What changed in this filing

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Item 1. Business

2021-03-11 compared with 2020-03-17 · 133 added, 94 removed, 866 unchanged (21% of the section changed)

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We also have commercialized the OCS Lung and OCS Heart outside of the United States.

We submitted a premarket approval, or PMA, application to the FDA in December 2018 for the use of the OCS Heart for donor hearts currently utilized and unutilized for transplantation based on the results of our OCS Heart EXPAND Trial and OCS Heart PROCEED II Trial.

We expect that in the second quarter of 2020 the FDA will convene an advisory committee meeting to discuss our OCS Heart PMA application, which is typical for novel technologies, and we anticipate FDA action with respect to this PMA application over the next six months.

We submitted a Pre-Market Approval, or PMA, application to the FDA in December 2018 for the use of the OCS Heart for donor hearts currently utilized and unutilized for transplantation based on the results of our OCS Heart EXPAND Trial, OCS Heart EXPAND Continued Access Protocol, or CAP, Trial and OCS Heart PROCEED II Trial.

The FDA will convene an advisory committee meeting, typical for novel technologies, to discuss our OCS Heart PMA application.

The FDA advisory committee panel was initially set for April 2020 but was delayed due to the COVID-19 pandemic, and we currently expect it to be held on April 6, 2021.

It is possible that the FDA decides that the data from our clinical trials does not support PMA approval or any of the claims we wish to make, or the FDA could require us to gather significant additional clinical data or conduct additional non-clinical testing.

In addition, we completed enrollment of the 300 patient OCS Liver PROTECT trial in October 2019.

We expect to submit a new PMA application for the OCS Liver in 2020.

In addition, we completed enrollment of the 300 patient OCS Liver PROTECT trial in October 2019, and we submitted a PMA application for the OCS Liver in June 2020 and it is currently under review by the FDA.

We also completed enrollment of the 180 patient OCS Heart DCD trial in September 2020.

We expect to submit a PMA supplement application for the use of OCS Heart for DCD hearts in 2021.

We are focused on establishing the OCS as the standard of care for solid organ transplantation.

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Our commercial strategy is focused on leveraging these relationships to drive deeper adoption of the OCS at the leading, large-volume academic transplant institutions.

We are also seeking to establish a turnkey organ retrieval and OCS perfusion service offering for transplant centers in order to assist transplant programs in overcoming logistical hurdles, which we believe would accelerate adoption of the OCS.

We have also initiated a national OCS program that provides turnkey organ retrieval and OCS perfusion services to transplant centers in order to assist transplant programs in overcoming logistical hurdles.

We believe this program has the potential to accelerate adoption of the OCS.

We believe the OCS will drive significant benefits to all stakeholders in the field of organ transplantation.

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As of December 31, 2020, we employed 110 people, globally, most of which were full-time employees.

We generated $23.6 million of net revenue during the fiscal year ended December 28, 2019 and $13.0 million of net revenue during the fiscal year ended December 29, 2018, representing an 81% increase.

We generated $25.6 million of net revenue during the fiscal year ended December 31, 2020 and $23.6 million of net revenue during the fiscal year ended December 28, 2019, representing a 9% increase.

Growth in our business was negatively impacted by the global COVID-19 pandemic after net revenue growth of 81% in 2019 compared to 2018.

Our business model is characterized by a high level of recurring revenue, which is derived primarily from sales of our single-use, organ-specific disposable sets that are required for each transplant using the OCS.

We expect that greater than 90% of our net revenue will be related to sales of our single-use OCS disposable sets.

Commercial Opportunity

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We believe the OCS could be adopted for use in a significant share of transplants;

however, certain factors may limit the actual utilization of the OCS, including the need to continue to educate surgeons, transplant centers and private payors of the merits of the OCS as compared with cold storage, the requisite training of surgeons prior to their use of the OCS and the overall capacity of transplant centers to perform organ transplants due to factors such as the availability of surgeons.

however, certain factors may limit the actual utilization of the OCS, including the need to continue to educate surgeons, transplant centers and private and public payors of the merits of the OCS as compared with cold storage, the requisite training of surgeons prior to their use of the OCS and the overall capacity of transplant centers to perform organ transplants due to factors such as the availability of surgeons.

See “Item 1A.

Risk Factors—Risks Related to Research and Commercialization—We depend heavily on the success of the OCS and achieving market acceptance.

If we are unable to successfully commercialize the OCS, our business may fail” and “—We must continue to educate surgeons, transplant centers and private payors and demonstrate the merits of the OCS compared with cold storage or new competing technologies.

Surgeons, transplant centers and private payors may require additional clinical data prior to adopting or maintaining coverage of the OCS” in this Annual Report on Form 10-K.

If we are unable to successfully commercialize the OCS, our business may fail” and “—We must continue to educate surgeons, transplant centers and private and public payors and demonstrate the merits of the OCS compared with cold storage or new competing technologies.

