LivaNova PLC

Good day ladies and gentlemen and welcome to the Levernova PLC third quarter 2021 earnings conference call. My name is Lydia and I'm your operator today. As a reminder this conference call is being recorded. I would now like to introduce your host for today's conference Mr Matthew Dodds, Levernova's Senior Vice President of Corporate Development. Please go ahead sir.

Thank you, Lydia, and welcome to our conference call and webcast discussing Leiva Novus financial results for the third quarter of 2021. Joining me on today's call are Damian McDonald, our Chief Executive Officer, Alex Schwartzberg, our Chief Financial Officer, and Lindsay Little, our Senior Director of Investor Relations. Before we begin, I would like to remind you that discussions during this call will include forward-looking statements. Factors that can cause actual results to differ materially are discussed in the company's most recent filings and documents furnished to the SEC, including today's press release that is available on our website. We do not undertake to update any forward-looking statement. Also, the discussions will include certain non-GAAP financial measures with respect to our performance, including but not limited to sales results, which will all be stated on a constant currency basis. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release, which is available on our website. We have also posted a presentation to our website that summarizes the points of today's call. This presentation is complimentary to the other call materials and should be used as an enhanced communication tool. You can find the presentation and press release in the investor section of our website under news events and presentations at investor.livanova.com. With that, I will now turn the call over to Damian. Thank you, Matt.

And thank you, everyone, for joining our third quarter 2021 earnings call. I'll start off by discussing our third quarter sales results, then review our strategic portfolio initiatives. After my comments, Alex will provide you with additional details on our results and increased guidance. Then I'll wrap up with closing comments before moving on to Q&A. We're encouraged by the third quarter results where, excluding heart valves, we experienced sequential sales growth, operating margin expansion, and adjusted free cash flow generation, while navigating a more challenging environment impacted by COVID-19 related headwinds. Due to the impact of the pandemic on our prior year results, today's commentary will also include certain comparisons to 2019. We believe this will provide helpful context for the underlying trajectory of our business. Additionally, there are comparisons that are reflected on slide 12 of our earnings presentation. Turning to our core growth drivers, epilepsy and ACS. Epilepsy sales increased 15% globally versus the third quarter of 2020, with double digit growth across all three regions. Additionally, epilepsy sales for the quarter were in line with 2019 levels. These results reflect improved global market dynamics resulting from increased hospital access and patient willingness to return to clinics versus the prior year period. US epilepsy sales increased 11% versus the third quarter of 2020 and were in line with the third quarter of 2019 levels. Total implants grew in the high single digits versus the prior year but remained below 2019 levels. Similar to prior quarter trends, total implant growth was driven by replacements, which continue to benefit from a catch-up in procedures deferred in 2020. Additionally, while sales were down 3% sequentially primarily due to the Delta variant surge, we saw an improvement in leading indicators for patient volumes during October. Our progress in US epilepsy continues to be supported by our go-to-market initiative, which currently encompasses 12 dedicated teams. These teams now account for approximately 19% of US sales and implants, up from 17% in Q2 on a same account basis. They continue to deliver sales and implant growth that is trending above the baseline business compared to the third quarters of 2020 and 2019. Epilepsy sales in Europe grew 16% versus prior year, led by the UK and Italy. We achieved growth of 47% in the rest of world region, led by strong recovery in China, Taiwan, and Saudi Arabia. Europe and the rest of world in aggregate were in line with the third quarter 2019 results. We continue to expect global epilepsy sales to grow 25 to 30% for the full year. Our forecast includes sequential growth in new implants in the US as patients and their caregivers return to in-person physician visits. In addition, We anticipate a continued tailwind in replacement implants related to our backlog created in 2020 that has continued into this year. ACS sales were $15 million in the quarter, an increase of 23% from the third quarter of 2020, and sequential growth of 16%. Growth was driven by the continued adoption of LifeSpark and an increase in procedure volumes, particularly in respiratory distress. Given our performance in the first nine months of the year, We now anticipate ACS to grow over 30% in 2021. Turning now to DTD, sales in the third quarter were $2 million and for the first nine months of 2021 were $6 million. For the full year, we now anticipate DTD sales of approximately $10 million from a combination of the recover study and replacement implants for CMS eligible patients. While we remain encouraged by the progress of patients consenting into the RECOVER study, impacts related to the COVID Delta variant created some delay in implants during the quarter. Due to these delays, it is now more likely that we will achieve 250 unipolar patients implanted in early Q1 of 2022. In addition, since we are currently skewing unipolar, we anticipate achievement of this milestone will occur ahead of the bipolar cohort As a reminder, we can submit the data from the unipolar and bipolar cohorts separately for transition to the post-longitudinal study or the registry. We still anticipate a transition to registry to occur in late 2022 or early 2023. In heart failure, the Anthem HFREF pivotal trial continues to advance after reaching a key milestone of 300 patients enrolled in April. Once these patients are followed for nine months and the 400th patient is enrolled, independent statisticians will review the data set. If all five criteria have been met, including safety, a trend towards primary endpoint, and success in the three functional endpoints, we may submit the functional data to the FDA. If we do not meet all the criteria, independent statisticians will take another look at the data after the 500th patient is enrolled. We continue to expect the independent statisticians to start analyzing the data in the first half of 2022. Moving to OSA, our Osprey trial has commenced and we are activating all 20 selected sites with several already screening patients. We remain on track to implant our first patient this quarter and still assume submission for FDA approval in mid 2024. For the cardiopulmonary business, sales were $123 million in the quarter an increase of 15% versus the third quarter of 2020. Oxygenated sales increased in the high teens globally, with growth across all three regions, driven by improvement in cardiac surgery volumes. Heart-lung machine sales increased over 25% with growth across all three regions, with particular strength in the US. Additionally, cardiopulmonary sales for the quarter were 2% above 2019 levels. HeartValves was divested on June 1 of this year, and HeartValves sales for the third quarter of 2020 were $21 million. And with that, I'll turn it over to Alex.