LivaNova at Barclays Conference: Strategic Growth and Innovation

On Tuesday, 11 March 2025, LivaNova PLC (NASDAQ: LIVN) presented at the Barclays 27th Annual Global Healthcare Conference, outlining a strategic plan focused on sustainable growth, innovation, and market expansion. The company highlighted its achievements in organic revenue growth and discussed ongoing challenges, such as the Sinead litigation. LivaNova aims to leverage its core business strengths while exploring new opportunities in high-growth markets.

Key Takeaways

• LivaNova achieved double-digit organic revenue growth in 2024, with plans for 6-7% top-line growth in 2025.
• The company is exploring commercialization strategies for its obstructive sleep apnea (OSA) technology, with FDA submission targeted in the first half of the year.
• LivaNova is increasing manufacturing capacity by 40% from 2023 to 2026 to support cardiopulmonary business growth.
• The Sinead litigation could impact financials, but a favorable outcome would allow the company to retire a $350 million term loan.
• LivaNova is focusing on innovation in epilepsy treatment and difficult-to-treat depression (DTD) markets.

Financial Results

• LivaNova reported double-digit organic revenue growth in 2024, with expectations for 6-7% growth in 2025.
• The cardiopulmonary segment showed potential for continued growth, driven by heart-lung machines and cardiopulmonary disposables.
• The company has allocated $300 million in restricted cash for the Sinead litigation guarantee and another $300 million plus for potential liability.
• A liability of $454 million could result in a $0.11 per quarter impact on the P&L.

Operational Updates

• For OSA, LivaNova plans a PMA submission to the FDA in the first half of the year, with 12-month data expected in May.
• The company is considering partnerships with sleep or ENT companies to commercialize its OSA technology.
• In epilepsy, LivaNova aims to improve innovation and expand indications, addressing a significant unmet clinical need.

Future Outlook

• LivaNova aims to grow its core business above market rates, with a focus on innovation and market expansion.
• The company is increasing manufacturing capacity by 40% from 2023 to 2026 to gain market share in the cardiopulmonary sector.
• LivaNova is pursuing internal innovations, such as a next-generation oxygenator and software upgrades for heart-lung machines.

Q&A Highlights

• Analysts inquired about LivaNova’s growth strategy, focusing on achieving sustainable mid-to-high single-digit growth.
• Questions were raised about capital reallocation in the event of a favorable Sinead litigation ruling.
• LivaNova’s plans for driving growth in cardiac surgery through innovation were also discussed.

Readers are encouraged to refer to the full transcript for a detailed understanding of LivaNova’s strategic plans and financial outlook.

Full transcript - Barclays 27th Annual Global Healthcare Conference:

Unidentified speaker, Analyst: And maybe how they’re different from, I don’t know, first half middle of last year? Yes.

Vlad, CEO, LivaNova: So thank you, first of all, and good afternoon, everybody. Thank you for your interest in LivaNova. And Matt, thank you for the opportunity to be here with you. So it’s been one year for me in the role. And I think 2024 was a year where we continue to build on our strength and made some meaningful changes to position us better into the future.

First of all, I’m really proud of the strength of LivaNova in execution. 2024 was the second year in a row where we grew top line double digits on organic basis. We expanded our margin and delivered very healthy cash flow. And I think that sets us well with the momentum into the future. From the people point of view, it’s been very rewarding to get into the organization that is inclusive, that is welcoming change.

And I think we’ve initiated a cultural transformation of LivaNova to get our culture to more be in growth and innovation focused. And one thing that I’m proud that we’ve done in 2024 is actually accelerated many talents that are legacy LivaNova talent. And at the same time, we brought some of the leading external talent, some leading professionals in med tech, especially in the area of innovation. And then third, which takes me to the innovation, and this is the one of the areas where we need to continuously improve. We have some mixed history on both external and internal innovation.

And we worked hard to upgrade our talent, our processes, our governance to make sure that moving forward our innovation agenda is designed and executed well. So I think those three topics position us well for 2025 and beyond. And when I think about our strategy and what will drive our future performance is really about threefold. One is continue to build sustainable performance in the core where we grow sales faster than the market and where we grow bottom line faster than top line and build core as a strong foundation for our future. The second one is our expansion into obstructive sleep apnea and difficult to treat depression, Very interesting spaces with high unmet clinical needs, but more importantly for the Venova’s performance potential is that they take us to the markets of faster growth.