Surgeons, transplant centers and private and public payors may require additional clinical data prior to adopting or maintaining coverage of the OCS”.

Lung Opportunity

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Only 16,700 donor livers are utilized annually for transplantation in our key geographies, resulting in approximately 50,300 organs, comprised of 3,300 from potential DBD donors and 47,000 from potential DCD donors, going unutilized each year due to the limitations of cold storage.

To support an FDA PMA for the OCS Liver, we are currently conducting a pivotal trial to preserve and assess donor livers from both DBD and DCD donors.

To support an FDA PMA for the OCS Liver, we have completed a pivotal trial, OCS Liver PROTECT, to preserve and assess donor livers from both DBD and DCD donors.

The results of the OCS Liver PROTECT Trial demonstrated that the OCS Liver resulted in approximately 98% utilization of DBD and DCD donor livers.

Final results from the OCS Liver European REVIVE Trial demonstrated that the OCS Liver resulted in approximately 100% utilization of DBD and DCD donor livers.

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Each OCS product consists of three primary components customized for each organ:

• OCS Console:

The OCS Console is a highly portable electromechanical medical device that houses and controls the function of the OCS and is designed to fit in the current workflow for organ transplantation.

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FDA—PMA approved for donor lungs currently utilized and currently unutilized for transplantation

FDA—Pivotal trial enrollment completed for currently utilized and unutilized DBD donor hearts, PMA application submitted in December 2018.

Expect FDA Advisory Committee meeting in the second quarter of 2020 and FDA action within the next six months

FDA—Pivotal trial enrollment completed for currently utilized and unutilized DBD donor hearts;

PMA application submitted in December 2018.

Expect FDA Advisory Committee meeting on April 6, 2021.

Pivotal trial enrollment completed for DCD hearts.

Expect PMA for DCD hearts to be submitted in 2021.

FDA—Pivotal trial completed enrollment in October 2019.

Expect PMA submission in second quarter of 2020.

PMA submitted in June 2020 and currently under review.

Expect FDA Advisory Committee meeting in 2021.

CE Marked for console, perfusion set and solutions

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CE Marked for console, perfusion

set and bile salts

Proprietary and customized ventilation circuit and method allows the lung to breathe outside of the human body, while maximizing portability

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Customized cannulation enables the lung to be maintained and assessed using standard clinical diagnostics

Proprietary automated drug delivery system optimizes condition of the heart perfusion during preservation

Proprietary automated drug delivery optimizes condition of the liver perfusion during preservation

Proprietary automated solution delivery system optimizes condition of the heart perfusion during preservation

Proprietary automated solution delivery optimizes condition of the liver perfusion during preservation

Proprietary nutrient-rich, lung-specific solution improves lung condition from negative effects of brain death

Proprietary nutrient- and hormone-rich physiologic solutions replenish and optimize the heart with depleted nutrients

Customized OCS bile salt solution stimulates the liver to continue to produce bile

Customized OCS bile salt solution replenishes the liver to continue to produce bile

Key Advantages of the OCS Platform

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We believe we are well-positioned to leverage these centers’ familiarity with the value of the OCS to increase the number of transplants they perform and increase our penetration of their case volumes.

Grow our National OCS Program, a turnkey organ retrieval and OCS perfusion service to overcome logistical hurdles and deliver better clinical outcomes.

We have initiated a service program that leverages our clinical and logistical capabilities to provide access to and use of the OCS for transplant centers in certain regions of the United States.

We believe we could become a national clinical service provider of organ retrieval and perfusion service to transplant centers throughout the United States.

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.

Expand the existing pool of utilizable donor organs by securing additional FDA PMA supplements and new PMAs for expanded indications.

We secured our first PMA approval for the OCS Lung in March 2018 and our second PMA approval for the OCS Lung in May 2019.

We have submitted additional PMA applications for the OCS Heart and OCS Liver.

Continue to build clinical evidence in the pre- and post-market settings to substantiate the benefits of the OCS and expand clinical transplant indications.

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We plan to expand this body of clinical evidence in the pre- and post-market settings, for example with our ongoing post-market Thoracic Organ Perfusion Registry.

Expand the existing pool of utilizable donor organs by securing additional FDA PMA Supplements and new PMAs for expanded indications.

We secured our first PMA approval for the OCS Lung in March 2018 and our second PMA approval for the OCS Lung in May 2019.

We have submitted an additional PMA application for the OCS Heart, and we also plan to seek PMA approval for the OCS Liver.

Develop the next generation OCS technology platform to improve user experience and facilitate our National OCS Program.

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 n ational OCS p rogram.

Leverage the established commercial reimbursement process and billing mechanisms to accelerate U.S.

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We are in the process of seeking long-term reimbursement for our OCS products in several other countries.

