating expenses 182,820 96,709 60,587 Loss from operations (28,727 ) (31,437 ) (39,428 ) Other income (expense): Interest expense (10,791 ) (3,726 ) (3,874 ) Other income (expense), net 12,847 (1,002 ) (877 ) Total other income (expense), net 2,056 (4,728 ) (4,751 ) Loss before income taxes (26,671 ) (36,165 ) (44,179 ) (Provision) benefit for income taxes 1,643 (66 ) (36 ) Net loss $ (25,028 ) $ (36,231 ) $ (44,215 ) 71 Revenue OCS transplant-related revenue consists of: Year Ended December 31, 2023 2022 Change (in thousands) OCS Transplant Revenue by country by organ: United States Lung total revenue $ 10,548 $ 7,967 $ 2,581 Heart total revenue 59,080 29,902 29,178 Liver total revenue 151,719 46,169 105,550 Total United States OCS transplant revenue 221,347 84,038 137,309 All other countries Lung total revenue 1,272 880 392 Heart total revenue 14,012 8,451 5,561 Liver total revenue 104 90 14 Total all other countries OCS transplant revenue 15,388 9,421 5,967 Total OCS transplant revenue $ 236,735 $ 93,459 $ 143,276 We also had service revenue unrelated to OCS transplant of $4.9 million, including $3.0 million of charter flight and aircraft management and related services and $1.9 million of flight school training revenue, from Summit's legacy operations for the year ended December 31, 2023.
Investing Activities During the year ended December 31, 2022, net cash provided by investing activities of $54.5 million consisted of proceeds from sales and maturities of marketable securities of $76.9 million, partially offset by $10.5 million in purchases of marketable securities and $11.9 million in purchases of property and equipment.
During the year ended December 31, 2022, net cash provided by investing activities of $54.5 million consisted of proceeds from sales and maturities of marketable securities of $76.9 million, partially offset by $10.5 million in purchases of marketable securities and $11.9 million in purchases of property and equipment.
The financial covenants include, among other covenants, (x) a requirement to maintain a minimum liquidity 69 amount of the greater of either (i) the consolidated adjusted EBITDA loss (or gain) for the trailing four month period (only if EBITDA is negative) and (ii) $10.0 million, and (y) a requirement to maintain total net revenue of at least 75% of the level set forth in the total revenue plan presented to CIBC.
The financial covenants include, among other covenants, (x) a requirement to maintain a minimum liquidity amount of the greater of either (i) the consolidated adjusted EBITDA loss (or gain) for the trailing four month period (only if EBITDA is negative) and (ii) $10.0 million, and (y) a requirement to maintain total net revenue of at least 75% of the level set forth in the total revenue plan presented to CIBC.
Borrowings under the CIBC Credit Agreement bear interest at an annual rate equal to either, at our option, (i) the secured overnight financing rate for an interest period selected by us, subject to a minimum of 1.5%, plus 2.0% or (ii) 1.0% plus the higher of a) the prime rate, subject to a minimum of 4.0% or b) the Federal Funds Effective Rate, plus 0.5%.
Borrowings under the CIBC Credit Agreement bear interest at an annual rate equal to either, at our option, (i) the secured overnight financing rate for an interest period selected by us, subject to a minimum of 1.50%, plus 2.0% or (ii) 1.0% plus the higher of a) the prime rate, subject to a minimum of 4.0% or b) the Federal Funds Effective Rate, plus 0.5%.
Interest income consists of interest earned on our invested cash balances. Foreign currency transaction gains and losses result from intercompany transactions as 64 well as transactions with customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded.
Interest income consists of interest earned on our invested cash balances. Foreign currency transaction gains and losses result from intercompany transactions as well as transactions with customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded.
For each new transplant procedure, customers purchase an additional OCS disposable set for use on the customer’s existing organ-specific OCS Console. We also generate service revenue by providing outsourced organ retrieval and OCS organ management services under our NOP in the United States.
For each new transplant procedure, customers purchase an additional OCS disposable set for use on the customer’s existing organ-specific OCS Console. We also generate service revenue by providing outsourced organ retrieval, OCS organ management and logistics services under our NOP in the United States.
When a customer order includes disposable sets and organ retrieval or OCS organ management services, we have determined that the disposable sets and services constitute separate performance obligations and we recognize revenue as the disposable sets and services are each delivered to the customer.
When a customer order includes disposable sets and organ retrieval, OCS organ management or logistics services, we have determined that the disposable sets and services constitute separate performance obligations and we recognize revenue as the disposable sets and services are each delivered to the customer.
Revenue for each organ in the table above includes net product revenue from sales of disposable sets as well as service revenue from organ retrieval and OCS organ management services under the NOP in the United States.
Revenue for each organ in the table above includes net product revenue from sales of disposable sets as well as service revenue for organ retrieval, OCS organ management and logistics services under the NOP in the United States.
We also expect to see modest improvements in the future in our gross margin on services as we provide more services and the efficiency in provisioning of these services improves due to scale and experience.
We also expect to see modest improvements in the future in our services gross margin as we provide more services and the efficiency in provisioning of these services improves due to scale and experience.
We intend to use our design, engineering and manufacturing capabilities to further advance and improve the efficiency of our manufacturing processes, which we believe will reduce costs and increase our gross margin.
We intend to use our design, engineering and manufacturing capabilities to further advance and improve the efficiency of our manufacturing processes, which we believe will reduce costs and increase our product gross margin.
Until such time, if ever, as we can generate substantial revenue sufficient to achieve profitability, we expect to finance our operations through a combination of equity offerings, debt financings and strategic alliances. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms or at all.
