Livanova Plc · NASDAQ:LIVN
Livanova — Investor Day (September 2017)
82 slides from Livanova's investor day presentation, Sep 14, 2017
Slide 1: LivaNova Investor Day: Strategy
NEUROMODULATION LivaNova Investor Day Heart Valves Strategy Damien McDonald Chief Executive Officer September 14, 2017 CARDIAC SURGERY
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements in this presentation, other than purely historical information, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 19
Slide 3: We are a $1.2B focused medical innovator
We are a $1.2B focused medical innovator Strong leadership Targeting underserved Improving quality of position in and high-growth patients’ lives Neuromodulation and market segments Cardiac Surgery 3
Slide 4: Leading positions in critical areas of treatment
Leading positions in critical areas of treatment 80% Sales 1H17 Vagus Nerve Stimulation Cardiopulmonary (CP) (VNS Therapy®) Heart-lung machines (HLM) Oxygenators Neuro- Autotransfusion systems (ATS) modulation Cannulae (NM) Cardiac 60% Surgery Low voltage 30% (CS) 50% Pacemakers Cardiac CRT-P Rhythm
Slide 5: Exploring strategic options for Cardiac Rhythm Management
Exploring strategic options for Cardiac Rhythm Management Sharpening our focus on areas of strength and market leadership Committed to ensuring portfolio is optimally positioned to deliver long-term value CRM is no longer a fit within LivaNova’s portfolio, but is a global business with attractive as
Slide 6: Committed to ensuring portfolio is optimally positioned to deliver long-term value
Committed to ensuring portfolio is optimally positioned to deliver long-term value Leading positions in Neuromodulation and Cardiac Surgery Innovative technology focusing on high-margin products LivaNova: An attractive Targeting high-growth and underserved markets long-term investment Executing disc
Slide 7: Focusing portfolio on "Head & Heart"
Focusing portfolio on “Head & Heart” CARDIAC SURGERY NEUROMODULATION CARDIOPULMONARY HEART VALVES Creator, leader of VNS Only sutureless valve on Market-leading positions Therapy the market Global Market $4.1B $2.0B $1.7B (2016)* Market Growth Low-double-digit Low-single-digit Low-single-digit Sales
Slide 8: Our portfolio has multiple near-term growth drivers
Our portfolio has multiple near-term growth drivers NEUROMODULATION CARDIAC SURGERY Perceval® optimizes the S5® HLM reduces Inspire® oxygenator surgical approach to AspireSR® advances the transfusions and provides personalized sutureless aortic science of VNS Therapy® improves recovery perfusion val
Slide 9: Multiple mid- to long-term growth drivers: strategic portfolio initiatives
Our portfolio has multiple mid- to long-term growth drivers: strategic portfolio initiatives TREATMENT-RESISTANT TRANSCATHETER MITRAL CHRONIC HEART FAILURE DEPRESSION VALVE REPLACEMENT Novel delivery of Autonomic VNS Therapy may provide Unique transseptal Regulation Therapy (ART) may better outcomes
Slide 10: M&A strategy targets growth and margin expansion
M&A strategy targets growth and margin expansion TMVR & HF: High- mainly growth single- potential HF digit TMVR Neuromodulation: Growth Mid- margin and growth NM potential single- digit Cardiac Surgery: Low- mainly margin CS single- expansion digit Profitability improvement Illustrative only and not
Slide 11: Clear roadmap for value creation
Clear roadmap for value creation 2017-2018 2019-2020 2021+ Invest & Grow Accelerate Growth Positioned for Success • Global leader in VNS Therapy • Operational excellence • Global leader in cardiopulmonary • Global expansion of VNS • Global leader in sutureless valves Therapy leadership • Increasing
Slide 12: Four pillars to transform the organization
Four pillars to transform the organization GROWTH PROFITABILITY TALENT CULTURE 12
Slide 13: Strategy to accelerate growth
Strategy to accelerate growth Expand Drive demand Build pipeline portfolio 13
Slide 14: Significant opportunities to improve profitability
