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Three Medical Stocks with Huge Ambitions

May 3, 2024

While our recent history has been exciting, we believe our future will be transformational.

Sham Shiblaq, Chief Commercial Officer, PROCEPT BioRobotics Corp., Q1 2024, 1 May 2024

The group is trading strongly.

We are pleased to report another strong quarter with total revenue for the first quarter of 2024 of $44.5 million representing growth up 83pc compared to the first quarter of 2023. Growth in the quarter was driven by strong US system sales, increased utilization from our expanded US install base, and record international revenues.

US monthly utilization increase approximately 7pc compared to the prior year period, which is significant given an 84pc increase in our install base. We exited the first quarter of 2024 with a US install base of 354 systems out of target market of 2,700 total hospitals that performed BPH surgeries. The significant increase in new accounts in conjunction with our ability to move accounts up to utilization care further demonstrates not only our team’s consistent commercial execution but growing customer and patient demand for Aquablation therapy.

As we highlighted earlier this year, there are multiple factors trending in the right direction, which will allow us to continue to execute against our long-term growth plan, while being disciplined ensuring a path to profitability. We believe these underlying fundamentals reflect the technology that is laying the foundation to become the BPH [Benign prostatic hyperplasia] surgical standard of care and a business that will be a leading urology franchise globally.

Reza Sadno, CEO, PROCEPT BioRobotics Corp., Q1 2024, 1 May 2024

The group is also starting to address international markets.

With respect to international performance in the first quarter, we generated $4.3m of international revenue in the first quarter of 2024, representing growth of 65pc compared to the prior year period. Growth in the first quarter was once again driven primarily by strong sales momentum in the United Kingdom. Given the accelerating interest from UK surgeons and strong unit economics on handpiece and system average selling prices, we plan to make further investments in 2024 in the UK to accelerate growth and expand patient awareness.

Additionally, following our post-market survey in Japan, we have generated significant interest from Japanese surgeons. We are currently in the final stages of signing sales contracts with some of the most reputable urology practices in Japan, and we plan to launch a population therapy program later this year. While we are excited about these early placements, it’ll take time to build our pipeline and launch accounts to start generating meaningful procedure volumes and revenue. Like the US and the United Kingdom, our strategy is to lead with clinical data and key opinion leader adoption to support a more robust and sustainable commercial launch.

Reza Sadno, CEO, PROCEPT BioRobotics Corp., Q1 2024, 1 May 2024

It also appears that there may be scope for the group’s therapy to be used to treat patients with prostate cancer.

Lastly, I want to touch on prostate cancer. A few weeks ago we announced we will be hosting an investor event and surgeon panel at the 2024 American Urological Association Conference in San Antonio on Friday, May 3rd at 8:00 AM Central, a webcast option will be available on our IR website for those who cannot attend in person. The agenda for Friday’s event will be to highlight six months follow-up data of patients treated for prostate cancer with Aquablation therapy. Additionally, one of our panelists will share a specific prostate cancer case and how the patient was treated?

Lastly, we will conduct a fireside chat with Dr. Inderbir Gill, Founding Executive Director of USC, Urology and Chairman of Urological Cancer Surgery at Keck School of Medicine of USC. The fireside chat will focus on limitations of current prostate cancer treatment options and why Aquablation therapy has the potential to be a great option for patients and ultimately surgeons who want to recommend a treatment that is effective and reduces rates of unnecessary harm. We look forward to seeing many of you this Friday in person.

Reza Sadno, CEO, PROCEPT BioRobotics Corp., Q1 2024, 1 May 2024

As you can see above PRCT has a strong chart which suggests these shares could be early in a sustained bull run.

TMDX is an exciting business.

For the past two years, TransMedics has delivered exceptional revenue growth while making transformational investments in our business. 2024 represents another crucial year, not only for exceptional growth but also for broadening our infrastructure and product pipeline to drive further growth, profitability and importantly, increased transplant volumes. Specifically, we are focused on three verticals; first, completing the initial buildout phase of our TransMedics aviation fleet and transplant logistics infrastructure. Second, preparing for the launch of three major new clinical programs to accelerate OCS lung and OCS heart adoption and expand our clinical indications for OCS heart in the US. And finally, growing the overall, national transplant volumes even further through our one of a kind NOP program.

[The TransMedics Organ Care System (OCS) is a fully portable, multi-organ, normothermic preservation and assessment technology that mirrors human physiology, minimises ischemia, and provides the ability to optimise the organ during transport.]

Waleed Hassanein, CEO, TransMedics, Q1 2024, 1 May 2024

The group is growing strongly.

Total Revenue for Q1 grew to $96.9m, representing 133pc growth over Q1 2023 and a 19pc sequential growth from Q4 2023. This growth was achieved through increased utilization of both, OCS product across lung, heart and liver, as well as TransMedics transplant logistic service. I want to highlight the diversified nature of our growth to dispel any potential misperception that our growth is only driven overwhelmingly by transplant logistics revenue growth. Said differently, we fully expect our future growth to be driven by both, increased product and transplant logistics adoption.

TransMedics transplant logistics service revenue for Q1 was $14.5m, up from $9.2m in Q4 of last year, representing approximately 58pc growth quarter-over-quarter. We are continuing to demonstrate that our integrated and cost efficient TransMedics NOP and logistics service infrastructures are delivering real value to transplant programs across the US. We remain focused on expanding our operational capabilities for TransMedics logistics throughout 2024.