Until such time, if ever, as we can generate substantial revenue sufficient to achieve sustained profitability, we may finance our operations through a combination of equity offerings, debt financings and strategic alliances. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms or at all.
All of our revenue has been generated by sales to transplant centers and Organ Procurement Organizations, not-for-profit organizations responsible for recovering organs from deceased donors for transplantation, in the United States, Europe and Asia-Pacific, or, in some cases, to distributors selling to transplant centers in select countries.
All of our OCS transplant-related revenue has been generated by sales to transplant centers and Organ Procurement Organizations, not-for-profit organizations responsible for recovering organs from deceased donors for transplantation, in the United States, Europe and Asia-Pacific, or, in some cases, to distributors selling to transplant centers in select countries.
Other Income (Expense) Interest Expense Interest expense consists of interest expense associated with outstanding borrowings under our loan agreements as well as the amortization of debt discount associated with such agreements. In July 2022, we entered into a credit agreement with Canadian Imperial Bank of Commerce, or CIBC, under which we borrowed $60.0 million.
Other Income (Expense) Interest Expense Interest expense consists of interest expense associated with outstanding borrowings under our loan agreements as well as the amortization of debt discounts associated with such agreements. In July 2022, we entered into a credit agreement with Canadian Imperial Bank of Commerce, or CIBC, under which we borrowed $60.0 million.
As of December 31, 2022, we were in compliance with all covenants of the CIBC Credit Agreement. During the continuance of an event of default, the interest rate per annum will be equal to the rate that would have otherwise been applicable at the time of the event of default plus 2.0%.
As of December 31, 2023, we were in compliance with all covenants of the CIBC Credit Agreement. During the continuance of an event of default, the interest rate per annum will be equal to the rate that would have otherwise been applicable at the time of the event of default plus 2.0%.
To date, we have funded our operations primarily with proceeds from borrowings under loan agreements, proceeds from the sale of common stock in our public offerings and revenue from clinical trials and commercial sales of our OCS products. Since our inception, we have incurred significant operating losses.
To date, we have funded our operations primarily with proceeds from borrowings under loan agreements, proceeds from the sale of common stock in our public offerings, and revenue from clinical trials and commercial sales of our OCS products and NOP services. Since our inception, we have incurred significant operating losses.
Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital” in this Annual Report on Form 10-K. 70 Material Contractual Obligations Our contractual obligations include amounts payable as principal and interest payments under the CIBC Credit Agreement. As of December 31, 2022, our outstanding principal balance was $60.0 million and is due in 2027.
Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital” in this Annual Report on Form 10-K. Material Contractual Obligations Our contractual obligations include amounts payable as principal and interest payments under the CIBC Credit Agreement. As of December 31, 2023, our outstanding principal balance was $60.0 million and is due in 2027.
We only include estimated variable amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Other Revenue Considerations We only include estimated variable amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
While we expect our gross margins to increase over the long term, they will likely fluctuate from quarter to quarter. 63 Operating Expenses Research, Development and Clinical Trials Expenses Research, development and clinical trials expenses consist primarily of costs incurred for our research activities, product development, hardware and software engineering, clinical trials to continue to develop clinical evidence of our products’ safety and effectiveness, regulatory expenses, testing, consultant services and other costs associated with our OCS technology platform and OCS products, which include: • employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research, hardware and software development, regulatory and clinical trial functions; • expenses incurred in connection with the clinical trials of our products, including under agreements with third parties, such as consultants, contractors and data management organizations; • the cost of maintaining and improving our product designs, including the testing of materials and parts used in our products; • laboratory supplies and research materials; and • facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance.
While we expect our gross margins to increase over the long term, they will likely fluctuate from quarter to quarter. 69 Operating Expenses Research, Development and Clinical Trials Expenses Research, development and clinical trials expenses consist primarily of costs incurred for our research activities, product development, hardware and software engineering, clinical trials to continue to develop clinical evidence of our products’ safety and effectiveness, regulatory expenses, testing, consultant services and other costs associated with our OCS technology platform and OCS products, which include: • employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research, hardware and software development, regulatory and clinical trial functions, and recruiting and temporary service fees related to such personnel; • expenses incurred in connection with the clinical trials of our products, including under agreements with third parties, such as consultants, contractors and data management organizations; • the cost of maintaining and improving our product designs, including the testing of materials and parts used in our products; • laboratory supplies and research materials; and • facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance.
Since our inception, we have focused substantially all of our resources on designing, developing and building our proprietary OCS technology platform and organ-specific OCS products; obtaining clinical evidence for the safety and effectiveness of our OCS products through clinical trials; securing regulatory approval; organizing and staffing our company; planning our business; raising capital; commercializing our products; developing and expanding our National OCS Program; developing and expanding our market and distribution chain and providing general and administrative support for these operations.
Since our inception, we have focused substantially all of our resources on designing, developing and building our proprietary OCS technology platform and organ-specific OCS products; obtaining clinical evidence for the safety and effectiveness of our OCS products through clinical trials; securing regulatory approval; organizing and staffing our company; planning our business; raising capital; commercializing our products; developing and growing our NOP; developing and expanding our market and distribution chain and providing general and administrative support for these operations.
Changes in accounts receivable, inventory, accounts payable, and accrued expenses and other current liabilities in each reporting period are generally due to growth in our business and timing of invoices and payments.
Changes in accounts receivable, inventory, prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities in each reporting period are generally due to growth in our business and timing of invoices and payments.
Cost of Revenue, Gross Profit and Gross Margin Cost of net product revenue consists of costs of components of our OCS Consoles and disposable sets, costs of direct materials, labor and the manufacturing overhead that directly supports production, and depreciation of OCS Consoles loaned to customers.
