Dive Brief:

• Medtronic sued Axonics ​Modulation Technologies in the U.S. District Court for the Central District of California Monday, alleging the small medtechs rechargeable sacral neuromodulation system infringes four Medtronics patents covering the implantation method, lead fixation, and recharging technology.
• Medtronic is asking for a jury trial, injunctive relief to have the Axonics system pulled from the market, and triple damages. 
• Irvine, California-based Axonics, which gained FDA approval for the r-SNM System in September, said Tuesday it "intends to vigorously defend itself against Medtronic's claims."

Dive Insight:

Sacral neuromodulation therapy uses a small device to send electrical pulses to nerves located just above the tailbone. The therapy can be used to treat fetal incontinence and related bowel and bladder control issues. Medtronic has led the market with its InterStim product line but Axonic's introduction of its r-SNM System this quarter is challenging the Dublin-based medtech's dominance.

Medtronic's system was approved more than twenty years ago and has treated more than 300,000 patients worldwide, Medtronic said. Meanwhile, Axonics is just getting started with commercial launch of its system, which FDA approved in September.

The fetal incontinence market is potentially huge with more than 5.5 million Americans suffering from the condition according to the American College of Gastroenterology. If Medtronic wins the patent suit, it could be entitled to tripled infringement damages and could either force Axonics' product off the market or force it to license Medtronic's patents or pay Medtronic royalties.

"We aren't particularly surprised that MDT has filed a patent lawsuit since it has had a monopoly in the sacral neuromodulation market and is likely attempting to protect its position in the market," Needham analysts wrote in a note to investors.

Still, the analysts said those risks are small for Axonics.

The legal battle could take multiple years to play out but analysts said the biggest concern for investors is how quickly Axonics might burn through cash as the litigation unfolds. Companies can pay as much as $1 million per quarter on patent litigation fees. But the analysts also expect FDA approvals for urinary indications for the r-SNM system to come through shortly, which will bolster Axonic's market prospects.

Analysts also said Axonic's commercial launch of the r-SNM, begun in the fourth quarter, would ramp up as the company continues to engage doctors at physician seminars, noting the company implanted its first system in the U.S. in October.​

Meanwhile, Medtronics and Axonics are duking it out on the public relations front.

Axonics CEO Raymond Cohen called the Medtronic lawsuit "an attempt to use legal tactics to slow down competition, and deny patients and physicians the innovative new technology that they desire."

The Axonics system stimulates sacral nerves, located in the pelvic area, to modify their activity and correct erroneous messages. It is rechargeable and can be used in full-body MRIs, characteristics setting it apart from its competition, Axonics said.

In contrast, Medtronic has "failed to introduce any meaningful innovation for the sake of patients or their physician customers" in the market for the last 20 years, Cohen said.

But Medtronic denied Axonics claims it is trying to stave off competition in the market.

"Medtronic welcomes competitors and we believe competition drives innovation and broader market awareness, which is good for the industry and for patients," Brooke Story, vice president and general manager of the Pelvic Health and Gastric Therapies business, part of the Restorative Therapies Group at Medtronic, said in a statement.