Establish turnkey organ retrieval and OCS perfusion service to overcome logistical hurdles and deliver better clinical outcomes.

We intend to develop clinical and logistical capabilities that would allow us to be the regional or national clinical service provider of organ retrieval and perfusion to transplant centers in the United States.

We believe this service offering would 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 expand OCS products.

We intend to invest in developing the next generation multi-organ platform to improve the user experience.

Commercialization Strategy & Business Model

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We believe the close relationship between transplant surgeons and our team provides us with unparalleled customer access that should enable us to further penetrate these transplant centers.

In addition, we have initiated a n ational OCS p rogram, which allows us to partner with transplant centers and organ procurement organizations to provide logistical and perfusion solutions to reduce inefficient burdens on both organizations.

We believe this program has the potential to accelerate the adoption of the OCS technology throughout the United States.

Business Model

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In light of the unscheduled nature of transplant procedures, our users replenish OCS disposable sets to maintain a minimum stock of three to five units per OCS product, on average.

For the fiscal year ended December 28, 2019, the sales of our single-use OCS disposable sets was greater than 90% of our net revenue.

We generate a significant amount of our net revenue from a limited number of customers.

For the fiscal year ended December 28, 2019, no individual customer accounted for greater than 10% of our net revenue.

For the fiscal year ended December 29, 2018, Harefield Hospital and Massachusetts General Hospital each accounted for 10% of our net revenue.

For the fiscal year ended December 31, 2020, Massachusetts General Hospital accounted for 14% of our net revenue and Duke University accounted for 10% of our net revenue.

We expect that sales to relatively few customers will continue to account for a significant percentage of our net revenue in future periods.

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Current Donor Hearts

OCS Heart EXPAND Trial for

OCS Heart EXPAND Trial and OCS Heart EXPAND CAP for

Currently Unutilized DBD Donors

OCS Heart DCD Trial and OCS Heart DCD CAP

PMA submission in December 2018

Expect PMA submission in 2021

International pivotal trial for FDA approval and market access for current heart transplant market

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Single arm trial to assess the ability of the OCS to improve donor heart utilization from currently unutilized DBD donors

Continued Access Protocol (CAP) to allow access to the OCS Heart System for the same currently unutilized DBD donors while PMA is under review

pivotal trial for FDA approval and market access for DCD donors.

Prior to this trial DCD hearts were never utilized for transplant

Randomized trial vs.

standard hearts transplanted with ice

Number of Patients

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12 months post-transplantation

Number of Centers

and international centers

OCS Heart PROCEED II Trial in

Current Donor Hearts

OCS Heart EXPAND Trial and OCS Heart EXPAND CAP for

Currently Unutilized DBD Donors

OCS Heart DCD Trial and OCS Heart DCD CAP

Summary Outcomes

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Met the primary effectiveness endpoint of 30-day patient survival and freedom from severe PGD within 24 hours post-transplant

Demonstrated significant increase in donor heart utilization from currently unutilized DBD donors to 81% utilization

Demonstrated significant increase in donor heart utilization from currently unutilized DBD donors to 81% to 84% utilization

Demonstrated good patient survival at 6 months and 12 months post-transplantation

Low incidence of severe left ventricular or right ventricular PGD

Results to be reported in 2021

Publication Status

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Pre-publication

The OCS Heart PROCEED II Trial was the first FDA trial for machine perfusion technologies for solid organ transplantation and helped identify several trial design and device technology implementation opportunities.

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donor hearts used for the OCS Heart EXPAND Trial had been declined for transplantation an average of 66 times by other transplant centers before reaching a center participating in the OCS Heart EXPAND Trial due to variety of clinical and logistical reasons, including donor organ quality, donor age, expected injurious ischemic time or travel distance, or type of donor.

After conclusion of enrollment of the OCS Heart EXPAND Trial, we began enrollment of the OCS Heart EXPAND CAP trial.

A CAP trial is approved by the FDA to allow continued usage of a medical technology for those hospitals that were in the original clinical trial, using the same protocol as the original EXPAND trial.

This allows patients to receive access to this critical lifesaving technology during the review of the PMA.

As of February 28, 2021, we have enrolled 62 patients in the OCS Heart EXPAND CAP trial.

Summary results of the OCS Heart EXPAND Trial:

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The figure below demonstrates the donor heart characteristics and observed rates of successful transplantation in the OCS Heart EXPAND Trial.

When the patients transplanted in the OCS Heart EXPAND CAP are combined with the OCS Heart EXPAND patients, the utilization rate was 84%

OCS Heart EXPAND Trial Donors Type

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Despite the higher risk profile associated with the donor hearts used in the OCS Heart EXPAND Trial, the trial demonstrated short- and mid-term survival rates of 94.7%, 88.0% and 83.8% at 30 days, six months and 12 months, respectively.

