What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-06 compared with 2021-05-07 · 150 added, 84 removed, 246 unchanged (49% of the section changed)

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To date, we have developed three OCS products, one for each of lung, heart and liver transplantations, making the OCS the only multi-organ technology platform.

Our OCS products have been used for over 1,800 human organ transplants.

We have commercialized the OCS Lung and OCS Heart outside of the United States and received our first PMA from the FDA in March 2018 for the use in the United States of the OCS Lung for donor lungs currently utilized for transplantation and since May 2019, for donor lungs currently unutilized for transplantation.

We have commercialized the OCS Lung and OCS Heart outside of the United States and received our first Pre-Market Approval (“PMA”) from the Food and Drug Administration (the “FDA”) in March 2018 for the use in the United States of the OCS Lung for donor lungs currently utilized for transplantation and a PMA from the FDA in May 2019 for the use in the United States of the OCS Lung for donor lungs currently unutilized for transplantation.

Since our inception, we have focused substantially all of our resources on designing, developing and building our proprietary OCS technology platform and organ-specific OCS products;

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developing our market and distribution chain and providing general and administrative support for these operations.

To date, we have funded our operations primarily with proceeds from sales of preferred stock and borrowings under loan agreements, proceeds from the sale of common stock in our initial public offering, or IPO, the sale of our common stock in equity offerings, and revenue from clinical trials and commercial sales of our OCS products.

To date, we have funded our operations primarily with proceeds from sales of preferred stock and borrowings under loan agreements, proceeds from the sale of common stock in our initial public offering, or IPO, the sale of our common stock in follow-on equity offerings, and revenue from clinical trials and commercial sales of our OCS products.

Since our inception, we have incurred significant operating losses.

Our ability to generate net revenue sufficient to achieve profitability will depend on the successful further development and commercialization of our products.

We generated net revenue of $7.1 million and incurred a net loss of $7.9 million for the three months ended March 31, 2021.

We generated net revenue of $15.2 million and incurred a net loss of $18.6 million for the six months ended June 30, 2021.

We generated net revenue of $25.6 million and incurred a net loss of $28.7 million for the year ended December 31, 2020.

As of March 31, 2021, we had an accumulated deficit of $406.1 million.

As of June 30, 2021, we had an accumulated deficit of $416.8 million.

We expect to continue to incur net losses for the foreseeable future as we focus on growing commercial sales of our products in both the United States and select non-U.S.

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The impact of the COVID-19 pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.

Impacts to our business as a result of COVID-19 include the temporary disruption of transplant procedures at many of the organ transplant centers who purchase OCS products;

Impacts to our business as a result of COVID-19 include:

the temporary disruption of transplant procedures at many of the organ transplant centers who purchase OCS products;

customer delays or reductions in customer capital expenditures and operating budgets and the related impact on our product sales;

disruptions to our manufacturing operations and supply chain caused by facility closures, reductions in operating hours, staggered shifts and other social distancing efforts;

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restrictions on or delays of our clinical trials and studies;

delays of reviews and approvals by the FDA and other health authorities;

limitations on our employees’ and customers’ ability to travel, and delays in product installations, trainings or shipments to and from affected countries and within the United States.

delays of reviews and approvals by the FDA and other health authorities , including with respect to the Company’s OCS Heart PMA application ;

limitations on our employees’ and customers’ ability to travel;

and delays in product installations, trainings or shipments to and from affected countries and within the United States.

In addition, o ur sales and clinical adoption team was restricted in visiting many transplant centers in person between April 2020 and September 2020.

In response to the pandemic, healthcare providers have, and may need to further, reallocate resources, such as physicians, staff, hospital beds and intensive care unit facilities, and these actions significantly delay the provision of other medical care such as organ transplantation and reduce the number of transplant procedures that are performed, which has a negative impact on our revenue and clinical trial activities.

Our sales and clinical adoption team has been and may continue to be restricted in visiting many transplant centers in person .

Customer delays or reductions in capital expenditures and operating budgets also have a negative impact on our product sales.

The COVID-19 pandemic also has impacted operations at the FDA and other health authorities, resulting in delays of reviews and approvals, including with respect to our OCS Heart PMA application, and may affect other potential PMA applications.