And then three is beyond OSA and DTD, we are actively looking at the areas of high unmet clinical needs, high growth markets and where we want to win moving forward. So again, shifting our portfolio to faster growth markets. So those are the three elements of our future value creation and we continue to execute on those fronts.

Unidentified speaker, Analyst: Okay. So one of the things that maybe focusing on that first core sustainable in the core, What does that growth look like? I think you started maybe this time last year thinking mid single digits and as you say delivered double digits, started maybe thinking about cardiopulmonary as a business that sort of might have been benefiting from some competitive issues or stocking problems, other competitors exiting the market it turns out. And that now seems more sustainable in a high single digit or mid to high single digit range. So when you think of core, is that mid single with aspirations of mid to high or is that a solid mid single over time?

How do you think about it as part of the model?

Vlad, CEO, LivaNova: So let me comment on 25% and I think then we can talk beyond that. So we’ve guided 67% top line growth. I think that’s a prudent guide. We have line of sight to upside opportunity, especially in cardiopulmonary business. That would come potentially from two areas.

One is continued growth in heart lung machines. And then two is continued share gain in cardiopulmonary disposables. So that’s 2025. On the longer term view, our aspiration does not change. We want to be in our core business, grow above market.

What it would shape like and how the components come together, we would have a discussion during our Investor Day in quarter four. Okay. So better long term view sort of calibrating some of those things. Understood. All right.

Unidentified speaker, Analyst: And then on I know we want to make sure we leave a moment to get to the Sinead litigation since that’s kind of coming up here. But your point about litigation I mean, litigation innovation, can’t get it out of line. Is those the two programs that you talked about OSA and difficulty to depression, I think one of the questions we get often is the different avenues of commercializing OSA, assuming that the data continues to fall in place. Maybe talk a bit about that, about the timing, about the preference, likelihood of which partnership sale, I guess, are going to the loan, if I could describe that one.

Vlad, CEO, LivaNova: So you want me to focus on OSA or Yes, first and then we’ll get to DTC. Yes. So I’ll start and then maybe you can build on that and Brianna, please. So I think it all starts with a significant unmet need. So it’s fast growing patient population.

And as a result of that, the market is growing fast. That creates an opportunity for us. We were very pleased with our clinical results at six months. And what I can tell you that is, it was the only randomized clinical study that’s number one. The patient population that went into the study was very complex with high DMI, AHI and ODI.

And then as a result, what we saw is significant improvement in AHI and ODI. So we can see very fast onset of response to treatment. That’s number one. Number two, we are not going to indicate it from complete concentric collapse, which is twenty percent to twenty five percent of patient population, which gives access right away to this important patient population. And then number three, we also believe that the architecture of our technology with fixed electrodes is differentiated and gives us potential to continue to improve clinical outcomes.

So those are kind of the big benefits why we think this is a very valuable asset for patients and for Livanova. We are now in the so two important milestones that are going to come in quarter first half of the year. First is PMA submission to FDA. And second one in May, we will announce the twelve month data. So that will inform them in a way to we it will give our potential partners for commercialization and opportunity to reflect on twelve month data.

And some way in the middle of the year, we will make a decision whether we commercialize this asset ourselves or use a commercial partner that already has commercial capability in either sleep channel or ENT channel.

Unidentified speaker, Analyst: Right. Okay. So before we get to DTD, I think sometimes we think about these things, okay. So you have an OSA neuro stem kind of opportunity, you have a DTCD opportunity. They’re both interesting.

They’re both large. But I think there is an important distinction, which is that one is an established market. And so you talked about the high growth of the market. I mean, growth is great. Market growth is great, but just penetrating and growing into an existing market without the call it market development burden and other aspects that some of the early entry companies went through is just makes that a different opportunity than DTD.

So maybe with that in mind, if that’s a fair way to think about the two opportunities, what’s different about your approach to DTD than OSA?

Vlad, CEO, LivaNova: Well, you’re right from the point of view that DTD would be a market development effort. It’s interesting with some historic data from early 2000s where when this therapy first started to be discovered the penetration of the procedure was had a very fast onset. Look, what why DTD is very interesting is because there’s a significantly difficult patient population. That patient population with difficulty to treat depression is growing and becoming a significant burden on the society and then there’s no alternative treatment. So that’s number one.

