Operator: Welcome to XVIVO Q2 report for 2026. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing #5 on their telephone keypad. Now, I will hand the conference over to CEO Christoffer Rosenblad and CFO Kristoffer Nordström. Please go ahead.
Christoffer Rosenblad: Thank you so much. Good morning and good afternoon, everyone, welcome to XVIVO's earnings call for the second quarter of 2026. To get started, we go to slide two. Today's presenters are me, Christoffer Rosenblad, CEO, calling in from Gothenburg, Sweden, and Kristoffer Nordström, CFO, calling in from Denver in Colorado. With that, we can go over to slide three, which is the Q2 financials at a glance. The Q2 shows the sales amount in line with the previous quarter, Q1, with a 36% organic top-line growth compared to the same quarter last year. EBITDA was kept at a healthy level, resulting in a good operating cash flow. For the third consecutive quarter, the total cash flow was neutral and hence the cash position stable. Kristoffer Nordström, our CFO, will get into the details on sales, gross margin, cash flow, and EBITDA later in this presentation. If we look into the segments, both the thoracic and abdominal segments are growing rapidly in both regions, North America and Europe. The lung market trend from Q4 last year continued into 2026 with a good lung market growth. I'm also very pleased with the strong kidney sales in the quarter, fueled by larger sales spread in Europe and a growing sales force, and most importantly, growing interest from clinicians in the U.S. We will come back later in the presentation on the progress for the service segment, the actions taken, and how we will execute to become the preferred partner in the transplant process. With that, we can go over to next slide, which is slide number four, which is the same picture, but for the first six months of the year. It shows a similar picture as the quarter. Good, stable overall growth comes from strong thoracic growth and healthy abdominal growth. During this year, we have continued to invest mainly in sales force, scalable production structures, as well as regulatory approval. Sales came in at SEK 480 million with a 29% organic growth. If we look into the segments, we can see that for heart, the main hurdle is regulatory approval. Once the heart assist is used, the feedback is overwhelmingly positive. We continue to build evidence, and more than 600 patients now have been successfully transplanted with the heart assist. The best testament to success is Australia, where the heart penetration year one was approximately 30%. Year two, it increased to 40% of DBD hearts in 2025. This year, we already see an increase to approximately 50% penetration of all transplanted hearts in Australia. I also want to mention that our projects are progressing according to plan. Regulatory timelines are hard to predict, but clinical trials, submission file, and the development progress are progressing according to timelines we have previously agreed internally. The full-scale production of disposables for heart, liver, and kidney will be extremely important to capture future growth potential for all three products. With that project coming to an end, we will now focus on reducing cost per disposable, setting up dual production where deemed necessary, as well as improving our machine production setup. This project will also include our lung portfolio. Lastly, and most important to mention, is that this quarter again shows that the business model is scalable. With increased sales, we see that turning to an improved EBITDA and an improved underlying cash flow. With that, we can go over to slide five, and we will come back later to the financial numbers in that section. We can go into the Q2 highlights on slide five, and those we will see on the slide six and seven. We can go straight to number six. One key is that we definitely start to see that with a larger sales force, we meet more customers, and we see an increase in adoption of our technologies across the line. Number two, we mentioned before that the lung market is back, and we are very importantly are running an OPO EVLP hub pilot that is successfully now up and running, and that explains partly the increased lung sales during the quarter. So far, the progress is in line with plan, and we have identified 45 OPOs in the rollout pipeline, where of the third OPO was onboarded last week. We are continuously investing in more feet on the ground in the U.S. to enable closer customer relations with a growing number of EVLP partners. Look into heart. As I just stated, in Australia, we saw fast pickup of usage early on, and it increases year by year. Now, we see a similar interest in Europe, and it translated into usage under derogation or compassionate use. It's interesting, we hear more and more testimonies from customers who say that the XVIVO Heart Assist changed not only the ability to transplant more patients with a higher patient survival rate, but it also reduced stress level in the transplant team and increased the confidence in heart transplantation. In the U.S., the interest in our XVIVO heart technology is equally high, and we have recently submitted the extension of the CAP, or Continuous Access Protocol, to the FDA. I mentioned in the last quarterly call, but I will mention again, after spending time at the ISHLT 2026 in Toronto, it's clear that XVIVO is by far the innovation leader in the field of both lung and heart transplantation. If we look into number four, we saw increased sales from the Kidney Assist Transport, and we also see an increased interest and momentum from customers using the Kidney Assist Transport. This is based on more and more clinical evidence being available to the clinicians that support the use of Kidney Assist Transport, as well as a larger commercial footprint in both regions, Europe and the U.S. In parallel, we are working hard to develop the product to meet U.S. opioid needs, as well as lowering the cost per disposable to increase margins over time. With that, we continue on highlights and slide number