LivaNova PLC (LIVN, $83.50):
“LivaNova by your strengths”
By: Andrew
Duwa, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for it,
and I have no business relationship with any company whose stock is mentioned
in this article.
Summary
- LivaNova
PLC. (NASDAQ: LIVN) is a global medical company that designs and
provides therapeutic products for patients, healthcare professionals, and
systems primarily in the United States, Western Europe, and Asian Pacific.
- LIVN continues to dominate aortic valve market, new competitors entering suture-less market
- Announced early retirement of $450 million senior secured term loan, executes $125 million revolving credit facility
- Experiencing a recovering demand for products on Covid-19 tailwinds, some risk of resurgence with new variants and hospital bed shortages
- Begin clinical trials of OSPREY to treat obstructive sleep apnea
Key
points: LivaNova continues to dominate the
aortic valve market, which provides replacement valves for patients requiring
open heart surgery. Even with new competition entering the market only 9
companies currently produce these valves, and only 3 offer suture-less valves.
LivaNova no longer has as strong of market domination in this area but continues
to control it none-the-less.
On
August 16th, 2021LivaNova announced the retirement of a 5-year
senior secured term loan, paying out $35.6 Million in accrued interest. This
was funded by an offering of shares on August 6th, 2021, to reduce
interest expenses by $39 million through Q2 of 2022. This move is expected to
increase EPS by $0.20 and improve their financial standing.
Throughout
2020 and early 2021, a lag in demand for healthcare products occurred due to a
variety of reasons. According to the United States Surgical Procedure Volume Database,
major surgical procedures have increased substantially in 2021. These rates
will stabilize through FY 2025 to a growth of 10%. This return in demand
translated to a 41% increase in revenues in Q2 2020.
In Q2
of 2021, LivaNova received investigational device exemption FDA approval to
begin confirmatory clinical trial of OSPREY, an implantable device to treat
obstructive sleep apnea, with the first patient expected to be in Q4 of 2021.
This type of sleep apnea is a common yet extremely dangerous condition that
affects around 100 million globally, with approximately 25% receiving
treatment. The most common treatment is continuous positive airway pressure,
but only 46% of patients can comply with this treatment.
What
has the stock done lately?
LIVN has grown 8.11% within the
past month, peaking at around $90 per share. The continued growth from delayed
procedures as well as capital restructure have aided LivaNova, and they are
expected to turn a profit in the second half of 2021, which will only propel
the company further.
Past
Year Performance: LIVN has increased 83.68% in value over the past
year, which has been a monster gain in a great year for healthcare companies. This
growth will continue through 2021 as their dominant products and improved
financial standing will aide this continued rise.
1 Year Stock Chart vs. Russel 2000
My
Takeaway
The
market domination that LivaNova has built, the introduction of new products,
major sales increase due to a lag in demand in FY 2020 from Covid-19 and
improved financial situation set LIVN up for continued growth even with their
impressive 2021 already. Because of these reasons I recommend LivaNova as a
buy.
1 Month Stock Chart from FactSet here
