BREAKING: Transmedics PLUNGES on Short Report | Here's What I'm Doing $TMDX

Summary

TransMedics' stock has been heavily impacted by a short report from Scorpion Capital, which criticizes the company for overcharging hospitals, particularly for transportation services, and for its shift to a more costly business model involving its own planes and specialists. The report claims that TransMedics' practices are causing dissatisfaction among hospitals and could potentially harm market share. However, Brian remains cautious and is monitoring upcoming investor presentations and earnings reports to assess whether these issues will significantly affect TransMedics' long-term potential. Despite the concerns, he has not made any immediate moves with his shares.

Takeaways

• 😀 Transmedics' shares have fallen by up to 15% due to a short report, with the stock down 64% from its all-time high in August.
• 😀 The company's market share growth slowed significantly in 2023 compared to the previous year when it grew 10 times faster than the overall organ donation market.
• 😀 Despite some issues with the short report's writing style and incendiary language, it's important to investigate these reports as they might reveal a critical truth for investors.
• 😀 The short report suggests that Transmedics' shift to a full-service business model—controlling both the machines and transportation—might be a concern for hospitals and organ procurement organizations (OPOs).
• 😀 Transmedics' change to owning planes for transportation has raised accusations that the company is overcharging hospitals for flights and specialists, especially when the distances are short.
• 😀 The short report argues that there are no reasonable caps on federal reimbursement for organ procurement, allowing Transmedics to potentially overcharge.
• 😀 Transmedics is focusing on increasing business by offering a service that allows doctors to perform transplants first thing in the morning, which might not be as significant as the company claims.
• 😀 Some hospitals and OPOs are concerned that Transmedics is overusing its planes and charging for unnecessary flights, adding to costs.
• 😀 Despite these challenges, there is no immediate plan to sell Transmedics shares, although investors need to stay alert to developments in the coming months, including the upcoming investor presentation and earnings report.
• 😀 Competitors offering cheaper alternatives, such as neurothermic regional perfusion (NRP), are gaining market share, which could hurt Transmedics in the long run as hospitals seek lower-cost options.

Q & A

What triggered the sharp drop in Transmedics' stock price?

Transmedics' stock price dropped by 15% following the release of a short report by Scorpion Capital, which raised several accusations against the company, leading to concerns among investors.

What is Transmedics' primary business?

Transmedics provides a device that helps prolong the life of donated organs, such as livers, during transport from donor to recipient.

How did Transmedics' market share perform in 2023 compared to previous years?

In 2023, Transmedics' market share growth slowed down significantly. The company previously saw rapid growth, with its devices' revenue increasing ten times faster than the overall market for organ donations, but it no longer appeared to be gaining market share at the same pace.

What key claim does the short report make regarding Transmedics' business model?

The short report claims that Transmedics has shifted to a full-service business model, requiring hospitals to use Transmedics' own transportation services and specialists, instead of allowing them to use third-party services. It also accuses the company of overcharging for transportation.

Why is the pricing strategy of Transmedics a major concern?

The report argues that Transmedics is overcharging hospitals for organ transport, especially by sending multiple planes for short distances and charging for specialists' flights. This inflated pricing could lead to dissatisfaction from hospitals and organ procurement organizations.

What role does the federal government play in Transmedics' business model?

The federal government, through Medicare, reimburses hospitals for the costs of organ transplants. There are no strict caps on the reimbursement for organ procurement, which allows companies like Transmedics to pass on high transportation and service costs to hospitals.

What changes did Transmedics make to its business model in the past year?

Transmedics transitioned to a vertically integrated model where it no longer sells devices to hospitals but rather provides a full-service offering. Hospitals must now use Transmedics' transportation services and specialists, with Transmedics also owning a fleet of planes for organ transport.

How does Transmedics' new business model affect hospitals?

Hospitals are now required to use Transmedics' services for both the machine and the specialists, which limits their ability to use third-party providers. The high costs of using Transmedics' planes and specialists have raised concerns, as some hospitals believe it leads to unnecessary expenses.

What is the competitive landscape for Transmedics' devices?

Transmedics faces competition from other organ preservation technologies, such as NRP, which are cheaper and gaining market share. While Transmedics' device is effective, its high cost could hinder its competitiveness against these more affordable alternatives.

What actions will Brian take in response to the short report and stock decline?

Brian will closely monitor upcoming company events, such as the investor presentation on January 13 and the earnings report, to assess whether the concerns raised in the short report are justified. He remains cautious but is not ready to sell his shares yet.