Cost of Revenue, Gross Profit and Gross Margin Cost of net product revenue consists of costs of components of our OCS Consoles and disposable sets, costs of direct materials, labor and the manufacturing overhead that directly supports production and depreciation of OCS Consoles.
Additionally, we do not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
Additionally, we do not assess whether a contract has a significant financing component if the expectation at contract inception is that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less. Revenue is reported net of taxes.
Substantially all of our customer contracts have multiple-performance obligations that contain deliverables consisting of OCS Perfusion Sets and OCS Solutions. Customer contract deliverables may also include organ retrieval and OCS organ management services under our National OCS Program or an OCS Console, whether sold or loaned to the customer.
Substantially all of our customer contracts have multiple-performance obligations that contain deliverables consisting of OCS Perfusion Sets and OCS Solutions. Customer contract deliverables may also include organ retrieval, OCS organ management and logistics services under our NOP or an OCS Console, whether sold or loaned to the customer.
We expect that our selling, general and administrative expenses will increase over the long term as we increase our headcount to support the expected continued sales growth of our OCS products and our National OCS Program.
We expect that our selling, general and administrative expenses will increase over the long term as we increase our headcount to support the expected continued sales growth of our OCS products and our NOP.
Any write-down of inventory to net realizable value creates a new cost basis. The reserve for excess and obsolete inventory was $0.3 million as of December 31, 2022 and 2021.
Any write-down of inventory to net realizable value creates a new cost basis. The reserve for excess and obsolete inventory was $0.8 million and $0.3 million as of December 31, 2023 and 2022, respectively.
Financing Activities During the year ended December 31, 2022, net cash provided by financing activities of $167.9 million consisted of net proceeds from our public offering in August 2022 of $139.9 million, net proceeds from the issuance of long-term debt of $58.5 million, proceeds from the issuance of common stock upon exercise of stock options of $4.7 million, proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $0.5 million and proceeds from the issuance of common stock upon exercise of warrants of $0.4 million, partially offset by the repayments of long-term debt of $36.1 million.
During the year ended December 31, 2022, net cash provided by financing activities of $167.9 million consisted of net proceeds from our public offering in August 2022 of $139.9 million, net proceeds from the issuance of long-term debt of $58.5 million, proceeds from the issuance of common stock upon exercise of stock options of $4.7 million, proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $0.5 million and proceeds from the issuance of common stock upon exercise of warrants of $0.4 million, partially offset by the repayments of long-term debt of $36.1 million. 75 For a discussion of our cash flows for the year ended December 31, 2021, see Item 7.
We have also developed our National OCS Program, or NOP, an innovative turnkey solution to provide outsourced organ retrieval and OCS organ management, to provide transplant programs in the United States with a more efficient process to procure donor organs with the OCS.
We have also developed our NOP, an innovative turnkey solution to provide outsourced organ retrieval, OCS organ management and logistics services, to provide transplant programs in the United States with a more efficient process to procure donor organs with the OCS.
Funding Requirements As we continue to pursue and increase commercial sales of our OCS products, we expect our costs and expenses to increase in the future, particularly as we expand our commercial team, grow our National OCS Program, scale our manufacturing and sterilization operations, continue research, development and clinical trial efforts, and seek regulatory approval for new products and product enhancements, including new indications, both in the United States and in select non-U.S. markets.
Funding Requirements As we continue to pursue and increase commercial sales of our OCS products, we expect our costs and expenses to increase in the future, particularly as we expand our commercial team, grow our NOP, scale our manufacturing and sterilization operations, continue research, development and clinical trial efforts, seek regulatory approval for new products and product enhancements, including new indications, both in the United States and in select non-U.S. markets, and seek greater control of air and ground transport for our NOP.
The timing and amount of our operating and capital expenditures will depend on many factors, including: • the amount of net product revenue generated by sales of our OCS Consoles, OCS disposable sets and other products that may be approved in the United States and select non-U.S. markets, revenue generated by our services, and expansion of the NOP; • the costs and expenses of expanding our U.S. and non-U.S. sales and marketing infrastructure and our manufacturing operations; • the extent to which our OCS products are adopted by the transplant community; • the ability of our customers to obtain adequate reimbursement from third-party payors for procedures performed using the OCS products; • the degree of success we experience in commercializing our OCS products for additional indications; • the costs, timing and outcomes of post-approval studies or any future clinical studies and regulatory reviews, including to seek and obtain approvals for new indications for our OCS products; • the emergence of competing or complementary technologies or procedures; • the number and types of future products we develop and commercialize; • the cost of development of the next generation OCS; • the costs associated with building our commercial operations; • the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; and • the level of our selling, general and administrative expenses.
The timing and amount of our operating and capital expenditures will depend on many factors, including: • the amount of product revenue generated by sales of our OCS Consoles, OCS disposable sets and other products that may be approved in the United States and select non-U.S. markets, revenue generated by our services, and growth of the NOP; • the costs and expenses of expanding our U.S. and non-U.S. sales and marketing infrastructure and our manufacturing operations; 77 • the extent to which our OCS products are adopted by the transplant community; • the ability of our customers to obtain adequate reimbursement from third-party payors for procedures performed using the OCS products; • the degree of success we experience in commercializing our OCS products for additional indications; • the costs, timing and outcomes of post-approval studies or any future clinical studies and regulatory reviews, including to seek and obtain approvals for new indications for our OCS products; • the emergence of competing or complementary technologies or procedures; • the number and types of future products we develop and commercialize; • the cost of development of the next generation OCS; • the costs associated with building our commercial operations, including the NOP; • the costs associated with maintaining and growing our logistics capabilities, including by means of the acquisition of fixed-wing aircraft for our aviation transportation services or other acquisitions, joint ventures or strategic investments; • the cost of maintaining, replacing or acquiring additional fixed-wing aircraft; • the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; and • the level of our selling, general and administrative expenses.
Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in our commercial team and personnel in executive, marketing, finance and administrative functions.
Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in our commercial team and personnel in executive, marketing, finance and administrative functions, and recruiting and temporary service fees for such personnel.
The decrease was due to a lower interest rate for our indebtedness under the CIBC Credit Agreement, partially offset by an increase in the principal amount of the loan outstanding compared to the principal that had been outstanding under our prior credit agreement with OrbiMed.
Interest expense also increased due to an increase in the principal amount of the CIBC loan outstanding compared to the principal that had been outstanding under our prior credit agreement with OrbiMed, partially offset by the lower average interest rate for our indebtedness under the CIBC Credit Agreement.
For a discussion of our cash flows for the year ended December 31, 2020, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Flows included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Flows included in our Annual Report on Form 10-K for the year ended December 31, 2022.
Therefore, we allocate the arrangement consideration between the lease deliverables (i.e., the OCS Console) and non-lease deliverables (i.e., the OCS disposable sets) based on the relative estimated standalone selling price of each distinct performance obligation. To date, the amounts allocated to lease deliverables have been insignificant.
Therefore, we allocate the arrangement consideration between the lease deliverables (i.e., the OCS Console) and non-lease deliverables (i.e., the OCS disposable sets) based on the relative estimated standalone selling price of each distinct performance obligation.
Revenue from customers outside the United States was $9.4 million in the year ended December 31, 2022 and increased by $1.0 million compared to the year ended December 31, 2021.
Revenue from customers outside the United States was $15.4 million in the year ended December 31, 2023 and increased by $6.0 million compared to the year ended December 31, 2022.
As of December 31, 2022, our remaining purchase commitment is $7.0 million. We also enter into other contracts in the normal course of business with consulting firms, material suppliers and other third parties for clinical trials and testing and manufacturing services. These contracts do not contain minimum purchase commitments and are cancelable by us upon prior written notice.
We also enter into other contracts in the normal course of business with consulting firms, material suppliers and other third parties for clinical trials and testing and manufacturing services. These contracts do not contain minimum purchase commitments 78 and are cancelable by us upon prior written notice.
Gross profit is the amount by which our revenue exceeds our cost of revenue in each reporting period. We calculate gross margin as gross profit divided by revenue.
Gross profit is the amount by which revenue exceeds cost of revenue in each reporting period and gross margin is gross profit divided by revenue.
Selling, general and administrative expenses also include direct and allocated facility-related costs, logistics costs, promotional activities, marketing, conferences and trade show costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services.
Selling, general and administrative expenses also include direct and allocated facility-related costs, costs to facilitate the NOP, promotional activities, marketing, conferences and trade show costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services and amortization of sales and marketing-related intangible assets.
We determine the appropriate accounting treatments for these payments depending on the nature of the payment and whether they are for distinct goods or services. Other Revenue Considerations Revenue is reported net of taxes.
We determine the appropriate accounting treatments for these payments depending on the nature of the payment and whether they are for distinct goods or services.
As required by the EU Medical Devices Regulation (Regulation 2017/745), or the MDR, we received recertification of the CE Mark in September 2022 for each of the OCS Heart and OCS Lung systems, which includes the OCS Console, the OCS disposables, and the OCS solution additives.
As required by the MDR, we received recertification of the CE Mark in September 2022 for each of the OCS Heart and OCS Lung systems, which includes the OCS Console, the OCS disposables, and the OCS solution additives. We also received the recertification of the CE Mark in September 2022 for the OCS Liver Console and disposables.
As of December 31, 2022, we had fixed lease payment obligations of $10.5 million, of which $2.0 million is payable during 2023. In January 2021, we entered into an unconditional $9.5 million purchase commitment in the ordinary course of business, for goods with specified annual minimum quantities to be purchased through December 2029. The contract is not cancellable without penalty.
In January 2021, we entered into an unconditional $9.5 million purchase commitment in the ordinary course of business, for goods with specified annual minimum quantities to be purchased through December 2029. The contract is not cancellable without penalty. As of December 31, 2023, our remaining purchase commitment is $7.0 million.
If we are unable to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the further development and commercialization efforts of one or more of our products, or may be forced to reduce or terminate our operations. As of December 31, 2022, we had cash of $201.2 million.
If we are unable to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the further development and commercialization efforts of one or more of our products, or may be forced to reduce or terminate our operations. In March 2023, the U.S.
The primary performance obligations in our customer arrangements from which we derive revenue are the OCS Perfusion Sets, the OCS Solutions, the OCS Console, organ retrieval services and OCS organ management services. 71 When a customer order includes an OCS Console, we have determined that customer training and the equipment set-up of the OCS Console, each performed by us, are not distinct because they are not sold on a standalone basis and can only be performed by us in conjunction with a sale or loan of our OCS Console.
When a customer order includes an OCS Console, we have determined that customer training and the equipment set-up of the OCS Console, each performed by us, are not distinct because they are not sold on a standalone basis and can only be performed by us in conjunction with a sale or loan of our OCS Console.
Net cash used by changes in our operating assets and liabilities for the year ended December 31, 2022 consisted primarily of an increase in accounts receivable of $21.7 million and an increase in inventory of $8.0 million, partially offset by a decrease in prepaid expenses of $2.5 million. 68 During the year ended December 31, 2021, operating activities used $28.9 million of cash, primarily resulting from our net loss of $44.2 million, partially offset by net non-cash charges of $12.3 million and net cash provided by changes in our operating assets and liabilities of $3.0 million.
