Good day, ladies and gentlemen and welcome to the LivaNova PLC Third Quarter 2021 Earnings Conference Call. My name is Lydia and I'm your operator today. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Matthew Dodds. LivaNova's Senior Vice President of Corporate Development.

Please go ahead, sir..

Thank you, Lydia. And welcome to our conference call and webcast discussing LivaNova's financial results for the third quarter of 2021. Joining me on today's call are Damien McDonald, our Chief Executive Officer; Alex Shvartsburg, our Chief Financial Officer; and Lindsey Little, our Senior Director of Investor Relations.

Before we begin, I would like to remind you that the discussions during this call will include forward-looking statements. Factors that can cause actual results to differ materially are discussed in the company's most recent filings and documents furnished to the SEC, including today's press release that is available on our website.

We do not undertake to update any forward-looking statement. Also the discussions will include certain non-GAAP financial measures with respect to our performance, including but not limited to sales results which will all be stated on a constant currency basis.

Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release which is available on our website. We have also posted a presentation to our website that summarizes the points of today's call.

This presentation is complementary to the other call materials and should be used as an enhanced communication tool. You can find the presentation and press release in the Investors Section of our website under News, Events & Presentations at LivaNova -- at investor.livanova.com. With that, I will now turn the call over to Damien..

Thank you, Matt. And thank you everyone for joining our third quarter 2021 earnings call. I'll start off by discussing our third quarter sales results, then review our strategic portfolio initiatives. After my comments, Alex will provide you with additional details on our results and increased guidance.

Then I'll wrap up with closing comments before moving on to Q&A. We are encouraged by the third quarter results where, excluding Heart Valves, we experienced sequential sales growth, operating margin expansion and adjusted free cash flow generation, while navigating a more challenging environment impacted by COVID-19-related headwinds.

Due to the impact of the pandemic on our prior year results, today's commentary will also include certain comparisons to 2019. We believe this will provide helpful context for the underlying trajectory of our business. Additionally, there are comparisons that are reflected on Slide 12 of our earnings presentation.

Turning to our core growth drivers, Epilepsy and ACS. Epilepsy sales increased 15% globally versus the third quarter of 2020 with double-digit growth across all three regions. Additionally, Epilepsy sales for the quarter were in line with 2019 levels.

These results reflect improved global market dynamics, resulting from increased hospital access and patient willingness to return to clinics versus the prior year period. U.S. Epilepsy sales increased 11% versus the third quarter of 2020 and we are in line with the third quarter of 2019 levels.

Total implants grew in the high-single-digits versus the prior year but remained below 2019 levels. Similar to prior quarter trends, total implant growth was driven by replacements which continue to benefit from a catch-up in procedures deferred in 2020.

Additionally, while sales were down 3% sequentially primarily due to the Delta variant surge, we saw an improvement in leading indicators for patient volumes during October. Our progress in U.S. Epilepsy continues to be supported by our go-to-market initiative which currently encompasses 12 dedicated teams.

These teams now account for approximately 19% of U.S. sales and implants, up from 17% in Q2 on a same account basis. They continue to deliver sales and implant growth that is trending above the baseline business compared to the third quarters of 2020 and 2019. Epilepsy sales in Europe grew 16% versus prior year led by the U.K. and Italy.

We achieved growth of 47% in the rest of world region led by strong recovery in China, Taiwan and Saudi Arabia. Europe and the rest of world, in aggregate, were in line with the third quarter 2019 results. We continue to expect global Epilepsy sales to grow 25% to 30% for the full year.

Our forecast includes sequential growth in new implants in the U.S. as patients and their caregivers return to in-person physician visits. In addition, we anticipate a continued tailwind in replacement implants related to our backlog created in 2020 but that has continued into this year.

ACS sales were $15 million in the quarter, an increase of 23% from the third quarter of 2020 and sequential growth of 16%. Growth was driven by the continued adoption of LifeSPARC and an increase in procedure volumes, particularly in respiratory distress.

Given our performance in the first nine months of the year, we now anticipate ACS to grow over 30% in 2021. Turning now to DTD. Sales in the third quarter were $2 million and for the first nine months of 2021 was $6 million.

