Revenue Rises at Cyberonics

The company warns that the current quarter will miss expectations.
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Cyberonics

(CYBX)

reported first-quarter revenue that topped Wall Street's consensus estimate, but the Houston-based company warned that the current quarter's bottom line would miss expectations.

The company's loss was narrower than analysts were expecting in the just-ended quarter.

Cyberonics said Thursday it will record extra expenses in the second quarter to reflect the launch of the VNS Therapy device for treating depression. Cyberonics began marketing the device on Aug. 1 as a treatment for adults who had failed at least four previous treatments for depression.

The VNS Therapy device, which is about the size of a cardiac pacemaker, is surgically implanted in patients and delivers mild electrical shocks to a nerve in the brain.

The Food and Drug Administration

approved VNS Therapy for depression in mid-July after a lengthy and controversial review process. Eight years ago, the agency approved VNS for treating epileptic seizures.

For the quarter ended July 29, Cyberonics lost $18.9 million, or 76 cents a share, on revenue of $27 million. The consensus of analysts polled by Thomson First Call predicted a loss of $17.4 million, or 81 cents, on revenue of $26.7 million.

In the similar period last year, Cyberonics lost $2.9 million, or 12 cents a share, on revenue of $25.1 million.

Pamela Westbrook, the chief financial officer, said the 2006 fiscal year's performance will be "largely determined" by U.S. sales of the VNS Therapy device, especially as a treatment for depression.

During the fiscal year, "we will gain important clarity and certainty" on how well psychiatrists, patients and insurance providers accept the VNS, she said in a prepared statement.

For the second quarter, she predicted VNS sales in the range of $30 million to $34 million, which is in keeping with the Wall Street consensus of $33 million. She predicted a loss of $20 million to $25 million, or 80 cents to $1 a share, which is worse than the losses of $10 million and 42 cents forecast by the Thomson First Call consensus.

There will be "continued increases in operating expenses," she added, due to the VNS depression-treatment launch, as well as for post-marketing clinical studies that are a condition of the FDA's approval.

Westbrook stuck to the company's fiscal-year guidance of $145 million in sales, a maximum loss of $35 million and a loss per share of $1.41. Analysts expect $146.8 million in sales and a loss of $32.7 million, or $1.49 a share.

Cyberonics stock was off 85 cents, or 2.2%, to $38.24.

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