Medical devices giant,
St. Jude Medical
) has entered into an exclusive distribution agreement with
Spinal Modulation, Inc. to sell its Axium Neurostimulator System
in the global market. The new product expands St. Jude's
neuromodulation product line for chronic pain management under
the Implantable Electronic Systems Division.
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St. Jude has made a $40 million equity investment in the
privately-held company and has also signed a long-term exclusive
option to purchase the company for up to $300 million. In
addition, revenue-based milestones will be paid following
approval from the U.S. regulatory body for sale within the
Spinal Modulation's Axium Neurostimulation System offers therapy
to patients with chronic, intractable pain. The uniqueness of the
device lies in the fact that it delivers specific stimulation to
the dorsal root ganglion instead of the traditional spinal cord
stimulation (SCS) technologies that operate by positioning leads
along the dorsal column of the spine. The targeted stimulation
allows for treatment in areas, which are difficult to address
such as the groin, lower leg and foot. Moreover, it uses 95% less
power than the traditional ones.
According to management, 10%-13% of the adult population ails
from crippling conditions, including chronic pain. St. Jude has
the advantage of selling the Axium Neurostimulation System in
Europe as the technology has already received the European CE
Mark in Nov 2011.
Spinal Modulation has also gained an investigational device
exemption (IDE) from the U.S. Food and Drug Administration (FDA)
to conduct a study on the efficiency of the product. Enrollment
is expected to begin in the second half of 2013.
The Neuromodulation product line constitutes only 7% of St.
Jude's vast product offerings. Neuromodulation sales dropped 4%
in the first quarter of 2013, with the U.S. sales down 6% and
international revenues up 4% year over year.
We believe that the deal is beneficial for St. Jude as the
CE-Marked Axium Neurostimulation System has considerable
opportunity to attract revenues in the European Union.
St. Jude currently has a Zacks Rank #3 (Hold). Some of St. Jude's
larger peers such as
) are also major players in the neuromodulation market.