Number two is we already have strong capability in this area with our research and development, our manufacturing, because there’s a lot of leverage with our current VNS device for epilepsy. And we have some strength in the commercial organization that was previously focused on executing the clinical study. So I see this as a kind of a low risk high impact opportunity for us if CMS grants reimbursement. Right.

Unidentified speaker, Analyst: Okay. So a way to not have to invest quite so much perhaps it’s a more focused call point, I would imagine. Absolutely. Don’t have any competition and it is a large unmet medical need, so there’s all that. But there’s just a slightly different.

I think if I could say the go it alone for OSA, even though I think every negotiation of any partnership or any sale would require that you have a go it alone alternative, right? So you’ve got to build that out. You’ve got to be prepared to pursue that publicly. But that final answer, I think most investors would prefer you find a suitable partner. Maybe talk about the way your partnership might work or the kinds of partners you might engage with or

Vlad, CEO, LivaNova: Yes. So we are exploring this today already. And like I said, I think the final stages of this will have to be happening after the twelve month data is out. But we are looking at potential partnership with sleep companies that give us access to the subscriber if you like or to somebody who can channel the patients or ENT companies which then give us access to the operator, let’s say, the implanter. Yes.

So those are two types of companies that we’re exploring. And like I said, we should have an answer by the middle

Unidentified speaker, Analyst: of the year. Anything about the current incumbent leader in that market that makes one of those more challenging in terms of just locking up the distribution or clinicians or folks having to choose between you and the No,

Vlad, CEO, LivaNova: I think the market leader has done a formidable job developing this market. And obviously, we will be coming in, obviously, capitalizing on some of the incredible work they’ve done. But again, we will deploy different strategy, much more targeted, much more focused on our clinical outcomes. And we would not need to reinvent the wheel in terms of direct to patient advertisement and this type of activity. So it would be much more focused effort to launch

Unidentified speaker, Analyst: our OSAID technology. And is that focused mean like is it I don’t want to read too much into this, but is it concentration on more challenging patients presenting that alternative to the clinical channel?

Vlad, CEO, LivaNova: So I wouldn’t go there yet, but I would say concentrated in the way that first of all, right away you have access to complete from center collapsed patients. Right. So that’s one of the challenges currently. Secondly, we would focus on large sleep centers, high volume centers versus going broadly. And I think that is the first step and those are the examples of kind of a very targeted approach.

Unidentified speaker, Analyst: Okay. So, I guess with about a little over eight minutes left, we’ve got to talk about the big elephant in the room, which is Sia. After talking about it for a number of years, we’re kind of closing in on a decision. So maybe it’s a serious issue. It’s a significant issue.

I think it’s one that maybe a couple of years ago investors were willing to think about later given all the things that were happening at the time, but now we have to think about it now. So maybe talk a little bit about how you’re framing it for investors. Obviously, you’re not going to predict what the verdict is, but you can talk about the impact and then kind of like where we can get into maybe some of the scenarios and how you manage the business in one scenario versus the other.

Alex, CFO, LivaNova: Sure. So let me just kind of frame the top line here, right? So February 26, there’s a hearing where both sides presented their kind of closing arguments. So basically the Supreme Court is now in deliberations around the liability question and the quantum. From a capital structure perspective, we’ve been dealing with this issue as you noted for a long time.

So we had a financing event. We have a term loan A that we took to the tune of $350,000,000 We have $300,000,000 of restricted cash on the balance sheet to deal with the guarantee that we were required to put up in order to proceed with the appeals process. And then we have another $300,000,000 plus on the balance sheet to deal with a potential liability. Remind you that this case goes back many, many years and originally when Soren was sort of at the center of this, they were found not liable for the damages. And so that’s been our contention all along that we are not responsible for the environmental damages.

And so we continue to proceed down that path. So like I said, I think there’s a variety of outcomes here.

Vlad, CEO, LivaNova: We’re still hoping

Alex, CFO, LivaNova: for the best case scenario, which is we’re not liable. And we get to deploy our capital in a more productive way. But when this issue came up back up in 2021, the lower courts ruled against us. They ruled against us to a tune of million roughly $500,000,000 and that’s the amount that we appealed. We obviously have enough capital to deal with that if that is the ultimate ruling against LivaNova.

