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Cyberonics, Inc. Competitor Data Further Validates Chronic Heart Failure Opportunity

This morning, BioControl Medical (a vagus nerve stimulation [VNS] therapy developer for chronic heart failure) announced that its pilot clinical study of its CardioFit VNS system has been recognized as seminal original research (research that is expected to provide a solid basis for future studies in the field) in the European Journal of Heart Failure. We view this announcement as a positive sign for Cyberonics, as the validation of clinical data associated with chronic heart failure begins to frame the opportunity for the company going forward.

The initial pilot clinical study (published early this year) demonstrated that chronic vagus nerve stimulation is associated with improvements in the six-minute walk test, left ventricular ejection fraction, and systolic volumes up to one year. More recent clinical results with the device were released at the American Heart Association Scientific Sessions in November, which showed favorable clinical effects (improved hemodynamics, quality of life, and six-minute walk test) in patients beyond the
study’s initial endpoints (initially 6-12 months; patient follow-up now extends beyond four years with good results and no reported safety issues). While these initial results are compelling, we expect the INOVATE-HF trial (a randomized, multicenter, IDE clinical study funded by an investment by Medtronic [MDT $42.56; Market Perform]) will further validate the technology. Though there has been no further update as to the timing around the trial, we expect that the clinical studies will wrap up in a little over a year or so (the trial began in 2011, and at the time it was expected that the clinical trials would last around three years).

We view BioControl as a company to monitor in chronic heart failure (we do not view it as a likely competitive threat in epilepsy), as Cyberonics is researching its system for this application. BioControl’s device (CardioFit) is slightly different in that it stimulates from the right side of the vagus nerve and has an additional lead to the heart (considered more invasive, as the extra lead stimulates downward), though any clinical support that suggests vagus nerve stimulation can be used for the treatment of chronic heart failure (CHF) is a positive sign for Cyberonics, since it plans to enter the market in the next few years.

In addition to BioControl, there are other companies (such as NeuroTECH, recently sold to Sorin, and Boston Scientific [BSX $5.74], which has been doing further clinical research in the area) that are pursuing the CHF indication with vagus nerve
stimulation therapy. Cyberonics has indicated that it will likely partner when it decides to enter the market for CHF, and we expect that the company will choose a partner with a sizable distribution network and experience in the heart failure
industry (St. Jude [STJ $35.38; Market Perform] may make sense given its experience within the cardiology space).

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