Cyberonics rises on expectation of higher sales

Shares of medical device maker Cyberonics Inc. climbed Monday on expectations that sales of new and replacement stimulation implants will drive sales higher in coming quarters.

The Houston-based company's stock rose $1.42, or 12 percent, to $12.91 in midday trading.

Last week Piper Jaffray analyst Thom Gunderson upgraded the stock on strong second-quarter earnings, which included a 24 percent rise in sales.

Gunderson said an uptick in revenue from new implants suggests "the company's refocused sales force is on track and that market penetration can increase."

Cyberonics' chief product is the Vagus Nerve Stimulator, or VNS system, which is used to treat seizures and severe depression. The device is implanted in a patient's chest and sends electrical signals to nerves in the neck to alleviate symptoms.

Gunderson said increased sales of replacement devices also suggest the company will boost sales in coming quarters, as a wave of batteries on already-implanted devices begin to expire. In a note to investors, Gunderson also wrote that the company is working on new devices to detect seizures, ahead of 2011 patent expirations on its current device.

"With a return to profitability, a pipeline of new products to strengthen IP, a significant replacement cycle opportunity, and now a return of new patient growth, we see limited downside to current levels," Gunderson wrote.

He upgraded Cyberonics shares to "buy" from "neutral" and affirmed a price target of $15.