Xvivo Perfusion AB (publ) (XVIVO) Earnings Call Transcript & Summary

Welcome to Xvivo Q4 Report for 2024. [Operator Instructions] Now I will hand the conference over to CEO, Christoffer Rosenblad and CFO, Kristoffer Nordstrom. Please go ahead.

Welcome to Xvivo's earnings call for the fourth quarter of 2024 and the full year '24 as well. I want to start this meeting with Xvivo's purpose and vision that nobody should die waiting for an organ, and you see one of our patients here on the front page, Alex from Australia. And during 2024, we estimate that Xvivo's products and services have contributed to more than 12,000 transplants globally. And that means that 12,000 patients got the chance to prolong life and a better life quality. And I want to take the moment end of the year to also thank all of you who invested in Xvivo for financing development of the groundbreaking technology that we now take to market and that enable all of those 12,000 patients to be saved every year. And I hope in the future, there will be many, many more. So with that, we turn to the first slide of the presentation, which is today's presenter, and they are me, Christoffer Rosenblad, I'm the CEO of the company, and we have also Kristoffer Nordstrom, CFO of the company. And we can jump straight to Slide 2, which is Q4 financial at the glance. I'm proud and happy to report that Q4 shows improvement in top line as well as EBITDA compared to same quarter last year. Q4 shows again that Xvivo has a scalable business model with improving margins with scale. Even though we have continued, and I press on this to invest in the organization for future growth, we are a growth company, so we continue to invest. Sales came in at SEK 228 million. Gross margin continued to show strength. We plan to improve abdominal margins to 70% at the latest in 2027 or earlier when we reach economies of scale in production. The EBITDA shows an improvement to 23%, but more on the details will be given by Kristoffer Nordstrom, our CFO. I also want to point out here that the growth for thorax is continuously picking up and mainly coming from higher XPS activity during the quarter. Another growth driver during the quarter and the year has been the U.S. heart trial, which was included in a record 13 months. And we have seen an unprecedented high interest in both joining the trial and also to use the heart device while in the trial. We know and we always thought and we hope that this technology has the potential to change the paradigm of heart transplantation and to be used in all hearts. And we now get more and more customer testimonials that, that could actually be the case. So with that, we go to the next slide, which is the year, the YTD financials also at the glance. We see a similar picture in the YTD numbers. And the key takeaway here is what I actually said in the previous calls during the year that growth is mainly coming from increased activity in existing customers and a stronger market, especially in the lung. We see very, very high interest to start both heart and lung programs with our new technology, especially after ISHLT in April 2024. And with an increasing number of feet on the ground, we can gradually convert this interest to new sales and new customers. And of course, for heart, we are still limited due to lack of approved products, but the interest is as big or even greater than we see in lung. We can also conclude that sales from product is picking up faster than sales from services, even though we believe we have a fantastic service offering with a very, very good quality, which is something we measure every month in the quality metrics and share with our customers. We will come back later in the call to the strategic importance of both service and digital efforts. A few points here also. Even though we invest heavily in mainly commercial and field force, we see that we have a scalable revenue if we look year-on-year, and we can convert that increased sales into better gross margins and better EBITDA margins. Lastly and most important to mention, on this picture is what we don't see and which explains why the numbers looks like they do and that the projects we are running are progressing according to plan. I mean, the whole project is on time and budget, albeit we didn't expect a long lead time from EMA and the Swedish Medicare Agency, but they have stated that they have a high workload. The production capacity project, where we invest to scale up volumes times 10 of the today's volumes for disposables are running in line with communicated time lines. And this project will be extremely important for the future, and we can already see during 2024 that it has improved sales. Also, we see an increasing interest in starting XPS programs for lung, and we are currently suffering from a shortage on machines. We are in the process of scaling up XPS machine production capacities and deem that we will meet the full market demand during the summer or, let's say, Q3. So with those -- that introduction, we'll go into the highlights and go over to Slide 4, and we can actually go straight to Slide 5 where we see 2024 highlight summary. It's a snapshot of key events during 2024. And after this, we will have more two deep dive slides. But I think the first three I want to mention is in relation to heart. And one is that we did run and it was presented the first randomized controlled trial with a superiority design in heart and lung transplantation. This is unprecedented, a huge step for both us and the transplant community. And also, it was easier since we've got a great results to present this, of course. But it's also a testimony to the belief all transplant surgeons in the world have on this new technology. They believe it is far better than anything they've seen before and which is a great testimony to the technology. Two, we need to mention the first cross-Atlantic heart transplant. It's completely unprecedented and I think this is also a testimony to what this technology can bring to the future that when we can take a flight on a commercial carrier in economy class, we will reduce the cost burden on the transplant community and enable more transplants to be made. Three, we also know that an increasing number of transplants are coming from DCDs and we also want to prove this technology for DCD hearts. And we are -- have now commenced that work and we are running a European trial, which for DCD. And we now can state that there is definitely a new hope for hearts. When we come to point #4 on this slide, liver, it was hard to summarize it because there have been more or less an avalanche of positive studies coming up during 2024. For example, we have superior short- and long-term graft survival in multiple studies. Cost benefits has been proven and the ability to schedule transplant in a cost-efficient way, have improved through the year. I will come into that later actually. So this is the product that is now a market leader in Europe for liver and where we handed in our IDE recently in the United States. And our goal is that also American patients and transplant centers should get the ability to reap the benefit of this fantastic product. Point number five, I think in highlight is that the increasing interest and demand for XPS and STEEN Solution to make more lungs available for transplantation. We have seen an high increase in the U.S. during 2024. And I must say we now start to see the same interest spread into Europe, which is great. The last point on this slide is the Flowhawk acquisition, where we think that is key for the future to increase efficiency in transplant process in a HIPAA-compliant way. The acquisition of Flowhawk has that exact aim. In recent study, it has been shown that transplant centers improve efficiency in the organ allocation process and communication, and they can increase their ability to get reimbursed by using Flowhawk. This is still early stage. It has high strategic impact, which we will come back to, but I think it's an important milestone still to mention, even though we don't see huge sales coming from it in 2024. With that, we're going to deep dive a little bit into the clinical results and turn to Slide 6 in the slide deck, and that's a deep dive into heart and lung clinical trials. And we