Thursday, February 6, 2014

Seeking Alpha: Depression Likely The Biggest Incremental Driver For Cyberonics

Watching Cyberonics (CYBX) evolve over the years has been pretty compelling. I was part of a sell-side research team that covered the stock in the late 90s and early 00s and followed the company as it struggled to gain the acceptance of the FDA, physicians, and patients, not to mention overcome a particularly aggressive CEO. In more recent years, the company has settled into a solid growth trajectory driven by incremental market penetration and a very strong replacement cycle, while delivering impressive margins.

The question is what comes next. While I do believe the company's core addressable market in developed countries (epilepsy) remains significantly under-penetrated, I don't see that changing rapidly or dramatically. That puts even more significance on the under-developed opportunity in depression, where the company has only a limited opportunity to drive real change. Although these shares aren't all that expensive relative to other growth med-techs on the basis of multiples, it's going to take either accelerated penetration in epilepsy or upside in depression to drive a higher intrinsic fair value.

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Depression Likely The Biggest Incremental Driver For Cyberonics

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