For example, although the FDA had scheduled an advisory committee of experts from outside the FDA to review and evaluate our OCS Heart PMA application in the second quarter of 2020, due to the COVID-19 pandemic the advisory committee meeting was postponed to October 2020 and was further postponed before convening on April 6, 2021.

In April 2020, we announced several steps to respond to the COVID-19 pandemic.

These steps are intended to protect the health and safety of our employees, to establish a process to support the continuous supply of our OCS products at transplant centers globally and to maintain financial flexibility.

These actions include transitioning most employees to a remote work environment, except for those who are deemed essential to product supply and reducing near-term expenses, such as reducing non-essential discretionary expenses.

We also deferred a portion of executive and employee compensation from April 2020 through August 31, 2020.

While the COVID-19 pandemic did not significantly impact our business or results of operations during the first quarter of 2020, OCS product sales have been negatively impacted by the COVID-19 pandemic since the second quarter of 2020 and we anticipate a negative impact to OCS product sales in 2021.

The extent of the future impact on our operations and financial condition will depend on the length and severity of the pandemic, its consequences, and containment and vaccination efforts.

While the FDA approved emergency use authorization of vaccines in December 2020, it is expected to take several months for widespread vaccinations to occur and it is not yet known how vaccination efforts will impact the COVID-19 pandemic.

We have observed recovery in the frequency of transplant procedures, but not yet at the same activity level as prior to the disruption of business and economic activities resulting from COVID-19.

In addition, while the number of transplant procedures performed has declined during the COVID-19 pandemic, organ transplantations are non-elective, life-saving procedures and we believe that the need for these procedures will persist.

However, as interventions to contain the spread of the virus are lifted or reduced, new COVID-19 outbreaks may result in new or heightened restrictions, which could again cause disruptions to our customers’ operations and adversely impact organ transplant procedures.

In April 2020, we announced several steps to respond to the COVID-19 pandemic intended to protect the health and safety of our employees, to establish a process to support the continuous supply of our OCS products at transplant centers globally and to maintain financial flexibility.

These actions included transitioning most employees to a remote work environment, except for those who are deemed essential to product supply, and reducing near-term expenses, such as reducing non-essential discretionary expenses and deferring a portion of executive and employee compensation from April 2020 through August 31, 2020.

OCS product sales were negatively impacted by the COVID-19 pandemic from the second quarter of 2020 through the second quarter of 2021 and we anticipate a negative impact to OCS product sales to continue through 2021.

We have observed recovery in the overall frequency of transplant procedures to pre-pandemic levels in most countries during the most recent quarter.

In addition, while the number of transplant procedures performed declined during the COVID-19 pandemic, organ transplantations are non-elective, life-saving procedures and we believe that the need for these procedures has persisted and will continue to persist as demonstrated by procedure recovery.

We continue to monitor developments regarding the COVID-19 pandemic and its impact on our business, financial condition, results of operations and prospects.

However, we are unable to predict the extent of the impact with confidence due to the uncertainty of future developments, such as the duration of the pandemic, additional or modified government actions, new information which may emerge concerning the severity and incidence of COVID-19 and actions to contain the virus or treat its impact.

The extent of the future impact on our operations and financial condition is difficult to predict and will depend on the length and severity of the pandemic, its consequences, and containment and vaccination efforts.

In particular, the speed of the continued spread of COVID-19 globally, and the magnitude, duration and frequency of interventions to contain the spread of the virus, such as government-imposed quarantines, including shelter-in-place mandates, sweeping restrictions on travel, mandatory shutdowns for non-essential businesses, requirements regarding social distancing, and other public health safety measures, will determine the impact of the pandemic on our business.

While the FDA approved emergency use authorization of vaccines starting in December 2020 and vaccination efforts have been ongoing in the United States, it is not yet fully known how vaccination efforts will impact the COVID-19 pandemic, including with respect to the duration of the efficacy of the vaccines, their effectiveness against the Delta variant or any other variants as new strains of the virus evolve.

Recent Developments

On April 6, 2021, the FDA’s Circulatory Systems Devices Panel of the Medical Devices Advisory Committee convened for an advisory committee meeting to review our clinical evidence from the OCS Heart EXPAND Trial, the associated Continued Access Protocol results, as well as the clinical evidence from our OCS Heart PROCEED II Trial and to provide the FDA with non-binding recommendations with respect to our OCS Heart PMA application.