start with heart. We always knew that our product was good, but we are getting more and more convinced every day that this can really change how we see our transplantation. And the first point here is The Lancet publication, where we see a 61% risk reduction in PGD, which is highly clinically significant. We are really looking forward now to the 1-year follow-up data, including 1-year survival data points. It will be presented during ISCT in Boston in April 2025. So that's going to be the next milestone for heart. The second point on heart is that we know that a portion of the donor product coming from DCD is comparatively large in some countries, and it's growing very fast. And if you want to substantially increase the number of transplants, we need to also prove that this technology works for DCD hearts. And we need to improve that we can do it in a safe, cost-efficient and practically feasible way with good patient outcome. And that is how we designed the study to show that, and we're now enrolling patients into that study. If we go over to the lung side, the key takeaway is that based on good clinical studies in the past, we now see that the usage of XPS and STEEN Solution is taking off. Together with clinics, we continue to improve decision-making for lungs. This is one example where we, together with our Cleveland, did the research and we developed the product, where we look at real-time lung weight analysis to make a better judgment of a go or no go for lung. I also want to mention that we want to do our utmost and spend a lot of resources in getting the best product approved at the right indication. And we now can confirm that Perfadex Plus that has -- or 2 to 8 degrees centigrade usage and now confirmed effective for preservation up to 10 degrees. This is old news. We knew that the preservation temperature should be between 8 to 14 degrees, but to enable 10, we are hitting that sweet spot in a better way to secure that we can continue to be the gold standard of transplantation. And let's go to the next Slide 7 on my deck, where we go into deep dive in delivering kidney. And there I said it's hard to choose all the fantastic news and the new data points regarding in 2024. But to mention a few, both we see there Cochrane review, and we also had a study of a 1,200-patient real-world setting trial. It now brings, I would say, the Liver Assist into ideal stage IV, which means that, hence, it's proved in a real-world setting and not only in clinical trials, but actually in real usage, and this supports the implementation of this technology as a routine practice for liver transplantation. Another study that shows the same and has the same aim that it should be a clinical practice using the Liver Assist in any setting is that, the second study there, so that also came out in 2024 that the cost savings year 1 after using Liver Assist is approximately EUR 26,000 per patient that we can obtain by the use of Liver Assist. And that is that the aftercare is lower, so you have less biliary implication, et cetera. For kidney, we also had a Cochrane review summary of evidence for HOPE and Kidney Assist Transport is the only transport device that has a HOPE technology approved today. Cochrane, just to mention, is a freestanding nonprofit that has a reputable method of evaluating new technology in the market. And hence, it carries a lot of clinical believability within the field of transplantation. So this is when we say Cochrane review, it is not us who said anything about our technologies, it's actually third-party nonprofit, et cetera. So we get very good reviews when we see this other institute actually evaluating our technology as well. And with that, we will leave the highlights of the year, and we will take a brief look into the clinical pipeline, which is the next slide, and we could actually jump straight into the Slide number, I think it's #10, which is Clinical Trial Status and Time Line, which is a regulatory review. Very few things have changed since the last time we met. So I would mainly repeat what I said in October 2024. But one thing that has changed is that the heart trial is now fully included in record time. The next milestone will be the 12-month patient follow-up. In parallel, we will prepare our technical and also our preclinical files for submission to the FDA. And after the 12 months follow-up period, we can also start preparing the clinical file for submission to the FDA. As mentioned before, in Europe, we have handed in our technical documentation for review according to our time plan. The launch will be a bit staged due to different regulatory entities in Europe. And in dialogue with our notified body, we understood that the heart box is more or less ready to be approved. This will enable us to talk to clinics about the heart box and start installing it. The security we still face is how fast EMA or the European Medical Agency and the Swedish MPA, which is a Swedish Medical Product Agency can hand you their review of the heart solution or the heart liquid and the additive to the heart solution. They are under high workload. We fully understand that they are trying to do their best to answer all the questions in due time. Key here to remember is that we are ready to launch when the products are approved. The launch plans are ready, everything is -- everyone is trained, staff is recruited. And again, the interest is extremely high to start using the products from more clinics in Europe. In Australia and New Zealand, we have high usage of the product already. Approximately 1/3 of all hearts are on the heart device. The regulatory approval is still pending a CE mark in Europe. So we come back to that when we have a CE mark. For liver, we have reported that the Liver Assist has been granted breakthrough device designation by the FDA, and this means we will get a faster route through the FDA PMA process compared to non-breakthrough device designation. It's also a quality stamp that the products are innovative and fulfilling the need in the market. And I will go a little bit deeper into both heart and liver in the next two slides. I turn to Slide 11 for an update on the heart PRESERVE trial recap. So as you know, it was a study which had enrolled all patients ahead of schedule. It was 141 patients at 14 trial sites. We had approval of getting more trials sites into the trial, but unfortunately, they could not because they are the ones in the trial enrolled so fast. The next steps is we have the 1-year patient follow-up period. And then, of course, we have a regulatory review by the FDA after that. Also, we have -- the last point there is that we have handed in our safety data for Continuous Access Protocol. So this is now at the FDA, and we're waiting for their review and they will come back with a decision or feedback. And this will, if approved by the FDA, enable the users in the trial to continue to use the product for a limited number of transplants and patients before -- prior to we have a real PMA approval. So it's very important, and we have a high pressure from transplant clinics that they want to use it, and they state that they lose a lot of hearts right now because they cannot use our technology. And with that, we turn in to the next slide, and that's an update on the liver PMA process, and we have now handed in our IDE application and it is currently under review by the FDA. The study proposal is the DHOPE or dual hypothermic oxygenated perfusion study. It's a 215 patients, single arm design where we will ask for a maximum of 20 clinics participating into the study. The primary endpoint is the 7-day early allograft dysfunction after transplantation. And safety and also primary endpoint is the 180-day postoperative endpoint, which is a patient's survival with a functioning liver which, of course, will be key for this product and what we have seen so far. In Europe, by using this product, we fared very well in both those endpoints. And with that, we will leave the, let's say, clinical and regulatory update, and I will move to the next slide 12 and hand over to our CFO, Kristoffer Nordstrom, who will present the financial performance and give a little bit more into the details into the numbers. But thank you, I will come back later in the presentation.

