Fantastic Voyage

Cyberonics’ medical implant is the size of a chocolate-chip cookie, and it could–could–be worth $2.8 billion someday. But as this dramatic tale of innovation and entrepreneurship shows, saving lives can be one tough business.


Lying on the table in Operating Room 22 at Children’s Hospital Boston, under a blanket of sterile blue surgical draping, is a 6-year-old girl named Jordyn Cook. Jordyn has had epilepsy since she was 3, and often the seizures are so bad that they won’t stop unless she is given a dose of Valium.


She has had seizures while riding in the car, while sitting in the tub, while traveling on an airplane. “There’s no set pattern,” says her mother, Xan Cook. Jordyn’s healthy twin brother is in the first grade this year, but she is repeating kindergarten because of her illness. “It makes me sad, thinking that they’re twins and they can’t be in the same grade,” Xan says.

Jordyn has tried 11 different epilepsy drugs, none of which worked very well. Last fall, she had surgery to remove part of her brain’s right temporal lobe, which seemed to be the primary source of her seizures. That helped for a while–but then the seizures came back.

Today, a neurosurgeon named Dr. Joseph R. Madsen will implant a medical device in Jordyn that represents one of the last options for improving her epilepsy and putting her young life back on track. Madsen is the surgeon every parent would choose for her child. He is affable and supremely confident, and he has performed this half-hour procedure about 500 times. Most often, it goes smoothly–but there’s no guarantee.


Jordyn is under general anesthesia, her heart beating 88 times per minute. The left side of her chest is exposed, and so is her pale white neck. Madsen takes a blue pen and draws two lines where he will make incisions. One mark is vertical, running about an inch-and-a-quarter up her neck, directly above where Jordyn’s carotid artery pulses away. The second, slightly longer, mark also runs vertically, this one near her armpit, close to the place where Jordyn’s fingers would touch when she put her hand over her heart to say the Pledge of Allegiance.

The device that will be installed in Jordyn is a small titanium disc called a vagus-nerve stimulator (VNS). It’s about the size and thickness of a Chips Ahoy chocolate-chip cookie and costs $15,000. (The total cost of implantation can run from $20,000 to $35,000.) Similar to a pacemaker, it sends out pulses of electricity, but instead of stimulating the heart, it stimulates the vagus nerve, which runs up the neck to the brain. In many patients, the VNS device lessens the frequency and severity of seizures. It is not a miracle cure for epilepsy, but as Xan says, “We’re just trying to give Jordyn the best quality of life that she can have.”

The company that makes the VNS device, Cyberonics Inc., headquartered in Houston, traveled a rocky path toward getting the device approved and then getting neurologists to accept it as a viable treatment for epilepsy–which had previously been treated only with drugs or brain surgery. Over the course of its 16-year life, the company has coped with disappointing data from clinical trials, a newly hired CEO who quit after a week, potential acquirers who walked away at the eleventh hour, rejections by the Food and Drug Administration, and cash shortages that seemed certain to flatline the company. As a startup, Cyberonics had no other product to supply revenue; the VNS device was its lone hope. “Since I’ve been CEO, our stock has dropped 50% or more on several occasions, we’ve had under $2 million in cash on three occasions, and we’ve seen major disappointments in almost every aspect of the business,” says Skip Cummins, Cyberonics’ current CEO and one of the venture capitalists who originally funded the company in 1987.


Despite its travails, Cyberonics managed to go public and attract major investments from Pfizer and later Boston Scientific, a medical- device company. The company, which began with two employees in a strip mall, now employs 450 people, and has annual sales of $110 million. To date, 22,000 VNS devices have been implanted in people who suffer from refractory epilepsy, the kind of epilepsy that doesn’t respond to drugs.

Now Cyberonics is hoping to take the next step, one that could vault the company into the big time. It has asked the FDA to approve its device this year for use in people who suffer from severe, drug-resistant depression. It’s also investigating whether the device helps those who suffer from anxiety disorders, chronic migraines, and Alzheimer’s disease. Gaining approval into any of those areas, Cummins believes, would help Cyberonics grow from a small player in the world of medical devices into a billion-dollar company. And it’s that prospect that seems to keep Cummins going despite the company’s repeated stumbles. “I’m a person who loves challenges,” he explains. “There’s nothing I’d rather be doing than helping people trapped by bad epilepsy and, hopefully within a year, people with bad depression. If you don’t have passion and you’re not committed, don’t waste your time.” But as tough as it was to get the VNS device approved for epilepsy, making the leap to the much bigger market for depression is a task company insiders compare to climbing Mount Everest.

