Livanova plc sees transcatheter mitral valve replacement (TMVR) is coming up next as a multibillion segment following on TAVR. To secure what it expects will be market-leading technology, the London-based company has acquired Maple Grove, Minn.-based Caisson Interventional LLC.

Sorin SpA and Cyberonics Inc. merged in the fall of 2015 to become Livanova; Sorin had been a Caisson investor since 2012. Livanova has acquired the remaining 51 percent of Caisson for $78 million in cash, milestones and debt forgiveness.

APPROACH ADVANTAGE?

Caisson's TMVR implant is the only one designed entirely for use via a transseptal approach that Livanova expects to be the predominant route, while competitive devices have been adapted from transapical access designs. It is in an ongoing feasibility trial, with a CE mark trial slated to start this year.

"We believe this is just a unique technology, and it's right on the forefront of a disease state that has a huge unmet need, a multibillion dollar market. We want this to be about the team focusing on commercialization – not on getting to the next funding milestone," Livanova CEO Damien McDonald told Medical Device Daily.

"We believe we can bring a lot to help them especially on the clinical trial program, and the regulatory and market access pathway – on the whole development timeline. So, we've been working with this company for five years ... We figured it was a very considered dating process, and we thought now was the time that we could really help them accelerate their commercialization plan," he added.

Livanova expects it could gain a CE mark for the implant in late 2018 or in 2019; a potential FDA approval would follow "several years" after a European go-ahead.

The feasibility trial, known as PRELUDE, started in June 2016. It's enrolled six patients thus far out of an anticipated 20-patient total. Five of the implants were successful, with the sixth one being retrieved. The device is designed for its function to be assessed prior to final release during implantation.

"Early results from the PRELUDE trial show that we're seeing good results in terms of mitral valve regurgitation scores going down after implantation," said McDonald. He added that, in addition to efficacy and safety measures, the demonstration of retrievability for the implant will be a priority for the clinical program.

BUSINESS FIT

There are about two million people in the U.S. with severe mitral regurgitation. But only about 55,000 receive mitral valve surgery annually – which is about 3 percent of that patient pool.

"We believe this market will develop comparably to the transcatheter aortic valve replacement (TAVR) market with the vast majority of procedures taking place through the trans-septal route, which is our approach," said McDonald on Livanova's May 3 earning call. "This acquisition places Livanova in a strong position to set the benchmark for TMVR systems and to be a leading player in the market," he concluded.

He is scarcely alone in his billion-dollar expectations for the future of TMVR; several major med-tech players have done sizeable mitral valve startup deals in recent years including Medtronic, Abbott and Edwards Lifesciences Inc.

Livanova has a trio of major business units: Cardiac Surgery, Cardiac Rhythm Management and Neuromodulation. So, it already sells surgical cardiac valve replacement and repair products via that first business. It's optimistic that the Caisson acquisition will help it gain a leadership position in this field.

Livanova bought the remainder of Caisson for $72 million plus $6 million in debt forgiveness. An $18 million payment of 25 percent upfront was made at close, with an additional 45 percent to be paid based on undisclosed milestones, and the remaining 30 percent to be based on undisclosed sales earn-outs.

The deal is expected to be dilutive to Livanova earnings in the near to mid-term due to associated R&D spending, including clinical trial costs, as well as manufacturing and commercial investment. In the long-term, the Caisson deal is expected to be accretive to earnings.

FLAT QUARTER

Livanova updated its 2017 guidance on the Caisson deal. It reduced its 2017 diluted adjusted EPS estimate to a $3.10 to $3.30 range, down from the prior $3.25 to $3.45. It also guided to a 2017 operational cash flow of $170 million to $190 million, down from $190 million to $210 million. Its expected net sales growth expectation remains at 1 percent to 3 percent.

For the first quarter, sales were roughly flat at $285 million as compared to the same period a year earlier. This quarter Livanova beat consensus EPS expectations by $0.03, coming in at $0.71, while it missed consensus revenue expectations by $2.6 million. Wall Street seemed to embrace the near-term news, sending shares up 3 percent.

Still, Livanova's valuation remains well below its market cap when the newly combined entity started trading in October 2015. It hit as high as $3.2 billion then, but even after a strong run this year, its market cap is only about $2.7 billion now. McDonald characterizes Livanova's growth rate as on par with its med-tech peers, but argues that Wall Street would like to see more consistency quarter-to-quarter.

Livanova is looking to Caisson, and perhaps additional mitral valve additions, to boost its growth in the long-term. McDonald said he favors "surrounding a disease state and not just having a single point" when it comes to mitral valve. He said Livanova takes a disciplined opportunity to reviewing inorganic opportunities, but noted that when development advances, they will be looking for complementary technology.

Summed up McDonald on the Caisson effort, "While the system is still in the early feasibility stage, we believe that this deal makes clear strategic sense. Our cardiac surgery business currently sells a portfolio for surgical valve replacement and repair and this acquisition will position us as a leader in the field. We are in a position to accelerate the clinical and regulatory efforts in TMVR and, ultimately, to deliver important, innovative therapies to our patients."