Net cash used by changes in our operating assets and liabilities for the year ended December 31, 2022 consisted primarily of an increase in accounts receivable of $21.7 million and an increase in inventory of $8.0 million, partially offset by a decrease in prepaid expenses of $2.5 million.
Since our inception, we have incurred significant operating losses. To date, we have funded our operations primarily with proceeds from borrowings under loan agreements, proceeds from the sale of common stock in our public offerings and revenue from clinical trials and commercial sales of our OCS products.
To date, we have funded our operations primarily with proceeds from borrowings under loan agreements, proceeds from the issuance of our convertible senior notes, proceeds from the sale of common stock in our public offerings and revenue from clinical trials and commercial sales of our OCS products and NOP services.
Our gross margin has been and will continue to be affected by a variety of factors, primarily production volumes, the cost of components and direct materials, manufacturing overhead costs, direct labor, the cost of services provided under the NOP and the selling price of our OCS products and NOP services.
Product and service gross margins are also affected by a variety of factors, primarily production volumes, the cost of components and direct materials, manufacturing overhead costs, direct labor, the cost of services provided under the NOP and the selling price of our OCS products and NOP services.
Revenue outside of the United States increased for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to increased pricing and increased sales volumes of OCS Lung, OCS Heart and OCS Liver disposable sets.
Revenue outside of the United States increased for the year ended December 31, 2023 compared to the year ended December 31, 2022 due primarily to increased sales volume of OCS Heart disposable sets.
Net cash provided by changes in our operating assets and liabilities for the year ended December 31, 2021 consisted primarily of an increase in accounts payable and accrued expenses and other current liabilities of $10.0 million and a decrease in accounts receivable of $0.8 million, partially offset by an increase in inventory of $4.9 million and an increase in prepaid expenses and other current assets of $3.2 million.
Net cash used by changes in our operating assets and liabilities for the year ended December 31, 2023 consisted primarily of an increase in accounts receivable of $33.8 million, an increase in inventory of $28.1 million and an increase in prepaid expenses and other current assets of $2.1 million, partially offset by an increase in accounts payable and accrued expenses and other current liabilities of $21.2 million.
Economic Impacts and COVID-19 Inflation, changes in trade policies, and the imposition of duties and tariffs have and could continue to adversely impact the price or availability of raw materials, the components of our products as well as shipping and transportation costs.
We intend to further develop these technologies to expand our product offerings and indications for organ transplantation. Economic Impacts Inflation, changes in trade policies, and the imposition of duties and tariffs have and could continue to adversely impact the price or availability of raw materials, the components of our products as well as shipping and transportation costs.
Substantially all of our customer contracts have multiple-performance obligations that contain promises consisting of OCS Perfusion Sets and OCS Solutions and may also contain promises for organ retrieval and OCS organ management services under our NOP, and an OCS Console, whether sold or loaned to the customer. 62 When a customer order includes disposable sets and organ retrieval or OCS organ management services, we have determined that the disposable sets and services constitute separate performance obligations and we recognize revenue as the disposable sets and services are each delivered to the customer.
Substantially all of our customer contracts have multiple-performance obligations that contain promises consisting of OCS Perfusion Sets and OCS Solutions and may also contain promises for organ retrieval, OCS organ management or logistics services under our NOP, and an OCS Console, whether sold or loaned to the customer.
We expect to continue to incur net losses for the foreseeable future as we focus on growing commercial sales of our products in both the United States and select non-U.S. markets, including growing our commercial team, which will pursue increasing commercial sales of our OCS products; expanding our NOP; scaling our manufacturing and sterilization operations; developing the next generation OCS; continuing research, development and clinical trial efforts; seeking regulatory clearance for new products and product enhancements, including additional indications or other organs, in both the United States and select non-U.S. markets; and operating as a public company.
We expect our operating and capital expenditures will continue to increase as we focus on growing commercial sales of our products in both the United States and select non-U.S. markets, including growing our commercial team, which will pursue increasing commercial sales of our OCS products; growing our NOP, including by maintaining and growing our logistics capabilities, including aviation transportation, to support our NOP 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; scaling our manufacturing and sterilization operations; developing the next generation OCS; continuing research, development and clinical trial efforts; seeking regulatory clearance for new products and product enhancements, including additional indications or other organs, in both the United States and select non-U.S. markets; and operating as a public company.
We expect that our revenue will increase over the long term as a result of receiving PMAs for the OCS Lung, OCS Heart and OCS Liver in the United States and as a result of the continued expansion of the NOP in the United States.
We expect that our revenue will increase over the long term as a result of the continued growth of the NOP in the United States.
During the year ended December 31, 2021, net cash provided by financing activities of $1.4 million consisted of proceeds from the issuance of common stock upon exercise of stock options of $1.0 million and proceeds from the issuance of common stock in connection with the employee stock purchase plan of $0.4 million.
Financing Activities During the year ended December 31, 2023, net cash provided by financing activities of $400.4 million consisted of net proceeds from the issuance of our Notes of $445.4 million, partially offset by payments of $52.1 million for associated capped calls, proceeds from the issuance of common stock upon exercise of stock options of $6.2 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $1.0 million.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of Our Results of Operations—Comparison of the Years Ended December 31, 2021 and 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2021. Liquidity and Capital Resources At December 31, 2022, our principal source of liquidity was cash of $201.2 million.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Components of Our Results of Operations—Comparison of the Years Ended December 31, 2022 and 2021 included in our Annual Report on Form 10-K for the year ended December 31, 2022. Liquidity and Capital Resources Since our inception, we have incurred significant annual operating losses.
Other expense, net for the year ended December 31, 2022 also included a loss on extinguishment of debt of $0.6 million. Comparison of the Years Ended December 31, 2021 and 2020 For a discussion of our results of operations for the year ended December 31, 2021 as compared to the year ended December 31, 2020, see Item 7.
