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St. Jude Medical (NYSE:STJ), a health care technology company in St. Paul, Minnesota, added this week another device to its portfolio to battle chronic pain with a $40 million investment in the privately-owned Spinal Modulation in Menlo Park, California. The deal, announced on 7 June, gives St. Jude Medical an exclusive distribution license for Spinal Modulation's neurostimulation device, with an option for St. Jude Medical to acquire the whole company later.

St. Jude Medical's anti-pain products are still a small part of its total product portfolio. Most of the company's devices focus on heart and circulatory disorders, such as coronary artery disease, cardiac arrest, and heart rhythm conditions.

Chronic pain is a widespread and complex condition that the Institute of Medicine in 2011 called "a national challenge" requiring a cultural transformation to address. The institute's report says chronic pain affects some 100 million adults, more than heart disease, cancer, and diabetes combined. The effects of chronic pain, says the report, costs the U.S. economy as much as $635 billion each year in lost productivity and medical treatments.

Much of the problem in treating chronic pain results from pain being as much of a symptom of other disorders, as a condition onto itself. Thus, treating chronic pain often needs to be personalized for the patient, combining a number of strategies: e.g., therapies, counseling, rehabilitation, and lifestyle changes.

Spinal Modulation makes a device for relieving pain called the Axium Neurostimulator System that sends electrical signals to stimulate the dorsal root ganglion, a mass of neurons (nerve cells) that lies along the vertebral column of the spinal cord. Recent evidence points to the dorsal root ganglion as an important therapeutic target for controlling chronic pain, because of its key role in sending pain signals through the central nervous system. The dorsal root ganglion is also well connected to the central nervous system, which indicates a pain therapy targeting this structure could be more successful than many drugs that need to cross the difficult blood/brain barrier.

Cleared in Europe

The Axium system, says Spinal Modulation, sends mild electrical pulses to the dorsal root ganglion to mask or interrupt pain signals before they enter the spinal cord and then move on to the brain. The company reported on trials of the device in 2011 at a meeting of the North American Neuromodulation Society, which led to the granting of a CE mark. CE is an acronym for the French Conformité Européene that indicates a product meets safety, health and environmental protection requirements in the 27 EU member states, as well as Iceland, Liechtenstein, and Norway. (Medical device manufacturers often receive clearance to market their devices in Europe before the U.S.)

Under the deal with Spinal Modulation, St. Jude Medical receives a license to distribute the Axium system worldwide, including Europe. St. Jude Medical already has neurostimulation systems in its product portfolio, the Eon line of devices that send electrical signals up the spinal cord to mask or interrupt pain signals, which it tested in trials of lower back and migraine pain. A CE mark was awarded to Eon neurostimulators last year as a treatment for migraine.

In addition to the distribution license for the Axium system, St. Jude Medical also gets an option to acquire the whole Spinal Modulation company for up to $300 million, plus revenue-based milestones, following commercialization of Axium system in the U.S. Spinal Modulation says it received in investigational device exemption from the Food and Drug Administration that clears the company to conduct clinical trials in the U.S., scheduled to begin later this year.

The Axium system complements St. Jude Medical's lineup of neurostimulation systems and thus should be able to take advantage of its existing development, marketing, and distribution infrastructure established for the Eon and earlier Genesis lines. The Axium product already has a track record with early clinical trials overseas, which reduces the risk of failure in U.S. trials.

Even with the licensing -- and maybe acquisition -- deal, however, St. Jude Medical still faces competition in the neurostimulation market. Both Medtronic (NYSE:MDT) and Boston Scientific (NYSE:BSX), for example, offer neurostimulator systems for pain management. In addition, Boston Scientific is recruiting participants for clinical trials to test the long-term effectiveness and patient satisfaction of its Precision Spectra neurostimulator devices.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: St. Jude Medical Boosts Anti-Pain Portfolio In $40M Deal