When the results for the OCS Heart EXPAND CAP are combined with the results for the OCS Heart EXPAND Trial, the survival rates were 94.7%, 88.0% and 83.8% at 30 days, six months and 12 months, respectively.

Low Incidence of Severe Primary Graft Dysfunction:

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Recently published studies of standard heart transplants have demonstrated higher rates of severe LV or RV PGD.

We have received FDA approval for a Continued Access Protocol, or CAP, for the OCS Heart EXPAND Trial.

We have received FDA approval for a CAP for the OCS Heart EXPAND Trial .

This trial follows the same protocol as the OCS Heart EXPAND Trial and is intended to allow patient access to the OCS Heart while the OCS Heart PMA is under review.

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OCS Heart DCD Trial

In December 2019, we began enrolling in the first U.S.

In September 2020, we completed enrollment of 180 patients in the first U.S.

trial of DCD hearts for transplantation.

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The primary endpoint is a non-inferiority comparison of patient survival at 6 months post-transplant between recipients of DCD donor hearts preserved on the OCS Heart and concurrent recipients of standard criteria donor hearts preserved using cold storage, adjusting for risk factors.

We have enrolled 20 out of 53 DCD heart transplant patients as of February 29, 2020.

We have completed enrollment in this trial and have transplanted 90 patients with DCD donor hearts and 90 patients with standard of care hearts preserved on cold storage.

This trial is currently in the follow-up phase and we anticipate submission of a PMA supplement for this trial in 2021.

Similar to the OCS EXPAND Heart trial, once enrollment was complete, we initiated the OCS DCD Heart CAP trial.

As of February 28, 2021, we have enrolled 28 patients in the OCS Heart DCD CAP trial.

Summary of Key Ex-U.S.

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OCS Liver Clinical Trials

Summary Overview of OCS Liver PROTECT Trial & Results

In October 2019, we completed enrollment of patients in our U.S.

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This is a two-armed, multi-center, randomized, controlled pivotal trial with participants assigned to the OCS treatment arm or the control arm, which uses cold storage.

Summary Results of the OCS Liver PROTECT Trial:

Observed a 98.1% utilization rate.

Lower incidence of EAD compared to control across both DBD donor and DCD donor cohorts in the trial.

We have received FDA approval for a CAP for the OCS Liver PROTECT Trial.

This study follows the same protocol as the OCS Liver PROTECT Trial and is intended to allow patient access to the OCS Liver while the OCS Liver PMA is under preparation and review.

As of February 28, 2021, we have enrolled 74 patients in this trial.

Summary Overview of OCS Liver REVIVE Trial

Additionally, our OCS Liver European REVIVE Trial, which was a single arm, prospective trial of 25 transplanted liver recipients, evaluated the safety and performance of the OCS Liver.

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Results from the OCS Liver European REVIVE Trial demonstrated that the OCS Liver resulted in 100% utilization of DBD and DCD donor livers.

We have received FDA approval for a CAP for the OCS Liver PROTECT Trial.

This study follows the same protocol as the OCS Liver PROTECT Trial and is intended to allow patient access to the OCS Liver while the OCS Liver PMA is under preparation and review.

As of February 29, 2020, we have enrolled 7 of 72 patients in this trial.

In November 2019, we received FDA approval for the OCS™ Liver DCD Trial.

The objective of the trial is to evaluate the safety and effectiveness of the OCS™ Liver to preserve, optimize the condition and assess livers from DCD donors with extended warm ischemic time and older age that currently are seldom used for liver transplantation due to limitations of cold storage.

The primary endpoint is a non-inferiority comparison of liver graft survival at six months post-transplantation compared to a performance goal derived from graft survival reported for recipients of standard criteria DCD livers preserved using cold storage.

The study will enroll 130 patients.

Intellectual Property

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Our patent portfolio includes patents and patent applications that we own or license from third parties.

As of December 28, 2019, our owned and licensed patent portfolio consisted of approximately 200 issued patents and pending patent applications worldwide, including in Australia, Europe, Canada, China, Israel, New Zealand and Japan.

As of December 31, 2020, our owned and licensed patent portfolio consisted of approximately 248 issued patents and pending patent applications worldwide, including in the United States, Australia, Europe, Canada, China, Israel, New Zealand and Japan.

Our licensed portfolio includes one issued unexpired United States patent licensed from the Veteran’s Administration, or VA.

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patent covered by the VA license agreement, U.S.

We have been granted an interim patent term extension until September 23, 2020 for this patent.

The maximum extension granted could be through May 2022;

however, the length of the patent term extension is currently being determined by the United States Patent and Trademark Office.

We have been granted an interim patent term extension until September 23, 2021 for this patent and have requested an extension to May 2022.

However, the length of the patent term extension is currently being determined by the United States Patent and Trademark Office (USPTO) based on input from the FDA.