Comparison of the Years Ended December 31, 2022 and 2021 For a discussion of our results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021, see Item 7.
Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: Year Ended December 31, 2022 2021 2020 (in thousands) Cash used in operating activities $ (45,817 ) $ (28,864 ) $ (30,265 ) Cash provided by (used in) investing activities 54,513 29,267 (41,598 ) Cash provided by financing activities 167,927 1,393 75,549 Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,021 ) (797 ) 803 Net increase in cash, cash equivalents and restricted cash $ 175,602 $ 999 $ 4,489 Operating Activities During the year ended December 31, 2022, operating activities used $45.8 million of cash, primarily resulting from our net loss of $36.2 million and net cash used by changes in our operating assets and liabilities of $26.8 million, partially offset by net non-cash charges of $17.2 million.
At December 31, 2023, our principal source of liquidity was cash of $394.8 million. 74 Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash used in operating activities $ (13,028 ) $ (45,817 ) $ (28,864 ) Net cash provided by (used in) investing activities (193,953 ) 54,513 29,267 Net cash provided by financing activities 400,418 167,927 1,393 Effect of exchange rate changes on cash, cash equivalents and restricted cash 193 (1,021 ) (797 ) Net increase in cash, cash equivalents and restricted cash $ 193,630 $ 175,602 $ 999 Operating Activities During the year ended December 31, 2023, operating activities used $13.0 million of cash, primarily resulting from our net loss of $25.0 million and net cash used by changes in our operating assets and liabilities of $44.3 million, partially offset by net non-cash charges of $56.3 million, which included an IPR&D charge of $27.2 million.
Personnel related costs increased by $18.1 million primarily due to the continued expansion of our team to support the National OCS Program and commercial growth of our OCS Heart and OCS Liver products in the United States, as well as an increase in stock-based compensation 67 expense of $3.0 million due primarily to additional grants to new and existing employees.
Personnel related costs increased by $32.2 million primarily due to the continued expansion of our team to support the growth in our business, as well as an increase in stock-based compensation expense of $7.8 million, due primarily to additional grants to new and existing employees.
Revenue from sales to customers of OCS Perfusion Sets, OCS Solutions and OCS Consoles is classified as net product revenue in the our consolidated statements of operations. Revenue from sales to customers of organ retrieval and OCS organ management services is classified as service revenue in our consolidated statements of operations.
To date, the amounts allocated to lease deliverables have been insignificant. 79 Revenue from sales to customers of OCS Perfusion Sets, OCS Solutions and OCS Consoles is classified as net product revenue in the our consolidated statements of operations.
Cost of service revenue primarily consists of labor and overhead and transportation costs that directly support organ retrieval and OCS organ management services. We expect that cost of revenue will increase or decrease in absolute dollars primarily as, and to the extent that, our revenue increases or decreases.
We expect that overall cost of revenue will increase or decrease in absolute dollars primarily as, and to the extent that, our revenue increases or decreases.
Our ability to generate revenue sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated total revenue of $93.5 million and incurred a net loss of $36.2 million for the year ended December 31, 2022. As of December 31, 2022, we had an accumulated deficit of $478.7 million.
Our ability to generate revenue sufficient to achieve sustained profitability will depend on the continued growth in customer utilization of our products and services. We generated total revenue of $241.6 million and incurred a net loss of $25.0 million for the year ended December 31, 2023. As of December 31, 2023, we had an accumulated deficit of $503.7 million.
Revenue is recognized when control is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for the product or services.
Revenue from sales to customers of organ retrieval, OCS organ management services and organ transportation is classified as service revenue in our consolidated statements of operations. Revenue is recognized when control is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for the product or services.
At that time, we repaid the remaining $35.0 million of principal that had been outstanding under our prior credit agreement with OrbiMed Royalty Opportunities II, LP, or OrbiMed. Other Income (Expense), Net Other income (expense), net includes interest income, realized and unrealized foreign currency transaction gains and losses and other non-operating income and expense items unrelated to our core operations.
At that time, we repaid the remaining $35.0 million of principal that had been outstanding under our prior credit agreement with OrbiMed Royalty Opportunities II, LP, or OrbiMed.
As a result, we will need substantial additional funding for expenses related to our operating activities, including selling, general and administrative expenses and research, development and clinical trials expenses. 61 Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.
Because of the numerous risks and uncertainties associated with product development, commercialization and regulations of our industry, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability on an annual basis.
To a lesser extent, we also generate product revenue from the sale of OCS Consoles to customers and the implied rental of OCS Consoles loaned to customers at no charge. For each new transplant procedure, customers purchase an additional OCS disposable set for use on the customer’s existing organ-specific OCS Console.
Components of Our Results of Operations Revenue We generate net product revenue primarily from sales of our single-use, organ-specific disposable sets used on our organ-specific OCS Consoles. To a lesser extent, we also generate product revenue from the sale of OCS Consoles to customers and the implied rental of OCS Consoles loaned to customers at no charge.
Revenue from sales of OCS Liver disposable sets and organ retrieval and OCS organ management services in the United States increased by $44.3 million due primarily to higher sales volumes of OCS Liver disposable sets resulting from the recent FDA approval of the OCS Liver product and the expansion of our National OCS Program during the year ended December 31, 2022.
Revenue from customers in the United States related to OCS transplant was $221.3 million in the year ended December 31, 2023 and increased by $137.3 million compared to the year ended December 31, 2022, primarily due to higher sales volumes of our OCS Liver and OCS Heart disposable sets.
To date, we have 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 our products, OCS Heart, OCS Lung and OCS Liver, have received Pre-Market Approval, or PMA, from the Food and Drug Administration, or FDA.
