For some epilepsy patients, the first shot at treatment is often the best.
About 50 percent of epileptics experience a reduction in seizures after being placed on prescription medication for the first time. The other half of the patient population is often forced to try a number of other possible drug therapies before finding one that works, and even that’s sometimes a long shot. Research suggests that the likelihood of reducing seizures in this “refractory” population goes down significantly after the first treatment fails, leaving physicians and patients trying up to eight or nine different types of medication to stop the debilitating seizures.
Enter Cyberonics Inc. (NSDQ:CYBX) of Houston, Texas, where the answer isn’t more drugs, but a treatment similar to cardiac defibrillation therapy. The vagus nerve stimulator that Cyberonics sells about $100 million worth of every year uses a pacemaker-like device implanted in the chest, with a lead threaded under the skin to the left vagus nerve in the neck. The device emits a small, intermittent pulse to the brain, designed to help prevent the electrical irregularities that cause seizures.
MassDevice caught up with Cyberonics CEO Daniel Moore, who was in Boston for the American Epilepsy Society‘s annual meeting. Moore has deep roots in the Hub, having attended both Boston University and Harvard University. He’s also a Boston Scientific Corp. (NYSE:BSX) alum and spoke at some length about how his experiences there, during Boston Scientific’s expansion into a multi-billion-dollar global company, helped shape his vision for Cyberonics since he took over two years ago.
MassDevice: Can you give us a 1,000-foot view of the VNS therapy from a clinical standpoint and how it can be effective in reducing epileptic seizures?
Daniel Moore: The idea of using neuro-modulation, or vagus nerve stimulation, for patients with epilepsy is really targeted at the refractory population. When someone is diagnosed with epilepsy, the logical first approach is to try a drug, a single drug or mono-therapy, and that’s successful in 40 percent to 50 percent of the cases. In the event that that drug fails, they’ll usually try a second drug, again in a mono-therapy fashion, and your success rates go down from there to about the 25 percent range. The third drug, or a combination of drugs, is usually the next step after two failures.
But the biggest single indication of either success or failure of drug therapy for a patient with epilepsy is the uptake of that first drug. It’s been been shown that this has nothing to do with VNS; it’s more the condition of epilepsy and the effectiveness of drugs.
So the patient population we’re talking about is largely this drug refractory population, which means even though they are on prescription drugs, the drugs do not provide them sufficient relief from their seizures. From there, the idea is that there are ways that neuro-modulation can provide relief to some of those patients. Traditionally, that’s been done by choosing an endpoint that was chosen in pharma trials as well, which is a 50 percent reduction in seizure activity. The way that endpoint is usually expressed is the percentage of patients that have a 50 percent or more reduction in their seizures. The early trials, going back 15 years or so, show that going out at the two- and three-year point, it was about 43 percent of patients. However, the therapy and the benefit that goes beyond the 50 percent reduction is evidenced by VNS re-implant rates, which are around 70 percent or greater when the battery goes. So it’s an adjunctive therapy for patients who have failed drug therapy.
MassDevice: Would you describe this as a therapy of last resort, or something that’s only used when all other pharmaceutical methods have been shown to be ineffective?
DM: I would say it’s not used as early in the cycle as we would like, but I wouldn’t refer to it as a therapy of last resort. There are other therapies that can be tried, it just depends on which order the physician chooses. I mentioned a second, third and possibly fourth drug; the average patient might have to have seven or eight drugs before they have VNS. That’s not the case for all patients; if you go to the largest children’s hospital in the U.S. in Houston, after the second drug failure they begin to talk to their patients’ families about alternatives.
Those can include, in the case of pediatrics, a ketogenic diet, surgical resection — which is identifying an area in the brain where the seizure activity is coming from and just that area of the brain is resected — and then VNS is also an alternative. So I wouldn’t call it a last resort. I think what’s happening is that it’s being recognized as an alternative therapy when drugs fail.
MassDevice: How do you get physicians to consider this at an earlier stage? What’s the challenge in getting this therapy introduced earlier in the course of treatment?
DM: It depends on the practice, but it’s more of a challenge to get physicians to consider it earlier in the patient population. If you look at the Kwan/Brodie paper, once the patient fails the second drug ,the likelihood of a third drug working goes down to 2.3 percent. With the fourth and fifth drugs, it falls to 0.8 percent chance of the patient becoming seizure-free.
And if you go back to 30 years ago, when there were just two or three drugs available and about 30 percent of patients were refractory, if you fast-forward from there to 10 years later, when they had six to eight drugs available, they still had a population where 30 percent were refractory. Today, there are easily 15 — and I’ve heard of as high as 25 — different types of drugs that could be tried for epilepsy, and yet the average percentage of patients in a physician’s population that are refractory has not changed. What has changed somewhat is the cumulative effects of these drugs.
Drugs do wonderful things for a lot of people, but they are chemicals being introduced to the body and they do have a cumulative effect on people. Sometimes the idea of going to VNS is about improving quality of life as much as it’s about reducing the seizure count. More drugs, or higher concentrations of drugs, may reduce seizure counts, but that come with side effects — both day-to-day in a person’s mood, gaining or losing weight and their overall ability to function cognitively. And then there are the long-term effects of putting those drugs into patients. The challenge is getting it back from waiting until you’ve tried the seventh or eighth drug to looking at the data and saying, “If they haven’t responded after two, they’re unlikely to respond to more,” and perhaps it’s time to bring in other options like VNS, or surgery, or a ketogenic diet.