On February 8, 2021, the FDA provided to the USPTO a determined regulatory review period for the OCS Lung.

Under the FDA’s analysis, the patent term extension of the ’082 patent would be until November 6, 2021.

Our rights under the license agreement will continue until the expiration of the last to expire of the licensed patents, which will be the ’082 patent.

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We purchase some of the components of the OCS Console and OCS Perfusion Set from single-source suppliers and, in a few cases, sole-source suppliers.

As of December 28, 2019 and December 29, 2018, we had backlog of $0.5 million and $1.2 million, respectively.

Of the amount of backlog as of December 28, 2019, we expect that substantially all of it will be invoiced to customers within the following 12 months.

However, because our customers may cancel, change or reschedule orders without penalty at any time prior to shipment, we have no assurance that we will be able to convert our backlog into shipped orders.

See “ Item 7.

Management’s Discussion and Analysis—Backlog”, in this Annual Report on Form 10-K.

We source the OCS Solutions using our proprietary formulas from third-party suppliers.

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We may also terminate this agreement with 12 months’ notice if we request that Fresenius qualifies a second manufacturing plant or qualifies a reputable third party to manufacture the OCS Lung Solution and Fresenius fails to respond to this request.

Until December 2018, we were obligated to meet certain annual minimum purchase commitments based upon rolling order forecasts that we provided to Fresenius in accordance with this agreement.

Our agreement with Fresenius includes an obligation to meet certain annual minimum purchase commitments based upon rolling order forecasts that we provided to Fresenius in accordance with this agreement.

Our agreement with Fresenius for the supply of OCS Heart Solution has one-year evergreen terms, terminable by either party at least 12 months prior to the end of the then-current term.

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EU laws in relation to Conformité Européenne marking, or CE, will apply in Switzerland and Turkey at least until May 26, 2021 due to mutual recognition agreements, and thereafter it is anticipated that a new mutual recognition agreement with Switzerland and a Customs Union with Turkey will allow application to continue, although potentially with some interruption.

Our products are subject to regulation as medical devices under the Federal Food, Drug and Cosmetics Act, or FDCA, as implemented and enforced by the FDA.

Our products are subject to regulation as medical devices under the Federal Food, Drug and Cosmetic Act, or FDCA, as implemented and enforced by the FDA.

The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, effectiveness, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing and distribution, and import and export of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.

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While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting a substantial equivalence determination that provides permission to commercially distribute the device.

The FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance.

FDA’s permission to commercially distribute a device subject to a 510(k) premarket notification is generally known as 510(k) clearance.

Under the 510(k) process, the manufacturer must submit to the FDA a premarket notification demonstrating that the device is “substantially equivalent” to either a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or a device that was reclassified from Class III to Class II or I, or another commercially available device that was cleared through the 510(k) process or that was granted marketing authorization through the De Novo classification process under section 513(f)(2) of the FDCA.

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Pre-amendment Class III devices require a PMA only after FDA publishes a regulation calling for PMA submissions, and prior to the PMA effective date are subject to the FDA’s 510(k) premarket notification and clearance process in order to be commercially distributed.

We received PMA approval for the OCS Lung in March 2018 for the preservation of donor lungs currently unutilized for double-lung transplantation, and we received PMA approval for the OCS Lung for preservation of donor lungs currently unutilized for double lung transplantation in May 2019.

Each of our OCS products is a Class III device.

We received PMA approval for the OCS Lung in March 2018 for the preservation of donor lungs currently utilized for double-lung transplantation, and we received PMA approval for the OCS Lung for preservation of donor lungs currently unutilized for double-lung transplantation in May 2019.

In the future, we also hope to obtain PMA approvals for the OCS for preservation of donor hearts currently utilized and unutilized for transplantation, and donor livers currently utilized and unutilized for transplantation.

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In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those patients.

For our currently marketed OCS Lung, as part of the conditions of approval, we must complete three PMA post-approval studies:

For our currently marketed OCS Lung, as part of the conditions of approval, we must complete three PMA post-approval studies, or PAS:

the OCS Lung INSPIRE Continuation PAS, which is a two-arm observational study intended to evaluate long-term outcomes of the OCS Lung INSPIRE Trial patients, the OCS Lung EXPAND Continuation PAS, which is a single-arm study intended to evaluate long-term outcomes of the OCS Lung EXPAND Trial patients, and our TOP Registry, which is a prospective, single-arm, multi-center, observational study designed to evaluate short- and long-term safety and effectiveness of the OCS Lung for both donor lungs currently utilized and unutilized for transplantation.

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If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials.

A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining

human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.

A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject.

To be approved, an IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound.

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Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits or protocol violations.

Currently, pivotal trials are being initiated or conducted under IDEs that investigate the safety and effectiveness of the OCS Liver for currently utilized donor livers and certain donor livers that are currently unutilized for transplantation and the safety and effectiveness of the OCS Heart for the preservation of donor hearts that are donated after circulatory death.

