HOUSTON, Jan. 24 /PRNewswire-FirstCall/ --
Cyberonics, Inc. (Nasdaq:
CYBX -
News)
today announced that it will send the following letter to stockholders
urging
them to vote to reelect the Board's highly qualified nominees, Stanley
H.
Appel, M.D., Tony Coelho, Guy C. Jackson, Kevin S. Moore, Hugh M.
Morrison,
Alan J. Olsen, Michael J. Strauss, M.D., M.P.H., and Reese S. Terry, Jr.
January 24, 2007
Dear Fellow Cyberonics Stockholder,
Cyberonics' February 1st Annual Meeting of Stockholders
is rapidly
approaching, and your vote is important, no matter how many, or how
few,
shares you own. We urge you to support your Board of Directors by
signing,
dating and returning the enclosed WHITE proxy card today.
In advance of the Annual Meeting, members of our Board
and management team
have been meeting with stockholders to have open discussions about the
future
of our Company. We have appreciated the opportunity to exchange ideas
and
share our vision of Cyberonics' bright future. While we did not seek
out this
proxy contest -- and indeed, sought to avoid it -- we are grateful for
the
opportunity it has provided us to meet with you and benefit from your
insights.
We are resolutely focused on creating stockholder value, and we are
actively
executing on a strategy designed to make it happen.
YOUR BOARD HAS IMPLEMENTED STRONG
CORPORATE GOVERNANCE SAFEGUARDS
You should be aware that your Board has proactively
addressed a number of
governance issues over the past year, even before this proxy contest
began.
For example, the Company has adopted an option grants policy with
underlying
work instructions that are meant to ensure tight administrative
accountability.
The work instructions describe the process for initiating, approving,
and
documenting all equity grants and the persons responsible for each step
of the
process. Among the highlights of the policy are:
-- Officers and directors are not eligible to receive options. Equity
grants to officers and directors will be limited to restricted stock.
This codifies a practice adopted in 2004.
-- Restricted stock grants to officers and directors can be made only
once each year on the date of the annual meeting.
-- Equity grants to other employees can be made only once each quarter in
the 7th week of the fiscal quarter. All paperwork for these grants
(other than Compensation Committee approval) must be complete by the
4th week of the quarter.
VOTING ADVISORY FIRM ISS RECOGNIZES OUR STEADILY INCREASING REVENUES, COST
CUTTING EFFORTS, AND INCREASING GROSS PROFIT MARGINS
In addition to recognizing a number of improvements our
Board is making,
we are pleased that Institutional Shareholder Services (ISS), a leading
independent voting advisory service, recommended that Cyberonics
stockholders
vote to re-elect Cyberonics' Chairman, Tony Coelho, to the Cyberonics
Board of
Directors. In its January 22, 2007 report, ISS stated:
-- "[O]perationally the company has been able to steadily increase its
revenues, expand into international markets, and as a result of an
internal cost structure review, has been able to increase its gross
profit margins."*
-- "The company is awaiting favorable coverage from the large national
and regional insurance payers which may require close relationships
with constituencies such as lawmakers, regulators, providers and major
payers which could be critical to the company's success. We believe
that the presence of Tony Coelho on the board could enhance this
process, particularly given his experience and his position as the
chairman of the Epilepsy Foundation. As such, we believe that Tony
Coelho should continue as a director."*
-- "[W]e believe that replacement of Tony Coelho could negatively impact
the execution of the company's business plan, in particular obtaining
broad-based national and regional coverage policy for treatment using
the VNS device."*
* Permission to use quotations from the ISS report was neither sought
nor obtained.
OUR BOARD AND MANAGEMENT HAVE IN PLACE A STRATEGIC PLAN
We've heard in our meetings with stockholders that you
would like a
clearer understanding of our plan to create value and of the key
milestones on
the path ahead. We're proud of the actions we have already taken to
position
Cyberonics for continued success. As a result of these efforts,
Cyberonics is
now a stronger company with less risk and uncertainty. Our focus is on
obtaining broad-based national and regional coverage policy for Vagus
Nerve
Stimulation Therapy (VNS Therapy) in treatment-resistant depress (TRD)
more
quickly than we did for refractory epilepsy.
