LivaNova PLC

Good day, ladies and gentlemen, and welcome to the Lever Nova PLC first quarter 2022 earnings conference call. If you would like to ask a question following today's presentation, please press star followed by one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Matthew Dodds, Lever Nova's senior vice president of corporate development. Please go ahead, sir.

Thank you, Melissa, and welcome to our conference call and webcast discussing Levanova's financial results for the first quarter of 2022. Joining me on today's call are Jamie McDonald, our Chief Executive Officer, Alex Fartsberg, our Chief Financial Officer, and Lindsay Little, our Senior Director of Investor Relations. Before we begin, I would like to remind you that the discussions during this call will include forward-looking statements. Factors that could 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 complementary to the other call materials and should be used as an enhanced communication tool. You can find the presentation and press release in the Investors 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 to everyone for joining us. Welcome to our conference call for the first quarter of 2022. I'll start off by discussing sales results, then review our strategic portfolio initiatives, and conclude by describing a recently completed tuck-in acquisition. After my comments, Alex will provide you with additional details on our results and outlook. Then I'll wrap up with closing comments before moving on to Q&A. In the quarter, we achieved 9% sales growth, excluding heart valves. This was driven by above-market growth in cardiopulmonary and neuromodulation sales, which accelerated after experiencing COVID-related pressures early in the quarter. Advanced circulatory support sales were unfavorably impacted by hospital staffing shortages and a decline in respiratory cases, including COVID cases. Below the top line, we expanded gross profit, which was partially offset by investments in our strategic portfolio initiatives, preparations for the phase launch of our next generation heart-lung machine, Essence, and expanded commercial efforts in ACS and epilepsy. Now, turning to the segment results. For the cardiac pulmonary segment, sales were $117 million in the quarter, an increase of 12% versus the first quarter of 2021. Oxygenator sales grew over 20% globally, driven by procedure volume recovery across all regions, particularly in Europe and rest of world. Heart-lung machine sales increased in the high single digits due to growth in rest of world. We now expect cardiopulmonary sales to grow 1% to 3% for the full year 2022. This increased range takes into account the first quarter performance, the read-through of year-over-year comparisons, and the sales transition to the Essence HLM. Global epilepsy sales increased 8% versus the first quarter of 2021, with growth across all regions. This increase is attributable to procedure volumes that improved each month during the quarter. US epilepsy sales increased 6% versus first quarter 2021, with total implant growth in low single digits. Similar to recent quarterly trends, total implant growth was driven by replacements, which physicians continue to prioritize over new patient implants. The progress in US epilepsy continues to be supported by a go-to-market initiative, which currently encompasses 14 dedicated CEC teams, two of which were formed during the first quarter. These teams accounted for 21% of US sales in implants in the quarter, as compared to 18% on the same account basis during the prior year. They continue to deliver sales and implant growth that trended above the baseline business compared to the first quarter of 2021. Epilepsy sales in Europe grew 14% versus prior year, primarily led by the UK. We also achieved 14% growth in rest of world led by APAC. For full year 2022, we continue to expect global epilepsy sales to grow 5% to 7%. Our forecast includes growth in new patient implants as patients and their caregivers return to in-person physician visits and hospital capacity improves. In addition, we anticipate a continued tailwind in replacement implants related to the backlog created during the pandemic that has continued into this year. We're pleased with the progress of the go-to-market initiative and plan to add two additional dedicated teams in the US during the remainder of 2022. ACS sales were $12 million in the quarter, representing a decrease of 10% from the first quarter of 2021. Results were impacted primarily by hospital staffing shortages and less severe COVID cases. Respiratory cases, including COVID cases, declined approximately 30% year over year, as fewer hospitalized patients required ECMO therapy. Non-respiratory cases were flat year over year, as account acquisitions were offset by the impact of hospital staffing shortages. Given these headwinds, we now expect ACS growth to be in the low single digits for 2022. As a reminder, for comparative results, heart valves were divested on June 1 of last year. Heart valve sales for the first quarter of 2021 were $21 million. Turning now to our strategic portfolio initiatives, DTD sales for the first quarter were $1.4 million. For 2022, we anticipate DTD sales of approximately $10 million. Turning to the RECOVER study, during the first quarter, we achieved a key milestone of implanting our 250th unipolar patient. The randomized controlled study is designed with frequent interim analyses that will assess if predictive probability of success has been reached or if the study should continue. As stated previously, we believe a series of interim analyses is likely needed as we collect patient follow-up data over time. Our interim analyses confirm continuation of the study. We still anticipate a transition to registry to occur for the unipolar cohort in late 2022 or early 2023. In heart failure, the ANSYM HEPREP pivotal trial continues to advance. During the quarter, independent statisticians conducted the first interim analysis reviewing safety, a trend towards the primary endpoint, and success in the three functional endpoints. The review indicated that one or more of the conditions were not yet achieved and recommended continuation of the study according to the protocol. The next interim analysis will occur after the 500th patient is enrolled, which we anticipate in the fourth quarter. If the results are favorable, we may submit the functional data to the FDA. Moving to OSA, our Osprey trial continues to enroll patients with the first patient implanted in February. We now have activated approximately 15 of the 20 study sites. The Osprey trial is a randomized controlled trial to evaluate the efficacy of hyperglossal nerve stimulation for patients with moderate to severe OSA. We still assume submission for FDA approval to occur in the latter half of 2023 with a decision anticipated in 2024. Now, turning to the acquisition of Alung. On May 2nd, we acquired Alung Technologies Inc. The purchase price included $10 million paid at closing and contingent considerations payable on achievement of sales-based milestones. Alung was a privately held developer and manufacturer of an innovative lung assist device for treating respiratory failure called the Hemolung Respiratory Assist System, or RAS. This system is an alternative, or a supplement to, invasive mechanical ventilation. The Hemolung RAS is the only FDA-cleared platform designed specifically for low-flow extracorporeal carbon dioxide removal for acute respiratory failure. ALung provides a complementary technology to our ACS portfolio in the respiratory market. The business, which will be integrated into our ACS segment, and we expect to initiate commercialization of Hema Lung later this year, with nominal sales expected during 2022. The impact of the acquisition is expected to be neutral to adjusted diluted earnings per share. And with that, I'll turn it over to Alex.