We designed the OCS to be a platform that allows us to leverage core technologies across products for multiple organs. To date, we have 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.
Our sales in the EU are dependent on obtaining and maintaining the CE Mark certifications for each of our OCS products.
Through December 31, 2023, all of our sales outside of the United States have been commercial sales (unrelated to any clinical trials). Our sales in the EU are dependent on obtaining and maintaining the CE Mark certifications for each of our OCS products.
Other Expense, Net Other expense, net for the years ended December 31, 2022 and 2021 included interest income of $0.9 million and $0.1 million, respectively, resulting from higher interest earned on our invested cash balances. Other expense, net also included $1.3 million and $1.0 million of realized and unrealized foreign currency transaction losses, respectively.
Other Income (Expense), Net Other income (expense), net for the years ended December 31, 2023 and 2022 included interest income of $12.5 million and $0.9 million, respectively, from interest earned on invested cash balances, due to higher invested cash balance and to a lesser extent higher interest rates.
We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources”.
We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources”. Strategic Transactions On August 16, 2023, we acquired Summit Aviation, Inc. and Northside Property Group, LLC, or together Summit. Summit was a charter flight operator based in Bozeman, Montana.
We also generate service revenue by providing outsourced organ retrieval and OCS organ management services under our NOP in the United States.
For each new transplant procedure, customers purchase an additional OCS disposable set for use on the customer’s existing organ-specific OCS Console. We also generate service revenue by providing outsourced organ retrieval, OCS organ management and logistics services under our NOP in the United States.
Gross margin from net product revenue increased primarily as a result of economies of scale from higher sales volumes and increased sales of higher priced OCS disposable sets in the United States. Gross margin from service revenue was 21% for the year ended December 31, 2022 and consisted primarily of organ retrieval and OCS organ management services under our NOP.
The decrease in gross margin was primarily a result of increasing manufacturing capacity and increased costs of certain parts. Gross margin from service revenue was 29% and 21% for the years ended December 31, 2023 and 2022, respectively, and consisted primarily of organ retrieval, OCS organ management and logistics services under our NOP.
Also, all three of our products, OCS Heart, OCS Lung and OCS Liver are approved for both organs donated after brain death, or DBD organs, and organs donated after circulatory death, or DCD organs.
All three of our products, OCS Heart, OCS Lung and OCS Liver, have received PMA from the FDA, for both DBD organs and DCD organs.
This increase was partially offset by an unfavorable impact of foreign exchange rates of $0.8 million. 66 Cost of Revenue, Gross Profit and Gross Margin Cost of net product revenue increased by $7.9 million from $9.0 million in the year ended December 31, 2021 to $17.0 million in the year ended December 31, 2022.
Cost of Revenue, Gross Profit and Gross Margin Cost of net product revenue increased by $24.0 million in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Logistics and other costs increased by $9.6 million due to increased start-up and logistics costs related to the expansion of our National OCS Program. Other Income (Expense) Interest Expense Interest expense was $3.7 million and $3.9 million for the years ending December 31, 2022 and 2021, respectively.
Facility related and other costs increased by $4.8 million due primarily to increased facilities costs and depreciation and amortization expense due to the growth in our business. 73 Other Income (Expense) Interest Expense Interest expense was $10.8 million and $3.7 million for the years ending December 31, 2023 and 2022, respectively.
We estimate we will pay $3.7 million in interest payments during 2023. Our estimate of payments is based on an assumed rate of 6.1%, which was the interest rate in effect at December 31, 2022. We lease our facilities under non-cancelable operating leases that have remaining lease terms of 5 years as of December 31, 2022.
We estimate we will pay $4.5 million in interest payments during 2024. Our estimate of payments is based on an assumed rate of 7.3%, which was the interest rate in effect at December 31, 2023. On May 11, 2023, we issued $460.0 million aggregate principal amount of Notes due 2028.
Long-Term Debt In July 2022, we entered into a credit agreement with CIBC pursuant to which we borrowed $60.0 million, referred to herein as the CIBC Credit Agreement. We used proceeds of the CIBC Credit Agreement to repay all amounts due under our credit agreement with OrbiMed, which was entered into in June 2018.
Long-Term Debt In July 2022, we entered into a credit agreement with CIBC as amended by the First Amendment to Credit Agreement, dated as of May 8, 2023, by and among the Company and CIBC, or the First Amendment, the Second Amendment to Credit Agreement, dated as of June 23, 2023, by and among the Company and CIBC, or the Second Amendment, and the Third Amendment to Credit Agreement, dated as of November 9, 2023, by and among the Company and CIBC, or the Third Amendment, pursuant to which we borrowed $60.0 million, referred to herein as the CIBC Credit Agreement.
Selling, General and Administrative Expenses Year Ended December 31, 2022 2021 Change (in thousands) Personnel related (including stock-based compensation expense) $ 39,350 $ 21,202 $ 18,148 Professional and consultant fees 7,991 7,032 959 Tradeshows and conferences 4,347 1,445 2,902 Logistics and other 18,209 8,604 9,605 Total selling, general and administrative expenses $ 69,897 $ 38,283 $ 31,614 Total selling, general and administrative expenses increased by $31.6 million from $38.3 million in the year ended December 31, 2021 to $69.9 million in the year ended December 31, 2022 due to increases in personnel related costs, professional and consultant fees, tradeshows and conferences and logistics and other costs.
