UPDATE 2-Cyberonics Q1 profit tops Wall Street

(Recasts; adds details from conference call, background, share movement, analyst's comments)

BANGALORE, Aug 21 (Reuters) - Medical-device maker Cyberonics Inc (CYBX.O: Quote, Profile, Research, Stock Buzz) posted a better-than-expected first-quarter profit, boosted by strong product sales and reduced operating expenses, and reiterated its financial-year 2009 outlook, sending its shares up as much as 6 percent.

Cyberonics, which makes Vagus Nerve Stimulation (VNS) therapy used to control epileptic seizures and treat depression, expects positive earnings and revenue of $134 million to $138 million in the 2009 financial year.

Analysts expect earnings of 25 cents a share on revenue of $137.4 million, according to Reuters Estimates.

"No specific earnings guidance is being provided at this time as the long-term status of the depression indication remains undecided and could potentially have a material impact on net income," the company said in a statement.

In May last year the company said the Centers for Medicare and Medicaid Services (CMS) had determined not to provide reimbursement for VNS therapy for treating treatment-resistant depression (TRD).

In February this year Cyberonics said it engaged an investment bank to find a financial partner to assist in seeking options including the possible transfer of the depression indication to a separate entity in which it would maintain at least a minority interest.

The company would not begin another clinical study related to the depression indication without a partner and expects to finalize the process by the end of 2008, Chief Executive Dan Moore said in a conference call on Thursday.

STRONG FIRST QUARTER

Cyberonics reported net income of $2.1 million, or 8 cents a share, for the quarter ended July 25, compared with a net loss of $8.2 million, or 31 cents a share, a year earlier.

Revenue rose 16 percent to $33.7 million. Operating expenses fell to $26.1 million from $31.4 million.

"One of the main strategies for the company is to focus on their epilepsy (indication) and to get that up and running and certainly they have had success in doing that," Anthony Petrone, an analyst with Maxim Group, said.

Net product sales attributable to the epilepsy indication rose 22 percent to $32.6 million from $5.8 million.

Analysts on average expected the company to earn 3 cents a share, before items, on revenue of $33.1 million.

Shares of Cyberonics were trading up more than 1 percent at $25.57 Thursday morning on Nasdaq. They had touched a high of $26.60 earlier. (Reporting by Anuradha Ramanathan in Bangalore; Editing by Himani Sarkar, Pratish Narayanan)