In a move that it said is designed to "enhance efficiency and reduce the cost of ongoing operations," embattled Vagus Nerve Stimulation (VNS) therapy provider Cyberonics (Houston) yesterday reported restructuring initiatives.

The restructuring will result in a roughly 15% reduction in staff headcount, meaning about 90 of its 600-employee workforce will be cut. Additionally, it reported the hiring of a new president/CEO, Daniel Moore, who comes to the company from Boston Scientific (Natick, Massachusetts).

The company said the $1.3 million in costs associated with the reductions will be accounted for in 4Q07, which ended Friday, April 27. It said the workforce reductions are expected to result in direct annual savings exceeding $12 million beginning in FY08.

"One of the things that we're trying to do is refocus a little bit on the epilepsy market," Hugh Morrison, chairman of Cyberonics told Medical Device Daily. "That's not exclusively, but I think we have perhaps been a bit over-focused on [treatment-resistant] depression [TRD]."

The company has been hanging its technological hat on the TRD application, a use that has been heavily criticized and one that has not panned out financially. The company most recently reported a nine-month loss of $40.4 million for its current fiscal year.

He said that decision was made based primarily on "current reimbursement trends," obviously referring to the Centers for Medicare and Medicaid Services (CMS) preliminary ruling in February rejecting the company's request to expand coverage for its VNS therapy to TRD (MDD, Feb. 7, 2007).

CMS provided full coverage for the pharmacoresistant epilepsy indication for the therapy since 1999.

"Given the difficult reimbursement environment for TRD, the Cyberonics management team and board initiated a thorough review of the company's business structure," said George Parker, the company's interim COO. "We have created extraordinary awareness and acceptance of VNS therapy for TRD, but with limited payer access we have decided to reduce our spending in demand creation while we continue to grow the body of scientific evidence for the therapy."

Morrison added: "With the distractions of the past year now behind us, the board and management of Cyberonics are fully committed to creating shareholder value by returning the company to positive cash flow generation and profitability as quickly as possible."

Those "distractions" have been comprised of a host of problems for the company over the past 18 months, including facing delisting from the NASDAQ.

Other difficult issues have included responding to governmental investigations relating to its stock option grants, several shareholder lawsuits and a forced change in its board membership by dissident shareholders backed by billionaire investor Carl Icahn (MDD, Jan. 30, 2007).

And this past November, Robert "Skip" Cummins, Cyberonics' president/CEO and chairman, and Pamela Westbrook, the firm's CFO, resigned in the wake of a stock options investigation (MDD, Nov. 21, 2006).

Moore, selected as the company's new president/CEO, will also serve on the company' board, effective immediately. Moore replaces Reese Terry Jr, co-founder of Cyberonics and interim CEO since Cummins' resignation last November. Terry will remain a member of the board.

Moore previously was with Boston Scientific, where, since 1989, he has held positions in sales, marketing and senior management in the U.S. and in Europe.

Moore told MDD that he is familiar with the regulatory and reimbursement hurdles that Cyberonics is facing at this time, but that he joined the company because he believes in the promise of neuromodulation technology.

"Coming to Cyberonics and watching neuromodulation over the last few years, I think it's the next platform in devices where we can affect the electrical systems of the body. There's a lot that is not understood yet, and that's part of what we're going through in getting the reimbursement of depression. I believe we're into a new frontier here, and what I saw with Cyberonics was a company that was a pure-play in neuromodulation."

Looking towards the company's future strategy, Moore said that, as with any medical device company, the trick is to get the "right devices, the right procedures to the right patients, and I think that's what we need to do in epilepsy. And we've just got even more work ahead of us in depression."

He noted that he sees "a lot of potential here that goes far beyond epilepsy and depression, [but] if you try to do it all at once, you probably won't do it well."