Significant opportunities to improve profitability Build better Spend better Price better Lean manufacturing SAP Direct implementation procurement Footprint Indirect consolidation Profitability procurement SKU Sales force rationalization effectiveness Pricing consistency 14
Slide 15: Integrated Talent Strategy
Attracting new talent and developing existing talent Attract Retain Develop Integrated Talent Strategy Total Talent Talent Talent Rewards Acquisition Analytics Development 15
Slide 16: Creating a culture of continuous improvement
Creating a culture of continuous improvement Discipline Accountability Teamwork Our size allows us We are blending We have a global Our mission is to to make decisions discipline and and diverse improve patients’ and implement accountability with workforce lives change swiftly an innovative spirit 1
Slide 17: We are a compelling investment
We are a compelling investment Leadership positions in most of our served markets Innovative products with patient/physician benefits Significant barriers to entry Opportunities for geographical expansion Multiple drivers to accelerate growth Executing on initiatives for margin expansion 17
Slide 18: We are poised for success
We are poised for success • Large, globally expanding markets • Broad geographic presence Top and Growing • Growing positions in head and heart bottom line • Customer-centric innovation • Realizing capital and operational efficiencies • Four pillars transforming organization Transforming Organizatio
Slide 19: LivaNova
LivaNova | ivaNova Health innovation that matters 19
Slide 20: LivaNova Investor Day: Financial Outlook
NEUROMODULATION LivaNova Investor Day Heart Valves Financial Outlook Thad Huston Chief Financial Officer September 14, 2017 CARDIAC SURGERY
Slide 21: First-half 2017: measurable growth across the company
First-half 2017: measurable growth across the company Strong earnings performance based on Solid cadence of expanding margins, Executing on integration customer-centric new disciplined spending and of Caisson acquisition product innovation focused R&D Improved in-channel On track to meet $80M invent
Slide 22: Improving margins and delivering on our commitments
Improving margins and delivering on our 1H16 1H17 commitments +1.0% on $1.72 constant- currency basis 65.8% $608M $607M 64.8% $1.41 19.6% 17.5% Net sales Adjusted gross margin* Adjusted operating Adjusted EPS* margin* * Gross margin, operating margin and diluted EPS are adjusted non-GAAP measures 22
Slide 23: Building a strong future through top line growth
Building a strong future through top line growth 2017-2022 CAGR Mid- Mid- to High- single-digit high- single-digit single-digit M&A SPI* Neuromodulation High-single-digit Cardiac Surgery Low-single-digit 2017E 2022E SPI = Strategic Portfolio Initiatives, which include Transcatheter Mitral Valve Repl
Slide 24: Expanding our gross margins
Expanding our gross margins Gross margin* as a percentage of revenues 70%+ Mid 60% 2017E Price Lean Business SKU Inflation / FX 2022E Manufacturing Mix Rationalization * Gross margin is an adjusted non-GAAP measure 24
Slide 25: Executing on initiatives to drive profitability
Executing on initiatives to drive profitability Direct Central purchasing aligned by common strategy 1 across functions procurement Identify and replicate best practices, apply strict 2 Lean manufacturing performance management COGS Streamlining product portfolio and focusing on 3 SKU rationalizatio
Slide 26: Invest in R&D today to drive growth tomorrow
Invest in R&D today to drive growth tomorrow R&D* as a percentage of revenues 12-13% 11-12% • In 2016/2017, prior to 10-11% Caisson acquisition, R&D* expense was 9-11% of net sales • R&D profile will increase mid- term to support investment in portfolio expansion • Expanding margins enable longer-te
Slide 27: Expanding operating margins
Expanding operating margins Operating income* as percentage of revenues 20%+ Gross margin expansion High- teens SG&A reduction R&D investment 2017E 2022E * Operating Income is an adjusted non-GAAP measure 27
