The medical tech industry has endured a rough ride in the wake of the recession, but you wouldn't know it by looking at the stock charts of leading device companies over the past year. St. Jude Medical (NYSE:STJ) is among the most notable names in that department. The company has struggled with declining sales and tough competition, yet St. Jude's shares have surged by more than 60% over the past year on hopes of a turnaround.

Those hopes might be coming to fruition. St. Jude is pivoting away from its reliance on older, stagnating industries and turning to new technologies to fuel its growth. The company's latest regulatory approval out of the neuromodulation field is a key example of that swing, but can St. Jude investors feel confident about the long-term success of this med tech leader?

St. Jude's big opportunity
Neuromodulation is an up-and-coming field in medical tech, with St. Jude and rivals such as Medtronic (NYSE:MDT) pushing to use devices to stimulate nerves and the spinal cord in order to treat chronic pain. It's a potentially huge market: St. Jude estimates that more than 1.5 billion people around the globe suffer from the condition, and while the company won't pin its hopes that high, there's plenty of opportunity for neuromodulation devices to make a big dent and earn sizable rewards.

That's exactly what St. Jude is aiming for with its Prodigy neuromodulation device -- and it conquered a big hurdle on Wednesday, earning CE Mark approval from European regulators.

St Judes Prodigy

St. Jude's Prodigy Spinal Cord Stimulation Device. Source: St. Jude Medical Room.

It's a step forward for St. Jude, which has seen its Implantable Electronic Systems Division -- its largest business by revenue and one that includes its neuromodulation group -- suffer from slumping sales over the recent past. The business has taken a sales hit in each of the past two fiscal years, with the fall primarily driven by a slump in St. Jude's pacemaker sales, as well as ongoing sluggishness in the company's implantable cardioverter defibrillator branch.

By contrast, St. Jude's neuromodulation unit has seen sales tick up each of the past two years -- although that pace slowed to just 0.7% revenue growth in 2013. The Prodigy's European approval should help that, and more importantly, it will help St. Jude lessen its reliance on ICDs and pacemakers as the chief products of its portfolio. ICDs have shown faint glimmers of hope around the medical device industry as of late, as rival Medtronic's ICD sales managed to avoid a decline over the past nine months. Pacemakers have been another story, and if St. Jude can lessen pacemakers as such a huge cog in its machine, investors will be far better off going into the future.

The Prodigy isn't a done deal yet for St. Jude and its neuromodulation business, however. The company is still looking for U.S. approval of the device, and competitors will pose a big challenge for St. Jude in this niche. Chief cardiac device rivals Medtronic and Boston Scientific (NYSE:BSX) both operate in the area, and both have managed better growth than St. Jude over the recent past. Boston Scientific's neuromodulation unit, roughly comparable to St. Jude's in overall sales, has posted at least 9% sales growth in each of the last two years. Medtronic's business, meanwhile, is around three times as large as St. Jude's and Boston's by revenue, and Medtronic has driven 5% revenue growth over the past nine months.

St. Jude looking up
Still, the Prodigy should help St. Jude close the gap with Boston and Medtronic in the future. More importantly for investors, it's a step in the right direction for this company after dealing with years of declines from its pacemaker and ICD products. Increasing its market portfolio's diversification will give St. Jude more flexibility in the future -- and if the Prodigy can gain FDA approval to add to its European green light, look for this firm to cement its place among the neuromodulation leaders for years to come. It's not quite a guarantee that St. Jude's turned the corner, but it's another building block for this company, and a great sign for eager investors.

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Dan Carroll has no position in any stocks mentioned. The Motley Fool owns shares of Medtronic. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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