Latest Program to End at LivaNova Underscores Our Poor Capital Allocation Rating

Though we weren't entirely surprised by the halt of LivaNova's development of Vitaria for vagus nerve stimulation in heart failure patients and have already lowered our fair value estimate, this latest development underscores our largest concern about LivaNova—the firm does not have enough bandwidth to support multiple development programs (and the inevitable occasional gutter balls) necessary to ultimately successfully commercialize new technologies. It was just about three years ago that LivaNova ended its Caisson program (transcatheter mitral valve replacement). We see little in the pipeline to get excited about and hold tempered views of neuromodulation for refractory depression because the clinical data has been underwhelming. We’re also skeptical about LivaNova’s technology for obstructive sleep apnea, which strikes us as a relatively invasive approach compared with existing alternatives. All this leaves us lukewarm on LivaNova’s ability to generate meaningful innovation, even off its neuromodulation platform and expertise, which we think are significantly more compelling than its cardiopulmonary technology.