The era of putting machines inside the human body began in the 1960s with the pacemaker. Today, patients can receive implantable defibrillators that jump-start their hearts in mid-attack and cochlear implants that restore hearing. Progress is being made on miniature, microchip-based pharmacies that will be able to dispense drugs internally, as needed. The $60 billion medical-device industry–about 6,000 companies in the United States–is in the throes of an unprecedented wave of innovation, all concentrated on saving lives and improving their quality. In this burgeoning industry, a single person with a product and a vision can still have tremendous impact–and potentially reap tremendous rewards. But as the story of Cyberonics shows, this business also takes tremendous resiliency and determination: Conceiving a medical device, designing it, earning FDA approval, and persuading doctors to use it is one of the hardest–and riskiest–tasks in the world of business.


In Operating Room 22, just before 1 p.m., Dr. Dan Cahill, a surgical resident working under Dr. Madsen’s supervision, begins to make the incisions in Jordyn’s neck and chest. At the end of the table, Jordyn’s feet poke out from beneath the surgical draping; her toes are painted with red polish, about half of the coat worn and chipped away. Soon, her feet and her face are covered, and blond-haired Jordyn becomes just a body on the table, her heart beating 88 times per minute.

Reese Terry was the vice president of technology at Intermedics, a Texas medical-device company, in the mid-1980s, when a neurophysiologist from Temple University showed him a primitive vagus-nerve stimulator that had been implanted in dogs with some success. When the animals went into seizures, the device seemed to halt them.

Terry was intrigued, but when Intermedics funded a study of the device in four monkeys, the outcome was cloudy. “Fifty percent of monkeys it helped,” he says with a Kentucky drawl.


His employer didn’t seem interested in pursuing the epilepsy project. In 1986, Terry found himself out of a job, the victim of a corporate restructuring. Rather than looking for another job with an established device company, he decided to try to develop a vagus-nerve stimulator on his own. “It was a great idea, and nobody else was picking it up,” he says. “There was a lot of risk, but I thought I might as well try it. I knew I could design a product fairly quickly and inexpensively.”

Terry bought a book on how to write a business plan. In 1987, he managed to raise $1 million in funding from a brand new venture capital firm in Houston called Ventures Medical, along with Cummins’s venture firm, the Vista Group, and Sevin Rosen, the firm that initially funded Compaq Computer. But the money came in stages, contingent on making progress.

Terry felt far from flush. His rented office space was in a strip mall. Personnel matters were discussed in a booth at the Dairy Queen. And while $1 million is a windfall to most start-ups, he knew that it might not be enough to get the first device into a human. To save money, Terry and the medical-device consultants he hired tried to adapt off-the-shelf parts for their purposes instead of designing everything from scratch. Terry found a handful of doctors willing to try the device in their patients, though there was a lot of skepticism about stimulating the vagus nerve. Some thought it would cause heart problems or give patients ulcers, since the nerve sends signals to both the heart and stomach. “Several physicians got involved with the trials, they’ll tell you, to prove that it wouldn’t work,” says Brent Tarver, Cyberonics’ third employee and now the senior director of medical affairs. The first implant was done in North Carolina in late 1988. Patient number one was a 25-year-old man from Virginia who’d been having one or two seizures a day.


On a ski trip in Colorado that Christmas, Terry called the doctor who had performed the first implant for a status update. “The patient’s seizure rate had dropped down by about 80%,” Terry recalls. “That was a nice Christmas gift.” The results were similar in patient number two, a young man who’d been having about one seizure every hour. “His seizures went to almost zero,” Terry says. Cyberonics was getting neurologists’ worst patients–the ones on whom they’d tried every available treatment–and its device seemed to be helping them.

Cyberonics was getting neurologists’ worst patients–the ones on whom they’d tried every available treatment–and its device seemed to be helping them.

By June 1989, 10 patients had received the implant. “Not all patients responded as well as the first two,” Terry says. “It’s not a home run in every patient.” And the company had encountered its first big snafu: A wire running from the generator, the small disc that produces the electrical impulses, to the vagus nerve itself was breaking from fatigue. It had to be replaced in many of the first 10 patients, requiring another surgery.

