St. Jude Medical (NYSE:STJ) today said it plans to exercise its buyout option on Spinal Modulation in a bid to extend its reach into the neuromodulation space.
Spinal Modulation makes the Axium device, a neurostimulator designed to treat an area of the spine called the dorsal root ganglion, which contains nerve fibers that carry pain signals to the brain.
St. Paul, Minn.-based St. Jude paid $40 million for a stake in Spinal Modulation back in June 2013, including international distribution rights for Axium and an exclusive buyout option worth up to $40 million. Today St. Jude said it will pay another $175 million when the buyout closes, expected in the 2nd quarter, with further milestones due on FDA approval and "achievement of certain revenue targets."
The buyout will make it the only medical device maker to offer radiofrequency ablation, spinal cord stimulation and dorsal root ganglion stimulation therapy solutions for the treatment of chronic pain, St. Jude said.
Privately held Spinal Modulation, which in November 2011 won E.U. approval for Axium, has had backing from some of the largest companies in the medtech space, including Medtronic (NYSE:MDT) and Johnson & Johnson (NYSE:JNJ) which both participated in a $30 million Series D financing round in June 2011.
Back in December 2014, Menlo Park, Calif.-based Spinal Modulation said it closed enrollment in a U.S. pivotal study of its Axium device and later submitted a pre-market approval application with the FDA , according to a press release.
"Physicians need a range of options to effectively treat chronic pain, and our acquisition of Spinal Modulation is part of our ongoing commitment to providing physicians new and innovative therapy options," St. Jude COO Michael Rousseau said in prepared remarks. "Dorsal root ganglion stimulation with the Axium system is highly complementary to our current chronic pain product portfolio, and acquiring this technology will further our ability to partner with physicians to reduce the burden of chronic pain."
"St. Jude Medical has a legacy of bringing new, innovative therapy options to patients suffering from chronic pain, and we believe adding DRG stimulation to their chronic pain portfolio will have a number of benefits to patients worldwide," added Spinal Modulation president & CEO David Wood. "We’re proud of what the Spinal Modulation team has built over the past 10 years, and see great potential for St. Jude Medical to continue expanding access to DRG stimulation therapy for patients who may benefit from additional therapeutic options."
St. Jude said it expects the Spinal Modulation buyout to dilute adjusted earnings per share by 5¢ per share for the rest of the year.