On July 14, 2021, the FDA’s Gastroenterology and Urology Devices Panel of the Medical Devices Advisory Committee convened for an advisory committee meeting to review our clinical evidence from the OCS Liver PROTECT Trial and to provide the FDA with non-binding recommendations with respect to our OCS Liver PMA application.

At the advisory committee meeting, the panel voted:

12 to five, with one abstaining, that the benefits of the OCS Heart outweigh its risks;

10 to six, with two abstaining, that there is reasonable assurance that the OCS Heart is effective;

and nine to seven, with two abstaining, that there is reasonable assurance of the OCS Heart’s safety.

We anticipate FDA will issue a decision regarding whether to approve or deny approval of the PMA application within three to four months following the advisory committee meeting, which decision may or may not follow the advisory committee’s recommendation.

14 to zero that the OCS Liver is safe for patients;

14 to zero that the OCS Liver is effective for use in patients;

and 12 to one (with one panel member abstaining) that the benefits of the OCS Liver outweigh its risks.

We anticipate the FDA will issue a decision regarding whether to approve or deny approval of our OCS Liver PMA application within three to four months following the advisory committee meeting, which decision may or may not follow the advisory committee’s recommendation.

On July 30, 2021, the FDA provided a 510(k) clearance for use of the OCS Lung Solution in lung transplantations using cold storage.

Components of Our Results of Operations

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Because some of these payments do not provide us with a separately identifiable benefit, we record such payments as a reduction of revenue from the customer, resulting in our net revenue presentation.

We recorded reimbursable clinical trial costs as a reduction of revenue of $0.6 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively.

We recorded reimbursable clinical trial costs as a reduction of revenue of $0.5 million and $1.1 million for the three and six months ended June 30, 2021, respectively, and $0.5 million and $1.2 million for the three and six months ended June 30, 2020.

In March 2018, we received our first FDA PMA for the OCS Lung, and we began commercial sales of this product in the United States during the fourth quarter of 2018.

In May 2019, we received our second FDA PMA for the OCS Lung for additional clinical indications.

In May 2019, we received an FDA PMA for the OCS Lung for additional clinical indications.

Therefore, our net revenue in the United States for the OCS Lung is now derived from commercial sales and consists of sales of OCS disposable sets and, to a much lesser extent, sales of OCS Consoles.

In the United States, we expect to continue to only have clinical trial sales for our OCS Heart and OCS Liver products until we receive similar FDA PMA for those products.

In the United States, we expect to continue to only have clinical trial sales for our OCS Heart and OCS Liver products until we receive similar FDA PMAs for those products.

Our net revenue in the United States for OCS Heart and OCS Liver products fluctuates from period to period as a result of the timing of patient enrollment in our clinical trials.

Historically, our net revenue during periods of patient enrollment has been higher due to the sale of OCS disposable sets for use during these clinical trials, as compared to periods during which our clinical trials were not actively enrolling.

Our OCS Heart EXPAND Trial began patient enrollment in September 2015 and completed patient enrollment in March 2018.

Our OCS Liver PROTECT trial began enrollment in January 2016 and completed enrollment in October 2019.

Our OCS Heart EXPAND CAP trial began patient enrollment in May 2019 and is currently

enrolling patients.

Our OCS Heart DCD trial began patient enrollment in December 2019 and has completed enrolling patients.

Our OCS Heart DCD CAP trial began patient enrollment in December 2020 and is currently enrolling patients .

Our OCS Liver PROTECT CAP trial began patient enrollment in February 2020 and has completed initial enrollment;

however, we have applied to the FDA to enroll additional patients in this trial.

Our OCS Heart EXPAND CAP trial began patient enrollment in May 2019 and is currently enrolling patients.

Our OCS Liver PROTECT CAP trial began patient enrollment in February 2020 and completed initial enrollment in the first quarter of 2021.

Our net revenue may continue to fluctuate from period to period as a result of the timing of ongoing clinical trials in which our OCS products are used.

Through March 31, 2021, all of our sales outside of the United States have been commercial sales (unrelated to any clinical trials) and our net revenue has been generated primarily from sales of OCS disposable sets and, to a much lesser extent, sales of OCS Consoles.

