TransMedics (Nasdaq: TMDX) is facing allegations of fraud, organ trafficking, and unethical practices that have triggered shareholder investigations.
The claims, detailed in a report by short-seller Scorpion Capital, have triggered investigations by two shareholder rights law firms. In response, TransMedics has issued a strong denial, calling the report inaccurate and misleading.
On January 10, Scorpion Capital released a report alleging that TransMedics engages in fraudulent billing, coercive business practices, and unsafe organ transplantation. The report also accuses the company of steering damaged or rejected organs to select transplant centers, engaging in off-label use of its Organ Care System (OCS), and overcharging hospitals through its National OCS Program (NOP).
Scorpion Capital called TransMedics a “grotesque healthcare fraud,” and assigned the company’s stock TMDX a target price of $0. Following the release of the report, TransMedics’ shares dropped 13% over two trading days.
The allegations have prompted shareholder rights firms Bragar Eagel & Squire, P.C., and Hagens Berman Sobol Shapiro LLP to investigate whether TransMedics violated federal securities laws by allegedly issuing misleading statements and failing to disclose critical information to investors.
TransMedics denies the allegations
TransMedics released a statement earlier this week denying the claims and attributing them to market manipulation by Scorpion Capital.
“We strongly believe that the claims made in the Scorpion Capital report have no merits, and were primarily intended to manipulate the market for financial gains. The report fails to accurately represent TransMedics’ business, technology, diverse culture and steadfast focus on delivering exceptional products and services to meet the needs of the global transplant community,” TransMedics said.
The company also highlighted the impact of its OCS technology and NOP program in facilitating over 7,000 organ transplants. According to TransMedics, its programs expanded U.S. transplant volumes.
“Critically, our technology and services have driven an expansion in overall U.S. transplant volumes and exceptional post-transplant clinical outcomes for patients, which have been repeatedly validated across our extensive and unrivaled clinical data set,” the company said in a news release.
What’s next?
TransMedics is engaged with its legal advisor at Kirkland & Ellis LLP to explore legal options.
“We are grateful for the support and trust of our clinical collaborators and users, OPO partners, donor families, and the transplant recipients we serve,” said Waleed Hassanein, TransMedics CEO. “We remain laser focused on executing our growth plans, including the launch of our next-gen OCS Heart and OCS Lung programs as well as several other strategic initiatives, in 2025.”
Bragar Eagel & Squire is examining whether TransMedics allegedly violated securities laws, while Hagens Berman is investigating the legality of the company’s reported revenues and NOP strategy.
Hagens Berman has encouraged whistleblowers with non-public information to come forward, noting they may qualify for SEC whistleblower rewards.
The allegations and ensuing legal scrutiny come as TransMedics prepares for significant business developments, including the launch of next-generation OCS Heart and OCS Lung programs in 2025.