Record Q2 Fuels LivaNova's Raise, But OSA Timing Slips
Oxygenator supply deal and epilepsy pricing power drive the beat, while the sleep apnea launch timeline is pushed out.
LIVN · Earnings Call · 2026-08-05
A Quarter of Contradictions
LivaNova delivered a record second quarter, with revenue up 9.8% constant currency to $391 million and adjusted EPS of $1.26, a 20% year-over-year increase. The company raised full-year revenue guidance to 8–9% and EPS to $4.30–$4.40, citing strength across Cardiopulmonary and Epilepsy. Yet beneath that headline strength, the company disclosed a delay in its obstructive sleep apnea (OSA) program—a key long-term growth driver. The juxtaposition of near-term momentum and a phasing shift in the pipeline reveals a company executing well on its core while making calculated bets on future optionality.Cardiopulmonary: Securing the Supply Chain
The Cardiopulmonary segment grew 10% year-over-year, led by mid-teens growth in heart-lung machine revenue and high-single-digit consumables growth, with oxygenators and perfusion tubing kits leading the way. Management estimates its oxygenator market share has climbed from roughly 30% to 40% in a few years, but supply constraints have been the primary limiter. The new long-term agreement with Thermo Fisher Scientific is designed to eliminate that bottleneck. As CEO Vladimir Makatsaria put it, “this agreement basically ensures that mid- to long term, we will have reliable supply of the critical component and kind of completely remove the bottleneck from manufacturing output.” — Vladimir Makatsaria, Chief Executive Officer and member of the Board of Directors · 2026-08-05 This is a company-specific move to secure a critical component and underpin oxygenator share gains. The company also cited a clinical data advantage for its next-generation oxygenator, further differentiating its portfolio.Epilepsy: Pricing Power and a Strengthening Funnel
Epilepsy revenue rose 10% in the quarter, with U.S. up 8% and international up 15%. Management attributed the acceleration to two forces: reduced volume discounting (realized price nearly double the historical 1–2% annual increase) and the CORE-VNS real-world evidence driving referrals. CFO Alex Shvartsburg had noted on the prior call “we've seen traction in new and expanded and reopened accounts to date” — Alex Shvartsburg, Chief Financial Officer · 2026-05-06, and the current call confirms the patient funnel is at its strongest ever. The patient funnel expansion, alongside supportive CMS reimbursement changes, is a durable tailwind. The company raised its epilepsy growth outlook to 7–8% for the full year. The stronger pricing also contributed a one-time “$6 million net tariff benefit” — Alex Shvartsburg, Chief Financial Officer · 2026-08-05 that boosted gross margin by 150 basis points, though management flagged it as non-recurring.OSA Timing Slip
The less positive news came from the OSA program. The company now expects to submit the PMA supplement for its next-generation system between 2H26 and 1H27, a shift from the prior expectation of 2H26.Management emphasized the delay is related to design verification, not efficacy or safety, and reiterated the 2030 revenue target of $200–400 million. Still, the slip adds uncertainty to a program that investors had hoped would begin contributing sooner. The company also pointed to a new critical component agreement as a separate but complementary initiative to support oxygenator supply.We are in the final stages of product development. And now we expect the PMA supplement submission to be between the second half of '26 and the first half of 2027 versus our prior expectation of second half of this year.