Through June 30, 2021, all of our sales outside of the United States have been commercial sales (unrelated to any clinical trials) and our net revenue has been generated primarily from sales of OCS disposable sets and, to a much lesser extent, sales of OCS Consoles.

Commercial sales of OCS disposable sets generally have a higher average selling price than clinical trial sales of OCS disposable sets.

We expect that our net revenue will increase over the long term as a result of receiving our first two FDA PMAs for the OCS Lung in the United States in March 2018 and May 2019 and any potential future FDA approvals in the United States for OCS Heart and OCS Liver.

We expect that our net revenue will increase over the long term as a result of receiving our first two FDA PMA s for the OCS Lung in the United States in March 2018 and May 2019 and any potential future FDA approvals in the United States for OCS Heart and OCS Liver .

We expect to receive decision s from the FDA regarding whether to approve the PMA for the use of the OCS Heart and OCS Liver in the United States in 2021 following the advisory committee meeting s held on April 6, 2021 and July 14, 2021, respectively .

We also expect that our net revenue will increase over the long term as a result of anticipated growth in non-U.S.

sales if national healthcare systems begin to reimburse transplant centers for the use of the OCS, if transplant centers utilize the OCS in more transplant cases, and if more transplant centers adopt the OCS in their programs.

sales if national healthcare systems begin to reimburse transplant centers for the use of the OCS, in all served geographies, if transplant centers utilize the OCS in more transplant cases, and if more transplant centers adopt the OCS in their programs.

We expect that net revenue will continue to be negatively impacted in 2021 a result of the COVID-19 pandemic.

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We calculate gross margin as gross profit divided by net revenue.

Our gross margin has been and will continue to be affected by a variety of factors, primarily production volumes, the cost of components and direct materials, manufacturing costs, headcount, the selling price of our OCS products and fluctuations in amounts paid by us to customers related to reimbursements of their clinical trial expenses.

Our gross margin has been and will continue to be affected by a variety of factors, primarily production volumes, the cost of components and direct materials, manufacturing overhead costs, headcount, the selling price of our OCS products and fluctuations in amounts paid by us to customers related to reimbursements of their clinical trial expenses.

We expect that cost of revenue as a percentage of net revenue will decrease and gross margin and gross profit will increase over the long term as our sales and production volumes increase and our cost per unit of our OCS disposable sets decreases due to economies of scale.

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In the future, we expect that research, development and clinical trials expenses will increase over the long term due to ongoing product development and approval efforts.

We expect to continue to perform activities related to obtaining additional regulatory approvals for expanded indications in the United States and to developing the next generation of our OCS technology platform.

We expect to continue to perform activities related to obtaining additional regulatory approvals for expanded indications in the United States and other served geographies, as well as developing the next generation of our OCS technology platform.

Selling, General and Administrative Expenses

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Results of Operations

Comparison of the Three Months Ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

Comparison of the Three Months Ended June 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020:

Three Months Ended June 30,

(in thousands)

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Provision for income taxes

Three Months Ended March 31,

Three Months Ended June 30,

(in thousands)

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Total net revenue

Net revenue from customers in the United States was $5.8 million in the three months ended March 31, 2021 and increased by $0.5 million compared to the three months ended March 31, 2020, primarily due to a $1.5 million increase in OCS Lung product and OCS Heart product sales, partially offset by a $0.9 million decrease in sales of OCS Liver products.

Net revenue from sales of OCS Lung products in the United States increased from $1.9 million in the three months ended March 31, 2020 to $2.3 million in the three months ended March 31, 2021.

Net revenue from customers in the United States was $5.8 million in the three months ended June 30, 2021 and increased by $3.3 million compared to the three months ended June 30, 2020, primarily due to higher sales volumes of our OCS Lung and OCS Heart disposable sets.

Net revenue from sales of OCS Lung disposable sets in the United States increased from $0.4 million in the three months ended June 30, 2020 to $3.5 million in the three months ended June 30, 2021.

The increase was due primarily to higher sales volume of OCS Lung disposable sets as the adverse impact of COVID-19 had less of an impact in the 2021 period.

Net revenue from OCS Heart disposable sets in the United States increased by $1.0 million.

The increase in net revenue from OCS Heart disposable sets is attributed to a higher volume of OCS Heart disposable sets sold to customers for use in the OCS Heart DCD CAP Trial in the United States.

