St. Jude Medical has exercised the company's exclusive option to acquire Spinal Modulation, Inc., developer of the Axium Neurostimulator System.
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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.
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.
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.
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 its 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. ■