LivaNova PLC

Good day, ladies and gentlemen, and welcome to the Liveanova PLC third quarter 2022 earnings conference call. My name is Charlie and I'll be the coordinator for today's call. You will have the opportunity to ask a question at the end of the presentation. If you'd like to register a question, please press star followed by one on your telephone keypad. As a reminder, this conference call is being recorded. I'd now like to introduce your host for today's conference, Mr. Matthew Dodds, Liveanova's Senior Vice President of Corporate Development. Please go ahead, sir.

Thank you, Charlie, and welcome to our conference call and webcast discussing Levanova's financial results for the third quarter of 2022. Joining me on today's call are Jamie McDonald, our Chief Executive Officer, Alex Schwarzberg, our Chief Financial Officer, and Brianna Gotland, 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 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 to everyone for joining us. Welcome to our conference call for the third quarter of 2022. I'll start by discussing our third quarter results and reviewing our strategic portfolio initiatives. After my comments, Alex will provide additional details on our results. I will wrap up with closing comments before moving on to Q&A. In the quarter, we achieved 5% revenue growth, reflecting solid execution in neuromodulation and cardiopulmonary. Advanced circulatory support remains unfavorably impacted by a significant decline in severe COVID cases and hospital-related challenges. More broadly, as a company, we continue to navigate macro headwinds, including supply chain inflation and foreign exchange volatility. Now, turning to segment results. For the cardiopulmonary segment, revenue was $121 million, an increase of 7% versus the third quarter of 2021. Oxygenator revenue grew in the high single digits, driven by continued procedure volume recovery. Heart-lung machine revenue increased in the mid single digits, led by growth in the rest of world region. We now expect cardiopulmonary revenue to grow 8% to 10% for the full year. This range considers the strong performance in the first nine months of the year and continued demand for the S5 HLM, particularly in the rest of world region. Epilepsy revenue increased 11% versus the third quarter of 2021 with growth across all three regions. This performance was primarily driven by replacement implants as well as improving market dynamics and focused commercial strategies. US epilepsy revenue increased 9% year-over-year, with total implants up mid-single digits, with price contributing the balance. Similar to prior quarter trends, total implant growth was driven by replacements which continued to benefit from a catch-up in procedures deferred due to COVID-related challenges. Additionally, both new patient and replacement implants improved sequentially. US epilepsy results continue to be supported by our go-to-market initiative, which currently encompasses 14 dedicated CEC teams. These teams accounted for 22% of US implants in the quarter as compared to 20% on a same account basis during the prior year. This key commercial strategy continues to deliver implant growth above the baseline business. Epilepsy revenue in Europe grew 6% versus prior year, primarily led by the Nordic region as acute pandemic impact softened. The rest of world region achieved 28% growth, led by Brazil. For the full year, we now expect global epilepsy revenue to grow 6% to 8%. Our forecast includes sequential growth in new patient implants in the fourth quarter, as we expect healthcare-related challenges to modestly improve. In addition, we anticipate a continued tailwind in replacement implants related to the backlog created during the pandemic. We're pleased with the progress of the go-to-market initiative and plan to add two additional dedicated teams in the fourth quarter. ACS revenue was $9 million in the quarter, representing a decrease of 44% from the third quarter of 2021. Results were impacted by a continued reduction in severe COVID cases, hospital-related challenges, and product mix. Our field data suggests ACS case volumes related to COVID declined more than 90% year-over-year as fewer hospitalised patients progressed to a severity that required ECMO therapy. Notably, ACS non-COVID case volumes increased more than 20% year-over-year. Results in the quarter were modestly impacted by our field action relating to the LifeSpark controller. Before turning to the ACS outlook, I wanted to provide a brief update on the field action and related Class 1 recall. In July, we notified customers regarding modifications we made to the operations manual for the LifeSpark controller. This addressed situations during which certain users were incorrectly stopping the pump in response to a screen error message. At the end of September, the FDA classified this as a Class 1 recall. Importantly, The FDA is not requiring that we remove the product from the field and the device is considered safe for use when used in accordance with the operations manual. Patient safety is our top priority and before year-end, we expect to release a software upgrade to address the screen error message. Now turning to our revised outlook for the ACS business. For the full year 2022, we now expect ACS revenue to be down approximately 30%. Our forecast has been updated to reflect the disappointing third quarter results and the impact of the FDA recall. Turning now to our strategic portfolio initiatives, DTD revenue for the third quarter was $2.1 million. And for 2022, we now anticipate DTD revenue of approximately $8 million. The RECOVER study continues to advance. 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 enrolling. 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 for the unipolar cohort to date have confirmed the study's continuation, with the next interim look at 400 patients expected by the end of this month. We still anticipate a transition to the prospective longitudinal study for the unipolar cohort in late 2022 or early 2023. In heart failure, the Anthem HEF-REF US Pivotal Trial continues to advance. The Independent Statistical Analysis Committee will conduct the next interim analysis after the 500th patient is enrolled, which we anticipate will occur in the fourth quarter, with a readout early in the first quarter of 2023. If all pre-specified conditions are met, including safety, a trend towards the primary composite endpoint, and success in the three functional endpoints, we would expect to submit the functional data to the FDA. Moving to OSA, the OSPRO trial continues to progress. All 20 study sites are active and recruiting patients. We still assume submission for FDA approval to occur in the latter half of 23 with a decision anticipated in 2024. Finally, I wanted to provide a brief update on the SNEA litigation. As planned, the Supreme Court hearing took place on October 5th regarding the appeals of liability and damages. We anticipate a decision in the first half of 2023. And with that, I'll turn the call over to Alex. Thanks, Damien.