Slide 28: Projecting strong growth in earnings per share
Projecting strong growth in earnings per share 2017 - 2022 CAGR Low- to EPS* mid-teens * EPS is an adjusted non-GAAP measure 28
Slide 29: Focused capital allocation strategy
Focused capital allocation strategy PRIORITIES Organic growth Liquidity to support the strategy Investment Capital enhancements Capital structure that adapts to business needs Focused M&A on core competencies Operating CF Drive increased shareholder returns Share repurchase program Target leverage*
Slide 30: Delivering strong free cash flow growth
Delivering strong free cash flow* growth Net income is a key driver of growth Improving cash conversion ~$225M to $275M Working capital improvements contribute to FCF through 2022 Future growth will support M&A 2017E 2022E * Free cash flow is an adjusted non-GAAP measure 30
Slide 31: M&A strategy targets growth and margin expansion
M&A strategy targets growth and margin expansion TMVR & HF: High- mainly growth single- potential HF digit TMVR Neuromodulation: Growth Mid- margin and growth NM potential single- digit Cardiac Surgery: Low- mainly margin CS single- expansion digit Profitability improvement Illustrative only and not
Slide 32: Driving shareholder value creation
Driving shareholder value creation • Large, globally expanding markets REVENUE Mid- to high- • Broad geographic presence GROWTH single-digit CAGR • Accelerating growth through execution, innovation and M&A • Executing initiatives to improve profitability EPS Low- to mid- • R&D investments drive futu
Slide 33: LivaNova
LivaNova | ivaNova Health innovation that matters 33
Slide 34: Appendix
Appendix RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED) * Numbers may not add up precisely due to rounding 34
Slide 35: Appendix
Appendix RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED) * Numbers may not add up precisely due to rounding 35
Slide 36: LivaNova Investor Day: Neuromodulation
NEUROMODULATION LivaNova Investor Day Jason Richey General Manager, Neuromodulation & President, North America September 14, 2017
Slide 37: We are the market leader in Vagus Nerve Stimulation (VNS) Therapy
We are the market leader in Vagus Nerve Stimulation (VNS) Therapy® EPILEPSY DEPRESSION Significant growth opportunity Unmet global need CUSTOMERS DISEASE STATE MARKET Neurologists Drug-resistant epilepsy Large underpenetrated Epileptologists (DRE) markets with opportunity Psychiatrists Treatment-res
Slide 38: Neuromodulation is a large and growing market
Neuromodulation is a large and growing market Neuromodulation (NM) Market Technology Growing number Patient awareness 11.2% $6.2B advancements of indications and physician CAGR acceptance Epilepsy • Miniaturization • Epilepsy • Patients largely NM market • Battery longevity • Chronic pain influence
Slide 39: Epilepsy
EPILEPSY 39
Slide 40: ~35% of patients need treatment beyond medication
~35% of patients need treatment beyond medication Significant growth opportunity remains Epilepsy patients ~10M Drug resistant ~3M Referral Gap Evaluated at EMU ~300K / yr Surgery/Other ~7K / yr Treatment Gap Treated VNS ~8K / yr Source: Prevalence data and approximations based on CDC; EMU = Epileps
Slide 41: Growing through innovation and patient awareness
Growing through innovation and patient awareness MRI (U.S. and OUS) and Remove barriers pediatric labeling expansions (U.S.) Maintain new product cadence Innovation every 12-24 months International growth Strategic targeting of key markets opportunities Direct-to-consumer marketing Patient awareness
Slide 42: Unlocking potential via labeling expansions
Unlocking potential via labeling expansions FDA expanded VNS Therapy access to patients as young as age 4 (2017) OUS CE Mark approval with no age restrictions (1994) Pediatric Clinical data proves early adjunctive use yields better results Patients having seizures for <10 years respond better to VNS
Slide 43: Developing customer-centric innovation