For the full year, we now anticipate DTD sales of approximately $10 million from the combination of the RECOVER study and replacement implants for CMS-eligible patients.

While we remain encouraged by the progress of patients consenting into the RECOVER study, impacts related to the COVID Delta variant continued -- created some delay in implants during the quarter. Due to these delays, it is now more likely that we will achieve 250 unipolar patients implanted in early Q1 of 2022.

In addition, since we are currently skewing unipolar, we anticipate achievement of this milestone will occur ahead of the bipolar cohort. As a reminder, we can submit the data from the unipolar and bipolar cohorts separately for transition to the post-longitudinal study or the registry.

We still anticipate a transition to registry to occur in late 2022 or early 2023. In Heart Failure, the ANTHEM HFrEF pivotal trial continues to advance after reaching a key milestone of 300 patients enrolled in April. Once these patients are followed for nine months and the 400th patient is enrolled, independent statisticians will review the data set.

If all five criteria have been met, including safety, a trend toward primary endpoint and success in the three functional endpoints, we may submit the functional data to the FDA. If we do not meet all the criteria, independent statisticians will take another look at the data after the 500th patient is enrolled.

We continue to expect the independent statisticians to start analyzing the data in the first half of 2022. Moving to OSA; our OSPREY trial has commenced and we are activating all 20 selected sites with several already screening patients.

We remain on track to implant our first patient this quarter and still assume submission for FDA approval in mid-2024. For the Cardiopulmonary business, sales were $123 million in the quarter, an increase of 15% versus the third quarter of 2020.

Oxygenator sales increased in the high-teens globally with growth across all three regions, driven by improvement in cardiac surgery volumes. Heart-lung machines sales increased over 25% with growth across all three regions, with particular strength in the U.S. Additionally, Cardiopulmonary sales for the quarter were 2% above 2019 levels.

Lastly, Heart Valves was divested on June 1 of this year and Heart Valves sales for the third quarter of 2020 was $21 million. And with that, I'll turn it over to Alex..

Thank you, Damien. During my portion of the call, I'll share a brief recap of our third quarter results and provide an update to our 2021 guidance. Sales in the quarter were $253 million, an increase of 15% versus the third quarter of 2020, excluding Heart Valves. Sales increased by 5% in comparison to 2019.

Cardiovascular sales were $139 million, an increase of 15% compared to the third quarter of 2020 and 9% compared to the third quarter of 2019. Neuromodulation sales were $113 million, an increase of 15% compared to the third quarter of 2020 and were flat in comparison to the third quarter of 2019.

Adjusted gross margin as a percent of net sales in the quarter was 71%, up from 67% in the third quarter of 2020 and up from 70% in the third quarter of 2019. The increase in the margins for both comparative periods were primarily driven by product and geographic mix.

Adjusted R&D expense in the third quarter was $37 million compared to $36 million in the third quarter of 2020. R&D as a percent of net sales was 14.8% which was in line with prior year. Adjusted SG&A expense for the third quarter was $93 million compared to $92 million in the third quarter of 2020.

SG&A as a percent of net sales was 36.6% down from 38.2% in the third quarter of 2020. Adjusted operating income from continuing operations was $48 million compared to $32 million in the third quarter of last year. Adjusted operating income margin from continuing operations was 19% compared to the 13% in the third quarter of 2020.

This increase was primarily driven by favorable sales results and gross margin improvements. Part of the operating income margin improvement was driven by deferring certain operating expenses into the current quarter. The adjusted effective tax rate in the quarter was 10.5% compared to 4.5% in the third quarter of 2020.

The higher tax rate is primarily attributable to geographic income mix. Adjusted diluted EPS from continuing operations in the quarter was $0.68 compared to $0.38 in the third quarter of 2020. Following the equity offering, adjusted diluted weighted average shares outstanding in the quarter were 52.4 million.

Our cash balance at September 30, 2021 was $182 million, down $71 million from cash balance of $253 million at year-end 2020. Net debt at quarter end was $123 million versus $505 million at year-end 2020.

The change in our cash balance and net debt was impacted by the equity offering, where we raised $323 million in net proceeds and the retirement of $450 million term loan. In addition, we executed a $125 million secured revolving credit facility that is available for general corporate purposes and remains undrawn.

