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LITTLE CANADA, Minnesota — Earlier this month, St. Jude Medical Inc. marked a 30-year history of developing neurostimulation technology at the American Academy of Pain Medicine’s annual meeting.
But in truth, St. Jude’s neurostim business really began in 2005. That’s when the local medical device maker, known mostly for its pacemakers and implantable cardio defibrillators, purchased Advanced Neuromodulation Systems (ANS) in Plano, Texas. The smooth acquisition has given St. Jude a much-needed boost in revenue at a time when global demand for mechanical heart devices starts to wane.
ANS has also helped St. Jude narrow the considerable lead of industry giant Medtronic Inc. in Fridley, Minn. Last year, St. Jude won European approval for its Libra deep brain stimulation (DBS) device to treat Parkinson’s disease. It hopes to soon challenge Medtronic’s Activa devices in the United States. St. Jude is conducting clinical trials on a DBS device to treat depression. The company also recently entered China and Japan.
ANS “has been a very good acquisition for St. Jude,” said Chris Chavez, the former ANS CEO who now leads St. Jude’s neurostim division. ” We have not only expanded by revenue, but also by geography. It’s a classic acquisition in which everyone wins. The reason for St. Jude to buy us was to build on a growth platform. Judging by our performance [since the deal], it’s clear that we continued our growth and outpaced the competition.”
Since 2005, St. Jude’s neurostimulation sales have more than doubled to $353 million, jumping 30 percent alone last year. It’s the company’s fastest-growing business. By contrast, St. Jude’s core cardiac rhythm management division in 2008 posted a sales increase of 14.1 percent.
St. Jude’s 21 percent average growth rate over the past four years has allowed it to gain some ground on Medtronic, by far the industry leader. Last year, Medtronic’s neuromodulation business grew 9 percent to $1.4 billion.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
The key to St. Jude’s success, analysts and executives say, was the company’s ability to seamlessly absorb its acquisition. ANS senior executives, including Chavez, have remained at St. Jude, a continuity of management virtually unheard of in today’s world of messy corporate marriages, said Tom Gunderson, a medical device analyst with Piper Jaffray & Co. in Minneapolis, who has followed ANS closely.
“We have built on a [cultural] foundation that really celebrates on what people can do,” Chavez said.
It also helps that St. Jude largely avoided the legal and regulatory headaches of Boston Scientific’s much larger purchase of Guidant Corp., an acquisition also meant to help a Medtronic rival boost its neurostim business, said Venkat Rajan, a medical device analyst with research firm Frost & Sullivan.
Thanks in large part to ANS, St. Jude is gaining market share on Medtronic with a solid, high-quality portfolio of neurostim products like the Eon Mini, Rajan said, the world’s smallest and lightest rechargeable implantable pulse generators for chronic pain.
Chavez said the company has adopted a “not-one-size-fits-all” strategy in which “we create a family of components that are interchangeable, a kind of Legos that enables physicians to create solutions for patients.”
For instance, the Food and Drug Administration recently approved the company’s new Penta neurostimulation leads for back pain which uses a unique design and mirco-texturing process to deliver greater amounts of electricity through small electrodes. Last December, St. Jude introduced its next-generation Multi-Steering software to its Rapid Programmer at the North American Neuromodulation Society’s annual conference. The software allows doctors to more quickly evaluate pain patterns and create multiple therapies to different parts of the body.
Experts, however, say the future growth in neuromodulation lies with deep brain stimulation. There St. Jude faces an uphill battle against Medtronic, the only company selling FDA-approved, rechargeable DBS devices in the United States.
Last June, Medtronic won regulatory approval to market its Activa DBS devices to treat advanced Parkinson’s and epilepsy. A major study published earlier that year in the Journal of the American Medical Association concluded that Medtronic’s DBS devices worked just as well as drugs in improving the quality of life of patients suffering from Parkinson’s.
Chavez says Medtronic’s first-to-market position gives it an “obvious advantage.”
However, “the brain is rich with targets,” he said. “I suspect the market for DBS will expand into multiple applications.” The company estimates the global DBS market will hit more than double to $637 million in 2014 from $309 million last year.
St. Jude completed enrollment for a 150-patient, 15-site study to treat migraine headaches with DBS technology. The company is expanding its high profile BROADEN clinical trial. The 50-patient study will test whether St. Jude DBS devices can help patients suffering from depression who don’t respond to drugs.
The company is unlikely to ever catch Medtronic in neurostim sales, but St. Jude can provide a spirited challenge to Medtronic’s dominance, Gunderson of Piper Jaffray said.
Chavez hopes St. Jude can chip away at Medtronic’s lead the same way it did with pacemakers and ICDs, using the same entrepreneurial spirit present at ANS.
“At ANS, we had more vision than resources,” he said. “We don’t think of it as competing with Medtronic. We view it as a [company] that comes between our products and the patient.”
