Xvivo Perfusion AB: Extra time: XVIVO extends play for an organ transplant's critical journey

XVIVO's mission statement is to establish machine perfusion as the new standard for organ transplant preservation. This would effect the changeover from the use of static cold storage (basically ice coolers) to a combined cold temperature/oxygenerated blood based preservation machine called HOPE (Hypothermic Oxygenerated Perfusion). HOPE effectively creates an "out of body" environment for an organ transplant that simulates "in body" conditions. XVIVO is the only medtech company in the market offering HOPE preservation for livers, kidneys, and hearts. XVIVO expects this organ preservation technology will expand the donor pool, improve organ utilization rates, and extend the time duration of ex vivo organ preservation. XVIVO's HOPE heart preservation product, the future crown jewel of their business, has just completed the clinical testing stage in the US and is awaiting final approval in Europe. XVIVO is optimistic that HOPE will increase the ex vivo preservation of a heart from 4 hours to a minimum of 12 hours.

Organ preservation machines are the "razor" of XVIVO's business model (6% of net sales), while disposables are "the razor blades" (94% of net sales) - excluding their service business. Disposables are single-use perfusion containers. Since 2020, XVIVO's disposables have posted +42% CAGR in net sales, and in 2024, they delivered 75% gross margins. Their lung transplant preservation product is the company's main current generator of recurring disposable revenues and delivers 85% gross margins.

Despite being in the midst of a heavy investing cycle, XVIVO is already delivering >20% adj. EBITDA margins, and have at their disposal ~SEK 415 mil of net cash (>50% of current market cap). XVIVO replenished its capital base in 2023 in lieu of the growth phase ahead, increasing its equity by 30% at the time. XVIVO has a line-up of cashflow-producing products (lung transplant preservation and services together are >70% of revenues) that can help fund future product development.

Sustained market-leading lung preservation growth + launch point for heart preservation roll-out

Lung transplant preservation alone drives >60% of XVIVO's sales, with most of this US and disposable product driven. This is made more extraordinary by the fact that lung transplant has the lowest utilization rate of the 4 main organs at 20%. This organ has been the driver behind the >40% CAGR in thoracic sales since 2021. Underpinning XVIVO's lung preservation business are both their industry standard solution for static cold storage (their Perfadex Plus product has 90% market share in this area) and their EVLP warm solution perfusion products (XPS machines and STEEN solutions). XVIVO is confident they will see a revenue contribution from heart preservation outside the US in 2025, as European CE marking/approval will open up Europe and Australia/New Zealand for commercial product roll-out.

Ramping up their abdominal transplant preservation business

Abdominal organs are XVIVO's # 2 transplant preservation business segment (22% of sales), with an 80/20 split of liver vs. kidneys. This has actually been their faster-growing segment, posting CAGR +50% in sales since 2021. Revenues are >85% disposable, and gross margins are on track to reach their 70% target (from 54% in 2022). Their abdominal business is primarily focused on European markets, a geographic slant accentuated by their acquisition of their Italian distribution partner in 2022. XVIVO's Kidney Assist Transport (HOPE box container) offers exciting growth upside - only launched in Europe in 2024, with the introduction to the US market still to come.

Future home run = changing heart transplant preservation in the US

XVIVO's stated long-term goal is to become the market leader in heart transplant preservation. The headline bogey thrown around for the goal is the ability to increase the ex vivo preservation of a heart from 4 hours to 12 hours. The fact that only 3 of 10 hearts donated are actually transplanted is evidence of the opportunity at hand. XVIVO views the US as the biggest market opportunity for their heart storage and transport HOPE products. However, 2027 is probably the most realistic timeframe for XVIVO's heart product to enter the commercial market there: as their US clinical study completed enrollment on Nov 24; they are now undergoing the one year continuous follow-up data stage; only after this can they begin approval discussions with the FDA. At year end 2025, heart products contributed <7% of XVIVO sales - what could this grow to if they are successful bringing to market in the US?

R&D expenses continue to run at elevated levels inside XVIVO's profit & loss at >20% of sales or closer to 30% with net capitalization accounted for. This fits with ~SEK 200mil of annual capex and development capitalization carried on their balance sheet (SEK 676mil or 30% of equity). So far development capex assets have held up well - XVIVO absorbed a SEK 20m non-recurring write-down at 4Q24 results.

Many of XVIVO's more exciting long-term products are still in the clinical testing and approval phases. Any adverse testing, discontinued development, or delayed commercial introduction of these new HOPE products would be very unhelpful. Substantial sales growth expectations (out to 2027 and beyond) set a high bar for them to deliver on.

The guantlet of potential external risks includes a lack of progress in improving organ transplant utilization, competition in the ex-vivo organ preservation space (TransMedics Group), and government austerity risk (reimbursement shortfalls). XVIVO's shares are exposed to the risk of market selloff of export driven companies on the back of trade war/tariff fears - potentially exacerbated by strong SEK appreciation. Trading at a sharp discount to their 52-week high has built in some downside risk into XVIVO's current share price.