In addition, we are conducting, under IDE approval, a Continued Access Protocol to the OCS Heart Study for the preservation of certain donor hearts that do not meet the current standard donor heart acceptance criteria for transplantation.

Currently, we are conducting, under IDEs, a Continued Access Protocol to the OCS Heart Study for the preservation of certain donor hearts that do not meet the current standard donor heart acceptance criteria for transplantation, a Continued Access Protocol to the OCS Heart DCD study for the preservation of hearts donated after circulatory death, and a Continued Access Protocol to the OCS Liver study for the preservation of currently utilized donor livers and certain donor livers that are currently unutilized for transplantation.

Post-market Regulation

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Our notified body is based in the Netherlands and issues the certificates that allow CE marking of the OCS products.

In addition, we have engaged with a new Authorized Representative covering both the U.K.

as well as Europe in separate arrangements in compliance with both region regulations.

Regulations Applicable to Transport of Organs Intended for Transplantation

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Many countries in which we operate have laws with extra-territorial effect—those laws apply to our operations outside the relevant country, to the extent they are breached.

Examples of such laws include:

the Foreign Corrupt Practices Act, or the FCPA, the UK Bribery Act 2010 and the General Data Protection Regulation, or the GDPR.

Examples of such laws include the Foreign Corrupt Practices Act, or the FCPA, the UK Bribery Act 2010 and the General Data Protection Regulation, or the GDPR.

The extra-territorial effect of those laws affects our sales and marketing strategy, since in many countries healthcare professionals are officers of the state.

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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.

The Health Insurance Portability and Accountability Act, or HIPAA, proscribes 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.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, proscribes 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.

HIPAA also requires business associates to enter into business associate agreements with covered entities and to safeguard a covered entity’s PHI against improper use and disclosure.

HIPAA privacy regulations cover the use and disclosure of protected health information by covered entities as well as business associates, which are defined to include subcontractors that create, receive, maintain, or transmit protected health information on behalf of a business associate.

These regulations also set forth certain rights that an individual may have with respect to his or her protected health information maintained by a covered entity, including the right to access or amend certain records containing protected health information, or to request restrictions on the use or disclosure of protected health information.

HIPAA privacy regulations cover the use and disclosure of PHI by covered entities as well as business associates, which are defined to include subcontractors that create, receive, maintain, or transmit PHI on behalf of a business associate.

These regulations also set forth certain rights that an individual may have with respect to his or her PHI maintained by a covered entity, including the right to access or amend certain records containing PHI, or to request restrictions on the use or disclosure of PHI.

HIPAA security regulations set forth requirements for safeguarding the confidentiality, integrity, and availability of protected health information that is electronically transmitted or electronically stored.

The Health Information Technology for Economic and Clinical Health Act, among other things, provides certain health information security breach notification requirements.

Under these laws, the covered entity must notify any individual whose protected health information is breached as required under the breach notification rule.

Although we believe that we currently are neither a “covered entity” nor a “business associate” under HIPAA, a business associate relationship may be imputed from facts and circumstances even in the absence of an actual business associate agreement.

Under these laws, the covered entity must notify any individual whose PHI is breached as required under the breach notification rule.

Although we believe that we currently are neither a “covered entity” nor a “business associate” directly under HIPAA, a business associate relationship may be imputed from facts and circumstances even in the absence of an actual business associate agreement.

In addition, HIPAA may affect our interactions with customers who are covered entities or their business associates.

The HIPAA privacy and security regulations establish a uniform federal “floor” and do not supersede state laws that may be more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their health and other personal information.

In the European Union, we may be subject to laws relating to our collection, control, processing and other use of personal data, such as data relating to an identifiable living individual.

States are increasingly regulating the privacy and security of individually identifiable information, including financial information and health information.

For example, the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020, gives California consumers (defined to include all California residents) certain rights, including the right to ask covered companies to disclose the types of personal information collected and delete a consumer’s personal information, and imposes several obligations on covered companies to provide notice to California consumers regarding their data processing activities and limitations on covered companies’ ability to sell personal information.

We expect additional federal and state legislative and regulatory efforts to regulate consumer privacy in the future.

In the European Economic Area, or EEA, we may be subject to laws relating to our collection, control, processing and other use of personal data, such as data relating to an identifiable living individual.

We process personal data in relation to our operations.

We process data of both our employees and our customers, including health and medical information.

The data privacy regime in the European Union includes the GDPR, regarding the processing of personal data and the free movement of such data, which became applicable on May 25, 2018, the E-Privacy Directive 2002/58/EC and national laws implementing each of them.

The data privacy regime in the EEA includes the GDPR, regarding the processing of personal data and the free movement of such data, which became applicable on May 25, 2018, the E-Privacy Directive 2002/58/EC and national laws implementing each of them.