Developing customer-centric innovation Providing ease of use, better patient care, cost effectiveness SenTivaTM innovations Future generations • Senses bradycardia and • Auto gain control – tachycardia minimal device positioning by physician • Monitors patient sleeping position • Microburst – new va
Slide 44: Targeting international markets
Targeting international markets More than 100K global patients treated ~15% • Focused team with 30% regional marketing OUS • Key markets: UK, Germany, Nordics, High-single to France, Japan low-double- digit growth with M&A • Increase sales force 70% U.S. • Enhance R&D teams ~85% 2017 2022 Source: Li
Slide 45: Clinical studies to further support adoption
Clinical studies to further support adoption Our customers rely on data PATIENT REGISTRY EARLY ADJUNCTIVE USE STUDY • Goes live in parallel with SenTiva launch • Prospective multi-center study • Tracks seizure activity and overall patient • Patients 4+ years quality of life • VNS as adjunctive thera
Slide 46: Universal platform: foundation for additional indications
Universal platform: foundation for additional indications Psychiatric Disorders VNS for Chronic VNS for Heart Failure Epilepsy Patient Data and analytics Movement Universal Rheumatoid clinician Disorders Platform Arthritis and diagnostic processing tools Genitourinary Obstructive Disorders Sleep Apn
Slide 47: Depression
DEPRESSION 47
Slide 48: Depression affects patients in the prime of their life and burdens families and society
Depression affects patients in the prime of their life and burdens families and society • 300M+ patients globally • Median age of onset: 25 years Depression • Fewer than half of patients receive treatment • Leading cause of disability and major burden • ~10-30% of patients with depression Treatment-
Slide 49: Exploring options for LivaNova's TRD treatment
Exploring options for LivaNova’s TRD treatment Received CE Mark in 2001 Received FDA approval in 2005 Currently have 4,000 devices implanted over ~18-month period Started pilot trial in Germany in 1Q17 Planning scaled launch in other European countries where we have approval and reimbursement Ongoin
Slide 50: Summary: a pioneer in Neuromodulation with robust growth opportunities
Summary: a pioneer in Neuromodulation with robust growth opportunities • Strong core growth driven by consistent product innovation • Label expansion increases patient pool Epilepsy • International expansion opportunities • Inorganic opportunities drive high-single- to low-double-digit growth trajec
Slide 51: LivaNova
LivaNova = ivaNova Health innovation that matters 51
Slide 52: LivaNova Investor Day: Cardiac Surgery
LivaNova Investor Day CARDIAC SURGERY Alistair Simpson General Manager, Cardiac Surgery September 14, 2017
Slide 53: We are a market leader in Cardiac Surgery
We are a market leader in Cardiac Surgery CARDIOPULMONARY HEART VALVES EPILEPSY TREATMENT-RESISTANT DEPRESSION Preferred HLM* by perfusionists, Differentiated in a large, growing fastest oxygenator adoption segment: the only sutureless valve CUSTOMERS DISEASE STATE MARKET Heart valve disease Perfusi
Slide 54: We have a strong core foundation with key growth drivers
We have a strong core foundation with key growth drivers Reduces transfusions and S5® HEART-LUNG MACHINE improves recovery Inspire® Personalized perfusion OXYGENATOR Data drives better outcomes CONNECTTM in clinical efficacy Optimizing the surgical Perceval® SUTURELESS VALVE valve replacement High p
Slide 55: Cardiopulmonary
LY x \ yi, Selig / ’ SN / CARDFOPULMONARY NOS IN f Z Ay / Hi LivaNova
Slide 56: Large market with opportunity to further surround the perfusionist
Large market with opportunity to further surround the perfusionist $2.3B market M&A opportunity Capital Capital 40% LivaNova share M&A Market is growing opportunity low-single digits Disposables M&A enables faster 28% LivaNova share than market / mid- single-digit growth Disposables Estimated total
