Cyberonics, Inc. (CYBX)

Cyberonics is a neuromodulation company engaged in designing, developing and bringing to market medical devices that provide Vagus Nerve Stimulation (VNS) Therapy, for the treatment of epilepsy, treatment-resistant depression (TRD) and other debilitating neurological or psychiatric diseases, and other disorders.


VNS Therapy consists of the electrical stimulation of the Vagus nerve with an implantable device. The VNS Therapy System consists of a pulse generator, a bipolar lead, a programming wand and software and a tunneling tool. In July 2005, FDA also approved the VNS Therapy System for the adjunctive long-term treatment of chronic or recurrent depression for patients 18 years of age or older who are experiencing a major depressive episode.


Net sales for the thirteen weeks ended January 2007 decreased by $1.0 million, or 4%, primarily as a result of 5% decrease in unit sales volumes partially offset by 2% rise in sales price. However, Cyberonics will remain a company that is struggling commercially which is seen from its slower than expected revenue growth in depression sales, substantial market development expenses and inadequate reimbursement. Its epilepsy business has low prospects for future growth, as new patient sales have remained flat.


Recently the Centers for Medicare and Medicaid Services (CMS) posted a proposed National Coverage Determination (NCD) arguing that there is sufficient evidence to conclude that Vagus nerve stimulation is not a reasonable treatment of resistant depression. This decision is bad news for Cyberonics, as this means that the company cannot expect help from CMS to pay for post-approval studies, and the cost will be left on the shoulders of Cyberonics. All these factors sum up to Cyberonics being a poor investment proposition.