seven. Point five, what is very encouraging is to see that where we put commercial capabilities and increase our sales force, we grow typically between 30%-60%. With future approvals expected and coming in, as well as our product improvement, we will continue to see this leverage of commercial sales force turning into increased sales at a good return on investment. Point six here, even though I wish to have had great news, we have seen great progress in all our regulatory processes as well as we have stated, we worked hard on the derogation and compassionate use here in Europe. We see it taken up in Australia. Now we see that we have what I deem as good progress in the regulatory processes. I will shed more light on where we are on each approval in the next section of the call, the regulatory and clinical update. I just want to conclude here that we are pleased with what we have seen so far. If we look at point seven, very important point. To start with, we are very pleased with the growth and the cash flow we saw during the first half of the year. We invest heavily in future growth. The majority of the investment, of course, go into regulatory application for heart globally and liver in the U.S. Besides that, we continue to invest heavily in building commercial capability and the production scale-up to enable higher volume than we have today. We are also investing in quality capabilities to support the growth we will see that we believe will be times 10 in volume versus what we see today. Lastly, number eight, that capture, I think, the first half year is that we have a scalable business model. We do invest to capture that opportunity, and we see increased sales turn into EBITDA, that turn into an improved operating cash flow that we then can invest into regulatory approvals of our future sales drivers, which is heart global and liver in the United States. With that nice segue, we can go into the regulatory update, slide number eight, we can actually quickly go to slide number nine to go into the regulatory processes we have. This is the usual overview that we show every quarter on slide nine. We now see more and more evidence for the heart assist globally. In Europe, we ran the first randomized control trial with superior endpoint that was performed in the field of heart transplantation. The clinical outcome was great, with an additional six lives saved per approximately 100 patients. It is also the first clinical trial to establish a link between preservation method, severe PDD reduction, and reduced one-year mortality. In the analysis of the trial data, it was noted that the XVIVO group had a reduction of severe PDD by 76%, which is a lot. In comparable number, the severe PDD was 20% in the control group, which is expected, but only 5% in the XVIVO group. It was further noted that the mortality of the severe PDD was approximately 40% in both groups, leading to increased survival of six percentage point in the XVIVO group versus the control group. The U.S. heart trial was fully included in record time. It showed the same picture. The severe PDD rate there was only 7.9%, and we are now finalizing the submission for the FDA for their review. The team is working very hard. We are expected to hand in the submission file to the FDA during this quarter. We are waiting for some validation and prolongation data before we can finally submit it. In Europe, the CE mark process for Europe is ongoing and at the late stage now is my best judgment. Stated earlier, the HeartBox and disposable part of the product is already CE mark. The solution has passed EMA consultation, and we're now waiting for consultation at the Swedish Medical Products Agency for the one part of the product. During Q2, we received a few question of clarification nature, which we turned around in less than 1 week. We are now waiting for feedback on that additional information, where we unfortunately don't have an exact timeline, but we expect feedback during this quarter, Q3. As we stated earlier, the uptake of Heart Assist is good in Europe under derogation and compassionate use, and we are ready to launch when the product is fully approved. Hence, the launch plan is ready. We have staff recruited, and they are meeting customers today under derogation to support them with everything they need. The interest from clinics is very high in Europe, as it is in the rest of the world. I still want to mention that even though the use under derogation and compassionate use is increasing and appreciated by our customer, we need to mention that European heart clinics are suffering badly from lack of alternatives to the XVIVO Heart Assist. In both United States and Canada, the regulatory approval will be pending the CE mark in Europe. We are waiting for that one until we will seek for approval in those two regions. The last point, liver in the United States, I will come back with an update on the next slide 10, and the Liver Assist regulatory status in the United States. We have previously reported that the Liver Assist has been granted breakthrough device designation by the FDA. With an approved IDE and CMS funding approved, we could have started a trial Q3 already last year at this point, pretty much 1 year ago. We did decide to temporarily pause activities for the liver PMA process to investigate alternative regulatory routes possible. We are preparing for the FDA Q-Sub meeting, where the possible regulatory route will be decided by the FDA. We have recently opted to focus the majority of the resources we have on the heart US submission. That being said, we have very high interest from US clinics that are supporting the US liver submission, and we are in good dialogue with clinics to prepare ourselves for the Q-Sub meeting with the FDA. We will inform all investors of the next steps in the US liver regulatory investigation latest in the Q3 report, if we don't feel the need to do it before that. With that, I conclude the first section of the Q2 presentation, I will hand over to our CFO, Kristoffer Nordström, who will present the financial performance.