But the results of the initial implants were good enough to raise Cyberonics to the next level. The company got a second round of venture capital, this time for $2 million. Cyberonics brought in an outside CEO and a vice president of clinical studies and regulatory affairs who’d helped Eli Lilly win FDA approval for Prozac.


The company began conducting the clinical studies that are required by the FDA to prove that a new device not only works but is also safe. The VNS device didn’t seem to cause problems, and early data looked promising. However, Cyberonics was rebuffed by the agency the first time it applied for approval, since most of its data related to patients who’d had the implant for only three months. It applied a second time in 1994, but was told that its clinical study hadn’t included enough patients. This time, the agency’s rejection hurt worse: Cyberonics had just gone public, on the assumption that FDA approval was imminent. “We completely misread the FDA,” Terry says. “We had 100 patients in our study, and they said we needed 200.” The company didn’t have the money to give the FDA what it asked for–another yearlong study with 200 participants.

The CEO left, as did the vice president who’d come from Eli Lilly. Cyberonics shrunk from 50 employees to about 35. “We had to cut back advanced development, lay people off, squinch by,” Terry says. “It was the lowest point of my career.” But the company didn’t go out of business. “We had around $20 million left over from the IPO, but that wasn’t going to be enough to do the next study,” he says. The company arranged private stock sales at low share prices to put more money in the bank. A new CEO was recruited from Johnson & Johnson to help Cyberonics make sure that the third FDA approval attempt was the charm–but he called the board of directors after a week to tell them he’d decided not to take the job after all.

At that point, Cummins, the venture capitalist serving on Cyberonics’ board of directors, was drafted to serve as acting chief. He took the job–temporarily, he thought–in part to help Cyberonics’ investors cash out. (Sevin Rosen was especially anxious to get the troubled company off its hands.) One part of Cummins’s mission as CEO was to scrounge enough money to keep the company moving toward FDA approval, but another was to find a corporate savior that would buy it.


Cummins thought he’d found just that in St. Jude Medical, a Minneapolis device maker. St. Jude invested $12 million in Cyberonics, nearly enough to complete the clinical study the FDA had demanded, and also had the option to acquire the company. Cyberonics began seeing preliminary results from its new study in August 1996. The data looked good but not great. “Patients did better, but the results weren’t outstanding,” says Shawn Lunney, a longtime Cyberonics employee who is now vice president for market development and engineering. “It wasn’t clear-cut enough for a big company.”

St. Jude bought two other device makers that fall, but not Cyberonics. “People outside the company thought it meant our device didn’t work,” Lunney says. “Shareholders were pissed off. The stock went down to $2.50, from about $6.50. But St. Jude’s investment had given us not just money but also time and some credibility. Inside, you knew that [the device] worked and that we had enough cash to make our own submission to the FDA.”

By January of 1997, Cummins had dropped “acting” from his CEO title. The company went back to the FDA once again. In June, Cyberonics executives and a group of six doctors traveled to Washington, DC, to meet with an FDA advisory panel, which makes the formal recommendation to the agency as to whether a new device should be approved for sale.


The panel unanimously recommended approval of Cyberonics’ VNS device for epilepsy. Still ahead were the difficult jobs of convincing often-conservative neurologists that they should consider using the device and persuading Medicare and private insurers to cover the cost. But on July 16, Cyberonics finally received the official approval letter from the FDA in the mail. It had taken 10 years and $50 million.

There are about 80 parts that fit together to make Cyberonics’ VNS device. A chip inside sends out precisely calibrated electrical impulses to the nerve along a thin strand of insulated wire; it’s paired with a lithium battery that powers the device for seven or eight years. The components are housed in a titanium container that’s laser-welded together.

No one knows exactly why the VNS device decreases the frequency and severity of seizures for some epileptics. It may disrupt the patterns of synchronized electrical activity that constitute a seizure, or it may change the way blood flows through the brain in a way that’s beneficial to epileptics. Since so little is known about why the device works, it’s also hard to tell which patients it will help the most. “The best way to tell,” Madsen says, “is to implant someone.”


