STIFEL 2026 HEALTHCARE CONFERENCE - LIVANOVA PLC

Explicit Guidance:

• Cardiopulmonary (Oxygenators): Anticipated double-digit output capacity expansion in 2027; long-term strategy targets an additional 800 basis points (bps) of market share gain over the strategic plan horizon (reaching approx. 48% total share from current 40%).
• Cardiopulmonary (Heart-Lung Machines - HLMs): Plans to finish the current year with 80% penetration of "Essence" units; target is to reach ~100% penetration by 2027, after which the price/mix uplift from Essence adoption will plateau.
• Epilepsy (Reimbursement): CMS confirmed reimbursement rate increases for new patient implants (NPI) will remain stable at the improved rate through 2027; replacement implants (RPI) reimbursement rates increased by 11%.
• OSA (Commercial): Target of $400 million in revenue by 2030; commercial launch scheduled for 2027 with scale expected to materialize in 2028.
• Long-Term Growth Rates: Epilepsy business framework calls for mid-to-high single-digit growth in new patient implants and low single-digit growth in replacement implants.

Business-Segment Outlook:

• Oxygenators: Market growth has accelerated from low single-digit to mid-single-digit procedural growth; competitive landscape shifted with one competitor exiting; strategy focuses on commercial excellence, supply chain expansion via Thermo Fisher partnership, and innovation.
• Oxygenator Innovation: Launching a new clinically differentiated oxygenator in 2028 featuring efficient gas transfer, lower pressure drop, and better platelet preservation; aims to drive share gains in both current and competitive accounts.
• HLMs: ~10,000 units in the market with a 10-year normal capital cycle (S5 units approaching 20 years); significant upgrade cycle opportunity remains for non-Essence units; secondary opportunity exists to upgrade heater cooler and air manager components on existing Essence units.
• Epilepsy (New Product): Launching a new digitally-enabled Implantable Pulse Generator (IPG) next year (2027); first new IPG launch in 8 years; features include remote programming to optimize therapeutic dose faster.
• Epilepsy (Sales Mix): Current sales split is 20% private pay and 80% public pay (40% Medicare, 40% Medicaid); 12 states follow Medicare fee-for-service rates, with progress made in other states to match these elevated rates.
• OSA (Market Entry): Entering a market where ~30% of patients have "complete concentric collapse," a condition not contraindicated by Levenova's technology; claims 85% responder rate in the total addressable pool based on new polysync data.
• OSA (Regulatory): New Category 1 CPT code for the technology effective January 1, 2028 (subject to finalization); payment rates expected to be determined in July 2026 via the RUC process.

Market and Competitive Outlook:

• Oxygenators: Industry is characterized by high volume, low value, and high capital intensity; scale is a key competitive advantage; Levenova expects to continue gaining share due to capacity constraints and innovation.
• Epilepsy: New IPG addresses a significant barrier to care (travel burden for programming); competitors currently lack comparable remote programming capabilities in the same ecosystem.
• OSA: Levenova leverages its existing neuromodulation backbone (Epilepsy) for market access and shared go-to-market capabilities (digital cloud platform, coding advocacy), differentiating from pure-play sleep companies.
• Depression: Potential market expansion for treatment-resistant depression remains an optionality pending CMS feedback on 36-month data; no formal submission date confirmed yet.

Macro / Industry Outlook:

• Reimbursement Environment: Management views recent reimbursement improvements (approx. 50% increase for NPIs) as a sustainable tailwind; no significant divergence expected between Medicare and Medicaid rates in key states.
• Coding Stability: The introduction of the new Category 1 code in 2028 is expected to remove headwinds related to coding ambiguity and create a single standardized environment for growth.
• Innovation Value: Clinical community indicates strong demand for innovation in oxygenators (historically viewed as commoditized), shifting the dynamic toward clinically differentiated products.

Strategic Initiatives:

• Capacity Expansion: New oxygenator manufacturing line is operational; additional capacity enabled by long-term partnership with Thermo Fisher for critical components, removing supply constraints.
• Digital Health Platform: FDA-approved digital cloud platform will be applied across portfolios starting next year with the Epilepsy IPG; technology will be leveraged for OSA remote programming and shared engineering teams.
• M&A and Partnerships: Capital allocation priority remains investment in core businesses (Cardiopulmonary and Epilepsy) and organic growth (OSA); M&A is viewed as optionality rather than a requirement for hitting targets; partnership with Thermo Fisher cited as a model for external collaboration.
• Supply Chain Optimization: Leveraging scale and existing capabilities (LEDs, batteries, canes) across epilepsy, OSA, and potential future indications (e.g., depression) to achieve efficiencies.

Risks and Headwinds to Outlook:

• OSM Reimbursement Uncertainty: Materialization of OSA growth depends on the finalization of the Category 1 code and the determination of physician payment rates in July 2026.
• Depression Regulatory Path: Future growth in depression therapy hinges on receiving positive feedback from CMS regarding 36-month data and subsequent formal submission approval.
• Product Lifecycle: The "price mix" tailwind from HLM upgrades will diminish after 2027 as penetration nears 100%; future growth must rely on unit growth or component upgrades.
• Competitive Exit/Entry: While one competitor exited the oxygenator market, the remaining competitive landscape and potential new entrants remain a factor for share gains.

Management Tone on the Future:

• Confidence Level: High confidence in the sustainability of growth, driven by "quality of growth" (balanced geographically and across business units) and multiple tailwinds (reimbursement, innovation, supply).
• Strategic Philosophy: Adopts a "not satisfied" stance, prioritizing talent, innovation, and execution over complacency; describes guidance as "annoyingly conservative" relative to performance.
• M&A Stance: Disciplined approach; no immediate need for inorganic growth to meet targets, but open to "tuck-in" deals if they offer strategic fit and financial returns.
• Innovation Sentiment: Strong belief that innovation (e.g., digital IPG, new oxygenator) is the primary driver for the next phase of growth, moving beyond pure capacity expansion.