Thank you so much. Yes. Hi, everyone. As Christoffer has already commented, we ended the year on a high note, very thankful for that. We were delivering a record quarter in terms of sales, EBITDA and also operating cash flow, which was very strong. Net sales came in at SEK 228 million, which translates to an organic growth of 44%. Overall gross margin, 77%. That's 2% units better than last year due to product mix and strong growth in Thoracic specifically. Adjusted EBIT in Q4 was 7%, strengthened from 1% last year. So a big jump up there. Adjusted EBITDA in Q4 was 23% versus 14% last year, mainly driven by increased sales and strong gross margins. For the full year, sales amounted to SEK 822 million, an organic growth of 39%. Adjusted EBIT 11% and adjusted EBITDA 22%, both significantly outperforming last year. EBIT more than doubled versus last year, SEK 95 million versus SEK 43 million, and EBITDA improved by 5% units from 17% to 22%. Summarizing 2024, we are very happy that we continue to grow our top line and at the same time, strengthen our profitability, especially since we are continuously investing in and expanding our organization, as Christoffer mentioned, to gear up for continued growth across all organs. For 2025, we foresee continued sales growth absolutely. It will be a year where we will continue to invest in building an organization that should be able to grasp significantly larger opportunities than today. Our target for 2025 is to continue improving our profitability. We always do that, but it will be weighted. It will always be weighted against investment opportunities with both short- and long-term ROIs. With that, we'll move over to the business areas, starting with Thoracic, which has been the growth train in 2024. Yet another solid growth quarter. Sales in Q4 came in at SEK 152 million. Organic growth for disposables was strong, again, 50%, and the main driver was EVLP in the U.S. specifically. You've heard that before, it's the same mantra in the previous quarter this year. In the U.S., we saw EVLP sales volumes grow 90% versus Q4 last year. Gross margin on disposables in Q4 was 87%, and that was an improvement from last year with 2% units. So we're very grateful for that. In summary, EVLP adoption grew confidently in 2024 as a full year. The Xvivo EVLP business in the U.S. grew 75% in the full year in terms of units sold. We continue to see a growing interest in EVLP globally, so not only in the U.S. A couple of new installments are planned of the XPS device in the U.S. in the near term, and we see our revitalized interest in Europe as well that we believe will materialize in XPS deliveries in the second half of 2025. That said, we will continue to develop a strength in our global leading position in EVLP in 2025. When it comes to heart, sales were SEK 16 million in Q4, primarily from revenue under the U.S. heart trial. Full year, heart sales amounted to SEK 65 million, were up SEK 45 million in U.S. and SEK 20 million in Pacific and Europe. For 2025, we expect the heart sales contribution from the U.S. to decrease as we have communicated before. And the reason for that is that the PRESERVE trial has ended. We will follow up with our CAP or continued access protocol trial, but that will include somewhat less patients. So what this means is that the growth in heart in 2025 is expected to come from sales in Europe and Australia after regulatory approvals are obtained and also from market entry in Canada. That was it for thoracic. Moving over to abdominal. Net sales in Q4 came in at SEK 50 million. Organic growth in disposables was 35%. Liver stood for 71% of abdominal sales and kidney 29%. Gross margin disposables came in 67% versus 69% last year, a minor decrease due to product mix. For the full year 2024, Abdominal sales were SEK 179 million and growth in disposable sales were 32%. For the full year, the kidney disposables globally grew 50% and liver disposables grew 25%. As mentioned during the Q3 call, focus for 2025 is to scale up the commercial organization and to start acquiring clinical data on U.S. patients to continue to build clinical evidence supporting HOPE, hypothermic oxygenated perfusion on the U.S. market. And in general, to further building -- I would say, in general, to further building clinical evidence will be important to reach a high market penetration and to establish reimbursement on the various geographies. Moving over to services, our third business area. So sales in Q4 were SEK 26 million. We have seen an increased activity in our recovery business in both Q3 and Q4, which is delightful. SEK 23 million was related to organ recovery and SEK 3 million was related to [indiscernible]. I wanted to provide some insights to the organ recovery program and kind of the momentum there. So the Xvivo organ recovery program served 20 transplant clinics in 2024 and went out on 470 recovery cases and went to 40 different states in the U.S. So we started to gradually expand this service model also regionally. We partnered with more than five aviation companies using a flexible transparent business model where our customers, the transplant clinics, always decide the mean of transportation with no markup from Xvivo. So we have a very transportable -- sorry, a very transparent and flexible business model. The organ recovery business grew 7% in 2024. We expect to return to double-digit growth in 2025 with a clinical program that stands out in the United States when it comes to establishing high quality standards and transplant communication. We also expect to see synergies from the Flowhawk integration. It's a great team that we now have onboarded, and it's a true integration going on, where we are uniting the two commercial organizations. Moving over to EBITDA profitability. So yes, came in at 23% for the quarter and 22% for the full year. As you can see here in the middle, the rolling 12-month trend is developing nicely. A short comment I said it before, but our ambition is to continue to improve EBITDA year-on-year step by step and to maintain a healthy relationship between sales growth and market opportunities and profitability. Final slide on my side before I turn the mic over to Mr. Rosenblad again, financial position and cash flow. Q4 delivered a record high operating cash flow, SEK 62 million, main reason has been a strong sales growth in Q3 and Q4. Investments amounted to SEK 111 million, and we primarily spent funds on the U.S. clinical trials, the SEK 38 million, and also the acquisition of Flowhawk, SEK 51 million that we paid with our own cash. This led to a total cash flow of minus SEK 52 million. We ended the year with a solid cash position of SEK 416 million. Despite this solid cash position and a good underlying profitable growth, we entered into a revolving credit facility with a Nordic bank here in January. The reason is simply to provide further financial flexibility, if needed, and to finance a growing working capital if needed when we are building for further growth. So it's a EUR 20 million facility with a 3-year term. That was all for me, Christoffer. I will now hand the mic over to you again. Thank you.

