Summary: Cyberonics posted a meaningful 13.6% rise in its second-quarter fiscal 2014 EPS to $0.50, and a healthy 12% increase in revenues to $70.1 million. The numbers also surpassed the Zacks Consensus Estimates of $0.49 and $69 million, respectively. Cyberonics continued to gain from a solid foothold in the epilepsy market and strong overseas business. Further penetration in the still untapped epilepsy market should catalyze growth. The company's lucrative pipeline is another upside. Attractive share buyback continues to boost investors' return. However, the setback on TRD indication and lower contributions from Japan remain major downsides. The situation in Japan is not likely to improve in this fiscal year, and margin pressure represents another area of concern. The company also faces a tough competitive landscape and a challenging macroeconomic scenario. Thus, we remain Neutral.
Overview:
Cyberonics Inc. (CYBX) is a medical technology company with core expertise in neuromodulation. The company provides Vagus Nerve Stimulation (VNS) therapy for the treatment of refractory epilepsy and treatment-resistant depression (TRD). The VNS Therapy System is delivered from a small pacemaker-like generator implanted in the chest that sends preprogrammed, intermittent, mild electrical pulses through the vagus nerve in the neck to the brain.
VNS Therapy for Epilepsy: The VNS Therapy System was approved as treatment for medically refractory epilepsy in Europe in 1994 and in the U.S. and Canada in 1997. Cyberonics is growing its products for epilepsy through a direct sales force and distributors in the U.S., Europe, Latin America, (including Brazil), Russia and Asia, including India, Japan and China.
The company focuses on research and development in the field of VNS therapy for patients with refractory epilepsy specifically, seizure detection, responsive stimulation and associated technology. Over the last three years, Cyberonics' continuous investment in product development resulted in two new generators, the AspireHC and the AspireSR.
VNS Therapy for TRD: The VNS Therapy System was approved as treatment for TRD in 2001 in Europe and Canada. Subsequently, the system received approval in the U.S. (for patients of 18 years or above) in Jul 2005. Regulatory bodies in the European Economic Area, Canada and Israel have also approved the system for patients without age restrictions. To date, an estimated 4,000 patients worldwide have been treated with the VNS Therapy System for depression. However, Cyberonics no longer actively sells or markets the product for depression in the U.S. market due to reimbursement issues. The company also does not actively market VNS Therapy for TRD in Europe and Canada.
On May 28, 2013, Cyberonics disclosed that CMS declined its reconsideration request associated with the TRD indication. The decision of CMS of non-coverage of VNS Therapy for patients with TRD was a setback. While the company is seeking options to obtain a review on the CMS decision, it will continue to work with other interested parties for the TRD indication.
CYBERONICS INC (CYBX): Free Stock Analysis Report
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Cyberonics, Inc. (CYBX): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report