LIVN

Leadership Updates

• Long-time cardiopulmonary business leader Franco Poletti retired after 40 years with the company; Stefano Folli (formerly of Philips) joined as the new cardiopulmonary president, with a smooth transition already completed.
• Anne Liddy (formerly of Hologic) will join as the new chief legal officer later this month.

Cardiopulmonary Operational Strategy

• Secured a long-term supply agreement with Thermo Fisher Scientific for a critical oxygenator component, eliminating the primary long-term manufacturing bottleneck that limited market share growth. This agreement complements internal capacity expansion plans, with benefits building over the medium to long term.
• A new internal oxygenator manufacturing line is on track to launch in H2 2026. The company has grown oxygenator market share from ~30% to ~40% over the past two years, with further gains expected from increased output and innovation.
• The next-generation clinically differentiated oxygenator remains on track for 2028 launch; dedicated separate manufacturing capacity is under construction, with no tradeoff in existing production space.
• Essence HLM is expected to represent ~80% of 2026 annual HLM unit placements, up from 55% in 2025, reaching 100% placement penetration in 2027. Full upgrade of the installed base will take multiple years.

Epilepsy Business Progress

• The U.S. CMS issued a preliminary recommendation to maintain Vagus Nerve Stimulation (VNS) therapy new patient implants in the new tech ambulatory payment classification (APC), and proposed an additional end-of-service APC reimbursement increase for 2027. If implemented, this will expand patient access and support long-term growth.
• Growing real-world clinical evidence for VNS is accelerating referrals, increasing clinician confidence, and driving earlier adoption of VNS in the epilepsy treatment pathway. The new patient funnel is currently at its strongest level in company history.
• Limited market release of the cloud-based clinician portal for VNS is progressing well with positive early user feedback; full U.S. launch is upcoming, with limited 2026 financial impact. This platform will support remote titration for the next-generation implantable pulse generator (IPG), expected to launch in 2027, and can be leveraged across all business units to accelerate digital health innovation.

Pipeline Updates

• Obstructive Sleep Apnea (OSA): New clinical data shows the Polysync algorithm increases cumulative AHI response rate to ~85% for moderate-severe OSA patients treated with PHGNS technology, reducing non-responders to ~1 in 7 patients compared to ~1 in 3 for current standard of care. This expands the addressable patient population and strengthens competitive positioning. The PMA supplement submission for the next-generation MRI-compatible system is now expected between H2 2026 and H1 2027 (slightly delayed from prior H2 2026 target, for final design verification) but the 2030 $200-$400 million revenue target remains unchanged.
• Treatment-Resistant Depression: 36-month data from the RECOVER trial for VNS therapy has been submitted to a preprint server (expected to be published this month), demonstrating sustained long-term improvements in depressive symptoms, function, and quality of life for active treatment patients, with similar outcomes for control arm patients after they initiated active treatment. The company remains in active engagement with CMS regarding coverage, and CMS will formally review the data only after peer-reviewed publication.

• Full year 2026 total company constant currency revenue growth guidance raised to 8%-9%, up from the prior 7%-8% range. Foreign exchange is expected to add a ~1% tailwind to reported revenue based on current rates.
• Cardiopulmonary segment full year 2026 revenue growth guidance raised to 9.5%-10.5%, up from the prior 8.5%-9.5% range, with continued market share gains in consumables expected as manufacturing expansion executes.
• Epilepsy segment full year 2026 revenue growth guidance raised to 7%-8%, up from the prior 6%-7% range.
• Adjusted diluted earnings per share guidance raised to $4.30-$4.40, representing ~11.5% growth at the midpoint.
• Full year 2026 capital spending guidance increased to $135 million, up from $120 million previously, to support cardiopulmonary capacity expansion, next-generation oxygenator manufacturing scale-up, and IT infrastructure investments.
• Adjusted free cash flow guidance lowered to $140-$160 million, down from the prior $160-$180 million range, due to higher capital expenditures and investment associated with the Thermo Fisher agreement, partially offset by the one-time IEPA tariff refund benefit.
• Full year adjusted operating income margin is maintained at 20%-21%, and the adjusted effective tax rate remains forecast at ~23%. All updated guidance aligns with the company's 2025-2028 growth framework outlined at Investor Day.