Thank you so much. Then we go into outlook and -- which I think is the outlook of -- we start with 2025 to do a recap of where we -- what we look forward to in 2025. And for lungs, the key is that we can cater to the high interest we see in EVLP to make more lungs available for transplantation. And we work hard to both increase the feet on the ground to stay closer to customers, improve availability of XPS machines, et cetera. So we see a high interest and we need to make sure that we're there for the customers. That's the #1 key. Then we have seen good clinical results for HOPE or hypothermic oxygenated perfusion for liver, kidney and heart, and we will continue to build on that evidence. And then in terms of clinical milestones, of course, we have -- the first and most important is that regulatory approval and sequential launch of heart in Europe and Pacific, which we think will be one of the biggest milestones in the company's history. Also, we hope to include the first patient in the PMA study for Liver Assist in the U.S., which is -- it has been said before, but we have a fantastic product, where American patients and clinics don't have access to this now, so we want to make it available for them. And lastly, we see more also in terms of investments, and we alluded to it before. We see that we have a large number of investments with really good return on investment of approximately 1 year, and we want to capture those ideas. So we want to invest in strengthening the organization, definitely in terms of field force. We have a kidney launch in the U.S., which is ongoing, and we are continuously strengthening that department and that field force to meet more customers. We have, of course, the European heart launch, which we have staffed up already, and we have a launch in Canada, which we are investing into in terms of commercial and regulatory capabilities. I also want to say we continue to invest in supply chain and -- including also improving our quality department or having more staff there to capture the increased demand and the increased number of machines we have out on the market. So we definitely see that in 2025 we are going to continue to see high investments and very good returns on those investments. And we will -- before going to the long-term view, we will go into just a short recap of the strategy. In the last 6 months, we have sharpened it. The strategy remains the same, but we have sharpened it, and I want to emphasize on a few things. And the first thing is we're going to emphasize on patient need. There is a true belief in the organization that only with satisfying dire patient need, we can have long-term success. So we will steer R&D money or research money into finding patient need that we can improve patient outcome after transplantation or we can improve the number of transplantable organs, et cetera. We also want to emphasize on a decided position and the mission statement where our mission is to develop technology that saves organs in order for transplant surgeons to save lives. And we really want to emphasize that it's the transplant surgeons that we are there for them. We don't save lives as our company, but we give them the means to do that. And that means we've continued to develop easy-to-use products that the clinics really wants to use and which give good clinical outcome. We will continue to develop products, services to ease the burden on the transplant society, both in terms of work-life balance and also in terms of lessened economic burden for the health care system. So we think we have a dual role to play here. And in terms of -- we touched based on it before in terms of developing our service and digital offering. We know it's still early days. We are still trying to find the best offering here. We know that high quality is definitely one of it. And we know that we need to satisfy demand of both OPO system as well as clinics. And we are improving every day. So this is the new strategy we have and with that one or the same strategy, but sharpened and with that one, we go into the long-term outlook, which you have seen before, but I still want to end on this note because it's so important. And we see to start with the demand is approximately times 10 of the today's supplies of organs, and this is according to WHO. Also important to see is that the new type of products, which brings higher value to the transplant system is approximately sales value of times 10 versus cold static storage. We also see that our machine perfusion and service model have proven to increase the number of organs used for transplantation. So we are on the way to improve outcome both for patients and also getting more patients the chance of actually having a transplant. And the last point which is important is that Xvivo has a unique, innovative and world-leading. We are, by far, the most innovative company within our field. That is either on the market or in the R&D pipeline or in a regulatory/clinical pipeline that will hopefully hit the market soon. And with that, we hope that we can do our part of the test to enable a times 10 number of transplants. So I want to thank you all for listening today. We are all here to make sure that nobody should die waiting for an organ. And with that, I want to open up for questions.

