LivaNova Plc Q2 FY2025 earnings call

• In epilepsy, long-term results from the CORE-VNS study showed clinically meaningful and durable seizure reduction in children and adults with drug-resistant epilepsy.
• Initiated process with CMS to seek national Medicare coverage for VNS therapy in unipolar patients with treatment-resistant depression.
• Advancing OSA program with proximal hypoglossal nerve stimulation (p-HGNS) technology, PMA submission progressing with FDA.
• Upgrading critical PCBA in cardiopulmonary to enable advanced software updates.
• Raising overall organic growth outlook by 200 basis points to between 9% and 10% due to strong quarter and execution.

Cardiopulmonary: Revenue was $199 million in the quarter, an increase of 13% versus Q2 2024. Heart-lung machine revenue grew in the low double digits, Essenz placements increased y-o-y and sequentially, and oxygenators revenue grew in the low double digits. Full-year cardiopulmonary revenue growth revised to 12%-13% from 9%-10% previously. Epilepsy: Revenue increased 6% versus Q2 2024, with growth across all regions. Europe and Rest of World combined 9% growth, US epilepsy revenue up 5% y-o-y. Full-year epilepsy revenue growth revised to 4.5%-5.5% from 4%-5% previously.

• Revenue growth: 8%-9% constant currency, 9%-10% organic.
• Adjusted diluted earnings per share: $3.70-$3.80.
• Adjusted free cash flow: $140M-$160M.
• Adjusted effective tax rate: ~23%, an increase of 200 basis points.

• Tariffs and supply chain issues, but LivaNova has a mitigation plan in place to manage impact, estimating a tariff net impact of less than $5 million on adjusted operating income for the full year.

Q: Talk about the positive data from the CORE-VNS study and its implications for epilepsy growth and patient access.

A: Ahmet Tezel mentioned the large CORE-VNS study showed durable seizure reduction, which will be used for publications, regulatory agencies, and to broaden the label. Stephanie Bolton noted KOLs are encouraging and expect it to strengthen the epilepsy franchise.

Q: Discuss the impact of the CMS proposal to move end-of-service procedures to Level 5 for Medicare and its effect on providers and patients.

A: Stephanie Bolton said the proposal could mean a 48% increase in reimbursement for EOS procedures, benefiting hospital economics and potentially increasing provider interest in new patients. She mentioned patients often have multiple replacements over their lifetime, making the change meaningful for sustainable VNS therapy.

Q: Talk about the market strategy for the OSA p-HGNS program.

A: Vladimir Makatsaria stated LivaNova is confident in commercializing the OSA program internally, with the p-HGNS technology offering a differentiated modality to treat various OSA patients. The modular PMA submission is progressing with the FDA, and the company looks to leverage existing expertise in neuromodulation, manufacturing, and R&D.