Kristoffer Nordström: Yes. Thank you, Christoffer. Turning to the financial performance for the second quarter. This was another strong quarter for XVIVO. The strong momentum we saw in the first quarter continuing to Q2, as you have seen, we delivered net sales of SEK 239 million, which corresponds to an organic growth of 36% in local currencies. Importantly, growth was broad-based across our portfolio and driven by continued adoption of our technologies in all major organ areas. Pleased to see that. At the same time, we continue to invest in commercial capabilities, regulatory activities, and operational scale-up initiatives while maintaining a solid profitability. EBITDA amounted to SEK 45 million, and that's around 19% in an EBITDA margin. We believe that this demonstrates both the strength and the scalability of our business model. I will get back to that. Gross margin was 71%. Thoracic margins remain strong, while gross margins in abdominal and services continue to impact the overall mix. I will come back to that as well in a moment here. Going over to the next slide, which is the largest business area today for XVIVO, thoracic. Thoracic delivered a positive quarter with net sales of SEK 158 million and an organic growth of 53%. Adjusted for part trial revenue, we're still at 52% organic growth, very good. The momentum in lung continued to strengthen. EVLP disposable sales grew 69% in the quarter, we continue to see expansion beyond our largest customer accounts. Activity remains strong, both among leading transplant centers, but also within our growing OPO strategy. During the quarter, as an example, two additional XPS systems were installed at OPOs in the U.S. and are expected to become operational in the second half of the year. Heart, Kristoffer touched upon it. We're very pleased, very proud to see that we delivered a particularly strong quarter on heart, generating sales of SEK 24 million and primarily from Europe and Australia. We continue to see increase in use under compassionate use and derogation in wait for our regulatory approvals. With the approximately 600 hearts transplants with our technology, we continue to build both clinical experience and commercial momentum ahead of our future approvals, which will be very important. Gross margin on thoracic was 83%, remaining at a very attractive level despite the increasing contribution from heart sales that we should remember is still at pre-launch pricing. Moving over to abdominal. Abdominal delivered another strong quarter and reported net sales of SEK 65 million, corresponding to 26% organic growth. Liver sales grew 11% in local currencies while kidney contributed, and was the primary growth driver with a growth of 72%. We are particularly encouraged by the continued adoption of Kidney Assist Transport, both to Europe and North America, as more centers gain experience with the early adoption of this technology. Gross margin was 57%, an improvement from Q1, but less than 68% last year. The decrease was primarily driven by product mix, with kidney representing a larger share of sales, as well as pricing conditions in certain markets. While this impacts margins in the short term, we remain very confident in the long-term margin opportunity within Abdominal as adoption increases in the U.S., where pricing levels are structurally higher, and as we continue implementing manufacturing and sourcing improvements, we expect margins to improve over time. Overall, we remain satisfied with the growth trajectory in Abdominal and the increasing adoption of both our liver and kidney technologies. Turning to services, our third business area. Net sales were SEK 15 million, corresponding to negative growth of 25%. The development continues to be explained mainly by lower organ recovery volumes, while FlowHawk delivers another strong quarter. FlowHawk grew 48% organically, and continues to gain traction among transplant programs across the United States. We remain convinced that the digital workflow solutions will become an increasingly important part of transplant infrastructure and customer integration for XVIVO over time. Within organ recovery, volumes remain below our expectations yet another quarter. However, following the investments we have made into the organization, the talent that we have attracted, we feel that we are getting closer to growing our customer base, and we have a firm focus on returning to growth here in the second half of the year. I think we should see some results, especially in the back end of the year. Gross margin was 10%, and that's purely reflecting the lower organ recovery volumes combined with our investments in capacity. As volumes recover, the margins should naturally improve. Switching gear from sales and going into EBITDA and profitability. Despite continued investments, as we talk a lot about in commercial expansion, regulatory activities, and scaling the organization for future growth, EBITDA remains strong at 19% in the quarter and 20% year to date. On a rolling 12-month basis, EBITDA has now improved to 21%. Many companies can deliver high growth, and many companies can deliver profitability. We're thinking that delivering 29% organic growth during the first half year of the year while sustaining around 20% EBITDA margins and generating positive cash flow demonstrates the quality of our business model, and this already at the very early phase of our growth journey. We're very proud of that. As we have said previously, XVIVO's business model is highly scalable. We will continue to invest where we see clear long-term commercial opportunities, particularly in North America, but we will also maintain disciplined cost control across the organization. My final slide, cash flow. One of the most encouraging aspects of the quarter, we think, was the continued improvement in cash generation. Operating cash flow amounted to SEK 63 million in the quarter and SEK 129 million year-to-date. This should be compared with a negative operating cash flow during the first half of the year, last year. This reflects both the stronger commercial performance and the continued focus on working capital management. Cash flow from investments amounted to minus SEK 68 million in the quarter and relates primarily to regulatory and product development activities, especially within heart. What we think is particularly important is that over the past three quarters, we have demonstrated our ability to largely self-fund both our operating investments, but also our growth investments, our CapEx. Despite continued investments into future growth, total cash flow for the first half of the year was essentially break even, and we ended the quarter with a strong cash position of SEK 305 million. With those comments, I will hand it over to you again, Christoffer. Thank you.