[Operator Instructions] The next question comes from Jakob Lembke from SEB.

I have a few questions, and I'll take them one by one. Starting with lung and EVLP sales growth in 2025. I mean you mentioned that you have some contribution from new accounts, but my question is on the potential you see from higher utilization. I mean, can it continue to grow at a high level given that, yes, growth seems to have been so strong in 2024?

Thank you for that question. Yes, we believe it can continue. A few of the reasons are that we now are on approximately 10% market penetration. When we talk to leading clinics in the U.S. and Europe, they believe that it could go up to 50% of penetration that they -- that's what they deem should be evaluated to enable more transplants. We also see that we are not present in the U.S., for example, we're not present on the West Coast today. So there are also a geographical footprint where we continue to grow where there are no XPS systems available today. So that -- we see that there are still a large part of the growth potential still there for us to capture, and that will be more deemed on availability on XPS, how many feet we have on the ground that can support the clinics, et cetera. So it's more up to us than market conditions as of now.

Okay. And another question on lung. If we look at the overall lung transplant market in the U.S. in 2024, it was quite strong growth. Do you anticipate it will remain at a high growth rate for 2025?

That's a million dollar question. We do believe it will, driven by OPTN has still high targets on lungs also for next year. So we do believe that this momentum will continue. But again, it's more speculation than knowledge, but we plan for it.

Okay. Sounds good. Then a question on heart. If we look here in Q4, it seems to be quite strong heart revenues despite the sort of early completion of the trial. So if you could give a breakdown of sort of where the heart revenues came from expect Australia, other sources or mainly in the U.S.?

Yes, it was -- so we had SEK 16 million of heart revenue in Q4, 60% of that I would approximate what's still in the U.S. because we still had 1.5 to 2 months of the final inclusion in the PRESERVE trial. The revenue in Pacific, Australia mentioned was a bit boosted again. I think we mentioned in the Q3 call that there was a gap couple of months over the summer where we had reduced sales due to software updates on the device. So we started to see a growing momentum again in the Pacific in the fourth quarter.

Okay. And then a follow-up on the Continued Access Protocol you're anticipating. If you can give a guide when you expect that to commence?

Great question. Pending FDA review time, of course. Our -- still when I talk to the team, they believe that somewhere during Q1 that we can get it approved based on -- it's the -- we handed in the safety data, which, of course, is what they want to see before they can do more. And when I talk to my team, they say it looks good, so they don't see any showstoppers and therefore, they deem, yes, end of Q1 for CAP to be approved. But again, this is pending FDA and you never know if they have follow-up questions, et cetera, and then that would be a longer time line. So if it didn't happen, we will still come back on a new time line in the next quarterly call. But we still believe -- when I talk to my team, they are positive.

Okay. Sounds promising. Then on liver, I think sales growth seems to have been a bit lower here during the second half of 2024. And my question is then, is there any reason behind this? And how should we think about 2025?

We still see a very high interest in our liver product. We have seen in -- especially in Italy, a little bit lower growth from -- still from a high level. We are still a little bit lower growth during the second half. We are still positive towards 2025. We see, especially when we talk to everyone, we had our Liver Master class with, I think, 100 clinics and 100 surgeons and they are all very enthusiastic about the technology, given all the good data coming out in terms of cost savings, lung preservation times and especially graft approval that you get actually better results. We need to still work hard. Many clinics in Europe won't help with reimbursement support, better decision-making tools and more frequent visits from us. So that's something we're working on to get the growth rate up higher, so to say. But the interest is there to both start and launch the liver programs they have.

Okay. And just a final question on abdominal. It's just like sales from North America showed an all-time high level here in Q4 with quite substantial margin. Is that the kidney sales in the U.S.? Or how should we read it?

Yes, it's mainly kidney sales, Kidney Assist Transport in U.S. And we now have better supply of the products. It's better. We can sell more when we have supply basically.

The next question comes from Ulrik Trattner from Carnegie.

Chris and Kris, I have a couple of questions. And potentially, we could start off with some high-level topics on heart or in general for the transplantation market in the U.S., there is a lot of talk about NRP. Are we seeing some leading clinics like Vanderbilt. among others evaluating it. And in my book, it looks like a complementary product to yours. But is there any potential threats that is sort of lingering from NRP?

Great question. I mean, we see NRP growing and it has been doing for a couple of years. We don't see -- today, we don't see a threat. It's more complementary. One of the reason is that it's mainly used. If you take TA NRP it's mainly used for heart and hence, the lungs still need devaluation. And in many cases, actually, we need more EVLP after NRP. So it's actually almost positive for us. In terms of heart, I would say, I mean, we optimize transportation with or without NRP. So I would say it has no to a positive impact for us. The same with kidney and liver that it's not -- the devices we have now has better graft survival, better -- it basically improve graft function and cost savings, and that is with or without NRP, so to say. So we don't -- today, we don't see any that -- yes, it's complementary as far as we can judge today.

