LivaNova’s $519 million fine threatens pipeline portfolio and Q4 earnings potential, says GlobalData

  • Court of Appeal Milan announced its decision to fine LivaNova $519 million and holds LivaNova jointly liable for SNIA’s environmental damages.
  • LivaNova’s current cash position and debt obligations raises questions on the potential impact to its operations.
  • LivaNova plans to file an appeal with the Italian Supreme Court, while LIVN shares had their largest single day decline in over a year.

Following the news that the Court of Appeal Milan (CoA) has fined LivaNova $519 million;

Richard Hyde, Medical Analyst at GlobalData, a leading data and analytics company, offers his view on the matter:

“On November 3, LivaNova surprised shareholders with a strong Q3 2021 performance. Two weeks later, it has been announced that LivaNova will pay a fine equal to 68% of its current 2021 revenue. Increased R&D expenditure and the performance of its Advanced Circulatory Support and Neuromodulation portfolios were the big highlights. The current fine from CoA puts these portfolios and their pipeline products within them under threat.

“LivaNova currently has $181.8 million in available cash, but also has $227.8 million in current debt obligations. LivaNova reported a basic loss per share for nine months in 2021 of $-2.56, factoring in the recent fine this increases losses to $-12.99 per share. LivaNova’s ability to pay this Italian fine is certainly in question and will likely result in diverting resources away from R&D, selling, general and administrative expenses. LivaNova already divested from its Heart Valves Business valued at 80% of its 2020 revenue; selling off more of the business should not be a direction pursued.

“LivaNova is a major player in cardiopulmonary bypass, extracorporeal membrane oxygenation (ECMO) devices, and Vagus Nerve Stimulating Neuromodulation devices. LivaNova currently has the following products in development: NINO Oxygenator, Next Generation Heart-Lung Machine, Bi-Flow Arterial Cannula, and VITARIA System.

“LivaNova may need to delay these projects or take on a much larger debt position to cover the fine. Both options threaten the financial health of the company and its future earnings potential.”

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