Christoffer Rosenblad: Thank you, Nordström. We will round off this presentation with outlook for the rest of the year and then a little bit longer-term outlook. We start with slide 2019 and the outlook for 2026, our focus areas. We will continue to build sales force and build new partnerships in the U.S. to enable OPO and other clinics to recover more lungs by EVLP adoption through a combination of service models and staying very close to customers. In parallel, we increase our service offering to better tailor customer needs, especially offering FlowHawk and NRP from a hopefully increased footprint. We have an increased surgical footprint. We should also have an increased contract footprint. We will continue to work closely with our competent authorities in Europe with the aim of obtaining the CE mark of heart, of course. We are aiming to submit the regulatory heart file to the FDA for their review during this quarter, as well as deciding the regulatory pathway for Liver Assist in the U.S., with the aim of giving U.S. surgeons the same opportunity we now see here in Europe using the Liver Assist, where European clinical team saves hundreds of lives every quarter, thanks to Liver Assist. If we turn from this year outlook to a little bit longer term, which is, I think is important to keep in mind while we're here, is that the demand for transplant is still 10 times higher than the supply of organs. We should also remember that the sales value for machine perfusion is approximately 10 times higher versus what is used today to a large extent, static cold storage or a beer cooler box type with ice. Machine perfusion and our service model have proven to increase the number of organs to be used for transplantation, especially in the fast-growing DCD organ pool, where the main growth drivers are superior clinical result from machine perfusion and the fact that we can reduce complexity and add time for the transplant clinic in order to reduce stress. In conclusion, we know that machine perfusion and good service models on normal and DCD graft will drive growth in the near and the long-term future. Lastly, XVIVO want to change the paradigm for transplantation by innovation. We are convinced and committed to increasing patient lives after transplantation, making sure that no one dies waiting for an organ, and making sure that we have rested transplant teams performance surgery at a lower cost than what we see today in the transplant chain. We hope that you, dear listener, in the future, when you fly, you might be seated near to an XVIVO HeartBox with a heart being transported to a patient whose life is about to change soon. If you see that XVIVO heart device on your flight, you should know that it's not just a heart traveling, it's a hope for a new and a better life for the patient and his/her family. I want to thank you for supporting us on this journey to change the transplant system forever through superior innovation. With those last words, I also want to thank you for listening today, and with that, we will open up the lines for questions.
Operator: If you wish to ask a question, please dial #5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial #6 on your telephone keypad. The next question comes from Simon Larsson from Danske Bank. Please go ahead.
Simon Larsson: Good afternoon, everyone. A few questions from me, I would like to start on the strong heart print that you mentioned. Would it be fair to assume that sales in this quarter was maybe a bit boosted by a lot of new placement of the boxes, or were revenues mainly stemming from existing clients already sort of using consumables and from what was sort of a basic run rate for the business or just how we should think about the dynamics of the business model here in the beginning of the launch, if you will, and if we should extrapolate anything into second half.
Christoffer Rosenblad: Thank you, Simon. It's a great question. We are scaling up in Europe. There were limited HeartBox sales both in Q1 and Q2. The main sales coming from disposables. We should remember that once you get started, you have a few kits as safety stock. That has affected half year one to some extent. We see definitely increasing uptake in Europe from using Heart.
Simon Larsson: Great. The second question was on EVLP. I believe you have three OPOs, yeah, signed now soon online as well. It sounds like more also in the pipeline, hopefully for the remainder of the year. If you could help us understand the potential of these OPOs when it comes to revenue. I guess you have data on their current volumes and growth rates, et cetera. Just trying to understand what three to five OPOs can do for you in, let's say, next fiscal year. What's the magnitude we're talking about?
Christoffer Rosenblad: We are in pilot phase, we do need to come back in probably six months to answer that question properly and with more exact data. What we do see is that the opportunity to evaluate in lungs on the OPO side is vastly outnumber the one on the clinical side due to their access to extended criteria lungs that is there. Also the fact that it simplified the whole process. We have seen in one OPO, we saw a fairly fast uptake. We need to replicate that three to four times more to come back with exact numbers coming into next year. So far it looks good. According to our own plans, it's according to those at least.
