St. Jude Invests in Spinal Modulation; Gains Option to Acquire Company

St. Jude Medical Inc. (STJ) has agreed to invest $40 million in a privately held medical device company that developed a new pain management therapy, gaining the right to exclusively distribute the system and potentially acquire the company. The Menlo Park, Calif.-based Spinal Modulation Inc. has developed a type of neuromodulation therapy that provides a new pain management option for patients with chronic, intractable pain. The Axium Neurostimulator System works through stimulation of the dorsal root ganglion, which are small structures that contain nerve fibers, which carry signals to the brain. The agreement gives St. Jude an exclusive option to distribute the Axium system in international markets where it is approved for sale. St. Jude Medical will also have the exclusive option to acquire the company for up to $300 million plus certain revenue-based milestones following U.S. commercialization of the system. The Axium system received European CE Mark approval in November 2011 for the management of chronic, intractable pain. Spinal Modulation has received an investigational device exemption from the U.S. Food and Drug Administration and expects beginning enrollment in the second half of this year. Last month, St. Jude reported first-quarter earnings rose 5.2% as lower costs offset weaker sales, while the medical-device maker's core heart-rhythm-management business continued to weaken. The Wall Street Journal, June 2013.