Innovations often (but not always) drive life-changing returns for the companies that engineer them and the people who get in on the ground floor. That's why investors should sometimes look toward smaller, innovative companies, as some have highly attractive upside potential.
One such corporation to consider is TransMedics Group (TMDX 5.85%), which is helping revolutionize the organ transplant market. For those with $5,000 to spare (outside of your emergency fund), here's why investing that money in TransMedics Group could lead to monster returns.
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TransMedics' breakthrough
Storing organs for transplants isn't easy. The traditional cold storage method has significant drawbacks. Many (in some cases, most) organs that are kept and transported that way end up deteriorating and becoming unusable for transplant. That's a problem, considering there aren't enough organs available for transplants.
TransMedics developed its Organ Care System (OCS), devices that mimic the physiology of the human body to help keep organs in good-enough shape for longer. The result? Fewer organs deteriorate, and more of them are saved for patients. The OCS is approved for heart, lung, and liver transplants.
NASDAQ: TMDX
Key Data Points
How does it compare to cold storage? The OCS's utilization for livers, hearts, and lungs is 98%, 97%, and 96%, respectively. In cold storage, utilization for these three organs is 61%, 24%, and 20%, respectively. TransMedics Group has created a better mousetrap, and the company has been rewarded for it. The company's revenue and earnings have increased rapidly in recent years.
TMDX Revenue (Quarterly) data by YCharts
It has encountered some issues, including problems with organ transport. TransMedics' reliance on third-party charter aircraft came with a host of headwinds, including delays, pilot shortages, and others. However, the medical device manufacturer has since built its own dedicated transportation network that has helped it address these problems.
What's next for TransMedics Group?
TransMedics could see its revenue and earnings continue moving in the right direction, along with the organ transplant market. And if it captures a higher share of that space, its stock price could soar. Further, it is developing newer versions of its OCS for the heart, liver, and lungs, aiming to eventually target other organs.
However, there are some risks. For instance, developing these organ transplant systems isn't easy and requires jumping through regulatory hoops. Setbacks here could sink the stock, especially since the company will need to stay innovative to remain competitive in this niche of the healthcare industry.
TransMedics' fleet of aircraft also isn't easy or cheap to maintain -- while it now has more control over its transportation network, that comes with its own set of risks. Investors should monitor these (and other) potential challenges. But if TransMedics can manage them while increasing its market share, the stock could skyrocket in the next decade or so.
