St. Jude Medical Inc. is investing in new pain management technology with an option to buy.

The Little Canada-based medical device company said Friday it will invest $40 million in privately owned Spinal Modulation, and in return get an exclusive option to acquire the Menlo Park, Calif., company for as much as $300 million plus incentives based on Spinal Modulation reaching revenue milestones. The company is currently funded by investors — one of whom is Fridley-based Medtronic — and its product is not yet approved for use in the United States.

In the meantime, St. Jude will get exclusive rights to market Spinal Modulation's Axium Neurostimulator System that manages pain in patients with chronic, intractable pain. St. Jude said the device extends pain management to parts of the body that are often difficult to treat, such as the lower leg, foot and groin.

Analysts said St. Jude is investing in one of many start-up companies that are pursuing a potential high-growth area called neurostimulation technology, in which pain is controlled by delivering electrical shocks to different parts of the spine.

What makes this investment particularly unusual is that St. Jude's medical device competitor Medtronic of Fridley is already an investor in Spinal Modulation. Both St. Jude and Medtronic already have neurostimulation products, but the Spinal Modulation technology represents an extension of the present state-of-the-art for both of them.

Analysts say that while such dual ownership of a start-up by large competitors is not unheard of, it is unusual.

"There are a couple of options for companies such as St. Jude or Medtronic," said Debbie Wang, an analyst at Morningstar in Chicago. "They could buy a company such as Spinal Modulation outright to keep competitors from getting access to the technology. But that's risky, because the big companies don't know if the little company's technology is going to pan out. So the second option for big companies is to make equity investments in smaller companies. While the big companies are minority shareholders, they can keep their fingers in the pie and keep track of where things are going."

St. Jude declined to provide details of its investment, such as its ownership percentage of Spinal Modulation. But St. Jude said it did not acquire the shares of any of the existing investors, which include Medtronic and five venture capital firms.

Medtronic officials could not be reached for comment. A spokesman for Spinal Modulation did not return a phone call.

St. Jude would appear to have gotten the upper hand with its ownership stake in Spinal Modulation, because it also got the exclusive rights to market the Spinal Modulation product in Europe, where it has regulatory approval, and received an exclusive option to eventually acquire the company.

But that advantage may be short-lived, Wang said.

"Medtronic is the 800-pound gorilla in chronic pain treatment through neurostimulation; they own that market," Wang said. "So, while in the short run St. Jude has an edge in the technology from this particular small company, I don't know that that edge would necessarily give them a huge leg up against Medtronic."