Okay. Great. And if we were to stick to heart and approval just sort of around the corner. If we can talk about the expected reimbursement trend here over the next year and next years as well as sort of your controlled commercial launch, I guess you would go after France as sort of initial market similar to that what you did with the XPS system back in the day. But if you can help us provide some more thoughts around how we should view the commercial ramp-up of heart in Europe?

That's a great question, and I think you answered half of it already that yes, we will have selected markets where we know that there will be payment systems. So we will probably -- we don't have resources to go full launch into every single country in Europe. So we will select typically the big ones or the ones with reimbursement system. France is always the number one, it has the quickest market in Europe to adapt. It has more similarity to U.S. than other European medtech market. So that's definitely number one. There is a couple of select markets in Europe that have also good reimbursement system and also how do you say, high level of adoption of new technology where there are markets who takes a little bit longer time. So we will state that launch in a couple of states where we will attack the markets with reimbursement and high adaptability to innovation first, and then we will take them 1 by 1 after that.

Great. And on to abdominal and kidney, now that the production capacity is no longer an issue. What is left in order to take on larger OPO contracts as well as you're building data on HOPE in the U.S. Would you say that you're going out starting with the DBD organs? And can you later on, expand into DCD? Or would that impact pricing?

That's a great question. We still have a fair bit of work before we can hit any larger OPO with the Kidney Assist Transport device. Mainly I would say it's a twofold work we have to do. The first one is we need to acquire better clinical data on the DBD side. We have very convincing DCD data, albeit is from Europe, but it's still convincing. So we need to complement with U.S. DBD and DCD data to be truly convincing. And we also have to prove that by using this product, we can allocate more kidneys and we get better survival. So that's the proof points we want to do clinically. The other thing is that there are a couple of product/usability features we need to work on during 2025. So we will soon take decision on time lines, but that will be approximately one year also. So I would say this time, next year, we will be in a better place to fit into the OPO system and being relevant for any OPO in the U.S. That's it.

Great. And on liver, IDE submitted obviously very positive. And when can you start the delivery trial? And are you experiencing sort of very high interest already to participate in the study, especially what we've been seeing and hearing about TransMedics and especially sort of the costs affiliated with your product? And as well as sort of an additional question to that is that would you expect to get the same type of reimbursement during the trial as you did with heart?

Yes, great questions, all of them. I would try to take them one by one. I would say we were fairly unknown in liver a year ago, but we see that we have a really steep increase in our product. I think that a lot of the studies has crossed Atlantic Ocean, and they see that there are other technologies that are actually better than what's on the market today. And so to answer the question, yes, the interest is very high, and I would say it increases every day. In terms of cost recovery by CMS during a trial, it's something we will be in a discussion. It's not our decision. So I need to come back to that when we have a firm answer by the CMS. It's nothing we know today. But in general, my feeling is that the U.S. is mature for having real innovative technology coming to them and supporting them both with patient outcome in a cost-efficient way and to make sure that they get the access to the best technology available. That's my feeling. And I heard sometimes when I talk about heart and kidney and lung and say because that's where we are on a trial, and that's what I can talk about, I very often get the question, yes, but what about your liver technology? When do we get in the U.S.? That's the one we're really interested in. So I would say, from customer testimonials, it's a bright future for that product.

Great. Last question on my end. I promise I won't ask any more questions. You did a write-down of a development project in Q4. Can you provide some more information on this?

Yes, absolutely. It's -- I mean it's natural with this type of business with a lot of innovation and pipeline, so it was about product development and early stage that we decided to discontinue.

The next question comes from Maria Karlsson Osipova from DNB.

Christoffer and Kristoffer, Maria Osipova from DNB. Firstly, congratulations on a strong finish to 2024. I have -- all my colleagues have asked very good questions here. So I have a short and sweet ones left for you. Could you please clarify on your geographical footprint on the West Coast in U.S.? You mentioned low exposure or no exposure? I'm thinking the potential CAP for heart, what are the state of those relationships? What will you work on in 2025?

Yes. Great. I mean, yes, that was actually a great question. I mean in terms of Perfadex, of course, we're everywhere in the U.S. In terms of the heart trial, we had actually very high presence and interest from the West Coast with many of the high enrollers into the clinical trial came from the West Coast. My comment regarding the West Coast is that we have very low to no presence in terms of XPS and STEEN Solution and in terms of our organ recovery service. So we have let's say, geographic footprint journey to make -- to capture that part of the country because I'm sure there are patients there as well who are eager to get a prolonged life with a transplant.

Yes. Great. And another question is also one of your last points was the outlook on short term, investing in supply chain and manufacturing. Could you provide a bit more details what needs to be done in 2025?

Yes. In 2025, we'll continue the tail investment of the disposable times 10 investment. And we've seen that tail of that investment coming to fruition, we will turn our eyes into machine manufacturing and to improve both design for producibility and cost per device and also production capacity. Because we know that the need for our devices could be very high at short notice. So we need to prepare ourselves for that. And we saw that now with a high increase in XPS and we very fast ran out our production capacity on that device. So that's something we will definitely turn our eyes or turn our attention to. In parallel to that, the more machines we have on the market, we will also invest in quality capabilities to make sure that they have always the highest quality possible on the market to satisfy customer needs.