We did not have revenue from OCS Liver disposable sets during the three months ended June 30, 2021 as we had completed enrollment in our OCS Liver Protect CAP Trial in the first quarter of 2021.

Net revenue from customers outside the United States was $2.4 million in the three months ended June 30, 2021 compared to $1.0 million in the three months ended June 30, 2020.

The increase in net revenue from customers outside the United States was primarily due to higher sales volumes of OCS Heart and OCS Lung disposable sets.

Net revenue from sales of OCS Lung disposable sets outside the United States increased by $0.1 million from the three months ended June 30, 2020 to the three months ended June 30, 2021.

Net revenue from sales of OCS Heart disposable sets outside of the United States increased by $1.4 million from the three months ended June 30, 2020 to the three months ended June 30, 2021.

Cost of Revenue, Gross Profit and Gross Margin

Cost of revenue increased by $1.1 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Gross profit increased by $3.7 million in the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

Gross margin was 68% and 56% for the three months ended June 30, 2021 and 2020, respectively.

Gross margin increased primarily as a result of higher margin OCS disposable sets sold and improvements in the efficiency of the production process.

Operating Expenses

Research, Development and Clinical Trials Expenses

Three Months Ended June 30,

(in thousands)

Personnel related (including stock-based compensation

Clinical trials costs

Consulting and third-party testing

Laboratory supplies and research materials

Total research, development and clinical trials expenses

Total research, development and clinical trials expenses increased by $2.4 million from $3.9 million in the three months ended June 30, 2020 to $6.3 million in the three months ended June 30, 2021 .

Clinical trial costs increased by $0.3 million due to an increase in ongoing trial enrollment activity primarily related to the OCS Heart DCD CAP Trial.

Consulting and third-party testing increased by $0.8 million due to increased regulatory activity, including costs related to preparation for both the OCS Heart FDA advisory committee panel in April and the OCS Liver FDA advisory committee panel in July.

The increase in laboratory supplies and research materials costs of $0.9 million and other costs of $0.3 million is due primarily to increased research activities, product development and other activities as restrictions implemented in response to the COVID-19 pandemic were eased.

Selling, General and Administrative Expenses

Three Months Ended June 30,

(in thousands)

Personnel related (including stock-based compensation

Professional and consultant fees

Tradeshows and conferences

Total selling, general and administrative expenses

Total selling, general and administrative expenses increased by $3.3 million from $5.9 million in the three months ended June 30, 2020 to $9.2 million in the three months ended June 30, 2021 due to an increase in personnel related costs, professional and consultant fees, tradeshows and conferences and other costs.

Personnel related costs increased primarily due to the continued expansion of our commercial team to support commercial sales of our OCS Lung product in the United States.

Stock-based compensation expense also increased by $1.0 million due primarily to additional grants to new and existing employees and an increase in the respective grant date fair values due to the increased market price of our stock.

The increase in professional and consultant fees, trade shows and conferences and other costs is a result of an increase in activities as restrictions implemented in response to the COVID-19 pandemic were eased.

Other Income (Expense)

Interest Expense

Interest expense was $1.0 million for each of the three months ended June 30, 2021 and 2020.

Other Income (Expense), Net

Other income (expense), net for the three months ended June 30, 2021 and 2020 included interest income of less than $0.1 million and $0.2 million, respectively, resulting from interest earned on invested cash balances, and $0.1 million and $0.2 million of realized and unrealized foreign currency transaction gains, respectively.

Comparison of the Six Months Ended June 30, 2021 and 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020:

Six Months Ended June 30,

(in thousands)

Cost of revenue

Operating expenses:

Research, development and clinical trials

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense):

Interest expense

Other income (expense), net

Total other expense, net

Loss before income taxes

Provision for income taxes

Six Months Ended June 30,

(in thousands)

Net revenue by geography:

United States

Outside the U.S.

Total net revenue

Net revenue by OCS product:

OCS Lung net revenue

OCS Heart net revenue

OCS Liver net revenue

Total net revenue

Net revenue from customers in the United States was $11.5 million in the six months ended June 30, 2021 and increased by $3.9 million compared to the six months ended June 30, 2020, primarily due to higher sales volumes of our OCS Lung and OCS Heart disposable sets.