Our adjusted free cash flow for the third quarter of 2021 was $40 million and was $52 million for the first nine months of 2021. We invested $18 million in capital spending during the first three quarters of the year which was $11 million lower than the comparative period for 2020. Now, turning to our revised 2021 guidance.

As Damien mentioned, based on our performance during the first three quarters of 2021, we are increasing our previously announced full year guidance. We are now forecasting 2021 sales growth between 8% and 11% and between 15% and 18%, when excluding the Heart Valves business.

This is up from our prior guidance of 5% to 10% and 12% to 17%, respectively. Our full year sales growth guidance assumes a 2% tailwind from exchange rates. We are projecting adjusted diluted earnings per share from continuing operations in the range of $2 to $2.10, up from our prior guidance of $1.75 to $2.05.

We assume our adjusted diluted weighted average shares outstanding to be 54.1 million for the fourth quarter of 2021 and 51.5 million for the full year. Adjusted free cash flow from operations is now expected to be between $55 million to $75 million, up from our prior guidance of $50 million to $70 million.

And with that, I'll turn the call back over to Damien..

Thanks, Alex. We are building good momentum across a diverse portfolio and, taking this into consideration, we've increased our guidance ranges. While we continue to live with the changing market dynamics resulting from the pandemic, we remain focused on delivering improved business performance and delivering on our pipeline commitments.

I look forward to sharing additional updates with you at our upcoming Investor Day on December 7 which will be a virtual event. And with that, Lydia, let's open the line for questions..

Thank you, Damien. [Operator Instructions] Our first question today comes from Rick Wise of Stifel. Rick, your line is open. Please go ahead..

Hi. Good morning, Damien. Hi, everybody. Obviously, there's so much to unpack here, it's like where do we start. Let's start with Neuromod. Clearly, you continued another quarter of solid execution as you indicate, Damien.

Maybe, just you could unpack it a little more, what, if any, impact on this momentum did COVID have do you think in the quarter and how is the fourth quarter starting out. We're just hearing so much from so many people.

And just related to all that, I know backlog has helped last quarter -- the second quarter and I'm guessing this quarter, I think you said.

Where are we with that and what's your confidence as you move ahead, not just in the fourth quarter but into next year on that front?.

Well, first of all, good morning, Rick. Thanks for joining us. Yes, let me -- like you say, a lot to unpack. Let's start with, clearly Delta is still having an impact, particularly the U.S., Australia, Japan. To unpick the U.S. a bit, the leading indicators from the U.S. Epilepsy business improved significantly in October.

I think for us, the important thing is, you're right, we're getting a tailwind from end-of-service. So total U.S. implants grew high-single digits and the strongest performance was August and September. So it improved through the quarter.

Similar to the last few quarters, the end-of-service recovered faster than NPIs and that's a lot to do with the deferred procedure catch-up. So end-of-service grew over 15% year-on-year. NPIs grew -- declined mid-single-digits. So it was an end-of-service implant business opportunity for us that really helped.

In 2021, we expect end-of-service to grow over 20% and the NPIs to grow in the mid-single-digits. So I'd say improved conditions in the back half of the quarter into October. End-of-service definitely helped in the U.S.

In international which I know is a smaller part of the business, nevertheless, we saw a really significant increase in Canada, China, Saudi Arabia, Taiwan, all really significant growth and we're really pleased about that.

Taiwan was interesting because there were some recent reimbursement changes and our sales force investments read through, so really pleased with how the team executed in rest of world as well..

Yes, Rick. It's Matt. So on the backlog, as Damien highlighted, we're at 900. Remember last quarter we said we were at 1,000. So we did think we ate a little bit into the enrollment backlog but just given that number, we're not going to capture that in the fourth quarter. We might capture maybe 100 or 200; so this will roll into 2022 as well..

Got you. Turning to -- I think the second big topic, the RECOVER trial. You highlight the delay, thinking about it generously, you're delaying into the first quarter, it seems like a modest delay.

But can you just help us feel confident that it's not going to be worse than that in general and how did -- and it's not fair but I don't care, how did monthly enrollment trends flow through in the third quarter? Was September the weakest? Are you starting to see it reaccelerate and pick up and the pace that gives you confidence that -- and gives us confidence that the first quarter will be sufficient to get to where you need to be on the unipolar side?.