Simon Larsson: Okay. Makes sense. The final one was on further recovering investments in sales force when we're approaching a Heart launch both in Europe and in the U.S. right into next year. Could you give us any help or ballpark estimate on how many more sales persons, support persons do you need to really cater and to meet the demand and to make it a successful launch here for the Heart product? What's the magnitude of investments basically that we should expect here in next year maybe?
Christoffer Rosenblad: Yeah. In Europe we have invested. There will be add-on investments when the more customers come on, the more field force we need, so to say, ranging from customer support to technical support to clinical support to sales reps. That is more of a scaling exercise. In the U.S. we will start to, during next year, scale up. Depending a little bit on the timing, but we do believe that we need an approximately 10 to 13 extra commercial headcounts ranging from sales reps again to customer support, technical support and increased clinical training/support.
Simon Larsson: Okay. That sounds fair. Thank you so much. I'll get back in line.
Christoffer Rosenblad: Thank you.
Operator: The next question comes from Jakob Lembke from SEB. Please go ahead.
Jakob Lembke: Yes. Hi, and good afternoon. My first question is on the OPO customer channel. I'm wondering if the first OPO that you won here earlier in the year, if you can elaborate on how that has sort of developed and ramped up here in the first half of 2026.
Kristoffer Nordström: I can go on that one. Yeah. You're right, Jakob, we acquired that OPO in the back end of last year, and they became active very early this year. I would say they have a strong ambition at the OPO and it's a mutual ambition on par with volume-wise, pre-LP on par with, let's say the top five centers in the U.S. We talk about fairly larger volumes. This is a new method and we are three parties that needs to collaborate. It's XVIVO and it's PSI, our perfusion partner and the OPO. There are learnings in the making, but we believe that we have a proof of concept to provide some more color. I think they are now close to, let's say, 20 LP for the first half year. I know their ambition is higher than that when they are fully up and running, but we consider that a very strong start and now we want to replicate that on the other OPOs as well. I think you will see a variety of slightly lower volumes than this one, but also perhaps higher for other OPOs as well. It's a good start.
Jakob Lembke: Okay. This, let's say 20 in the first half, is that a reasonable assumption for the second two you won now in Q2 for H2 2026?
Kristoffer Nordström: I think you will see the ramp-up time could vary a little bit on these two OPOs. One is smaller and one is bigger. It's a little bit too early to say, I think. A lesson is that it takes at least a quarter, I think, to come up to speed for them.
Jakob Lembke: That sounds fair. I have a question on the heart sales in Europe here in Q2. If you can elaborate on what countries are contributing to that.
Kristoffer Nordström: As Kristoffer said, we are very happy now with the good people that we have in Europe. Naturally, there is some background noise here. I'm not sure if it's you, Jakob, but naturally these are sites that has participated in the European clinical trial. We talk about France as we sent out the press release this year about the derogation. They are contributors. You have the Benelux countries, Germany, Sweden and Denmark, if I remember correctly. We think that's a very good starting point here. Thank you.
Jakob Lembke: On the CE process for heart in Europe. I understand that it's very tough for you, and it's hard for you to make predictions. It sounds based on your commentary that we're unlikely to get this within the one year horizon from the press release you sent out August last year.
Christoffer Rosenblad: Yeah. That's our best guesstimate at this moment based on where we are in, let's say, level of clarification. That being said, it's hard to predict regulatory timelines, especially during the summer. Yes, that's our best guesstimate.
Jakob Lembke: It's still reasonable to expect it in 2026, perhaps?
Christoffer Rosenblad: Yeah, I certainly hope so.
Jakob Lembke: Okay. It's tough, I get it. A question on Liver, which had a bit slower growth here for the second quarter in a row. I'm wondering if there's something that has changed there or if it's only normal fluctuations.
Christoffer Rosenblad: I think that we had a fairly strong liver quarter last year to start with, we have fairly strong comparables. We do have a good liver pipeline still in Europe. We believe that the majority of market penetration from hereafter will come from both increased sales in, let's say, newer European countries where we have, for example, really high penetration in Benelux. We can see an increased penetration in other countries, Italy there. We believe that a large part, besides new countries, will also come from improved service models here in Europe as well. If we look at the pipeline, it looks possible for liver as well.
Jakob Lembke: Okay. On liver, I know there is one competitor that is talking about expanding more into Europe and there's also another competitor that I know is growing a lot. You're not seeing any increased competition from those in the short term?