Net revenue from sales of OCS Lung disposable sets in the United States increased from $2.3 million in the six months ended June 30, 2020 to $5.8 million in the six months ended June 30, 2021.

The increase was due primarily to higher sales volume of OCS Lung disposable sets.

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The increase in net revenue from OCS Heart disposable sets is attributed to higher volume of OCS Heart disposable sets sold in the OCS Heart DCD CAP Trial.

The lower sales volume of OCS Liver disposable sets was primarily a result of the substantial completion of enrollment of approved patients in our OCS Liver Protect CAP Trial early in the first quarter of 2021.

Net revenue from customers outside the United States was $1.3 million in the three months ended March 31, 2021 compared to $2.3 million in the three months ended March 31, 2020.

The decrease in net revenue from customers outside the United States was primarily due to the adverse impact of COVID-19 on transplant procedures in Europe .

Net revenue from sales of OCS Lung disposable sets outside the United States was relatively flat and net revenue from OCS Heart disposable sets decreased by $1.0 million from the three months ended March 31, 2020 to the three months ended March 31, 2021.

The lower sales volume of OCS Liver disposable sets was primarily a result of the completion of enrollment of approved patients in our OCS Liver Protect CAP Trial early in the first quarter of 2021.

Net revenue from customers outside the United States was $3.7 million in the six months ended June 30, 2021 compared to $3.3 million in the six months ended June 30, 2020.

The increase in net revenue from customers outside the United States was primarily due to higher sales volumes of OCS Lung and OCS Heart disposable sets.

Net revenue from sales of OCS Lung disposable sets outside the United States increased by $0.1 million and net revenue from OCS Heart disposable sets increased by $0.3 million from the six months ended June 30, 2020 to the six months ended June 30, 2021.

Cost of Revenue, Gross Profit and Gross Margin

Cost of revenue decreased by $0.4 million in the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Gross profit was relatively flat in the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Gross margin was 68% and 65% for the three months ended March 31, 2021 and 2020, respectively.

Gross margin increased primarily as a result of efficiency in the production process.

Cost of revenue increased by $0.7 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Gross profit increased by $3.6 million in the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Gross margin was 68% and 62% for the six months ended June 30, 2021 and 2020, respectively.

Gross margin increased primarily as a result of increased activity, higher margin OCS disposable sets sold and improvements in the efficiency of the production process.

Operating Expenses

Research, Development and Clinical Trials Expenses

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Personnel related (including stock-based compensation expense)

Personnel related (including stock-based compensation

Clinical trials costs

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Total research, development and clinical trials expenses

Total research, development and clinical trials expenses decreased by $1.7 million from $6.2 million in the three months ended March 31, 2020 to $4.5 million in the three months ended March 31, 2021 .

Clinical trial costs decreased by $1.0 million due to a reduction in ongoing trial enrollment activity primarily related to the OCS Heart DCD CAP Trial.

Consulting and third-party testing and laboratory supplies and research materials costs decreased by $0.4 million and $0.2 million, respectively, due primarily to decreased activities as a result of the continued impact of the COVID-19 pandemic.

Total research, development and clinical trials expenses increased by $0.7 million from $10.1 million in the six months ended June 30, 2020 to $10.8 million in the six months ended June 30, 2021.

Clinical trial costs decreased by $0.7 million due to a reduction in ongoing trial enrollment activity primarily related to the OCS Heart DCD CAP Trial and completion of our OCS Liver Protect Trial.

Consulting and third-party testing costs increased by $0.4 million due primarily to increased regulatory activity, including costs related to preparation for both the OCS Heart FDA advisory committee panel in April and the OCS Liver FDA advisory committee panel in July.

The increase in laboratory supplies and research materials costs of $0.7 million is due primarily to increased research activities, product development and other activities as restrictions implemented in response to the COVID-19 pandemic were eased.

Selling, General and Administrative Expenses

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Personnel related (including stock-based compensation expense)

Personnel related (including stock-based compensation

Professional and consultant fees

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Total selling, general and administrative expenses

Total selling, general and administrative expenses increased by $0.1 million from $6.7 million in the three months ended March 31, 2020 to $6.8 million in the three months ended March 31, 2021 due to an increase in personnel related costs, partially offset by decreases in professional and consultant fees, tradeshows and conferences and other costs.

