Dive Brief:

• LivaNova will end its transcatheter mitral valve replacement program as part of a broader restructuring of its heart valve segment, the company announced Wednesday.​ In recent quarters, heart valve sales accounted for roughly 11% of LivaNova's overall business, having gone from generating about $140 million in yearly revenue upon LivaNova's formation in 2015 to approximately $126 million last year. Business in the unit is down a further 10% so far in 2019.

• "The time has come to address the continued declines we have experienced in our heart valve business," CEO Damien McDonald said in a company statement. "We will restructure and simplify our heart valve manufacturing network, which will eliminate operational overlap between facilities and enable us to address new regulatory requirements."

• Approximately 150 employees may be impacted by the restructuring across its operations in Minneapolis; Vancouver, Canada; and Saluggia, Italy, the company said. LivaNova did not specify anticipated cost savings in the announcement.

Dive Insight:

LivaNova's investment in its not-yet-marketed mitral valve replacement system has failed to pay off as competition in treating mitral regurgitation has emerged.

LivaNova was established in 2015 through the $2.7 billion combination of Houston, Texas-headquartered neuromodulation specialist Cyberonics and Milan-based cardiovascular disease medtech Sorin. Parts of the company had invested in privately held clinical-stage medical device company Caisson Interventional since 2012, and in 2017, LivaNova acquired the remaining 51% of Caisson for up to $72 million.

Through the deal, LivaNova gained a ​transcatheter mitral valve replacement implant with a fully transvenous delivery system. The device is meant to treat people with mitral regurgitation, a condition in which the heart's mitral valve allows blood to flow backward, resulting in inefficient blood movement throughout the rest of the body and symptoms like fatigue and shortness of breath.

Since then, LivaNova worked to move the device closer to market, completing a 20-participant feasibility study last August that evaluated the system in patients with moderate to severe mitral regurgitation using a less invasive transseptal approach, with plans to conduct premarket trials to support U.S. and E.U. approvals.

But simultaneously, competitors' transcatheter mitral valve repair devices have taken off. In March, FDA expanded the label for Abbott's blockbuster MitraClip device, first approved in 2013, authorizing its use for patients with secondary mitral regurgitation. Abbott reported $176 million in third-quarter MitraClip sales, representing organic growth of almost 32% over the prior year. And Edwards Lifesciences is currently rolling out mitral repair device Pascal in Europe and enrolling patients in a U.S. pivotal trial of the device.

As the company evaluated regulatory requirements and changes in the structural heart market, "we determined it was no longer viable to continue to invest in our TMVR program," said McDonald, who took over as chief executive in 2016, replacing former Sorin CEO André-Michel Ballester.

LivaNova said in its announcement the revenue decline in heart valves occurred across both biological and mechanical valves, with growing portfolio maintenance costs related to increasingly burdensome regulatory requirements, making a restructuring "necessary."

In a move to boost profitability, LivaNova plans to close its TMVR operations in Minneapolis at the end of the year. "Patients who participated in clinical trials related to TMVR will continue to be followed within the parameters of the trial," the company said.

Additionally, LivaNova plans to focus its operations in Italy on R&D and manufacturing of mechanical heart valves, rings, accessories and nitinol stents, while its tissue heart valve production will be centered in its Vancouver plant, the company said. 

Analysts at Jefferies called changes to LivaNova's surgical aortic valve-focused heart valves business "a long time coming," and "bowing to" realities in the space.

"LivaNova acknowledged what has been apparent in its valve portfolio for some time now: the rising tide of transcatheter valves is drowning open surgical procedures," the Jefferies team wrote. Development spending on LivaNova's mitral system totaled $20 million annually, which frees up 35 cents per share, the analysts estimated.

Analysts at Stifel said in a note to investors LivaNova has had "a more challenging 2019 than expected." The decision will likely improve profitability and refocus investment on more important nearer-term pipeline priorities like treatment-resistant depression, obstructive sleep apnea and heart failure, "ultimately setting the stage for more stable 2020 performance," the analysts said.

LivaNova has had better success this year with the neuromodulation arm of its business (about 38% of the company, with the rest focused on cardiovascular therapies), which was up 7.2% year over year in third-quarter results. According to guidance given Oct. 30, the company expects full-year net sales growth between 1% and 3%.

This story has been updated with charts.