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What changed in TransMedics Group, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of TransMedics Group, Inc.'s 2023 and 2024 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 2024 report.

+460 added−454 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-27)

Top changes in TransMedics Group, Inc.'s 2024 10-K

460 paragraphs added · 454 removed · 378 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

107 edited+19 added−16 removed175 unchanged
Biggest changeIn 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2002 No 618, as amended) (UK MDR 2002) which give effect in UK law to the directives listed below (which have now been repealed and replaced in the European Union by the EU MDR and EU IVDR): • Directive 90/385/EEC on active implantable medical devices (EU AIMDD) • Directive 93/42/EEC on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.
Biggest changeIn the United Kingdom medical devices are regulated under the Medical Devices Regulations 2002 (SI 2002 No 618, as amended), or the UK MDR, which give effect to the MDD and associated EU legislation which has since been repealed and replaced in the European Union by the MDR.
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.
If MHRA considers that a person or company has committed a serious offense by failing to comply with applicable regulations or the conditions of a notice issued then a person/company may be subject to prosecution.
If the MHRA considers that a person or company has committed a serious offense by failing to comply with applicable regulations or the conditions of a notice issued then a person/company may be subject to prosecution.
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.
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 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.
It is well demonstrated that donor organs benefit from some form of optimization to replenish depleted levels of substrates, hormones, and electrolytes that are significantly altered or used up during the donation process. • No organ viability assessment capability During cold storage, the organs are not physiologically active, nor functioning; thus, there are no means for evaluating the suitability of these organs for transplantation.
It is well demonstrated that donor organs benefit from some form of optimization to replenish depleted levels of substrates, hormones, and electrolytes that are significantly altered or used up during the donation process. 5 • No organ viability assessment capability During cold storage, the organs are not physiologically active, nor functioning; thus, there are no means for evaluating the suitability of these organs for transplantation.
We require relevant employees to complete workplace safety training before performing any job duties that entail potential health hazards, such as trainings for employees who handle hazardous chemicals and biohazardous materials. Talent Attraction, Retention, and Development We continually seek exceptionally talented and dedicated people to join our team to help shape both our future and the future of transplant medicine.
We require relevant employees to complete workplace safety training before performing any job duties that entail potential health hazards, such as trainings for employees who handle hazardous chemicals and biohazardous materials. Talent Attraction, Retention, and Development We seek exceptionally talented and dedicated people to join our team to help shape both our future and the future of transplant medicine.
In addition, many transplant surgeons at our clinical trial locations may have moved to new centers, bringing their OCS experience with them and allowing our relationships to grow to these new centers. • Expertise in transplant reimbursement and billing The OCS has been reimbursed by the Centers for Medicare & Medicaid Services, or CMS, and private insurers during our clinical trials and continues to be reimbursed in the commercial setting.
In addition, many transplant surgeons at our clinical trial or commercial customer locations may have moved to new centers, bringing their OCS experience with them and allowing our relationships to grow to these new centers. • Expertise in transplant reimbursement and billing The OCS has been reimbursed by the Centers for Medicare & Medicaid Services, or CMS, and private insurers during our clinical trials and continues to be reimbursed in the commercial setting.
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.
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.
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.
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.
Item 1. Business. Overview We are a commercial-stage medical technology company transforming organ transplant therapy for end-stage organ failure patients across multiple disease states. We developed the OCS to replace a decades-old standard of care that we believe is significantly limiting access to life-saving transplant therapy for hundreds of thousands of patients worldwide.
Item 1. Business. Overview We are a medical technology company transforming organ transplant therapy for end-stage organ failure patients across multiple disease states. We developed the OCS to replace a decades-old standard of care that we believe is significantly limiting access to life-saving transplant therapy for hundreds of thousands of patients worldwide.
Where personal data is being transferred outside the EEA (or the UK), it must be done in compliance with applicable data export requirements. Any failure by us or third parties to comply with applicable data laws, could lead to a security or privacy breach, regulatory enforcement, or regulatory, reputational or financial harm. U.S.
Where personal data is being transferred outside the EEA (or the UK), it must be done in compliance with applicable data export requirements. Any failure by us or third parties to comply with applicable data laws, could lead to a security or privacy breach, regulatory enforcement, or regulatory, reputational or financial harm. 23 U.S.
These laws include, without limitation, U.S. and foreign laws intended to prohibit or otherwise regulate activities that might result in fraud, abuse and bribery. U.S. Laws U.S. federal healthcare fraud and abuse laws generally apply to our activities because our products are covered under federal healthcare programs such as Medicare and Medicaid.
These laws include, without limitation, U.S. and foreign laws intended to prohibit or otherwise regulate activities that might result in fraud, abuse and bribery. 20 U.S. Laws U.S. federal healthcare fraud and abuse laws generally apply to our activities because our products are covered under federal healthcare programs such as Medicare and Medicaid.
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.
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.
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.
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 procurement 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.
If granted, the pending U.S. and foreign patent applications in our portfolio are expected to expire between 2025 and 2043, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable. 10 As of December 31, 2023, our patent portfolio relating to the OCS Lung or lung transplantation technology includes families comprised of patents and patent applications with claims that are generally directed to certain methods and systems for preserving a lung ex vivo using both perfusion and ventilation.
If granted, the pending U.S. and foreign patent applications in our portfolio are expected to expire between 2025 and 2043, excluding any potential additional patent term for patent term adjustments or patent term extensions, if applicable. 10 As of December 31, 2024, our patent portfolio relating to the OCS Lung or lung transplantation technology includes families comprised of patents and patent applications with claims that are generally directed to certain methods and systems for preserving a lung ex vivo using both perfusion and ventilation.
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.
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.
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.
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.
The OCS is reimbursed under this second mechanism. 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.
The OCS is reimbursed under this second mechanism. 8 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.
Additionally, the manufacturer of high risk devices must submit periodic safety update reports to its notified body and manufacturers of lower risk devices must maintain periodic safety update reports as part of the technical documentation for their products. Authorities in the European Union also closely monitor the marketing programs implemented by device companies.
Additionally, the manufacturer of high risk devices must submit periodic safety update reports to its notified body and manufacturers of lower risk devices must maintain periodic safety update reports as part of the technical documentation for their products. National competent authorities in the European Union also closely monitor the marketing programs implemented by device companies.
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
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
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.
However, most national healthcare systems do not reimburse transplant centers for the use of the OCS and additional reimbursement in international markets may require us to undertake additional clinical studies. Some international hospitals using the OCS currently pay for the OCS from their hospital budget or charitable funds.
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.
As of December 31, 2024, 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.
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.
As of December 31, 2024, 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.
Under the EU-US DPF, it will be possible to transfer EEA personal data freely to the US recipient that has self-certified under the EU-US DPF regime, although this may be challenged in the European Union Court of Justice by EU based privacy advocates.
Under the EU-US DPF, it is possible to transfer EEA personal data freely to the US recipient that has self-certified under the EU-US DPF regime, although this may be challenged in the European Union Court of Justice by EU based privacy advocates.
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.
As of December 31, 2024, 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.
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.
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 procurement, OCS perfusion management and transplant logistics services, to provide transplant programs with a more efficient process to procure donor organs with the OCS.
Upon expiration the agreement will continue to extend for subsequent periods of 24 months each, unless terminated by either party at least 12 months prior to the end of the initial term or the then-current extension term.
Upon expiration of the extension term, the agreement will continue to extend for subsequent periods of 24 months each, unless terminated by either party at least 12 months prior to the end of the then-current extension term.
Our NOP provides transplant centers with the ability to utilize the OCS to procure and transplant more organs for their patients than they would otherwise be able to do without increasing their own staff. 3 On August 16, 2023, we acquired Summit Aviation, Inc. and Northside Property Group, LLC, or together Summit.
Our NOP provides transplant centers with the 3 ability to utilize the OCS to procure and transplant more organs for their patients than they would otherwise be able to do without increasing their own staff. In August 2023, we acquired Summit Aviation, Inc. and Northside Property Group, LLC, or together Summit.
The expansion of our NOP to provide our own transportation logistics services, including 100% owned and operated private aircraft dedicated to organ retrieval, further improves the efficiency of utilizing the NOP as a complete solution for organ procurement. • Significant body of strong clinical evidence In order to receive FDA approval for our PMA products, we have conducted a very large number of clinical trials with very large numbers of patient participants, with the results of these trials published in leading medical journals.
The expansion of our NOP to provide our own transportation logistics services, including 100% owned and operated private aircraft dedicated to organ procurement, further improves the efficiency of utilizing the NOP as a complete solution for organ procurement. 4 • Significant body of strong clinical evidence In order to receive FDA approval for our PMA products, we have conducted clinical trials with large numbers of patient participants, with the results of these trials published in leading medical journals.
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.
We have also developed our NOP, an innovative turnkey solution to provide outsourced organ procurement, OCS perfusion management and transplant 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.
The EU CE mark is also recognized in Turkey and, for a transitional period following the UK’s withdrawal from the European Union, referred to as Brexit, in the United Kingdom.
The CE mark is also recognized in Turkey and, for a limited transitional period following the UK’s withdrawal from the European Union, referred to as Brexit, in the United Kingdom.
Summit was a charter flight operator based in Bozeman, Montana. The acquisition enabled us to add aircraft transportation services to our NOP and become a comprehensive national provider of donor organ retrieval and delivery in the United States. We have also acquired 13 fixed-wing aircraft to transport donor organs as part of the services offered under our NOP.
Summit was a charter flight operator based in Bozeman, Montana. The acquisition enabled us to add aircraft transportation services to our NOP and become a comprehensive national provider of donor organ procurement and delivery in the United States. We have also acquired 21 fixed-wing aircraft to transport donor organs as part of the services offered under our NOP.
Our NOP enables transplant centers to outsource the retrieval, organ management and transportation logistics process to our trained organ procurement surgeons, clinical specialists and transplant and logistics coordinators using our OCS products. Our offering allows the transplant center to focus their internal resources on the transplant surgery and patient care.