MassDevice: We’re talking as Medtronic has just released the results of a pivotal study on deep-brain stimulation therapy for epileptics. Can you distinguish between VNS and deep-brain stimulation?
DM: The primary difference is that we are able to impact the brain without doing brain surgery. We implant a small, pacemaker-like device in the chest and we run a small electrode to the vagus nerve in the neck. Our therapy delivers a pulse from that generator, at a program interval, up the electrode onto the vagus nerve and the vagus nerve takes over and uses the body’s pathways to our advantage to send that signal up into the brain. Our procedures are outpatient, much more straightforward. In the case of DBS, you’re burning a hole through the skull and placing depth electrodes in the brain. There’s a remarkable difference.
MassDevice: Who are your competitors?
DM: Our main competition is the pharmaceutical industry. If patients can get seizures stopped with just one drug, then that’s great. It’s not really competition for us, because the patient’s going to end up on that drug, which works for them as long as it will. Sometimes patients will have breakthroughs on seizures and then move on to a second drug and that’s quite frankly one of the ways a patient can end up on seven or eight drugs before they try something else.
MassDevice: Your sales are very healthy, around $40 million last quarter, the majority of which came from VNS therapy. What’s your market share look like?
DM: Our focus is limited to epilepsy and medical devices for epilepsy. The primary business is the vagus nerve stimulation and that consists of the generators, the leads, a programmer and a wand. But most of the revenues come from the generators and the largest amount of the revenue comes from the leads.
As for our market share, we have sort of a “good news, better news” situation. The good news is Cyberonics is one of those few start-ups that actually made it through a long start-up period, in this case 10 years, made it through the Food & Drug Administration and got a product to market, then built that product line to more than $100 million [in revenues]. So the good news is that we’ve hit the $100 million threshold, have good margins and there’s a lot we can do to continue the mission.
The better news is that represents about 10 percent market penetration, over the last 10 years, of potential patients that are within our FDA labeling. We have about 400,000 potential patients under FDA labeling, so that’s the prevalence. On the incidence side, there’s anywhere from 125,000 to 250,000 patients diagnosed every year with epilepsy, according to the Epilepsy Foundation. Using the our indications that’s about 24,000 new potential patients for us coming into the pool every year. Over the years we’ve treated about 45,000 patients. Last year we did about 3,500 new patients in the U.S.
So when I say there’s better news out there, I mean that although the penetration is low there’s plenty of opportunity to go out and get more patients introduced to the therapy.
MassDevice: Cyberonics also has an indication for treating depression. What’s the status of that business line?
DM: We do. I think the original strategy was, after the company got approval for the epilepsy procedure, for this to become a VNS platform strategy where you would go from the approval on epilepsy to the next indication, which was depression. It’s the same kind of scenario, where you have patients whose drugs failed them for depression and there’s potential for a neuro-modulation play.
The company did get FDA approval for using VNS for depression, but failed to get the CMS reimbursement coverage decision for depression. We’ve continued a couple of studies in the area of depression, but I think the new team came in two-and-a-half years ago to run an epilepsy company and to continue with depression, but make the focus bringing device technology to patients with epilepsy.
MassDevice: So the depression product’s on the back burner now?
DM: Well, we’ve moved a lot of the spending, because the market size for depression is 10 times the size of the epilepsy market, unfortunately, in the U.S. A couple of the other, larger companies are doing neuro-modulation studies with depression. So although we moved a lot of resources of the company over to epilepsy, which was largely neglected for the last few years before we came in, we continued the clinical part of [the] depression [indication] to enroll the post-market FDA trials that we had agreed to do, so that we could gather more evidence over time.
So it’s on the back burner in the sense that we don’t have as much resource loaded onto the indication, but we continued on with the two most important things that we could do to further the evidence of VNS for depression, by continuing to enroll in those two trials. One of those trials completed enrollment last February; there’s a one-year follow up on that trial, so we will be un-blinding it early next calendar year.
MassDevice: So making VNS therapy into a platform technology is still a goal?
DM: In a sense. If you look at our investment in R&D and where we’ve chosen to go, this probably comes out of having spent a lot of years in devices and looking at how you build a device company.
When I joined Boston Scientific, it was a $100 million company. Eighteen years later, when I left, it was $8 billion. This isn’t unique to Boston Scientific. If you look at what Boston Scientific, Medtronic and J&J all did when they built the device businesses, they went from being small companies to larger, $100 million divisions to device businesses that were worth billions. Because when you go into an area, either a procedure or a call point — in our case it’s the epileptologist, neurologist and the neurosurgeons — you build that business around a call point, as long as it’s profitable to continue to grow and expand that business. If you want to do something else like depression, you start building that business alongside of the other businesses.
When I joined Boston Scientific, there were three divisions that made up that $100 million. By the time I left I think it was more like nine or 10 divisions, and that original division was still there, still growing, still bringing technology to people, and I think that’s more the view we have. Instead of betting the farm on a platform strategy, where you abandon one strategy and go to the next one because it’s 10 times the market size, then what’s next?
Either sell the company or go into obesity, because those numbers are probably even bigger, in more ways than one. We came in and said, “We’re here to build a device company.” There’s some great things about this; you’ve got $100 million in revenue to work with each year, you’ve got margins north of 80 percent, you’ve got an under-served patient population. We can bring device technology that’s been created for other indications, like cardiology, and bring some of it over to the under-served epilepsy patient population and have a good future doing that.
So we went from a platform strategy to building a smaller device company that you could grow into a larger device company around a call point.