Canaccord starts TransMedics at buy; PT $37

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Canaccord Genuity initiated coverage of TransMedics Group (NASDAQ:TMDX) with a “buy” rating and price target of $37. The stock closed at $28.88 on May 24.

Analyst Jason Mills writes that the company’s “revolutionary Organ Care System (OCS) technology will change the paradigm in the field of organ transplantation long term in lung, heart and liver (and possibly kidney).”

He figures the opportunity for OCS calculates into a multibillion-dollar target addressable market, in which “we think OCS will have a profound effect on the supply/demand imbalance that exists today.”

The OCS system directly addresses the major limitations of cold storage, which is the current standard of care for organ preservation – namely long ischemic time and inability to assess or optimize the organ ex vivo.

Mr. Mills said TransMedics has invested more in clinical studies than any company in history in organ transplantation and the data show OCS improves clinical outcomes, reduces post-transplant complications, and “we believe

will ultimately portend cost savings for the healthcare system.”

Mr. Mills also expects TransMedics to grow quickly for several years to come, modeling top-line growth of about 90% in 2019, ramping to nearly 140% in 2020, and remaining strong at 35% by 2023.

“We also see significant margin expansion to 70%-plus over the next several years as the business scales, portending a highly profitable model over the long term,” he added.

Sydney Stewart