Total company Q2 2026 revenue was $391 million, representing 9.8% constant currency year-over-year growth.

• Cardiopulmonary segment: Q2 2026 revenue was $222 million, 10% year-over-year growth, contributing 56.8% of total quarterly revenue. Heart-lung machine (HLM) revenue grew mid-teens year-over-year, driven by higher Essence placements and sustained favorable price premiums. Cardiopulmonary consumables (excluding HLM) grew high single digits, with low double-digit growth in oxygenators and perfusion tubing kits partially offset by slower growth in autotransfusion systems and cannula. Improved component availability and internal manufacturing optimization supported higher oxygenator output.
• Epilepsy segment: Q2 2026 revenue grew 10% year-over-year, contributing approximately 43.2% of total quarterly revenue. Combined Europe and Rest of World revenue grew 15% year-over-year, while U.S. revenue grew 8% year-over-year. Growth was driven by favorable realized pricing (from reduced volume discounting and annual list price increases) and higher volume, supported by strong clinical evidence, improved reimbursement, and commercial execution.

• Manufacturing output constraints for oxygenators, primarily driven by critical component shortages, have limited market share growth to date, though the new Thermo Fisher agreement and internal capacity expansion are expected to resolve this over the medium to long term.
• The 3-6 month delay in the OSA PMA supplement submission reflects the need for additional design verification work, though management notes this does not relate to efficacy or safety and does not impact long-term targets.
• CMS coverage for VNS therapy for treatment-resistant depression remains pending formal review of the 36-month RECOVER trial data, which cannot be completed until the data is peer-reviewed and published, creating uncertainty around near-term reimbursement and market access for this indication.
• While the new oxygenator manufacturing line and component supply agreement are on track, unforeseen execution delays could limit near-term output and market share gains. Slower-than-expected HLM upgrade penetration could also impact near-term cardiopulmonary growth.

Q: How long was the Thermo Fisher oxygenator component partnership in development, and how does it change LevaNova's cardiopulmonary growth outlook? / A: The company has built oxygenator market share from 30% to 40% over the past two years via internal process improvements, and already had a new internal manufacturing line coming online in H2 2026. The Thermo Fisher agreement, which was negotiated over an extended period, eliminates the remaining critical long-term component supply bottleneck for output. Management has increased confidence in continued market share gains, and the agreement also ensures reliable supply for this life-saving procedure from a public health perspective.\n\nQ: What is driving the higher realized ASP in epilepsy from reduced volume discounting, and will this pricing strength continue? / A: Epilepsy momentum is driven by two core tailwinds: strong clinical evidence that accelerates referrals, and a nearly 50% 2026 Medicare reimbursement increase for VNS procedures. In Q2 2026, realized price growth was roughly double the normal annual price increase, driven by reduced discounting tied to improved reimbursement. Contract renegotiations driving this improvement continued through the first half of 2026, will persist for the rest of the year, and residual renegotiations will carry into 2027, creating ongoing pricing tailwinds. Volume is also growing from new account activation and higher implant volumes in existing accounts.\n\nQ: Why was the OSA PMA supplement submission delayed, and does this change the long-term opportunity or 2030 revenue target? / A: The delay to H2 2026-H1 2027 (from prior H2 2026 guidance) is only to complete final design verification and validation work, and is unrelated to device efficacy or safety. The company maintains high quality standards for product development, so the timeline adjustment is to uphold those standards. Management's conviction in the OSA opportunity has actually increased following the strong Polysync clinical data, which significantly reduces non-response rates and expands the addressable market. The 2030 OSA revenue target of $200-$400 million remains unchanged.\n\nQ: What is the launch plan for the next-generation oxygenator, including pricing and portfolio strategy? / A: The current plan is to sell both the current and next-generation oxygenator as a portfolio after the 2028 launch. Pricing strategy for the new product is still being finalized, and management has not yet decided whether to eventually phase out the older generation, waiting to see market reaction before making that decision. Preclinical data confirms the next-generation oxygenator has significantly better performance than existing products on the market, supporting a successful launch.