Yes, it's a good set of questions there. So it was really the last couple of months we just saw the implant rate slowdown. And largely, an impact related to Delta, patients availability and this clinical staff shortages at some of our clinical sites. If you look at consents, consents actually sequentially increased nearly 25% quarter-on-quarter.

So actually -- that technical step was really positive. It really was just the pull-through into implants. And so that's why this -- I think the modest delay into early Q1 is, as we described, a modest delay and it doesn't really affect our transition to registry.

We said and we still commit to this late 2022, early 2023 depending on CMS' review timing; so that hasn't changed. We're skewing unipolar, so the unipolar one will come through earlier and bipolar who are sicker patients and just harder to move through the pipeline, that's extended a little bit but we're really positive about the unipolar..

Yes, Rick. If you look at our average in August, September, October for implants and you extrapolate that through the next three months, that's why we're very still confident it's the first half of Q1 '22..

Great, that's great. Just last -- I'll sneak one last one in. LifeSPARC had a brilliant quarter obviously and maybe just give us a little more color there.

To what degree has this been COVID-related patients? What percent is COVID? And if I'm doing the quick math right, I may not be, your guidance, while excellent for the year, implies a fourth quarter slowdown. Why would it slow? Is that COVID? Just give us some more perspective. Thanks so much. Great to see the quarter..

Thanks, Rick. I'll take half and then, Damien, other half. So for COVID, in terms of the procedure volumes, we estimate it was about 45% in the third quarter, Rick. That is up a little bit from the second quarter, probably not a big surprise.

But one thing you should think about is when COVID and Delta kind of got worse in the third quarter, it also does have a negative impact on the business. It's just harder to get into the hospital and that's critical for the ACS business. So there are pluses and minuses to COVID but the percentage was 45%.

And in October, we actually saw it come down a little bit..

Yes. And just in terms of growth rate, the Q4 comp is just more difficult than the Q3 comp because we were ramping. So that's really the implied growth rate change but nothing apart from that sequential improvement in revenue..

Great. Thanks, again..

Thanks, Rick..

Thank you. The next question today comes from Mike Matson of Needham. Mike, your line is open..

Yes, good morning. Thanks for taking my questions. I guess I'll start with the Cardiopulmonary business. So you saw a pretty strong growth there. I understand you probably had a fairly easy comp. But maybe you can just comment there, the heart-lung machines, the oxygenators, both saw good growth.

And then, just can you give us an update on the timing of the new heart-lung machine? Is that still consistent with what you said before?.

Hi, Mike. It's Alex. So the Cardiopulmonary business is really just a function of a recovery from sort of the doldrums of COVID last year. We saw strong execution and good performance by our sales teams, both on the consumables front, as well as HLM. So we feel pretty good about the quarter.

It was a good strong performance but again I think we were benefiting from the tailwinds of last year..

And in terms of the HLM rollout. We're still anticipating in the second half of next year to start the rollout of the new HLM, first in Europe, then in the U.S..

Okay, got it. And then, I guess I'll ask one on the OSA trial.

So can you maybe just talk a little bit about the design of that trial and the expected timing again in terms of enrollment and submission to the FDA?.

Sure, Mike. It's Matt. So we're targeting up to 150 patients, 2-to-1 randomization, six-month follow-up if we assume about 18 months to enroll. That's how we get to our 2024 FDA approval timeline..

Okay, got it. Thanks..

Thanks, Mike..

Thank you. The next question today comes from Adam Maeder of Piper Sandler. Adam, your line is open..

Hey, guys. Congrats on the nice quarter here and thanks for taking the questions. Two for me. I guess the first one is just on the construction of the EPS guidance.

Given the outperformance and the strength that we saw in Q3, it looks like, if I'm doing the math right here, you're assuming a little bit of a step down in adjusted EPS in Q4 even with the raised guidance.

So why is that? Is that conservatism or are there any one-timers to call out in Q3? And then secondly, just maybe help us think through OpEx spend heading into next year. You're obviously wiping away Heart Valves-related expenses but then investing in key growth drivers like Neuromod, ACS and the ANTHEM pivotal trial. So maybe just touch on that.