Christoffer Rosenblad: We do see increased competition in Europe to some extent, absolutely. We believe we have a strong track record, very strong clinical proof, good customer relations, so to say. We so far haven't seen that strong competition coming in. I believe that most of how successful we are lies in our hands and how successful we are to implement good service models. When I talk to customers in liver, that applies to all organs, but in liver especially, they are looking for support in reimbursement, but especially in service model due to shortage of staff. If we can support them with that, I'm sure that we will become the preferred partner to a lot of clinics in Europe over time.
Jakob Lembke: Okay. That's all from me. Thank you.
Operator: The next question comes from Filip Wiberg from Pareto Securities. Please go ahead.
Filip Wiberg: Hi. I've got a couple of questions, but I'll take them one by one, I think. The first one is around the largest customer that you have in lung. You had another strong quarter here, so I'm wondering what your expectations are now for the coming quarters and what kind of visibility that you have there. Also if your projections have changed at all following their own approval.
Christoffer Rosenblad: Thank you. In general, we stay close to all our customers and especially the large ones. We are part of their approval and we will continue to see increasing quantities. We're convinced of that. The sales value will of course be smaller compared to today. We have visibility approximately six months, good visibility, and for the six months it looks good. After that, we have less visibility to say so. We are in good dialogue to have a better understanding of how the future will be shaped together. We need to come back on a more detailed answer to that question.
Filip Wiberg: Okay. Thanks. I think in connection with the last report in Q1, you mentioned it was fair to assume that was a new baseline for the DLP number. This seems to have been true in Q2, so it sounds like you still have confidence around that statement now looking forward as well.
Christoffer Rosenblad: We are confident for the next six months, so to say. We are also very confident that we together will increase the number of EVLPs so we can make sure that nobody dies waiting for lung at one point, and that we will do together. We are convinced and committed to increase the volume and the number of EVLPs going forward. Exactly how that will shape into USD it's something we need to come back with if we look into 2027, 2028, 2029.
Filip Wiberg: That's all right. Thank you. A question on heart. You now plan for the PMA submission after the summer. Now, how large would you say the uncertainty is around the exact timeline for that? Do you have all the clear steps that you need to take now going forward until that submission? Are you able to provide some more details around what that exactly is and what is remaining before you are ready for the submission?
Christoffer Rosenblad: The main, let's say, hurdle, bottleneck is that we have had some changes of components with the product. That happens. We need to verify all and product aging for, let's say, the final product. That is what we're waiting for now during the summer. It's a large clinical file, a large, let's say, product file and animal file as well that needs to be submission. We have a great team on board. I sat with them for a week. The clinical results, fantastic. I am confident if nothing goes wrong. I'm extremely confident. With product aging or something out of our control. If it comes to submission, I am right to the file, et cetera, I'm 100% convinced that we will do that on time. It's more the unknown unknowns or that I don't know. For the rest, I'm 100% confident that we will hit that timeline if nothing out of the ordinary happens.
Filip Wiberg: Okay. Very good. Lastly from me, around the PMA in the U.S. You submitted it, I think you said earlier. How long time does it take before the FDA can grant approval for that? When can we expect transplants to start again in the U.S.?
Christoffer Rosenblad: The straight answer is I don't know 100% sure, but it's a fairly easy turnaround, so to say, for the FDA to do. My best guesstimate would be approximately 30 days turnaround time. Hence, it should be able to start in somewhere here in Q3 if everything goes all right.
Filip Wiberg: Okay, perfect. Thanks. That was all from me.
Operator: The next question comes from Ludwig Germunder from Handelsbanken. Please go ahead.
Ludwig Germunder: Thank you, and good afternoon. I have two questions, I think. I want to start with going back to what was discussed earlier here with the investments in Salesforce. When we think about OPEX and scalability going into next year, is the big driver of higher OPEX the investments in Salesforce, or is there anything else we should also keep in mind?
Christoffer Rosenblad: Yeah, it's a great question. Thank you for asking that one. With a growing company and a growing machine fleet, you also need to scale up quality and technical product management, let's say the back end of the company, to take care of the growing fleet and be able to return answers to customers very fast. Those investments are in comparison to commercial capabilities limited. That's why we normally talk more about commercial capabilities, because that's where the bulk of investments will be funneled. You are right, in general, you also need to scale up the, let's say, the back end of the company in order to enable higher growth rates. In terms of production, we don't see that we need to scale up because we are relying on the majority on third-party manufacturing, et cetera. That's more improvement projects, lowering costs over time, efficient processes. We have the right people on board doing a fantastic job, so I don't see a large scale up there. Definitely quality side, technical product management side, there is a need. Compared to sales force, it's smaller and limited.
