LivaNova PLC

Good day ladies and gentlemen and welcome to the Levenover plc second quarter of 2023 earnings conference call my name is Emily and I'll be coordinating your call today after the presentation you will have the opportunity to ask a question by pressing start followed by the number one on your telephone keypads as a reminder this conference call is being recorded I would now like to introduce your host for today's conference Mr Matthew Dodds Levenover's Senior Vice President of Corporate Development and IT please go ahead sir

Thank you, Emily, and welcome to our conference call and webcast discussing Leva Nova's financial results for the second quarter of 2023. Joining me on today's call are Bill Cozy, our Chair of the Board of Directors and Interim Chief Executive Officer, Alex Schwarzberg, our Chief Financial Officer, Stephanie Bolton, President of Global Epilepsy, 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.Levanova.com. With that, I will now turn the call over to Bill.

Thank you, Matt, and thank you everyone for joining us. Welcome to Levanova's conference call for the second quarter of 2023. Before discussing results for the quarter, I'd like to recount some firsthand observations introduce Stephanie Bolton and provide a brief update on the CEO search. Since taking on the role of interim CEO in April, I've been firmly focused on our patience, performance, and execution. I've engaged with many of our global customers and colleagues. That ongoing customer focus, commitment to quarterly results, and shaping our 2024 strategic plan will remain as top priorities. In May, we named Stephanie Bolton as Levanova's President of Global Epilepsy. The assignment of global responsibility for this key business aligns well with our commitments to leveraging an integrated worldwide business strategy with a continued focus on local execution. Steph has a 12-year record of achievement at Levanova. She started as a territory manager before taking on leadership roles in epilepsy and cardiopulmonary. Most recently, Steph served as president of International, where she led both businesses to commercial success. We're excited to have Steph's commitment to company performance and passion for helping epilepsy patients. Steph, we look forward to your participation in the Q&A. Now allow me to provide a brief update on the CEO search. The board and I are currently in the process of reviewing our first slate of potential candidates. Our process of slate review interview selection, and board assessment remains on track. We're committed to selecting the right individual to lead our team. For the remainder of the call, I will discuss our second quarter results and then turn to our strategic portfolio initiatives. After my comments, Alex will provide additional details on our results and updates to 2023 guidance. I'll wrap up with closing remarks before moving on to Q&A. In the quarter, we achieved 16% revenue growth, marked by strength in the cardiopulmonary and neuromodulation businesses across all regions. We were encouraged by the continued strong performance in the rest of world and Europe regions and were particularly pleased with the U.S. commercial execution, which drove strong double-digit revenue growth and helped improve profitability in the quarter. Now turning to segment results. For the cardiopulmonary segment, revenue was $151 million in the quarter, an increase of 21% versus the second quarter of 2022. Oxygenator revenue grew in the mid-teens, led by the U.S., driven by higher demand and steady supply chain execution. Heart-lung machine revenue increased more than 30%, primarily driven by S5 placements in the rest of world region and initial Essence installations in Europe and the U.S. The commercial rollout of Essence is progressing, and we're encouraged by early customer feedback. Following the clearance of our blood gas monitoring software integration later in the year, we still anticipate increased contribution. We now expect cardiopulmonary revenue to grow 11% to 13% for the full year 2023. Our revised forecast incorporates the strong first half performance in oxygenators and HLMs. As previously stated, we continue to expect a ramp in essence revenue through the second half of the year, with much of that coming after our next wave of software launches. Alex will comment on some underlying factors that impacted the second quarter results in cardiopulmonary. Epilepsy revenue increased 14% versus the second quarter of 2022, with strength across all three regions, including growth in both new and replacement implants on a year-over-year and sequential basis. U.S. epilepsy revenue increased 15% year over year, driven by higher total implants, realized price, and favorable product mix. Notably, we achieved 838 new patient implants in the quarter, representing 13% growth versus the prior year, and achieved 1,947 replacements, representing 8% growth versus the prior year. Epilepsy revenue in Europe grew 10% versus prior year, led by the Nordics and the UK. The rest of world region achieved 15% growth, led by Turkey and China. For the full year 2023, we now expect global epilepsy revenue to grow 6% to 8%. Our revised forecast incorporates the strong first half performance in replacement implants. Alex will comment on some underlying factors that impacted the strong second quarter result in epilepsy. ACS revenue was $9 million in the quarter, an increase of about 1% versus the second quarter of 2022, reflecting growth in cardiac case volumes and partially offset by respiratory case declines and product mix. We now expect ACS to be flat year over year. Turning now to the strategic portfolio initiatives. DTD revenue for the second quarter was $1 million. For 2023, we now anticipate DTD revenue of approximately $6 to $8 million, primarily from the RECOVER study. The RECOVER study continues to advance. Enrollment for the unipolar cohort of the study has been completed and we await the results of the 12-month follow-up. As a reminder, we randomized the 500th unipolar patient into the trial in March and subsequently completed all implants in May. Upon receipt of the 12-month follow-up data for the 500 unipolar patients in June of 2024, We will conduct a final analysis and expect a publication of the study results by late 2024. The bipolar cohort is similar to the unipolar cohort in that the randomized controlled study is designed with frequent interim analyses that will assess if predictive probability of success or futility was reached or if the study should continue enrolling. In June, the interim analysis for the 150th patient in the bipolar cohort was completed. This milestone was achieved faster than previously communicated, and we were pleased with the success we had in refocusing our recruitment efforts from unipolar to bipolar patients. Moving to OSA, the Osprey trial continues to progress, and as of earlier this month, all 25 study sites are actively recruiting patients. And heart failure, the closeout of the Anthem clinical study is progressing as expected. We fully defined most of the accelerated costs in 2023, the majority of which occurred in the first half of the year. We continue to expect the overall R&D spend related to heart failure this year to be approximately $24 million. With that, I will turn the call over to Alex.