Our NOP enables transplant centers to outsource the organ procurement, OCS perfusion management and transplant logistics process to our trained organ procurement surgeons, clinical specialists and transplant and logistics coordinators using our OCS products. Our offering allows the transplant center to focus their internal resources on the transplant surgery and patient care.
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.
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 previously limited time period for procurement during which high quality transplant outcomes can reliably be obtained.
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.
Our patent portfolio includes patents and patent applications that we own or license from third parties. As of December 31, 2024, our owned and licensed patent portfolio consisted of approximately 430 issued patents and pending patent applications worldwide, including in the United States, Australia, Europe, Canada, China, Israel, New Zealand and Japan.
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.
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 16 • criminal prosecution.
Once the product has been placed on the market in the European Union, the manufacturer must comply with requirements for reporting incidents and field safety corrective actions associated with the medical device. The notified body has ongoing audit rights and must be notified of all significant changes to the device.
Once the device has been placed on the market in the European Union, the manufacturer must comply with requirements for reporting incidents and field safety corrective actions associated with its use. The notified body has ongoing audit rights and must be notified of all significant changes to the device.
Such patents are issued in the United States, Australia, Belgium, Canada, China, Denmark, Europe, France, Germany, Ireland, Israel, Italy, Japan, Hong Kong, Netherlands, New Zealand, Spain, Sweden, and United Kingdom, and patent applications are pending in the United States, Australia, Canada, China, Europe, Hong Kong, Israel, Japan and New Zealand.
Such patents are issued in the United States, Austria, Australia, Belgium, Brazil, Canada, China, Czech Republic, Denmark, Europe, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Spain, Sweden, and United Kingdom, and patent applications are pending in the United States, Australia, Brazil, Canada, China, Europe, Israel, Japan, and New Zealand.
Such patents are issued in the United States, Australia, Belgium, Canada, China, Denmark, Europe, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Spain, Sweden, and United Kingdom, and patent applications are pending in the United States, Australia, Canada, China, Europe, Hong Kong, Israel, Japan, and New Zealand.
Such patents are issued in the United States, Austria, Australia, Belgium, Brazil, Canada, China, Czech Republic, Denmark, Europe, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Spain, Sweden and United Kingdom, and patent applications are pending in the United States, Canada, China, Europe and Hong Kong.
To demonstrate compliance with the GSPRs, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its classification. Conformity assessment procedures require an assessment of available clinical evidence, literature data for the product and post-market experience in respect of similar products already marketed.
To demonstrate compliance with the GSPRs, medical device manufacturers must undergo a conformity assessment procedure, the specifics of which vary according to the type of medical device and its classification. Conformity assessment procedures involve an assessment of available clinical evidence, literature data for the product and post-market experience in respect of similar products already marketed.
If satisfied that the relevant product conforms to the relevant GSPRs, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity.
If satisfied that the relevant medical device conforms to the relevant GSPRs, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity.
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.
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, 2024, 2023 and 2022 our research, development and clinical trials expenses were $56.0 million, $36.1 million and $26.8 million, respectively.
As we expect the number of transplants to increase and the retrieval distance to extend, we believe the field will need alternatives to the current model in which the recipient transplant center sends its team to the donor site for retrieval.
As we expect the number of transplants to increase and the procurement distance to extend, we believe the field will need alternatives to the previous model in which the recipient transplant center sends its team to the donor site for procurement.
Medicare and private payors provided reimbursement for the OCS Lung, OCS Heart and OCS Liver during the U.S. pivotal trials and have provided reimbursement for the OCS Lung, OCS Heart and OCS Liver following their FDA approvals. This has established multiple years of billing precedent.
Medicare and private payors provided reimbursement for the OCS Lung, OCS Heart and OCS Liver during the U.S. pivotal trials and have provided reimbursement for the OCS Lung, OCS Heart and OCS Liver following their FDA approvals. This has established a history of billing precedent.
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.
The time required to obtain marketing authorization in foreign countries may be longer or shorter than that for FDA approval or clearance, and requirements for licensing a product in a foreign country may differ significantly from FDA requirements.
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.
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.
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.
While we are not directly affected by this regulation and guideline, our UK customers are, and our products may either help or impede their compliance with this regulation. 19 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/investigations; • 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.
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.
Since its inception in 2021, the NOP has accelerated adoption of the OCS, and we believe this program has the potential to 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.
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 Medical Devices in the European Union In the European Union, our products are regulated as medical devices. Regulation of medical devices in the European Union is harmonized through Regulation (EU) 2017/745, or the MDR, which repealed and replaced Directive 93/42/EEC on medical devices, or the MDD, with effect from May 26, 2021.
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.
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 will: • conduct risk-based assessments of all allegations of non-compliance brought to their attention; • 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.
For all devices other than low risk devices ( i.e. , Class I non-sterile, non-measuring devices), a conformity assessment procedure requires the intervention of a notified body. The notified body must audit and examine a product’s technical dossier and the manufacturer's quality system.
For all medical devices other than low risk devices ( i.e. , Class I non-sterile, non-measuring devices), a conformity assessment procedure requires the intervention of a notified body. Notified bodies are independent organizations which audit and examine a product’s technical dossier and the manufacturer's quality system.
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.
We are developing the next generation multi-organ platform to improve the usability, incorporate new technology and automation, and facilitate the use of OCS in our NOP.
The 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 Perfusion Set includes all accessories needed to place the organ on the system. • OCS Solutions: The OCS Solutions are a set of nutrient-enriched solutions used with blood to replenish depleted nutrients and hormones needed to optimize the organ’s condition outside of the human body. 6 The 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 procurement; • 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.
Clinical Investigations In order to demonstrate compliance with the essential requirements of the UK MDR 2002 and the general safety and performance requirements of the EU MDR, and in order to justify the application of UKCA/CE/CE UKNI marking, it will sometimes be necessary for the manufacturer of the device to provide clinical data with which to back up claims made for that device.
Clinical Investigations In order to demonstrate compliance with the essential requirements of the UK MDR and the GSPRs of the MDR, and in order to justify the application of UKCA/CE/CE UKNI marking, it will sometimes be necessary for the manufacturer of the device to provide clinical data with which to substantiate claims made for that device.
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.
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 international authorities including, but not limited to, those in the European Union.
For example, if, as a result of manufacturing error, the efficacy of our products does not meet the standards claimed in the accompanying instructions for use, regulatory authorities could prevent our products from being placed on the market. Internationally, the approaches to product defects will vary. A product may be recalled in one country but not in others.
For example, if, as a result of manufacturing error, the efficacy of our products does not meet the standards claimed in the accompanying instructions for use, regulatory authorities could prevent our products from being placed on the market. Internationally, the regulatory requirements relating to product defects may vary.
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.
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 53 issued patents and 12 pending applications. Outside the United States, our owned portfolio includes about 313 issued patents and 52 pending applications.
In the UK the Competent Authority is the Human Tissue Authority, which has published the “The Quality and Safety of Organs Intended for Transplantation: a documentary framework” which details mandatory requirements as well as guidance on how those requirements may be met.
This Regulation provided for the establishment of a competent authority for the regulation of organ transplantation, the Human Tissue Authority, or the HTA. The HTA has published the “The Quality and Safety of Organs Intended for Transplantation: a documentary framework” which details mandatory requirements as well as guidance on how those requirements may be met.
In the European Union, the manufacturer of a device must affix a Conformité Européene mark, or CE Mark, which allows the device to be placed on the market anywhere in the EU and additional Member States of the European Economic Area, or EEA, (i.e ., Norway, Lichtenstein and Iceland).
The CE mark allows the device to be placed on the market anywhere in the EU and additional Member States of the European Economic Area, or EEA, (i.e ., Norway, Lichtenstein and Iceland).
These benefits to eligible employees include a 401(k) retirement plan with an employer matching contribution, health insurance (including medical, dental, and vision), life insurance, short- and long-term disability insurance, and paid time off policies. We offer an employee stock purchase plan to facilitate broad-based stock ownership by our employees.
These benefits to eligible employees include a 401(k) retirement plan with an employer matching contribution, health insurance (including medical, dental, and vision), life insurance, short- and long-term disability insurance, and paid time off policies.
UK Regulations Applicable to Organs Intended for Transplantation The standards for the quality and safety of organs for transplantation has been enacted into UK law through The Quality and Safety of Organs Intended for Transplantation Regulations 2012, as amended. This Regulation allows for the establishment of a Competent Authority for the regulation of organ transplantation.
UK Regulations Applicable to Organs Intended for Transplantation The standards for the quality and safety of organs for transplantation has been enacted into UK law through The Quality and Safety of Organs Intended for Transplantation Regulations 2012, as amended.
Currently the European Commission has only harmonized a relatively limited number of standards (these include, for example, standards of sterilization, biological evaluation, the quality management system, etc. ) but the Commission will continue to harmonize more standards.
To date, the European Commission has harmonized a limited number of standards, including, for example, standards of sterilization, biological evaluation, the quality management system, etc. but will continue to harmonize more standards going forward.
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.
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. We have adopted policies to promote compliance with laws and regulations as well as to foster a respectful workplace for all employees.
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.
Our agreement with Fresenius for the supply of OCS Lung Solution had an original term through April 2024 and was automatically extended for an extension term through April 2026.
In recent years, the focus of our recruitment efforts has been centered on finding talent for the NOP and our engineering, manufacturing, and supply chain operations. Since the launch of our aircraft operations in 2023, we are also seeking additional resources in the field of logistics and aviation, including logistics coordinators, pilots and aviation mechanics.
The focus of our recruitment efforts has been centered on finding talent for the NOP, our engineering, manufacturing, and supply chain operations, and in the field of logistics and aviation, including logistics coordinators, pilots and aviation mechanics.
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.
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 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 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).
Our failure to maintain compliance with the QSR or other applicable regulatory requirements could result in the shutdown of, or restrictions on, our manufacturing operations and the recall or seizure of our products.
As a manufacturer, our facilities, records and manufacturing processes are subject to periodic scheduled or unscheduled inspections by the FDA. Our failure to maintain compliance with the QSR or other applicable regulatory requirements could result in the shutdown of, or restrictions on, our manufacturing operations and the recall or seizure of our products.