Once doctors had begun the early trials of the VNS device, they started to notice something else. Not only was the device cutting down on seizures but the patients “all perked up after getting the implant,” says Dr. B.J. Wilder, a University of Florida neurologist, now retired, who did many of the earliest implants. “They were in a better mood.”

That led to research into whether the VNS device might help patients who suffered from prolonged bouts of depression that didn’t ease no matter what drugs they tried. Brain imaging showed that vagus-nerve stimulation was activating parts of the brain that influence mood, and there were also changes in the levels of certain feel-good neurotransmitters. The discovery certainly stimulated some good feelings at Cyberonics. The company figures the depression market is about 10 times the size of the epilepsy market.

One day in January 2002, Cyberonics executives gathered in CEO Cummins’s corner office to await some of the early results from the first big study in depression. The study involved 235 patients. Half had received eight weeks of vagus-nerve stimulation on top of their usual regimen of pharmaceuticals, and the other half had served as a control group. They’d gotten the implant and were taking their drugs–but the implant had not been turned on during those first eight weeks.


As the fax machine began to spit out data, “you could’ve heard a pin drop,” recalls Alan Totah, Cyberonics’ vice president of regulatory affairs. “We said, ‘Holy mackerel, what happened?’ ” The data didn’t show any statistically significant difference between patients in the control group and those who’d actually been receiving vagus-nerve stimulation.

Everyone had a theory as to why the results were so bad. The electrical stimulation hadn’t been high enough. Eight weeks of stimulation wasn’t long enough to have a real impact. The patients in this study were more depressed than those in an earlier pilot study, which had shown better results.

Following the bad news, three Cyberonics executives who were involved with that study left the company. Richard Rudolph, Cyberonics’ chief medical officer, argued to start another study from scratch. But that would’ve been time consuming and expensive, and Cummins didn’t feel it was necessary.


Fortunately, a change in the clinical-trials strategy produced better data a year later. One out of every six patients who had gotten the VNS device found that their depression had vanished, or that they had only a few symptoms. Just one out of 18 patients in a control group saw that kind of improvement.

In October 2003, Cyberonics shipped the requisite 10 copies of its application to the FDA to try to gain approval for treating depression. Each copy of the application filled 87 three-ring binders. The agency had previously granted Cyberonics “expedited review” status, something it does for devices that may represent a breakthrough.

It’s the first week of January 2004. Cyberonics has arranged a special conference call with the Wall Street analysts who follow the company’s stock. Seated at a conference table in Houston with eight other executives, Cummins is wearing dark-blue pin-striped pants, a light-blue striped shirt, and a bright yellow tie. His head is shaved, and he’s wearing rimless glasses. He looks as if he were dressed by a Hollywood costume designer for the role of someone who runs a bond-trading desk.

The call is a blend of good news and bad news. The company is lowering its earnings estimates for the last two quarters of its 2004 fiscal year–bad news that is saved for the very end of the call. The good news seems based largely on guesswork and wishful thinking. FDA approval for depression is expected to come relatively easily, since the device is the same as the one that has already been implanted in 22,000 epilepsy patients, and it will be made in the same FDA-inspected faci-lity at Cyberonics’ Houston headquarters. And the FDA’s review of Cyberonics’ filing documents seems to be going smoothly.

When the FDA is ready to summon Cyberonics to a panel meeting, it will send a letter. As of January, the company hadn’t received it. Still, on the conference call, Totah, the head of regulatory affairs, makes what amounts to an educated guess that the company will be invited to present to an FDA panel in April. Totah says if the company gets that chance–the process sounds a bit like going to see the Wizard–Cyberonics expects the FDA will make its decision by July.

Those are big suppositions for a company with Cyberonics’ history. And on the basis of those suppositions, Cummins announces to Wall Street, the company will spend $5 million hiring 140 sales and marketing staffers over the next six months and training the company’s existing sales staff to sell the VNS device to psychiatrists. Cummins tells the analysts that 4.4 million people in the United States suffer from deep depression that doesn’t respond to existing treatments, and he predicts that Cyberonics can sell $2.8 billion of the VNS devices to that population in the next six years.

After the call, Cummins tells his executives, “Now all we need to do is deliver on our revised promises. It wouldn’t be good to change them again in three weeks,” when the company will hold its regularly scheduled third-quarter earnings call. Heading back to his office, Totah is confident in his interpretation of the FDA’s next move. He says that with 30 years of device experience, understanding the workings of the agency no longer feels like Vatican-watching.

