Cyberonics Posts First-Quarter Gains

The first quarter of fiscal 2015 (ended July 25) was one of growth for Houston, Texas-based Cyberonics Inc.

The maker of neuromodulation technology repaired solid top and bottom line increases for the first three months of its fiscal year—though the expansion was just shy of expectations. 

The company developed the VNS (vagus nerve stimulation) Therapy System, which is U.S. Food and Drug Administration (FDA)-approved for the treatment of refractory epilepsy and treatment-resistant depression.  The VNS Therapy System uses an implanted medical device that delivers pulsed electrical signals to the vagus nerve.  Cyberonics offers the VNS Therapy System in selected markets worldwide.

“Cyberonics continued to deliver increased sales and earnings during our first quarter of fiscal 2015 over the same quarter last year,” said Dan Moore, president and CEO. “However, overall net sales for the quarter fell short of our expectations by approximately $1 million. The softness was in our U.S. business, where unit sales grew by 2 percent, and net sales increased by 4 percent over the comparable period in the prior year to a new high of $58.8 million. We have not yet reestablished year-on-year growth in new patient adoption. While we expect greater productivity in the second quarter from our new field sales employees, the entire Cyberonics U.S. commercial team remains focused on restoring new patient growth. The team has implemented additional initiatives for the second quarter targeting comprehensive epilepsy centers and physicians who have been inconsistent in their utilization of VNS Therapy. We remain optimistic about the potential for VNS therapy in this underserved market.  As mentioned last quarter, we are increasing our investment in sales and marketing significantly for fiscal 2015.”

Worldwide net product sales were $72 million,  an increase of 6.8 percent. International net sales were $13.2 million, an increase of 14.5 percent on a constant currency basis. Income from operations of $22 million increased by 12.4 percent from an adjusted income from operations in the prior year of $19.6 million. Net income from the quarter was $13.5 million, up from $8.5 million for the same period in fiscal 2014.

“Again this quarter, Europe and Latin America led the growth with solid country performances throughout their respective regions,” said Moore. “The continuation of our limited market launch of the AspireSR generator in the U.K. and Germany is in line with our expectations.  Several accounts have reordered the product, and penetration of the AspireSR generator in these countries is estimated at 17 percent, and has been accompanied by a price increase. VNS Therapy implants in Japan grew by an estimated 20 percent over the same quarter in the prior year.  If this level of growth is sustained, Japan will become one of our larger single-country markets this fiscal year.  We previously discussed our plan to hire direct employees in that country, and we now expect to hire the first of these new employees by the end of the second quarter.”

During the quarter the company submitted the ProGuardianREST in-home seizure monitoring system to the FDA or regulatory clearance. Moore said he expects a “limited market launch” in Europe for ProGuardian in the company’s fiscal third quarter. The company also submitted the first module, comprising clinical data, to support eventual CE mark approval of the Vitaria system (autonomic regulation therapy for chronic heart failure). The company also received  initial regulatory approvals for the new manufacturing facility in Costa Rica.

Cyberonics also is in ongoing discussions with the FDA to agree on next steps for U.S. regulatory process of the AspireSR generator. The company received CE mark for the system in February.
    
“We have had constructive discussions with the FDA to ascertain next steps for U.S. approval for the AspireSR generator. While we are encouraged by this progress and are not planning another study to support the U.S. regulatory submission, approval could still require further clinical work,” Moore said. “The AspireSR generator is the first closed-loop VNS Therapy System, and is an important addition to our product portfolio, providing physicians and patients with another foundational treatment option for drug-resistant epilepsy, as we have already seen in the European limited launch.”