Slide 57: Our HLM is the market leader
Our HLM is the market leader Reduces transfusions, better neurological protection 70% market share, available in 30 languages Proven safety over 40 years Robust, proven reliability, Near-term: commercial execution and S5 made in Germany enhancements Mid- to long-term: 100% customizable, flexible, ne
Slide 58: Inspire ignited the fastest adoption of oxygenators
Inspire ignited the fastest adoption of oxygenators Reduces transfusions, better neurological protection 30% market share, market leader Broad choice from complete family of products Fastest adoption ever, Near-term: commercial execution and closing in on 1 million patients leverage HLM footprint Mi
Slide 59: CONNECTing the cardiopulmonary workflow
CONNECTing the cardiopulmonary workflow Data is the driver for Goal Directed Perfusion HLM • One system connects data from all devices • Automatic integration S5® of perfusion data, patient parameters and product information • Allows user to tailor OXYGENATOR ATS perfusion to individual patient fact
Slide 60: Investing in the future of cardiopulmonary
Investing in the future of cardiopulmonary LIVANOVA CLINICAL NEEDS SOLUTION • MICS support • Near-term S5 • Data compatibility enhancements with hospital systems • Mid- to long-term • Improved patient next-generation S5 Capital management • Next-generation Connect • M&A capital opportunity • Patient
Slide 61: Heart Valves
Heart Valves LivaNova
Slide 62: Tissue valves will be a larger component of the valve portfolio
Tissue valves will be a larger component of the valve portfolio • Decline in line with market MECHANICAL • Target specific regions • Invest in sutureless fast- deployment valves • Perceval main growth driver TISSUE • Tissue valve growth will outgrow the decline in mechanical in 2018 2017 2022 Source
Slide 63: Perceval: the only sutureless fast-deployment valve in the market
Perceval: the only sutureless fast- deployment valve in the market 10+ years of clinical use/data 190+ publications Enabler for minimally invasive procedures Strong economic benefits Our goal is $80M by 2018 63
Slide 64: Recent studies continue to show clinical and economic benefits of Perceval
Recent studies continue to show clinical and economic benefits of Perceval Comprehensive systematic review of 9 years of studies, reports the following main findings for Perceval: • Simplify surgery by reducing ischemic time in all procedures • Facilitate MICS • Show lower mortality and PVL vs TAVR
Slide 65: Driving expansion and penetration of Perceval
Driving expansion and penetration of Perceval Near-term Medium-term • Focusing on $200M • Larger sizes to increase MICS segment addressable market • Sales force • Continued clinical and effectiveness economic evidence to support efficacy • Proctorship expansion • Geographic expansion: • Deeper penet
Slide 66: Summary: the market leader in cardiopulmonary and sutureless valves
Summary: the market leader in cardiopulmonary and sutureless valves • Strong core business, significant market share • Life cycle management and new product Cardiopulmonary innovation enhances base business • Inorganic opportunities drive above-market growth • Superior new technology sutureless valv
Slide 67: LivaNova
LivaNova = ivaNova Health innovation that matters 67
Slide 68: LivaNova Investor Day: Transcatheter Mitral Valve Replacement
TRANSCATHETER MITRAL VALVE REPLACEMENT (TMVR) LivaNova Investor Day Paul Buckman General Manager, TMVR September 14, 2017
Slide 69: We are in a leadership position in TMVR
We are in a leadership position in TMVR TMVR EPILEPSY TREATMENT-RESISTANT DEPRESSION Differentiated technology and leadership position in preferred approach CUSTOMERS DISEASE STATE MARKET Potential to become 2-3 Interventional times the size of cardiologists Mitral regurgitation Transcatheter Aortic
Slide 70: Mitral Regurgitation is a reliable predictor of health outcomes, including mortality