Total selling, general and administrative expenses increased by $3.4 million from $12.5 million in the six months ended June 30, 2020 to $15.9 million in the six months ended June 30, 2021 due to increases in personnel related costs, tradeshows and conferences and other expenses.

Personnel related costs increased from the continued expansion of our commercial team to support commercial sales of our OCS Lung product in the United States.

Stock-based compensation expense also increased by $0.6 million due primarily to additional grants to new and existing employees.

The decrease in professional and consultant fees, tradeshows and conferences and other expenses was due to overall reduced travel, tradeshow and conference activity as a result of the COVID-19 pandemic.

Stock-based compensation expense also increased by $1.6 million due primarily to additional grants to new and existing employees and an increase in the respective grant date fair values from the increased price of our stock.

The increase in tradeshows and conferences and other expenses was due to a gradual return to normal activity as restrictions implemented in response to the COVID-19 pandemic were eased, which resulted in higher activity levels for the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 and a resulting increase in related expenses.

Other Income (Expense)

Interest Expense

Interest expense was $1.0 million for each of the three months ended March 31, 2021 and 2020.

Interest expense was $1.9 million and $2.0 million for the six months ended June 30, 2021 and 2020, respectively.

Other Income (Expense), Net

Other income (expense), net for the three months ended March 31, 2021 and 2020 included interest income of less than $0.1 million and $0.3 million, respectively, resulting from interest earned on invested cash balances, and $0.5 million and $0.1 million, respectively, of realized and unrealized foreign currency transaction losses.

Other income (expense), net for the six months ended June 30, 2021 and 2020 included interest income of $0.1 million and $0.5 million, respectively, resulting from interest earned on invested cash balances, and $0.4 million of realized and unrealized foreign currency transaction losses and $0.1 million of realized and unrealized foreign currency transaction gains, respectively.

Liquidity and Capital Resources

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The follow-on public offering was completed on May 26, 2020 and resulted in net proceeds of $75.1 million.

As of March 31, 2021, we had cash, cash equivalents, and marketable securities of $118.1 million.

As of June 30, 2021, we had cash, cash equivalents, and marketable securities of $112.2 million.

The following table summarizes our sources and uses of cash for each of the periods presented:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Cash used in operating activities

Cash provided by investing activities

Cash provided by (used in) investing activities

Cash provided by financing activities

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Operating Activities

During the three months ended March 31, 2021, operating activities used $7.3 million of cash, primarily resulting from our net loss of $7.9 million and net cash used by changes in our operating assets and liabilities of $2.0 million, partially offset by net non-cash charges of $2.6 million.

Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2021 consisted primarily of a $0.9 million increase in prepaid expenses and other current assets, a $0.6 million increase in accounts receivable, a $0.4 million increase in inventory and a $0.3 million decrease in accounts payable and accrued expenses and other current liabilities, partially offset by a $0.2 million increase in deferred revenue.

During the three months ended March 31, 2020, operating activities used $8.2 million of cash, primarily resulting from our net loss of $8.9 million and net cash used by changes in our operating assets and liabilities of $0.3 million, partially offset by net non-cash charges of $1.0 million.

Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2020 consisted primarily of a $0.2 million increase in inventory and a $0.6 million decrease in accounts payable and accrued expenses and other current liabilities, both partially offset by a $0.4 million decrease in accounts receivable and a $0.3 million increase in deferred rent.

During the six months ended June 30, 2021, operating activities used $12.9 million of cash, primarily resulting from our net loss of $18.6 million, partially offset by net cash provided by changes in our operating assets and liabilities of $0.6 million and net non-cash charges of $5.2 million.

Net cash provided by changes in our operating assets and liabilities for the six months ended June 30, 2021 consisted primarily of a decrease in accounts receivable of $0.6 million and an increase in accounts payable and accrued expenses and other current liabilities of $2.9 million, partially offset by a $1.9 million increase in inventory and a $1.2 million increase in prepaid expenses and other current assets .

During the six months ended June 30, 2020, operating activities used $16.7 million of cash, primarily resulting from our net loss of $17.3 million and net cash used by changes in our operating assets and liabilities of $1.3 million, partially offset by net non-cash charges of $1.9 million.

Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2020 consisted primarily of a $3.2 million decrease in accounts payable and accrued expenses and other current liabilities, a $1.4 million increase in inventory and a $0.3 million increase in prepaid expenses and other current assets, partially offset by a $2.1 million decrease in accounts receivable, a $0.8 million increase in deferred revenue and a $0.6 million increase in deferred rent.

Changes in accounts receivable, inventory, accounts payable, and accrued expenses and other current liabilities in each reporting period are generally due to growth in our business and timing of invoices and payments.

Investing Activities

During the three months ended March 31, 2021, net cash provided by investing activities of $9.3 million consisted of proceeds from sales and maturities of marketable securities of $21.0 million, partially offset by $11.7 million in purchases of marketable securities.

During the three months ended March 31, 2020, net cash provided by investing activities of $12.7 million consisted of proceeds from sales and maturities of marketable securities of $17.2 million, partially offset by $4.2 million in purchases of marketable securities and $0.3 million in purchases of property and equipment.

During the six months ended June 30, 2021, net cash provided by investing activities of $13.1 million consisted of proceeds from sales and maturities of marketable securities of $58.8 million, partially offset by purchases of marketable securities of $45.5 million and purchases of property and equipment of $0.3 million.

During the six months ended June 30, 2020, net cash used in investing activities of $28.0 million consisted of $63.6 million in purchases of marketable securities and $0.4 million in purchases of property and equipment, partially offset by proceeds from sales and maturities of marketable securities of $36.0 million.

Financing Activities

During the three months ended March 31, 2021, net cash provided by financing activities of $0.6 million consisted of proceeds from the issuance of common stock in connection with the employee stock purchase plan of $0.2 million and proceeds from the issuance of common stock upon exercise of stock options of $0.4 million.

During the three months ended March 31, 2020, net cash provided by financing activities of $0.2 million consisted of proceeds from the issuance of common stock in connection with the employee stock purchase plan of $0.2 million and proceeds from the issuance of common stock upon exercise of stock options of $0.1 million, partially offset by payments of offering costs related to our IPO of $0.1 million.

During the six months ended June 30, 2021, net cash provided by financing activities of $0.8 million consisted of proceeds from the issuance of common stock in connection with the employee stock purchase plan of $0.2 million and proceeds from the issuance of common stock upon exercise of stock options of $0.6 million.

During the six months ended June 30, 2020, net cash provided by financing activities of $75.7 million consisted primarily of proceeds from the issuance of common stock in our public offering and employee share ownership plans of $76.0 million, partially offset by payments of offering costs of $0.3 million.

We also received proceeds from the Paycheck Protection Loan of $2.2 million, which we then fully repaid in the same period.

Long-Term Debt

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Borrowings under the Credit Agreement are repayable in quarterly interest-only payments until the maturity date, at which time all principal and accrued interest is due and payable.

At our option, we may prepay outstanding borrowings under the Credit Agreement, subject to a prepayment premium that decreases annually.

Our current prepayment premium is 4.5% and will decrease to zero in June 2021.

At our option, we may prepay outstanding borrowings under the Credit Agreement, subject to a prepayment premium that decreased to zero in June 2021.

Our current prepayment premium is zero.

We are also required to make a final payment in an amount equal to 3.0% of the principal amount of any prepayment or repayment, which we are accreting to interest expense over the term of the Credit Agreement using the effective interest method.

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The obligations under the Credit Agreement are subject to acceleration upon the occurrence of specified events of default, including payment default, change in control, bankruptcy, insolvency, certain defaults under other material debt, certain events with respect to governmental approvals (if such events could cause a material adverse change in our business), failure to comply with certain covenants, including the minimum liquidity and unqualified audit opinion covenants, and a material adverse change in our business, operations or other financial condition.

As of March 31, 2021, we were in compliance with all of the covenants under the Credit Agreement.

As of June 30, 2021, we were in compliance with all of the covenants under the Credit Agreement.

Upon the occurrence of an event of default and until such event of default is no longer continuing, the Applicable Margin will increase by 4.0% per annum.

41 unchanged sentences

We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

As of June 30, 2021, the market value of our common stock held by non-affiliates exceeded $700 million.

As a result, we will no longer be an emerging growth company as of December 31, 2021 and will be a large accelerated filer beginning January 1, 2022.

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-Q

Item 2. Management’s Discussion and Analysis