Each EU member state has transposed the requirements laid down by the Data Protection Directive and E-Privacy Directive into its own national data privacy regime and therefore the laws may differ by jurisdiction, sometimes significantly.

In addition, many EU member states have passed legislation addressing areas where the GDPR permits member states to derogate from the regulation’s requirements, thus leading to divergent requirements between member states in spite of the GDPR’s stated goal of creating a uniform privacy law for the entire EU.

In addition, many EEA member states have passed legislation addressing areas where the GDPR permits member states to derogate from the regulation’s requirements, thus leading to divergent requirements between member states in spite of the GDPR’s stated goal of creating a uniform privacy law for the entire EEA.

We need to ensure compliance with the rules in each jurisdiction where we are established or are otherwise subject to local privacy laws.

For example, we may be subject to the GDPR for processing personal data in connection with offering goods or services to persons located in the European Union or monitoring the behavior of persons located in the European Union.

GDPR requirements include that personal data may only be collected for specified, explicit and legitimate purposes based on a legal grounds, and may only be processed in a manner consistent with those purposes.

Processing of personal data also needs to be adequate, relevant, not excessive in relation to the purposes for which it is collected, secure, not be transferred outside of the European Union unless certain steps are taken to ensure an adequate level of protection and not be kept for longer than necessary for the purposes of collection.

To the extent that we process, control or otherwise use sensitive data relating to living individuals (for example, patients’ health or medical information), more stringent rules may apply, limiting the circumstances and the manner in which we are legally permitted to process that data and transfer that data outside of the European Union.

For example, we may be subject to the GDPR for processing personal data in connection with offering goods or services to persons located in the EEA or monitoring the behavior of persons located in the EEA.

GDPR requirements include that personal data may only be collected for specified, explicit and legitimate purposes based on a certain legal bases set forth in GDPR, and may only be processed in a manner consistent with those purposes.

Processing of personal data also needs to be adequate, relevant, not excessive in relation to the purposes for which it is collected, secure, not be transferred outside of the EEA unless certain steps are taken to ensure an adequate level of protection and not be kept for longer than necessary for the purposes of collection.

In particular, in order to process such data, explicit consent to the processing (including any cross-border transfer) usually may be required from the data subject (being the person to whom the personal data relates), though in certain cases, and depending on the jurisdiction in which the data originate or are processed, such data may be processed absent explicit consent for purposes of medical diagnosis, public interest in the area of public health or scientific research.

The new EU-wide GDPR became applicable on May 25, 2018, replacing the current data protection laws issued by each EU member state based on the Directive 95/46/EC.

Unlike the Directive, which needed to be transposed at national level, the GDPR text is directly applicable in each EU member state, resulting in a more uniform application of data privacy laws across the European Union.

The GDPR also imposes potentially onerous accountability obligations requiring data controllers and processors to maintain a record of their data processing and policies.

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Fines for non-compliance with the GDPR may be significant.

The GDPR provides that EU member states may introduce further conditions, including limitations, to the processing of genetic, biometric or health data, which could limit our ability to collect, use and share personal data, or could cause our compliance costs to increase, ultimately having an adverse impact on our business.

The GDPR provides that EEA member states may introduce further conditions, including limitations, to the processing of genetic, biometric or health data, which could limit our ability to collect, use and share personal data, or could cause our compliance costs to increase, ultimately having an adverse impact on our business.

The July 2020 invalidation by the Court of Justice of the European Union of the EU-U.S.

Privacy Shield framework, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the U.S., has led to increased scrutiny on data transfers from the EEA to the U.S.

generally and may increase our costs of compliance with data privacy legislation.

We are subject to the supervision of local data protection authorities in those jurisdictions where we are established or otherwise subject to applicable law.

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With such providers we have a practice of entering into contractual arrangements to ensure that they process personal data only according to our instructions, and that they have adequate technical and organizational security measures in place.

Where personal data is being transferred outside the European Union, our policy is that it is done so in compliance with applicable data export requirements.

Where personal data is being transferred outside the EEA, our policy is that it is done so in compliance with applicable data export requirements.

Any failure by us or third parties to follow these policies or practices, or otherwise comply with applicable data laws, could lead to a security or privacy breach, regulatory enforcement, or regulatory or financial harm.

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Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality or expanding access.

Additional healthcare reform efforts have sought to address certain issues related to the COVID-19 pandemic.

Current and future legislative proposals to further reform healthcare or reduce healthcare costs may limit coverage of or lower reimbursement for the procedures associated with the use of our products.

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The implementation of the Affordable Care Act in the United States, for example, has changed healthcare financing and delivery by both governmental and private insurers substantially, and affected medical device manufacturers significantly.

The Affordable Care Act imposed, among other things, a 2.3% federal excise tax, with limited exceptions, on any entity that manufactures or imports Class I, II and III medical devices offered for sale in the United States that began on January 1, 2013.