We have begun the development of required comprehensive material for various national healthcare systems throughout Europe. We believe international expansion will be an additional growth driver for us in the long term. Commercialization We commercialize our products through two channels: our NOP and a direct acquisition model.
We have begun to add resources in Europe focused on commercial expansion and market access. We believe international expansion will be an additional growth driver for us in the long-term. Commercialization We commercialize our products through two channels: our NOP and a direct acquisition model.
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.
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, although neither the EU MDR nor EU IVDR apply in Great Britain, the UK MDR 2002 provide a transitional period that allows manufacturers to place devices CE marked under the EU MDR or EU IVDR (including their relevant transition periods), on the market in Great Britain potentially up until June,30 2030.
Despite the MDR not applying in Great Britain, the UK MDR provides a transitional period that allows manufacturers to place devices CE marked under the MDR (including their relevant transition periods), on the market in Great Britain potentially up until June 30, 2030, depending on the class of device.
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.
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.
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.
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.
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.
Utilizing our NOP saves the transplant center from investing in additional resources to support higher volumes and longer distance procurements. Since the launch of the NOP, our sales of the OCS have primarily been through the NOP.
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.
All of our medical devices that were previously certified under the MDD, including OCS Heart, OCS Lung, and OCS Liver systems, which includes the OCS Console, the OCS disposables, and the OCS solution additives, have been recertified under the MDR. Clinical Investigations Clinical evidence is required for the conformity assessment of most medium and high risk devices.
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 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.
However, the competent authorities in each member state enforce the standards set out in the MDR against relevant economic operators (including the manufacturer, importer, authorized representative and distributors) making medical devices available in the member state (although, under the MDR there are provisions for national competent authorities to inform other competent authorities, the European Commission and Notified Bodies, as applicable, of certain non-compliances).
The national competent authorities in each member state oversee and enforce compliance with the standards set out in the MDR against relevant economic operators (including device manufacturers, importers, authorized representatives and distributors). Under the MDR, national competent authorities can inform other national competent authorities, the European Commission and Notified Bodies, as applicable, of certain non-compliances.
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.
This patent 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. 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.
Our corporate headquarters, manufacturing and clinical training facilities are located in Andover, Massachusetts. We also have a geographically distributed team in the United States supporting our NOP. We have additional distribution and commercial operations in Europe. As of December 31, 2023, we had 584 employees, most of whom were full-time and located in the United States.
Our corporate headquarters, manufacturing and clinical training facilities are located in Andover, Massachusetts. We also have a geographically distributed team in the United States supporting our NOP and a designated maintenance hub for our aircraft in Dallas, Texas. We have additional distribution and commercial operations in Europe.
Value to Payors We believe organ transplantation is a cost-effective treatment for end-stage organ failure as it provides the longest life expectancy, and better quality of life, compared to other treatments like mechanical support or medical therapy.
In addition, we believe the increase in transplant volumes enabled by the OCS will help providers achieve “Center of Excellence” designations with payors and thus drive significant revenue growth for their transplant programs. 7 Value to Payors We believe organ transplantation is a cost-effective treatment for end-stage organ failure as it provides the longest life expectancy, and better quality of life, compared to other treatments like mechanical support or medical therapy.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeReimbursement in international markets is likely to require us to undertake country-specific reimbursement activities, including additional clinical studies, which could be time-consuming and expensive and may not yield acceptable reimbursement rates. In international markets, market acceptance of our products will likely depend in large part on the availability of reimbursement within prevailing healthcare payment systems.
Biggest changeIf hospitals or surgeons determine that the benefits of the OCS do not or will not outweigh the initial cost and ongoing expense of the OCS, we might fail to achieve significant sales and may fail to maintain profitability on a sustained basis. 51 Reimbursement in international markets is likely to require us to undertake country-specific reimbursement activities, including additional clinical studies, which could be time-consuming and expensive and may not yield acceptable reimbursement rates.
Furthermore, the use of the OCS for indications other than those approved by the FDA/ by any foreign regulatory body or for which they are CE marked may not effectively treat such conditions, which could harm our reputation in the marketplace among surgeons and patients.
Furthermore, the use of the OCS for indications other than those approved by the FDA or by any foreign regulatory body or for which they are CE marked may not effectively treat such conditions, which could harm our reputation in the marketplace among surgeons and patients.
Failure by our sales staff to comply with those laws may result in criminal and civil penalties and damage our reputation; and • analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any private payor, including commercial insurers or patients; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm customers, foreign and state laws, including the GDPR, governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.
Failure by our sales staff to comply with those laws may result in criminal and civil penalties and damage our reputation; and 56 • analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any private payor, including commercial insurers or patients; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm customers, foreign and state laws, including the GDPR, governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.
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.
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; 35 • 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 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; • 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.
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; • 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.
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.
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.
Alternatively, if the Business Litigation Session of the Superior Court of Suffolk County, Massachusetts or a court outside of Massachusetts were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other venues or jurisdictions, which could materially and adversely affect our business, financial condition, operating results, cash flows and prospects.
Alternatively, if the Business 61 Litigation Session of the Superior Court of Suffolk County, Massachusetts or a court outside of Massachusetts were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other venues or jurisdictions, which could materially and adversely affect our business, financial condition, operating results, cash flows and prospects.
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.
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; 60 • 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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Long-term Debt” in this Annual Report on Form 10-K. Servicing our 1.50% convertible senior notes due 2028 requires a significant amount of cash, and we may not have sufficient cash flow to pay our debt.
Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Long-term Debt” in this Annual Report on Form 10-K. 26 Servicing our 1.50% convertible senior notes due 2028 requires a significant amount of cash, and we may not have sufficient cash flow to pay our debt.
However, within the European Union, competent authorities are required without delay to take corrective action against a device (including withdrawal/recall of a device) and notify other national competent authorities, the European Commission and notified bodies (as applicable) of any devices that present an unacceptable risk to the health or safety of patients, users or other persons, or other aspects of the protection of public health.
Within the European Union, competent authorities are required without delay to take corrective action against a device (including withdrawal/recall of a device) and notify other national competent authorities, the European Commission and notified bodies (as applicable) of any devices that present an unacceptable risk to the health or safety of patients, users or other persons, or other aspects of the protection of public health.
Outside the United States, our products and operations are also often required to comply with standards set by industrial standards bodies, such as the International Organization for Standardization. For example, in the European Union the MDR includes detailed requirements for clinical investigations, which are in line with the international standard ISO 14155:2020 on good clinical practical, or GCP.
Outside the United States, our products and operations are also often required to comply with standards set by international standards bodies, such as the International Organization for Standardization. For example, in the European Union the MDR includes detailed requirements for clinical investigations, which are in line with the international standard ISO 14155:2020 on good clinical practical, or GCP.
The TCJA also reduced the corporate income tax rate to 21%, from a prior rate of 35%. This may cause a reduction in the potential economic benefit of our NOLs and other available deferred tax assets. We may need to raise additional funding, which might not be available on favorable terms or at all.
The TCJA also reduced the corporate income tax rate to 21%, from a prior rate of 35%. This may cause a reduction in the potential economic benefit of our NOLs and other available deferred tax assets. 28 We may need to raise additional funding, which might not be available on favorable terms or at all.
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.
Our failure to compete effectively will harm our business and operating results. 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.
We may not be able to pass along increased component part prices to customers in the form of price increases or our ability to do so could be delayed. Consequently, our results of operations and financial condition may be adversely affected. Our failure to compete effectively will harm our business and operating results.
We may not be able to pass along increased component part prices to customers in the form of price increases or our ability to do so could be delayed. Consequently, our results of operations and financial condition may be adversely affected. 34 Our failure to compete effectively will harm our business and operating results.
Code, Section 40102 and administrative interpretations thereof issued by the DOT or its predecessor or successors, or as the same may be from time to time amended). A failure to comply with or changes to these restrictions may materially adversely affect our business. 41 Revocation of permits, approvals, authorizations and licenses.
Code, Section 40102 and administrative interpretations thereof issued by the DOT or its predecessor or successors, or as the same may be from time to time amended). A failure to comply with or changes to these restrictions may materially adversely affect our business. Revocation of permits, approvals, authorizations and licenses.
We will need to continue to monitor the developments in the UK to assess how they impact our devices sold in Great Britain We are subject to certain federal, state and foreign fraud and abuse laws, health information privacy and security laws and transparency laws, which, if violated, could subject us to substantial penalties.
We will need to continue to monitor the developments in the UK to assess how they impact our devices sold in Great Britain. 55 We are subject to certain federal, state and foreign fraud and abuse laws, health information privacy and security laws and transparency laws, which, if violated, could subject us to substantial penalties.
We may be unable to transition to alternative methods of sterilization in a timely or cost-effective manner or at all, which could harm our business and results of operations. Our results of operations could be materially harmed if we are unable to accurately forecast customer demand for our products and manage our inventory.
We may be unable to transition to alternative methods of sterilization in a timely or cost-effective manner or at all, which could harm our business and results of operations. 30 Our results of operations could be materially harmed if we are unable to accurately forecast customer demand for our products and manage our inventory.
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.
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; 29 • 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.
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.
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 these organizations or national authorities were to name us as having breached our obligations under their laws, regulations, rules or standards, our reputation would suffer and our business, financial condition, operating results, cash flows and prospects could be adversely affected. 58 Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws, including the FCPA, as well as export control laws, customs laws, sanctions laws and other laws governing our operations could result in civil or criminal penalties, other remedial measures and legal expenses.
If these organizations or national authorities were to name us as having breached our obligations under their laws, regulations, rules or standards, our reputation would suffer and our business, financial condition, operating results, cash flows and prospects could be adversely affected. 57 Failure to comply with anti-bribery, anti-corruption, and anti-money laundering laws, including the FCPA, as well as export control laws, customs laws, sanctions laws and other laws governing our operations could result in civil or criminal penalties, other remedial measures and legal expenses.
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 procurement of donor organs despite availability.
Even if we are not determined to have violated applicable data laws, government investigations into these issues can be expensive and lengthy and generate adverse publicity, which could harm our business, financial condition, results of operations or prospects. 59 The EEA and the UK, as well as other international jurisdictions, also have laws and regulations dealing with the collection, use and processing of personal data concerning individuals who are located there.
