UPDATED: Jan. 5, 2011, 5:10 p.m. EST

Just a few weeks after taking its pain management arm off the auction block, Boston Scientific Corp. (NYSE:BSX) doubled down on the division with a $78 million buyout of Intelect Medical Inc.

After shopping its neuromodulation business for a spell last year, the Natick, Mass. based medical device maker pulled it off the market Dec. 15 after failing to find a suitor ardent enough to swallow a $1.5 billion price tag.

Intelect, which quietly slipped from Cleveland to The Hub recently, is developing the Guide deep-brain stimulation programming system designed to provide images of stimulation fields in the brain for more precise targeting. BSX was a strategic investor in the firm, leading an $11 million investment round in 2008 (Greatbatch (NYSE:GB), a New York-based medical device company, also invested in Intelect). Because of its equity and debt positions in Intelect, BSX will pay $60 million in cash to seal the deal.

Boston Scientific said it plans to integrate the Intelect technology with its Vercise DBS system, which is in clinical trials as a treatment for Parkinson’s disease. The company also announced the completion of its biuyout of Sadra Medical and fired back at a report in the Journal of the American Medical Assn. that questioned some ICD implantations.

Intelect acquisition

Intelect, spun out of Cleveland Clinic and Cornell University in 2005, has flown under the radar in recent years. It hasn’t issued a press release since 2008 and the company never publicly announced its move from Cleveland to Boston until BoSci made the acquisition public today.

Neuromodulation is a rapidly expanding market. The worldwide neuromodulation device industry is expected to grow from $3 billion in 2008 to $4.5 billion this year, according to the International Neuromodulation Society. The top companies in the space generally are the same as the leading players in the medical device market overall: Medtronic Inc. (NYSE:MDT), St. Jude Medical Inc. (NYSE:STJ), BSX and the like. Revenues in BSX’s neuromodulation unit grew 6 percent to $219 million through the first nine months of the year.

Medical technology companies such as Boston Scientific are increasingly taking early equity stakes in — and then sometimes later purchasing — promising startups. For large medical device firms with lots of cash, an early investment in a startup normally means buying a right to eventually acquire the company at a certain price. Such exclusive deals allow big companies to shut out competitors as they troll for acquisitions to boost growth. Early equity stakes also allow big companies a chance to preview and influence a startup’s technology.

Intelect’s exit is a win for Cleveland Clinic Innovations, the hospital’s commercialization arm, as well as anyone at Innovations who might have a stake in the company. In its first decade, Cleveland Clinic Innovations has had two exits. Its first was Cleveland BioLabs (NSDQ:CBLI), via a $14 million initial public offering in 2006. A second company, ReVasc, was sold in 2007 to Micrus Endovascular Corp. (NSDQ:MEND) in San Jose, Calif., for $1 million, with the potential of $5 million more in future milestone payments.

Intelect’s stroke recovery therapy is based on the work of Dr. Andre Machado and other researchers at Cleveland Clinic’s Center for Neurological Restoration. The company’s software is based on the work of Cameron McIntyre of the Clinic’s Lerner Research Institute Department of Biomedical Engineering. Among the company’s founders is Dr. Ali Rezai, formerly one of the Clinic’s top neurosurgeons who left last year to become vice chair of the Department of Neurological Surgery at Ohio State University Medical Center.

JAMA study

Boston Scientific also rebutted a study published today in the Journal of the American Medical Assn. showing that more
than a fifth of implantable cardioverter-defibrillator procedures fall outside of medical guidelines.

Study author Dr. Sana M. Al-Khatib of Duke University did not expect cardiologists to rigidly follow the guidelines, but the 22.5 percent rate of non–evidence-based ICD implantations “is way too high,” she told The New York Times.

The way Dr. Khatib framed the results of the study troubled Boston Scientific chief medical officer of cardiac rhythm management, Dr. Kenneth Stein.

“Currently, more than a million patients are eligible for an ICD, but only a small percentage of patients actually receive the life-saving device. In fact, previous studies show that ICDs are used in only 20-40 percent of indicated patients in the U.S.,” Stein said in prepared remarks.

Khatib has herself “made important contributions to addressing the under-utilization of device therapies for the prevention of [sudden cardiac arrest],” Stein said.

Sadra buyout

It was a busy day in Natick. BSX also closed its $450 million buyout of Sadra Medical Inc. The acquisition of Los Gatos, Calif.-based Sadra marks the medical device giant’s entry into the aortic valve replacement market. Sadra is developing a device, the Lotus valve system, that’s designed to replace the valve that can be deployed via catheter; Boston Scientific became a strategic investor in the company in 2005 for 14 percent of Sadra.