And then I had one follow-up. Thanks..

Hi, Adam. It's Alex. So we're still looking at the Delta variant. It kind of continues to impact hospitals and patients' willingness to undergo non-acute procedures. We're also -- our sales force is indicating staffing shortages at the hospital level. So I think we're being cautious in that regard.

We're also seeing some -- we're also being cautious in terms of our supply chain risk, especially in kind of our larger ticket items for HLM. So that's kind of the headline on revenues. And so from a cost perspective, I would say, freight costs are going up.

I think you're hearing that from most of our peers and then in terms of the phasing of our expenses. So as we saw some of the challenges in the quarter around revenue trends, we kind of deferred some of the expenses in Q3 into the current quarter. So you will see a kind of a little bit of a bounce back in Q4 around OpEx.

Still feeling pretty good about our EPS guide and our ability to achieve our target here..

Okay, that's really helpful color. Appreciate that, Alex. And then I guess just the one other one for me. You touched on, I think the Investor Day in the prepared remarks, was hoping just to get a sneak peek there for early December and in terms of what to expect.

Will we get initial '22 P&L guidance? Will we get an update to the LRP? Is it primarily focused on increased visibility on pipeline and pipeline initiatives and commercialization plans? Just what should we be looking for here in a couple of weeks. Thanks so much..

Sure, Adam. It's Matt. So we're going to walk through all the major businesses and the SPI's. They are all going to be separate sessions. We're going to give a long-range plan.

We're not going to focus yet on '22, we're going to save that for February but this will be pretty comprehensive and build off the educational series we've run over the past 12 months..

Sounds great, Matt. Looking forward to it. Thanks..

Cheers, Adam. Thanks..

Our next question today comes from Anthony Petrone of Jefferies. Anthony, your line is open. You may proceed with your question..

Thank you and good morning, everyone. Hope everyone is doing well. Congratulations on a strong print here. A couple on VNS and then I have one on depression. On the VNS side, certainly year-to-date strong traction. You spoke a bit about the backlog sort of contributing here.

I'm wondering if you could give us just an update on de novo implants, specifically how those have trended in 3Q and perhaps how they're trending versus 2019 levels. We're attempting to do some math here but we're still getting -- we looked at, it's still down relative to the 2019 levels. So just wondering how de novo placements in VNS are trending.

And then I have a follow-up on depression..

Sure, Anthony. It's Matt. So on NPI, it's down about mid-single-digits versus the third quarter of 2020 and it did decline sequentially. Versus 2019, that is still trending below, it's down in the 25% to 30% range.

And again, similar to what you're hearing from a lot of the Neuromod companies, it's still not back to normal for, what Alex defined as, non-acute procedures. So no surprise the replacements are getting more attention than de novo. But overall, a lot of this is still related to the hospitals and the patient reluctance to come in for procedures today.

So we said, we expect the NPI to accelerate into the fourth quarter, the pipeline looks good so far and certainly to 2022. But that is the one area that is still not back to 2019..

Quick follow-up there just on Comprehensive Epilepsy Centers and just in that context, how the CECs are performing. Are you seeing, at those locations, just better traction and pulling backlog through as well as de novo placements? And then real quickly, just on depression here on the push-out to 1Q of '22.

Is there anything in the way of drop-out that has led to some of that push-out and is that a risk? Meaning, again, patient drop-out and so that's causing a delay. Thanks, again..

Yes, just on the first, the go-to-market. So the CEC group is still outperforming the baseline. 3Q '21 versus 3Q '19 sales are up 20% to 30% in that group versus sort of flat versus 2019 in the baseline. So I think again this group is continuing to show traction in that market segment.

And I think that is a good sign for continuing to focus on those 12 parts. And we're looking to expand that in 2022. Just on DTD, as I said, consents were up sequentially by nearly 25%. It's just having that pull through into the implant cycle that is taking some time.

And again I think it largely related to patient willingness to come into clinics and the staff shortages at some of our clinical sites..

Yes. And there is some level of drop-out expected. If you look at the public CMS agreement, that is part of the calculation. Our understanding so far is that's not been something to watch out for..

All right. Thanks, again..