Even if we are not determined to have violated applicable data laws, government investigations into these issues can be expensive and lengthy and generate adverse publicity, which could harm our business, financial condition, results of operations or prospects. 58 The EEA and the UK, as well as other international jurisdictions, also have laws and regulations dealing with the collection, use and processing of personal data concerning individuals who are located there.
If we are unable to deliver OCS products to customers through their participation in the NOP, our revenue would be materially reduced, which would materially and adversely effect our business, financial condition, operating results, cash flows and prospects. We depend on single-source suppliers and, in a few cases, sole-source suppliers for many of the components used in the OCS.
If we are unable to deliver OCS products to customers through their participation in the NOP, our revenue would be materially reduced, which would materially and adversely affect our business, financial condition, operating results, cash flows and prospects. We depend on single-source suppliers and, in a few cases, sole-source suppliers for many of the components used in the OCS.
As of December 31, 2023, our outstanding principal balance of long-term debt under our credit agreement with Canadian Imperial Bank of Commerce, or CIBC, was $60.0 million, which we refer to as the CIBC Credit Agreement. Our payment obligations under the CIBC Credit Agreement reduce cash available to fund working capital, capital expenditures, research and development and general corporate needs.
As of December 31, 2024, our outstanding principal balance of long-term debt under our credit agreement with Canadian Imperial Bank of Commerce, or CIBC, was $60.0 million, which we refer to as the CIBC Credit Agreement. Our payment obligations under the CIBC Credit Agreement reduce cash available to fund working capital, capital expenditures, research and development and general corporate needs.
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.
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 maintaining profitability will suffer materially.
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.
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; • 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. 42 We rely on shipping providers to deliver products to our customers globally.
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.
Although we have received PMA approvals 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.
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.
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 recalls.
We may not successfully or profitably utilize newly acquired assets or integrate, operate, maintain and manage any newly acquired operations or employees. Further development of the assets we acquired from Bridge to Life, or the Bridge to Life Assets, will require extensive clinical development, management of nonclinical, clinical and manufacturing activities.
We may not successfully or profitably utilize newly acquired assets or integrate, operate, maintain and manage any newly acquired operations or employees. Further development of the assets we acquired from Bridge to Life, or the Bridge to Life Assets, have and will continue to require extensive clinical development, management of nonclinical, clinical and manufacturing activities.
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.
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 normothermic regional perfusion, or the loss of, reduction of business with, or less favorable terms with any of our largest customers.
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.
Our prospects for generating revenue and maintaining 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 maintain insurance coverage for these types of incidents, such policies, may not provide coverage for, or offset the costs of responding to and remediating this infiltration or any other such incidents or any other liability that may arise from this infiltration or any other such incident.
While we maintain insurance coverage for these types of incidents, such policies, may not provide coverage for, or offset the costs of responding to and remediating such incidents or any other liability that may arise from such incident.
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.
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. 62 Item 1B. Unresolved Staff Comments. None.
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.
Moreover, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, or if activist investors continue to, 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.
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.
In addition to our own surgical and clinical personnel, we utilize a network with a limited number of partners for organ procurement, organ preservation and transportation services offered through our NOP.
If Pratt & Whitney fails to adequately fulfill its obligations towards us or experiences interruptions or disruptions in production or provision of parts or services due to, for example, bankruptcy, natural disasters, labor strikes or disruption of its supply chain, we may experience a significant delay in the delivery of or fail to receive previously ordered aircraft engines and parts, which could result in grounded aircraft.
If Pratt & Whitney fails to adequately fulfill its obligations towards us or experiences interruptions or disruptions in production or provision of parts or services due to, for example, bankruptcy, natural disasters, labor strikes, increased FAA, oversight of the production process, or disruption of its supply chain, we may experience a significant delay in the delivery of or fail to receive previously ordered aircraft engines and parts, which could result in grounded aircraft.
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.
During the years ended December 31, 2024, 2023 and 2022, 3%, 6% and 10%, 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.
Furthermore, our ability to utilize our NOLs or credits is conditioned upon our attaining profitability and generating U.S. federal and state taxable income.
Furthermore, our ability to utilize our NOLs or credits is conditioned upon our maintaining profitability and generating U.S. federal and state taxable income.
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.
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 developing and operating our NOP.
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.
The timing and amount of our operating and capital expenditures will depend on many factors, including: • revenue generated from our NOP services and sales of our OCS Consoles, OCS Perfusion Sets and OCS Solutions; • the costs and expenses of expanding our U.S. and non-U.S. commercial infrastructure and our manufacturing operations; 27 • 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 and maintaining current and 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; • 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.
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.
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.
However, although neither the EU MDR nor EU IVDR apply in Great Britain, the national UK medical devices rules currently allow manufacturers to place devices CE marked under the EU MDR or EU IVDR (including their relevant transition periods) on the market in Great Britain, potentially up until June 30, 2030, provided certain conditions are met.
However, although neither the EU MDR nor EU IVDR apply in Great Britain, the national UK medical devices rules currently allow manufacturers to place devices CE marked under the EU MDR or EU IVDR (including their relevant transition periods) on the market in Great Britain, potentially up until June 30, 2030, depending on the class of device and provided certain conditions are met.
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.
We may not be able to continue to recruit, train and retain qualified personnel, including due to demand for their capabilities and competitive compensation offered by other employers.
The Budget Control Act of 2011, as amended, or the Budget Control Act, includes provisions intended to reduce the federal deficit, including reductions in Medicare payments to providers through 2030 (except May 1, 2020 to March 31, 2022).
The Budget Control Act of 2011, as amended, or the Budget Control Act, includes provisions intended to reduce the federal deficit, including reductions in Medicare payments to providers through fiscal year 2032 (except May 1, 2020 to March 31, 2022).
Even where reimbursement or funding is available, in some foreign countries, particularly in the European Union, the pricing of medical devices is subject to governmental control. In these countries, reimbursement and pricing negotiations with governmental authorities can take considerable time after the CE marking of a product.
Even where reimbursement or funding is available, in some foreign countries, particularly in the European Union, the pricing of medical devices is subject to governmental control and a determination of affordability for medical devices to be accessed. In these countries, reimbursement and pricing negotiations with governmental authorities can take considerable time after the CE marking of a product.
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.
The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that: 45 • 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.
If any maintenance provider with whom we have a flight hour agreement fails to perform or honor such agreements, we could incur higher interim maintenance costs until we negotiate new agreements. Any unexpected increase in maintenance costs may negatively impact our financial position and results of operations. Our inability to acquire additional aircraft may adversely affect operations.
If any maintenance provider with whom we have a flight hour agreement fails to perform or honor such agreements, we could incur higher interim maintenance costs until we negotiate new agreements. Any unexpected increase in maintenance costs may negatively impact our financial position and results of operations.
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.
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.
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.
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.
Our failure to comply with FDA or local requirements that pertain to clinical trials/investigations, including GCP requirements, and the QSR (in the United States), or failure to take satisfactory and prompt corrective action in response to an adverse inspection, could result in enforcement actions, including a warning letter, adverse publicity, a shutdown of or restrictions on our manufacturing operations, delays in approving or clearing our products, refusal to permit the import or export of our product, prohibition on sales of our product, a recall or seizure of our products, fines, injunctions, civil or criminal penalties, or other sanctions, any of which could cause our business and operating results to suffer.
Our failure to comply with FDA or local requirements that pertain to clinical trials/investigations, including GCP requirements, and the QSR (in the United States), or failure to take satisfactory and prompt corrective action in response to an adverse inspection, could result in enforcement actions, including a warning letter, adverse publicity, a shutdown of or restrictions on our manufacturing operations, delays in approving or clearing our products, refusal to permit the import or export of our product, prohibition on sales of our product, a recall or seizure of our products, fines, injunctions, civil or criminal penalties, or other sanctions, any of which could cause our business and operating results to suffer. 52 We may not be able to obtain or maintain regulatory qualifications outside the United States, which could harm our business.
We may review additional acquisition, joint ventures and strategic investment opportunities to expand our current product offerings, increase the size and geographic scope of our operations or otherwise offer growth and operating efficiency opportunities. There can be no assurance that we will be able to identify suitable candidates or consummate future transactions on favorable terms.
We may review additional acquisition, joint ventures and strategic investment opportunities to expand our current product offerings, increase the size and geographic scope of our operations or otherwise offer growth and operating efficiency opportunities. We may not be able to identify suitable candidates or consummate future transactions on favorable terms.
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.
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 may not be able to achieve satisfactory prices for our products or maintain prices at the levels we have historically achieved.
In addition, even if we do obtain international reimbursement approvals, the level of reimbursement may not be enough to commercially justify expansion of our business into the approving jurisdiction.
We may not obtain international reimbursement approvals in a timely manner, if at all. In addition, even if we do obtain international reimbursement approvals, the level of reimbursement may not be enough to commercially justify expansion of our business into the approving jurisdiction.
We expect our operating and capital expenditures will continue to increase for the foreseeable future as we focus on growing commercial sales of our products in both the U.S. and select non-U.S. markets, including growing our NOP and expanding our NOP offerings to include transportation logistics services, including the acquisition of additional aircraft to support aviation transportation; growing our commercial team, which will pursue increasing commercial sales of our OCS products; scaling our manufacturing operations; continuing research and development for our next generation OCS products; and seeking regulatory clearance for new products and product enhancements, including new indications, in both the U.S. and select non-U.S. markets.
We expect our operating and capital expenditures will continue to increase for the foreseeable future as we focus on growing commercial sales of our products in both the U.S. and select non-U.S. markets, including growing our NOP; acquiring and maintaining additional aircraft to support aviation transportation; growing our commercial team, which will pursue increasing commercial sales of our OCS products; scaling our manufacturing operations; continuing research and development for our next generation OCS products, including conducting clinical trials for our next generation OCS products; and seeking regulatory clearance for new products and product enhancements, including new indications, in both the U.S. and select non-U.S. markets.
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.
We depend heavily on the success of the OCS and it gaining additional market acceptance as well as the success of the next generation OCS. If we are unable to continue to successfully commercialize the OCS or the next generation OCS, our business may fail.