As you may know, we expect to receive a proposed
national coverage
determination for VNS Therapy in TRD from the Centers for Medicare
& Medicaid
Services (CMS) on February 7, 2007. If favorable, this will be an
important
step forward in the quest for TRD coverage. During the first public
comment
period for our TRD coverage request, CMS received 1,329 public
comments, 99.5%
of which favored coverage for TRD, including comments from 258
psychiatric
thought leaders and psychiatrists, 50 neurologists, more than 100 other
healthcare professionals, 645 patients and family members, 41 patient
advocacy
groups, and more than 20 members of Congress.
Given the body of clinical evidence that VNS Therapy in
TRD is safe and
effective, and the overwhelming support among physicians and patients,
CMS
should propose a favorable coverage policy for our life-altering
product.
Even if CMS proposes a favorable coverage policy, however, our quest
for
coverage among major private payers and the sales growth that will
accompany
increased coverage must continue anew. In this regard, continuity on
your
Board is critical as the current Board members have relationships with
key
constituencies that are critical to our success, in particular, key
contacts
with lawmakers, regulators, providers and major payors -- our most
important
constituencies.
WE URGE YOU NOT TO JEOPARDIZE THE CONSIDERABLE SUCCESS WE HAVE ALREADY
ACHIEVED
Your Board unanimously recommends that Cyberonics
stockholders vote to
reelect the following highly qualified individuals: Stanley H. Appel,
M.D.,
Tony Coelho, Guy C. Jackson, Kevin S. Moore, Hugh M. Morrison, Alan J.
Olsen,
Michael J. Strauss, M.D., M.P.H., and Reese S. Terry, Jr. Each of these
directors possesses extensive and relevant experience, and
relationships with
key constituencies that are critical to the Company's success.
TIME IS SHORT. Protect your investment in Cyberonics
TODAY by voting your
shares by phone, by using the internet, or by signing, dating and
returning
the enclosed WHITE proxy card.
On behalf of your Board of Directors, thank you for your continued support.
TONY COELHO REESE S. TERRY, JR.
Chairman of the Board of Directors Interim Chief Executive Officer
About VNS Therapy and Cyberonics
Information on Cyberonics, Inc. and VNS Therapy is
available at
http://www.cyberonics.com
and http://www.vnstherapy.com
.
Additional Informational and Forward-Looking Statements
These Definitive Additional Materials contain
forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended
and Section 21E of the Securities Exchange Act of 1934, as amended.
These
statements can be identified by the use of forward-looking terminology,
including "may," "believe," "will," "expect," "anticipate," "estimate,"
"plan," "intend," and "forecast," or other similar words. Statements
contained in these Definitive Additional Materials are based upon
information
presently available to the Company and assumptions that the Company
believes
to be reasonable. The Company is not assuming any duty to update this
information should those facts change or should we no longer believe
the
assumptions to be reasonable. Investors are cautioned that all such
statements involve risks and uncertainties, including without
limitation,
statements regarding creating stockholder value, obtaining favorable
reimbursement coverage by CMS and other payers for VNS Therapy in TRD,
and
execution of our business plan. The Company's actual decisions,
performance
and results may differ materially. Important factors that may cause
actual
results to differ include, but are not limited to: continued market
acceptance
of VNS Therapy and sales of the Company's product; the development and
satisfactory completion of clinical trials and/or market test and/or
regulatory approval of VNS Therapy for the treatment of Alzheimer's
disease,
anxiety, or other indications; adverse changes in coverage or
reimbursement
amounts by third-parties; intellectual property protection and
potential
infringement claims; maintaining compliance with government regulations
and
obtaining necessary government approvals for new applications; product
liability claims and potential litigation; reliance on single suppliers
and
manufacturers for certain components; the accuracy of management's
estimates
of future expenses and sales; the results of the previously disclosed
governmental inquiries; the impact of the previously announced
restatement of
the Company's financial statements or other actions that might be taken
or
required as a result of the review by the Audit Committee of the
Company's
Board of Directors of the Company's stock option grants, procedures,
and
practices, including a default under credit facilities or debt
instruments;
any litigation relating thereto or to the Company's stock option
grants,
procedures, and practices (including the previously disclosed private
litigation); uncertainties associated with compliance with the
requirements of
the NASDAQ Panel to avoid possible delisting of the Company's stock
from
NASDAQ for failure to file timely periodic reports with the SEC;
uncertainties
associated with any appeal concerning any possible delisting by NASDAQ;
uncertainties associated with stockholder litigation and other risks
detailed
from time to time in the Company's filings with the SEC. For a detailed
discussion of these and other cautionary statements, please refer to
the
Company's most recent filings with the SEC, including its Form 10-K for
the
fiscal year ended April 28, 2006.