Through a series of legislative amendments, the tax was suspended for 2016 through 2019.

Absent further legislative action, the device excise tax will be reinstated on medical device sales starting January 1, 2020.

The Affordable Care Act also provided incentives to programs that increase the federal government’s comparative effectiveness research, and implemented payment system reforms, including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.

Additionally, the Affordable Care Act has expanded eligibility criteria for Medicaid programs and created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative

clinical effectiveness research, along with funding for such research.

We do not yet know the full impact that the Affordable Care Act will have on our business.

There have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect additional challenges and amendments in the future.

Moreover, the Trump Administration and the U.S.

Congress may take further action regarding the Affordable Care Act, including, but not limited to, repeal or replacement.

Most recently, the Tax Cuts and Jobs Acts was enacted, which, among other things, removes penalties for not complying with the individual mandate to carry health insurance.

The Affordable Care Act also implemented payment system reforms, including bundled payment models and Medicare value-based purchasing plans.

Additionally, the Affordable Care Act has expanded eligibility criteria for Medicaid programs and provided incentives to programs that increase the federal government’s comparative effectiveness research, including the creation of a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

There have been ongoing judicial and Congressional challenges seeking to repeal, modify or invalidate some or all of the provisions of the Affordable Care Act, and we expect additional challenges and amendments in the future.

In November 2020, the U.S.

Supreme Court heard argument in Texas v.

Azar, which challenges the constitutionality of the Affordable Care Act.

Pending resolution of the litigation, all of the Affordable Care Act but the individual mandate to buy health insurance remains in effect.

The effect of the transition from the Trump administration to the Biden administration in January 2021 on the Affordable Care Act is unknown at this time.

If the Affordable Care Act is repealed, replaced or modified, additional regulatory risks may arise and our future financial results could be adversely and materially affected.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.

For example, the Budget Control Act of 2011, among other things, included reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional Congressional action is taken.

For example, the Budget Control Act of 2011, as amended, among other things, included reductions to Medicare (but not Medicaid) payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030 (except May 1, 2020 to March 31, 2021) unless additional Congressional action is taken.

Additionally, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

We expect additional state and federal healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.

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 .

As of December 31, 2020, we employed 110 people globally, most of which were full-time employees.

Except for certain European employees, our employees are not subject to collective bargaining agreements, and we believe that we have good relations with our employees.

Corporate Information, Initial Public Offering, and Organizational Transactions

Corporate Information and Organizational Transactions

TransMedics Group, Inc., was incorporated in the Commonwealth of Massachusetts in October 2018 to facilitate our IPO.

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Our principal executive offices are located at 200 Minuteman Road, Andover, Massachusetts 01810, and our telephone number at that address is (978) 552-0900.

On May 6, 2019, we completed the IPO of our common stock pursuant to which we issued and sold 6,543,500 shares of common stock, inclusive of 853,500 shares we sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, resulting in net proceeds to us of $91.4 million, after deducting underwriting discounts and commissions as well as other offering costs payable by us.

On May 6, 2019, immediately prior to the completion of the IPO, the Company engaged in a series of transactions whereby TransMedics, Inc.

On May 6, 2019, immediately prior to the completion of our initial public offering, the Company engaged in a series of transactions whereby TransMedics, Inc.

became a wholly owned subsidiary of TransMedics Group, Inc.

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We are also a “smaller reporting company,” as defined in Regulation S-K.

We will cease to be a smaller reporting company if we have (i) more than $250 million in market value of our shares held by non-affiliates as of the last business day of our second fiscal quarter or (ii) more than $100 million of annual revenues in our most recent fiscal year completed before the last business day of our second fiscal quarter and a market value of our shares held by non-affiliates more than $700 million as of the last business day of our second fiscal quarter.

We may continue to be a smaller reporting company if either (i) market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million as of the last business day of our second fiscal quarter.

If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Prior to 2020, our fiscal year ended on the last Saturday in December, and we reported fiscal years using a 52/53-week convention.

Under this convention, certain fiscal years contained 53 weeks.

Each fiscal year was typically composed of four 13-week fiscal quarters, but in years with 53 weeks, the fourth quarter was a 14-week period.

The fiscal year ended December 28, 2019 included 52 weeks.

In February 2020, we changed the end of its fiscal year end from the last Saturday in December to December 31.

Available Information

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Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, proxy and information statements and amendments to those reports filed or furnished pursuant to Sections 13(a), 14, and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available through the “Investors” portion of our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

In addition, our filings with the SEC may be accessed through the SEC’s Interactive Data Electronic Applications system at http://www.sec.gov .

In addition, our filings with the SEC may be accessed through the SEC’s Electronic Data Gathering, Analysis and Retrieval system at http://www.sec.gov .

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business