Replies to post #29962 on Biotech Values

[DewDiligence]

More on CYBX…

http://boston.com/globe/business

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Problems put FDA under senator's scrutiny

June 8, 2006

Food and Drug Administration problems that have attracted the attention of Senator Charles E. Grassley and his investigators:

…Scientific integrity: A senior FDA staffer last year overruled more than 20 scientists who had spent 15 months reviewing the safety and effectiveness of the Vagus nerve stimulation therapy system, an implant to treat chronic depression . The reviewers said Cyberonics Inc., the device's maker, did not demonstrate a reasonable assurance of its safety and effectiveness for that use.
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[DewDiligence]

Cyberonics Says SEC Probing Stock Options

[Perhaps the SEC will find other interesting stuff while they’re at it. This company has no shame.]

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20060612:MTFH65836_2...

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Mon Jun 12, 2006 8:55 AM ET

CHICAGO, June 12 (Reuters) - Medical device maker Cyberonics Inc. < CYBX > on Monday said the U.S. Securities and Exchange Commission is conducting an inquiry into stock options granted at the company.

In recent weeks, about 30 public companies have disclosed criminal, regulatory or internal probes into possible manipulation of stock options.

Cyberonics, which makes implantable devices to treat severe depression and epilepsy, last week denied allegations by a securities analyst that certain stock option grants were timed to create a windfall for its executives. In the SEC filing, the company said it has confirmed that the grants in question were approved unanimously by its board of directors without any participation by management. Cyberonics said the options, which vest over a five-year period, were previously disclosed in SEC filings.

"None of the options subject to the grants have been exercised and none of the underlying shares have been sold," the company said in the filing.

Cyberonics said it will review its prior options grants and practices, in cooperating with the SEC.

Last week, Robinson Humphrey analyst Amit Hazan issued an investor advisory saying certain Cyberonics options were granted by the board just hours after the company received positive news about the regulatory prospects for its depression device.

Hazan said the options were granted after a U.S. medical advisory panel recommended approval of the device but before Cyberonics shareholders got to trade on the news.

The next day, Cyberonics shares jumped 78 percent. Cyberonics Chief Executive Robert "Skip" Cummins reaped an "overnight paper profit" of $2.3 million, and two of his lieutenants also benefited, Hazan wrote.
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[DewDiligence]

Skip Cummins better hire a good lawyer.
Never mind the SEC—Grassley et al are
now talking about criminal charges.

http://online.wsj.com/article/SB115022849102179235.html

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“I've asked the Justice Department to let me know whether the tax laws on the books are adequate to rein in and prosecute stock-option backdating,” said Sen. Chuck Grassley, the Iowa Republican who is chairman of the Senate Finance Committee. "If the tax laws are inadequate, I want to beef them up."

Mr. Grassley also said he was glad Justice Department officials made it clear "that executives can face possible prison time for backdating stock options."

Eileen O'Connor, assistant attorney general in the tax division of the Justice Department, said at the hearing that the government is investigating "very serious" issues and "such conduct would be a fraud on the market," and could potentially result in securities, mail-fraud, wire-fraud and tax charges against individuals and corporations.
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[north40000]

CYBX has done rather well since those days, if current share price is an indication.