Ludwig Germunder: Just to follow up on that, is it fair to expect that to grow in line with sales growth?
Christoffer Rosenblad: In the beginning, it will be a larger, so to say, investment, let's say approximately six months before launch and 12 months after launch. Once that has stabilized, growth will far outpace those type of investments. There's more of a-
Ludwig Germunder: Got it. Thank you for that. Yeah, great. Then a question on abdominal, I guess. You mentioned in the report that you had some pricing conditions in, I believe, undisclosed markets. Could you elaborate a bit on this? Is it possible to say what kind of pricing conditions, what markets are affected, and is this for the entire abdominal segment or is it more towards liver or kidney?
Kristoffer Nordström: I can take that one. This relates to Europe primarily. If you look at certain countries in Europe, you have the East Europe, you have certain South European countries where there simply is not enough money in the systems, pricing has to be lower, and it's at those countries, those markets, where we do see competition from competitors implementing lower prices. We will need to ask ourselves if those markets are, at the moment, attractive for us. If you look at the more important markets and what historically have been our main markets, you don't see that pricing pressure, and you see an increased utilization, especially DCD, and now looking into DPD as well. We see less of competition today, but that might change. Last year, we were very good at coming into those markets, Eastern Europe and certain other countries, it comes with lower margin. That's not where you will see the growth either for XVIVO going forward. I'm not worried from that perspective. It's just an effect we have at the moment.
Ludwig Germunder: Just to be clear, was this something that started or that you started seeing during Q2?
Kristoffer Nordström: Well, the volumes at those markets has picked up for us during this year due to our successful installations of our devices last year. If you look at the Q2 specifically, I would rather say it's the fact that we have been very successful on kidney, and kidney sales globally are at lower margins. With reimbursement long term, we hope that we can improve that. Also, we touched upon it, but I want to mention that one of the good outcomes of the manufacturing project that we have run now for 2 years, moving manufacturing from Netherlands to Sweden, is that we will see a lower COGS on especially our abdominal portfolio. I would say perhaps not this year, but that's starting from mid next year, we should start to see that come in.
Ludwig Germunder: Thank you. The final question from me, please, also on the COGS. Besides what you just mentioned, you've also previously been speaking about, for kidney specific, that volumes have been too low, and that's why the gross margin has been lower. Besides the initiatives and the move of production that you mentioned, how much higher volumes do you think is needed to see higher gross margin for the kidney sales?
Christoffer Rosenblad: I can answer that to some extent. We need to see 3 things. One is a geography mix. I should also mention it's partly by choice, where we choose to gather more DPD data on kidney, in countries with a little bit lower margins, but you get very good data. It makes economically sense because we don't have to pay for it, so to say, but we pay for it through slightly lower margin. We think that that will be very useful data going forward in approximately one to one and a half year. It's a geography mix where when we grow more in high-margin countries, it will, so to say, look better picture. It's definitely cost per kit. There are 2 components there to look at. One is the component cost, where we need to reduce that and also get a better process. Lastly, we have seen that when you come up to, let's say, stable production, it is not exactly a quantity because we do not have a pricing with our production suppliers that is based on how much we purchase. We do not get lower if we purchase more. It is more that the process gets improved over time, and then you, year by year, reduce a little bit of cost every year because of better processes and higher scale, pretty much. It is a combination of those three factors that I think will take 1 to 1.5 years to get out of the system. Once we do that, we will have very healthy margin on our full product line.
Ludwig Germunder: Very clear. Thank you so much.
Operator: The next question comes from Ed Hall from Stifel. Please go ahead.
Ed Hall: Good afternoon. Thank you very much for taking my questions. I have a couple here. The first one would just be on lung and the OPOs. I guess as we look into H2, how much do you view that as driving growth? Maybe more specifically in Europe and the EVLP momentum you have seen there, do you see that continuing into the rest of the year?
Christoffer Rosenblad: Yeah. Looking into forecast, yes, we do believe that that momentum will continue. We do see an increasing interest for lungs in general, EVLP in particular. The donor pool is becoming more and more extended criteria, to put it that way. Hence, there is a larger portion of DCD. There is more TA-NRP done, which potentially harm the lungs, et cetera. There is an increased insecurity coming from donor lungs. We see an increased interest, and if we are staying close to customers and do our job right, we believe that that momentum will continue through the rest of the year, yes. Both in Europe and the U.S.
Ed Hall: Perfect. That was really clear. Maybe just more of a Q3 question, but it's obviously we've seen the typical seasonality in the U.S. for lung. I was just wondering to hear your thoughts on it for this year, given dynamics like phasing of revenues and obviously this growing OPO strength. Is there anything to upset that seasonality?
