Analyst Note| Debbie S. Wang |
In the fourth quarter, narrow-moat LivaNova saw a continuation of the stabilization and improvement seen in the third quarter. For the full year, revenue growth and R&D expense came in slightly higher than expected, but this was offset by better-than-expected gross margin and S&GA expense, and we’re leaving our fair value estimate unchanged. As seen in earlier quarters, the greatest area of strength came from advanced circulatory support (up 53% versus the prior-year period) where treatment of COVID-19 patients has accelerated adoption of extracorporeal membrane oxygenation. Nonetheless, this wasn’t enough to steady the ship at LivaNova, as this product line only accounts for roughly 5% of consolidated revenue. The rest of the firm’s product segments remained hampered by declines in the quarter, with the most dramatic decreases in heart valves and cardiovascular, though the 6% fall in quarterly revenue was still considerably improved from the 34% dip seen in the second quarter.