Waleed Hassanein, CEO, TransMedics, Q1 2024, 1 May 2024

The business is profitable.

Our overall gross margins for Q1 was 62pc, up from 59pc last quarter and in line with our expectations. We are extremely confident that we will be able to further improve the gross margin over the next 12 to 18 months as we achieve more leverage of scale in both, product and service operations. The strong growth in revenue and gross margins enabled us to deliver GAAP operating profit of $12.4m which presents 13pc of total revenue. Net income was $12.2m. We are very proud to have achieved these profitability metrics while still investing heavily in future growth. We remain laser focused, however, on delivering sustainable positive operating cash flow over the next several quarters.

Waleed Hassanein, CEO, TransMedics, Q1 2024, 1 May 2024

The group is making waves and expanding physically.

From a customer footprint perspective, we have also continued to grow the number of programs that are using our transplant logistic services. In Q1, approximately 105 US transplant programs used TransMedics logistics compared to approximately 97 in Q4 of 2023. As we have rapidly achieved this critical mass of our users, we are now focusing on going deeper within these programs and meeting more of their transplant logistics needs going forward.

Overall, we’re very pleased with the early success of our transplant logistics services and are confident that transplant programs are seeing the significant cost efficiency and reliability of TransMedics logistics compared to historical model. We look forward to expanding further throughout the year and into 2025 as we scale our air fleet and ground operations.

We are also encouraged by our growing base of clinical evidence from real world outcomes and the growing excitement around our offering across clinical transplant users. We saw this excitement firsthand in April of this year as we attended the International Society of Heart and Lung Transplant Conference in Prague. At the meeting, several scientific presentations by transplant academic experts demonstrating the value of OCS heart and OCS lung were presented.

Waleed Hassanein, CEO, TransMedics, Q1 2024, 1 May 2024

An exciting business, showing accelerating growth.

We’re excited to share the strong results from the first quarter. With the continued execution from our team, we’re raising our guidance for the year, bolstered by our view that we can sustainably deliver profitable growth in service of a critically important unmet need for diagnosing rare disease to an ever-growing group of patients and their families.

We have transformed GeneDx over the past few years, but it’s also fair to say that our entire industry has changed tremendously in that time. The companies that are thriving are those that are focused on their distinct strengths, and in our case, it’s our industry-leading exome and genome. Our team is working with exceptional focus, purpose and care, to put an end to the diagnostic odyssey by delivering the most comprehensive answers to clinicians and their patients.

We’re proud to say that we’ve hit yet another milestone. We’ve interpreted more than 600,000 clinical exomes since 2012. To give you a sense of how we’ve accelerated the growth, we interpreted half of those in the past 3 years, and 100,000 since the fall. These exomes contribute to our proprietary data assets, which enables more definitive diagnoses for more patients. That data asset is key to our competitive advantage, and it’s only getting stronger with our growth.

Katherine Stueland, CEO, GeneDX Holdings, Q1 2024, 29 April 2024

Katherine Stueland became CEO in 2023 and she is having an impact.

We organized our entire team around three goals in the middle of last year: one, driving exome utilization; two, improving our average reimbursement rates; and three, producing cash burn. This focus is paying off. In the first quarter, we delivered more than $61m in revenues, 61pc in gross margins, and an 8th consecutive quarter of cash burn reduction. As a result, we’re raising our annual revenue guidance to $235m to $245m. We’ll continue to expand our gross margins off of Q1, and we’re reducing our cash burn guidance, which Kevin will walk through. There’s a lot that went well in Q1.

Our commercial and medical affairs teams are driving exome and genome as the standard of care in the pediatric setting. This increased utilisation positively impacted our product mix, which came in at about 30pc exome and genome, with this representing over 70pc of our total revenue. Over time, we expect to drive substantially all of our volumes and revenues to exome and genome, so our product mix this quarter is a sign of early success on this path to a two-test future.

Katherine Stueland, CEO, GeneDX Holdings, Q1 2024, 29 April 2024

Children are a big part of their target market.

Today, 1 in 10 Americans have a rare disease, with 50pc of them being children. We know that the expanded utilisation of testing reveals that far more people are impacted by genetic diseases, and we are committed to serving this growing patient population in the future. Our sites are set on diagnosing all hereditary diseases and as many families as possible. So, over time, we’ll introduce GeneDx to broader pace of populations to inform health decisions through every stage of life, but for now, our team is focused on helping end the diagnostic odyssey for as many children and families as quickly as we can, and that purpose motivates our team each and every day.

Katherine Stueland, CEO, GeneDX Holdings, Q1 2024, 29 April 2024

The graphic below shows the growing importance of exome/genome testing to GeneDX and to medicine generally.

The diagnostic market is changing.

The shift from single-gene testing to multigene testing began more than a decade ago. And now, we’re successfully shifting the rare disease market from multigene panels to exome and genome. 

Katherine Stueland, CEO, GeneDX Holdings, Q1 2024, 29 April 2024panzer

Strategy – Medical Technology Shares Poised to Capture Investor Imaginations

At the moment most investor attention is on AI and why not given the incredible growth being shown by companies exposed to this market? But there is action elsewhere and I have found three small but exciting medical technology companies whose shares seem to be just taking off. I could easily imagine investors becoming very excited about these businesses as awareness grows of how fast they are growing.

Share Recommendations

Procept BioRobotics Corporation PRCT. Buy @ $63.44

Transmedics Group TMDX. Buy @ $126.85

GeneDX Holdings. WGS. Buy @ $19.74

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