Christoffer Rosenblad: In general, doing this for 14 years, Q3 is typically a bit of a weaker quarter, very much depending on that's where the majority of people take vacation, and that applies, of course, to transplant teams as well. Last year was a bit of an anomaly, with an extremely weak Q2, and actually July, August, and then we saw volumes picking up in September. That has more to do with the U.S. and the economy behind transportation, more resource in the transplant system. If I look at a normal year, I would say Q3 is seasonally a bit weaker, and then Q1 to Q4 is typically a little bit stronger.
Ed Hall: Okay, perfect. This year, there's nothing to upset the last 14 years that you've experienced?
Christoffer Rosenblad: No, we haven't seen any sign of that so far.
Ed Hall: Okay. No, that's really clear. Just my last question just would obviously be on FlowHawk. I appreciate it's a small part of your service business, obviously it looks like it's growing really well and it's a SaaS. I assume quite a high gross margin contribution. I just want to try and understand how big could this be, both in terms of your revenue, I guess who's using it now. I'd just be curious to understand a little bit more about this business.
Kristoffer Nordström: Yeah. I agree with you. We have high hopes for FlowHawk, it's still a very unique communication and a transplant administration tool. We will paint this picture more deeply for you guys during the rest of the year here as we move into our strategy work at XVIVO. We see it as an air traffic control tower, more or less, that could be used by all OPOs, all transplant centers. We believe that in the near future here, you should be able to integrate our technologies with FlowHawk, which will create stickiness at the centers and so on. It can also potentially make us come even closer to the customers at the organ offering stage and so on. It's still in the early innings, that's why we're also happy to see that we have this growth now, it comes from both renewals from happy customers, also additional centers coming on board. It's definitely a product for the future for us.
Ed Hall: Perfect. That's really clear. Thanks a lot.
Christoffer Rosenblad: Thank you. I see we have one more question left. We are nearing the end of this call, of course, we will allow one more question. Elvin, please.
Operator: The next question comes from Elvin Rolder from DNB Carnegie. Please go ahead.
Elvin Rolder: Yes, good afternoon. Thank you. I appreciate you taking the questions, even though we're pretty much out of time. I will just have two ones and see if we can manage both. Perhaps beginning a bit on the gross margin dynamics in the thoracic segment. They're strong, but they're still down a bit year-over-year. You mentioned mix effect here in the quarter, I guess it's because of the EVLP outgrowing PERFADEX year-over-year, I guess also a bit on heart. I guess my question is, what is the kind of current gross margin that you're operating with in the heart business, and how would you expect this to evolve from where you are now and the kind of 12 months post a European approval? How should we think of that?
Christoffer Rosenblad: I can take that one. Heart coming from clinical trial supply chain setup has lower gross margin compared to the rest of the product portfolio. I think that it will take a couple of years post-launch until we are, let's say, up and running. We will see definitely 12 months after European launch, we will see improvements and then going further into. You need typically those changes since it's a PMA in the U.S. and a Class 3 device here in Europe. There are quite long regulatory timelines for all production and product improvement projects. I would say we need probably a couple of years to get up to both scale and optimize production before we see the really high margins we see on more mature products.
Elvin Rolder: Okay, great. Thank you. Just one more from me. Looking at cash R&D costs here in the quarter, it took quite a noticeable step up in Q2 versus Q1, and I guess also versus Q2 last year. I acknowledge, of course, that you have the kind of intensive work with both the PMA submission and the European approval. Are there any sort of extra temporary effects that are specific to Q2 now that will start to abate once we have a potential approval in Europe? How should we look at R&D when we include capitalized development as well?
Kristoffer Nordström: I'm glad you asked the question there. It's been a busy quarter, as we have talked about, with a high focus on our regulatory processes, primarily in the U.S. Naturally, the CapEx and the R&D spend in Q2 was higher. We will see that go down in the second half of the year, and what will happen is that when we get the CE mark, we will start to amortize the CapEx tied to the CE mark, so to say. I've disclosed that before, and it's around SEK 25 million per year in amortization. Despite this, we still believe that we should be able to end the year, if we track sales-wise, we should be able to end the year being cash positive for 2026, which would be the first time in its history.
Elvin Rolder: Okay, great. Thank you so much for taking my questions here in the last nick of time. I'll get out of the queue. Thank you.
Christoffer Rosenblad: Thank you so much. With that, I want to conclude this quarterly Q2 report, and I hope to see you all back on October 22 for the Q3 report as well. Thank you very much for good questions, and thank you everyone for listening and being part of the journey of making sure that nobody dies waiting for an organ.