“Such a little girl,” the surgeon murmurs as he slips the device into her chest. “I want to get it nicely under the muscle” so it’s less visible beneath her skin.

But the next day, in an interview, Terry, the founder who now sits on the company’s board, sounds apprehensive about trying to read too much into the FDA’s tea leaves. “I didn’t understand it,” he says of the guesswork presented in the conference call. “There was no announcement from the FDA. This is really just our best estimate.” Later in January, Terry’s conservatism is borne out. The FDA cancels its April panel meeting–the one Totah had predicted Cyberonics would attend–without explanation. Cyberonics is also forced to change its financial projections again, for the worse. It starts talking about a July date with the FDA, and the stock sinks.

In Operating Room 22, Madsen and Cahill are fishing for the vagus nerve. It’s not always easy to find. The nerve itself is a whitish-yellow cord, about the width of a cocktail straw. It runs alongside the carotid artery and the jugular vein–treacherous terrain.

The surgeons loosely loop a strand of blue surgical thread behind the nerve to keep it separated out from the blood vessels. The most delicate part of the procedure involves wrapping three tiny coils around the nerve. The coils, which will deliver the electrical impulses from the generator, look very much like the tiny metal spring inside a ballpoint pen. “It’s a tiny little procedure,” says Cahill, the surgical resident. “You just focus very hard on what you’re doing.” As he’s wrapping the coils around the nerve, it looks like he’s tying a fly.

They thread the wire from the incision in Jordyn’s neck down to her armpit. There, Madsen plugs the wire into the titanium-encased generator, and using a small screwdriver, he turns a screw until he hears two clicks, indicating that the wire is tightly connected. He slides the generator into a small pocket he’s created in the flesh, and in a few seconds, it has disappeared underneath Jordyn’s pectoral muscle, like a shiny coin in a magic routine. “Such a little girl,” Madsen says. “I want to get it nicely under the muscle,” so that the device isn’t very visible beneath her skin.

Before they close the incisions, Madsen picks up a Dell handheld computer that’s used, with a Cyberonics-designed “programming wand,” to test the VNS device and make sure that the generator, the wire, and the coils are all working properly. In rare instances, the test, which sends a large electrical impulse through the system, can cause the patient’s heart rate to drop, so the anesthesiologist stands at the ready.

Madsen looks puzzled. “This came back as ‘high impedance.’ “

“Oh, that’s not good,” Cahill says. The electrical current isn’t flowing properly along the circuit that runs from the generator to the vagus nerve. “We may need to open this back up and fiddle with it,” Madsen says. “There’s something wrong with the way it’s interpreting the connection. It could be the [wire] or the generator that’s a problem.” Madsen and Cahill seem miffed; they thought they were in the home stretch. Madsen asks a nurse to make sure that the hospital has a spare VNS device on hand in case this first one proves defective.

Madsen proceeds to pull the generator out of Jordyn’s chest, and starts to troubleshoot. “We want to localize the electronic problem to the generator or the cables,” he says. He unplugs the wire, wipes it off, and plugs it back in. Cahill holds the generator in his hand, and Madsen tests it again with the computer and wand setup. He clicks the computer’s touch screen with a silver surgical clamp; it emits a faint chime, and they wait for the diagnostic to run again. A segmented progress bar creeps across the screen. “Now it says the impedance is okay,” Madsen says. He still can’t figure out what

exactly happened: “It could be that the screw didn’t seat right.”

He puts the device back into Jordyn’s chest and tests it again. It’s fine. They start to close the two incisions, using dissolving sutures on the inside and a surgical glue on the outside.

Madsen, with some 500 VNS implants and replacements under his belt, says, “I have not seen that particular thing happen in just that way.” But the patient is in good shape. It’ll take a few weeks to see whether the device reduces Jordyn’s seizures, though, as the amount of electrical stimulation is progressively increased.

A half hour later, the patient is resting in a postoperative recovery room. She’s expected to go home the following morning. (Many recipients of the VNS device go home the same day.) With her mother and father standing next to her bed, Jordyn’s eyelids flutter open for a second–and then she goes back to sleep. nFC

Scott Kirsner writes about technology from Boston.