CYBX Resumes Reimbursement Efforts

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Cyberonics (CYBX) recently provided further information on its reimbursement claim submission to the Centers for Medicare & Medicaid Services (CMS). The leading player in the neuromodulation space is currently seeking reimbursement coverage for all treatment-resistant depression (:TRD) indications for its well-regarded VNS Therapy System.

Cyberonics provides VNS Therapy for the treatment of refractory epilepsy and 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.

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 also approved the system for patients without age restrictions.

However, Cyberonics no longer actively sells or markets the product for depression in the U.S. market due to reimbursement issues following CMS determination of non-coverage of VNS Therapy for patients with TRD. The company also does not actively market VNS Therapy for TRD in Europe and Canada.

Earlier, Cyberonics submitted an appeal to reconsider reimbursement coverage for VNS Therapy for TRD to CMS. Subsequent to the request, the company expected some form of formal feedback from CMS, either affirmative or dissenting, before the end of Mar 2013. However, Cyberonics is yet to receive any acknowledgement from CMS to date.

Although the company is still engaged in discussions with CMS to reconsider the request, the timing and result of the ongoing dialogue is uncertain. Nonetheless, Cyberonics is optimistic about securing reimbursement coverage for VNS Therapy for TRD on the back of positive clinical outcomes obtained in the last five years. We believe that the reimbursement coverage for TRD indication is likely to garner incremental revenues in the U.S. as well as in the international market.

Uptrend in the core epilepsy business, pipeline development, strategic investments and consistently impressive quarterly performance reflects the strong growth potential of Cyberonics. Accordingly, the stock carries a Zacks Rank #1 (Strong Buy). Other Zacks Rank #1 medical stocks are Cepheid (CPHD), Given Imaging (GIVN) and Medical Action (MDCI).

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