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.
If we identify any additional material weaknesses in our internal controls over financial reporting or if 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 not have a complete understanding of our operations or may lose confidence in our financial and other public reporting.
In the EU, Regulation (EU) 2017/745, or the MDR, repealed and replaced the Medical Devices Directive (93/42/EEC) with effect from May, 26 2021.
In the EU, the MDR repealed and replaced the Medical Devices Directive (93/42/EEC) with effect from May, 26 2021.
The UK Medical Devices Regulations 2002 (UK MDR 2002) provided a transitional period under which the UK will recognize EU CE marks and the MHRA has confirmed that this will be extended potentially until June 30, 2030 (subject to certain conditions).
The UK Medical Devices Regulations 2002 (UK MDR 2002) provided a transitional period under which the UK will recognize EU CE marks and the MHRA has confirmed that this will apply potentially until June 30, 2030 (subject to certain conditions and depending on the type of device).
These provisions, alone or together, could delay hostile takeovers and changes in control of our company or changes in our management. 62 Our restated articles of organization designate the Business Litigation Session of the Superior Court of Suffolk County, Massachusetts (or, if and only if the Business Litigation Session of the Superior Court of Suffolk County, Massachusetts lacks jurisdiction, another state or federal court located within the Commonwealth of Massachusetts) as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors and officers.
Our restated articles of organization designate the Business Litigation Session of the Superior Court of Suffolk County, Massachusetts (or, if and only if the Business Litigation Session of the Superior Court of Suffolk County, Massachusetts lacks jurisdiction, another state or federal court located within the Commonwealth of Massachusetts) as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors and officers.
Risks Related to Our Common Stock and General Risks The market price of our common stock has been and may continue to be volatile and could subject us to securities class action litigation. During the year ended December 31, 2023, the price per share of our common stock has ranged from as low as $36.42 to as high as $99.63.
Risks Related to Our Common Stock and General Risks The market price of our common stock has been and may continue to be volatile and could subject us to securities class action litigation. During the year ended December 31, 2024, the price per share of our common stock has ranged from as low as $58.27 to as high as $177.37.
If we raise additional funds through additional debt financing, we may need to dedicate a substantial additional portion of any operating cash flows to the payment of principal and interest on such indebtedness.
If we raise additional funds through additional debt financing, we may need to dedicate a substantial additional portion of any operating cash flows to the payment of principal and interest on such indebtedness. The terms of any debt financing also could impose significant restrictions on our operations.
Congress that could significantly change the statutory provisions governing the regulation of medical devices. In addition, FDA regulations and guidance may be revised or reinterpreted by the FDA in ways that may significantly affect our business and our products.
From time to time, legislation is drafted and introduced in the U.S. Congress that could significantly change the statutory provisions governing the regulation of medical devices. In addition, FDA regulations and guidance may be revised or reinterpreted by the FDA in ways that may significantly affect our business and our products.
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.
The cost of the OCS significantly exceeds the cost of cold storage preservation. 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 organ procurement and OCS perfusion management using the OCS rather than utilizing our NOP.
In addition, to the extent an accident occurs with an aircraft we operate or charter, we could be held liable for resulting damages, which may involve claims from injured passengers, and survivors of deceased passengers and property owners.
In addition, to the extent an accident occurs with an aircraft we own or through the use of a third-party network of private aircraft, we could be held liable for resulting damages, which may involve claims from injured passengers, and survivors of deceased passengers and property owners.
If we identify a material weakness in our internal control over financial reporting, we may not be able to remediate the material weakness identified in a timely manner or maintain all of the controls necessary to remain in compliance with our reporting obligations.
In addition, if we identify any additional material weaknesses or significant deficiencies in our internal control over financial reporting, we may not be able to remediate such material weaknesses or significant deficiencies identified in a timely manner or maintain all of the controls necessary to remain in compliance with our reporting obligations or to prevent fraud.
Establishing additional or replacement suppliers for any of these materials or components, if required, or any supply interruption from our suppliers, could limit our ability to manufacture our products, result in production delays and increased costs and adversely affect our ability to deliver products to our customers on a timely basis.
We could be adversely affected if we experience any delay or deficiency in the quality of products obtained from suppliers and/or if we have to replace our suppliers. 33 Establishing additional or replacement suppliers for any of these materials or components, if required, or any supply interruption from our suppliers, could limit our ability to manufacture our products, result in production delays and increased costs and adversely affect our ability to deliver products to our customers on a timely basis.
As of December 31, 2023, we had federal net operating loss, or NOL, carryforwards of $376.4 million, which may be available to offset future taxable income, of which $207.4 million of the total net operating loss carryforwards expire at various dates beginning in 2024, while the remaining $169.0 million do not expire but are limited in their usage to an annual deduction equal to 80% of annual taxable income.
As of December 31, 2024, we had federal net operating loss, or NOL, carryforwards of $404.1 million, which may be available to offset future taxable income, of which $204.6 million of the total NOL carryforwards expire at various dates through 2037, while the remaining $199.5 million do not expire but are limited in their usage to an annual deduction equal to 80% of annual taxable income.
As described above, we have incurred significant net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future; and therefore, we do not know whether or when we will generate the U.S. federal or state taxable income necessary to utilize our NOL or credit carryforwards.
As described above, prior to 2024, we incurred significant net losses since inception; and therefore, we do not know whether we will generate the U.S. federal or state taxable income necessary to utilize our NOL or credit carryforwards.
In addition, we may decide that only certain of the acquired technology is useful for the next generation of the OCS, or that integration of the acquired technology is not feasible or is too costly. We also may face challenges integrating Summit into our organization.
In addition, we may decide that only certain of the acquired technology is useful for the next generation of the OCS, or that integration of the acquired technology is not feasible or is too costly.
We rely on our information technology systems to effectively manage sales and marketing data, accounting and financial functions, inventory management, product development tasks, clinical data, donor and patient data, customer service and technical support functions.
We rely on our information technology systems to effectively manage sales and marketing data, accounting and financial functions, inventory production and management, product development tasks, clinical and other data required to support NOP missions, customer service and logistics activities, and technical support functions.
Any changes of, or uncertainty with respect to, coverage or reimbursement of services provided by organ procurement organizations, transplant centers or hospitals could affect demand for the OCS, which in turn could have a material adverse effect on our business, financial condition and results of operations. 60 In addition, other broader legislative changes have been adopted that could have an adverse effect upon, and could prevent, our products’ commercial success.
Any changes of, or uncertainty with respect to, coverage or reimbursement of services provided by organ procurement organizations, transplant centers or hospitals could affect demand for the OCS, which in turn could have a material adverse effect on our business, financial condition and results of operations.
If any variation in the uses for which the CE/UKCA mark has been affixed to the OCS requires us to perform further research or to modify the technical documentation required to affix the CE/UKCA mark, our revenue and operating results could be adversely affected and our reputation could be harmed. 51 If we fail to obtain and maintain regulatory approval in foreign jurisdictions, our market opportunities will be limited.
If any variation in the uses for which the CE/UKCA mark has been affixed to the OCS requires us to perform further research or to modify the technical documentation required to affix the CE/UKCA mark, our revenue and operating results could be adversely affected and our reputation could be harmed.
Furthermore, we would need to pay any product liability losses in excess of our insurance coverage or within the deductibles provided under our insurance policies applicable to the claim out of cash reserves, which could materially and adversely affect our business, financial condition, operating results, cash flows and prospects.
Furthermore, we would need to pay any product liability losses in excess of our insurance coverage or within the deductibles provided under our insurance policies applicable to the claim out of cash reserves, which could materially and adversely affect our business, financial condition, operating results, cash flows and prospects. 53 The FDA has recognized the threat of cyberattacks on medical devices, and imposes requirements on medical device manufacturers to ensure the cybersecurity of devices.
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.
Adoption of our products in the European Union may be hindered if the adoption impedes or otherwise compromises 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.
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.
As of December 31, 2024, we had state NOL carryforwards of $349.6 million, which may be available to offset future taxable income and expire at various dates beginning in 2030.
If securities or industry analysts issue an adverse or misleading opinion regarding our business or do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline. The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business.
If securities or industry analysts issue an adverse or misleading opinion regarding our business or do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.
In February 2024 FDA issued the QSMR Final Rule to amend the QSR, incorporating by reference ISO 13485:2016. Until the QSMR becomes effective on February 2, 2026, we are required to comply with the QSR. The FDA enforces the QSR through periodic inspections and unannounced “for cause” inspections.
In February 2024 FDA issued the QSMR Final Rule to amend the QSR, incorporating by reference ISO 13485:2016. Until the QSMR becomes effective on February 2, 2026, and we are required to transition to the QMSR by that date. Prior to February 2, 2026 we are required to comply with the QSR.
As we continue to expand commercialization of our products and sell OCS products to new customers, the impact of any future product recall increases, and any future product recalls would require greater administrative and response efforts than historical product recalls. Internationally, the approaches to product defects will vary. A product may be recalled in one country but not in others.
As we continue to expand commercialization of our products and sell OCS products to new customers, the impact of any future product recall increases, and any future product recalls would require greater administrative and response efforts than historical product recalls. Internationally, the regulatory requirements relating to product defects may vary.
In particular, private aircraft are occasionally in high demand and/or subject to price fluctuations based on market conditions. Further, availability is constrained by a limited number of private aircraft available in the United States and a limited number of qualified pilots.
In particular, private aircraft are occasionally in high demand and/or subject to price fluctuations based on market conditions. Further, availability is constrained by a limited number of private aircraft available in the United States and a limited number of qualified pilots. As a result, third-party private aircraft providers may not be able to prioritize our use of their services.
Comparing our financial results on a period-to-period basis may not be meaningful, and past results may not be an indication of our future performance.
Comparing our financial results on a period-to-period basis may not be meaningful, and past results may not be an indication of our future performance. Our existing and any future indebtedness could adversely affect our ability to operate our business.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Audit Committee and Board of Directors engage with members of the executive team and are briefed on cybersecurity risks at least once each calendar year and with respect to any potentially material cybersecurity incidents.