Selling, General and Administrative Expenses Year Ended December 31, 2023 2022 Change (in thousands) Personnel related (including stock-based compensation expense) $ 72,717 $ 40,551 $ 32,166 Professional and consultant fees 17,401 7,991 9,410 NOP Support 11,985 8,463 3,522 Tradeshows and conferences 4,575 4,788 (213 ) Facility related and other 12,875 8,104 4,771 Total selling, general and administrative expenses $ 119,553 $ 69,897 $ 49,656 Total selling, general and administrative expenses increased by $49.7 million from $69.9 million in the year ended December 31, 2022 to $119.6 million in the year ended December 31, 2023 due to increases in personnel related costs, professional and consultant fees, NOP support costs and facility related and other costs.
Cost of service revenue increased by $11.1 million from $0.1 million in the year ended December 31, 2021 to $11.2 million in the year ended December 31, 2022, as the National OCS Program launched in late 2021. Gross profit increased by $44.1 million in the year ended December 31, 2022 compared to the year ended December 31, 2021.
Cost of service revenue increased by $35.3 million in the year ended December 31, 2023 compared to the year ended December 31, 2022 as we expanded and increased utilization of the NOP. Gross profit increased by $88.8 million in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Operating Expenses Research, Development and Clinical Trials Expenses Year Ended December 31, 2022 2021 Change (in thousands) Personnel related (including stock-based compensation expense) $ 9,548 $ 8,292 $ 1,256 Clinical trials costs 1,778 3,180 (1,402 ) Consulting and third-party testing 5,104 4,212 892 Laboratory supplies and research materials 5,404 2,837 2,567 Other 4,978 3,783 1,195 Total research, development and clinical trials expenses $ 26,812 $ 22,304 $ 4,508 Total research, development and clinical trials expenses increased by $4.5 million from $22.3 million in the year ended December 31, 2021 to $26.8 million in the year ended December 31, 2022.
Service revenue gross margin during the year ended December 31, 2022 included our initial launch of the NOP program and did not include a full period of our NOP service offering. 72 Operating Expenses Research, Development and Clinical Trials Expenses Year Ended December 31, 2023 2022 Change (in thousands) Personnel related (including stock-based compensation expense) $ 15,489 $ 9,818 $ 5,671 Laboratory supplies and research materials 7,939 5,404 2,535 Consulting and third-party services 5,788 5,277 511 Clinical trials costs 1,077 1,778 (701 ) Facility related and other 5,762 4,535 1,227 Total research, development and clinical trials expenses $ 36,055 $ 26,812 $ 9,243 Total research, development and clinical trials expenses increased by $9.2 million from $26.8 million in the year ended December 31, 2022 to $36.1 million in the year ended December 31, 2023.
We also received the recertification of the CE Mark in September 2022 for the OCS Liver Console and disposables. We have applied for and expect to receive the CE Mark for the OCS Liver combined with our solution additives under the MDR within the next 12 months.
We received the CE Mark for the OCS Liver combined with our solution additives under the MDR in May 2023, with an effective date of April 2023.
We believe the use of the OCS combined with the NOP has the potential to significantly increase the number of organ transplants and improve post-transplant outcomes. We designed the OCS to be a platform that allows us to leverage core technologies across products for multiple organs.
In 2023, we enhanced our NOP offering with the addition of a logistics team to expand our transportation logistics capabilities. Our logistics services include aviation transportation, ground transportation, and other coordination activity. We believe the use of the OCS combined with the NOP has the potential to significantly increase the number of organ transplants and improve post-transplant outcomes.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe effects of these foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of stockholders’ equity on our consolidated balance sheets. We recorded a foreign currency translation loss of $0.1 million during the year ended December 31, 2022.
Biggest changeThe effects of these foreign currency translation adjustments are included in accumulated other comprehensive loss, a separate component of stockholders’ equity on our consolidated balance sheets. We recorded a foreign currency translation gain of less than $0.1 million during the year ended December 31, 2023.
Assets and liabilities arising from such transactions are translated into the legal entity’s functional currency using the period-end exchange rates. Foreign currency transaction gains (losses) are included in the consolidated statements of operations as a component of other income (expense). We recognized foreign currency transaction losses of $1.3 million during the year ended December 31, 2022.
Assets and liabilities arising from such transactions are translated into the legal entity’s functional currency using the period-end exchange rates. Foreign currency transaction gains (losses) are included in the consolidated statements of operations as a component of other income (expense). We recognized foreign currency transaction gains of $0.3 million during the year ended December 31, 2023.
As of December 31, 2022 borrowings outstanding under the CIBC Credit Agreement totaled $60.0 million and the interest rate applicable to such borrowings was 6.1%. An immediate 10% change in the Federal Funds Effective Rate would not have a material impact on our debt-related obligations, financial position or results of operations. 74
As of December 31, 2023 borrowings outstanding under the CIBC Credit Agreement totaled $60.0 million and the interest rate applicable to such borrowings was 7.3%. An immediate 10% change in the Federal Funds Effective Rate would not have a material impact on our debt-related obligations, financial position or results of operations.
For the year ended December 31, 2022, 9% of our revenue and 4% of our operating costs and expenses were generated by subsidiaries whose functional currency is not the U.S. dollar and therefore are subject to foreign currency exposure. 73 Currently, our largest foreign currency exposure is that with respect to the Euro.
For the year ended December 31, 2023, 5% of our revenue and 2% of our operating costs and expenses were generated by subsidiaries whose functional currency is not the U.S. dollar and therefore are subject to foreign currency exposure. Currently, our largest foreign currency exposure is that with respect to the Euro.
Added
In May 2023, we issued the Notes with an aggregate principal amount of $460.0 million. In connection with the issuance of the Notes, we entered into privately negotiated capped call transactions with certain counterparties. The capped calls are expected generally to offset the potential dilution to our common stock as a result of any conversion of the Notes.
Added
The Notes have a fixed annual interest rate of 1.50%. Accordingly, we do not have interest rate exposure on the Notes. 81

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