FDA approves Cyberonics depression device

A stopwatch-sized device that uses electrical impulses to treat chronic depression won U.S. Food and Drug Administration approval, Cyberonics said on Friday.

About 18.8 million adults in the United States suffer from depression in any given year, according to the National Institutes of Health.

News of the FDA approval sent the company's shares up 8 percent in after hours trading to $48.50. Those gains were pared back to $47.50 before after hours trade was through.

The device, known as the Vagus Nerve Stimulation (VNS) Therapy System, is implanted in the chest and sends impulses to the brain through a nerve in the neck. It was cleared by the FDA for long-term use in adults whose depression has not responded to other treatments.

FDA officials cautioned that the VNS device is not to be used as the first therapy but would give the sickest patients another option.

"We're really dealing with a very sick group of patients here. These are not standard depression patients," said Dr. Daniel Schultz, director of the FDA's device center.

The device would carry the strongest warning possible - a so-called black box - cautioning patients that the device is permanent, Schultz said in an interview. Cyberonics will also have to create a registry to monitor some patients.

The Houston-based firm ramped up its sales force during the last three months and has 200 people to start calling on customers on Monday, Cyberonics Chief Executive Officer Robert "Skip" Cummins report.

"We have the potential to do $300 million in revenue in the first four quarters after launch," he said.

Analysts said the long-anticipated decision would boost shares of the Texas-based firm.

"I expect Monday's trading will be chaotic and the stock will go up some more on the reality of the good news rather than on the prospect of the good news," Piper Jaffray analyst Thomas Gunderson said.

But FDA approval sparked renewed concern from patient advocates. The agency rejected the device in August 2004.

"It's a new low for FDA device approvals. If this device can get approved with data as unconvincing as these, it's hard to see what can't get approved," Peter Lurie of Public Citizen's Health Research Group said.

An FDA advisory panel last year supported the device but said muddled data made it hard to tell if the implant or other factors were at work. The advisers also worried about suicide risk seen in some study patients who received the device.

In February, the FDA granted conditional approval if the company provided more information.

The agency's handling of the Cyberonics application is the subject of a Senate Finance Committee Investigation. Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican, and the committee's ranking Democrat, Sen. Max Baucus of Montana, said on Friday that their inquiry would continue.