LivaNova Reportedly in Early Talks with Medtronic for Potential Acquisition; Boston Scientific, Edwards, J&J Also Eyeing the Neuromodulation and Cardiovascular Player

Recently, according to foreign media reports, a report by the investment consulting firm Reorg Research stated that Medtronic Is in Early-Stage Talks to Acquire LivaNova , this news was well received by LivaNova shareholders.

The report shows that,Medtronic to Spin Off LivaNova Post-Acquisition, Retaining Its Neuromodulation Business and Divesting Its Cardiovascular Business 。

However, the report also points out thatBoston Scientific, Edwards Lifesciences, and Johnson & JohnsonMay also be eyeing LivaNova.

Mike Matson, an analyst at Needham & Co., conducted a comprehensive analysis of LivaNova’s cardiovascular and neuromodulation businesses, respectively. His analysis indicates thatLivaNova’s cardiovascular business is valued at $1.4 billion, its neuromodulation business at $2.5 billion, for a total value of $3.9 billion. 。

In a report released last Friday, Matson stated: “This transaction makes sense as it will strengthen Medtronic’s neuromodulation business, but LivaNova is undervalued, particularly given its pipeline.”However, we believe it is far too early to make a definitive determination. 。”

Medtronic offers spinal cord stimulation (SCS) and deep brain stimulation (DBS).

(deep brain stimulation) and sacral neuromodulation products, but no vagal nerve stimulation (VNS) products.

And according to Matson’s data,LivaNova is the market leader in VNS, with a 9% market share in the neuromodulation sector., which enables LivaNova’s VNS to serve as a strong complement to Medtronic’s neuromodulation business.

Matson’s analysis is based on the following assumptions: Medtronic to Acquire LivaNova for $4.4 Billion ($85 per Share) and Divest LivaNova’s Cardiovascular Business for $1.4 Billion He estimated that the transaction would add less than 1% to Medtronic’s 2021 earnings per share.

“But as time goes on, if any one of LivaNova’s three key pipeline projects succeeds, the deal could prove to be more value-accretive, as we believe each of these three projects can generate $500 million or more in sales,” said Matson.

Just last week, LivaNova established a research partnership with Verily Life Sciences, a subsidiary of Google, to evaluate the efficacy of VNS therapy in treating depression. 。

Company Profile of LivaNova

LivaNova was established in 2015 through the merger of Sorin, a company focused on the cardiovascular field, and Cyberonics, a company specialized in the neuromodulation sector. Headquartered in London, its business operations span more than 100 countries worldwide.

At its inception, LivaNova’s core business spanned three major areas: cardiac surgery (50.4%), neuromodulation (28.9%), and rhythm management (20.5%).

In November 2017, in order to focus on its core business, LivaNovaSold its cardiac rhythm management business to MicroPort Medical for $190 million in cash.therapy. Since then, LivaNova has primarily focused on its two core businesses—cardiovascular and neuromodulation—with a strategic emphasis on transcatheter mitral valve replacement (TMVR).

November 2019,LivaNova Announces Termination of TMVR Program, as revenue from the valve business continued to decline, the Caisson valve factory in Minnesota was shut down, and the valve R&D teams in Europe and North America were restructured, affecting 150 employees.

LivaNova’s two existing major business lines are:

• Cardiovascular Field: LivaNova is a global leader in the field of heart-lung machines, recognized as the world’s largest cardiopulmonary bypass company, and one of the top three global manufacturers of ECMO devices used during the COVID-19 pandemic.

  Furthermore, LivaNova also offers Perceval®, the only truly sutureless aortic valve replacement product.

• Neuromodulation Field: As a pioneer in Vagus Nerve Stimulation (VNS) therapy systems, LivaNova continues to provide advanced medical device solutions for patients with drug-resistant epilepsy and treatment-resistant depression. The system is also under investigation to validate its capability to deliver autonomic regulation therapy for heart failure.

  Furthermore, LivaNova also treats obstructive sleep apnea (OSA) through hypoglossal nerve stimulation (HGNS).

▲ Revenue Contribution of Two Major Business Segments in Fiscal Year 2019

LivaNova’s portfolio comprises multiple Strategic Portfolio Initiatives (SPIs), which serve as drivers of medium- to long-term growth, including:

• Treatment-Resistant Depression (TRD)VNS Therapy 。

• For Heart Failure VITARIA® : Using the VNS Therapy System, LivaNova’s new approach to Autonomic Regulation Therapy may improve the regulation of cardiovascular function.

• For OSATHN Sleep Therapy:LivaNova’s THN sleep therapy treats OSA by delivering mild stimulation to multiple tongue muscles, thereby keeping the airway open during sleep.

FY2019 Overview

In 2019, LivaNova’s global sales amounted to US$1.1 billion, representing a 0.1% increase over the full year 2018 on a constant currency basis.

▲2019 Global Sales and Business Overview

(As of December 31, 2019)

(Unit: million USD) (Click the image to view a larger version)

Cardiovascular Field

2019, LivaNova Sales in the cardiovascular sector amounted to $656.6 million , a decrease of 0.7% compared to the full year 2018.Among them Cardiopulmonary product sales amounted to $504.7 million, a 3.1% decrease compared to the full year 2018. This was due to the impact of terminating a Canadian distribution agreement in other regions worldwide, which had generated $32.9 million in revenue in the prior year, as well as issues related to the supply of components associated with the Inspire oxygenator.

including tissue and mechanical heart valvesHeart valve sales amounted to $120 million., a 0.7% decrease compared to the full year 2018.

ACS (Advanced Circulatory Support) sales amounted to USD 31.9 million yuan, representing a 64.1% increase compared to 2018, primarily driven by the growth of ProtekDuo; since the acquisition of TandemLife in April 2018, sales in 2019 increased by one-quarter compared to 2018.

Neuromodulation Field

For the full year 2019, LivaNova Sales in the field of neuromodulation amounted to$424.5 million, representing a 1.2% increase compared to the full year 2018. In Europe and other regions worldwide, sales experienced strong growth, driven by the SenTiva® VNS Therapy® system.

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