Cyberonics and Depression's Happy Face
Seven years ago, Cyberonics was all but dead, with an interesting technology and little else. Left at the altar when St. Jude refused to exercise an option to buy the company, Cyberonics faced the daunting task of getting FDA approval for a novel approach to epilepsy therapy and convincing a conservative customer group, neurologists, of the value of its vagus nerve stimuation (VNS) therapy. But Cyberonics was able to establish VNS in epilepsy and the company is now targeting depression, a market that could be as much as ten times larger than its first indication. And as Cyberonics' prospects brighten, the company now faces the challenge of keeping would-be acquirers at bay.
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The market for neurostimulation products in the US was valued at approximately $1.3 billion in 2009 and it hasn't even scratched the surface of its potential. According to "US Markets for Neurostimulation Products," a report published in March by the Medtech Insight division of Elsevier Business Intelligence, this market is projected to grow at a healthy compound annual rate of almost 16%, reaching more than $2.7 billion five years from now.
The seeds planted in neurostimulation ventures over the past 10 years have produced more disappointments than results, but the fallow period is over. The Food & Drug Administration recently cleared Neuronetics to begin selling its NeuroStar TMS as a treatment for people who haven't responded to a drug regimen taken during their current episode of depression. This is good news for scores of venture-backed neurostimulation companies, although Neuronetics is somewhat unique. It is developing a non-invasive device that delivers magnetic, rather than electrical pulses.
For Northstar Neuroscience, which is exploring new approaches for neurostimulation devices, the decision to take the money and run when the device IPO window was open in 2006 has meant the difference between survival or closing up shop. The FDA's recent approval of the company's second study of its Renova cortical stimulation device for the treatment of major depressive disorder is one sign that reports of Northstar's demise may, have been premature. The company's second chance can largely be attributed to the fact that it flew in the face of conventional wisdom that held that it was too early for the company to go public in 2006.