So from a liquidity perspective where our balance sheet is in a good place. I kind of tried to frame this for investors in terms of what does this mean from our earnings power perspective. We’ve quantified this and if the bullion goes against us and it’s to a tune of $454,000,000 which was the lower court’s ruling in the first place, the impact to the P and L is roughly $0.11 per quarter. So that’s kind of the way I’m sort of boxing it in, if you will. Obviously for obvious reasons, we’re not guiding to the potential impact here.

And we’ll see what the outcome looks like in possibly sixty to ninety days. So we’re coming up sort of toward the end of the conclusion there.

Unidentified speaker, Analyst: Okay. So the additional interest expense kind of like the having to hold the debt that you raised to raise that cash and but losing the cash, having to pay that out, assuming kind of worst case it happens quickly. I think that’s a scenario everybody can kind of understand and look at. In the other scenario where it kind of goes more favorably. I guess, how does that change your because you’ll get this question on day one if that does go that way.

Like what do you do now? What would you do differently in the back half? Yes. We would retire

Alex, CFO, LivaNova: the term loan A. So that’s $350,000,000 savvy cash burn that goes along with that. So that would be extremely useful for the company.

Unidentified speaker, Analyst: So that would be our sort of first order of business. Great. Okay. So maybe a little more flexibility in P and L and cash flows to pursue some of the things that we’ve what Fran talked about. So maybe you talked about innovation in terms of the two programs.

What can you do, are you doing? You mentioned some of the upside opportunities around cardiopulmonary. And I think they have to do with the level of sort of capacity build out investment. What else can you do to drive a more sustainable mid to high single digit growth rather than one which I mean I’ve seen like consensus just a year ago that everyone thought well this is cardiac surgery. So it’s going to kind of just slow to something lower than what innovation opportunities do you have to stay in higher growth?

Vlad, CEO, LivaNova: Yes. I think on cardiopulmonary again the way I would look at it is in chapters. Chapter one is to continue execute with excellence with what we have and main growth is going to come from our ability to expand manufacturing capacity. From the end of twenty twenty three to the end of twenty twenty six, we’re looking at a 40% increase in the output. And we believe that that’s our opportunity to continue gaining share.

The second chapter is the second one in this chapter is continue to improve our placement of essence at a significant price premium. So that I think for the next two to three years gives us a very nice path for growth for the current portfolio. Chapter two is driving innovation in the core business and we are looking at a number of innovative technologies and they’re kind of mid development. One of them is next generation oxygenator that is clinically more differentiated versus anything on the market today. That’s an example of internal innovation.

We are looking at upgrade of other equipment outside of HLM, which will be another nice addition from the internal innovation and then software innovation on HLM. And then Chapter three is looking outside of our current portfolio in the areas that are going faster in terms of market growth, but also where we still have the right to win. And so we’re constantly monitoring those areas. Got it. So those are kind of the three chapters of long term growth

Unidentified speaker, Analyst: in this business. Okay. And the first chapter being kind of CapEx capacity driven?

Vlad, CEO, LivaNova: Yes. Execution internal innovation external innovation. There you go.

Unidentified speaker, Analyst: So and that kind of accounts for the step up in CapEx this year that you kind of start to leverage and benefit from I guess ’26 and ’27. It’s great. Well, we’re coming up on time here. Glad, if there’s anything that you’d like to kind of offer in terms of your thoughts going forward or things that we haven’t talked about?

Vlad, CEO, LivaNova: Brianna, anything you want to capture? No, I think you covered everything. Yes. I think the one thing that we haven’t maybe we haven’t touched on epilepsy as an opportunity to grow. And look epilepsy is also very interesting space, significant disease burden, a lot of unmet clinical need.

And if you look at the procedure penetration, there’s a million patients just in The U. S. With drug resistant epilepsy and it’s ten thousand procedures per year. So there’s a huge opportunity to improve the penetration. And I think the formula to do that is we talked about is driving better innovation, which we are again looking inside and outside.

It’s making sure that indication continues to expand that reimbursement in this area continues to improve and that we can execute our commercial organization with excellence. And so those are kind of the chapters of driving growth in epilepsy and we believe that there’s still significant opportunities to grow this business moving forward. Excellent.

Unidentified speaker, Analyst: Well, thanks so much, Vlad, Alex, Brianna for joining us.

Vlad, CEO, LivaNova: Matt, thank you.

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