Okay. And the last one, how should we think about services going into 2025? You have also said that it's early days for takeaways from Flowhawk integrations. But still, if you could just finish on the services note?

Yes, absolutely. I was just meeting the U.S. team earlier this month. And I mean there is high eagerness to grow this part of the business. One is strategic because we know when we hit the market with heart, we have to have a fully built-out service offering, including digital offerings. So we have a strategic implication of it. But there is also a belief in the whole team that this is a business where we could improve efficiency for the transplant teams quite drastically. And hence improve sales from our side. But the key is that we can -- with a good service offering, the transplant team could focus more on the transplant procedure than going out to recovery in the organ, et cetera. So we will have a more rested team. And within a better setup, we will also improve efficiency of our surgeons, so to say. So there should be less traveling on airplanes and more in the organ recovery theater. And by doing that, we can enable cost saving for the whole transplant system in the United States. So I believe it's more strategic growth right now to make sure that we have the right type of offering in 2027, but there is a high enthusiasm in the team to actually sell this and that comes from a high customer need actually.

The next question comes from Maria Vara from Bryan Garnier & Co.

Thank you very much for this presentation of results and congratulations for the strong performance. My colleagues asked a lot of questions, so I'll keep it short in two questions. I wanted to clarify a bit more about heart technology and what we can expect in the U.S. in terms of sales for next year? So obviously, if you get the FDA Continuous Access Protocol, we could expect some revenue coming perhaps from Q2 as you expect clearance in Q1? Maybe you could clarify a bit how this will work in terms of centers being able to use the device? What kind of volume could be comparable to the sales from last year?

Thank you for your questions. I want to be very clear, it's -- I mean we have a huge push from our customers to use this technology where they every day tell us that they lose hearts because they don't have access to it. It's something we do more out of, let's say, compassionate use for patients and we really want to help our clinics and for -- in this case, financial gain because we will only get a limited number approved by the FDA for a 2-year period, and it will be less than was in the trial. And I mean, we concluded the trial in approximately one year. So we know that if we have, let's say, the next two years, we will have a limited number of patients, including, but we hope to get 120 patients. But this, again, it's really up to the FDA. So -- and it's something we definitely do more because we know our surgeons need this technology to make sure that they can satisfy their patient needs. But it's not a huge gain, so to say, it's -- but there are other reasons to do it.

Yes. Makes sense. Maybe just a last remark. It's obvious that DBD donors is relevant as a pool in the heart technology, and that's why it's being added to the U.S. trial. I was just wondering why for the European trial that donor pool was not included and why is it included now? And if you foresee any risks on safety or efficacy considering the different nature of these donors and hearts?

Yes, interesting. I mean we have run, let's say, yes, three types of trials in the world in Australia, the long transport times. In Europe, the randomized control superior to endpoint. So that was just normal DBD hearts where we just took every second heart into control group and every second heart into the Box group, and that showed a 61% PGD improvement, which should translate to better patient survival, of course, over time. So that was the main aim of it. In the U.S., we went for the extended criteria, which has -- could be numerous reasons why it is extended criteria. One is DCD. What we have seen in preclinical trials is that -- and that means typically pig studies with the heart device is that we have very good results on DCD either do it after NRP with our heart box or direct with our heart box. So we are confident that we will see good results also on the DCD arm, both in the FDA but also in the European 4-center trial we do right now. So what we aim right now is to -- on request by the surgeons is that they say that it would simplify their life a lot if we can do direct procurement, hence not doing an NRP and they want to prove that, that is safe and good patient outcome and economically viable. So that's what we try to prove now. But of course, the trial is running. It's not always that you get preclinical results and you can translate it into clinical results. But I would say very often that has been the case so far in my experience. So we have high hopes. What we have seen so far is that it works really good to -- under the right protocol, take a DCD heart and just put a direct procurement into our box and then with peace of mind, transport it, no stress, transport it to the clinic and there without stress open the patient and then do the transplant. So, so far, very good results and very good customer testimonies from the cases we have. That being said, it's a trial, and we don't know the result until the trial is fully included, and we have seen the publication, so to say.

The next question comes from Filip Wiberg from Pareto Securities.

I've just got a couple questions from my end here. So First 1 on the margins. So gross margin was very strong at a level we haven't seen for a while. As you mentioned, product mix, but was it positively impacted by any other sort of one-off effects?

Good question. No, it wasn't. So I think this is a result of, first of all, the thoracic business area growing, right, but also our continuous drive to work diligently on improving our ASPs. We have good cost controls on COGS overall also when the heart revenue that we have had in the PRESERVE Trial came in at price levels in line more or less with the EVLP sales, so it was not diluting the margin, which it could have since it's more or less cost recovery. So no, nothing spectacular there.

Filip, there is a level of economies of scales in our COGS that I think one reason is not the only reason for abdominal, there's also a price level there, and we haven't launched in the U.S. But we do see that economies of scale is -- there is a set of fixed cost to have a supply chain, either you like it or not. And the more products you produce, the better gross margin in percentage.

Yes, yes, of course. But are you then expecting it to remain higher going forward? Is this a new normal because it tends to have been like a record since a couple of years back now.

I mean we will expect, depending on product mix, we will expect it to go a little bit up and down. I mean a good quarter will definitely look like this. We will, depending on what the product mix looks like. But it's -- we don't know exactly where the gross margin is going to be in every quarter in the next, let's say, 2 to 3 years, but we know that we continue to improve cost structures in the supply chain, for sure.