Biggest changeOur executive team, along with our Audit Committee, assess and manage cybersecurity risk as part of our overall business strategy, financial planning and capital allocation. Our Audit Committee and Board of Directors engage with members of the executive team and are briefed on cybersecurity risks at least once each calendar year and with respect to any potentially material cybersecurity incidents.
Although we have experienced cybersecurity incidents in the past, cybersecurity threats, including as a result of previous cybersecurity incidents, have not materially affected the Company, including its business strategy, results of operations or financial condition. Our executive team, along with our Audit Committee, considers cybersecurity risk as part of our overall business strategy, financial planning and capital allocation.
Although we have experienced cybersecurity incidents in the past, cybersecurity threats, including as a result of previous cybersecurity incidents, have not materially affected the Company , including its business strategy, results of operations or financial condition.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe 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.
Biggest changeIn connection with our acquisition of Summit, we acquired a 20-year operating lease with one 10-year renewal option, for space at the Bozeman Yellowstone International Airport in Bozeman, Montana where we constructed a commercial aircraft hangar that we use for our flight school aircraft and office space for personnel located in Bozeman.
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.
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 ISO Class 7 cleanroom facility.
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.
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.
Added
We have a designated maintenance hub for our aircraft in Dallas, Texas under a lease that expires in 2027, subject to certain early termination provisions. We also lease office space at various locations in the United States for our NOP and hangar space for our aircraft under short-term leases.

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.
Biggest changeFrom time to time, we may be involved in other 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. 63 Item 4. Mine Safety Disclosures. Not applicable. PART II
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Item 3. Legal Proceedings. On February 14, 2025, a class action captioned Merly Jewik v. TransMedics Group, Inc., et al., Case No. 1:25-cv-10385, was filed against us in the United States District Court for the District of Massachusetts.
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The complaint purports to assert claims against us and certain of our current and former officers pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, on behalf of a putative class of investors who purchased or otherwise acquired the Company’s shares between February 28, 2023 and January 10, 2025 (the “class period”).
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Plaintiff seeks to recover damages allegedly caused by purported misstatements and omissions contained in certain risk disclosures set forth in our 2022 and 2023 Annual Reports.
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The complaint alleges the disclosures at issue were false or misleading, because they failed to describe what plaintiff alleges were coercive business and marketing tactics, anticompetitive conduct and fraudulent billing activities on the part of the Company. The complaint claims these alleged statements and omissions operated to artificially inflate the price paid for our common stock during the class period.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock 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.
Biggest changeStock Performance Graph (1) The following graph shows a comparison from December 31, 2019 through December 31, 2024 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. Such returns are based on historical results and are not intended to suggest future performance.
COMPARISON 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.
COMPARISON OF 60 MONTH CUMULATIVE TOTAL RETURN Among TransMedics Group, Inc., the NASDAQ Composite Index and the NASDAQ Healthcare Index 64 (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.
In addition, our CIBC Credit Agreement contains covenants that restrict our ability to pay cash dividends. Item 6. Reserved 66
In addition, our CIBC Credit Agreement contains covenants that restrict our ability to pay cash dividends. Item 6. Reserved 65
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.
Issuer Purchases of Equity Securities We did not purchase any of our registered equity securities during the period from September 30, 2024 to December 31, 2024. Dividends We have never declared or paid any dividends on our capital stock. We do not anticipate declaring or paying any cash dividends on our capital stock in the foreseeable future.
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.
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 2025 Annual Meeting of Stockholders and is incorporated herein by reference. Recent Sales of Unregistered Equity Securities None.
Such returns are based on historical results and are not intended to suggest future performance. Data for the NASDAQ Composite Index and the NASDAQ Healthcare Index assumed reinvestment of dividends.
Data for the NASDAQ Composite Index and the NASDAQ Healthcare Index assumed reinvestment of dividends.
Holders of Our Common Stock As of January 31, 2024, there were approximately 26 holders of record of shares of our common stock.
Holders of Our Common Stock As of January 31, 2025, there were approximately 20 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.
Removed
We do not anticipate declaring or paying any cash dividends on our capital stock in the foreseeable future.

Item 7. Management's Discussion & Analysis

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

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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.
Biggest changeForeign 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. 69 Results of Operations Comparison of the Years Ended December 31, 2024, 2023 and 2022 The following table summarizes our results of operations for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 (in thousands) Revenue: Net product revenue $ 273,866 $ 176,069 $ 79,234 Service revenue 167,674 65,554 14,225 Total revenue 441,540 241,623 93,459 Cost of revenue: Cost of net product revenue 58,345 41,015 16,970 Cost of service revenue 121,114 46,515 11,217 Total cost of revenue 179,459 87,530 28,187 Gross profit 262,081 154,093 65,272 Operating expenses: Research, development and clinical trials 55,968 36,055 26,812 Acquired in-process research and development expenses — 27,212 — Selling, general and administrative 168,617 119,553 69,897 Total operating expenses 224,585 182,820 96,709 Income (loss) from operations 37,496 (28,727 ) (31,437 ) Other income (expense): Interest expense (14,409 ) (10,791 ) (3,726 ) Interest income and other income (expense), net 12,693 12,847 (1,002 ) Total other income (expense), net (1,716 ) 2,056 (4,728 ) Income (loss) before income taxes 35,780 (26,671 ) (36,165 ) (Provision) benefit for income taxes (316 ) 1,643 (66 ) Net income (loss) $ 35,464 $ (25,028 ) $ (36,231 ) Revenue OCS transplant-related revenue consists of: Year Ended December 31, 2024 2023 Change (in thousands) OCS transplant revenue by country by organ: United States Lung total revenue $ 15,755 $ 10,548 $ 5,207 Heart total revenue 96,663 59,080 37,583 Liver total revenue 309,462 151,719 157,743 Total United States OCS transplant revenue 421,880 221,347 200,533 All other countries Lung total revenue 1,926 1,272 654 Heart total revenue 13,198 14,012 (814 ) Liver total revenue 158 104 54 Total all other countries OCS transplant revenue 15,282 15,388 (106 ) Total OCS transplant revenue $ 437,162 $ 236,735 $ 200,427 We also had service revenue unrelated to OCS transplant of $4.4 million and $4.9 million for the years ended December 31, 2024 and 2023, respectively. 70 Revenue from customers in the United States related to OCS transplant was $421.9 million in the year ended December 31, 2024 and increased by $200.5 million compared to the year ended December 31, 2023, primarily due to higher sales volumes of our OCS Liver and OCS Heart disposable sets.
Investing Activities During the year ended December 31, 2023, net cash used in investing activities of $194.0 million consisted of purchases of property, plant and equipment of $151.8 million, including $141.9 million of transplant-related aircraft purchases, the purchase of IPR&D assets from BTL for $27.2 million and the purchase of Summit for $14.9 million, net of cash received.
During the year ended December 31, 2023, net cash used in investing activities of $194.0 million consisted of purchases of property, plant and equipment of $151.8 million, including $141.9 million of transplant-related aircraft purchases, the purchase of IPR&D assets from BTL for $27.2 million and the purchase of Summit for $14.9 million, net of cash received.
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.
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.
Critical Accounting Policies and Significant Judgments and Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.
Critical Accounting Policies and Significant Estimates Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures.
Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview We are a commercial-stage medical technology company transforming organ transplant therapy for end-stage organ failure patients across multiple disease states.
Risk Factors” section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview We are a medical technology company transforming organ transplant therapy for end-stage organ failure patients across multiple disease states.
We recognize revenue from the single, combined performance obligation only once the OCS Console has arrived at the customer site and the training and equipment set-up have been completed by us. Customer orders may include the loan of an OCS Console as well as OCS disposable sets used in each transplant procedure.
We recognize revenue from the single, combined performance obligation only once the OCS Console has arrived at the customer site and the training and equipment set-up have been completed by us. 77 Customer orders may include the loan of an OCS Console as well as OCS disposable sets used in each transplant procedure.
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.
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 material minimum purchase commitments and are cancelable by us upon prior written notice.
Actual results may vary from these estimates and may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final 80 determination of asset and liability fair values, whichever comes first.
Actual results may vary from these estimates and may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever comes first.
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.
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), as defined, 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.
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.
Selling, general and administrative expenses also include direct and allocated facility-related costs, costs to support 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.
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.
Through December 31, 2024, 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.
At the end of each reporting period, we assess whether losses should be accrued on long-term manufacturing purchase commitments in accordance with ASC 330, Inventory , which requires that losses that are expected to arise from firm, noncancelable and unhedged commitments for the future purchase of inventory, measured in the same way as inventory losses, should be recognized in the current period in the statements of operations unless they are deemed recoverable through firm sales contacts or when there are other circumstances that reasonably assure continuing sales without price decline.
At the end of each reporting period, we assess whether losses should be accrued on long-term manufacturing purchase commitments in accordance with ASC Topic 330, Inventory , which requires that losses that are expected to arise from firm, noncancelable and unhedged commitments for the future purchase of inventory, measured in the same way as inventory losses, should be recognized in the current period in the consolidated statements of operations unless they are deemed recoverable through firm sales contracts or when there are other circumstances that reasonably assure continuing sales without price decline.
The decrease in gross margin from 2022 to 2023 was driven primarily by an increase in service revenue, which has a lower gross margin than product revenue. Gross margin from net product revenue was 77% and 79% for the years ended December 31, 2023 and 2022, respectively.
The decrease in gross margin from 2023 to 2024 was driven primarily by an increase in service revenue, which has a lower gross margin than product revenue. Gross margin from net product revenue was 79% and 77% for the years ended December 31, 2024 and 2023, respectively.
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.
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, 2024, our remaining purchase commitment is $5.0 million.
Establishing the NOP, which launched in late 2021, has allowed us to broaden our customer base and increase utilization of the OCS in organ transplantation. Significantly all of our customers in the United States now participate in the NOP. By adding logistics to our NOP offering, we have been able to further increase product and service revenue.
Establishing the NOP, which launched in late 2021, has allowed us to broaden our customer base and increase utilization of the OCS in organ transplantation. Substantially all of our customers in the United States now participate in the NOP. By adding logistics to our NOP offering in late 2023, we have been able to further increase product and service revenue.
