Cyberonics’ controversial CEO stepped down Monday after an internal audit found the company improperly dated stock option grants between 1999 and 2003.

The move is the latest drama to grip the troubled Houston, Texas-based medical technology company, which makes implantable devices to treat epilepsy and depression. As a result, Cyberonics will take a $10 million charge and restate results from fiscal 2000 to fiscal 2005.

implantable devices to treat epilepsy and depression. As a result, Cyberonics will take a $10 million charge and restate results from fiscal 2000 to fiscal 2005.

Robert P. “Skip” Cummins, who last year secured U.S. approval for Cyberonics’ unique treatment for depression, immediately resigned as CEO. Cyberonics’ stock jumped $2.56, or 11.86 percent, to $24.14, as investors bets that new management will bring a brighter future for the company.

Cyberonics’ stock jumped $2.56, or 11.86 percent, to $24.14, as investors bets that new management will bring a brighter future for the company.

Cyberonics’ device is a pacemaker-like generator, implanted in the chest, which sends mild electrical pulses to stimulate a nerve in the neck that is believed to stimulate the brain. Typically, only patients who have not responded to four or more antidepressant treatments are considered for the implant.

is a pacemaker-like generator, implanted in the chest, which sends mild electrical pulses to stimulate a nerve in the neck that is believed to stimulate the brain. Typically, only patients who have not responded to four or more antidepressant treatments are considered for the implant.

The company is the only neurotech group that makes an implantable device to treat the chronically depressed. Neurotech companies apply electronics and engineering to the human nervous system to treat and evaluate health ailments. Mr. Cummins fought to get the company’s depression device covered by Medicare, a step that would boost sales.

Saint vs. Sinner

But Mr. Cummins has been a lightening rod for criticism from some shareholders who said his behavior and tactics have been questionable. The SEC in June launched an inquiry into the company’s stock option granting process (see Drugs & Devices: Trial Stopped andDrugs & Devices: SEC Probe).

That probe was announced after a Wall Street analyst raised a red flag over the way the company issued stock options to key executives, including Mr. Cummins, in June 2004. The options were issued just hours after the FDA recommended approval of Cyberonics’ device for treating drug-resistant depression (see Cyberonics Denies Impropriety).

Corporate raider and billionaire investor Carl Icahn last week bought stock in Cyberonics, prompting Wall Street observers to predict a management shakeup at the company (see Corporate Raider Takes Cyberonics Stake).

billionaire investor Carl Icahn last week bought stock in Cyberonics, prompting Wall Street observers to predict a management shakeup at the company (see Corporate Raider Takes Cyberonics Stake).

Mr. Cummins will receive $1.7 million in cash, and 75,000 unregistered shares of common stock, according to a U.S. Securities and Exchange Commission filing.

Neurotech Reports editor and publisher James Cavuoto said recently that while instability never helps any company, Mr. Cummins'  behavior would not affect the value of the technology.

Contact the writer:RBarron@RedHerring.com