Our next question comes from Michael Polark of Baird. Michael, your line is open..

Hey, good morning. Just a handful for me here. Bipolar arm, would you hazard a comment on when you expect to reach 150 milestone in that arm? It sounds like clearly later than 1Q '22 but I did not hear an updated target. Sorry, if I missed it..

No. No, I don't know whether I said it but it's somewhere in the first half..

Okay..

As we hit the unipolar, a lot of the attention then will kick over into the bipolar group. As I said, they're sicker and harder to move through. And just again with this Delta variant surge, it just really changed some of the trajectory there.

And as I said, we're much more focused on pulling through the unipolar, given that that's the larger patient pool. It's like 65% of the DTD patients. So, getting that one into the registry cycle is our priority..

And tying together the slight delay here on unipolar and bipolar implants but the maintenance of the flip to registry target late next year or early '23, is that -- is it fair to say that embedded in your flip to registry target of late next year or early '23, you had a range of timelines considered for achieving the -- these important 250,150 milestones? I just -- the question is, you have pushed the enrollment timing but you have maintained the importance of the registry timing and I -- just help me -- help us better understand how that -- how those two updates work together..

Yes. We made available cushion in there is probably the short answer..

Yes. Okay. HFrEF, I don't think this has been discussed on this call or -- certainly not this call but -- or the last one. The MCIT seems to be on the shelf here and that was initially thought to be a nice catalyst for reimbursement for this program to the extent it's successful clinically.

So understanding that there is still the clinical update ahead of us and I don't want to get too far in front, would you be willing to share a few higher-level comments on what the -- how you envision the path to reimbursements for VNS and heart failure, given the MCIT program seems to be deferred, if not dead?.

Yes. I look at -- I'm personally disappointed that, that whole program disappeared or appears to be disappearing. I -- candidly, we never had that factored into our model when we started the whole program. The MCIT came along after we committed to the program.

So we continue to believe that there'll be a pathway starting with the MACs and then building data. A big part of our study was to make sure we were going to generate important data in the -- not only the functional milestones but also the primary endpoints. A big part of the program was also breaking it up and having this embedded study.

And so that we could have this conversation with the MACs in pieces. So it's a headwind but as I said, we had not reflected that into our initial model..

Thank you so much..

Cheers, Mike..

Our next question comes from Scott Bardo of Berenberg. Scott, your line is open. Hi, Scott, your line is now open..

Sorry, apologies, guys, I was on mute. Hi guys, thanks for taking my questions. Yes, the first question, please. Alex, I wonder if you could kind of give some view on the EBIT margin -- adjusted EBIT margin this year for LivaNova. I think if I'm right, your guidance implies something like a 14% margin. So I wonder if you could confirm that please.

And linked to that, obviously, we've had a bit of lower operating cost this quarter which I think you're highlighting into this -- a bit of a reversion into the fold.

Can you give us a flavor actually now that the Heart Valves is out of the business, how operating costs are likely to trend next year? Are they likely to be up, stable or below this year's OpEx level? Just some sense there would be helpful..

Second question, please..

Hey, well, go ahead, Alex and I'll come back with a follow-up. Thank you..

Sure. So you're right, the margin, we're forecasting it at 14% to 15%. That is -- that's our goal. In terms of our margin this quarter, obviously somewhat inflated. We -- I talked about deferring some of the expenses into the current quarter. We saw some sales softness earlier in the quarter rate and so we pulled back on some investments.

As you know, we typically start to invest ahead of 2022 in the second half of this year. So we looked at some discretionary expenses and decided to defer them into Q4..

And in terms of guidance, I mean, we'll do that in February but we will give a long-range view at the Investor Day in a few weeks' time..

Okay, thanks guys. And maybe second question just, please, on VNS. Thanks for giving the disclosure on new patient adds growing around 5%. Am I right in saying that new patient adds is really the best leading indicator to the longer-term growth of Neuromod? And I wonder if you could then give some sense of where we are on that metric versus 2019.

Are we still down on 2019 new patients? If you could just quantify that or give some sense there, that would be helpful..