Yes. Okay. That's fair. And second one and last from my end is just on the setup for the liver trial. So you went through it in the presentation here, and it's a single-arm trial then so you're not comparing the cold static storage?

Yes and no. But I mean, we have to -- we're not worse than standard of care, so to say. But it's in -- when you go in to extend the criteria organs, it's unethical to do randomized controlled because if you would take the controlled group on ice, you would expect worse result. And is that really ethical to randomize the patient expecting or almost knowing that you get a worse patient outcome. Hence, that's why we do it single arm. So it will look pretty much like the heart trial, but it's more patients in this one, but similar design in the way that you go for extended criteria, and therefore, you can't have a control on.

All right. But will there be any sort of comparison to national averages or any sort of like those kinds of comparisons?

Typically, yes. I mean if I -- yes, I mean if you look at the EVLP trial, we could prove that we could take extended criteria lungs, hence lungs that were initially denied for transplantation and turned down and would have been discarded. And if we actually evaluated them and the ones that's very good, they were transplanted, and we could get a similar result to the national average. And there will be a similar both for, let's say, heart and liver similar designs. But you compare yourself to what would be an outcome of, let's say, really good organ. So it's a high bar to pass. It's fair -- it's still fair. Of course, we need to add something to the transplant community, of course.

The next question comes from Johan Unnerus from Redeye.

Congratulations once again to a good quarter. Initially, some follow-up and clarification on the continuous protocol process. Just confirm that there has been no questions from the FDA at this stage, as I understand it?

Correct. At this stage, no question. So that's -- we are waiting for their feedback.

Exactly. And the relevance then if you get their go ahead, some of the 15 active centers will presumably continue to use your heart solution. What's the prospect of adding some -- you have up to 26 centers potentially. Is there a scope to increase the number of centers beyond the 15 active, not that it will be more than 15 in total, but you see my point?

I see your point. I mean, yes, to be very clear, it's a decision that is partly in our hands and which we have not taken. We know that there will be -- those patients we get approved from the FDA, there will be, of course, in high demand by the current sites that already have enrolled patients. So it's a decision we need to take, and it has not been taken so far. So I'll come back when that decision is taken.

That's useful. And also the significance of these continuous use patients, of course, it's not primarily about adding sales at this stage, but presumably, it's a sort of adding clinical experience ahead of the launch and continue to activate active centers, presumably?

Yes, exactly. I mean, every patient we include into Continuous Access Protocol is another safety data point, which -- and another, let's say, where the users are getting more accustomed to the technology. So it has many, let's say, added benefits for us, for the FDA and for the transplant community. We will learn more from every heart we do.

Very good. And then your capacity to manufacture, especially disposables during '25. Should we understand it as a sort of continuous gradual step up in this capacity during '25?

We have deemed that we have enough capacity for 2025 in terms of heart disposables and heart boxes. We have included heart into the times 10 production capacity projects. So over time, we also deem that, that will satisfy the need from a heart market once we're fully up and running on...

And also -- target -- I mean, the question was also related to liver and kidney and lungs well, your general capacity to increase manufacturing.

Yes. In general, we have capacity now for disposables. And that's something we are continue scaling up, but where we had bottlenecks, let's say, before in terms of disposables were definitely kidney and liver, which had the growth and then also heart where we could foresee that very soon, it would help the growth if we didn't set up large scale. So those projects are running and according to time plan. So right now, I don't foresee any shortages on those.

And what about OpEx, you obviously continue to expand, supporting launches and commercial reach? Is it possible to give any flavor on the level of expansion, presumably growth slightly on the sales growth?

I mean, we've seen -- if we talk about margin expansion during the last two years, it has been quite fast. We do see that we have a number of projects with really good ROI in 2025. So it would be unwise to continue with that margin expansion and add another five points during '25 because we see that we need to invest into the market for being ready for 2026 and think more growth in 2025 and then come back in '26 more -- with more harvesting because we have selected a lot of investments with pretty much 12 months ROI. And I believe that's really the right thing to do during this point of time.

Very good. And finally, on the liver side, that's sort of -- that will be -- is an area where you will face TransMedics competitive by more, more, yes, concrete. What's your take on your competitive situation vis-a-vis TransMedics on the liver side?

I mean, right now, we have very few competitors so to say because in lungs, there are no viable option besides ours, that is deemed viable by the customers at least. In heart, we are not hitting the market really. So in liver, of course, in Europe, we don't see TransMedics and we need to run a trial for it in the U.S. It's a little bit early. But I mean, based on the good clinical results we have, I have high hopes that liver is going to be a great product in the U.S. that they see a need. And based on the questions I get from a lot of surgeons and let's say, counterparties in the transplant community, including OPOs and coordinators, they very often ask me about the liver, where it's a product I can't talk about really because we don't have an IDE, and we have no presence at all in liver in the U.S. right now. It's a product where I normally don't talk about it at all, and that's the product they ask for. So deem on the interest, I think the chance of success is high. The future has to -- yes, we have to prove that in the future. Thank you so much. And with that, I see that we are actually 18 minutes...

There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Thank you so much for listening. I see that we are a little bit over time, 18 minutes, but that was -- it was a lot of great questions, and thank you for asking them. I wish you a great continue of your day and looking forward to see you on April 24 when we will present the Q1 2025 results. Thank you so much for listening and asking questions.

The host has ended this call. Goodbye.