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%.
As of December 31, 2024, we were in compliance with all financial 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%.
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.
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; • 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 maintaining and improving our commercial operations, including the NOP; • the costs associated with maintaining and growing our logistics capabilities, including by means of attracting, training and retaining pilots, and the acquisition, maintenance, or replacement of fixed-wing aircraft for our aviation transportation services or other acquisitions, joint ventures or strategic investments; • 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.
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 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 hiring, training and retaining pilots to scale our aviation transportation operations, to support our NOP and reduce dependence on third party transportation, including by means of the acquisition, maintenance or replacement 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 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.
We have also developed our NOP, an innovative turnkey solution to provide outsourced organ procurement, OCS perfusion management and transplant logistics services, to provide transplant programs in the United States with a more efficient process to procure donor organs with the OCS.
Cost of service revenue primarily consists of labor and overhead that directly support organ retrieval and OCS organ management services and transportation and logistics costs, including labor costs for pilots, aircraft depreciation, aircraft costs, fuel, crew travel, maintenance and third-party flight costs and ground transportation that support organ delivery.
Cost of service revenue primarily consists of labor and overhead that directly support organ procurement and OCS perfusion management services and transportation and logistics costs, including labor costs for pilots, aircraft depreciation, aircraft costs, fuel, crew travel, maintenance and third-party flight costs and ground transportation that support organ delivery.
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.
Comparison of the Years Ended December 31, 2023 and 2022 For a discussion of our results of operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022, see Item 7.
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.
If we are unable to raise capital or enter into such agreements as, and when, needed, we will have to delay, scale back or discontinue the further development and commercialization efforts of one or more of our products, or may be forced to terminate our operations. 66 In March 2023, the U.S.
We evaluate each promise within a multiple-performance obligation arrangement to determine whether it represents a distinct performance obligation. 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, OCS organ management services and organ transportation logistics.
We evaluate each promise within a multiple-performance obligation arrangement to determine whether it represents a distinct performance obligation. 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 procurement, OCS perfusion management and transplant logistics services.
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.
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 procurement, OCS perfusion management and transplant logistics services under our NOP or OCS Console, whether sold or loaned 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.
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 procurement, OCS perfusion management or transplant logistics services under our NOP, and OCS Console, whether sold or loaned to the customer.
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.
To date, we have funded our operations primarily with proceeds from borrowings under loan agreements, proceeds from the issuance of the Notes, proceeds from the sale of common stock in our public offerings, and revenue from commercial sales of our OCS products and NOP services and from sales of our OCS products for use in clinical trials.
Organ Procurement and Transplantation Network Act, which expressly authorizes HRSA to award multiple grants, contracts or cooperative agreements to support the operation of the OPTN and specifies that the OPTN shall be operated through awards that are distinct from awards made to support the organization tasked with supporting the networks’ board of directors.
Organ Procurement and Transplantation Network Act was signed into law and expressly authorizes HRSA to award multiple grants, contracts or cooperative agreements to support the operation of the OPTN and specifies that the OPTN shall be operated through awards that are distinct from awards made to support the organization tasked with supporting the networks’ board of directors.
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.
When a customer order includes disposable sets and organ procurement, OCS perfusion management or transplant 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.
(Provision) Benefit for Income Taxes We recorded a tax benefit of $1.7 million for the year ended December 31, 2023 for the release of a portion of our valuation allowance related to the net deferred tax liabilities recorded in purchase accounting.
For the year ended December 31, 2023, we also recorded a tax benefit of $1.7 million for the release of a portion of our valuation allowance related to the net deferred tax liabilities recorded in purchase accounting.
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.
Revenue for each organ in the table above includes net product revenue from sales of disposable sets as well as service revenue for organ procurement, OCS perfusion management and transplant logistics services under the 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.
For each new transplant procedure, these customers purchase an additional OCS disposable set for use on their existing organ-specific OCS Console. We also generate service revenue by providing outsourced organ procurement, OCS perfusion management and transplant logistics 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.
For each new transplant procedure, these customers purchase an additional OCS disposable set for use on their existing organ-specific OCS Console. We also generate service revenue by providing outsourced organ procurement, OCS perfusion management and transplant logistics services under our NOP in the United States.
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.
For a discussion of our cash flows for the year ended December 31, 2022, 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, 2023.
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.
Any write-down of inventory to net realizable value creates a new cost basis. The reserve for excess and obsolete inventory was $2.5 million and $0.8 million as of December 31, 2024 and 2023, respectively.
We expense research, development and clinical trials costs as incurred. In the future, we expect that research, development and clinical trials expenses will increase over the long term due to ongoing product development and approval efforts.
In the future, we expect that research, development and clinical trials expenses will increase over the long term due to ongoing product development and approval efforts.
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.
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. 68 We expense research, development and clinical trials costs as incurred.
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.
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 if we will be able to maintain profitability.
Laboratory supplies and research materials costs increased by $2.5 million from the year ended December 31, 2022 to the year ended December 31, 2023 primarily due to our increased need for supplies and materials used for development of our next generation OCS.
Laboratory supplies and research materials costs increased by $6.1 million from the year ended December 31, 2023 to the year ended December 31, 2024 primarily due to our increased need for supplies and materials used for development of our next generation OCS.
Personnel related costs increased by $5.7 million primarily due to increased headcount to support development efforts for our next generation OCS program and overall compensation increases. Personnel related costs included stock-based compensation expense of $2.8 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively.
Personnel related costs increased by $6.4 million primarily due to increased headcount to support development efforts for our next generation OCS and overall compensation increases. Personnel related costs included stock-based compensation expense of $4.2 million and $2.8 million for the years ended December 31, 2024 and 2023, respectively.
With the acquisition of Summit, the purchase of fixed-wing transplant aircraft and the addition of a logistics team, we anticipate increased service revenue from our aviation transportation service offering. 68 Prior to the acquisition, Summit derived its revenue primarily from charter flight services.
With the acquisition of Summit in August 2023, the purchase of fixed-wing transplant aircraft and the addition of a logistics team, we anticipate increased service revenue from our logistics services. Prior to our acquisition in 2023, Summit derived its revenue primarily from charter flight services.
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.
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.
We lease facilities under long-term non-cancelable operating leases that have a weighted average remaining lease term of 4.7 years as of December 31, 2023. As of December 31, 2023, we had fixed lease payment obligations of $11.6 million, of which $2.6 million is payable during 2024.
We lease facilities under long-term non-cancelable operating leases that have a weighted average remaining lease term of 3.7 years as of December 31, 2024. As of December 31, 2024, we had fixed lease payment obligations of $10.3 million, of which $3.3 million is payable during 2025.
Department of Health and Human Services’ Health Resources and Services Administration, or HRSA, announced initiatives designed to improve the Organ Procurement and Transplantation network, or OPTN, including its intent to solicit contract proposals to manage the OPTN, which 67 is currently operated by the United Network for Organ Sharing, or UNOS, under a contract that expires in March 2024.
Department of Health and Human Services’ Health Resources and Services Administration, or HRSA, announced initiatives designed to improve the OPTN, including its intent to solicit contract proposals to manage the OPTN, which is currently operated by the United Network for Organ Sharing, or UNOS, under a contract that expired in March 2024. Additionally, in September 2023, the Securing the U.S.
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.
Our estimate of payments is based on an assumed rate of 6.4%, which was the interest rate in effect at December 31, 2024. On May 11, 2023, we issued $460.0 million aggregate principal amount of the Notes.
Facility related and other costs increased by $1.2 million from the year ended December 31, 2022 to the year ended December 31, 2023 due primarily to the increased costs of supporting a larger group of research and development personnel and their development efforts. Clinical trial costs decreased by $0.7 million due to the timing of pre-approval and post-approval clinical trials.
Facility related and other costs increased by $0.9 million from the year ended December 31, 2023 to the year ended December 31, 2024 due primarily to the increased costs of supporting a larger group of research and development personnel and their development efforts. Clinical trial costs decreased by $0.6 million due to the timing of clinical trials.
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.
To date, we have funded our operations primarily with proceeds from borrowings under loan agreements, proceeds from the issuance of our Notes, proceeds from the sale of common stock in our public offerings and revenue from commercial sales of our OCS products and NOP services and from sales of our OCS products for use in clinical trials.
To a lesser extent, Summit also derived revenue from providing flight school training, managing aircraft and other related services. As part of the Summit integration, we have transitioned Summit's charter flight customers and are finalizing the transition of aircraft management customers to third parties.
To a lesser extent, Summit also derived revenue from providing flight school training, managing aircraft and other related services. As part of the Summit integration, we transitioned Summit's charter flight and aircraft management customers to third parties. We do not anticipate generating revenue from charter flights or aircraft management and related services.
During the year ended December 31, 2023, we acquired 11 transplant-related fixed-wing aircraft with an aggregate purchase price of $141.9 million and we plan to acquire additional aircraft in 2024, including two aircraft purchased in January and February 2024.
During the year ended December 31, 2024, we acquired eight transplant-related fixed-wing aircraft with an aggregate purchase price of $109.6 million and we plan to acquire additional aircraft in 2025, including two aircraft purchased in January 2025 and February 2025 with an aggregate purchase price of $28.4 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.
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. 73 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.
Acquired In-Process Research and Development Expenses IPR&D in 2023 was related to the acquisition of certain assets related to lung and heart perfusion technology from BTL.
Acquired In-Process Research and Development Expenses IPR&D in 2023 was related to the acquisition of certain assets related to lung and heart perfusion technology from Bridge to Life Ltd. and its subsidiary Tevosol, Inc., together BTL.
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.
In addition, we may be required to prepay outstanding borrowings, subject to certain exceptions, with portions of net cash proceeds of certain asset sales and certain casualty and condemnation events. 75 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 impact that the HRSA initiatives and the U.S. Organ Procurement and Transplantation Network Act may have on our business, including on our NOP, is uncertain at this time.
In September 2024, HRSA began awarding contracts aimed at supporting these initiatives. The impact that the HRSA initiatives and the U.S. Organ Procurement and Transplantation Network Act may have on our business, including on our NOP, is uncertain at this time.
