St. Jude Medical to acquire Spinal Modulation for $215M

St. Jude Medical to add DRG stimulation technology to its chronic pain portfolio, expanding the company’s range of treatment options for the management of chronic pain

ST. PAUL, Minn., Apr 20, 2015 (BUSINESS WIRE) — St. Jude Medical, Inc. STJ, +0.83% a global medical device company, today announced it has exercised the company’s exclusive option to acquire Spinal Modulation, Inc., developer of the Axium™ Neurostimulator System. Following the completion of this acquisition, St. Jude Medical will become the only medical device manufacturer to offer radiofrequency ablation (RFA), spinal cord stimulation (SCS) and dorsal root ganglion (DRG) stimulation therapy solutions for the treatment of chronic pain.

Once complete, the acquisition of Spinal Modulation, Inc. will further support St. Jude Medical’s mission to help physicians tailor treatment to a patient’s chronic pain condition to achieve superior outcomes. Stimulation of the dorsal root ganglion (DRG) with the Axium system has been shown to provide meaningful relief for patients battling chronic pain, and is especially useful for treating focal pain areas often challenging to treat using traditional spinal cord stimulation (SCS).

The Axium system originally received CE Mark approval in November 2011 for the management of chronic, intractable pain. In December 2014, Spinal Modulation announced that enrollment in its ACCURATE U.S. IDE trial had been completed. Spinal Modulation subsequently submitted its PMA application to the FDA in support of marketing approval in the United States. Results from the ACCURATE Study will be presented at the 12th annual International Neuromodulation Society (INS) Congress, to be held in Montreal, Quebec, Canada, June 6-11, 2015.

“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,” said Michael T. Rousseau, chief operating officer of St. Jude Medical. “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.”

Chronic pain affects approximately 1.5 billion people worldwide, more than heart disease, cancer and diabetes combined. The condition can dramatically affect quality of life, negatively impacting personal relationships, work productivity and daily routines. SCS and DRG stimulation have both been proven to offer patients relief from chronic pain while restoring lost quality of life.

DRG stimulation works differently than traditional SCS, targeting nerves within the DRG, a structure packed with sensory nerves that transmit information to the spinal cord, which then conducts those signals to the brain. Traditional SCS takes a different approach, targeting nerves along the spinal cord’s dorsal column which often proves challenging to isolate the desired target painful area.

By targeting the DRG, stimulation with the Axium system has been shown to be effective in treating conditions currently underserved by traditional SCS, such as chronic intractable pain in the leg, foot and groin. Research has also shown DRG stimulation can benefit patients suffering post-surgical pain and neuropathic pain. This underserved population is estimated to represent more than five times the current addressable market.

“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,” said David Wood, president and chief executive officer of Spinal Modulation. “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.”

Transaction Details

In June 2013, St. Jude Medical entered into a series of agreements under which the company made a $40 million equity investment in Spinal Modulation. In addition to providing St. Jude Medical with an exclusive option to distribute the Axium™ Neurostimulator System in international markets where the technology is approved for sale, the agreements also provided St. Jude Medical with an exclusive option to acquire the company. Having exercised its exclusive option, St. Jude Medical expects to complete the acquisition of Spinal Modulation in the second quarter of 2015, subject to customary closing conditions.

St. Jude Medical will make a payment of approximately $175 million upon closing with additional payments due upon FDA approval of the Axium system and achievement of certain revenue targets. Excluding acquisition-related expenses, we estimate that this acquisition will be approximately $0.05 dilutive to our adjusted consolidated earnings per share for the remainder of 2015, which we expect to partially offset with operating efficiencies. St. Jude Medical will provide an update to its adjusted 2015 earnings per share guidance on its first quarter earnings call scheduled to be held on April 22, 2015.

About St. Jude Medical

St. Jude Medical is a global medical device manufacturer dedicated to transforming the treatment of some of the world’s most expensive epidemic diseases. The company does this by developing cost-effective medical technologies that save and improve lives of patients around the world. Headquartered in St. Paul, Minn., St. Jude Medical has four major clinical focus areas that include cardiac rhythm management, atrial fibrillation, cardiovascular and neuromodulation. For more information, please visit sjm.com or follow us on Twitter@SJM_Media.

About the St. Jude Medical Chronic Pain Portfolio

Chronic pain affects approximately 1.5 billion people worldwide, more than heart disease, cancer and diabetes combined. The condition can negatively impact personal relationships, work productivity and a patient’s daily routine. St. Jude Medical offers multiple solutions for patients to manage debilitating chronic pain, including spinal cord stimulation (SCS), spinal cord stimulation targeting the DRG, radiofrequency ablation and peripheral nerve stimulation (PNS).

About Spinal Modulation

Spinal Modulation is dedicated to improving the lives of patients with chronic pain by providing the next generation of neuromodulation systems through stimulation of the dorsal root ganglion. Spinal Modulation is a global medical device company based in Menlo Park, CA, Belgium, and Australia. The company is funded by St. Jude Medical, Johnson and Johnson Development Corporation, Medtronic, Kleiner Perkins Caufield and Byers, De Novo Ventures, MedVenture Associates, DFJ InCube Ventures, DFJ ePlanet Ventures, Raffles Venture Partners, The Angels Forum and The Halo Fund.

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include the expectations, plans and prospects for the Company, including potential clinical successes, anticipated regulatory approvals and future product launches, and projected revenues, margins, earnings and market shares. The statements made by the Company are based upon management’s current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include market conditions and other factors beyond the Company’s control and the risk factors and other cautionary statements described in the Company’s filings with the SEC, including those described in the Risk Factors and Cautionary Statements sections of the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2015. The Company does not intend to update these statements and undertakes no duty to any person to provide any such update under any circumstance.

SOURCE: St. Jude Medical, Inc.

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