Cyberonics Shares Drop After Downgrade To 'Hold'

NEW YORK (AP) — Shares of medical device maker Cyberonics Inc. fell Wednesday after a Canaccord Adams analyst downgraded the company, saying a Belgian biopharmaceutial company's new anti-seizure drug will slow Cyberonics' patient growth and drag on sales growth.

The new drug, Vimpat, has seen increasing prescriptions since being launched in June, said analyst William Plovanic in a note to analysts Tuesday. Patients are likely to try Vimpat before Cyberonics' VNS therapy system, he said, and those using Vimpat could see a three to six months' delay before doctors prescribe them VNS. New patient growth will be hit, he said.

He downgraded Cyberonics to "Hold" from "Buy."

VNS (vagus nerve stimulation) is used as a secondary therapy to anti-seizure medication for treating epilepsy and other neurological disorders. It will only be prescribed after patients try drugs, Plovanic said.

Plovanic also said the company's management has indicated it will face a higher tax rate in 2010, and he believes that will trigger analysts to cut future earnings estimates. That may weigh on the stock, he said. He cut his price target to $16 from $21.75.

Cyberonics shares dropped $1.05, or 5.9 percent, to $16.79 in afternoon trading.