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.
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.
All obligations under the CIBC Credit Agreement are guaranteed by us and each of our material subsidiaries. All obligations of us and each guarantor are secured by substantially all of our and each guarantor’s assets, including their intellectual property, subject to certain exceptions.
At our option, we may prepay borrowings outstanding under the CIBC Credit Agreement, without a prepayment fee. All obligations under the CIBC Credit Agreement are guaranteed by us and each of our material subsidiaries. All obligations of us and each guarantor are secured by substantially all of our and each guarantor’s assets, including their intellectual property, subject to certain exceptions.
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.
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.
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.
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, 2023, 2022 and 2021 included in our Annual Report on Form 10-K for the year ended December 31, 2023.
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 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. While we expect our gross margins to increase over the long term, they will likely fluctuate from quarter to quarter.
Cost of service revenue included approximately $4.4 million of costs related to charter flight and aircraft management and related services and flight school training revenue, from Summit's legacy operations, which is unrelated to the NOP and organ transplant. Overall gross margin was 64% and 70% for the years ended December 31, 2023 and 2022, respectively.
Cost of service revenue included approximately $3.1 million and $4.4 million for the years ended December 31, 2024 and 2023, respectively, of costs from Summit's legacy operations, unrelated to the NOP and organ transplant. Overall gross margin was 59% and 64% for the years ended December 31, 2024 and 2023, respectively.
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.
Net cash used by changes in our operating assets and liabilities for the year ended December 31, 2024 consisted primarily of an increase in accounts receivable of $34.3 million, an increase in inventory of $8.4 million and an increase in prepaid expenses and other current assets of $6.3 million, partially offset by an increase in accounts payable and accrued expenses and other current liabilities of $6.5 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.
At December 31, 2024, our principal source of liquidity was cash of $336.7 million Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented: Year Ended December 31, 2024 2023 2022 (in thousands) Net cash provided by (used in) operating activities $ 48,803 $ (13,028 ) $ (45,817 ) Net cash provided by (used in) investing activities (129,303 ) (193,953 ) 54,513 Net cash provided by financing activities 22,874 400,418 167,927 Effect of exchange rate changes on cash, cash equivalents and restricted cash (536 ) 193 (1,021 ) Net increase (decrease) in cash, cash equivalents and restricted cash $ (58,162 ) $ 193,630 $ 175,602 Operating Activities During the year ended December 31, 2024, operating activities provided $48.8 million of cash, primarily resulting from our net income of $35.5 million and net non-cash charges of $58.3 million, partially offset by net cash used by changes in our operating assets and liabilities of $45.0 million.
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.
Cost of service revenue increased by $74.6 million in the year ended December 31, 2024 compared to the year ended December 31, 2023 as we increased utilization of the NOP. Gross profit increased by $108.0 million in the year ended December 31, 2024 compared to the year ended December 31, 2023.
As of the end of each reporting period presented in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we did not identify any potential losses arising from remaining future purchase commitments as compared to estimated future customer sales through the remainder of the term of the manufacturing purchase commitment and, as a result, did not recognize in a current period any loss provision for future-period remaining purchase commitments.
As of the end of each reporting period presented in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we did not identify any potential losses arising from remaining future purchase commitments as compared to estimated future customer sales through the remainder of the term of the manufacturing purchase commitment and, as a result, did not recognize in a current period any loss provision for future-period remaining purchase commitments. 78 Business Combinations and Fair Value Estimates In determining whether an acquisition should be accounted for as a business combination or asset acquisition, we first determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets.
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.
Interest Income and Other Income (Expense), Net Interest income and other income (expense), net for the years ended December 31, 2024 and 2023 included interest income of $13.4 million and $12.5 million, respectively, from interest earned on invested cash balances.
From and after March 1, 2028, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. We have the right to elect to settle conversions either in cash, shares or in a combination of cash and shares of our common stock.
From and after March 1, 2028, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.
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.
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. In May 2023, we issued and sold $460.0 million in aggregate principal amount of our 1.50% convertible senior notes, due 2028.
In addition, we received a Class II Medical Device License from Health Canada for our OCS Liver combined with our solution additives in October 2023 to complement our existing Health Canada licenses for OCS Heart and OCS Lung.
In addition, we received a Class II Medical Device License from Health Canada for our OCS Liver combined with our solution additives in October 2023 to complement our existing Health Canada licenses for OCS Heart and OCS Lung. 67 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.
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.
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. Our overall gross margin is impacted by the relative mix of product and service revenue, as product and service revenue have different margin profiles.
For the year ended December 31, 2023, cost of service revenue also included approximately $4.4 million of costs related to charter flight and aircraft management and related services and flight school training revenue, from Summit's legacy operations, which is unrelated to the NOP and organ transplant.
For the years ended December 31, 2024 and 2023, cost of service revenue also included approximately $3.1 million and $4.4 million, respectively, of costs related to Summit's legacy operations, unrelated to the NOP and organ transplant.
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.
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 PMA from the FDA, for both DBD organs and DCD organs.
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.
Personnel related costs increased by $36.8 million primarily due to the continued expansion of our team to support the growth in our business. Stock-based compensation expense increased by $11.0 million, due primarily to additional grants to new and existing employees and the modification of stock awards pursuant to the transition agreement with our former Chief Financial Officer.
Other income (expense), net included $0.3 million of realized and unrealized foreign currency transactions gains during the year ended December 31, 2023. Other income (expense), net included $1.3 million of realized and unrealized foreign currency transactions losses during the year ended December 31, 2022.
Other income (expense), net included $0.7 million of realized and unrealized foreign currency transactions losses for the year ended December 31, 2024, and $0.3 million of realized and unrealized foreign currency transactions gains during the year ended December 31, 2023. 72 (Provision) Benefit for Income Taxes Income taxes for the years ended December 31, 2024 and 2023 included a tax provision of $0.3 million and less than $0.1 million, respectively, related to state and foreign income taxes.
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.
Revenue from customers outside the United States was $15.3 million and $15.4 million in the years ended December 31, 2024 and 2023, respectively. Cost of Revenue, Gross Profit and Gross Margin Cost of net product revenue increased by $17.3 million in the year ended December 31, 2024 compared to the year ended December 31, 2023.
The increase was due primarily to interest expense for our $460.0 million principal amount of the Notes, which were issued in May 2023.
Other Income (Expense) Interest Expense Interest expense was $14.4 million and $10.8 million for the years ending December 31, 2024 and 2023, respectively. The increase was due primarily to interest expense on the $460.0 million principal amount of the Notes, which were issued in May 2023.
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.
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.
During the year ended December 31, 2023, service revenue 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, is from Summit's legacy operations and is unrelated to the NOP and organ transplant.
We are continuing to offer flight school training services. During the years ended December 31, 2024 and 2023 service revenue of $4.4 million and $4.9 million, respectively, was from Summit's legacy operations, unrelated to the NOP and organ transplant.
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.
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 procurement, OCS perfusion management and transplant logistics services is classified as service revenue in our consolidated statements of operations.
For example, if the demand for our products exceeds our existing manufacturing and sterilization capacity, our ability to fulfill orders would be limited until we have sufficiently expanded such operations. In addition, following the closing of our IPO, we have incurred and expect to continue to incur additional costs associated with operating as a public company.
For example, if the demand for our products exceeds our existing manufacturing and sterilization capacity, our ability to fulfill orders would be limited until we have sufficiently expanded such operations.
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.
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.
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.
The increase in product gross margin was primarily as a result of increased sales volume and increased sales of higher margin OCS disposable sets. Gross margin from service revenue was 28% and 29% for the years ended December 31, 2024 and 2023, respectively, and consisted primarily of organ procurement, OCS perfusion management and transplant logistics services under our NOP.
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.
Selling, General and Administrative Expenses Year Ended December 31, 2024 2023 Change (in thousands) Personnel related (including stock-based compensation expense) $ 109,475 $ 72,717 $ 36,758 Professional and consultant fees 18,313 17,401 912 NOP support 12,289 11,985 304 Tradeshows and conferences 4,328 4,575 (247 ) Facility related and other 24,212 12,875 11,337 Total selling, general and administrative expenses $ 168,617 $ 119,553 $ 49,064 Total selling, general and administrative expenses increased by $49.1 million from $119.6 million in the year ended December 31, 2023 to $168.6 million in the year ended December 31, 2024 due primarily to increases in personnel related costs, and facility related and other costs.

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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 gain of less than $0.1 million during the year ended December 31, 2023.
Biggest changeThe effects of these foreign currency translation adjustments are included in accumulated other comprehensive income (loss), a separate component of stockholders’ equity on our consolidated balance sheets. We recorded a foreign currency translation loss of $0.2 million during the year ended December 31, 2024.
We have experienced and we will continue to experience fluctuations in our net loss as a result of revaluing our assets and liabilities that are not denominated in the functional currency of the entity that recorded the asset or liability. At this time, we do not hedge our foreign currency risk.
We have experienced and we will continue to experience fluctuations in our net income (loss) as a result of revaluing our assets and liabilities that are not denominated in the functional currency of the entity that recorded the asset or liability. At this time, we do not hedge our foreign currency risk.
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.
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 $0.7 million during the year ended December 31, 2024.
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.
For the year ended December 31, 2024, 3% 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.
The Notes have a fixed annual interest rate of 1.50%. Accordingly, we do not have interest rate exposure on the Notes. 81
The Notes have a fixed annual interest rate of 1.50%. Accordingly, we do not have interest rate exposure on the Notes. 80
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.
As of December 31, 2024 borrowings outstanding under the CIBC Credit Agreement totaled $60.0 million and the interest rate applicable to such borrowings was 6.4%. 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.
Removed
Interest Rate Sensitivity In July 2022, we entered into our CIBC Credit Agreement with CIBC.
Added
Interest Rate Sensitivity As of December 31, 2024, we had cash of $336.7 million, including cash held in savings accounts.
Added
Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of our savings accounts, an immediate 10% change in interest rates would not have a material effect on the fair market value of our cash balance. 79 In July 2022, we entered into our CIBC Credit Agreement with CIBC.

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