Mitral Regurgitation (MR) is a reliable predictor of health outcomes, including mortality SAVE sub study, n=727 16 days after Q-wave MI, n=303, 194 with IMR Cardiovascular survival Survival, % P = 0.0022 (-) MR n=141 (+) MR n=586 “Mild MR is an independent “The mortality risk is related predictor di
Slide 71: Surgical treatments are imperfect, creating opportunity for new interventional approaches
Surgical treatments are imperfect, creating opportunity for new interventional approaches Challenging surgery, Repair “Gold standard” 30%+ recurrence Established Surgical (open chest) Excellent mechanical Lifetime anticoagulation, Replace durability poor tissue durability Modest efficacy, 30%+ Repai
Slide 72: LivaNova TMVR Concept
LivaNova TMVR Concept • Delivery System – Completely transvenous percutaneous approach – 2-step implant – Fully reversible • Anchor – 4 sub-annular anchoring feet – SAM management feature – Nitinol self-expanding frame – Covered with polyester and ePTFE • Valve – Porcine pericardium – 3 leaflet circ
Slide 73: LivaNova TMVR Animation
LivaNova TMVR Animation LivaNova
Slide 74: TMVR is giving new hope to patients with little to no other options
TMVR is giving new hope to patients with little to no other options Typical patient Female (79%), ~79 years old, generally too sick for surgery Severe MR Grade 3-4 100% CAD 64% Heart disease Previous procedure 55% Heart failure NYHA III/IV 81% Pulmonary dysfunction COPD 46% Kidney Renal disease insu
Slide 75: TMVR advantages have recently created significant interest from leading players
TMVR advantages have recently created significant interest from leading players Caisson Interventional $120M Internal Fortis development Not disclosed CardiAQ Valve Technologies $400M Valtech $690M Tendyne $250M Cephea Valve Technologies Not disclosed Twelve Intrepid $458M Reportedly Option to buy M
Slide 76: Key investments to creating a TMVR market 2-3 times larger than TAVR
Key investments to creating a TMVR market that is 2-3 times larger than TAVR Current Future CLINICAL Too sick for EVIDENCE Lower risk populations surgery PRODUCT Ongoing improvements in delivery DEVELOPMENT systems and implant 76
Slide 77: We have the patience to build and are committed to investing in the market
We have the patience to build and are committed to investing in the market 2025-2030 Expansion into less Country expansion severe patient populations: Pivotal trial: FDA Additional training of positioning TMVR approval enables new implanters earlier in the care 2017 Continuing aggressive hiring, dri
Slide 78: Executing on a clinical data development plan
Executing on a clinical data development plan designed to enable commercialization Patients Centers Objective Status FIH study proving Continuing 20 8-10 TMVR concept enrollment Confirmatory study 75 15 to secure CE Mark Started to enroll in Europe U.S. IDE study to build on FIH and Finalizing proto
Slide 79: A proven approach to ensuring physician competence and confidence
A proven approach to ensuring physician competence and confidence • Therapy awareness tools to drive local education Patient and awareness selection • Joint screening activities with clinical sites • Virtual implant fit to ensure proper sizing • On-site instruction at hospital • Full day didactic an
Slide 80: Competitive advantage in TMVR and opportunity to lead the transseptal market
Competitive advantage in TMVR and opportunity to lead the transseptal market LivaNova Caisson Edwards CardiAQ TRANSSEPTAL Abbott Cephea Edwards Valtech Edwards CardiAQ Abbott Tendyne Medtronic Twelve MValve TRANSAPICAL Neovasc HighLife Sinomed Direct Flow 80
Slide 81: Summary: positioning for leadership in TMVR
Summary: positioning for leadership in TMVR • Transseptal delivery Technology • Distinct competitive advantages • Investment in clinical trials Clinical evidence • Post-market studies for reimbursement and/or expanded indications • Collaboration and responsiveness • World-class training Physician fo
Slide 82: LivaNova
LivaNova = ivaNova Health innovation that matters 82