Yes. So we are still down versus 2019. I think this is where Matt was trying to indicate that that's been the lag in terms of the shift as the markets have started opening up. It's improving, so sequentially we've seen improvement and we're predicting a sequential improvement in Q4. But that's the one that we're maniacally focused on.

The teams are heavily focused on NPIs because you're right, the long, long term view of the business is related to that -- those DRE patients and de novo. And it ramps because depending on how you cut the model, there's sort of 800,000 to 1.2 million DRE patients in the U.S.

alone, we believe that, that long-term growth is important to driving the business because obviously that leads to replacements. Given that average age is in late 20s, we are implanting patients three to four times in their life. And so being very focused on NPIs, being focused on pediatrics is a key aspect of the lifetime value of a patient.

We also know that there is a significant benefit to their quality of life by impacting and implanting them earlier too. So from a patient point of view, we believe it's been a reversal in terms of their cognitive development and the hospitalizations. And every time you get hospitalized, there's this significant number of complications.

So that is our primary focus..

Very clear and thanks. Just last follow-up on Neuromod then, if I may, Damien. And correct me if I'm wrong, please. But it's my understanding that you've canned the development of your next generation Neuromod platform, Iris. And I think that means then we won't have a new platform here for about four or five years or so.

I guess the question is, does that matter in terms of reaccelerating new patient additions? And perhaps then what is the plan for new platforms for Neuromod? When is that likely now?.

Yes. So more depth on that in the Investor Day in a few weeks' time. It will be about three years between iterations, not five. Our focus has been much more on how to think about patient connectivity and the app development. There were early aspects of what we were looking at with the original Iris, where we were talking about Bluetooth.

Significantly, we took a step back when we started looking at security and making sure we had a really stable platform. So while we were doing that, we shifted our focus more, as I said, to this patient app.

We'll talk more about this in a few weeks but I'm actually pleased with what I think we can do here and how we can engage with patients and clinicians ultimately. But that's the work we're doing and we'll talk about that in a few weeks..

Thanks, guys..

Cheers, Scott..

Thank you. And our final question today comes from Matt Taylor of UBS. Matt, your line is open..

Hi, good morning. Thanks for taking the questions. I just had two, I think. I think one was to follow up on heart failure.

I just wanted to know if you thought you could actually have a pathway to get reimbursement with, I guess, the shorter-term endpoint in the functional endpoint 90 days versus the two-year follow-up with heart failure hospitalizations, etc..

Yes. So that's -- it's Matt, that's the expectation. There already is a CPT code for VNS. And if you look at a couple other of the competitors, they're already out and they are getting reversed. It's just not as easy as [indiscernible]..

Yes. But can you do it with the functional versus the primary end? The answer is yes..

Yes..

Okay. And the COVID stuff has really impacted hospitalizations like we saw with the Cardio bandwidth.

Do you think that could have an impact on the endpoint year and how would you deal with that?.

So the trial design, it's an embedded trial, as Damien mentioned. The first look, we have to hit five different endpoints. It's safety, we have a lot of data on VNS. It's a trend in the primary endpoint of hospitalization mortality, not to hit it, just the trends.

And then we have to hit the quality of life, six-minute walk and the left ventricular ejection fraction. If we hit all five of those, then we can do a full assessment of the data and submit to the FDA. If we miss on one of those five or we don't quite get there, we will just keep going.

The external independent statisticians will just tell us to do -- if we're enrolling another 100 patients, then we can look again. So we do have kind of a long runway in this trial. We're going up -- we add up to a 1,000 patients. So we're not sort of boxed in on a set number that's coming up close.

If in fact COVID had some impact on that primary endpoint of hospitalization and mortality which -- again, we don't know, we're completely blinded but if it did, we still have a lot more patients to enroll hopefully during a non-COVID period..

Got it. Okay, great. Thanks for all that color, Matt. I really appreciate it. Thanks, guys..

Cheers, Matt..

Sure, Matt..

We have no further questions in the queue, so I'll hand back to Damien McDonald for closing remarks..

Thanks, Lydia. And, look, thank you everyone for joining today's call. On behalf of the entire team, we appreciate your support and interest in LivaNova and again we look forward to speaking to you at our Investor Day on December 10 [ph]. Thank you..

Ladies and gentlemen, this concludes today's call. Thank you for joining..